[Federal Register Volume 88, Number 215 (Wednesday, November 8, 2023)]
[Notices]
[Pages 77136-77139]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-24672]


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SURFACE TRANSPORTATION BOARD

[Docket No. AB 578X]


Austin Area Terminal Railroad, Inc--Discontinuance of Service 
Exemption--In Bastrop, Burnet, Lee, Llano, Travis, and Williamson 
Counties, Texas

    On December 30, 2022, the Board, by decision of the Director of the 
Office of Proceedings (Director), rejected the verified notice of 
exemption filed by Austin Area Terminal Railroad, Inc. (AATR) to 
discontinue service over an approximately 162-mile line in Texas 
because the required certification concerning the absence of local 
traffic on the line was deficient. AATR appealed that decision. For the 
reasons discussed below, the Board will deny the appeal. Nevertheless, 
the Board will grant on its own motion an exemption under 49 U.S.C. 
10502 from the prior approval requirements of 49 U.S.C. 10903 
permitting AATR to discontinue common carrier rail service over the 
line.

Background

    On November 30, 2022, AATR filed a verified notice of exemption 
under 49 CFR 1152.50 to discontinue common carrier rail service over 
approximately 162 miles of rail line owned by Capital Metropolitan 
Transportation Authority, located between milepost AUNW-MP 0.0 (SPT-MP 
57.00), west of Giddings, and milepost AUNW-MP 154.07 (SPT-MP 99.04), 
at Llano, including the Marble Falls Branch (6.43 miles), the Scobee 
Spur (3.3 miles), and the Burnet Spur (0.93 miles) in Bastrop, Burnet, 
Lee, Llano, Travis, and Williamson Counties, Tex. (the Lines).
    According to AATR, it received Board authority to provide common 
carrier service over the Lines in 2002, replacing its parent company, 
Trans-Global Solutions Inc., as operator. See Austin Area Terminal 
R.R.--Change in Operators Exemption--Trans-Glob. Sols., Inc., FD 33972 
(STB served Dec. 20, 2000); see also Trans-Glob. Sols., Inc.--Operation 
Exemption--Cap. Metro. Transp. Auth., FD 33860 (STB served Apr. 4, 
2000). AATR's verified notice states, however, that it has not operated 
over the Lines in many years and that the Lines are presently operated 
by Austin Western Railroad, L.L.C. (AWRR), a rail carrier unaffiliated 
with AATR. (Verified Notice 1-2.) \1\
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    \1\ See Austin W. R.R.--Operation Exemption--Cap. Metro. Transp. 
Auth., FD 35072 (STB served Sept. 14, 2007).
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    On December 30, 2022, the Director rejected the notice, noting 
that, under 49

[[Page 77137]]

CFR 1152.50(b), ``[a]n abandonment or discontinuance of service or 
trackage rights is exempt if the carrier certifies that no local 
traffic has moved over the line for at least 2 years . . . .'' The 
Director observed that, although AATR certified that it had not 
provided service over the Lines for at least two years, AATR also noted 
that the Lines were ``presently operated'' by AWRR. Austin Area 
Terminal R.R.--Discontinuance of Service Exemption--in Bastrop, Burnet, 
Lee, Llano, Travis, & Williamson Cntys., Tex., AB 578X, slip op. at 1 
(STB served Dec. 30, 2022). Thus, because AATR had not certified that 
there had been no local traffic on the Lines during the preceding two 
years, the Director found that the verified notice did not meet the 
requirements of the two-year out-of-service provision at 49 CFR 
1152.50.
    On appeal, AATR argues, among other things, that granting its 
appeal would be consistent with certain agency precedent accepting 
carrier-specific, two-year-out-of-service certifications--allowing 
invocation of the discontinuance class exemption when a carrier has 
certified that it has handled no traffic (local or otherwise) for at 
least two years, regardless of whether the line in question has hosted 
common carrier operations by other railroads in the past two years. 
(AATR Appeal 6.) AATR further asserts that not allowing carrier-
specific certifications would unnecessarily increase regulatory 
barriers to industry exit and, in turn, would discourage honest and 
efficient management of railroads, contrary to the objectives of 49 
U.S.C. 10101(7) and (9).\2\ (AATR Appeal 10.)
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    \2\ AWRR and its parent company, Watco Holdings, Inc., filed a 
joint pleading on January 20, 2023, confirming AWRR's role providing 
common carrier service on the Lines and noting their general support 
for AATR's discontinuance efforts.
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Discussion and Conclusions

    Under 49 CFR 1011.7(a)(2)(x), the Board has delegated to the 
Director the authority to determine whether to issue notices of 
exemption. The Board, however, has reserved for itself the 
consideration and disposition of all appeals of initial decisions 
issued by the Director. See 49 CFR 1011.2(a)(7). In this proceeding, 
AATR argues that the Director erred in rejecting its verified notice of 
exemption. On appeal, the Board considers whether the notice was 
properly rejected under the circumstances presented. See, e.g., Ill. 
Cent. R.R.--Aban. Exemption--in Champaign Cnty., Ill., AB 43 (Sub-No. 
189X), slip op. at 3 (STB served July 2, 2015).
    The Board finds that the verified notice was properly rejected. 
First, the Director's application of 49 CFR 1152.50(b) is consistent 
with the literal language of the regulation, which states that ``[a]n 
abandonment or discontinuance of service or trackage rights is exempt 
if the carrier certifies that no local traffic has moved over the line 
for at least 2 years . . . .'' (emphasis added). Indeed, the final rule 
adopting the discontinuance class exemption noted that the meaning of 
``out of service'' for the purpose of that exemption is the same as in 
the rulemaking establishing the class exemption for abandonments. 
Exemption of Out of Serv. Rail Lines (Discontinuance of Serv. & 
Trackage Rts.), 1 I.C.C.2d 55, 56 (1984). The abandonment rulemaking 
defined ``out of service'' rail lines as those lines where there had 
been ``no traffic originating or terminating on the line for at least 2 
years.'' Exemption of Out of Serv. Rail Lines, 366 I.C.C. 885, 887 
(1983) (emphasis added). Further, the final rule adopting the 
discontinuance class exemption noted that such discontinuances were 
limited in scope, having ``little or no competitive or operational 
impact,'' because they ``w[ould] usually pertain to short-line segments 
with no shippers,'' and that regulation was ``not needed to protect 
shippers from the abuse of market power, because the lines would not 
have been used by shippers for at least 2 years.'' Exemption of Out of 
Serv. Rail Lines (Discontinuance of Serv. & Trackage Rights), 1 
I.C.C.2d at 57 (emphasis added).
    The Director's ruling was also consistent with the discussion in 
CSX Transportation in Jefferson & Indiana Counties, Pa., AB 55 (Sub-No. 
453X) (ICC served Nov. 27, 1992), cited by the Director in the 
challenged order. There, the agency explained that the ``test [under 
the regulation] is not whether [the discontinuing carrier] has provided 
any local service over the line in the past 2 years but whether there 
has been any local service on the line during that period.'' CSX 
Transp., AB 55 (Sub-No. 453X), slip op. at 2.\3\ Although AATR 
characterizes CSX Transportation as ``obscure,'' (AATR Appeal 6), in 
none of the cases AATR cites did the agency squarely address the issue 
here: whether the regulation requires the discontinuing carrier to 
certify that no local traffic at all--as opposed to just its own--has 
moved over the line for at least two years. Nor did any party in the 
decisions cited by AATR challenge the adequacy of a carrier-specific 
certification versus one covering all local traffic on the line.\4\
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    \3\ The ICC later acknowledged the findings in CSX 
Transportation in a subsequent decision by the entire Commission. 
See Buffalo & Pittsburgh R.R.--Discontinuance & Aban. Exemption--
Between DC Tower & Homer City, in Jefferson & Ind. Cntys., Pa., AB 
369 (Sub-No. 2X) et al., slip op. at 2 n.3 (ICC served Nov. 17, 
1993) (explaining that the notice in CSX Transportation was 
``rejected because CSXT had failed to certify that there was no 
local traffic on the Line'').
    \4\ AATR notes that in Delaware & Hudson Railway--Discontinuance 
of Trackage Rights Exemption--in Broome County, N.Y., AB 156 (Sub-
No. 27X) (STB served Oct. 18, 2016), the Board rejected several 
challenges to the notice of exemption, ``including one focused on 
the accuracy of [the carrier's] certification.'' (AATR Appeal 9.) 
Questions were raised in that proceeding about whether the 
discontinuing carrier had in fact conducted local traffic on the 
relevant lines in the last two years. See, e.g., Reply to D&H Reply 
to Pet. to Revoke at 7, May 12, 2015, Del. & Hudson, AB 156 (Sub-No. 
27X) (arguing that if any of the traffic that ``D&H carries'' on the 
trackage rights lines is local traffic, then the ``Exemption Notice 
fails''). But no party in Delaware & Hudson argued that carrier-
specific certifications, in general, do not qualify for the class 
exemption, and the Board accepted the certification there--as it did 
in all the decisions cited by AATR--without discussing the issue 
raised in the Director's order or in CSX Transportation.
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    The Board acknowledges that carrier-specific certifications in two-
year-out-of-service discontinuance proceedings have been more recently 
accepted without challenge or controversy. See, e.g., Minn. Com. Ry.--
Discontinuance of Trackage Rts. Exemption--in Anoka, Hennepin, Ramsey, 
& Wash. Cntys., Minn., AB 882 (Sub-No. 4X) (STB served May 20, 2020); 
Wheeling & Lake Erie Ry.--Discontinuance of Serv. Exemption--in Erie 
Cnty., Ohio, AB 227 (Sub-No. 13X) (STB served Mar. 22, 2019); All. 
Terminal R.R.--Discontinuance of Serv. & Discontinuance of Trackage 
Rts. Exemption--in Denton & Tarrant Cntys., Tex., AB 1262X (STB served 
Apr. 23, 2018). Moreover, as the Board has explained previously, 
discontinuance of trackage rights that have not been operated for at 
least two years is unlikely to negatively impact shippers, ``especially 
. . . because a discontinuance of trackage rights still leaves [at 
least the] line owner in place to conduct service.'' See Norfolk S. 
Ry.--Acquis. & Operation--Certain Rail Lines of the Del. & Hudson Ry., 
FD 35873, slip op. at 20 (STB served May 15, 2015).
    Nevertheless, to resolve the inconsistency, the Board clarifies 
that the regulation should be applied as written and as intended at the 
time of its adoption. Carriers using the two-year-out-of-service notice 
must certify that no local traffic has moved over the line for two 
years, not just their own traffic. The Board further notes that 
carriers may petition for individual exemptions under 49 U.S.C. 
10502(a). While the individual exemption process

[[Page 77138]]

is less streamlined than the class exemption procedures, it still 
provides an avenue for obtaining ``expedite[d] decisions'' with 
``minimize[d] regulatory burdens'' in uncontested or noncontroversial 
proceedings involving rail line abandonments and discontinuances. See, 
e.g., Minn. N. R.R.--Aban. Exemption--Between Redland Junction & 
Fertile, in Polk Cnty., Minn., AB 497 (Sub-No. 2X), slip op. at 11 n.17 
(STB served Nov. 14, 1997) (``Detailed revenue and cost analysis is 
generally reserved for the application process . . . .'') Indeed, the 
Board has readily granted petitions for exemption to discontinue unused 
trackage rights in appropriate circumstances where there would be no 
impact on service. See, e.g., Idaho N. & Pac. R.R.--Discontinuance of 
Trackage Rts. Exemption--in Canyon, Payette, & Wash. Cntys., AB 433 
(Sub-No. 4X) (STB served Jan. 3, 2013) (granting discontinuance 
authority for one set of overhead trackage rights that had not been 
used for 17 years, and another that had not been used for three years); 
BNSF Ry.--Discontinuance of Trackage Rts.--in Peoria & Tazewell Cntys., 
Ill., AB 6 (Sub-No. 470X) (STB served June 4, 2010) (granting 
discontinuance authority for overhead trackage rights that had not been 
used in 28 years).
    Therefore, based upon the foregoing, AATR's appeal of the 
Director's decision rejecting the notice of exemption will be denied. 
However, as discussed below, the Board will grant on its own motion the 
discontinuance of rail service by AATR over the lines at issue.

The Sua Sponte Exemption

    In rejecting a verified notice of exemption, the Board often 
requires or suggests that a party file an application or petition for 
exemption to obtain the necessary authority it seeks. Under the 
circumstances here, however, and given the sufficiency of the current 
record, the Board will minimize the burden on AATR by granting an 
exemption for discontinuance authority over the Lines sua sponte.
    Under 49 U.S.C. 10903, a rail carrier may not discontinue 
operations without the Board's prior approval. Pursuant to 49 U.S.C. 
10502(a), however, the Board shall, to the maximum extent possible, 
exempt a transaction or service from regulation upon finding that (1) 
regulation is not necessary to carry out the rail transportation policy 
(RTP) of 49 U.S.C. 10101, and (2) either (a) the transaction or service 
is of limited scope, or (b) regulation is not needed to protect 
shippers from the abuse of market power.
    Here, detailed scrutiny under 49 U.S.C. 10903 of discontinuance by 
AATR is not necessary to carry out the rail transportation policy. By 
minimizing the administrative expense of the application or petition 
process, an exemption would reduce regulatory barriers to exit. See 49 
U.S.C. 10101(2), (7), (15). An exemption would also encourage efficient 
management by relieving AATR of the responsibility of operating over 
rail lines it has not used in more than 15 years. See 49 U.S.C. 
10101(9). Further, other aspects of the RTP would not be adversely 
affected.
    Regulation of the proposed discontinuance is also not needed to 
protect shippers from the abuse of market power.\5\ AATR has not 
operated over the Lines in many years, and shippers may request service 
from AWRR, which offers common carrier service over the Lines.
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    \5\ Given the Board's finding regarding market power, it need 
not be determined whether the proposed discontinuance is limited in 
scope.
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    Employee Protection. Under 49 U.S.C. 10502(g), the Board may not 
use its 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, the Board will impose the 
employee protective conditions set forth in Oregon Short Line 
Railroad--Abandonment Portion Goshen Branch Between Firth & Ammon, in 
Bingham & Bonneville Counties, Idaho, 360 I.C.C. 91 (1979).
    Offers of Financial Assistance, Interim Trail Use/Rail Banking, 
Public Use, and Environmental Review. Typically, in individual 
exemption proceedings, formal expressions of intent to file an offer of 
financial assistance (OFA) to subsidize continued rail service are due 
within 10 days of the Federal Register publication giving notice of the 
petition for exemption. See 49 CFR 1152.27(c)(1)(i). These filings must 
indicate the intent to file an OFA for subsidy and demonstrate that the 
filers are preliminarily financially responsible. See 49 CFR 
1152.27(c)(2)(i). In this case, given the Board's sua sponte grant of 
an exemption, formal expressions of intent must be filed by November 
13, 2023.
    Provided no formal expression of intent to file an OFA to subsidize 
continued rail service has been received, this exemption will be 
effective on December 3, 2023, unless stayed pending reconsideration. 
And, because this is a discontinuance and not an abandonment, the Board 
need not consider OFAs to acquire the Lines, interim trail use/rail 
banking requests under 16 U.S.C. 1247(d), or requests to negotiate for 
public use of the Lines under 49 U.S.C. 10905. Lastly, because there 
will be an environmental review if abandonment is sought in the future, 
environmental review is unnecessary here.
    In sum, the Board permits the discontinuance of rail service by 
AATR over the above-described rail lines, and notice of AATR's 
exemption will be published in the Federal Register.
    It is ordered:
    1. AATR's appeal of the Director's decision is denied.
    2. Under 49 U.S.C. 10502, the Board exempts from the prior approval 
requirements of 49 U.S.C. 10903 the discontinuance of service by AATR 
on the above-described lines, subject to the employee protective 
conditions in Oregon Short Line Railroad--Abandonment Portion Goshen 
Branch Between Firth & Ammon, in Bingham & Bonneville Counties, Idaho, 
360 I.C.C. 91 (1979).
    3. Notice of the exemption will be published in the Federal 
Register.
    4. This exemption will be effective December 3, 2023.
    5. Formal expressions of intent to file an offer of financial 
assistance (OFA) to subsidize continued rail service are due November 
13, 2023.
    6. Petitions to reopen and petitions to stay the effectiveness of 
the exemption must be filed by November 20, 2023.
    7. This decision is effective on its service date.
    Decided: November 2, 2023.
    By the Board, Board Members Fuchs, Hedlund, Oberman, Primus, and 
Schultz. Board Member Fuchs concurred with a separate expression.

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BOARD MEMBER FUCHS, concurring:

    I agree with today's decision (Decision) that the Director's 
interpretation of ``no local traffic''--requiring a line-specific 
certification--is consistent with the plain meaning of the regulation, 
Decision 3, and supported by the relevant legal history.\1\ I write

[[Page 77139]]

separately to suggest that the Board ought to consider changing this 
regulation. AATR's appeal understandably cites an extensive list of 
cases in which the agency has allowed carrier-specific ``no local 
traffic'' certifications via the notice process, (AATR Appeal 8-9), 
and--in considering this overwhelming precedent--I find that the Board, 
to carry out the rail transportation policy (RTP) at 49 U.S.C. 10101, 
need not routinely subject carriers to the different, more burdensome 
petition process in similar future cases. Over more than 30 years, the 
Board has rightly saved taxpayers and many entities, including small 
businesses, substantial resources by cutting up to 90 days out of the 
exemption process and eliminating a significant number of unneeded 
filings and decisions. See 49 CFR part 1121 (procedures for petitions 
for exemption), 49 CFR 1152.60 (special rules for abandonment and 
discontinuance petitions for exemptions); 49 CFR 1152.50 (exempt 
abandonments and discontinuances); see also 49 U.S.C. 10101(2) 
(minimizing the need for regulatory control over the rail 
transportation system), section 10101(7) (reducing regulatory barriers 
to entry and exit), section 10101(15) (providing for expeditious 
handling of proceedings). Though not the highest agency priority, the 
Board should consider, at the appropriate time, amending its 
discontinuance exemption regulations to allow carrier-specific 
certifications and once again achieve these savings.\2\
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    \1\ The Decision accurately traces the relationship of the 
discontinuance rulemaking to the abandonment rulemaking, and it 
faithfully quotes multiple statements in the discontinuance 
rulemaking preamble that treat phrases such as ``out of service'' 
and ``no local traffic'' as applying to all carriers on the line, 
not just the filing carrier. Decision 3. Yet I am troubled that the 
Federal Register notices accompanying the proposed and final rules 
in the discontinuance proceeding state the exemption can apply when 
``no traffic has been handled locally on the line by the carrier 
seeking the discontinuance for at least 2 years.'' Exemption of Out 
of Service Lines (Discontinuance of Service and Trackage Rights), 48 
FR 27584 (June 16, 1983) (emphasis added). Ultimately, I find 
Federal Register notices contain a drafting error because the phrase 
``by the carrier seeking the discontinuance'' does not appear in the 
related regulation or preamble. I also note that, after the agency 
issued the final rule and associated Federal Register notice, the 
D.C. Circuit--in upholding a remand decision that embraced both the 
abandonment and discontinuance exemption proceedings--stated that 
the ``originally proposed definition of `out of service,' which 
encompassed only rail lines carrying no traffic at all for at least 
two years, had been expanded in the final rule to include lines 
carrying overhead traffic, i.e., traffic that neither originates nor 
terminates on a line and can be rerouted over other lines.'' Ill. 
Com. Comm'n v. ICC, 848 F.2d 1246, 1249 (D.C. Cir. 1988) (emphasis 
added).
    \2\ As part of the rulemaking process, the Board should consider 
any necessary protections for when a carrier-specific certification 
would raise problems relevant to carrying out the RTP, particularly 
with respect to competition. But precedent shows such problems are 
far from the norm. The suggested future rulemaking could also 
address any problems or inconsistencies with the agency's treatment 
of atypical cases. See e.g., Consol. R. Corp.--Exemption--Aban. of 
the Weirton Secondary Track in Harrison & Tuscarawas, Cntys., Ohio, 
AB 176 (ICC decided June 7, 1989) (revoking a class exemption as 
applied to the proposed abandonment at issue and finding that a more 
thorough review of the transaction was necessary to carry out the 
national rail transportation policy).

Jeffrey Herzig,
Clearance Clerk.
[FR Doc. 2023-24672 Filed 11-7-23; 8:45 am]
BILLING CODE 4915-01-P