|SURFACE TRANSPORTATION BOARD DECISION DOCUMENT|
|FLORIDA DEPARTMENT OF TRANSPORTATION-ACQUISITION EXEMPTION-CERTAIN ASSETS OF CSX TRANSPORTATION, INC.|
|DECISION GRANTED THE MOTION OF THE FLORIDA DEPARTMENT OF TRANSPORTATION (FDOT) TO DISMISS THE NOTICE OF EXEMPTION IN THIS PROCEEDING. THE BOARD FOUND THAT UNDER 49 U.S.C. § 10901, FDOT WILL NOT BECOME A RAIL CARRIER AS A RESULT OF THIS TRANSACTION AND THAT BOARD AUTHORIZATION IS NOT REQUIRED.|
| 95 KB|
|Approximate download time at 28.8 kb: 1 Minutes|
If you do not have Acrobat Reader, or if you have problems reading our files with your current version of Acrobat Reader, the latest version of Acrobat Reader is available free at www.adobe.com.
|Full Text of Decision|
39887 SERVICE DATE – DECEMBER 15, 2010
SURFACE TRANSPORTATION BOARD
Docket No. FD 35110
Florida Department of Transportation—Acquisition Exemption—Certain Assets of CSX Transportation, Inc.
Digest: The Florida Department of Transportation does
not need Board authorization to acquire the real estate and rail tracks of a
rail line in Poinciana, Volusia, Seminole,
Decided: December 15, 2010
In this decision, the Board grants the motion of the Florida Department of Transportation (FDOT) to dismiss the notice of exemption in this proceeding. We find that 49 U.S.C. § 10901 does not apply to this sale of the physical assets of a rail line to a state agency because the selling rail carrier will retain an exclusive, perpetual easement to provide freight rail service on the rail line together with the common carrier obligation, and the purchaser cannot unduly interfere with the freight rail service.
On April 3, 2009, FDOT filed a
notice of exemption under 49 C.F.R. § 1150.31 to acquire from CSX
Transportation, Inc. (CSXT) certain physical assets and the associated
right-of-way of an approximately 61.5-mile rail line segment, extending through
Orlando, Fla., of CSXT’s A-Line, extending from milepost A-749.7 in DeLand to milepost A-814.1, in Poinciana, Volusia,
Seminole, Orange, and Osceola Counties, Fla. (Orlando Line). FDOT states that it is acquiring the physical
assets of the Orlando Line to develop a commuter rail passenger service in the
FDOT has filed a motion to dismiss
the notice of exemption, asserting that, under
BRS seeks leave to file a supplement to the record in response to statements in FDOT’s reply. FDOT opposes BRS’s filing on the ground that the supplement is a reply to a reply in violation of the Board’s rules at 49 C.F.R. § 1104.13. BRS responds that the supplement is only a declaration to answer allegations of fact that were first asserted in FDOT’s reply and that it does not respond to legal arguments advanced by FDOT. BRS limits its response to allegations of fact raised for the first time in FDOT’s reply, and we will grant leave to file the BRS supplement. The BRS supplement and letters filed by BRS and FDOT regarding admissibility of the document are made part of the record.
acquire the Orlando Line in cooperation with the Central Florida Commuter Rail
Commission (CFCRC) to develop the “SunRail” commuter
rail passenger system, which FDOT states is a $615 million project that will
provide commuter rail passenger service at 17 stations in Florida on the
Orlando Line, from as far north as DeLand, through
downtown Orlando, to as far south as Kissimmee/Poinciana. FDOT states that it will initiate commuter rail
passenger operations in 2 phases, with Phase One initial service from
uses the Orlando Line for local and through-train freight service, operating
approximately 14-18 trains per day in or through
CSXT also owns a rail line, known
as the S-Line, which runs from
FDOT states that, after the acquisition, it will upgrade the Orlando Line to a double-track corridor along nearly the entire line, with crossovers approximately every 5 miles or less, and will replace and upgrade the signal system. CSXT plans to divert approximately 8-9 trains per day from the Orlando Line to the S-Line. To facilitate this acquisition, FDOT and CSXT have entered into 3 agreements relating to the Orlando Line: (1) the Contract for Sale and Purchase (Sale Contract), which provides the terms for the acquisition of the land, real property, rights-of-way, and associated property of the Orlando Line; (2) the Central Florida Operating and Management Agreement (CFOMA), which is intended to govern the shared use of the Orlando Line by FDOT and CSXT (including CSXT’s tenants, Amtrak and FCEN); and (3) the Transition Agreement, which governs CSXT’s use of the Orlando Line after FDOT acquires the line but before SunRail commuter rail passenger operations begin.
By a series
of decisions, the Board held this proceeding in abeyance in order for the
that the current transaction is similar to an earlier transaction (the South
Florida transaction) involving FDOT and CSXT that led to the formation of a
commuter rail passenger system in Dade, Broward, and Palm Beach Counties,
currently operated as the South Florida Regional Transportation Authority
(SFRTA). In 1988, several years before
the State of Maine decision was issued, FDOT purchased approximately
67.5 miles of track from CSXT running parallel to Interstate 95 between
DISCUSSION AND CONCLUSIONS
I. Legality of
the State of
In this case, BRS asks the Board to reexamine the decision of the Interstate Commerce Commission (ICC) in State of Maine, which the ICC and the Board have followed for almost 20 years. State of Maine and its progeny hold that the sale of the physical assets of a rail line by a carrier to a state or other public agency does not constitute the sale of a railroad line within the meaning of 49 U.S.C. § 10901, if certain conditions are met. The required conditions are that the selling carrier must retain a permanent, exclusive freight rail operating easement, together with the common carrier obligation on the line, and that the terms of the sale must protect the carrier from undue interference with the provision of common carrier freight rail service.
BRS maintains that the Board’s
interpretation of § 10901 is wrong for 3 reasons. First, it argues that the physical assets of
a rail line cannot be separated from the freight rail operating rights and
common carrier obligation. Second, it argues
that the sale to a noncarrier of the track, track bed, and other physical
assets used to provide rail service is a sale of the line under § 10901 that
requires either Board approval or an exemption (under 49 U.S.C.
§ 10502) whenever the purchaser is responsible for maintaining and
dispatching the line. Third, it argues that
State of Maine is contrary to precedent, particularly Staten Island
Rapid Transit Operating Auth. v. ICC, 718 F.2d 533 (2d Cir. 1983) (SIRTOA). BRS also alleges that FDOT was primarily
motivated to structure the transaction under State of
We recently addressed nearly
identical legal arguments made by BRS and other rail labor unions in
The Board’s Interpretation of § 10901 and Separation of Physical
Assets. Section 10901(a)(4) requires a “person other than a rail carrier” to obtain
an agency certificate authorizing the person to “acquire a railroad line.” Nearly 20 years ago, in State of Maine,
the ICC held that the Maine Department of Transportation’s acquisition of the
physical assets of a rail line owned by a common carrier railroad was not the
sale of a railroad line, and thus, did not require approval under § 10901,
where the existing carrier retained a permanent and unconditional easement to
conduct common carrier freight rail operations and the right to maintain,
operate and improve the line. By virtue
of the rail carrier retaining the full right and necessary access to maintain,
renew, and operate the line, the rail carrier retained its common carrier
status on the line at issue, and the State avoided common carrier status. 8 I.C.C.2d at 836-37. Since 1991, the ICC and the Board have
followed State of
BRS argues that State of
The Board has general jurisdiction
over “transportation by rail carrier,” 49 U.S.C. § 10501(a)(1). A “rail
carrier” is defined in 49 U.S.C. § 10102(5) as “a person providing
common carrier railroad transportation for compensation.” Ordinarily, the Board exercises its
regulatory authority under § 10901(a)(4) where a noncarrier acquires a railroad line. Regulatory approval is required because the
noncarrier is acquiring the rail line in order to become a rail carrier and
provide the transportation in place of the selling carrier, which typically
relinquishes some or all of its right to use the line. In contrast, in the State of
BRS characterizes the freight rail easement
as a “made-up relationship” that is without “any basis in the Act or in
precedent” and argues that it is a device that permits purchasers of rail lines
such as FDOT to evade the Act. We rejected much the same argument recently
As the Board observed in State
B. SIRTOA. BRS argues that State of Maine conflicts with the 1983 decision of the United States Court of Appeals for the Second Circuit in SIRTOA. We conclude that SIRTOA is factually distinguishable. SIRTOA addressed whether a New York City (NYC) municipal corporation, the Metropolitan Transportation Authority (MTA) became a rail common carrier under the Act in 1970 when it acquired a rail line that was used primarily for intrastate passenger rail service, but also for freight rail service. At that time, the ICC had authorized a transaction under which: (1) MTA, under a predecessor of § 10901, acquired the entire property interests in the rail line; (2) MTA granted trackage rights over the line back to the selling carrier so that the selling carrier could continue to provide common carrier freight rail service; and (3) MTA agreed to maintain the line. See Bhd. of Locomotive Eng’rs v. Staten Island Rapid Transit Operating Auth., 360 I.C.C. 464, 472 (1979) (BLE) (discussing in general the 1970 transaction).
That arrangement was unchallenged until a dispute arose in 1976 over whether MTA’s maintenance employees, who were considered NYC workers, were covered by NYC laws (which did not permit strikes) or the RLA (which allowed strikes). The matter returned to the ICC for a determination as to whether MTA was a rail carrier under the Act, which would make it subject to the RLA.
In BLE, the ICC found that because NYC had filed an application to take over and operate the freight and passenger rail services on the line, with no qualifications, it did indeed become a regulated carrier. The ICC pointed out that the give-back of freight rail trackage rights from MTA to the freight rail operator meant that MTA then held what is now known as a residual common carrier obligation (one that engages only if the primary freight rail carrier fails to perform). Because parties with a residual common carrier obligation are deemed to be rail common carriers, the ICC found that MTA was a regulated carrier subject to the Act, and thus that the RLA would apply.
In SIRTOA, the Second Circuit upheld the ICC’s finding in BLE that MTA was a rail carrier subject to the Act. The court found that, even though MTA was primarily engaged in intrastate passenger rail carriage, its maintenance responsibilities and its residual common carrier obligation to carry freight (which the court called a “latent duty”) sufficed to make it a carrier subject to the Act. Thus, the court held, the RLA applied to the exclusion of the NYC laws governing other public workers.
In contrast with the situation in SIRTOA, FDOT will not acquire any common carrier duty — either latent or patent — to furnish freight rail service on any of the lines at issue because it is not buying all of CSXT’s property interests in the Orlando Line. Rather, FDOT is acquiring the line’s physical assets only; CSXT is retaining a permanent freight rail easement and, with it, the full duty to provide common carrier freight rail service on the lines. Consequently, although FDOT will assume responsibility for maintaining the lines at a standard that would permit both freight and passenger rail service, FDOT would not have any duty to furnish the freight rail service. For that reason, the SIRTOA case is distinguishable, and the ICC’s and Board’s interpretation of the Act in State of Maine has been consistent with it.
We need not determine in this proceeding whether the Board’s State of Maine doctrine is the only permissible reading of § 10901. BRS has not persuaded us that the only permissible conclusion in this type of transaction is that the state entity (here, FDOT) must become a rail carrier under § 10901. For that reason, and because an abrupt change in our statutory interpretation found in the State of Maine line of cases could have widespread impacts on transportation planning throughout the country, a rulemaking proceeding would provide the Board with a more comprehensive record on which to assess State of Maine.
Labor Concerns. In this
case, the dual requirements of State of
In this case, the Board is satisfied that the parties are not seeking to use State of Maine as a device to circumvent railway labor laws, for 2 reasons. First, the Board has considered the fact that, in this case, FDOT plans to take on some maintenance and operation roles that have been held by the selling carrier in other State of Maine transactions. Here, there is a logical and legitimate business justification for placing the maintenance and dispatching of the line in the hands of FDOT. FDOT will be providing time-sensitive commuter rail passenger service into a congested urban city. It will need assurances that the significant public resources it is spending on this project will result in reliable and efficient commuter rail passenger operations for its citizens, and is in the best position to coordinate the execution of that mission. In those circumstances, it is entirely reasonable for the parties to place dispatching and maintenance responsibilities on FDOT rather than CSXT. This will not, as discussed below, undermine the retention by CSXT of its common carrier capabilities under the retained freight rail easement.
Second, this transaction will have
no material adverse effect on employees of either CSXT or FDOT. CSXT offered
Under these circumstances, we are satisfied that the interests of rail labor have been adequately addressed.
II. Application of State of
Under State of
CSXT is not transferring its common carrier rights or obligations to FDOT, and FDOT will not hold itself out as a common carrier performing freight rail service. The agreements between FDOT and CSXT are designed so that FDOT will acquire only the railroad right-of-way and track assets. Moreover, we are satisfied that the freight rail easement retained by CSXT is permanent because, under the controlling agreement, freight rail service can be terminated only through obtaining Board authority either to discontinue service over, or to abandon, the freight rail easement.
CFOMA and the Transition Agreement set
forth operating windows during which priority will be given to freight or
commuter rail passenger service according to the time of day. During the period in which the Orlando Line
is being double-tracked for future commuter rail passenger service, CSXT will
continue to dispatch the line. Specific
limits are placed on work curfews, and the agreements include an extensive
program of coordination and notification among CSXT, FDOT, Amtrak, and
FCEN. The Board has found that
agreements that restrict freight rail operations to specific times in order to
accommodate reliable commuter rail passenger service are permissible. Here, CSXT has the ability to divert freight
traffic to its S-Line, which will become its primary freight corridor in
CFOMA provides that FDOT will be responsible for track maintenance on the Orlando Line after FDOT acquires the line from CSXT. FDOT is required to maintain the mainline tracks of the Orlando Line to FRA Class 4 standards, and to maintain all tracks, bridges, signals, and right-of-way in accordance with CSXT’s geometry standards. Train speeds on the Orlando Line cannot be lowered without CSXT’s consent. CSXT has the right to inspect the Orlando Line to ensure FDOT’s compliance with CFOMA maintenance obligations and to require that FDOT perform any necessary repairs. In the unlikely event FDOT fails to fulfill its maintenance obligations, CSXT may do so at FDOT’s expense. The responsibility for track maintenance here does not constitute acquisition of a railroad line requiring Board authorization.
Under CFOMA, FDOT will be
responsible for dispatching all trains on the Orlando Line. FDOT will initially contract with CSXT to
perform this function on FDOT’s behalf; upon initiation of SunRail
commuter rail passenger service, after upgrades to the Orlando Line are
completed, FDOT will have its own dispatching center. In both phases, trains will be dispatched “without
prejudice or partiality to any party and in such manner, as will afford the
economical and efficient manner of movement of all trains.” See CFOMA, section 3(i). Specific
dispatching protocols for train movements during the mixed passenger/freight rail
operating window will be mutually agreed to by the parties. As mentioned above, FDOT’s planned future
dispatching control over these lines is permissible under State of
We find that this transaction, as structured, does not require Board regulatory authorization. This action will not significantly affect the quality of the human environment or the conservation of energy resources.
It is ordered:
1. BRS’ request to supplement the record, as described above, is granted.
2. FDOT’s motion to dismiss the verified notice of exemption in this proceeding is granted.
3. Amtrak’s withdrawal of its opposition and related petition to revoke is granted.
4. The proceeding is dismissed.
5. This decision is effective on its service date.
By the Board, Chairman Elliott, Vice Chairman Mulvey, and Commissioner Nottingham.
 The digest constitutes no part of the decision of the Board but has been prepared for the convenience of the reader. It may not be cited to or relied upon as precedent. Policy Statement on Plain Language Digests in Decisions, EP 696 (STB served Sept. 2, 2010).
 FDOT will also obtain an option to acquire the portion of CSXT’s Aloma Spur, extending from a connection with the Orlando Line at milepost AU-766.0 in Sanford to milepost AU-771.8 near Airport Boulevard and the Orlando-Sanford International Airport, a distance of approximately 5.8 miles, and the CSXT DeLand Spur, extending from a connection with the Orlando Line at milepost ASE-750.3 (DeLand Junction) to milepost ASE-753.3 near downtown DeLand, a distance of approximately 3.0 miles.
 While FDOT uses the term “jurisdiction,” as have the Interstate Commerce Commission (ICC) and the Board from time to time in the past, in fact FDOT may only seek a finding that the transaction as currently structured does not require Board authorization. The Board will continue to have jurisdiction over the rail property, even though it concludes in this decision that the proposed transaction does not require Board approval. See Friends of the Aquifer, FD 33966, slip op. at 4 (STB served Aug. 15, 2001). The Brotherhood of Railroad Signalmen likewise in its pleadings mistakenly conflates regulatory authority over the transaction and jurisdiction over the property for purposes of common carrier freight rail service.
 The northern limit of the line has been amended from milepost A-749.7 to milepost A-749.57. The southern limit has been amended from milepost A-814.1 to milepost A-813.82. This lengthens the northern end of the line.
 Citations to specific provisions of the CFOMA reference the amended CFOMA.
 Failure to obtain an agency determination regarding whether the Board’s authority is required does not itself mean that the buyer of the railroad assets becomes a carrier. However, in the absence of a formal determination from the Board, the buyer runs the risk that it will be found to have violated the Act.
 UTDC Transit Serv. Inc., 17 NMB 343 (1990); Bhd. of Locomotive Eng’rs, 17 NMB 321 (1990); Tri-County Commuter Rail Org., Notice No. 89-35 (RRB Apr. 19, 1989); Herzog Transit Serv. Inc., B.C.D. 94-109 (RRB Dec. 5, 1994); Tri-County Rail Org, B.C.D. 09-02 (RRB Jan. 20, 2009), reh’g denied sub nom. Trinity Ry. Express–Train Dispatching, B.C.D. 09-53 (RRB Oct. 28, 2009).
 The Board has under certain unique circumstances applied the State of Maine doctrine to the sale of physical assets in a rail line to a private entity. See, e.g., Midtown TDR Ventures LLC–Acquis. Exemption–Am. Premier Underwriters, Inc., The Owasco River Ry., and Am. Fin. Group, Inc., FD 34953 (STB served Feb. 12, 2008); Mo. River Bridge Co.—Acquis. Exemption—Certain Assets of Chicago, Cent. & Pac. R.R., FD 32384 (ICC served Mar. 3, 1994).
 See MassDOT, slip op. at 6.
 As noted earlier, BRS and other unions recently raised the same arguments in MassDOT, and those issues are being litigated in court.
 See generally Nat’l Telecomm. & Cable Ass’n v. FCC, 567 F.3d 659, 667 (D.C. Cir. 2009) (agency action must either be consistent with prior action or offer a reasoned basis for its departure from precedent to show that its prior policies and standards are not casually ignored).
 Am. Orient Express Ry. v. STB, 484 F.3d 554, 556 (D.C. Cir. 2007).
 Section 10901(a)(4) provides: “A person may—in the case of a person other than a rail carrier, acquire a railroad line or acquire or operate an extended or additional railroad line, only if the Board issues a certificate authorizing such activity under [49 U.S.C. § 10901(c)].” See Common Carrier Status of States, State Agencies, 363 I.C.C. 132, 135 (1980), aff'd sub nom. Simmons v. ICC, 697 F.2d 326 (D.C. Cir. 1982).
 See BRS Comment at 1, 2, 11, 22, 24.
Coastal, slip op. at 4-5. Freight
rail easements were an established part of rail line ownership arrangements
many years before State of
 BRS would
prefer to see the rail carrier sell an entire rail line (including all
operating rights and obligations) to the public entity as a § 10901 transaction
and then have the public entity grant the rail carrier trackage rights subject
to Board approval under § 11323. BRS’
preferred arrangement, however, would place a residual common carrier
obligation on the State to provide freight rail service, which could become an
active obligation, if the trackage rights grantee ceases its service (with our
approval or otherwise). In that event,
the State would violate § 11101(a) of the Act if it did not provide
freight rail service upon a shipper’s reasonable request. A state entity, however, may not wish to have
even a residual common carrier obligation.
Indeed, some states have laws that prohibit them from operating rail
lines. See, e.g., State of
 The Board has previously determined that the party acquiring the right-of-way and track may negotiate terms and conditions with the freight rail carrier necessary to provide reliable commuter rail passenger service or protect its investment, consistent with the State of Maine doctrine, so long as such terms and conditions do not unreasonably interfere with freight rail service. This includes assuming responsibility for maintaining the line and dispatching freight operations if the operating procedures are reasonable and do not discriminate against freight rail service. See Md. Transit, slip op. at 4-5.
 BRS argues that State of Maine creates breaks in the interstate rail network by removing the rail properties acquired in the transaction from Board jurisdiction and subjecting them to State law. This argument is based on a misunderstanding of the consequences of the transaction. See fn. 3, supra. The rail properties continue to be part of the interstate rail network through the operating easement retained by the selling carrier. The selling carrier continues to have the common carrier obligation to provide freight rail service, and the acquiring entity cannot exercise its ownership rights in a way that interferes with the provision of freight rail service.
 See New York Dock Ry.―Control―Brooklyn E. Dist., 360 I.C.C. 60 (1979) (New York Dock), aff’d sub nom. New York Dock Ry. v. United States, 609 F.2d 83 (2d Cir. 1979). This labor protective arrangement offers up to 6 years of wages and benefits to unionized railroad employees who are adversely affected by certain transactions approved by the Board, such as mergers and acquisitions involving large carriers.
 See FDOT Reply at 19.
 See FDOT Reply at 20.
 FDOT states that a copy of its notice of exemption and motion to dismiss (with the operative documents) were served on all 57 known shippers on the Orlando Line.
 See Md. Transit, slip op. at 5 (STB served Oct. 9, 2007); Utah Trans. Auth.—Aquis. Exemp.—Union Pac. R.R. Co., FD 35008 (STB served July 23, 2007).
 See Utah, slip op. at 6; N. M. Dep’t of Transp.—Acquis. Exemption—Certain Assets of BNSF Ry., FD 34793 (STB served Feb. 6, 2006).