Railroad Legal Issues and Resources (2015)

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7 INDEX OF LEGAL TOPICS AND ISSUES Page I. ABANDONMENT OF RAIL LINES OR DISCONTINUANCE 171 OF SERVICE A. Introduction 171 Part I concerns only abandonment of rail lines and federal regulatory issues, including the abandonment or discontinuance of a rail line or a portion thereof that is subject to 49 U.S.C. § 10903, et seq. and the regulations in 49 C.F.R. § 1152, et seq.,1 as well as the interim use of railroad rights-of-way for recreational trails. B. Law Applicable to an Abandonment of a Rail Line or a 172 Discontinuance of Rail Service 1. Distinction Between Abandonment and Discontinuance 172 As explained by the Supreme Court of Michigan in Mich. Dep’t of Natural Res. v. Carmody-Lahti Real Estate, Inc.,2 an abandonment “involves relinquishing rail lines and underlying property interests,” whereas discontinuance “‘allows a railroad to cease operating a line for an indefinite period while preserving the rail corridor for possible reactivation of service in the future.’”3 Statutes and Regulations 173 2. Procedures Applicable to an Abandonment or Discontinuance 173 When a railroad carrier subject to the jurisdiction of the Surface Transportation Board (STB) decides to abandon or discontinue any part of a railroad line, the carrier must file an application with the STB and provide information as required by statute and the regulations thereto.4 1 See Surface Transportation Board, Overview, available at http://www.stb.dot.gov/stb/about/overview.html (last accessed Mar. 31, 2015). 2 472 Mich. 359, 699 N.W.2d 272 (Mich. 2005). 3 Id., 472 Mich. at 365, 699 N.W.2d at 276 (citations omitted). 4 49 U.S.C. §§ 10903–10905 (2014); 49 C.F.R. pt. 1152) (2014).

8 3. STB’s Authority to Exempt a Person, Class of Persons, or a 177 Transaction or Service The STB “shall exempt a person, class of persons, or a transaction or service whenever the Board finds that the application in whole or in part of a provision of this part…is not necessary to carry out the transportation policy of section 10101 of this title and…either…the transaction or service is of limited scope[] or the application in whole or in part of the provision is not needed to protect shippers from the abuse of market power.”5 Besides being able to commence a proceeding on its own initiative,6 the board is empowered to specify the effective period of an exemption7 and may revoke an exemption when “necessary to carry out the transportation policy” described in 49 U.S.C. § 10101. Cases 179 4. Statutory and Common Law Principles for Establishing 179 an Abandonment In Avista Corp. v. Wolfe,8 the Ninth Circuit held that whether a railroad has abandoned its right-of-way is determined based on the plain language of 43 U.S.C. § 912 and common law principles of abandonment: the present intent to abandon and physical acts demonstrating the clear intent to abandon. 5. Recent Railroad Abandonment Decisions by the STB 180 a. Request for Exemption under 49 U.S.C. § 10502 from Prior 180 Approval Requirements of 49 U.S.C. § 10903 In CSX Transp. Inc.– Aban. Exemption–In White County, Ind.,9 CSX Transportation, Inc. (CSXT) sought “an exemption under 49 U.S.C. § 10502 from the prior approval requirements of 49 U.S.C. § 10903 to abandon an approximately 9.67-mile rail line in White County, Ind. (the Line).”10 Although the board denied the CSXT petition because of insufficient evidence, CXST 5 49 U.S.C. § 10502(a) (2014). 6 49 U.S.C. § 10502(b) (2014). 7 49 U.S.C. § 10502(c) (2014). 8 549 F.3d 1239, 1248 (9th Cir. 2008). 9 CSX Transp. Inc., – Aban. Exemption – In White County, Ind., EB 43833, Slip Op. (STB served Sept. 19, 2014), available at http://www.stb.dot.gov/decisions/readingroom.nsf/UNID/15AA5535B36F775E85257D58004CE5AC/ $file/43833.pdf (last accessed Mar. 31, 2015). 10 Id. at 1.

9 could file an appropriate abandonment application or petition for exemption that cured the “defects” in the current petition.11 b. Request to Authorize a Third Party or Adverse Abandonment 182 of a Line In Paulsboro Refining Company LLC–Adverse Abandonment–in Gloucester County, N.J.,12 Paulsboro Refining Company LLC (PRC) requested the board to authorize the third-party abandonment, referred to as an adverse abandonment, of approximately 5.8 mi of PRC’s rail line (the Line) that SMS Rail Service, Inc. (SMS), a Class III railroad, operated for PRC. Because there was no present or future need for common carrier service, the board approved the application. The board rejected SMS’s claims that the abandonment should be denied because federal railroad safety regulations would no longer apply, noting that other federal safety regulations would continue to apply.13 c. Denial of Petition to Reopen Declaratory Order Proceeding in 184 the Absence of Changed Conditions or New Evidence In BNSF Railway Company–Petition for Declaratory Order,14 the board followed up on its 2010 authorization of BNSF to abandon 1.54 mi of a rail line in Oklahoma City, Oklahoma pursuant to 49 U.S.C. § 10903. The board denied J. Kessler’s petition filed in June 2009 to reopen the proceedings, finding that the shipper did not currently need rail service, that BNSF would provide rail service when the shipper required it, and that J. Kessler’s arguments regarding the absence of future rail service for the shipper was nothing more than speculation. 6. Class Exemption and Relocation 186 In Kessler v. Surface Transportation Board,15 the District of Columbia Circuit held that it is within the STB’s discretion to exempt a rail carrier from abandonment procedures under 49 U.S.C. § 10904 “when the right-of-way to be abandoned is needed for a public purpose and there is no overriding public need for continued rail service.”16 11 Id. at 6. 12 AB 1095 (Sub-No.1), Slip Op. at 1 (STB served Dec. 2, 2014), available at http://www.stb.dot.gov/decisions/readingroom.nsf/UNID/7A83E1ACF028CC8385257DA200546855/$fil e/43977.pdf (last accessed Mar. 31, 2015). 13 Id. 14 BNSF Railway Company–Petition for Declaratory Order, FD 35164, Slip Op. at 1 (STB served May 7, 2010), available at http://www.stb.dot.gov/decisions/readingroom.nsf/UNID/BFDBAEB594ECED188525771B00702699/ $file/40399.pdf (last accessed Mar. 31, 2015). 15 635 F.3d 1 (D.C. Cir. 2011). 16 Id. at 5.

10 7. Judicial Approval of the Abandonment of a Line of a Railroad 187 Company Reorganizing in Bankruptcy Normally, the STB must authorize the abandonment of a railroad line, but in the case of a railroad company reorganizing in bankruptcy, the court may authorize an abandonment.17 8. STB’s Authority in Adverse Abandonment Proceeding and in 187 Involuntary Bankruptcy Proceeding In Howard v. Surface Transportation Board,18 the First Circuit held that “Congress made it clear in enacting 11 U.S.C. § 1170 that it wanted the bankruptcy court, not the STB, to make the final determination of whether a debtor’s rail lines could be abandoned and the STB to play an advisory role, subject to time constraints”19 but that the board retains its jurisdiction over “adverse” abandonment or discontinuance proceedings.20 9. Preemption of Actions in State Court for Damages Caused by 190 Abandonment of a Rail Line In Chicago & N.W. Transp. Co. v. Kalo Brick & Tile Co.,21 the U.S. Supreme Court held “that the Interstate Commerce Act precludes a shipper from pressing a state-court action for damages against a regulated carrier when the [ICC], in approving the carrier’s application for abandonment, reaches the merits of the matters the shipper seeks to raise in state court.”22 C. Federal Grants of Rights-of-Way to Railroads, Abandonment, 191 and Reversionary Rights 17 11 U.S.C. § 1170 (2014). 18 389 F.3d 259 (1st Cir. 2004). 19 Id. at 268 (emphasis in original). 20 Id. at 268, 270–71. 21 450 U.S. 311, 101 S. Ct. 1124, 67 L. Ed. 2d 258 (1981). 22 Id., 450 U.S. at 322–23, 101 S. Ct. at 1132–1133, 67 L. Ed. 2d 258.

11 Articles 191 1. Statutes Applicable to Grants of Rights-of-Way to Railroads 191 by the United States An article published by the Congressional Research Service, analyzing the 1875 General Railroad Right of Way Act (the 1875 Act)23 and the Act of 1922,24 states that the Court of Federal Claims has held that because only an easement was granted for a right-of-way “when the right of way was no longer used for railroad purposes, the easement was lifted and no property interest reverted to the United States.”25 2. Whether the Federal Government Retains any Ownership in 194 Railroad Rights-of-Way Granted After 1871 A law review article, written prior to the decision in Marvin M. Brandt Revocable Trust v. United States,26discussed in subpart I.C.3 below, discusses the split that had developed in the federal circuit courts of appeals on whether the federal government retains any ownership in railroad rights-of-way that were granted after 1871, the year that Congress discontinued granting land to railroad companies in favor of granting rights-of-way to the companies.27 Case 195 3. Property Owner’s Right after a Railroad’s Abandonment 195 of an Easement In Marvin M. Brandt Revocable Trust v. United States,28 the Supreme Court held that the General Railroad Right-of-Way Act of 1875 granted only an easement to the railroad company, not an interest in fee, and thus when the railroad company in 2004 properly abandoned the right- of-way, “Brandt’s land became unburdened of the easement, conferring on him the same full rights over the right of way as he enjoyed over the rest of the Fox Park parcel.”29 23 43 U.S.C. § 934 (repealed). 24 43 U.S.C. § 912 (2014) (disposition of abandoned or forfeited railroad grants). 25 PAMELA BALDWIN & AARON M. FLYNN, FEDERAL RAILROAD RIGHTS OF WAY 16 (Congressional Research Service, CRS Report for Congress, updated May 3, 2006), available at http://congressionalresearch.com/RL32140/document.php (last accessed Mar. 31, 2015). 26 134 S. Ct. 1257, 1266, 188 L. Ed. 2d 272, 282 (2014). 27 Darwin R. Roberts, The Legal History of Federally Granted Railroad Rights-of-Way and the Myth of Congress’s “1871 Shift,” 82 U. COLO. L. REV. 85, 85–86 (2011). 28 134 S. Ct. 1257, 188 L. Ed. 2d 272 (2014). 29 Id., 134 S. Ct. at 1266, 188 L. Ed. 2d at 282.

12 Statutes 197 D. The National Trails System Act 197 1. Authorization for the Interim Use of Railroad Rights-of-Way 197 for Recreational Trails The National Trails System Act (Trails Act),30 supplemented by the 1976 Railroad Revitalization and Regulatory Reform Act (4R Act)31 and by the National Trails Systems Improvements Act of 1988,32 encouraged the use of railroad rights-of-way as trails. The 1994 Rails-to-Trails Act (Rails-to-Trails) preserves abandoned railroad rights-of-way by preventing them from reverting to the original grantor of the easement or the grantor’s successor-in- interest.33 Regulations 199 2. Requirements for Interim Trail Use of Railroad Right-of-Way 199 Federal regulations set forth the requirements with which a state, political subdivision, or private organization must comply when requesting to use an abandoned railroad right-of-way for interim trail use.34 E. Whether and When Interim Use as a Recreational Trail of an 200 Abandoned Railroad Right-of-Way Is a Taking Under the Fifth Amendment 1. Takings When an Easement Was Granted or Obtained Only for 200 Railroad Purposes This subpart of the digest discusses the rights that a private property owner may have when a railroad abandons a right-of-way that crosses the owner’s land. 30 16 U.S.C. § 1241, et seq. (2014). 31 Pub. L. No. 94-210, 90 Stat. 33. See 45 U.S.C. 801, et seq. (2014). 32 Pub. L. No. 100-470, 102 Stat. 2281, 2281 (1988), codified at 16 U.S.C. § 1248(c) (2014). 33 16 U.S.C. § 1247(d) (2014). 34 49 C.F.R. § 1152.29(a) (2014).

13 Statute 200 2. The Tucker Act and Claims Against the United States 200 Claims by landowners of a taking of their property when an abandoned rail line is to be used as a recreational trail are heard by the Court of Federal Claims under the Tucker Act,35 with the U.S. District Courts retaining concurrent jurisdiction over claims for $10,000 or less.36 Cases 201 3. Takings Claims Against the United States Arising Under the Trails Act 201 In Preseault v. Interstate Commerce Commission,37 the U.S. Supreme Court held that the petitioners’ claim of a reversionary interest in land over which a railroad had a right-of-way had to be brought under the Tucker Act in the Court of Federal Claims. 4. Requirement of Just Compensation When New Uses Are Imposed 202 In Toews v. United States,38 the Federal Circuit held that the government may impose new uses affecting the fee interests held by adjacent landowners for which the government must pay just compensation and further held that the use of a railroad right-of-way as a recreational trail is an entirely different use that constitutes a taking under the Fifth Amendment. 5. Whether There Is a Taking of a Reversionary Right or Interest 204 In Thompson v. United States,39 the Court of Federal Claims held that because the plaintiffs had a reversionary interest in the easements to their properties, and because Michigan did not authorize the use of railroad easements for public recreational trails, the government’s actions constituted a taking when the government converted a right-of-way to a public recreational trail. 35 28 U.S.C. § 1491 (2014). 36 28 U.S.C. § 1346(a)(2) (2014). 37 494 U.S. 1, 11–13, 110 S. Ct. 914, 921–922, 108 L. Ed. 2d 1 (1990). 38 376 F.3d 1371, 1376 (Fed. Cir. 2004). 39 101 Fed. Cl. 416, 434 (Fed. Cl. 2011).