Colorado Pacific Rio Grande Railroad, LLC-Petition for Exemption-Acquisition and Operation of Line of Railroad in Costilla County, Colorado

Published date18 September 2023
Record Number2023-20072
Citation88 FR 64020
CourtSurface Transportation Board
Federal Register, Volume 88 Issue 179 (Monday, September 18, 2023)
[Federal Register Volume 88, Number 179 (Monday, September 18, 2023)]
                [Pages 64020-64021]
                From the Federal Register Online via the Government Publishing Office []
                [FR Doc No: 2023-20072]
                [Docket No. FD 36694]
                Colorado Pacific Rio Grande Railroad, LLC--Petition for
                Exemption--Acquisition and Operation of Line of Railroad in Costilla
                County, Colorado
                 The Colorado Pacific Rio Grande Railroad, LLC (CP Rio Grande), a
                Class III carrier, filed a petition for exemption on June 20, 2023,
                seeking after-the-fact authority to acquire in bankruptcy and operate
                1.53 miles of track extending from milepost 0.0 in Blanca, Colo., to
                milepost 1.53 in McClintock, Colo. (the Blanca Spur).\1\ This petition
                follows CP Rio Grande's recent acquisition of substantially all assets
                of the San Luis & Rio Grande Railroad, Inc. (SLRG), in Colorado Pacific
                Rio Grande Railroad--Acquisition & Operation Exemption Containing
                Interchange Commitment--San Luis & Rio Grande Railroad, FD 36656 (STB
                served Jan. 5, 2023).
                 \1\ Despite the name, the Blanca Spur is not excepted spur track
                but track over which the Board has licensing authority.
                 According to CP Rio Grande, the Blanca Spur was originally part of
                a 31-mile line completed in 1910 by the San Luis Valley Southern
                Railroad that ran from Blanca, Colo., to Jaroso, Colo., and connected
                to the tracks of the Denver & Rio Grande Railroad. (Pet. 3.) This line
                was acquired by the Southern San Luis Valley Railroad (the old SSLV) in
                1953, at the direction of the Interstate Commerce Commission, the
                Board's predecessor agency. (Id.) Over time, the old SSLV abandoned and
                sold off sections of the line, leaving only the Blanca Spur remaining,
                which the old SSLV ceased operating by the mid-1990s. (Id.) However,
                the old SSLV never sought abandonment authority for the Blanca Spur.
                (Id.) Instead, it sold the Blanca Spur and the underlying right-of-way
                in 2000 to Richard Vondrak of Conejos County, Colo., before dissolving
                as an entity shortly thereafter. (Id.)
                 According to CP Rio Grande, Mr. Vondrak never sought or received
                Board approval to acquire or operate the Blanca Spur. (Id.) In 2007, he
                sold his interests in the Blanca Spur and the underlying right-of-way
                to Iowa Pacific Holdings, LLC (IPH), a railroad holding company and the
                parent of Permian Basin Railways (PBR), which in turn owned SLRG. (Id.)
                IPH did not seek authority for that transaction. Instead, in 2012, a
                newly formed Southern San Luis Valley Railroad, LLC (the new SSLV),
                filed a verified notice of exemption to acquire and operate the Blanca
                Spur from IPH, asking the Board to exempt IPH's 2007 transaction,
                arguing that there was no need for the Board to require IPH to
                ``unscramble'' it. See S. San Luis Valley R.R.--Acquisition & Operation
                Exemption--Iowa Pac. Holdings, LLC, FD 35586, slip op. at 2 (STB served
                Feb. 10, 2012). In a related transaction, PBR sought an exemption to
                continue in control of the new SSLV upon SSLV's becoming a Class III
                carrier. See Iowa Pac. Holdings, LLC--Continuance in Control--S. San
                Luis Valley R.R., FD 35585 (STB served Feb. 10, 2012). The Board,
                considering the two proceedings together, rejected the new SSLV's
                request and denied PBR's request as moot due to the insufficiency of
                the record. S. San Luis Valley, slip op. at 3. The Board stated that
                should IPH wish to proceed with the contemplated transactions, it
                should trace the history of the Blanca Spur as well as it could, with
                supporting evidence, and request specific authority from the Board for
                this prior transaction, id., but IPH did not do so, (Pet. 4).
                 CP Rio Grande further states that SLRG was placed into involuntary
                Chapter 11 bankruptcy in October 2019, with the order granting relief
                for the petition being entered on November 7, 2019. (Pet. 5.) In March
                2021, IPH filed for Chapter 7 bankruptcy, but it was dismissed on
                January 6, 2022. (Id.) As part of a litigation settlement agreement
                entered during those proceedings, the ownership of the Blanca Spur was
                transferred from IPH to SLRG's bankruptcy trustee, which the bankruptcy
                court approved on July 14, 2022. (Id.) SLRG's bankruptcy trustee
                conveyed the Blanca Spur to CP Rio Grande under a purchase and sale
                agreement in January 2023. (Id.) CP Rio Grande filed a notice of
                exemption in Colorado Pacific Rio Grande Railroad, Docket No. FD 36656,
                for the acquisition of most of SLRG's assets on December 20, 2022, and
                later filed this petition for exemption on June 20, 2023. (Pet. 5.)
                Discussion and Conclusions
                 The Board finds that CP Rio Grande has supplied information
                sufficient to grant this petition.\2\ The petition and supporting
                documents trace the ownership history of the Blanca Spur and do not
                reveal any extant dispute over CP Rio Grande's ownership of the Blanca
                Spur. The documents show that SSLV sold the Blanca Spur to Mr. Vondrak
                on July 14, 2000, (id., Ex. B), before he then sold it to IPH on May
                24, 2007, (id., Ex. B). During the bankruptcy
                [[Page 64021]]
                proceedings, the Blanca Spur was transferred from IPH to SLRG without
                Board authority, (id., Ex. C), before the bankruptcy trustee for SLRG
                sold the Blanca Spur to CP Rio Grande under a purchase and sale
                agreement in January 2023, also without prior Board authority as
                required by 11 U.S.C. 1172. (Id. at 5.)
                 \2\ In situations requiring after-the-fact acquisition
                authority, the Board strongly encourages parties to file for such
                authority as soon as possible.
                 CP Rio Grande indicates Mr. Vondrak cannot be located, and
                according to the Illinois Secretary of State's listing of businesses
                registered in Illinois, IPH was involuntarily dissolved on June 10,
                2022.\3\ There is no indication that any former IPH personnel are
                involved with CP Rio Grande. Similarly, PBR is listed as having been
                dissolved on October 8, 2021,\4\ and SLRG's bankruptcy was discussed in
                greater detail in Colorado Pacific Rio Grande Railroad, FD 36656, slip
                op. at 1-2 (STB served Jan. 5, 2023). Under these circumstances, the
                Board will not require any further action regarding the earlier
                acquisitions and transfers of the Blanca Spur.
                 \3\ Business Entity Search, Ill. Sec'y of State, (click ``Name'' under ``Choose a Search
                Method'' and enter ``Iowa Pacific Holdings'' in the ``Search for''
                box, click submit, then click the ``IOWA PACIFIC HOLDINGS, LLC''
                entity which has ``INVOLUNTARY DISSOLUTION'' next to it) (last
                visited Sept. 5, 2023).
                 \4\ Id. (click ``Name'' under ``Choose a Search Method'' and
                enter ``Permian Basin Railways'' in the ``Search for'' box, click
                submit, then click the ``PERMIAN BASIN RAILWAYS, INC.'' entity with
                ``DISSOLVED'' next to it) (last visited Sept. 5, 2023).
                 The acquisition of a rail line by a Class III carrier requires
                prior approval from the Board under 49 U.S.C. 10902(a). Under 49 U.S.C.
                10502(a), however, the Board must exempt a transaction or service from
                regulation upon finding that (1) the regulation is not necessary to
                carry out the rail transportation policy (RTP) under 49 U.S.C. 10101
                and (2) either the transaction or service is of limited scope or
                regulation is not needed to protect shippers from the abuse of market
                 The Board finds that an after-the-fact exemption should be granted
                for CP Rio Grande's acquisition of the Blanca Spur. Detailed scrutiny
                of the proposed transaction through an application for review under 49
                U.S.C. 10902 is not necessary here to carry out the RTP, and an
                exemption would promote the RTP by minimizing the need for regulatory
                control over the transaction (49 U.S.C. 10101(2)), ensuring the
                development and continuation of a sound rail transportation system able
                to compete with other modes of transportation and meet the needs of the
                public and national defense (49 U.S.C. 10101(4)), minimizing the need
                for regulatory barriers for entry into and exit from the industry (49
                U.S.C. 10101(7)), encouraging honest and efficient management of
                railroads (49 U.S.C. 10101(9)), and providing for the expeditious
                handling and resolution of proceedings required or permitted to be
                brought under this part (49 U.S.C. 10101(15)). Other aspects of the RTP
                will not be adversely affected.
                 Regulation of the transaction is not needed to protect shippers
                from an abuse of market power. CP Rio Grande purchased the Blanca Spur
                out of bankruptcy for the purpose of investing in the track and
                developing business for existing and new shippers. Granting the
                exemption would ensure that service along the Blanca Spur can continue
                because CP Rio Grande will have a common carrier obligation to provide
                service upon reasonable request along the track.
                 Under 49 CFR 1105.6(c)(1), this action, which will not result in
                significant changes in carrier operations, is categorically excluded
                from environmental review. Similarly, under 49 CFR 1105.8(b)(1), no
                historic report is required because the subject transaction is for
                continued rail service, CP Rio Grande has indicated no plans to alter
                railroad properties 50 years old or older, and any future abandonment
                of the Blanca Spur would be subject to Board jurisdiction.
                 It is ordered:
                 1. Under 49 U.S.C. 10502, the Board exempts CP Rio Grande's
                acquisition and operation of the Blanca Spur from the prior approval
                requirements of 49 U.S.C. 10902.
                 2. Notice of this exemption will be published in the Federal
                 3. This decision will be effective on October 18, 2023. Petitions
                for stay must be filed by September 28, 2023. Petitions to reopen must
                be filed by October 9, 2023.
                 Decided: September 11, 2023.
                 By the Board, Board Members Fuchs, Hedlund, Oberman, Primus, and
                Regena Smith-Bernard,
                Clearance Clerk.
                [FR Doc. 2023-20072 Filed 9-15-23; 8:45 am]
                BILLING CODE 4915-01-P

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