[Federal Register Volume 81, Number 217 (Wednesday, November 9, 2016)]
[Notices]
[Pages 78893-78895]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-27062]


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SURFACE TRANSPORTATION BOARD

[Docket No. FD 36077; Docket No. NOR 42148]


North Coast Railroad Authority and Northwestern Pacific Railroad 
Company--Petition for Declaratory Order; North Coast Railroad Authority 
and Northwestern Pacific Railroad Company v. Sonoma-Marin Area Rail 
Transit District

    On October 4, 2016,\1\ North Coast Railroad Authority (NCRA) and 
Northwest Pacific Railroad Company (NWPCo) (together Petitioners) \2\ 
filed a petition requesting an emergency declaratory order and 
preliminary injunctive relief to prevent Sonoma-Marin Area Rail Transit 
District (SMART) from interfering with freight rail operations over 
portions of the Northwestern Pacific Railroad Line.\3\ (Pet. 2, 4-5, 
10-11.) Board staff held two conference calls with representatives of 
both parties on October 6 and October 11, 2016, to clarify the facts of 
the dispute over Petitioners' request for preliminary injunctive 
relief. On October 21, 2016, the Board issued an order denying the 
preliminary injunction. See N. Coast R.R. Auth. v. Sonoma-Marin Area 
Rail Transit Dist. (October 21 Decision), NOR 42148 (STB served Oct. 
21, 2016) (with Commissioner Begeman partially concurring).
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    \1\ These proceedings are not consolidated. A single decision is 
being issued for administrative purposes.
    \2\ The initial pleading in this proceeding was styled as 
``Finance Docket No. NOR 42148'' but appears to request a 
declaratory order. (Pet. 2; Addendum to Pet. 2.) Therefore, the 
Board is changing the docket number from NOR 42148 to FD 36077, 
without prejudice to Petitioners' requesting to restyle their 
petition to seek another remedy, if any, that may be appropriate. 
All filings and decisions in Docket No. NOR 42148 will be considered 
part of the record in Docket No. FD 36077.
    \3\ The parties also refer to the Northwestern Pacific Railroad 
Line as the Northwestern Pacific Line. For purposes of this 
decision, we will refer to it as the Line.
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Background

    The Line consists of three segments: The Willits Segment, the 
Healdsburg Segment, and the Lombard Segment. (Pet. 2-3.) NCRA, the 
public agency created to preserve freight operations on the Line, holds 
the exclusive right to conduct freight operations over the Line. (Pet. 
3.) \4\ NWPCo is the freight operator. (Pet. 2.) \5\ SMART, the public 
agency created in 2003 and authorized to provide commuter passenger 
service over portions of the Line, holds the exclusive right to operate 
passenger service, including the right to dispatch over portions of the 
Line. (Pet. 2-3.) In 2004, SMART obtained Board authority to acquire 
the real estate and rail facilities and trackage to the Healdsburg and 
Lombard segments of the Line. Sonoma-Marin Area Rail Transit Dist., FD 
34400, slip op. at 1-2.\6\ NCRA owns the Willits Segment. (Pet. 2-3.) 
NWPCo operates on the Healdsburg and Lombard segments; SMART currently 
has plans to operate on the Healdsburg Segment. (Pet. 3.)
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    \4\ In 1996, NCRA acquired Board authority to lease and operate 
the Line. N. Coast R.R. Auth.--Lease & Operation Exemption--Cal. N. 
R.R., FD 33115 (STB served Sept. 27, 1996). See also Sonoma-Marin 
Area Rail Transit Dist.--Acquis. Exemption--N.W. Pac. R.R. Auth., FD 
34400, slip op. at 1 (STB served March 10, 2004) (indicating that 
SMART subsequently acquired portions of the Line subject to NCRA's 
freight easement).
    \5\ See N.W. Pac. R.R.--Change in Operators Exemption--N. Coast 
R.R. Auth., FD 35073 (STB served Aug. 24, 2007).
    \6\ SMART retains the residual common carrier obligation over 
portions of the Line, including the Lombard Segment, which is at 
issue here. See Sonoma-Marin Area Rail Transit Dist., FD 34400, slip 
op. at 2; see also Sonoma-Marin Area Rail Transit Dist.--Acquis. 
Exemption--in Marin Cty., Cal., FD 35732, slip op. at 2 n.2, 3 (STB 
served July 15, 2013).
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    In 2011, NCRA and SMART entered into an Operating and Coordination 
Agreement (Agreement) for the Line. (Pet., Williams Decl. para. 1.) The 
Agreement gives SMART dispatching authority over the Lombard and 
Healdsburg segments and a portion of the Willits Segment. (Pet., 
Williams Decl., Ex. A at 4.) It defines dispatching as having the same 
meaning as in 49 CFR 241.5(1)(i). (Pet., Williams Decl., Ex. A at Ex. 1 
at i.) The Agreement also contains a provision addressing hazardous 
materials, which states in part:

    Neither Party shall use, generate, transport, handle or store 
Hardous Materials on the Subject Segments other than as may be used 
by the Party in its operations in the normal course of business or, 
in the case of NCRA, as may be transported by NCRA in its capacity 
as a common carrier by rail and in all events in accordance with 
Applicable Laws.

(Pet., Williams Decl., Ex. A at 11.) The Agreement defines ``Industrial 
Track'' as ``all existing or later built track on the Healdsburg and 
Lombard Segments used solely for NCRA Freight Service'' and provides 
that ``NCRA, at its own expense, shall have the exclusive right to 
manage'' such track. (Id. at 3.) Finally, the Agreement contains a 
provision subjecting disputes to arbitration. (Id. at 19.)
    On July 28, 2016, NWPCo began transporting loaded liquid petroleum 
gas (LPG) tank cars to, and storing them at, the Schellville rail yard 
on the

[[Page 78894]]

Lombard Segment. (Pet. 2, 5.) For about two months, SMART dispatchers 
issued track warrants \7\ for these movements. By late September, 80 
loaded LPG tank cars were stored at the Schellville yard. However, 
according to Petitioners, SMART recently began using its dispatching 
function as preclearance authority to prohibit the movement of certain 
freight on the Line. (Pet. 4, 6, 8.) On October 2, 2016, SMART denied a 
track warrant for 12 LPG tank cars destined for Schellville and six 
grain cars destined for Petaluma, thus prohibiting those cars from 
proceeding. (Id. at 6.) As clarified on the two conference calls, the 
six grain cars were allowed to proceed, but the 12 loaded LPG cars 
remained sitting on the track at an interchange with the California 
Northern Railroad. NWPCo also has a voluntary hold on an additional 30 
loaded LPG tank cars bound for the Schellville yard. On October 21, 
2016, the Board rejected Petitioners' request for preliminary 
injunctive relief. See October 21 Decision, slip op. at 5.
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    \7\ A track warrant control system is a verbal authorization 
system using radio, phone, or other electronic transmission from a 
dispatcher. See CSX Transp., Inc.--Joint Use--Louisville & Ind. 
R.R., FD 35523, slip op. at 3 n.8 (STB served Apr. 10, 2015).
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    In addition to a preliminary injunction, Petitioners request an 
order that SMART has no regulatory authority to precondition freight 
shipments. (Pet. at 7.) They state that due to SMART's actions, they 
are uncertain when, and if, they will be able to discharge their common 
carrier obligations. (Id. at 9.) Petitioners also assert that the 
preclearance authority asserted and exercised by SMART through its 
dispatching function is preempted by federal law. (Id. at 8-9.)
    SMART contends \8\ that there is no reason for the Board to issue a 
declaratory order because it is not impermissibly interfering with 
Petitioners' movements. SMART acknowledges that it has refused to allow 
onto the Lombard Segment tank cars loaded with LPG that are not being 
moved directly to a customer or shipper destination but are instead 
intended for temporary storage, on the ground that NCRA does not have a 
contractual right to store such cars at the Schellville yard. (Reply 
2.) SMART asserts that the provision of the Agreement dealing with 
hazardous materials prohibits Petitioners from storing the LPG tank 
cars on SMART's property, including the Schellville yard. (Id. at 3.) 
SMART also contends that Petitioners' storage activities at its yard 
violate federal safety regulations. (Id. at 5-6.)
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    \8\ On October 5, 2016, the Board issued an order requiring 
replies to the petition on an expedited schedule and scheduling a 
conference call with parties, counsel, and Board staff. On October 
6, 2016, SMART filed a reply to the petition noting that it was not 
``waiving its right to file a more detailed response to the [October 
4] Petition.'' (Reply 2 n.1.)
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    SMART claims that this is a contractual dispute, that the Board 
typically does not get involved in contractual disputes, and there is 
no reason for it to do so in this instance. (Reply 2.) Specifically, 
the issue of whether the Petitioners ``can store the LPG-loaded tank 
cars on SMART's property is a question of contractual interpretation,'' 
(id. at 4), and SMART ``does not purport to require preclearance of the 
movement of grain cars over the SMART property,'' (id. at 3). Relying 
on Town of Woodbridge v. Consolidated Rail Corp., FD 42053 (STB served 
Dec. 1, 2000), SMART argues that the Petitioners ``agreed to the 
contractual restriction in [the hazardous materials section] of the 
Agreement and cannot invoke ICCTA preemption to avoid its voluntary 
contractual agreements.'' (Reply 4.) SMART also asserts that 
Petitioners failed to show that enforcement of the contractual 
agreement not to store hazardous materials at Schellville \9\ would 
unreasonably interfere with their common carrier obligations. (Reply 4-
5.) On October 31, 2016, the City of American Canyon and American 
Canyon Fire Protection District filed a notice of intent to 
participate.
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    \9\ The parties apparently disagree whether the Schellville yard 
tracks are ``Industrial Tracks'' as defined by the Agreement. (Reply 
4, n.5.)
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Discussion and Conclusions

    As the Board has stated, this case appears to raise a number of 
novel issues that require further briefing by the parties. N. Coast 
R.R. Auth. v. Sonoma-Marin Area Rail Transit Dist., NOR 42148, slip op. 
at 2 (STB served Oct. 7, 2016); October 21 Decision, slip op. at 2, 5. 
In this case, there are controversies regarding the railroads' common 
carrier obligation and whether SMART's actions are preempted by federal 
law. See 49 U.S.C. 10501(b). Petitioners are directed to brief the 
following issues and provide the following information, and SMART is 
directed to reply, as part of their further submissions to the Board in 
this proceeding:
    1. General requests:
    a. A detailed map of the entire Northwestern Pacific Railroad Line 
and operations including, but not limited to, information about 
interchange locations and responsibilities, which carrier has what 
rights and where, and alternative locations for storage. Also include a 
description of the volume and type of traffic that moves over the Line.
    b. As necessary, include comments on or corrections to the Board's 
written summaries of the October 6 and October 11 conference calls. The 
summaries are available on the Board's Web site as miscellaneous 
filings in the docket.
    c. As necessary, the parties should include any factual updates 
that have occurred since the date of their last filings.
    2. Regarding the common carrier obligation:
    a. Assuming for the sake of argument that the contract reflects 
that NCRA agreed not to store hazardous materials at the Schellville 
yard, would such an agreement be consistent with NCRA's common carrier 
obligation under 49 U.S.C. 11101? Why or why not?
    b. Does the storage of loaded LPG cars at the Schellville yard for 
an indeterminate period of time constitute ``transportation by rail 
carrier'' within the meaning of 49 U.S.C. 10501? In answering this 
question, parties should discuss:
    i. Whether the storage at Schellville is a service that NWPCo 
provides at the request of and/or for another railroad or a shipper, 
and how that service is marketed.
    ii. The typical route, from origin to ultimate destination, for 
loaded LPG tank cars stored at the Schellville yard. Include a 
description of NWPCo's role in that movement.
    iii. How long loaded LPG cars are typically scheduled to be stored 
at the Schellville yard. If there is no typical time period, provide a 
range of time the cars will be stored and a final date by which they 
would depart the yard for final destination.
    iv. Evidence, such as bills of lading, demonstrating that NWPCo 
uses the Schellville yard to transport goods in interstate commerce as 
part of a rail movement.
    c. What are the implications of SMART's residual common carrier 
obligation over portions of the Line, including the Lombard Segment?
    3. Regarding federal preemption:
    a. Does SMART's denial of track warrants for loaded LPG cars 
destined for the Schellville yard constitute ``regulation'' of rail 
transportation within the meaning of 49 U.S.C. 10501(b)?
    b. Assuming for the sake of argument that the contract reflects 
that NCRA agreed not to store loaded LPG cars at the Schellville yard, 
would such an agreement ``unreasonably interfere'' with interstate 
commerce? In answering this question, parties should:

[[Page 78895]]

    i. Address Town of Woodbridge v. Consolidated Rail Corp., NOR 42053 
(STB served Dec. 1, 2000), and PCS Phosphate Co. v. Norfolk Southern 
Railway, 559 F.3d 212 (4th Cir. 2009); and
    ii. Discuss the feasibility of NCRA/NWPCo storing loaded LPG tank 
cars elsewhere, either on tracks they currently own or lease or on 
tracks they could lease from other parties, or moving loaded LPG tank 
cars directly from their origin to their ultimate destination, thus 
avoiding entirely temporary storage at Schellville or elsewhere.
    c. What effect, if any, does SMART's status as a governmental 
agency have on the preemption analysis?
    As discussed above, the Petitioners and SMART have filed their 
initial pleadings.\10\ However, the Board is establishing a procedural 
schedule for receiving additional evidence. In addition, either party 
may move for an appropriate protective order to protect against the 
public disclosure of any commercially sensitive, confidential 
information.
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    \10\ As noted above, SMART stated that it filed its October 6 
reply in accordance with the Board's order and was not ``waiving its 
right to file a more detailed response to the [October 4] 
Petition.'' (Reply 2 n.1.)
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    It is ordered:
    1. The procedural schedule is as follows:
November 23, 2016 NCRA's and NWPCo's opening is due.
December 5, 2016 SMART's and any other party's replies are due.
    2. All filings and decisions in Docket No. NOR 42148 will be 
considered part of the record in Docket No. FD 36077.
    3. Notice of this decision will be published in the Federal 
Register.
    4. This decision is effective on its service date.

    Decided: November 3, 2016.

    By the Board, Rachel D. Campbell, Director, Office of 
Proceedings.

Jeffrey Herzig,
Clearance Clerk.
[FR Doc. 2016-27062 Filed 11-8-16; 8:45 am]
 BILLING CODE 4915-01-P