Guidebook for Intercity Passenger Rail Service and Development (2016)

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E-1 The Surface Transportation Board (STB, or “Board”) is a federal regulatory agency created by the Interstate Commerce Commission (ICC) Termination Act of 1995 (see Pub. L. No. 104-88, 109 Stat. 805 [1995]). Many, but not all, of the functions of the former ICC were transferred to the STB. Pursuant to 49 U.S.C. § 10501, the STB has general jurisdiction over railroad transportation in the United States between a place in a state and a place in the same or another state as part of the interstate rail network. The statute further provides that STB’s jurisdiction over the construction, acquisition, operation, abandonment, or discontinuance of spur, industrial, team, switching, or side tracks or facilities, even if the tracks are located entirely in one state, is exclusive and preempts conflicting provisions of federal or state law. This provision was enacted primarily to prevent state and local regulatory agencies from engaging in this type of regulation and to ensure a uniform scheme throughout the nation. Notwithstanding the broad general jurisdiction referenced above, the Board has been directed to exempt certain rail transportation from its jurisdiction. Congress mandated that the Board shall exempt a person, class of persons, or a transaction or service on finding that its regulation is not necessary to carry out national transportation policy AND either (1) the transaction or service is of limited scope or (2) the application is not necessary to protect shippers from the abuse of market power. Many passenger service matters fall within the purview of this exemption regardless of whether they involve interstate or intrastate service. Accordingly, when a new intercity passenger service is contemplated, the sponsors need to know whether STB authority should be sought to construct and/or operate the line. When the matter appears questionable, the usual procedure is to file a notice or petition for exemption with the STB, along with a motion to dismiss on the ground that the Board’s regulation is not necessary to carry out the national transportation policy and that the transaction is of limited scope. That is the safest course to follow because engaging in a regulated transaction without STB authorization or exemption could violate the statute. Role in Intercity Passenger Rail Service The Board is involved with intercity passenger rail issues in addition to the initial question of construction/operation of the line or service. However, the precise role played by the Board depends on whether the service is operated by Amtrak or some other entity. The provisions applicable to Amtrak include intercity services operated by Amtrak under financial support con- tracts with states or other public entities. They would not apply to a non-carrier’s acquisition of rail property for a service that ultimately may be operated by Amtrak under contract. A separate discussion follows for the STB’s role regarding Amtrak and non-Amtrak operations. A p p e n d i x e The Role of the U.S. STB Regarding Intercity Rail Passenger Service

E-2 Guidebook for intercity passenger Rail Service and development Amtrak Operations The statuary scheme governing Amtrak’s rights and duties are codified in various sections of Title 49 of the U.S. Code. Although modified in many respects over the years, the basic law dates to 1970. The provisions governing Amtrak’s use of services and facilities of other railroads are found at 49 U.S.C. § 24308 (Including railroads and regional transportation authorities that did not join or enter into contracts with Amtrak back in 1971. See Metro-North Commuter R.R. v. Interstate Commerce Commission et al., 792 F.2d 278, 294 [2d Cir. 1986]). Amtrak is empowered to enter into contracts for use of rail facilities or services, the terms of which agreements are to include a penalty for untimely performance. If the parties cannot agree on the terms, Amtrak may petition the STB for an order (1) directing that the requested services and/or facilities be furnished and (2) fixing the terms of use and the compensation to be paid by Amtrak. Section 24308(a)(2)(B) mandates that quality of service shall be a major factor in determining the extent to which such compensation shall be greater than the incremental costs of using the facilities and providing the services. Amtrak has legal entitlement to use facilities of other railroads on an incremental cost basis. No other rail passenger operator enjoys such rights. The rights of access and the system of incremental costing are said to be major advantages of employing Amtrak for passenger train operation. Amtrak’s rights in this area were interpreted by the Board in several decisions arising out of the plan of the NNEPRA and Amtrak to reestablish intercity passenger rail service between Boston, Massachusetts, and Portland, Maine. In its rulings the Board resolved disputes as to what costs should be deemed incremental, the extent to which capital improvements were needed for the new service, and the basis for performance incentive payments. It also held that Amtrak’s access rights are exclusive and cannot be transferred to another entity (e.g., Application of the National Railroad Passenger Corp.—Springfield Terminal Railway Company, Boston & Maine Corporation and Portland Terminal Company, STB Finance Docket No. 33381, decided May 28, 1998). The Board’s traditional roles regarding Amtrak and its operations can be summarized as follows: • Directing rail carriers to provide services and facilities to Amtrak and fixing the costs (generally incremental) to be paid for such services and facilities. • Protecting Amtrak’s statutory preference over freight trains using any rail line, junction, or crossing in the absence of certain findings by STB. • Directing rail carriers to allow higher speeds as well as the operation of additional Amtrak trains and to fix the compensation therefore (prior to the Passenger Rail Investment and Improvement Act of 2008 [PRIIA], below, the Secretary of Transportation [Sec. DOT] per- formed most of this function). • Ruling on complaints by Amtrak objecting to a proposed downgrading of a rail facility and determining the costs payable by Amtrak to continue maintaining the utility of the facility (49 U.S.C. 24309; previously a function of Sec. DOT). • Ruling on Amtrak requests to exercise eminent domain to acquire rail property interests and to fix the basis of compensation. (This ruling was upheld by the Supreme Court of the United States. See National Railroad Passenger Corp. et al. v. Boston & Maine Corp. et al., 503 US 407 [1992].) PRIIA Changes The Passenger Rail Investment and Improvement Act of 2008 (122 Stat. 4907 et seq.— October 16, 2008) gave the Board additional rights and duties. Those sections of that law having an effect on STB and related to intercity passenger rail are summarized below.

The Role of the U.S. STB Regarding intercity Rail passenger Service E-3 Sections 207 and 213 Perhaps the most controversial of the changes, these provisions mandate that Amtrak and FRA develop appropriate metrics and standards for measuring the performance and service quality of intercity passenger train operations. Such factors as cost recovery, ridership per train mile, onboard services, on-time performance, minutes of delay, and delays incurred on the lines of each rail carrier are to be considered. The standards and metrics are to be developed in consultation with the STB, rail carriers, states, employees, and groups representing passengers. Section 213, “Passenger Train Performance,” provides that if a train’s performance is below a certain level, Amtrak, a host freight railroad or an intercity passenger railroad (presumably non-Amtrak), or an entity for which Amtrak operates service, can file a complaint with the STB, which then is required to institute an investigation. If the Board finds the host railroad to be at fault, money damages can be awarded along with a mandate for measures to ensure future compliance. The Association of American Railroads challenged the constitutionality of these provisions in the U.S. District Court for the District of Columbia. Although the District Court judge upheld the ruling, the US Court of Appeals for the DC Circuit reversed, holding the provision to be unconstitu- tional in that it impermissibly delegates regulatory authority to Amtrak (see Association of American Railroads v. U.S. Department of Transportation et al., DC Circuit, decided July 2, 2013). The crux of the problem was that FRA and Amtrak were said to be put on an equal footing and government regulatory power cannot be delegated to a private entity. In defending Section 207, the govern- ment took the position that in view of the substantial federal involvement and unique powers vested in it, Amtrak is not a private corporation. Citing the Congressional mandate that Amtrak be operated as a for-profit corporation and “is not a department, agency or instrumentality of the United States Government” (see 49 U.S.C. § 24301[a]), the court observed that as a for-profit corporation, Amtrak has every incentive to strive to maximize its own financial benefit rather than the common good. The case is pending in the Supreme Court of the United States with a decision expected in 2015. By decision rendered on March 9, 2015, the Supreme Court held that, for the purpose of deter- mining the validity of the metrics and standards, Amtrak is a governmental entity. In reaching its conclusion, the court reviewed the unique ties between the federal government and Amtrak, including the fact that Amtrak has received federal funding during each year of its existence. The decision was unanimous with one justice writing a concurring opinion and another filing a lengthy opinion concurring in the judgment. The case was sent back to the DC Circuit Court of Appeals for consideration of other possible issues that had not been raised in the Supreme Court (see Department of Transportation et al. v. Association of American Railroads, 575 U.S. ___[2015]). The National Association of Railroad Passengers (NARP) and others interested in railroad passenger service had filed an amicus curiae brief urging reversal. They argued that the Court of Appeals’ finding that Amtrak is a private entity is erroneous and point out that the on-time per- formance of Amtrak long-distance trains has declined since the decision. In that regard, Amtrak recently filed a complaint with STB seeking an investigation of Canadian National for causing “unacceptable train delays on the Chicago to Carbondale corridor.” On November 17, 2014, Amtrak filed another complaint asking the STB to institute an investigation of alleged substandard performance of the Capitol Limited between Washington and Chicago by Norfolk Southern and CSX Transportation. In a decision served on April 7, 2015, the Board ordered mediation of the dispute under Board supervision (see National Railroad Passenger Corp.—Investigation of Substandard Performance of the Capitol Limited, Docket NOR 42141-0, STB served April 7, 2015). Section 209 This provision directs Amtrak, in consultation with states and certain other entities, to develop and implement a single, nationwide standardized method for establishing and allocating the

E-4 Guidebook for intercity passenger Rail Service and development operating and capital costs for state-supported trains. Subsection (c) provides that if Amtrak and the states cannot agree, STB shall determine the appropriate method and require the full implementation of this method within 1 year of the determination. Section 212 Among other aspects, this section provides for a NEC Infrastructure and Operations Advisory Commission. One of the commission’s duties is to develop a standardized formula for determining and allocating costs, revenues, and compensation for NEC commuter rail passenger transportation based on certain criteria (e.g., no cross-subsidization). Any commission member may petition the STB to assist in reaching an agreement through nonbinding mediation. Moreover, if Amtrak and the public agencies providing commuter passenger service fail to implement new agreements in accordance with the previously agreed-on timetable, the commission shall petition the STB to determine the appropriate compensation and to enforce its determination on the parties involved. Section 214 Section 214 mandates FRA to develop a pilot program to permit rail carriers over which Amtrak operates to petition to be considered as the passenger rail service operator on a specified route in lieu of Amtrak. Both the owning-carrier and Amtrak may submit bids with the winner selected by the FRA, which may require performance to be at the standards developed pursuant to Section 207. If the selected rail carrier ceases to operate the route or fails to adhere to the required standards, FRA, in collaboration with STB, shall take action to enforce the contract, including substituting another operator and re-bidding the contract. Section 217 If a state selects an entity other than Amtrak to operate an intercity rail passenger route, it is authorized to make an agreement with Amtrak for use of Amtrak facilities and equipment or to have certain services (e.g., equipment maintenance) provided by Amtrak. If the parties cannot agree, the STB is empowered to direct the provision of Amtrak facilities, equipment, and/or services and to determine the reasonable compensation, liability, and other terms. Such determination is to be made within 120 days of submission of the dispute, but only on findings that the facilities, etc., are needed by the state and that Amtrak’s other services will not be impaired. Section 401 Section 401 provides for nonbinding mediation by the STB in disputes for use of trackage and services of a rail carrier by a public agency sponsoring commuter rail passenger transportation. It also authorizes such STB mediation in situations where a public agency seeks an interest in a railroad right-of-way for construction and operation of a segregated fixed guideway facility to provide commuter rail passenger transportation. Originally the sponsors of this provision wanted it to extend to busways, but the commuter rail language was used. Presumably this could apply to construction of either standard commuter rail or light rail facilities parallel to the freight railroad’s trackage. Non-Amtrak Operations Rail carriers or other entities seeking to operate intercity rail passenger service do not possess the statutory powers enjoyed by Amtrak. In most situations such entities must engage in arms-length negotiations with owners of the tracks and facilities needed for passenger service operation. The willingness of freight railroads to involve themselves in passenger train operations depends on numerous factors, including capacity to handle additional trains, potential payments by the

The Role of the U.S. STB Regarding intercity Rail passenger Service E-5 passenger provider, relief from passenger liability, and implementation of capital improvements that can benefit both entities. The approaches taken by U.S. freight railroads toward new passenger service proposals vary in level of acceptance. The process of considering such proposals, however, is one of voluntary negotiation, not the exercise of legal rights. Other Related STB Powers that Affect Intercity Passenger Rail Service STB has statutory roles to play with regard to construction, acquisition, abandonment, and operation of railroad lines. STB’s abandonment role is not typically relevant in discussions of planning and development of intercity passenger rail projects and is not covered here. Construction, acquisition, and operation will be discussed separately in the following sections. Construction In recent years, proposals for construction of new railroad lines for intercity passenger ser- vice have related primarily to plans for high-speed rail (HSR) operations. Decisions have been rendered regarding proposed services in California, between California and Nevada, and within Florida. Each is discussed below. California/Nevada The first of these cases involved a new high-speed railroad line between Victorville, CA, and Las Vegas, NV, proposed by DesertXpress Enterprises, LLC (“Desert”). To aid in its planning, Desert petitioned for a declaratory order that its project falls within the Board’s exclusive juris- diction and, accordingly, that the preemption of most state or local laws would attach. After reviewing the legislative history and applicable cases, the Board found that Desert would be operating as a common carrier providing passenger rail transportation to the general public for compensation. Accordingly, STB has exclusive jurisdiction over the planned new track, facilities, and operations and the Federal preemption attaches (DesertXpress Enterprises, LLC—Petition for Declaratory Order, FD 34914 [STB served June 27, 2007]). In its decision the Board noted that courts have found two broad categories of state and local actions covered by the preemption: (1) any form of permitting or preclearance that could be used to deny the railroad the ability to conduct its operations or proceed with Board-authorized activities and (2) actions that would have the effect of preventing or unreasonably interfering with railroad transportation. The second Desert case arose from the efforts of the sponsors of a competing proposal (a Maglev operation within the same general territory) to reopen the initial decision on the grounds that the Desert proposal is not within STB’s jurisdiction. In its 18-page opinion discuss- ing the numerous issues presented, the Board declined the invitation to reopen (see DesertXpress Enterprises, LLC—Petition for Declaratory Order, FD 34914 [STB served May 7, 2010]). The more significant of these issues were (1) changed circumstances and (2) erroneous application of the phrase “as part of the interstate rail network.” Item 1 was dealt with by stating that the subsequent organization of a competing project does not change the STB’s jurisdiction over the DesertXpress project. The Board devoted a lengthy discussion to the issues raised in Item 2. In short, the competitor was arguing that to be part of the interstate rail network, an operation must carry freight or be connected to a railroad that does carry freight. The Board pointed out that this phrase was added by Congress to provide an expansion of previous jurisdiction that did not apply to purely intra- state transportation. Under present law such transportation is covered if related to interstate commerce. But in any event, that phrase is not involved here because the statute clearly confers

E-6 Guidebook for intercity passenger Rail Service and development jurisdiction over rail transportation between a place in one state and a place in another state, the situation at hand. The following quote from the Board’s opinion is instructive: In short, Congress retained after the [ICC Termination Act] the requirement . . . that a person must obtain authority to construct and operate a railroad line that will be used to transport passengers in interstate commerce, and that provision applies to a passenger rail line (other than used by Amtrak, local transit or a street railway), whether or not any freight would be transported over the line or the line would connect to an existing rail line on which freight is transported. Nowhere in the statute or its legislative history has Congress defined the interstate rail network as essentially or exclusively freight-based. Petitioners’ efforts to read such a restriction into the statute where none exists on its face are unpersuasive. Indeed, the plain language of the statute, as well as the public policy behind federal regulation of interstate transportation, militates against that interpretation. (p. 17) The following year the Board-authorized construction and operation of the proposed high- speed passenger DesertXpress line over the 190 miles between Victorville and Las Vegas. (See DesertXpress Enterprises, LLC et al.—Construction and Operation Exemption—In Victorville, CA, and Las Vegas, NV, FD 35544 [STB served October 25, 2011].) This was implemented by granting an exemption from the formal approval requirements on findings that the detailed application procedures are not necessary to carry out the national transportation policy and that the proposal is of limited scope. Protection of freight shippers was not at issue, given that no freight service was contemplated. In its decision, the STB cited the advantages of the project, including reduction of traffic congestion, provision of an environmentally friendly transportation option, elimination of air travel constraints, and a beneficial effect on the economies of both Nevada and California. The exemption from STB’s construction and operation requirements does not exempt this or similar projects from an environmental analysis. Indeed, the National Environmental Policy Act (NEPA) requires analysis of the environmental effects of proposed federal actions and that the public be informed of those effects (see Baltimore Gas & Elec. Co. v. Natural Res. Def. Council et al., 462 US 87 [1983]). The law requires agencies to take a hard look at the potential envi- ronmental impacts, including a reasonable range of alternatives that must include a no-action alternative. STB is required to consider significant potential beneficial and adverse environmental impacts in deciding whether to authorize a railroad construction project as proposed, deny the proj- ect, or grant or exempt it with conditions, including conditions to mitigate the environmental impact. In this case, as in numerous others, FRA became the lead agency in the environmental review with STB participating as a cooperating agency along with three other federal agencies (i.e., Bureau of Land Management, FHWA, and the National Park Service). Public meetings were held and draft, supplemental draft, and final EISs were issued. The final EIS enumerated the environmentally preferred alternative for the route, facilities, and technology, all subject to 146 mitigation measures to avoid or minimize potential adverse environmental impacts of the project. These included measures to protect desert birds and wildlife, to reduce noise and visual impacts, and to avoid or minimize adverse effects to cultural and paleontological resources, as well as requirements for Tribal monitoring of construction. The grant of the exemption was made subject to those measures. California As part of its plans for construction and operation of a high-speed passenger railroad between San Francisco and Los Angeles–San Diego, the California High-Speed Rail Authority has filed several exemption petitions with the STB. Insofar as relevant here, the first pertained to construc- tion of a 65-mile line between Merced and Fresno (see California High-Speed Rail Authority— Construction Exemption—In Merced, Madera and Fresno Counties, Cal. FD 35724 [STB served

The Role of the U.S. STB Regarding intercity Rail passenger Service E-7 June 13, 2013]), while the second covered construction of a 114-mile extension from Fresno to Bakersfield (see California High-Speed Rail Authority—Construction Exemption—In Fresno, Kings, Tulaire and Kern Counties, Cal. FD 35724 [Sub-No. 1] [STB served August 12, 2014]). As with the DesertXpress cases, the STB’s Office of Environmental Analysis worked with FRA to review the potential environmental impacts, including the requisite hard look at the alternatives for both phases of the project. In both cases, the Board granted the petitions for exemption, subject to enumerated conditions for mitigation of potential environmental consequences. Some of the arguments raised by the parties in both cases are noteworthy. First, the California authority took the position that STB lacked jurisdiction because the project would be located entirely within California and would provide only intrastate passenger rail service with no plans for through-ticketing to points outside the state. Although the plan entails sharing existing rail lines in the Los Angeles and San Francisco areas, the authority argued that this does not confer jurisdiction on the Board. In finding the proposal to be part of the interstate rail network, the Board observed that the plan is for Amtrak to operate over the line, at least on an interim basis, with through-ticketing and nationwide connections and that the blended approach will entail use of facilities of other railroads at both ends of the line. Finally, there will be interconnectivity with Amtrak at seven or more jointly used stations. Once again, the Board cited the provision of the ICC Termination Act, giving it jurisdiction over intrastate rail transportation operated as part of the interstate rail network. As outlined above, the proposal was held to be a part of that network. Other objections raised by opponents included allegedly improper segmentation and the argument that a full application, rather than an exemption petition, should be used for the project. The segmentation argument relates to the fact that this case dealt with but 65 miles of a planned 800-mile system. While recognizing that fact, the Board opined that the Fresno-Merced section can be used by Amtrak even before other parts of the high-speed system become operational. The Application v. Petition argument was based on the theory that such a large project must be made the subject of a fully documented application, rather than an exemption petition. In that regard the Board pointed out that Congress has enacted a presumption that new rail construction projects are in the public interest and are to be exempted unless the application process is necessary to carry out the national transportation policy and there is a danger of market power abuse (see Alaska Survival v. STB, 705 F.3rd 1073 [9th Cir., 2013]). The State of California has determined that there is a need for HSR in this area and that significant public benefits will flow from it. The application process is not necessary to carry out national rail transportation policy and there is no danger of market power abuse. Moreover, both STB and FRA have conducted thorough environmental reviews and have identified mitigation measures to be required. The Board also noted that rail passenger operations are among the most environmentally friendly modes of transportation. An exemption also was granted in the second case, involving the 114-mile line between Fresno and Bakersfield. Here, again, the Board was a cooperating agency for the preparation of a project- specific EIS. Some opponents argued that the full application process should be required because of funding problems and judicial proceedings pending in the California state courts. Citing Alaska Survival, supra, the Board held that the law does not prohibit an exemption proceeding when the viability of the proposal is being questioned. The exemption was approved, subject to environmental conditions, including use of a specified environmentally preferred route. Florida A different conclusion was reached regarding proposed construction and operation of a new higher speed rail passenger service within the state of Florida (All Aboard Florida—Operations LLC and All Aboard Florida—Stations—Construction and Operation Exemption—In Miami, Fla. and Orlando, Fla., FD35680 [STB served Dec. 21, 2012]). All Aboard Florida (AAF), an affiliate

E-8 Guidebook for intercity passenger Rail Service and development of the Florida East Coast Railway (FEC), plans to establish and operate a new higher speed service between Miami and Orlando, a distance of about 230 miles. Approximately 200 miles of line, between Miami and Cocoa, would be on the existing FEC freight line—in some locations alongside and in others by use of the same trackage. Although the existing FEC line is single track, the plan contemplates installing a second track in many locations. The segment between the existing FEC line in Cocoa and Orlando would be newly constructed, primarily on rights of way leased from public agencies. AAF contended that STB lacked jurisdiction over the proposed construction and operation, given that the project will be entirely within the state of Florida and not “part of the interstate rail network.” AAF pointed out that there will be no connection or through-ticketing with Amtrak or any other interstate carrier and that, although some trackage will be shared with FEC, the project does not entail any freight movements. Observing that whether an intrastate passenger service is part of the interstate rail network is a fact-based determination, the Board concluded that the proposed operation will not be part of that network. The facts cited in support of the conclusion were (1) the passenger service is purely intrastate in nature, (2) the location of a station at the Orlando airport does not make the service part of the interstate rail network, and (3) the joint use and dispatching of the 200-mile FEC corridor between Miami and Cocoa does not change the result. The Board also cited a Court of Appeals decision upholding a decision of the former Interstate Commerce Commission that an intrastate scenic passenger railway does not trigger ICC jurisdiction by use of tracks owned by an interstate freight railroad (Magner-O’Hara Scenic Ry. v. ICC, 692 F.2d 441, 443 [6th Cir. 1982]). The All Aboard Florida decision was 2-1 with Vice Chairman Mulvey dissenting. His opinion pointed to the facts that the operation will be an intercity train service, not a tourist or scenic train, that much of the operation will be within the existing FEC interstate freight railroad right- of-way, and that the terminus at the Orlando airport seems designed to serve passengers in interstate commerce. He also criticized the majority for relying on cases decided under former law before the ICC Termination Act specifically granted the STB jurisdiction over purely intrastate service (see 49 U.S.C. § 10501(a)(2)(A) and (b)(2)). His approach would be to review the case under the normal criteria for exemption from regulation and join in the environmental review being conducted by FRA. Acquisition of Railroad Lines In recent years there have been numerous cases involving acquisition of existing rail lines for passenger service operations. Usually such purchases are by public agencies that will sponsor, but not operate, the new passenger service. The leading case on this topic, Me. Dep’t, of Transp.— Acquis. & Operation Exemption—Me. Cent. R.R. (8 I.C.C.2d 835 [1991]), was decided by the Interstate Commerce Commission in 1991 and has been followed by both the ICC, STB’s pre- decessor agency, and STB since that time. The basic holding was that the sale of the physical assets of a railroad line by a carrier to a public agency does not make that agency a rail carrier if certain conditions are met. These include a requirement that the seller retain a permanent, exclu- sive freight rail operating easement, together with the common carrier obligation on the line, and that the sale terms protect the selling carrier from undue interference with the provision of common carrier rail freight service. Two more recent cases will be discussed. The first involved a proposal of the New Mexico Department of Transportation (a non-carrier) to acquire approximately 297 miles of line in New Mexico and Colorado from the BNSF Railway Company (see New Mexico Department of Transportation—Acquisition Exemption—Certain Assets of BNSF Railway Company, FD 34793 [STB served Feb. 6, 2006]). The proposal contemplated operation of commuter rail passenger

The Role of the U.S. STB Regarding intercity Rail passenger Service E-9 service by a yet-unknown operator while freight service and intercity passenger service would continue to be provided over the trackage by BNSF and Amtrak, respectively. Given that BNSF would retain freight common carrier rights and Amtrak would continue intercity passenger rail service, the Board determined that the real estate transaction does not require its approval. A more recent case, Florida Department of Transportation—Acquisition Exemption—Certain Assets of CSX Transportation, Inc., FD 35110 (STB served Dec. 15, 2010), involved the Florida Department of Transportation’s acquisition of 61.5 miles of railroad line as part of a plan to pro- vide commuter rail service to the Orlando area. Because opponents of the proposal argued that the Me. Dep’t. of Transp. case, supra., was incorrectly decided, the Board conducted a detailed review of the arguments. The objections were (1) the physical assets of a rail line cannot be sepa- rated from common carrier rights and obligations, (2) that sale to a non-carrier requires Board exemption or approval when the purchaser plans to maintain and dispatch the line, and (3) the case is contrary to the precedent of an earlier ICC decision involving the sale of a railroad line in New York City. With regard to the first two objections, the Board noted many years of holdings that sale of a rail line to a non-carrier does not constitute “the sale of a railroad line” where the existing carrier retained a permanent and unconditional easement to conduct common carrier freight opera- tions and the right to maintain and improve the line. The freight rail easement is recognized at law as a bona fide property interest frequently used in the rail industry. The seller would have remedies open to it in the event of improper dispatching or maintenance by the purchaser. The third objection contended that the earlier holdings conflict with prior ICC and court decisions involving purchase of a railroad line in Staten Island, New York, by New York City for operation by a subsidiary of the state’s Metropolitan Transportation Authority (MTA). Back in 1970, the ICC had authorized MTA’s acquisition of the entire property interests in the line and the grant by MTA of trackage rights back to the selling carrier while MTA would maintain the line. Some years later that arrangement was challenged, with the result that the ICC and Second Circuit Court of Appeals held this transaction to have made MTA a rail carrier with a residual obligation to handle freight service should the selling carrier default (see Bhd. of Locomotive Eng’rs v. Staten Island Rapid Transit Operating Auth., 360 ICC 464 [1979]); Staten Island Rapid Transit Operating Auth. v. ICC, 718 F.2d 533 [2d Cir. 1983]). The Board distinguished the Staten Island case from the case at hand given that Florida DOT is acquiring only the physical assets with CSX retaining a permanent easement and common carrier duty to operate the freight service. The lesson of these cases is that when a public agency acquires a rail line as a non-carrier, the selling railroad must reserve a permanent easement for freight service and to protect its obligations to Amtrak. The Board noted that reasonable restrictions on freight operations to protect commuter service are permissible. It also referenced a 1988 transaction whereby FL DOT acquired a 67.5-mile CSX line between West Palm Beach and Miami without ICC review. While stating that this alone would not make the state a rail carrier, by not seeking formal STB review, the buyer runs the risk that it will be found to have violated the statute. Operating Matters In several recent cases the Board has dealt with long-distance, tour-type passenger trains to be provided by non-rail entities and operated by others over the lines of rail carriers. One such case involved the so-called Florida Fun Train that ran between the Miami area and the Orlando area (see Fun Trains, Inc.—Operation Exemption—Lines of CSX Transportation, Inc. and Florida Department of Transportation, FD 33472 [STB served March 5, 1998]). Fun Train had obtained overhead trackage rights to operate entertainment-type excursion trains. Such rights were sub- ject to the rights of Amtrak to operate intercity passenger service, Tri-Rail to operate commuter

E-10 Guidebook for intercity passenger Rail Service and development passenger service within its service area, CSX to operate freight trains, and “the rights of others to operate high-speed passenger service.” Amtrak supplied the locomotives and operating crews for Fun Train. Holding that the operations would be under CSX’s complete control, that there would be no transfer of common carrier obligations or interference with Amtrak or CSX freight trains, the Board found that the proposed operations are not subject to its jurisdiction. Several years later the Board reached what would appear to be the opposite conclusion in a case involving a land cruise seasonal vacation tour operation with no set schedules (see American Orient Express Railway Company LLC—Petition for Declaratory Order, FD 34502 [STB served Dec. 29, 2005]). Petitioner, American Orient Express, owned vintage rail cars, diners, and sleepers, and sold tickets for various itineraries to the public on a one-way basis. While the trains were operated by Amtrak using Amtrak locomotives and crews, American Orient employed the onboard service staff such as waiters, cooks, and attendants. Applying the proposed operations to the statutory scheme, the Board first concluded that Petitioner does provide transportation of passengers by rail as part of its package. Considerable discussion was devoted to the issue of whether American Orient is a common carrier, a term referring to an entity that holds itself out to the general public as engaged in the business of transporting persons or property from place to place for compensation. While American Orient claimed to not hold itself out to the general public, the Board observed that it does hold itself out to the subset of the public to which it markets its services. Citing cases holding that cruise ships and tour bus operators are deemed common carriers, the STB concluded that American Orient’s somewhat similar operations fall within that category. After finding that American Orient is a rail common carrier subject to its jurisdiction, the STB exempted it from licensing regulation for its operation. The ultimate outcome was similar to that of the Fun Train case. Service for Local Governmental Agencies Congress has specifically exempted public transportation service provided by, or by a rail carrier under contract with, a local governmental authority from STB jurisdiction. The currently effective provision is found at 49 U.S.C. § 10501(c)(2). When the Massachusetts Bay Transit Authority, a local entity, sought to change operators of its rail commuter network, the proposed new operator, Massachusetts Bay Commuter Railroad Co. (MBCR), petitioned the STB for a declaratory order that it would be exempt from the Board’s jurisdiction. In its decision (see Massachusetts Bay Commuter Railroad Company, LLC—Petition for Declaratory Order, FD 34332 [STB served June 5, 2003]), the Board observed that although MBCR meets the definition of a common carrier railroad, it is exempt from STB jurisdiction given that its entire operation is to be performed under contract with a local governmental authority. This applies even if the service is operated between two or more states. Until recently, one open question was whether STB action would be required for the abandon- ment of trackage and facilities used for a rail passenger operation by or for a local governmental authority. The answer came in a decision involving the removal of the last 460 feet of track at the end of NJ Transit’s Princeton Branch (see New Jersey Association of Railroad Passengers and National Association of Railroad Passengers—Petition for Declaratory Order—Princeton Branch, FD 35745 [STB served July 25, 2014]). Because the line was used exclusively for passenger service with no common carrier freight obligation, it was held to be covered by the local governmental authority exemption. Notwithstanding that its trains connect with Amtrak and other carriers and— indeed, that some of them operate into other states—the Board held that the service NJ Transit operates over its entire system is not subject to STB jurisdiction. Presumably if common carrier freight service were provided on the branch, NJ Transit could change or eliminate the passenger

The Role of the U.S. STB Regarding intercity Rail passenger Service E-11 service, but the freight carrier would need STB action to abandon the line. But that was not the situation here. Summary of STB Role in Non-Amtrak Matters The following conclusions may be drawn from the above analysis of the STB’s emerging role in intercity passenger rail service covered in this appendix: • Both interstate and intrastate passenger service are subject to STB jurisdiction if operated as part of the interstate rail network. • STB regulation can attach to a passenger-only operation even if not connected to other railroads. • A purely intrastate project can be deemed part of the interstate rail network and thus subject to STB regulation if interconnected to and/or interchanging passengers with other carriers or using joint facilities. Conversely, such a project may not be part of the network if there are no connections or interchanging of passenger with other carriers. • Issues relating to funding or economic viability of a project do not prohibit the granting of an exemption by STB. Any decision to exempt a project is permissive only and does not mandate that the project be built or operated. • A public entity’s purchase of rail assets does not ipso facto make that agency a rail carrier; however, the seller must retain or properly extinguish (through discontinuance authority from the STB) its rights to honor its obligations to provide common carrier freight service and to serve Amtrak. • Commuter rail operations funded by state or local governmental agencies are statutorily exempt from STB jurisdiction.