|SURFACE TRANSPORTATION BOARD DECISION DOCUMENT|
|VFRC, LLC--ACQUISIITON EXEMPTION--UNION PACIFIC RAILROAD COMPANY|
|Director Of Proceedings|
|DECISION DETERMINED THAT VFRC, LLC MAY SUBMIT A MODIFIED OPERATING AGREEMENT BY MAY 2, 2011.|
| 14 KB|
|Approximate download time at 28.8 kb: 35 Seconds|
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|Full Text of Decision|
40924 SERVICE DATE – MARCH 1, 2011
SURFACE TRANSPORTATION BOARD
Docket No. FD 35353
VFRC, LLC–ACQUISITION EXEMPTION–UNION PACIFIC RAILROAD COMPANY
Decided: February 28, 2011
February 22, 2010, VFRC, LLC (VFRC), a noncarrier,
filed a verified notice of exemption under 49 C.F.R. § 1150.31 to acquire
certain physical assets of a rail line and the underlying right-of-way from Union
Pacific Railroad Company (UP), between milepost 682.25, near Greenberry, Or.,
and milepost 687.6, near
Subsequently, on June 30, 2010, VFRC filed the instant motion to dismiss its notice. VFRC asserts that the Board does not have regulatory authority over the transaction and that the transaction’s consummation did not render VFRC a common carrier.
The Line was embargoed in June 2007. To restore rail service, Venell Farms, Inc. (Venell), the only shipper on the Line, formed VFRC to acquire the Line’s physical assets. To that end, VFRC entered into an agreement on May 20, 2010, with UP, whereby VFRC agreed to acquire by quitclaim deed UP’s right, title, and interest in UP’s right-of-way underlying the Line, together with any track, ties, ballast, other track materials, signals, switches, bridges, culverts and other personal property, fixtures and improvements on the right-of-way. Because neither Venell nor VFRC wished to become a common carrier, UP retained what the quitclaim deed describes as a permanent, exclusive easement for the purpose of conducting freight rail operations on the Line. As part of the overall agreement, UP then transferred that easement to the Albany & Eastern Railroad Company (AERC).
VFRC states that it entered into an operating agreement with AERC, which “permits AERC to utilize the physical assets of the Line in exercising the rights and obligations conveyed by the Freight Easement.” VFRC motion at 5.
motion to dismiss its notice, VFRC claims that it acquired only the physical
assets underlying the Line. VFRC further
claims that it did not acquire either the right or the obligation to provide
common carrier rail service, and that it will not hold itself out to provide,
and is incapable of providing, such service.
VFRC states that AERC possesses the easement to provide freight service
on the Line. Therefore, VFRC argues that
the transaction does not require Board authorization and that its motion to
dismiss should be granted. In support,
VFRC cites Maine–Acquisition and Operation Exemption–Maine Central Railroad,
8.I.C.C.2d 835 (1991) (State of
DISCUSSION AND CONCLUSION
question presented is whether the Board’s regulatory approval is required for VFRC
to acquire the assets of the Line, including the
right-of-way, track, and physical assets. The acquisition of an active rail line and the
common carrier obligation that goes with it ordinarily requires Board
approval. Where the acquiring entity is
a noncarrier, the standard for approval is set out in 49 U.S.C. § 10901. However, State of Maine and its
progeny find 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 when
the selling carrier retains a permanent, exclusive freight operating easement
and has sufficient control over the line to carry out its common carrier
operations. When the seller does so, it
retains the common carrier obligation on the line, as well as the rights of a
common carrier. The terms of the sale
must protect the seller from undue interference by the purchaser with the
provision of common carrier freight rail service. See
The same standard has applied in the limited number of cases where, as here, the easement has been acquired by a non-public third party. Therefore, in determining VFRC’s status, the agency will look to whether AERC has obtained a permanent easement and has sufficient interest in and control over the Line to permit it to carry out the common carrier obligation.
Here, there is a problem that could
disqualify VFRC from invoking the State of
VFRC has made a significant effort to restore service over the Line, and, in furtherance of that goal, may submit a modified operating agreement by May 2, 2011 that removes or revises the language that suggests that AERC does not have a permanent easement to operate the Line. Alternatively, the Board will render a decision based on the existing record.
If VFRC desires assistance in addressing the concerns raised in this decision, the Board’s Office of Public Assistance, Governmental Affairs and Compliance may be contacted at (202) 245-0238.
It is ordered:
1. VFRC may submit a modified operating agreement by May 2, 2011.
2. This decision is effective on its service date.
By the Board, Rachel D. Campbell, Director, Office of Proceedings.
 AERC also acquired Willamette & Pacific Railroad’s (WPRR) operating rights and obligations with respect to the Line. UP and WPRR retained limited overhead trackage rights over the Line. See Albany & E. R.R.–Acquisition and Operation Exemption–Union Pac. R.R., FD 35355 (STB served Mar. 10, 2010).