|SURFACE TRANSPORTATION BOARD DECISION DOCUMENT|
|SAN PEDRO RAILROAD OPERATING COMPANY, LLC--ABANDONMENT EXEMPTION-IN COCHISE COUNTY, AZ|
|GRANTED SAN PEDRO RAILROAD OPERATING COMPANY, LLC AN EXEMPTION UNDER 49 U.S.C. 10502 FROM THE PRIOR APPROVAL REQUIREMENTS OF 49 U.S.C. 10903 TO ABANDON APPROXIMATELY 76.2 MILES OF RAILROAD LINE IN COCHISE COUNTY, AZ, SUBJECT TO ENVIRONMENTAL AND STANDARD EMPLOYEE PROTECTIVE CONDITIONS.|
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|Full Text of Decision|
36543 SERVICE DATE –
SURFACE TRANSPORTATION BOARD
STB Docket No. AB-1081X
SAN PEDRO RAILROAD OPERATING COMPANY, LLC—ABANDONMENT
By petition filed on October 17, 2005, San Pedro Railroad Operating Company, LLC (SPROC) seeks an exemption under 49 U.S.C. 10502 from the prior approval requirements of 49 U.S.C. 10903 to abandon approximately 76.2 miles of railroad line in Cochise County, AZ, as follows: (1) the Bisbee Branch, between milepost 1085.0 at Bisbee Junction and milepost 1090.6 at Bisbee, a distance of 5.6 miles; and (2) the Douglas Branch (a) between milepost 1097.3 near Paul Spur and milepost 1106.5 near Douglas, a distance of 9.2 miles, (b) between milepost 1055.8 near Charleston and milepost 1097.3 near Paul Spur, a distance of 41.5 miles, and (c) between milepost 1040.15 near Curtiss and milepost 1055.8 near Charleston, a distance of 19.9 miles.
of the filing was served and published in the Federal Register on
petition, SPROC states that it acquired the subject line from SWKR Operating
Co. Inc. in 2003. See San
Pedro Railroad Operating Company, LLC—Acquisition and Operation Exemption—SWKR
Operating Co. Inc., STB Finance Docket No. 34430 (STB served
to SPROC, on
calculates that it incurred a loss of $251,410 in the base year and that it
will incur a loss of $277,736 in the forecast year to operate the line. These calculations are based on operations
which SPROC conducted in the final 3 months of 2004 and in the first 5½ months
of 2005. Those are the only months in which SPROC
carried any traffic over the subject line after acquiring it in November 2003
and before SPROC embargoed the line on
Petitioner also asserts that it would need to invest approximately $710,030 in rehabilitation work to bring the line up to FRA class 1 track standards. Petitioner also asserts that it would cost $731,500 to repair all bridges on the line, including $136,496 to repair the bridge at milepost 1044.4. Finally, petitioner estimates the subsidy, including capital cost to restore the line to operations, at $1,798,221 and an annual opportunity cost of $19,974.
Chemical Lime, which produces lime from limestone, states that it
receives coal and coke at its plant in Paul Spur (the
Chemical Lime argues that, after filing its petition, SPROC, without any
regulatory authorization, unilaterally ceased service on the line, an action
that amounts to an illegal embargo and a violation of SPROC’s common carrier
obligation. Chemical Lime states that, between
June 2005, when SPROC ceased providing service, and
DISCUSSION AND CONCLUSIONS
Under 49 U.S.C. 10903, a rail line may not be abandoned without our prior approval. Under 49 U.S.C. 10502, however, we are directed to exempt a transaction or service from otherwise applicable regulatory requirements or procedures when we find that: (1) continued regulation is not necessary to carry out the rail transportation policy of 49 U.S.C. 10101; and (2) either (a) the transaction or service is of limited scope, or (b) regulation is not necessary to protect shippers from the abuse of market power.
abandonment authority is sought by application or petition, the railroad must
demonstrate that the line in question is a burden on interstate commerce. Typically, in an attempt to make that
showing, the carrier submits evidence to demonstrate that the costs it incurs
exceed the revenues attributable to the line, and that keeping the line in
service would impose a burden on it that outweighs the harm that would befall
the shipping public and the adverse impacts on rural and community development
if the rail line were abandoned.
In this case, detailed scrutiny under 49 U.S.C. 10903 is not necessary to carry out the rail transportation policy. Although a shipper opposes the abandonment, it offers no concrete evidence to support its position or to counter petitioner’s evidence that the revenues it can expect from handling the shipper’s traffic are well below the costs to operate the line. Accordingly, requiring SPROC to expend significant funds to repair and provide service on the line when there is an insufficient amount of traffic available would be an unreasonable burden. By minimizing the administrative expense of the application process, an exemption will reduce regulatory barriers to exit [49 U.S.C. 10101(7)]. An exemption will also foster sound economic conditions and encourage efficient management by allowing SPROC to avoid the cost of owning and maintaining this line [49 U.S.C. 10101(5) and (9)]. Other aspects of the rail transportation policy will not be affected adversely.
of the transaction is not necessary to protect shippers from an abuse of market
because Chemical Lime, the only active shipper on the line, has transportation
alternatives; it currently uses truck transportation to serve its Douglas Plant,
in conjunction with its transload facility in
Lime’s argument that SPROC has impermissibly embargoed the line likewise does
not provide a basis for denying this abandonment petition. An embargo is not unreasonable so long as the
railroad either restores the line to service within a reasonable amount of time
or promptly seeks abandonment authority.
Chemical Lime’s request for a formal proceeding is also unpersuasive. Such a proceeding would serve merely to further delay this abandonment with little or no prospect of providing any additional information that would change the result reached in this decision. SPROC based its demonstration of operating losses on all of the operations it had performed for Chemical Lime and it provided a detailed estimate of the cost of rehabilitating the line. Although Chemical Lime disputes SPROC’s statements, the shipper has not supported its assertions with any analyses of SPROC’s costs or revenues, although the shipper had access to detailed statements of SPROC’s analyses. A formal proceeding would offer Chemical Lime no greater opportunity to dispute SPROC’s showings than the shipper has had in this proceeding.
We would also point out that, if Chemical Lime believes maintaining rail service on this line is in its best interest, the offer of financial assistance (OFA) procedures at 49 U.S.C. 10904 and 49 CFR 1152.27 are available to it.
has submitted environmental and historic reports with its petition and has
notified the appropriate Federal, state, and local agencies of the opportunity
to submit information concerning the energy and environmental impacts of the
proposed abandonment. See
49 CFR 1105.11. Our Section of
Environmental Analysis (SEA) has examined the environmental report, verified
the data it contains, and analyzed the probable effects of the proposed action
on the quality of the human environment.
SEA served an environmental assessment (EA) on
In the EA, SEA states that the Arizona State Parks, State Historic Preservation Office (SHPO), has not completed its assessment of the proposed abandonment. Accordingly, pending completion of the SHPO’s review, SEA recommends that a condition be imposed requiring SPROC to retain its interest in and take no steps to alter the integrity of the entire rail line until completion of the section 106 process of the National Historic Preservation Act, 16 U.S.C. 470f.
No comments on the EA were filed. Accordingly, we will impose the condition recommended by SEA in the EA. Based on SEA’s recommendation, we conclude that the proposed abandonment, if implemented as conditioned, will not significantly affect either the quality of the human environment or the conservation of energy resources.
As previously noted, the Trust filed a request for the issuance of a NITU under the National Trails System Act, 16 U.S.C. 1247(d) (Trails Act), and 49 CFR 1152.29. The Trust has submitted a statement of willingness to assume financial responsibility for the right-of-way and has acknowledged that use of the right-of-way is subject to possible future reconstruction and reactivation of the right-of-way for rail service as required under 49 CFR 1152.29. However, because SPROC has not yet submitted a statement indicating whether it is willing to enter into negotiations, we cannot issue a NITU at this time. Once SPROC indicates whether it is willing to enter into trail use negotiations, the Board will be able to address the Trust’s request for a NITU as appropriate in a subsequent decision.
SEA has indicated in its EA that the right-of-way may be appropriate for other public use. As noted, the Trust filed a request for a public use condition under 49 U.S.C. 10905 for 180 days.
Persons who request a Trails Act condition may also request a public use condition under 49 U.S.C. 10905. See Rail Abandonments–Use of Rights-of-Way as Trails, 2 I.C.C.2d 591, 609 (1986) (Trails). The Trust has met the public use criteria prescribed at 49 CFR 1152.28(a)(2) by specifying: (1) the condition sought; (2) the public importance of the condition; (3) the period of time for which the condition would be effective; and (4) justification for the period of time requested. Accordingly, a 180-day public use condition, commencing from the effective date of this decision, will be imposed on the rail line to be abandoned to enable any state or local government agency or other interested person to negotiate the acquisition of the line for public use. Also, we note that a public use condition is not imposed for the benefit of any one potential purchaser. Rather, it provides an opportunity for any interested person to negotiate to acquire the right-of-way that has been found suitable for public purposes, including trail use. Therefore, with respect to the public use condition, SPROC is not required to deal exclusively with the Trust, but may engage in negotiations with other interested persons.
The parties should note that operation of the public use procedure could be delayed, or even foreclosed, by the financial assistance process under 49 U.S.C. 10904. As stated in Trails, 2 I.C.C.2d at 608, OFAs to acquire rail lines for continued rail service or to subsidize rail operations take priority over interim trail use/rail banking and public use. Accordingly, if an OFA is timely filed under 49 CFR 1152.27(c)(1), the effective date of this decision will be postponed beyond the effective date indicated here. See 49 CFR 1152.27(e)(2). In addition, the effective date may be further postponed at later stages in the OFA process. See 49 CFR 1152.27(f). Finally, if the line is sold under the OFA procedures, the petition for abandonment exemption will be dismissed and public use precluded. Alternatively, if a sale under the OFA procedures does not occur, the public use process may proceed.
49 U.S.C. 10502(g), we may not use our exemption authority to relieve a
carrier of its statutory obligation to protect the interests of its
employees. Accordingly, as a condition
to granting this exemption, we will impose the employee protective conditions
set forth in Oregon Short Line R. Co.—Abandonment—
It is ordered:
1. SPROC’s request for leave to reply to Chemical Lime’s reply is denied.
2. Under 49 U.S.C. 10502, the Board exempts from the requirements of 49 U.S.C. 10903 the abandonment by SPROC of the above-described line, subject to the employee protective conditions in Oregon Short Line R. Co.—Abandonment—Goshen, 360 I.C.C. 91 (1979), and the conditions that SPROC shall: (1) leave intact all of the right-of-way, including bridges, trestles, culverts and tunnels (except track, ties and signal equipment) for a period of 180 days from the effective date of this decision, to enable any state or local government agency or any other interested person to negotiate the acquisition of the line for public use; and (2) retain its interest in and take no steps to alter the integrity of the entire rail line until completion of the section 106 process of the National Historic Preservation Act, 16 U.S.C 470f.
3. An OFA under 49 CFR 1152.27(c)(1) to allow rail service to continue must be received by the railroad and the Board by February 13, 2006, subject to time extensions authorized under 49 CFR 1152.27(c)(1)(i)(C). The offeror must comply with 49 U.S.C. 10904 and 49 CFR 1152.27(c)(1). Each OFA must be accompanied by the filing fee, which is currently set at $1,200. See 49 CFR 1002.2(f)(25).
4. OFAs and related correspondence to the Board must refer to this proceeding. The following notation must be typed in bold face on the lower left-hand corner of the envelope: “Office of Proceedings, AB-OFA.”
5. Provided no OFA has been received, this
exemption will be effective
6. Pursuant to the provisions of 49 CFR
1152.29(e)(2), SPROC shall file a notice of
consummation with the Board to signify that it has exercised the authority
granted and fully abandoned the line. If
consummation has not been effected by SPROC’s filing of a notice of consummation
By the Board, Chairman Buttrey and Vice Chairman Mulvey.
 The Board denied SPROC’s prior petition for
exemption to abandon this line, without prejudice to SPROC’s refiling for
abandonment authorization. San Pedro
Operating Company, LLC—Abandonment Exemption—In
 SPROC petitions the Board to accept this pleading “to the extent the Board believes that leave to reply is required.” Because our rules at 49 CFR 1104.13(c) do not provide for a reply to a reply and SPROC has presented no justification for the relief sought, we will deny petitioner’s request and will not consider the pleading.
 SPROC carried 82 carloads of coke and coal to Chemical Lime over the line in the final quarter of 2004 and 190 carloads in 2005. SPROC provided one train round trip with one locomotive per week for 34 weeks. The locomotive carried a crew of 2 persons and took 10 hours per day; each round trip covered 138 miles.
 In support, SPROC provides detailed economic data with underlying workpapers, a detailed bridge inspection report prepared by Osmose Railroad Services, Inc., a signed salvage agreement, and a property appraisal prepared by Kenneth Young & Associates.
 Given our market power finding, we need not determine whether the proposed transaction is limited in scope.