Redmond-Issaquah Railroad Preservation Association v. The Surface Transportation Board United States of America, and the Land and Conservancy of Seattle and King County and Burlington Northern and Santa Fe Railway Company, Intervenors

Citations: 223 F.3d 1057; 2000 Daily Journal DAR 10209; 2000 Cal. Daily Op. Serv. 7693; 2000 U.S. App. LEXIS 23208Docket: 98-70906

Court: Court of Appeals for the Ninth Circuit; September 14, 2000; Federal Appellate Court

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The case involves an appeal by the Redmond-Issaquah Railroad Preservation Association (RIRPA) against the Surface Transportation Board (STB) regarding the STB's rejection of RIRPA's Offer of Financial Assistance (OFA) to acquire a 12.45-mile railroad line between Redmond and Issaquah, Washington. The STB determined that RIRPA's interest in continuing rail services was not genuine, labeling future traffic on the line as speculative. RIRPA argued that the STB exceeded its statutory authority by using the continuation of rail services as a criterion for denying the OFA and claimed the decision was arbitrary and capricious. The appeal follows a contentious history involving The Burlington Northern and Santa Fe Railway Company (BNSF), which ceased operations on the line in 1996 due to economic viability concerns. BNSF later reached an agreement to transfer the line's assets to The Land Conservancy of Seattle and King County, which agreed to pay BNSF $1.5 million and assume its common carrier obligations. Following this, The Land Conservancy sought STB approval for a non-carrier class exemption to acquire and operate the line without the standard certification process, which the STB granted. Subsequently, The Land Conservancy petitioned the STB to abandon the line to discontinue future rail service and remove it from the national transportation system. The court affirmed the STB's decision.

Congress granted the Surface Transportation Board (STB) and its predecessor, the Interstate Commerce Commission (ICC), regulatory authority over railroad abandonments to ensure a balance between railroad companies' operational efficiency and public access to an interstate railroad system. The Land Conservancy sought to abandon the Redmond-Issaquah line while petitioning for its use as a recreational trail under the National Trails System Act of 1983, known as the "Rails to Trails Program." The STB challenged this plan, revoking The Land Conservancy's acquisition exemption and ordering the line's reconveyance to BNSF due to concerns that The Land Conservancy intended to convert the line to trail use rather than maintain its potential for rail service.

The STB emphasized that its acquisition exemption procedures aim to sustain active rail operations, and noted that initiating abandonment proceedings shortly after acquiring a line indicates misuse of the regulatory process. It concluded that The Land Conservancy had no intention of reinstating rail service, thereby violating the intended purpose of the acquisition. In a subsequent decision, the STB denied The Land Conservancy's reconsideration petition and reinstated the abandonment process, allowing BNSF to pursue abandonment. The STB also clarified that any party wishing to continue rail service could file an Offer of Financial Assistance (OFA), which requires proof of financial capability and public need for service. The STB cautioned against potential abuse of the OFA process and noted the current lack of rail service demand for the line.

In June 1998, RIRPA filed an OFA but faced opposition from BNSF, which argued RIRPA had no real intent to continue rail service, while The Land Conservancy and King County claimed RIRPA aimed to obstruct the development of a nature trail to protect local privacy. The railroad corridor in question represents a critical gap in a statewide trail extending from Puget Sound to northern Idaho.

The STB rejected RIRPA's Offer of Financial Assistance (OFA) due to opposition and the speculative nature of future traffic. The evidence presented did not support the conclusion that the offer aimed to ensure continued rail service or that such service was likely to result from the offer. Allowing the section 10904 process to proceed under these circumstances would misuse procedural rights. While a motivation to thwart interim trail use does not necessarily invalidate an offer if there is intent to provide rail service and a genuine need for it, RIRPA's assertions about future traffic lack substantive basis. 

In a related matter, BNSF indicated its intention to act on an abandonment exemption and accepted a trail condition, leading to negotiations for interim trail use. RIRPA argued that the STB erred in denying its OFA, citing the ICCTA's removal of the requirement for continued rail service as a criterion for OFA approval. However, the STB maintained that the objective of § 10904 remains the continuation of rail service, interpreting Congress's intent in the context of the statute as a whole. The STB's interpretation is afforded deference, as agencies are typically granted substantial latitude in their statutory interpretations. The title of § 10904 suggests a legislative intent to promote the operation of railroad lines.

In subsection (b) of § 10904, Congress mandates that rail carriers seeking abandonment or discontinuance submit estimates of annual subsidies and minimum purchase prices to the Surface Transportation Board (STB) and prospective financial assistance offerors. Additionally, carriers must provide relevant traffic, revenue, and other data to evaluate the necessary annual financial assistance for continued rail operations. The language suggests that such information is required to sustain operation of the line in question. Furthermore, if a purchase amount cannot be agreed upon, the STB is tasked with determining compensation, ensuring it does not fall below fair market value. Importantly, new owners of lines acquired under § 10904 cannot transfer or cease service for two years post-sale, indicating a congressional intent to keep these lines operational.

Contrary to RIRPA's claims, the text of § 10904 does not imply a complete repeal of previous OFA provisions, but rather aligns with the goal of maintaining rail service. Legislative history reinforces this interpretation, highlighting that the new § 10904 preserves the process for assessing offeror fitness and setting sale prices while eliminating less frequently used methods for enforcing line operation through subsidies from non-rail parties. The STB is required to consider whether offered financial assistance will support continued rail transportation, and its case law consistently emphasizes the necessity of continuity in rail service for OFAs. The STB's position reflects its intent to expedite the approval process, despite the absence of the phrase "continuation of rail service" in § 10904. RIRPA’s additional arguments are deemed irrelevant in light of these conclusions.

The STB presumes that an offeror of financial assistance can operate a rail line for at least two years, contingent upon a finding of financial responsibility, unless opposing evidence is presented. This presumption does not eliminate the necessity of demonstrating intent to continue service in the Offer of Financial Assistance (OFA) approval process. The STB's interpretation of § 10904, which allows rejection of OFAs not aimed at sustaining rail service, is deemed reasonable under a deferential review standard. 

RIRPA's claim that the STB's rejection of its OFA was arbitrary and capricious hinges on whether the STB's decision was reasoned and adequately supported by the record. RIRPA argues that the STB failed to differentiate its decision from a previous ruling in Illinois Cent. R.R. Co. Abandonment Exemption, where the ICC approved an OFA despite the line being inactive. However, the STB found that RIRPA's case differed significantly; unlike the coal mine owner in Perry County, RIRPA has not demonstrated a genuine interest in preserving the line for future rail use. The key distinction is that while the evidence in Perry County indicated a clear intent to utilize the line for rail service if conditions improved, the evidence presented by RIRPA does not suggest a similar intent.

The Surface Transportation Board (STB) determined that the Rail Infrastructure Preservation and Improvement Act (RIRPA) submitted an Offer of Financial Assistance (OFA) primarily to obstruct the development of a recreational trail on the right-of-way. Evidence included public statements from RIRPA leadership emphasizing their intent to protect members' privacy. While RIRPA's purpose influenced the STB’s decision, it was not the decisive factor; instead, the STB concluded that future rail traffic on the line was highly unlikely. The last shipper using the Redmond-Issaquah line indicated a lack of interest in rail service, and the four shippers expressing interest did not have a history of using the line, lacked binding agreements on transportation rates, and the transportation of goods by rail was deemed impractical and costly. Additionally, the STB noted the significant costs required to rehabilitate the line. In contrast to previous cases, the STB found no potential for future traffic and concluded that RIRPA was not committed to offering rail service. The STB's decision to reject the OFA was deemed reasonable and was affirmed by the court, with the Honorable Lawrence K. Karlton presiding. The excerpt also notes the STB's authority to approve line abandonments under the Interstate Commerce Commission Termination Act (ICCTA).