Milwaukee Road also proposes to use trackage rights over BN to provide service from coal mines in eastern Montana. Milwaukee Road has estimated that it may gain approximately $12 million in gross revenues from this operation. BN on the other hand has indicated that it may lose up to $50 million in revenues from this operation by Milwaukee Road. We do not believe that Milwaukee Road is currently capable of meeting the demands that would be placed upon it by service to the coal mines in Kuehn, Big Sky, and Colstrip, MT. This requested protection is also not related to impacts from the merger.

Although Milwaukee Road believes that liquidated damages of $100,000 for violation of any merger condition will force BN to abide by the conditions, we do not find such a penalty warranted. It is unfair to require such a “penalty," particularly when the violation may be so minor as to be but a small fraction of $100,000.

Milwaukee Road's desire to have a successor and assigns clause imposed in the joint facility agreements with BN is not within the purview of this merger. This is something that the parties can work out through negotiation. A give and take process, whereby Milwaukee Road would be willing to surrender something in order to obtain the benefit of being able to assign its rights in joint agreements, is the proper method to revise the agreements.

ICG. In addition to standard traffic conditions, ICG seeks four other protective conditions. These are trackage rights between Memphis, TN, and Jasper, AL; terminal operations over Mopac between ICG and Frisco tracks in Memphis to facilitate the trackage rights; a gateway condition at Centralia, IL; and the right to serve facilities at the Birmingham terminal now served by Frisco. ICG seeks these conditions to offset what we have found to be approximately $6,780,000 in gross revenue diversion. This translates to $3,780,000 in net revenue loss.

We are sympathetic with ICG's request. However, we do not believe the conditions requested will benefit it.

We will not approve the trackage rights and concurrent terminal operation agreement for ICG to provide operations between. Memphis and Jasper. First, we believe that there would be operational problems for ICG over that line. Although ICG points out it would only be adding two more trains while the merged company would add eight trains a day, the merged company should not be harmed by permitting another carrier operationally to impede the flow of its traffic. We also question whether ICG's trackage rights would be profitable and efficient. ICG has indicated

that it will reroute traffic over a tremendously circuitous route, if this condition is granted nearly doubling the mileage involved. We do not see how this can be beneficial to the public. Additionally, the revenue obtained from this routing by ICG may not be sufficient to cover ICG's cost.

We do not favor keeping an interchange open where it may result in inefficient service. For this reason we will not approve ICG's request to keep open its interchange arrangement with BN at Centralia, IL. If the traffic warrants, market forces will keep it open. ICG's request to serve facilities at the Birmingham, AL terminal with its own engines and cars is something which should be negotiated with the merged company outside this proceeding. This type of condition should not burden a merger proceeding. It is a disagreement between the parties which existed prior to the merger and should not be presented for resolution in a merger proceeding. We reiterate that conditions sought in a merger should deal only with problems created by the merger.

Conditions imposed.-For the benefit of the carriers participating in this proceeding we shall impose standard traffic conditions as set out in appendix M for a period of 2 years. We believe this will give affected carriers sufficient time to adjust to the new competitive climate. Although we understand that the routing practices between the railroads are of longstanding, that does not require that it take a long time to change them. We are currently reevaluating our imposition of traffic protective conditions and will issue a policy statement on the matter shortly which may modify these conditions, but only after careful consideration. Specific conditions requested by KCS, Southern, SP and Cotton Belt, and UP for specific gateway and routing conditions will be imposed. The applicants have acquiesced to these conditions. We find that these conditions are operationally feasible, will not detract from the benefits of the merger, and are in the public interest.

We will not approve SP's requested trackage rights in the Portland, OR, area, providing SP with access to the North and South Rivergate industrial area. SP has not demonstrated any benefit from this trackage right. On the contrary, UP has demonstrated that it may cause operational problems in this area. Further, SP will merely acquire overhead trackage rights on BN. It will not be able to serve any shippers. Since we are required to find trackage rights in the public interest, we must deny SP's trackage rights even though stipulated to by BN.

CNW has also agreed to trackage rights with BN between St. Paul, MN, and Superior, WI, over the White Bear Lake route. These parties have negotiated what they believe to be reasonable compensation provisions. The parties also believe that there will be no operating problems and that CNW will be able to operate over this route efficiently, saving it the expense of rehabilitation of its own routes between these two points. The Twin Ports area is a major originating and terminating point. This condition will not only benefit CNW but also the shipping public.

CNW has also negotiated an option with BN to lease 20 acres of land located in BN's Union Yard complex. Use of this land will permit CNW to perform more efficient service in the MinneapolisSt. Paul area. We find this condition is also in the public interest. The conditions contained in appendix M shall be imposed on the merged company. They are all consistent with the public interest.

Control of FTC

When a rail carrier, or a person controlled by or affiliated with a rail carrier, is an applicant and the transaction involves a motor carrier, the Commission may approve and authorize the transaction only if it finds that the transaction is consistent with the public interest, will enable the rail carrier to use motor carrier transportation to public advantage in its operation, and will not unreasonably restrain competition. 106 This standard, as we have interpreted it, is not the basis for us to judge whether BN should be authorized to control FTC; instead the public interest test used to judge the overall transaction is the proper standard.

We have stated that where a transaction involving the control of a motor carrier by a railroad or of a motor carrier by a railroad affiliate, results in a change only of form, rather than in a change in substance, the proviso contained in 49 U.S.C. 11344(c) concerning the finding necessary in such cases is not applicable. 107 We have also approved the merger of a motor carrier controlled by a railroad into that railroad since the railroad would carry on the motor carrier operation as presently conducted. 108

10649 U.S.C. 11344(c).

107 New York Central R. Co. (Delaware) Merger, 312 I.C.C. 417, 419 (1961). See also. Atchison, T. & S. F. Ry. Co.-Control-Santa Fe Trail Transp., 15 M.C.C. 469, 472 (1938) and Greyhound Mergers, 1936, 1 M.C.C. 342, 351 (1936).

McCloud River R. Co.-Merger. I M.C.C. 354, 356 (1936).

FTC's service is generally restricted to being auxiliary or supplement to Frisco's train service. After the merger FTC's service will still be auxiliary or supplemental to train service, although the name of the train service will change from Frisco to BN. FTC will provide the same service to, from, and between the same points. Its corporate parent will change from Frisco to BN, but FTC will still operate in conjunction with what had been Frisco before the merger. We believe that this transaction, as a result of the BNFrisco merger, is merely a change in form, not substance.

The purpose of the BN-Frisco merger is to create a fiscally and physically healthy railroad capable of providing adequate service to the public. The control of FTC by BN is only a collateral impact of the merger, and will not result in any change of the physical properties of FTC, nor will it adversely affect the transportation service rendered to the public. The proposed transaction would create no new motor carrier network and there will be no adverse effect on competing motor carriers.

Securities

We may approve the issuance of securities by a carrier, and the assumption of an obligation or liability related to the securities of another person by a carrier109 if we find the issuance or assumption: (1) is for a lawful object within the corporate purpose of the carrier and reasonably appropriate for that purpose; (2) is compatible with the public interest; (3) is appropriate for or consistent with the proper performance by the carrier of service to the public as common carrier; and (4) will not impair the financial ability of the carrier to provide the service.110

The proposed issuance of stock by BN and the assumption by it of the obligation and liabilities of Frisco are governed by these principles. Each of these proposals is an integral part of the BNFrisco merger plan, and must be approved in order to effectuate the merger. We have concluded that the BN-Frisco merger is consistent with the public interest. We have also concluded that the stock exchange ratio is fair, and that BN is financially capable of assuming Frisco's obligation and liabilities.

10949 U.S.C. 11301(b)(1).

49 U.S.C. 11301(d)(1).

111

In past merger cases we have approved the issuance of securities and assumption of obligation and liabilities incidental to a merger.' The issuance of stock by BN and its assumption of Frisco's obligations and liabilities meet the statutory requirements, and shall be approved.

FINDINGS

In Finance Docket No. 28583 (Sub-No. 1F), subject to the terms and conditions set forth in appendix M, which we find to be just and reasonable, we find (a) that acquisition by Burlington Northern, Inc., of control of St. Louis-San Francisco Railway Company and its franchises and properties, and merger of St. Louis-San Francisco Railway Company and its properties and franchises into Burlington Northern, Inc., is within the scope of 49 U.S.C. 11343, is consistent with the public interest, and will not adversely affect the adequacy of transportation to the public; (b) that failure to include other railroads in the area involved in the transaction will not adversely affect the public interest; (c) that any guarantee, assumption of payments of dividends or of fixed charges, or any increase in fixed charges resulting from the transaction is consistent with the public interest; and (d) that the interests of employees affected by the proposed transaction will be adequately protected by imposition of the conditions set forth in appendix M.

In Finance Docket No. 28583 (Sub-No. 2F) we find (a) that Burlington Northern, Inc., is able, financially and otherwise, to consummate the transaction; (b) that the terms of the transaction are just and reasonable; (c) that the transaction is for a lawful object within the corporate purposes of Burlington Northern, Inc., and reasonably appropriate for that purpose, is compatible with the public interest, is appropriate for and consistent with the proper performance by Burlington Northern, Inc., of service to the public as a common carrier; and (d) will not impair the financial ability of Burlington Northern, Inc. to provide the service.

In No. MC-F-13500, we find that the acquisition by Burlington Northern, Inc. of control of Frisco Transportation Company through merger with St. Louis-San Francisco Railway Company is consistent with the public interest and will enable Burlington Northern, Inc. to

Seaboard Coast Line R. Co.-Merger-Piedmont, 334 1.C.C. 378, 394-395 (1969); Southern Pacific Transportation Co.-Merger, 334 1.C.C. 866, 872 (1969); Great Northern Pac.-Merger-Great Northern, 331 I.C.C. 228 (1967); and Chicago & N. W. Ry. Co.-Control. 347 1.C.C. 556 644 (1974).