Petition for Writ of Certiorari — City of Auburn v. United States

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981511 MAR 221%.

OFFICE OF THE CLERK

No.

IN THE

Supreme Court of the United States

OCTOBER TERM, 1998

CITY OF AUBURN, a municipal

corporation of the State of Washington,

Petitioner,

THE UNITED STATES GOVERNMENT and THE SURFACE

TRANSPORTATION BOARD, an agency of the United States

Government; KING COUNTY, a Washington municipal

corporation; BURLINGTON NORTHERN SANTA FE

CORPORATION, a Delaware corporation; BURLINGTON

NORTHERN RAILROAD COMPANY, a Delaware corporation;

BURLINGTON NORTHERN SANTA FE ACQUISITION, INC.;

and THE BURLINGTON NORTHERN AND SANTA FE

RAILWAY COMPANY,

Respondents.

On Petition for Writ of Certiorari

to the United States Court of Appeals

for the Ninth Circuit

PETITION FOR WRIT OF CERTIORARI

MICHAEL J. REYNOLDS PETER J. EGLICK

JupitH C. AUSMAN Counsel of Record

KAREN C. GULLIVER HELSELL FETTERMAN LLP

AUBURN City ATTORNEY’S OFFICE Suite 1500

25 West Main Street 1325 Fourth Avenue

Auburn, WA 98001 Seattle, WA 98101

(253) 931-3030 (206) 292-1144

Attorneys for Petitioner

151492 @ Counsel Press LLC |

FORMERLY LUTZ APPELLATE SERVICES me eX

(800) 274-3321 * (800) 359-6859 \ 4

QUESTION PRESENTED

Where the legislative history shows that Congress had

only intended to occupy the entire field of economic

regulation of the interstate rail transportation system, and that

the states would still retain “the police powers reserved by

the Constitution:”

Does the Interstate Commerce Commission Termination

Act, which went into effect January, 1996, preempt all

traditional state police powers, including environmental

review and permit authority?

PARTIES TO THE PROCEEDING

In addition to the parties named in the caption, the City

of Yakima, Washington and the City of Kent, Washington

were parties before the Court of Appeals, but reached

settlement prior to issuance of the Ninth Circuit decision.

ill

TABLE OF CONTENTS

Page

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Reasons for Granting the Writ .................. 12

I. The Petition Should Be Granted Because The

Ninth Circuit Erred In Refusing To Consider

RMN SERMON os Sed w ae casio aciccs 13

Il. The Petition Should Be Granted Because It

Presents A Significant Question Of Federal Law

— And, Particularly, Of Federalism — Which

Affects All States And Their Political

NT Rape ey ro aed erat TN 17

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TABLE OF CITED AUTHORITIES

Page

Cases:

Burlington Northern Santa Fe Corp. v. Anderson, 959

F, me, 1258 (0. BASF T) nc cio vcnbe thaws 15

City of Boerne v. Flores, 117 S. Ct. 2157 (1997) ... 19

CSX Transportation v. Georgia Public Service

Comm'n, 944 F.Supp. 1573 (N.D. Ga. 1996) .... 15

Georgia Public Service Comm’n v. CSX

Transportation, Inc., 484 S.E.2d 799 (Ga. Ct. App.

bo Fb Bare ren marin ame eaeara arene eR FE fe ub SESS 15, 16

Illinois Commerce Commission vy. Interstate Commerce

Commission, 879 F.2d 917 (D.C. Cir. 1989) .... 9

In Re Burlington Northern Railroad v. Page Grain Co.,

545 N.W.26 749 (Neb. 1996) 2... ose. 16

In Re Catapult Entertainment, Inc., 165 F.3d 747 (9th

Os SF hay obs ees CREM EY CA US a ea et 13

International Association v. Locke, 159 F.3d 1220 (9th

CRP, Se) oka vst rea hee be eae ene 13

Medtronic, Inc. v. Lohr, 518 U.S. 470 (1996) ...... 14

Norfolk & West Railroad vy. American Train

Dispatchers Ass'n, 499 U.S. 117 (1991) ........ 16

Cited Authorities

Page

Public Citizen v. United States Dept. of Justice, 491

RFs en CRD iki apn ees TRE < l s 15

Rubin v. United States, 449 U.S. 424 (1981) ...... 14

United States v. Gonzales, 117 S. Ct. 1032 (1997) .. 15

Watt v. Alaska, 451 U.S. 259 (1981) ............. 14

Statutes:

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Cited Authorities

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49'US.C. & 1050 N2) C987) i ec eS 10

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Revised Code of Washington, Chapter 43.21C ..... 3

Other Authorities:

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H.R. Conf. Rep. No. 104-422 (1995), reprinted in 1995

2B Sl BS Ble, SRR Wepeamnng ir eatin oer nog a 9,10

H.R. Rep. No. 104-311 (1995), 1995 U.S.C.C.A.N.

RT A EO MES ERPs so? gay Pe CTE eae 9

H.R. Rep. No. 104-311 (1995), reprinted in 1995

Tk Gel oe A, Bay | + prone paper rena tele et yey pr 8

vil

TABLE OF APPENDICES

Page

Appendix A — Order And Amended Opinion Of The

United States Court Of Appeals For The Ninth

Circuit Dated And Filed September 3, 1998 And

Amended October 20, 1998 ..........0ccccca. la

Appendix B — Decision Of The Surface Transportation

Board Dated And Decided July 1, 1997 ........ 22a

Appendix C — Decision Of The Surface Transportation

Board Dated And Decided September 25, 1996 .. 43a

Appendix D — Decision Of The Surface Transportation

Board Dated And Decided October 24, 1996 .... 54a

Appendix E — Order Of The United States Court Of

Appeals For The Ninth Circuit Denying Petition For

Rehearing Dated And Filed December 22, 1998 . 79a

Appendix F — Relevant Statutes ................ 8la

Appendix G — Letter From Eric Laschever To Paul

Krauss Dated March 24, 1997 Re: Withdrawal Of

Comprehensive Plan Amendment Request ...... 95a

Appendix H — Letter Of The Attorney General Of

Washington Dated October 27, 1998 ........... 97a

OPINION BELOW

The opinion of the United States Court of Appeals for

the Ninth Circuit is reported at City of Auburn v. United States

Government and the Surface Transportation Board, 154 F.3d

1025 (9th Cir. 1998). (Appendix A).

STATEMENT OF JURISDICTIGN

The Court of Appeals opinion was filed September 3,

1998, and amended October 20, 1998. An order denying a

petition for rehearing and rejecting a suggestion for rehearing

en banc was filed on December 22, 1998. (Appendix E). This

Court has jurisdiction to review the judgment of the Court of

Appeals for the Ninth Circuit by writ of certiorari pursuant

to 28 U.S.C. § 1254(1).

STATUTES INVOLVED

The statute involved is the Interstate Commerce

Commission Termination Act (“ICCTA”), 49 U.S.C. § 701,

et seq. The relevant portions are in Appendix F.

STATEMENT OF THE CASE

This Petition concerns a decision by the United States

Court of Appeals for the Ninth Circuit in three related cases,

consolidated for argument and decision, concerning rulings

of the federal Surface Transportation Board (“STB”),

successor to the Interstate Commerce Commission.

Pursuant to the Hobbs Act, 28 U.S.C. § 2342(S), appeal

of all STB actions is directly to the Courts of Appeals. The

STB decisions reviewed by the Ninth Circuit were issued,

respectively, September 25, 1996 (Appendix C), October 24,

1996 (Appendix D), and July 1, 1997 (Appendix B). They

arise out of a proposal by Burlington Northern Railroad

(“Burlington”) to acquire the Washington Central Railroad

and then to reconstruct and open its Stampede Pass line to

provide an additional route across the Cascade Mountains to

Western Washington. Burlington anticipated use of the route

for double-stacked intermodal trains.

Burlington’s Stampede Pass line extends from the City

of Auburn in Western Washington’s King County to the City

of Cle Elum in Eastern Washington’s Kittitas County, passing

over Stampede Pass in the Cascade Mountains. Burlington

effectively eliminated service on the line in approximately

1983, although it was never formally abandoned. Burlington

decided to reopen the Stampede Pass line in early 1996.

Because the line had been in disuse for close to 15 years, the

reopening required — in Burlington’s words — “major

construction,” including replacement of track sidings, new

maintenance buildings, improvements to an approximately

two-mile-long tunnel through the Cascade Mountains

(including raising tunnel heights and replacing snow sheds),

and installation of new communications towers.

Petitioner City of Auburn is located at the western

terminus of the Stampede Pass line, at its junction with

Burlington’s north-south Pacific Coast rail line, which

connects with the Ports of Tacoma and Seattle. Auburn is

divided into sectors by Burlington train tracks: the Stampede

Pass line east to west, and the Pacific Coast line north to

south. All trains traveling through the reopened Stampede

Pass line travel through Auburn, switching between the

Pacific Coast line and the Stampede Pass line in the middle

of downtown Auburn. Burlington has seven at-grade

crossings within the City of Auburn: two for the Stampede

Pass line, and five for the Pacific Coast line. Because trains

using the rebuilt Stampede Pass are frequently a mile or more

long, each train can simultaneously block several at-grade

crossings at once in the city, stopping vehicle traffic and

creating blocks-long traffic jams.

The City of Auburn has a population of almost 40,000.

Its streets are used not only for local access, but as heavily

traveled commuter routes between points in King County.

The only regional trauma center serving the South King

County area is located in Auburn east of Burlington’s north-

south Pacific Coast line. A Boeing facility employing 9,000

area citizens and a regional shopping mall are located

immediately west of the same line.

When Burlington first announced its plans for reopening

the Stampede Pass line, it stated that reopening the line would

be accompanied by a conversion of its old (largely inactive)

rail yard in downtown Auburn into a massive “intermodal”

facility. Burlington advised the City that the yard would result

in freight truck traffic projected at 3,000 trips per day onto

adjacent city streets.

In the first half of 1996, Burlington filed several permit

and environmental review applications with the planning

departments of both King and Kittitas Counties, where the

Stampede Pass line work would take place. Such applications

were not unusual: railroads have routinely submitted

applications to local jurisdictions and gone through

environmental review under the Washington State

Environmental Policy Act (“SEPA”), Revised Code of

Washington (“RCW”) Chapter 43.21C. Burlington also had

pending with the City of Auburn a preliminary application

for site planning approval of the intermodal yard in downtown

Auburn.

Auburn provided written comments to the two counties

handling environmental review and permitting under state

law of Burlington’s project, detailing the City’s concerns

about the effect of the work on the Stampede Pass line, as

well as the impact of the intermodal yard/truck terminal on

city streets and traffic. Auburn also challenged the failure of

Kittitas County to prepare an environmental impact statement

under SEPA.

Burlington’s response to adverse comments by Auburn

and others was to withdraw all of its state and local permit

applications, relying on an informal opinion issued by the

STB Secretary to the effect that the Interstate Commerce

Commission Termination Act (“ICCTA”), 49 U.S.C § 701,

et seq., preempted state and local authority for environmental

and land use regulation. In response, after prompting by

Auburn and other affected cities, King County petitioned the

STB on August 21, 1996, for a formal declaratory ruling on

whether the ICCTA preempted local environmental review

authority.

The STB issued its decision less than a month later, on

September 25, 1996, declaring that state and local

environmental laws were preempted. Appendix C. Although

Auburn’s concerns had been the impetus for the question,

the STB’s decision summarily rejected Auburn’s request to

participate in the proceeding. Appendix C at p. 44a n.2. The

Board did indicate that the City could attempt to file with the

STB a separate petition for declaratory order, even while the

decision announcing preemption remained in effect. Jd.

is ee ene ee el aa

Auburn filed its own petition on October 11, 1996. The

petition asked for a ruling that the ICCTA did not preempt

state and local environmental, land use, and building

permitting authority. In the alternative, the petition asked that

the STB vacate its September 25, 1996, decision in the King

County matter, and allow the question of preemption to be

settled in a more appropriate forum, for example, on district

court review of a claim of preemption in response to a state

or local permitting action.

While Auburn’s petition was pending, on October 24,

1996, the STB issued its decision approving the Burlington/

Washington Central merger transaction. Appendix D. The

approval rejected concerns expressed by Auburn and others

about the adequacy of environmental review of the

transaction. It endorsed “mitigation measures” which were

largely exhortatory — for example, providing a toll-free

number to handle inquiries, and requiring Burlington to

“consult” with state agencies and “discuss” funding options.

Appendix D at 75a, 77a. The STB merger approval decision

also emphasized that the STB did not review or regulate

impacts or construction not related to the transaction for

which STB approval was required. Appendix D at 71a.

On July 1, 1997, the STB issued its decision in response

to the Auburn petition. Appendix B. The STB treated

Auburn’s petition as one for “reconsideration” of its earlier

decision, and reaffirmed it, stating “that a state or local

permitting process for prior approval of this project, or of

any aspect of it related to interstate transportation by rail,

would of necessity impinge upon the federal regulation of

interstate commerce and therefore is preempted.” Appendix

B at p. 31a. In announcing this sweeping preemption, the

STB explicitly declined to review any of the individual

ordinances or state or local regulations which it swept aside.

Id. at p. 31a.

Auburn appealed both STB rulings to the Court of

Appeals for the Ninth Circuit. It also appealed the STB’s

approval of the merger transaction between Burlington

Northern and Washington Central on the grounds that the

environmental review pursuant to the National Environmental

Protection Act (“NEPA”), 42 U.S.C. § 4321, had been

inadequate. In its appeals, Auburn emphasized its concern

that the STB’s preemption ruling was too sweeping and too

indiscriminate. Auburn pointed out that it could be construed

as preempting any state or local review of any railroad

activities conceivably related to the Stampede Pass line,

including establishment by Burlington of a 3,000-trip-per-

day truck terminal in downtown Auburn. Burlington itself

had confirmed Auburn’s concerns in this regard by submitting

a letter to the City withdrawing its request for City review of

the terminal proposal, citing the STB decisions. Appendix

The Ninth Circuit consolidated all three Hobbs Act

appeals for argument. It subsequently issued a decision on

the merits on September 3, 1998, which was amended on

October 20, 1998, with petition for rehearing and suggestion

for rehearing en banc denied on December 22, 1998.

Appendices A, E.

The Ninth Circuit’s decision expansively confirmed the

STB’s statutory interpretation of sweeping preemption on the

premise that the ICCTA, as part of the federal scheme for

regulation of railroads, intentionally and explicitly

extinguished traditional state police power authority over

them, rather than just preempting state economic regulation

of them. In articulating this premise, the Ninth Circuit

acknowledged Auburn’s citations to the ICCTA’s legislative

history, in which Congress declared more than once that it

intended to preempt economic regulation, while preserving

the states’ traditional police powers. However, it refused to

consider this legislative history on the grounds that the

ICCTA itself was so clear and unambiguous that resort to

the legislative history was unnecessary.

In doing so, the court ignored the context of the statute

itself and contradictions which would arise in it if the STB’s

construction were accepted. Further, it ignored case law both

from this Court and from the Ninth Circuit itself suggesting

that, in some circumstances, legislative history should inform

statutory interpretation even where the statutory language

itself is purportedly clear.

The legislative history which the Ninth Circuit declined

to credit is substantial. For example, as the court

acknowledged (Appendix A at p. 12a), the House Committee

responsible for the ICCTA reported as follows:

Conforming changes are made to reflect the direct

and complete pre-emption of State economic

regulation of railroads. The changes include

extending exclusive Federal jurisdiction to matters

relating to spur, industrial, team, switching or side

tracks formerly reserved for State jurisdiction

under former section 10907. The former disclaimer

regarding residual State police powers is

eliminated as unnecessary, in view of the Federal

policy of occupying the entire field of economic

regulation of the interstate rail transportation

system. Although states retain the police powers

8 .

reserved by the Constitution, the Federal scheme

of economic regulation and deregulation is

intended to address and encompass a// such

regulation and to be completely exclusive. Any

other construction would undermine the

uniformity of Federal standards and risk the

balkanization and subversion of the Federal

scheme of minimal regulation for this intrinsically

interstate form of transportation.

H.R. Rep. No. 104-311 at 95-96 (1995), reprinted in 1995

U.S.C.C.A.N. 793, 807-08 (underlined emphasis added;

italics in original). The House Transportation and

Infrastructure Committee also commented on the intent of

the ICCTA “to standardize all economic regulation”

(emphasis added):

To reflect the replacement of the Staggers Act

system of optional certification of State regulatory

agencies to administer economic regulation of

railroads using Federal Standards, this provision

is conformed to the bill’s direct and general pre-

emption of State jurisdiction over economic

regulation of railroads. As used in this section,

“State or Federal law” is intended to encompass

all statutory, common law, and administrative

remedies addressing the rail-related subject matter

jurisdiction of the Transportation Adjudication

Panel. The bill is intended to standardize all

economic regulation (and deregulation) of rail

transportation under Federal law, without the

optional delegation of administrative authority to

State agencies to enforce Federal standards, as

provided in the relevant provisions of the Staggers

Rail Act.

H.R. Rep. No. 104-311, at 95 (1995), 1995 U.S.C.C.A.N. at

807 (emphasis added). “The central concern of the Staggers

Rail Act,” referred to in this House Report, “was reformation

of the economic regulation of railroads.” //linois Commerce

Commission v. Interstate Commerce Commission, 879 F.2d

917, 925 and n.66 (D.C. Cir. 1989) (citing Staggers Act

legislative history) (emphasis added). As evidenced by the

House Committee Report statements quoted above, that focus

on economic regulation was not altered by the ICCTA.

House Conference Report No. 104-422, drafted by the

House and Senate Committee of Conference to explain their

agreement on the form of bill which became the ICCTA,

restated Congress’ intent to preempt only state economic

regulation:

Also integrated into the statement of general

jurisdiction is the delineation of the exclusivity

of Federal remedies with respect to the regulation

of rail transportation. Former section 10103 dealt

with remedies in all modes of transportation

regulated by the ICC, but since 1980, former

section 10501(d) and 11501(b), with respect to rail

transportation, had already replaced the former

standard of cumulative remedies with an exclusive

Federal standard, in order to assure uniform

administration of the regulatory standards of the

Staggers Act. The Conference provision retains

this general rule, while clarifying that the

exclusivity is limited to remedies with respect to

rail regulation — not State and Federal law

generally. For example, criminal statutes

governing antitrust matters not preempted by this

Act, and laws defining such criminal offenses as

bribery and extortion, remain fully applicable

unless specifically displaced, because they do not

generally collide with the scheme of economic

regulation (and deregulation) of rail

transportation.

H.R. Conf. Rep. No. 104-422 at 167 (1995), reprinted in 1995

U.S.C.C.A.N. 793, 852 (emphasis added).

The Ninth Circuit declined to address the distinction in

the legislative history between congressional! intent to

preempt state economic regulations and intent to preempt all

state police power regulations, citing “the plain language of

two sections of the ICCTA.” Appendix A at 13a.

One section, quoted by the court, grants the STB

exclusive jurisdiction over “the construction, acquisition,

operation, abandonment, or discontinuance of spur, industrial,

team, switching, or side tracks, or facilities, even if the tracks

are located, or intended to be located, entirely in one state.”

49 U.S.C. § 10501(b)(2) (1997). As the court pointed out,

this section states that, “The remedies provided under this

part with respect to regulation of rail transportation are

exclusive and preempt the remedies provided under federal

or state law.” 49 U.S.C. § 10501(b) (1997). The court also

pointed to the immunity granted rail carriers for mergers or

transactions approved under 49 U.S.C. §§ 11323-25:

[a] rail carrier ... participating in that approved

or exempted transaction is exempt from the

antitrust laws and from all other law, including

State and municipal law, as necessary to let that

rail carrier ... carry out the transaction, hold,

maintain, and operate property, and exercise

control or franchises acquired through the

transaction.

49 U.S.C. § 11321(a) (1997).

Read in context, these provisions cited by the Ninth

Circuit do not unambiguously support its interpretation. The

jurisdiction granted to the STB over rail transportation is in

the context of regulated transactions and their economic

aspects — as the words themselves suggest — and do not

purport to create a regulatory void for the issues addressed

by state and local permits and environmental review.

The noncompelling nature of the Ninth Circuit’s

conclusion that the statutory language is unambiguous in

requiring across-the-board preemption is illustrated by the

“plain language” in § 10501, cited by the Ninth Circuit, to

the effect that a// state and federal laws are preempted other

than the ICCTA. No distinction is made in this language

between state and federal laws: no special “saving” exception

is included in the language for federal law.

Under the Ninth Circuit’s interpretation, devoid of

context or reference to legislative history, state and federal

law both stand equally preempted. However, this can only be

the case if, as the legislative history explains and the context

of the statute suggests, the preempted statutes relate to

economic regulation. Otherwise, if the Ninth Circuit’s “plain

language” reading were adopted, matters concerning railroads

would not be subject to the federal Clean Water Act (33

U.S.C. § 1251), federal Endangered Species Act (16 U.S.C.

§ 1531), National Environmental Policy Act (42 U.S.C.

§ 4321) or the federal Clean Air Act (42 U.S.C. § 7401). Yet,

the STB’s own rules acknowledge the continued applicability

of various federal! laws relating to environment, energy, and

historic preservation which, if the “plain language” of the

ICCTA were to be credited in the manner which the Ninth

Circuit suggests, would not apply:

These rules are designed to assure adequate

consideration of environmental and energy factors

in the commission’s decision-making process

pursuant to the National Environmental Policy

Act, 42 U.S.C. § 4332; the Energy Policy and

Conservation Act, 42 U.S.C. § 6362(b); and related

laws, including the National Historic Preservation

Act, 16 U.S.C. § 470f, the Coastal Zone

Management Act, 16 U.S.C. § 1451, and the

Endangered Species Act, 16 U.S.C. § 1531.

49 C.F.R. § 1105.1.

REASONS FOR GRANTING THE WRIT

The STB rulings and the Ninth Circuit decision,

purportedly “definitive” on the effect of the ICCTA, will

foster controversies in every state. Acceptance of the Petition

now and a definitive construction of the ICCTA by this Court

will provide needed guidance as to application of a statute

which touches virtually every jurisdiction in the country.

THE PETITION SHOULD BE GRANTED BECAUSE

THE NINTH CIRCUIT ERRED IN REFUSING TO

CONSIDER LEGISLATIVE HISTORY.

Context and legislative history are important here. The

declaration of “rail transportation policy” at the start of the

ICCTA addresses such matters as “competition,” “rates,”

“regulatory barriers,” “honest and efficient management of

railroads,” “fair wages,” and “predatory pricing.” 49 U.S.C.

§ 10101 (Appendix F at pp. 81a-82a). Even in the provisions

focused upon by the Ninth Circuit, the Act concerns

transactions, such as mergers or acquisitions, which are what

bring matters before the STB for review. Yet, as a result of

the Ninth Circuit decision, railroad action (such as the

decision to establish a large terminal in a downtown area)

would be exempt from all state and local permitting and

environmental review, but not subject to STB scrutiny, in

the absence of a merger or other regulated transaction. There

is nothing in the legislative history to indicate that this was

the intended result of the ICCTA’s elimination of state

economic regulation of railroads, and much to suggest

otherwise. The court should have looked to that history.

Ironically, in a decision by a different panel of the Ninth

Circuit issued a few months later, on January 28, 1999, the

court cited its Auburn decision for the principle that it could

look to legislative history “where the legislative history

clearly indicates that Congress meant something other than

what it said.” Jn Re Catapult Entertainment, Inc., 165 F.3d

747, 753 (9th Cir. 1999). See International Association v.

Locke, 159 F.3d 1220, 1223 (9th Cir. 1998) (dissent by Judge

Graber from denial of petition for rehearing and rejection of

suggestion for rehearing en banc).

The Ninth Circuit decision here cited this Court’s

decisions in Medtronic, Inc. v. Lohr, 518 U.S. 470, 486

(1996), and in Rubin v. United States, 449 U.S. 424, 430

(1981), in support of its interpretation of the ICCTA without

reference to its legislative history. Appendix A at p. 17a and

n.7. However, Medtronic suggests that an examination of the

“statutory framework surrounding” an asserted preemption

cannot occur without looking at the “structure and purpose

of the statute as a whole,” which is “revealed not only in the

text, but through the reviewing court’s reasoned

understanding of the way in which Congress intended the

statute and its surrounding regulatory scheme” to work.

Medtronic, 518 U.S. at 486. In fact, Medtronic engaged in an

extensive analysis of the legislative history as part of its

determination of the preemption question presented there. 518

U.S. at 490-92.

Similarly, as this Court pointed out with reference to

Rubin v. United States, 449 U.S. 424 (1981):

ascertainment of the meaning apparent on the face

of a single statute need not end the inquiry.

[citations omitted] This is because the plain-

meaning rule is “rather an axiom of experience

than a rule of law, and does not preclude

consideration of persuasive evidence if it exists.”

[citations omitted] The circumstances of the

enactment of particular legislation may persuade

a court that Congress did not intend words of

common meaning to have their literal effect.

Watt v. Alaska, 451 U.S. 259, 266 (1981). In short, this Court

has held that there can be no rule of law which prohibits

reference to aids to construction (including, certainly,

a are

legislative history) “however clear the words may appear on

‘superficial examination.’ ” [citations omitted] Public Citizen

v. United States Dept. of Justice, 491 U.S. 440, 455 (1989).

Rather than looking to legislative history to assist in

interpreting the ICCTA, the Ninth Circuit looked to various

lower-court cases as authority. For example, it referred to a

Montana District Court case, Burlington Northern Santa Fe

Corp. v. Anderson, 959 F. Supp. 1288, 1294-95 (D. Mt. 1997).

Ironically, Anderson explicitly relied on the legislative history

of the ICCTA (which the Ninth Circuit declined to consider

here) to find state regulation of railroad closure of stations

preempted. This preemption of a classic instance of regulation

of an economic business decision — whether to keep a

particular facility open or not — provides no insight into the

issue raised by Auburn.

Similarly, such cases as CSX Transportation v. Georgia

Public Service Comm'n, 944 F. Supp. 1573 (N.D. Ga. 1996),

cited by the Ninth Circuit do not address the preemption issue

presented here. The issue in CSX was, again, whether a state

could regulate the business decision to close a particular

railroad facility, and did not address sweeping preemption

of traditional state police powers.

None of the other cases relied upon by the Ninth Circuit

provide any greater insight into the critical issue raised by

the assertion of sweeping preemption of traditional state

police powers. See, e.g., Georgia Public Service Comm'n v.

1. United States v. Gonzales, 117 S. Ct. 1032, 1035 (1997),

also cited by the Ninth Circuit as authority for not looking at the

legislative history, is clearly not on point. In Gonzales, this Court

observed that the “snippet of legislative history” involved “only

muddies the waters.” Jd.

CSX Transportation, Inc., 484 $.E.2d 799, 801-02 (Ga. Ct.

App. 1997) (refers to elimination of “anti-competitive micro-

management” by ICCTA, with reference to state’s attempt

to regulate reduction in employees at customer service

facility); Jn Re Burlington Northern Railroad v. Page Grain

Co., 545 N.W.2d 749, 751 (Neb. 1996) (state regulation of

station closure preempted).

The Ninth Circuit also cited cases from this Court

addressing distinct issues under the predecessor to the

ICCTA. These cases are not particularly supportive of the

result reached by the Ninth Circuit here in interpreting the

ICCTA itself. For example, the Ninth Circuit referred to

Norfolk & West Railroad v. American Train Dispatchers

Ass'n, 499 U.S. 117, 127-34 (1991), interpreting a predecessor

to the ICCTA, as supporting “a broad reading” of the current

statute. Appendix A at p. 15a. However, that broad reading

was in the context of the narrow question articulated by this

Court, that is, whether the ICCTA’s predecessor preempted

collective bargaining agreements when those agreements

impeded an approved consolidation. 499 U.S. at 134. The

Norfolk Court was careful to point out that, “The immunity

provision does not exempt carriers from all law, but rather

from all law necessary to carry out an approved transaction.”

Id. It is a substantial leap from determining that a preexisting

labor agreement would interfere with a railroad consolidation

to sweeping aside all state and local environmental and

permitting laws.

Ae Nabil itt NEMO

z ae Siete:

Il.

THE PETITION SHOULD BE GRANTED BECAUSE IT

PRESENTS A SIGNIFICANT QUESTION OF

FEDERAL LAW — AND, PARTICULARLY, OF

FEDERALISM — WHICH AFFECTS ALL STATES

AND THEIR POLITICAL SUBDIVISIONS.

The concern which may have prompted the Ninth Circuit

to overlook ambiguities in the statute, and to turn a blind eye

to legislative history and clear expressions of legislative

intent, was identified by the court itself in its opinion. At the

close of its analysis of the preemption issue, it acknowledged

Auburn’s argument that the environmental review and

permitting requirements at issue were environmental rather

than economic, and within the traditional state police powers

that Congress did not intend to preempt. Appendix A at

p. 16a. The court rejected, however, recognition of any such

distinction under the ICCTA:

Additionally, given the broad language of section

10501(b)(2) (granting the STB exclusive

jurisdiction over construction, acquisition,

operation, abandonment, or discontinuance of rail

lines), the distinction between “economic” and

“environmental” regulation begins to blur. For if

local authorities have the ability to impose

“environmental” permitting regulations on the

railroad, such power will in fact amount to

“economic regulation” if the carrier is prevented

from constructing, acquiring, operating,

abandoning, or discontinuing a line.

Appendix A at p. 16a. This is tantamount to a confession by

the court that the burdens of federalism are too great. States

and their local constituent jurisdictions are to be left to

railroad feudalism, even in matters traditionally subject to

state police powers.

Neither the City of Auburn nor its amicus supporters

below’ have contested Congress’ capacity under the

Constitution or intent in the ICCTA to preempt state economic

regulation of railroad activities, even where such regulation

was permitted in the past. Earlier versions of the Act, which

over the last century variously allowed states to regulate

station closures, local rates, or other similar matters, have

admittedly gone by the board over the years, and particularly

with enactment of the ICCTA. However, the proposition now

upheld in a particularly extreme form by the Ninth Circuit,

that the ICCTA would also prevent a state or city from

requiring a permit and environmental review before a river

or stream could be blocked or diverted,’ or before a major

2. As the Ninth Circuit noted, amicus briefs in support of

Auburn’s position were filed in the Ninth Circuit by the State of

Washington and the National League of Cities. Appendix A at p. 8a.

3. The State of Washington particularly noted below, prior to

the Ninth Circuit’s decision, that Burlington’s diversion of streams

providing fish habitat required permits under state law. After the

Ninth Circuit decision, in supporting Auburn’s request for rehearing,

the State reported that Burlington had allegedly poured cement

directly into the Wenatchee River, destroying riparian habitat and,

in the opinion of the State Department of Fish & Wildlife biologist,

causing fish kills. Burlington had not obtained a state permit for the

work, and when challenged by the State, cited the recently issued

Ninth Circuit decision as preempting the State’s hydraulic code.

Appendix H.

truck terminal could be established opening onto downtown

city streets, represents a serious flight from federalism.

Of course, when a state or one of its political subdivisions

requires a permit and a life/safety code inspection for major

new construction, when it requires permitting and

environmental review before a salmon stream is dammed or

diverted (affecting downstream users as well as wildlife), or

when it asserts the right to regulate establishment of a new

truck terminal facility to ensure safety on its downtown

streets, the railroad’s bottom line may be affected.* However,

an incidental effect on the bottom line from a law of general

application cannot be deemed as equivalent to impermissible

economic regulation of railroads under the ICCTA,

particularly where the legislative history reflects no such

intent.

The effect of the Ninth Circuit ruling is to establish

railroads as sovereigns, answerable to no one. The STB has

no interest, expertise, or jurisdiction to regulate matters

relating to local environment, land use, or building codes.

Unless a matter comes before it because a regulated

transaction such as a merger is involved, there will not even

4. This incidental effect is analogous to that identified by this

Court in City of Boerne v. Flores, 117 S. Ct. 2157, 2171 (1997),

where the Court observed:

It is a reality of the modern regulatory state that numerous

state laws, such as the zoning regulations at issue here,

impose a substantial burden on a large class of

individuals. When the exercise of religion has been

burdened in an incidental way by a law of general

application, it does not follow that the persons affected

have been burdened any more than other citizens, let

alone burdened because of their religious beliefs.

be a basis for STB jurisdiction over building and land use

activities which affect states and localities and which have

been traditionally subject to state police powers. Here, for

example, Burlington’s creation of a new intermodal terminal

in its downtown yard will not be subject to any STB review

since no triggering transaction occurs. According to the

railroad it will not be subject to any other review under the

Ninth Circuit’s ruling. Regardless of the effects on local

citizenry, the railroad asserts it is free to take unfettered

action. Review by this Court of the regulatory void which

the STB has created and the Ninth Circuit has affirmed is

urgently required.

CONCLUSION

The City of Auburn respectfully requests that the Court

grant its Petition for Writ of Certiorari.

Respectfully submitted,

PETER J. EGLICK

Counsel of Record

HELSELL FETTERMAN LLP

Suite 1500

1325 Fourth Avenue

Seattle, WA 98101

(206) 292-1144

MICHAEL J. REYNOLDS

JupITH C. AUSMAN

KAREN C, GULLIVER

AUBURN CiTy ATTORNEY’S OFFICE

25 West Main Street

Auburn, WA 98001

(253) 931-3030

Attorneys for Petitioner

tS eee

—

vee

APPENDIX A — ORDER AND AMENDED OPINION OF

THE UNITED STATES COURT OF APPEALS FOR THE

NINTH CIRCUIT DATED AND FILED SEPTEMBER 3, 1998

AND AMENDED OCTOBER 20, 1998

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

City OF AUBURN, a municipal

corporation of the state of

Washington,

Petitioner,

7 No. 96-71051

THe Unirep States GOVERNMENT

and THE SURFACE TRANSPORTATION STB No.

Boarb, an agency of the United 33095

States Government; Kinc County, ORDER AND

a Washington municipal AMENDED

corporation; BURLINGTON NORTHERN OPINION

SANTA FE CorRPORATION, a

Delaware corporation; BURLINGTON

NORTHERN RAILROAD ComPANyY, a

Delaware corporation, et al.,

Respondents.

Crry oF AUBURN, a municipal

corporation of the state of

Washington; City oF YAKIMA, a

municipal corporation of the state No. 97-70022

of Washington; Crry or KENT, a > STB No.

municipal corporation of the state 32974

of Washington,

Petitioners,

Appendix A

U.S. GOVERNMENT; THE SURFACE

TRANSPORTATION BOARD, an agency

of the United States Government,

Respondents,

BURLINGTON NORTHERN SANTA FE

CorPoRATION, Burlington Northern ‘

Santa Fe Acquisition, Inc. (“BNSF

Acquisition”) and the Burlington

Northern and Santa Fe Railway

Company (“BN/Santa Fe’),

Respondents-Intervenors.

City OF AUBURN, a municipal

corporation of the state of

Washington,

Petitioner,

U.S. GOVERNMENT; THE SURFACE No. 97-70920

TRANSPORTATION BOARD, an agency 4 STB No.

of the United States Government, 33200

Respondents,

and

BURLINGTON NORTHERN and SANTA

Fe RaiLwAy Company,

Intervenors/Respondents.

Petitions to Review Decisions of

The Surface Transportation Board

Argued and Submitted

June 3, 1998—Seattle, Washington

in a ae

Appendix A

Filed September 3, 1998

Amended October 20, 1998

Before: Donald P. Lay,* Alfred T. Goodwin and

Harry Pregerson, Circuit Judges.

Opinion by Judge Lay

SUMMARY

Environmental Law/Litigation and Procedure

The court of appeals affirmed decisions of the Surface

Transportation Board (STB). The court held that the Interstate

Commerce Commission Termination Act (ICCTA) preempts

state and local permit laws regarding railroad operations.

In 1986, respondent Burlington Northern Railroad Com-

pany sold a portion of its Stampede Pass line to the Washing-

ton Central Railroad. Burlington continued to operate the

remainder of the Stampede Pass line. In 1996, Burlington

sought approval by the STB to reacquire the segment of the

Stampede Pass line that it had sold to Washington Central.

Initially submitting permit applications for proposed improve-

ments and repairs to local authorities, Burlington later

adopted the position that the ICCTA preempted state and

local law governing environmental review.

King County, Washington sought the STB’s opinion on the

preemption issue. Petitioner City of Auburn requested that it

be designated a party of record in the declaratory proceeding.

In a formal declaratory order, the STB concluded that federal

law preempted the County’s environmental review, and

*Honorable Donald P. Lay, Senior Circuit Judge for the Eighth Circuit,

sitting by designation.

Appendix A

denied the City’s request to intervene. The City followed the

STB’s advice to seek a separate declaratory order.

Meanwhile the STB prepared an environmental assessment

(EA) of Burlington’s proposal as required by the National

Environmental Policy Act (NEPA). Following a post-EA to

address concerns raised during the public comment period,

the STB concluded that Burlington’s proposal would not have

a significant environmental impact if certain mitigation mea-

sures were implemented. The STB approved Burlington’s

proposal. The City petitioned for review.

[1] Congress and the courts have long recognized a need to

regulate railroad operations at the federal level. The Supreme

Court has repeatedly recognized the preclusive effect of fed-

eral legislation in this area. The Interstate Commerce Aci still

governs federal regulation of railroads, and has been recog-

nized as among the most pervasive and comprehensive of fed-

eral regulatory schemes.

[2] Two sections of the ICCTA explicitly grant the STB

exclusive authority over railway projects like Stampede Pass.

Section 10501, which governs the STB’s jurisdiction, states

that the board has exclusive jurisdiction over tracks or facili-

ties, even if they are located entirely in one state. The same

section states that the remedies provided with respect to regu-

lation of rail transportation are exclusive and preempt reme-

dies provided under federal or state law. [3] Additionally, the

Statute provides that in a merger or acquisition transaction, a

participating rail carrier is exempt from state and municipal

law, as necessary to let the carrier hold, maintain, and operate

property acquired through the transaction.

[4] There was nothing in the caselaw that supported

Auburn’s argument that in the ICCTA Congress intended pre-

emption of only economic regulation of the railroads. [5] Pre-

ICCTA caselaw addressing federal preemption over railroad

Operations also supported a broad reading of the statute. [6]

Appendix A

Those decisions were consistent with decisions addressing

similar questions under federal law with similarly broad pre-

emptive scope.

[7] The pivotal question is not the nature of the state regu-

lation, but the language and congressional intent of the spe-

cific federal statute. [8] Additionaily, given the broad

language of § 10501(b)(2) (giving the STB exclusive jurisdic-

tion over construction, acquisition, operation, abandonment,

or discontinuance of rail lines), the distinction between

“economic” and “environmental” regulation begins to blur. If

local authorities impose “environmental” permitting regula-

tions on a railroad, such power would in fact amount to

“economic” regulation if the carrier is prevented from con-

structing, acquiring, operating, abandoning, or discontinuing

a line.

[9] The congressional intent to preempt this kind of state

and local regulation of rail lines is explicit in the language of

the ICCTA and the statutory framework. Because congressio-

nal intent was clear, and preemption of rail activity is a valid

exercise of congressional power under the Commerce Ciause,

the STB’s finding of federal preemption had to be affirmed.

[10] NEPA requires federal agencies to prepare a detailed

EIS for major federal actions significantly affecting the qual-

ity of the human environment. However, the responsible

agency will first prepare an EA to provide sufficient evidence

and analysis for determining whether to prepare an EIS, or a

finding of no significant impact. Under ICC regulations, the

only environmental review necessary in the usual merger pro-

ceeding is an EA discussing the impact of additional train

traffic due to the merger.

[11] The EA produced by the STB addressed environmen-

tal concerns. In addition, the post-EA laid out a long list of

mitigation measures. These documents demonstrated that the

STB conducted a thorough, independent investigation of the

Appendix A

environmental consequences of the Stampede Pass line

reopening as mandated by law. Even if the results were dis-

puted, the EA appeared to be the “hard look” at the factual

issues an agency is required to conduct.

[12] The affected cities were given ample opportunity to

raise environmental concerns. The STB observed the appro-

priate procedural requirements, allowed for public comment,

and properly informed the public of the environmental issues.

This was all that was required. [13] Regarding mitigation, an

agency may condition its decision not to prepare a full EIS on

adoption of mitigation measures. The STB developed specific

mitigation conditions to address the City’s main concern of

traffic delays at crossings, and denied its request to require

grade-separated crossings. There was no showing that the

denial rendered the mitigation measures inadequate.

{14] There was no merit in the claim that the STB failed

properly to consider alternatives to Burlington’s proposal. The-

EA and post-EA recognized that NEPA requires an agency to

consider alternatives that are feasible and reasonable. The

STB permissibly concluded that the alternatives such as using

trucks instead of rail lines were really no alternative because

the two railroads would forgo the expected improved service

capabilities and increased operating efficiencies that the pro-

posal was meant to achieve.

{15] The parameters of the EA, which excluded the impact

of upgrading and rehabilitating the portion of the line already

owned by Burlington, did not constitute an abuse of discre-

tion. The only action required by the board was the proposed

sale of the segment of the Stampede Pass line to Burlington.

It was therefore reasonable for the STB to limit its environ-

mental review to effects that would flow directly from

approval of the sale.

Appendix A

COUNSEL

Peter J. Eglick, Helsel] Fetterman, Seattle, Washington; Rod-

ney L. Brown, Jr., Marten & Brown, ‘Seattle, Washington;

Raymond L. Paolella, Yakima City Attorney’s Office, Yak-

ima, Washington, for the petitioners.

Evelyn G. Kitay, Surface Transportation Board, Department

of Transportation, Washington, D.C.; Kathryn A. Kusske and

Erika Z. Jones, Mayer, Brown & Platt, Washington, D.C.;

Paul J. Lawrence and Marc C. Levy, Preston, Gates & Ellis,

Seattle, Washington, for the respondents.

Christine O. Gregoire, Matthew A. Love, Neil L. Wise, Office

of the Attorney General, Olympia, Washington, for the State

of Washington as amicus curiae.

Jeffrey R. Moreland, Richard E. Weicher, Michael E. Roper,

Sarah J. Whitley, Burlington Northern Santa Fe Corporation,

Ft. Worth, Texas; and Erika Z. Jones, Roy T. Englert, Jr.,

Kathryn A. Kusske, Peter C. Choharis, Mayer, Brown & Platt,

Washington, D.C., for Burlington Northern Santa Fe Corpora-

tion, BNSF Acquisition Corporation, and The Burlington

Northern and Santa Fe Railway Company, as intervenors.

ORDER

The opinion filed on September 3, 1998 is hereby amended

on slip opinion page 10301, footnote 1. Footnote 1 of the

opinion should be deleted and the following footnote 1

inserted in its place:

‘The cities of Yakima, Washington, and Kent, Wash-

ington, were originally parties to the appeal in case

No. 97-70022. The cities reached settlement agree-

ments with Burlington on July 20, 1998, and August

Appendix A

5, 1998. The City of Kent’s appeal has been dis-

missed with prejudice. The City of Yakima’s appeal

is pending final consummation of the settlement

agreement.

OPINION

LAY, Circuit Judge:

These appeals arise out of three separate but related deci-

sions of the Surface Transportation Board (“STB”), concern-

ing the reopening of the Stampede Pass railroad line in

western Washington state. The City of Auburn’ challenges the

STB’s finding of federal preemption of state and local envi-

ronmental review laws in approval of the reopening of the

Stampede Pass line, and objects to the lack of a full Environ-

mental Impact Statement (“EIS”). The Burlington Northern

and Santa Fe Railway (“Burlington”) has intervened and filed

briefs in all three cases.’

I. Factual and Procedural Background

The Stampede Pass route is a 229-mile rail line running

east-west through the Cascade Mountains of Washington

state. The City of Auburn (population 37,000) lies at the line’s

western terminus, at the junction with the north-south Pacific

Coast rail line which connects the ports of Seattle and

Tacoma.

"The cities of Yakima, Washington, and Kent, Washington, were origi-

nally parties to the appeal in case No. 97-70022. The cities reached settle-

ment agrecments with Burlington on July 20, 1998, and August 5, 1998.

The City of Kent's appeal has been dismissed with prejudice. The City of

Yakima’s appeal is pending final consummation of the settlement agree-

ment.

_ *Amicus briefs have been filed in case No. 97-70920, by the State of

Washington, the National League of Cities, and the Association of Ameri-

can Railroads.

EE EE Ee eee

Appendix A

In the early 1980s, Stampede Pass was one of three main

lines serving the Seattle-Tacoma area that were owned and

operated by Burlington. In 1986, Burlington sold a 151-mile

portion of the Stampede Pass line — between the towns of

Cle Elum and Pasco — to the Washington Central Railroad

(“Washington Central’). Burlington continued to operate the

seventy-eight-mile western segment of the line between

Auburn and Cle Elum, providing limited local service.

In 1996, Burlington sought approval from the STB to reac-

quire the eastern segment of Stampede Pass from Washington

Central and re-establish the route as a third main rail line in

the Pacific Northwest. As part of this plan, Burlington pro-

posed repairs and improvements on the line, which included

replacement of track sidings and snow sheds, tunnel improve-

ments, and communication towers. Burlington initially sub-

mitted certain permit applications for these projects to local

authorities. However, during the permit-review process, Bur-

lington contended that local environmental review was pre-

cluded by federal regulation.

In response to Burlington’s position, King County, Wash-

ington, in May 1996 requested an informal opinion from the

STB, asking whether the Interstate Commerce Commission

Termination Act, codified at 49 U.S.C. §701 et seq.,

(“ICCTA”) preempted the county’s ability to review the

environmental impact of proposed operations on the Stam-

pede Pass line. In June 1996, the STB issued an informal

opinion that the line was not subject to state and local permit

requirements.

In August 1996, King County requested a formal declara-

tory order from the board as to whether the ICCTA preempted

*The ICCTA abolished the Interstate Commerce Commission, created

the STB, and granted the board jurisdiction over certain interstate rail

functions and proceedings. See the ICC Termination Act, Pub. L. No. 104-

88, 109 Stat. 803 (1995).

10a

Appendix A

the county’s environmental review. On September 17, 1996,

the City of Auburn wrote to the STB and requested designa-

tion as a party of record in the declaratory proceeding. On

September 25, 1996, the STB issued its decision in the King

County petition, finding federal preemption. See King County

Petition for Declaratory Order, STB Finance Docket No.

32974, 1996 WL 545598 (LC.C. September 25, 1996).*

In the King County order, the STB denied Auburn’s request

to intervene, but invited the city to submit its own petition for

a declaratory order. See id. at *5, n.2. Auburn, joined by the

City of Kent, followed this advice by filing a separate declara-

tory order petition on October 11, 1996. In July 1997, the

STB denied the cities’ petition, stating the action was “treated

as a petition for reconsideration of King County.” Cities of

Auburn and Kent Petition for Declaratory Order, STB

Finance Docket No. 33200, 1997 WL 362017, at *8 (I.C.C.

July 2, 1997).°

“Auburn filed a petition with the Ninth Circuit in November 1996 for

review of the board’s King County decision. In March 1997, this court dis-

missed the city’s appeal in part, finding the city lacked standing to obtain

review on the merits because it was not a party to the proccedings below.

See City of Auburn v. United States, No. 96-71051 (9th Cir. March 26,

1997) (order granting in part motion to dismiss).

*Auburn has also filed a separate appeal, No. 96-71051, consolidated

with the present appeal, contending it was denied party status in the earlier

King County petition despite a specific request that the STB not rule on

the preemption issue until the city had an opportunity to make a submis-

sion. The law is quite clear that an appeal should be dismissed as moot if

the occurrence of intervening events renders a decision unnecessary. See,

e.g., American Casualty Co. v. Baker, 22 F.3d 880, 896 (9th Cir. 1994);

Carter v. Veterans Admin., 780 F.2d 1479, 1481 (9th Cir. 1986). We hold

this appeal moot. The record makes clear that “interim relief or events

have deprived the court of the ability to redress the party’s injuries.”

United States v. Alder Creek Water Co., 823 F.2d 343, 345 (9th Cir.

1987).

_ It is difficult to understand how the relief Auburn now seeks, the

reopening of King County so that the city may intervene, is any different

from the relief it received — a hearing on its own petition. Both petitions

——————————————————

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Appendix A

While parties were disputing the preemption question, Bur-

lington’s petition for approval under 49 U.S.C. §§ 11323-25

to reacquire and conduct improvements on the Stampede Pass

line was proceeding. Pursuant to the National Environmental

Policy Act, codified at 42 U.S.C. § 4321 et seq. (“NEPA”),

the STB’s environmental staff in September 1996 prepared an

Environmental Assessment (“EA”) of Burlington’s proposal.

After the EA was released, comments were solicited and all

interested parties were given an opportunity to respond. After

comments were received, a post-EA was prepared to address

the concerns raised. The EA and post-EA concluded Burling-

ton’s proposal would not have a significant environmental

impact, if certain mitigation measures were implemented.

The STB approved Burlington’s proposal in October 1996.

See Burlington Northern Decision, STB Finance Docket No.

32974, 1996 WL 614254 (I.C.C. October 25, 1996). That

action is now challenged by the City of Auburn.

Il. Federal Preemption

Auburn asserts that the STB erred in finding federal pre-

emption of state and local environmental permitting laws

because the ICCTA legislative history establishes Congress’

intent to preempt only economic regulation of rail transporta-

tion, not the traditional state police power of environmental

dealt with the identical issue concerning ICCTA preemption of local envi-

ronmental permitting laws. Because the concerns of the city already have

been raised and considered, any order by this court for the STB to do so

—— again — would be redundant. In effect, the controversy has been

addressed, and this court now lacks the power to address it any further.

See Enrico’s, Inc. v. Rice, 730 F.2d 1250, 1254 (9th Cir. 1984) (“Where

events have occurred that prevent us from granting effective relicf, we

lack jurisdiction and must dismiss the appeal.”).

It also makes little sense to order the STB to reopen the King County

petition now, when the question addressed in the petition is being decided

by this court in case No. 97-70920. See Part II infra.

12a

Appendix A

review. The city points to a report from the House Transporta-

tion and Infrastructure Committee, which indicates that in

passing the ICCTA, Congress meant to “occupy{ } the entire

field of economic regulation of the interstate rail transporta-

lion system,” but retain for the states “the police powers

reserved by the Constitution.” H.R. Rep. No. 104-311, 104th

Cong., Ist Sess., at 95-96 (1995), reprinted in 1995

U.S.C.C.A.N. 793, 807-08. Auburn argues that the local regu-

lations at issue are not economic regulations, but rather

“essential local police power required to protect the health

and safety of citizens .. . .” Auburn Br., No. 97-70920, at 25.

Additionally, the city argues that the ICCTA contains no

provision expressly preempting state and local land use and

environmental regulations. It contends that because of the pre-

sumption against preemption in fields traditionally occupied

by the states, none of the express language in the ICCTA can

be read to usurp local environmental review.

[1] We begin by first noting that Congress and the courts

long have recognized a need to regulate railroad operations at

the federal level. Congress’ authority under the Commerce

Clause to regulate the railroads is well established, see, e.g.,

Houston, E. & W. Tex. Ry. v. United States, 234 U.S. 342,

350-52 (1914); Pittsburgh & Lake Erie R.R. v. Railway Labor

Executives Ass'n, 491 U.S. 490, 510 (1989), and the Supreme

Court repeatedly has recognized the preclusive effect of fed-

eral legislation in this area. See, e.g., Colorado v. United

States, 271 U.S. 153, 165-66 (1926) (ICC abandonment

authority is plenary and exclusive); Transit Comm’n v. United

States, 289 U.S. 121, 127-28 (1933) (ICC authority over inter-

state rail construction is exclusive); City of Chicago v. Atchi-

son, T. & S. F. Ry., 357 U.S. 77, 88-89 (1958) (local

authorities have no power to regulate interstate rail passen-

gers). The Interstate Commerce Act, ch. 104, 24 Stat. 379

(1887), which, as amended, still governs federal regulation of

railroads, has been recognized as “among the most pervasive

and comprehensive of federal regulatory schemes.” Chicago

13a

Appendix A

& N.W. Transp. Co. v. Kalo Brick & Tile Co., 450 U.S. 311,

318 (1981).°

Second, we note that Auburn places great reliance on the

legislative history of the ICCTA. However, while “[I]egis-

lative history can be a legitimate guide to a statutory purpose

obscured by ambiguity . . . in the absence of a clearly

expressed legislative intention to the contrary, the language of

the statute itself must ordinarily be regarded as conclusive.”

Burlington Northern R.R. v. Oklahoma Tax Comm'n, 481

U.S. 454, 461 (1987) (internal quotations omitted). “The start-

ing point in statutory interpretation is ‘the language [of the

statute} itself,’ ”’ United States v. James, 478 U.S. 597, 604

(1986) (quoting Blue Chip Stamps v. Manor Drug Stores, 421

U.S. 723, 756 (1975) (Powell, J., concurring)), and where

statutory command is straightforward, “there is no reason to

resort to legislative history.” United States v. Gonzales, ___

U.S. __, 117 S. Ct. 1032, 1035 (1997).

[2] We find that the plain language of two sections of the

ICCTA explicitly grant the STB exclusive authority over rail-

way projects like Stampede Pass. Section 10501 of the

ICCTA, which governs the STB’s jurisdiction, states the

board will have exclusive jurisdiction over “the construction,

acquisition, operation, abandonment, or discontinuance of

spur, industrial, team, switching, or side tracks, or facilities,

even if the tracks are located, or intended to be located,

entirely in one State.” 49 U.S.C. § 10501(b)(2) (1997). The

same section states that “the remedies provided under this part

*In 1980, Congress took additional steps to reduce regulatory authority

of the states over interstate rail lines by passing the Staggers Rail Act,

Pub. L. No. 96-448, 94 Stat. 1895 (1980). Before 1980, the ICC was

empowered to preempt state regulation of intrastate lines only when an

intrastate rate set by the state unjustly discriminated against or imposed an

undue burden on interstate commerce. In the Staggers Act, Congress

expressly provided that states could only regulate if they applied federal

standards. See Interstate Commerce Comm'n v. Texas, 479 U.S. 450, 453-

54 (1987).

14a

Appendix A

with respect to regulation of rail transportation are exclusive

and preempt the remedies provided under Federal or State

law.” 49 U.S.C. § 10501(b) (1997).

[3] Additionally, the statute expressly provides that in a

merger or acquisition transaction approved under 49 U.S.C.

§ 11323-25, “[{a] rail carrier . . . participating in that approved

or exempted transaction is exempt from the antitrust laws and

from all other law, including state and municipal law, as nec-

essary to let that rail carrier . . . hold, maintain, and operate

property . . . acquired through the transaction.” 49 U.S.C.

§ 11321(a) (1997) (emphasis added). The section unambigu-

ously states: “The authority of the Board under this subchap-

ter is exclusive.” Id. (emphasis added).

The preemptive effect of the ICCTA, which went into

effect January 1, 1996, is a question of first impression on the

appellate level of this circuit. The district courts which have

had the opportunity to examine this question have applied

federal preemption. Despite the petitioner’s claims to the con-

trary, the reasoning of these courts support preemption in this

case as well.

In CSX Transp., Inc. v. Georgia Public Service Comm’n,

944 F.Supp. 1573 (N. D. Ga. 1996), the district court found

§ 10501(b)(2)’s preemption of state regulation of railroad

agency closings by stating: “It is difficult to imagine a broader

statement of Congress’s intent to preempt state regulatory

authority over railroad operations.” 944 F.Supp. at 1581.

“Interpreting the preemption clause in the ICC Termination

Act to be broad enough to preempt state regulation of agency

closings,” the court stated, “is consistent with the Act’s grant

of exclusive jurisdiction over almost all matters of rail regula-

tion to the STB.” Jd.

The Montana district court in Burlington Northern Santa

Fe Corp. v. Anderson, 959 F.Supp. 1288, 1294-95 (D. Mt.

1997), made a similar broad reading of the ICCTA to find

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15a

Appendix A

preemption of state regulation of railroad agencies.

“Legislative history supports this analysis,” the court stated,

“as Congress noted that the ‘Federal scheme of economic reg-

ulation and deregulation is intended to address and encompass

all such regulation and to be cormpletely exclusive.’ ” 959

F.Supp. at 1295 (quoting H.R. Rep. No. 104-311, 104th

Cong., Ist Sess., at 96 (1995), reprinted in U.S.C.C.A.N. 793,

808).

[4] In fact, there is nothing in the case law that supports

Auburn’s argument that, through the ICCTA, Congress only

intended preemption of economic regulation of the railroads.

All the cases cited by the parties find a broad reading of Con-

gress’ preemption intent, not a narrow one. See also Georgia

Public Service Comm’n yv. CSX Transp., Inc., 484 S.E.2d 799,

801 (Ga. Ct. App. 1997); In re Burlington Northern R.R., 545

N.W.2d 749, 751 (Neb. 1996).

[5] Pre-ICCTA case law addressing federal preemption

over railroad operations also supports a broad reading of the

statute. In Norfolk & W. Ry. v. American Train Dispatchers

Ass'n, 499 U.S. 117, 127-34 (1991), the Supreme Court found

broad preemption in § 11341(a), which, as amended by the

ICCTA, is now § 11321(a). The Court stated: “The contested

language in § 11341(a), exempting carriers from ‘the antitrust

laws and all other law, including State and municipal law,’ is

clear, broad, and unqualified.” 499 U.S. at 128. “By itself,”

the court concluded, “the phrase ‘all other law’ indicates no

limitation.” Jd. at 129.

[6] These court decisions interpreting the preemptive scope

of the ICCTA also are consistent with decisions of courts

addressing similar questions under federal laws with similarly

broad preemptive scope. See, e.g., California v. Federal

Energy Regulatory Comm’n, 495 U.S. 490, 506-07 (1990)

(preempting state water flow requirements designed to protect

trout); Sayles Hydro Associates v. Maughan, 985 F.2d 451,

456 (9th Cir. 1993) (preempting state permitting of a hydro-

l6a

Appendix A

electric project); Burbank-Glendale-Pasadena Airport Auth.

v. City of Los Angeles, 979 F.2d 1338, 1340-41 (9th Cir.

1992) (finding federal preemption of local airport construc-

tion ordinances).

[7] Auburn attempts to distinguish its permitting require-

ments as environmental rather than economic regulation,

claiming this is a “traditional state police power” that Con-

gress did not intend to preempt. It correctly points out that

courts have declined to preempt state environmental regula-

tion in some other contexts. See, e.g., Chevron U.S.A., Inc. v.

Hammond, 726 F.2d 483, 501 (9th Cir. 1984). However, the -

pivotal question is not the nature of the state regulation, but

the language and congressional intent of the specific federal

statute. See, e.g., Metropolitan Life Ins. Co. v. Massachusetts,

471 U.S. 724, 738 (1985); Shaw v. Delta Air Lines, Inc., 463

U.S. 85, 95 (1983) (Preemption of state law is compelled if

Congress’ command is explicitly stated in the federal statute’s

language or implicitly contained in its structure or purpose.)

For example, in Hammond, the court allowed an Alaska

Statute governing the discharge of ballast by oil tankers after

finding that in the Clean Water Act, Congress “clearly

expressed its intent to allow the states to take an active role

in abating water pollution.” 726 F.2d at 489. In contrast, there

is no evidence that Congress intended any such state role

under the ICCTA to regulate the railroads.

{8} Additionally, given the broad language of § 10501(b)

(2), (granting the STB exclusive jurisdiction over construc-

tion, acquisition, operation, abandonment, or discontinuance

of rail lines) the distinction between “economic” and

“environmental” regulation begins to blur. For if local author-

ities have the ability to impose “environmental” permitting

regulations on the railroad, such power will in fact amount to

“economic regulation” if the carrier is prevented from con-

structing, acquiring, operating, abandoning, or discontinuing

a line.

17a

Appendix A

[9] We believe the congressional intent to preempt this kind

of state and local regulation of rail lines is explicit in the plain

language of the ICCTA and the statutory framework sur-

rounding it. See Medtronic, Inc. v. Lohr, 518 U.S. 470, 486

(1996).’ Because congressional intent is clear, and the pre-

emption of rail activity is a valid exercise of congressional

power under the Commerce Clause, we affirm the STB’s find-

ing of federal preemption.

III. Environmental Assessment of the Stampede Pass

Reopening

[10] The NEPA requires federal agencies to prepare a

detailed EIS for “major Federal actions significantly affecting

the quality of the human environment.” 42 U.S.C.

§ 4332(2)(C) (1994). However, under federal regulations pro-

mulgated by the Council on Environmental Quality, the

responsible agency will first prepare an Environmental

Assessment to “[b]riefly provide sufficient evidence and

analysis for determining whether to prepare an environmental

impact statement or a finding of no significant impact.” 40

C.F.R. § 1508.9(a)(1) (1997). Under ICC regulations, the only

environmental review necessary in the usual merger proceed-

ing is the preparation of an EA, discussing the impact of addi-

tional train traffic due to the merger. See 49 CFR.

§ 1105.6(b)(4) (1997).

Auburn contends the STB abused its discretion by failing

to take the necessary “hard look” at the possible environmen-

tal consequences of Burlington’s proposal. It claims the board

ignored evidence regarding the traffic and noise impact of the

reopening on the city. The city also maintains the STB vio-

"Because we find the Congress explicitly preempted state and local reg-

ulation of the Stampede Pass reopening, it is unnecessary to apply either

a conflict preemption or field preemption analysis to the issuc. See Rubin

v. United States, 449 U.S. 424, 430 (1981) (When a court finds the terms

of a statute unambiguous, judicial inquiry is complete.)

18a

Appendix A

lated the NEPA by failing to present and analyze alternatives

to the proposal, and claims the mitigation supporting the

board’s finding of no significant impact is “vague, conclu-

sory, and ineffective.” Auburn Br., No. 97-70022, at 47."

We begin by noting that an appellate court gives great def-

erence to an agency determination regarding NEPA require-

ments. See Friends of Payette v. Horseshoe Bend

Hydroelectric Co., 988 F.2d 989, 993 (9th Cir. 1993);

Greenpeace Action v. Franklin, 14 F.3d 1324, 1331 (9th Cir.

1992). The petitioner must make a showing that the STB’s

determination not to conduct a full EIS was arbitrary, capri-

cious, or an abuse of discretion. See id. While the petitioner

argues that the board did not take the requisite “hard look” at

the environmental issues in this case, we believe that the

record belies this assertion.

[11] The EA produced by the STB is more than sixty pages

long. It addresses environmental concerns such as rail traffic

increases, transportation safety, energy, air quality, and noise.

In addition, the post-EA produced by the board lays out a long

list of mitigation measures.’ These documents demonstrate

*Auburn also argues that an attached affidavit of Auburn’s city traffic

engincer, not available at the time of the STB decision, now should be

considered by this court to provide “clarification of technical issues.”

Auburn Br., No. 97-70022, at 61-62. However, this court repeatedly has

Stated that judicial review in NEPA cases almost always should be based

upon the record presented to the agency. See, e.g., Northcoast Envil. Ctr.

v. Glickman, 136 F.3d 660, 665 (9th Cir. 1998); National Audubon Society

v. United States Forest Serv., 46 F.3d 1437, 1447 (9th Cir. 1993); Animal

Defense Council v. Hodel, 840 F.2d 1432, 1436 (9th Cir. 1988), modified,

867 F.2d 1244 (9th Cir. 1989). This rule is in keeping with the court’s lim-

ited review of determining only whether the agency’s decision was made

in arbitrary and capricious manner. Auburn fails to demonstrate why an

exception to the gencral rule should be made in this case.

*Mitigation measures recommended by the post-EA and adopted by the

STB require the railroad to: 1) give notice to the towns of train schedules;

2) provide copies of all applicable Emergency Response Plans; 3) provide

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RENAN 0 A PLES ERI ete Ee

19a

Appendix A

that the STB conducted a thorough, independent investigation

of the environmental consequences of the Stampede Pass line

reopening as mandated by law. Auburn disputes the STB’s

asscssment of potential environmental impact, but that alone

does not render the board’s findings arbitrary and capricious.

Even if one may dispute the results, the EA appears to be the

“hard look” at the factual issues an agency is required to con-

duct.

As a reviewing court, “[w]e are not free to substitute our

judgment for that of the agency as to the environmental con-

sequences of its actions. . . . Instead, our task ‘is simply to

ensure that the agency has adequately considered and dis-

closed the environmental impact of its actions and that its

decision is not arbitrary or capricious.’ ” Association of Pub.

Agency Customers, Inc. v. Bonneville Power Admin., 126 F.3d

1158, 1183 (9th Cir. 1997) (quoting Baltimore Gas & Elec.

Co. v. Natural Resources Defense, Inc., 462 U.S. 87, 97-98

(1983)).

an 800 number to all local emergency response forces; 4) transport all haz-

ardous materials in compliance with U.S. Department of Transportation

regulations; 5) consult with state and local officials to develop a priority

list and discuss “funding options” for crossing signal upgrades; 6) space

train movements to allow for grade crossings to clear; 7) operate trains to

reduce locomotive fuel consumption and air pollution; 8) within 30 days

of the effective date of the board’s decision, consult with the Washington

Department of Fish and Wildlife to facilitate: a) maximum protection of

the Yakima and Green rivers, b) vegetation control along the right of way

as a means of fire suppression management, c) wildlife movement and

access to water, d) minimal adverse impacts on wildlife and protection of

water quality, and e) provision, placement and maintenance of fire sup-

pression vehicles in the Yakima Canyon area; 9) prevent, contain, and

control any fire that may occur; 10) apply only herbicides registered with

the U.S. Environmental Protection Agency; 11) install and maintain, if

requested, protective fencing in recreation areas; 12) provide an 800 num-

ber to facilitate communication between local communities and the rail-

road, and 13) consult with state and local authorities to identify grade

crossings where temporary signs should be posted to alert motorists of

increased rail traffic. See ER Vol. V, Tab HH, pp. 22-26.

20a

Appendix A

[12] We also find that the affected cities were given ample

opportunity to raise their environmental concerns before the

board for the requisite consideration. After the initial EA was

released, comments were solicited and all interested parties

were given an opportunity to respond. Following comments

from the parties, the STB issued its post-EA addressing the

parties’ concerns. “Because NEPA is essentially a procedural

Statute, an agency’s actions under NEPA are generally

reviewed to determine if the agency observed the appropriate

procedural requirements.” Northcoast Envil. Ctr., 136 F.3d at

665. The STB in this case “observed the appropriate proce-

dural requirements,” allowed for public comment, and prop-

erly informed the public of the environmental issues. This was

all that was required of the STB under the NEPA’s statutory

guidelines.

[13] Regarding mitigation, it is clear that an agency may

condition its decision not to prepare a full EIS on adoption of

mitigation measures. See, e.g., Jones v. Gordon, 792 F.2d

821, 829 (9th Cir. 1986); The Steamboaters v. Federal Energy

Regulatory Comm'n, 759 F.2d 1382, 1394 (9th Cir. 1985).

The STB developed three specific mitigation conditions

(notice of expected train movements, discussion of funding

options for crossing upgrades, and spacing of train move-

ments to allow time for crossings to clear) to address the

city’s main concern of traffic delays at rail crossings. While

the board denied the city’s request to require construction of

grade-separated crossings, there is no showing that this denial

alone renders the mitigation measures inadequate.

[14] Additionally, we find no merit in the petitioner’s claim

that the STB failed to properly consider alternatives to Bur-

lington’s proposal to re-establish Stampede Pass as a major

line. The EA and post-EA specifically recognized that the

NEPA requires an agency to consider alternatives to the

action that are feasible or reasonable. The STB permissibly

concluded that “alternatives” such as using trucks instead of

- rail lines to transport goods are really no alternative at all,

2la

Appendix A

because “the two railroads would forego the expected

improved service capabilities and increased operating effi-

ciencies that this proposal is meant to achieve.” ER, Vol V,

Tab HH at 22.

[15] Finally, we find the parameters of the EA set by the

STB, which exclude the impact of the upgrading and rehabili-

tating of the portion of the rail line already owned by Burling-

ton, do not constitute an abuse of discretion. There is no

showing the STB’s determination that those impacts fell out-

side of its jurisdiction under this proceeding constitutes an

arbitrary and capricious finding. The only action requiring

approval by the board was the proposed sale of the eastern

segment of the Stampede Pass line to Burlington. It therefore

was entirely reasonable for the STB to limit its environmental

review to effects that would flow directly, from the approval

of the sale.

IV. Conclusion

The STB’s denial of the City of Auburn’s request to inter-

vene in the 1996 declaratory relief proceeding brought by

King County is moot, because the city was granted a separate

proceeding and because this court now has ruied on the pre-

emption issue. State and local permitting laws regarding rail-

road operations are preempted by the plain language of the

ICCTA, and the statutory framework surrounding it. Finally,

there is no showing that the STB abused its discretion or ren-

dered a ruling that is arbitrary and capricious by approving the

Stampede Pass line reopening without conducting a full EIS.

For these reasons, we find the rulings of the STB should be

AFFIRMED.

22a

APPENDIX B — DECISION OF THE SURFACE

TRANSPORTATION BOARD DATED

- AND DECIDED JULY 1, 1997

SERVICE DATE — JULY 2, 1997

SURFACE TRANSPORTATION BOARD

DECISION

STB Finance Docket No. 33200

CITIES OF AUBURN AND KENT, WA —

PETITION FOR DECLARATORY ORDER —

BURLINGTON NORTHERN RAILROAD COMPANY —

STAMPEDE PASS LINE

Decided: July 1, 1997

On October 11, 1996, the Cities of Auburn and Kent, WA

(the Cities or petitioners) requested a declaratory order to the

effect that state and local environmental, building, and land

use permitting authority can be imposed on improvements

associated with the modernization by the Burlington Northern

Railroad Company (BN)! of its Stampede Pass railroad line in

the state of Washington, and is not preempted by federal law.

Specifically, the Cities contend that their local land use and

environmental permitting authority is not preempted by the ICC

Termination Act of 1995 (ICCTA) or the environmental review

process undertaken by this agency pursuant to the National

Environmental Policy Act (NEPA). BN replied, opposing the

Cities’ petition.’ The Cities then responded to BN’s reply, as

did BN to the Cities’ response.

1. Now, The Burlington Northern and Santa Fe Railway Company.

2. King County, WA filed a petition to intervene as an interested

~ party. That request will be granted.

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23a

Appendix B

BACKGROUND

|. The Nature of the Case. Because BN owned and

operated two other main line routes serving the Seattle-Tacoma,

WA area, BN sold the eastern portion of its Stampede Pass

main line — a 151-mile segment between Cle Elum and Pasco,

WA — and several branch lines to the Washington Central

Railroad Company (WC) in 1986. A fter the sale, BN continued

to provide some local service over the western approximately

78-mile portion of the line between Auburn and Cle Elum. Due

to increases in rail traffic after the sale, however, BN proposed

to reacquire the Stampede Pass lines from WC and reestablish

the Stampede Pass as a third main line route. Accordingly, in

June 1996, BN and its affiliates sought our approval under 49

U.S.C. 11323-25 to acquire control of WC and operate WC’s

151-mile segment of the Stampede Pass line in concert with its

western portion.* That proceeding — which is not directly at

issue here — was docketed as STB Finance Docket No. 32974.5

See p. 5-6, infra.

3. See Washington Central Railroad Company, Inc. — Exemption

Acquisition and Operation — Certain Lines of Burlington Northern

Railroad Company, Finance Docket No. 30916 (ICC served Oct. 3,

1986).

4. BN and its affiliates also proposed to acquire certain of WC’s

branch lines and assume WC’s obligation to operate over Union Pacific

Railroad Company’s Yakima Branch line between Kennewick and

Yakima, WA.

5. In that proceeding, BN explained that the Stampede Pass line

would provide an important link to international markets in the Pacific

Rim and that rail freight traffic to be transported on this line would be

(Cont'd)

24a

Appendix B

After 12 years of limited use, the Stampede Pass line was

in need of modernization, repairs, and improvements. This

work included (1) replacement of track sidings, (2) replacement

of maintenance-of-way buildings and snow sheds, (3)

improvement of the Stampede Pass tunnels, and (4) installation

of communication towers. BN initially submitted certain permit

applications for these projects to local authorities. During the

permit review process, however, BN suggested that any

environmental review of the project should exclude railroad

operations, which are regulated exclusively by the federal

government.

In light of BN’s position, King County, WA (the County),

on May 8, 1996, asked the Surface Transportation Board

(Board) for an informal opinion as to whether ICCTA preempts

the County’s authority to evaluate or condition BN’s proposed

operations of the Stampede Pass rail line within the County

and to issue grading, building or conditional use permits for

construction. BN joined in the County’s request for an informal

opinion on May 31, 1996, requesting expedited action so that,

(Cont'd)

important to the future economic growth of the Pacific Northwest. Its

proposal to put the Stampede Pass route back in service was supported

by the Ports of Seattle and Tacoma, the State Department of

Transportation, and communities in the eastern part of the state. None

of the commenters to BN’s proposal raised any competitive concerns.

Indeed, many of the commenters recognized the benefits to be derived

from BN’s ability to offer a shorter route for certain traffic and, at the

same time, reduce congestion on other BN routes for time sensitive

traffic. The Cities participated in our proceeding. They did not oppose

the project, although they expressed concern about the potential

environmental impacts that could result from increased traffic and

requested environmental conditions during the course of our

environmental review process to mitigate those impacts.

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25a

Appendix B

if the railroad obtained a favorable decision, the repairs and

improvements to the Stampede Pass line could begin by July 1,

1996.° BN recognized that the states retain their police powers

with respect to railroad safety. However, it stated that the

County’s powers over its repairs and upgrades are extremely

limited due to broad federal preemption of railroad

transportation. Citing ICCTA, judicial, and Interstate

Commerce Commission (ICC) precedent, it asserted that

allowing localities to regulate rail line maintenance and

upgrading through an environmental review and permitting

process would paralyze the national rail transportation system.

On June 20, 1996, the Secretary of the Board issued to the

County and BN an informal, nonbinding opinion that the

County’s permitting process was preempted by ICCTA.’ The

Secretary noted that the County, if allowed to subject BN to

the permitting process, could delay or deny BN authority to

undertake the improvements to the Stampede Pass line and thus

could in effect prevent BN from operating the line. As a result,

he concluded that the state or local permitting process appeared

to interfere with the federal licensing program and unreasonably

6. BN explained that, if work did not begin by that date, it would

seriously jeopardize the railroad’s ability to complete the repairs and

improvements before the onset of winter ended the work season in the

area,

7. While the Secretary limited the scope of his opinion to

preemption under ICCTA, he noted (Informal Opinion at 2. n.2) that

BN also must comply with the safety and environmental requirements

imposed by other federal Statutes, such as the Clean Water Act’s National

Pollution Discharge System program involving water quality issues

relating to spills into lakes or streams. Train noise also is subject to

federal jurisdiction, and local standards may not be imposed unless

identical to federal standards. 42 U.S.C. 4916(c); 49 CFR Part 210.

26a

Appendix B

burden interstate commerce. At the same time, the Secretary

recognized that state and local governments were entitled to

protect the health and safety of their citizens through means

other than the permitting process."

On August 21, 1996, the County petitioned for a formal

declaratory order similar to the one currently sought by the

Cities. The County argued, as the Cities maintain here, that

BN was required to obtain local permits before undertaking

improvements to the Stampede Pass rail line. In King County,

WA — Petition for Declaratory Order — Burlington Northern

Railroad Company — Stampede Pass Line, STB Finance Docket

No. 33095 (STB served Sept. 25, 1996) (King County),’ we

8. Based on the Secretary’s opinion, BN withdrew its pending

grading, building, and shoreline application permits that had been filed

with the County.

9. The City of Auburn also filed a lawsuit in King County Superior

Court seeking a declaratory judgment that BN’s proposed improvements

to the Stampede Pass line are subject to state and local permitting and a

writ of mandamus directing the County and Kittitas County to order

construction stopped until permits are obtained. At BN’s request, that

case was removed to the United States District Court for the Western

District of Washington on September 30, 1996. City of Auburn v. King

County Et Al., No. C96-1565-Z. BN then moved to dismiss the district

court case for lack of jurisdiction, explaining that the action constituted

a collateral attack on King County, which could only be challenged in a

United States Court of Appeals under the Hobbs Act, 28 U.S.C. 2321(a)

and 2342. On January 7, 1997, the district court granted the motion to

dismiss.

The City of Auburn, which had not been a party to the administrative

proceeding in King County, filed a petition for judicial review of King

(Cont'd)

27a

Appendix B

determined (slip op. at 4) that ICCTA wholly preempts the

County’s permitting of construction relating to the reopening

of the Stampede Pass:

The County permitting process contemplated for this

project would both interfere with the federal

licensing program and unreasonably burden

interstate commerce. Accordingly, it would be

preempted by the ICCTA.

No stay of King County was sought from us or from the Ninth

Circuit.

The Cities were not parties to the County’s petition, and

did not initially seek to formally intervene in our King County

proceeding. On September 17, 1996, however, the City of

Auburn sent a letter to the Board as an “interested party.” In

that letter, the City of Auburn requested that it be designated a

party of record in King County, and asked that we defer action

in King County until we had the opportunity to consider the

(Cont'd)

County in City of Auburn v. STB, U.S.C.A. 9th Cir. No. 96-71051 (pet.

for review filed November 22, 1996). BN then filed a motion to dismiss

the lawsuit (which we supported), explaining that City of Auburn was

not a “party aggrieved” within the meaning of 28 U.S.C. 2344 and

therefore lacked standing to file a petition for judicial review. By order

dated March 26, 1997, the court granted BN’s motion to dismiss in part.

The court agreed that because City of Auburn was not a party to the

proceedings below, it lacked standing to obtain review on the merits of

King County. However, noting that it may have jurisdiction to review

our denial of City of Auburn’s request to intervene in King County, the

court directed the parties to brief that issue. That court proceeding

remains pending in the Ninth Circuit.

28a

Appendix B

City of Auburn’s position on this matter. The City of Kent also

requested a ruling from us on local government preemption.

In view of the County’s and BN’s requests for expedition

in King County, we denied the Cities’ requests to intervene in

King County, and declined to delay the issuance of our

declaratory order in that proceeding (which was decided on

September 25, 1996, only 8 days after the date of the City of

Auburn’s letter). See King County, at 1 n. 2. However, we

invited the Cities to submit their own petition for declaratory

order in a separate docket (id.), and on October 11, 1996, the

Cities accepted our invitation and filed the instant petition

requesting a declaratory order similar to the one previously

requested by the County. The Cities’ petition, in effect, is a

petition for reconsideration of our decision in King County,

and we will treat it as such."

Subsequently, in a decision served October 25, 1996, we

approved BN’s proposed control of WC and operation of WC’s

segment of the Stampede Pass rail line. In that proceeding, we

conducted an environmental review under NEPA of BN’s

_proposed operation of the entire Stampede Pass line. See

Burlington Northern Santa Fe Corporation, BNSF Acquisition

Corp., and Burlington Northern Railroad Company — Control

10. In their petition for declaratory order, the Cities alternatively

ask the Board to vacate King County to permit the matter to be resolved

judicially. That request will be denied. It is appropriate for us to issue a

declaratory order addressing the jurisdictional questions presented here,

subject, of course, to the right of a dissatisfied party to seek judicial

review. See, e.g., 5 U.S.C. 554(e); 49 U.S.C. 721(a); Gray Lines Tour

Co. v. ICC, 824 F.2d 811, 815 (9th Cir. 1987). Texas v. United States,

866 F.2d 1546 (Sth Cir. 1989) (agencies have jurisdiction to determine

the scope of their jurisdiction).

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29a

Appendix B

— Washington Central Railroad Company, STB Finance

Docket No. 32974 (STB served Oct. 25, 1996), pending review

in City of Auburn v. United States, U.S.C.A. 9th Cir. 97-70022

(pet. for review filed December 20, 1996) (BNSF Control)."'

11. As required by our environmental rules for proceedings where

(as in this case) the railroad has demonstrated that the particular proposal

would involve operational changes that meet the agency’s thresholds

for environmental review but were not expected to result in a significant

environmental impact (see 49 CFR 1105.6(b)(4), 1105.6(d)) an

Environmental Assessment (EA) was prepared. The EA was based on

the information provided by BN or the third-party consultant,

consultation with appropriate environmental agencies, and independent

investigation and verification by the Board’s Section of Environmental

Analysis (SEA). The EA also assessed and developed environmental

mitigation to address potential environmental impacts based on an

increase in traffic to the City of Auburn. (Our environmental

documentation did not address the potential effects of upgrading,

maintaining, or rehabilitating the line because those actions were within

the railroad’s management discretion and did not require our approval.

See BNSF Control at 9.)

The EA was made available for public comment. SEA then issued

a detailed Post Environmental Assessment (Post EA) based on its

investigation of the comments received. The Post EA recommended final

environmental mitigation measures and concluded that, if the mitigation

recommended in the Post EA were imposed and implemented, the project

would not have significant environmental impacts. The comments to

the EA, the EA, and the Post EA were forwarded to us for consideration

in making our decision in the case. We then issued our October 1996

decision granting the application with various environmental mitigating

conditions to address environmental concerns raised by petitioners and

others. We concluded that, as conditioned, the BNSF Control proceeding

would not have significant environmental impacts. The Cities then filed

their environmental court challenged of BNSF Control, which remains

pending in the Ninth Circuit.

30a

Appendix B

2. The Parties’ Claims. In their petition for declaratory

order, the Cities concede that local law is preempted by Federal

law if: (1) Congress expressly preempts such activity;

(2) Federal law so thoroughly occupies a legislative area that it

is reasonable to conclude that Congress intended to prohibit

local regulation of the activity; (3) Federal law or regulation

actually conflicts with state or local law; or (4) State or local

law discriminate against or unreasonably burden interstate

commerce. Petitioners maintain, however, that none of these

criteria apply to BN’s proposed improvements to the Stampede

Pass line. According to the Cities, there is nothing in ICCTA

that directly preempts state or local law with respect to railroad

transactions such as this one. Any incidental effect of local

law on interstate commerce, the Cities argue, is legitimately

within their police power and justified by the benefits accruing

to the local populace and environment.

Petitioners complain that our decisions in King County and

BNSF Control have allowed BN’s Stampede Pass improvements

to be virtually unregulated. The mitigation measures imposed

on the carrier in BNSF Control, the Cities maintain, lack

substance and do not adequately address their environmental

or safety concerns. The Cities assert that the Board’s decision

in King County is not binding on local agencies or the courts

because the decision is merely advisory and the Board lacks

expertise in state and local environmental matters.

BN by contrast argues that all state and local permitting

regulations for BN’s improvements to the Stampede Pass are

preempted by federal law.

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Appendix B

DISCUSSION AND CONCLUSIONS

We will exercise our discretionary authority to issue a

declaratory order in this proceeding to eliminate controversy

and remove uncertainty on the preemption issue raised by

petitioners.'? 5 U.S.C. 554(e) and 49 U.S.C. 721. We will not

attempt here to analyze any particular ordinances or local

regulatory requirements; the review of individual ordinances

or state or local regulations is beyond the scope of our limited

inquiry in this case and is more appropriately an issue for the

courts. However, we will set out in this decision our view of

our role, and the appropriate role of state and local regulation,

in regulating BN’s reactivation of the Stampede Pass line.

At the outset, we reaffirm her our determination in King

County (at pp. 3-5) that a state or local permitting process for

prior approval of this project, or of any aspect of it related to

interstate transportation by rail, would of necessity impinge

upon the federal regulation of interstate commerce and therefore

is preempted. The power to authorize the construction of

railroad lines and the power to authorize railroads to operate

over them has been vested exclusively in the Board by 49 U.S.C.

10901. The ICCTA abolished the ICC, established the Board

as the successor to the ICC, and revised the law as it existed in

the former Interstate Commerce Act, all effective January 1,

1996. The Board now has exclusive authority over the

construction and operation of rail lines that are part of the

interstate rail network, pursuant to 49 U.S.C. 10501(b) and

12. It should be noted, however, that at this point there may be

little need for our guidance. As discussed above, no stay of King County

was sought from us or from the Ninth Circuit, and it is our understanding

that the improvements to the Stampede Pass line largely have been

completed.

32a

Appendix B

10901. The ICC and court precedents regarding the ICC’s

preemptive authority now apply to the Board’s authority. See

ICCTA section 205. 2

In the Transportation Act of 1920, Congress established a

comprehensive scheme of federal regulation of track additions

and deletions by interstate railroads like BN.’ Chicago & N.W.

Tr. Co. v. Kalo Brick & Tile Co., 450 U.S. 311, 318 (1981)

(Kalo Brick) (1CC abandonment authority is plenary and

exclusive); Transit Comm'n v. United States, 289 U.S. 121

(1933) (same for constructions). Moreover, under the

Commerce and Supremacy Clauses of the United States

Constitution, “there can be no divided authority over interstate

commerce * * * [T]he acts of Congress on that subject are

supreme and exclusive.” Missouri Pac. R.R. v. Stroud, 267 U.S.

404, 408 (1925). See also Edgar v. Mite Corp., 457 U.S. 624,

640 (1982), Kalo Brick, 450 U.S. at 318. Indeed, Congress in

ICCTA confirmed that the Board’s jurisdiction over

transportation by rail carriers like BN is exclusive and preempts

the remedies under Federal or state law. 49 U.S.C. 10501(b)(2).

See also 49 U.S.C. 11321(a) (a transaction approved under 49

U.S.C. 11323-25 is exempt from state or local law “as necessary

to let that rail carrier ... carry out the transaction ... and

operate properly.”). Thus, any state or local statute that requires

an interstate railroad like BN to obtain state or local approval

before construction or abandonment of a line, or a merger or

acquisition of control, would appear, on its face, to conflict

with ICCTA and is preempted.

13. The BN line through Stampede Pass was built before Congress

gave the ICC the authority to approve the construction of rail lines, but

authority to approve the construction of the line was “grandfathered”

under the provisions of the 1920 Act.

33a

Appendix B

In King County, we indicated that, in transactions such

as BNSF Control requiring Federal approval and federal

environmental review, there is no role for State and local

agencies to play other than to participate in the Federal

environmental review process under NEPA for the proposed

action. Because there are significant roles for state and local

agencies under various federal statutes, including environmental

Statutes, we want to clarify that statement here. For example,

the Clean Air Act requires states to implement plans to protect

and enhance air quality so as to promote the public health and

welfare. See 42 U.S.C. 7401 ef seq. Rather than relegating state

and local agencies to the periphery in implementing Federal

law, the Statutory scheme gives individual] States the

responsibility of developing and enforcing air quality programs

that meet or exceed the national standards within their borders.

See Chevron v. U.S.A. Inc., Hammond, 726 F.2d 483, 489 (9th

Cir. 1984) (Hammond), cert. denied, 471 U.S. 1140 (1985).

Nothing in King County or this decision is intended to interfere

with the role of the states and local entities in implementing

these federal laws.

Moreover, as explained in King County and the Secretary’s

informal opinion, not all state and local regulations that affect

interstate commerce are preempted. A key element in the

preemption doctrine is the notion that only “unreasonable”

burdens, i.e., those that “conflict with” Federal regulation,

“interfere with” Federal authority, or “unreasonably burden”

interstate commerce, are superseded. The courts generally

presume that Congress does not lightly preempt state law.

Medtronic Inc. v. Lora Lohr, 116 S. Ct. 2240, 2250 ( 1996),

14. See also comparable state responsibilities under the Federal

Water Pollution Control] Act, 33 U.S.C. 1251 ef Seq., and the Safe

Drinking Water Act, Pub. L. No. 93-523.

34a

Appendix B

Also, preemption does not deprive the states of the “power to

regulate where the activity regulated [is] a merely peripheral

concern” of Federal law. San Diego Building Trades Council

v. Garmon, 359 U.S. 236, 243 (1959). See CSX Transportation

v. Easterwood, 507 U.S. 658 (1993) (federal regulations adopted

by the Secretary of Transportation under the Federal Railroad

Safety Act preempt negligence action only insofar as it was

alleged that petitioner’s train was traveling at an excessive

speed).

In short, where the state or local law can be applied without

interfering with the Federal law, the courts have done so. See

Hayfield Northern R.R. v. Chicago & N.W. Transp. Co., 467

U.S. 622 (1984) (state proceeding to condemn railroad property

did not interfere with the Interstate Commerce Act because the

state process followed the abandonment of the line pursuant to

the ICC’s process and the line was no longer part of the national

transportation system). Local law, however, is preempted when

the challenged state statutes “stands as an obstacle to the

accomplishment and execution to the full purposes and

objectives of Congress.” Perez v. Campbell, 402 U.S. 637, 649

(1971), quoting Hines v. Davidowitz, 312 U.S. 52, 67 (1941).

Local law also is preempted where there is a compelling need

for uniformity. Hammond, 726 F.2d at 491. We believe that

there is such a need in connection with the interstate rail system,

which spans every state in the Continental United States.

As a result, we believe that state or local laws that would

impose a local permitting or environmental process on BN’s

operations on, or maintenance or upgrading of, the Stampede

Pass line are preempted to the maximum extent permitted by

the Constitution. As explained in King County and the

Secretary’s informal opinion, an incident of the carrier’s receipt

‘

35a

Appendix B

of authority to construct a line is the right to maintain and

improve it to keep it in operable condition." This is necessary

to remedy wear and tear and to meet the changing needs of the

market for rail services by, for example, enlarging or raising

tunnels to accommodate bigger cars, raising towers to employ

new communication systems, or replacing sidings to

accommodate more traffic. Moreover, a state or local permitting

process implies the power to deny authorization, which could

frustrate the activity that is subject to federal control. If BN

were unable to undertake the projects, or if its ability to

commence projects to maintain and upgrade its facilities were

substantially delayed pending resolution of a state or local

permitting or environmental process, its ability to carry rail

traffic over the Stampede Pass line could be greatly inhibited,

if not foreclosed. Given these circumstances, it appears that

state or local permitting or environmental requirements would

both interfere with the federal] licensing program and

unreasonably burden interstate commerce.

At the same time, we agree with the Secretary’s informal

opinion that there are areas with respect to railroad activity

that are reasonably within the local authorities’ jurisdiction

under the Constitution. For example, even in cases where we

approve a construction or abandonment project, a local law

prohibiting the railroad from dumping excavated earth into local

waterways would appear to be a reasonable exercise of local

police power. Similarly, as noted by the Secretary, a state or

local government could issue citations or seek damages if

harmful substances were discharged during a railroad

15. See, e.g., Detroit/Wayne Port Authority v. ICC, 59 F.3d 1314,

1317 (D.C. Cir. 1995) (while initial construction of a rail line requires

authority from the Board. improvements to existing lines do not require

an additional license or environmental review).

36a

Appendix B

construction or upgrading project. A railroad that violated a

local ordinance involving the dumping of waste could be fined

or penalized for dumping by the state or local entity. The

railroad also could be required to bear the cost of disposing of

the waste from the construction in a way that did not harm the

health or well being of the local community. We know of no

court or agency ruling that such a requirement would constitute

an unreasonable burden on, or interfere with, interstate

commerce. Therefore, such requirements are not preempted.

We also agree with the Cities that state or local laws

providing for permitting and environmental review, in other

areas, need not be found to discriminate against interstate

commerce. This process, initiated in the state legislature or local

governing body, is ordinarily within the localities’ legitimate

policing powers. However, where the local permitting process

could be used to frustrate or defeat an activity that is regulated

at the Federal level, the state or local process is preempted.

Here, the Cities’ admitted goal is to constrain BN’s train

operations that we have already approved in BNSF Control in

order to force BN to fund infrastructure improvements related

to the line. For example, Charles A. Booth, mayor of the City

of Auburn, has indicated that:

We do not appreciate having to devote substantial

effort to thwarting the Railroad’s plans but their

actions leave little other choice.

We are told the benefit of separated grade crossings

accrue mostly to the citizens, therefore, the expense

of constructing such should be a local responsibility.

All the City has ever asked is that those who benefit

or profit from the “improvements” be responsible

37a

Appendix B

for cleaning up the mess and mitigating the negative

impacts upon the City.'®

See also, the County’s petition for declaratory order in King

County, filed August 27, 1996, where, in view of the City of

Auburn’s threatened court action against the County, the County

requested our formal decision on whether BN can be required,

through the local permitting process, to construct Overpasses,

underpasses, and natural or artificial noise barriers to mitigate

the effects of increased train traffic through the City.

Petitioners’ claim that we ignored or overlooked their loca]

concerns is unfounded. As noted (see supra note | i), in BNSF

Control the Board engaged in an appropriate environmental

review under NEPA and our environmental rules and adopted

environmental mitigation conditions to address the

environmental concerns that had been raised during the

environmental review process by petitioners and others,

including mitigation in the City of Auburn.” Petitioners cannot

use this declaratory order proceeding to mount a collatera]

attack on, or seek to substitute a state or local environmental]

review process for, the agency's environmental review under

NEPA in BNSF Control."* See Toye Bros. Yellow Cab Co. y.

16. City of Auburn letters to the Board, dated May 15 and October

21, 1996.

17. The environmental impacts on the City of Kent were not

considered because SEA found that Kent was not on the Stampede Pass

line and would incur no direct environmental impacts. Moreover,

evidence of record in that case Showed that rail traffic in Kent will

decrease by an average of one train a day as a result of the reopening of

the Stampede Pass line to transcontinental traffic.

18. It is noteworthy here that the State is not attempting to apply

its own environmental review.

38a

Appendix B

Irby, 437 F.2d 806, 810 (Sth Cir. 1971). Rather, what we said

on the environmental issues that were addressed there is

conclusive, subject to the right of the Cities (or any other

interested parties) to seek judicial review, under the appropriate

standards, if they are dissatisfied with the scope or outcome of

the agency’s NEPA process."

We did not review the construction aspects of BN’s

improvements because BNSF Control was an inter-carrier

consolidation under 49 U.S.C. 11323-25, rather than a

construction project under 49 U.S.C. 10901. We therefore

appropriately limited our environmental review to the

operational changes that we were approving. Had this been a

construction case, any reasonable concerns relative to BN’s

compliance with local land use and building codes would have

been considered in detail in our environmental review and our

decision.

Petitioners complain that our decision in King County

creates a regulatory void that Congress could not have intended.

In such instances, according to the Cities, the states may impose

their own oversight authority. As an example, petitioners

maintain that states have residual regulatory authority over spur

or switching tracks that are expected from our jurisdiction

pursuant to 49 U.S.C. 10906. Under section 10501(b)(2) of

ICCTA, however, we have “exclusive” jurisdiction over spur

or switching tracks located entirely in one state. When sections

10906 and 10501(b)(2) are read together, it is clear that

Congress intended to remove our authority over the entry and

exit of these auxiliary tracks, while still preempting state

jurisdiction over them, leaving the construction and disposition

19. As noted, the Cities’ environmental court challenge of BNSF

Control is currently pending in the Ninth Circuit.

39a

Appendix B

of auxiliary tracks entirely to railroad management. See

Conference Report on ICCTA, explaining that section

10501(b)(2) was added “[iJn light of the exclusive Federal

authority over auxiliary tracks and facilities * * *” HLR, Rep.

No. 104-422, 104th Cong., Ist. Sess. 167 (1995). Thus,

although we may not regulate the construction and disposition

of spur and switching tracks, it is equally clear that state and

local authorities may not regulate those activities either.2! See,

20. The Cities’ reliance on Illinois Commerce Comm'n vy. ICC, 879

F.2d 917 (D.C. Cir. 1989), is misplaced. In that case, the court concluded

that the states had jurisdiction over abandonments of spur track under

section 10907(b)(1) of the former Interstate Commerce Act. Illinois

Commerce Comm'n, however, was expressly overruled by Congress in

ICCTA through the enactment of section 10501(b)(2).

The Cities incorrectly suggest that the local permitting they seek

to impose is only peripheral to and not in conflict with the Board’s

jurisdiction. As we stated in King County, at p. 4:

the permitting process implies the power to deny

authorization and thereby to frustrate the activity that must

be sanctioned. If BN[] were unable to undertake the

projects, or if its ability to commence projects to maintain

and upgrade its facilities were substantially delayed pending

resolution of environmental issues, its ability to Carry rail

traffic over the Stampede Pass line could be greatly

inhibited, if not foreclosed. Given these circumstances, it

appears that the county permitting process contemplated

for this project would both interfere with the federal

licensing program and unreasonably burden interstate

commerce. Accordingly, it would be preempted by the

ICCTA.

21. The Cities concede that section 10501 contains express

preemption language, but argue that the section does not govern the

(Cont'd)

40a

Appendix B

e.g., Morales v. Trans World Airlines, 504 U.S. 374 (1992);

Schneidewind v. ANR Pipeline Co., 485 U.S. 293 (1988).

Transcontinental Gas Pipe Line Corp. v. State Oil & Gas Bd.,

474 U.S. 409 (1986); G&T Terminal Packaging Co. v.

Consolidated Rail Corp., 830 F.2d 1230 (3d Cir. 1987), cert.

denied, 485 U.S. 988 (1988).

As BN states, Congress would not have totally preempted

the states from regulating the construction, operation, and

abandonment of spur and switching tracks in ICCTA if it had

intended to permit continued state regulation — through a

permitting process or otherwise — of main line interstate

trackage, such as the Stampede Pass line, which has a significant

impact on interstate commerce. See H.R. Rep. No. 104-311.

104th Cong., Ist Sess. 95 (1995) (“Although States retain the

(Cont'd)

local environment, land use, or building permit regulatory authority they

seek to have enforced. However, section 10501(b)(2) grants the Board

exclusive jurisdiction over rail transportation and the “practices, routes,

services, and facilities” of rail carriers. Section 10102(9) in turn broadly

defines “transportation” as including “a locomotive, car, vehicle,

property, facility, instrumentality, or equipment of any kind related to

the movement of passengers or property, and services related to that

movement, including receipt, delivery, elevation, transfer in transit,

refrigeration, icing, ventilation, storage, handling, and interchange of

passengers and property....” The Stampede Pass line plainly is

“oroperty,” a “facility,” or a “route” used in “transportation by [a] rail

carrier.” Moreover, BN’s operations over, and repair and upgrading,

that line are “services related to the movement... of ... property.” In

short, the Stampede Pass line constitutes property and facilities subject

io the exclusive jurisdiction of the Board. That jurisdiction encompasses

the original licensing and construction of the line, subsequent

maintenance and upgrade projects on the line, and BN’s operations over

the line.

4la

Appendix B

police powers reserved by the Constitution, the Federal] scheme

of economic regulation and deregulation is intended to address

and encompass all such regulation and be completely exclusive,

Any other construction would undermine the uniformity of

Federal standards and risk the balkanization and subversion of

the Federal scheme minimal regulation for this intrinsically

interstate form of transportation.”)

Finally, we note that none of BN’s Stampede Pass

construction projects criticized by petitioners is located within

their municipal boundaries or jurisdiction.” As noted, it is

apparent that petitioners’ primary concern is the increased level

of train traffic through their respective cities. After reviewing

the Cities’ concerns in this regard, we specifically addressed

the operational impacts of BN’s acquisition in BNSF Control

and imposed appropriate environmental mitigation measures.

The Cities are Clearly dissatisfied with the environmental

mitigation we imposed, but that does not justify their application

of local land use and building codes to force BN to make

additional concessions. We think that their effort to do so results

in an unreasonable burden on interstate commerce. In addition,

the Cities’ attempt to use local law in such a manner constitutes

an improper collateral attack on our decision in BNSF Control.

Therefore, while we have clarified King County to make it clear

that state and local entities have important roles in implementing

various federal statutes, we agree with that decision’s ultimate

ruling that state or local permitting or environmental review of

BN’s upgrading of the Stampede Pass line goes too far, and

that Congress intended to preempt all regulation of this project

under state law or local ordinances to the maximum extent

permitted by the Constitution.

22. The proposed snow sheds, communications towers, service

facilities buildings, and parkisg lots are located outside petitioners’ city

limits.

42a

Appendix B

This action will not significantly affect either the quality

of the human environment or the conservation of energy

resources.

It is ordered:

1. The request to intervene by King County, WA, is

granted.

2. The Cities’ petition for declaratory order will be treated

as a petition for reconsideration of King County.

3. King County is modified to the extent discussed above.

In all other respects, the petition for reconsideration of King

County, and the Cities’ petition for declaratory order, are

denied.

4. This proceeding is terminated.

5. This decision is effective 30 days from the date of

service.

By the Board, Chairman Morgan and Vice Chairman Owen.

Vernon A. Williams

Secretary

43a

APPENDIX C — DECISION OF THE SURFACE

TRANSPORTATION BOARD DATED AND

DECIDED SEPTEMBER 25, 1996

SURFACE TRANSPORTATION BOARD!

DECISION

STB Finance Docket No. 33095

KING COUNTY, WA — PETITION FOR

DECLARATORY ORDER —

BURLINGTON NORTHERN RAILROAD COMPANY —

STAMPEDE PASS LINE

STB Finance Docket No. 32974

BURLINGTON NORTHERN SANTA FE CORPORATION,

BNSF ACQUISITION CORP., AND BURLINGTON

NORTHERN RAILROAD COMPANY — CONTROL —

WASHINGTON CENTRAL RAILROAD COMPANY

Decided: September 25, 1996

By petition filed August 21, 1996, in Finance Docket No.

33095, King County, WA (County), seeks institution ofa

declaratory order proceeding to determine whether the ICCTA

preempts the County from requiring that the Burlington

Northern Railroad Company (BNRR) obtain permits from the

1. The ICC Termination Act of 1995, Pub. L. No. 104-88, 109

Stat. 803 (ICCTA), which was enacted on December 29, 1995, and took

effect on January 1, 1996, abolished the Interstate Commerce

Commission (ICC) and transferred certain functions to the Surface

Transportation Board (Board). This decision relates to functions that

are subject to Board jurisdiction pursuant to 49 U.S.C. 10501 and 10901.

44a

Appendix C

County before undertaking certain improvements on BNRR’s

Stampede Pass line in Kings County, Washington. The County

States that it is a municipal subdivision of the State of

Washington, and is authorized under its constitutional police

powers to adopt and enforce land use and environmental laws

and to conduct land use planning and permit review.’

BACKGROUND

According to the petition, BNRR and its predecessors have

operated the Stampede Pass line between Auburn and Pasco,

WA, since 1888 as a main line route serving the Pacific

Northwest. In 1983, BNRR allegedly downgraded the Stampede

Pass line to carry local traffic. In 1986, BNRR sold a segment

of the Stampede Pass line between Cle Elum and Pasco, WA,

together with several branch lines, to the Washington Central

Railroad Company (WCRC). BNRR continued to provide

limited local service over the remaining segment of the

Stampede Pass line between Auburn and Cle Elum (including

the portion of the line within the County).

2. The City of Auburn has filed a pleading stating that it is an

interested party with respect to King County’s petition and that, in

furtherance of these interests, the City is preparing its own petition to

the Board, to be filed in STB Finance Docket No. 33095. The City further

requested that we defer action on the County’s petition until we have

had an opportunity to consider the City’s position.

While the City is free to seek a declaratory order, if it wishes, it has

offered no reason for the Board to delay responding to King County’s

petition. The answer to the question presented by King County is

sufficiently straightforward that we need not seek or consider public

comment in issuing our order. The City of Auburn is not prejudiced by

our issuing a prompt response to King County’s petition, because, as

noted, the City may file its own, in a separate docket.

ic ace

45a

Appendix C

Because of an asserted increasing demand for rail service,

BNRR is now proposing to reacquire the segment sold to WCRC

and reestablish the Stampede Pass line as a main line for through

traffic. To that end, in an application filed June 17, 1996, in

STB Finance Docket No. 32974, the Burlington Northern Santa

Fe Corporation. (BNSF), BNSF Acquisition Corp. (BNSF

Acquisition), BNRR and WCRC (collectively, applicants) are

seeking approval under 49 U.S.C. 11323-25 for BNSF to

continue in control of BNSF Acquisition, its noncarrier

subsidiary, after BNSF Acquisition acquires the common stock

of, and subsequently merges with, WCRC. Applicants are also

seeking approval under 49 U.S.C. 11323 for BNRR to operate

WCRC’s segment of the Stampede Pass Line between Cle Elum

and Pasco, WA, and connected branch lines.

the County. The EA did not consider any proposed construction

or improvements to the line but addressed the anticipated

impacts of an increase in train traffic on the entire Stampede

Pass line. Based ona projected increase of 10 trains per day on

the line, SEA concluded that the proposal would not have

significant environmental impacts if the mitigation measures

recommended in the EA are implemented. The County and a

number of other governmental organizations were consulted

by SEA in preparing the EA. Comments on all aspects of

the EA are due October 4, 1996. SEA will issue fina]

recommendations after reviewing the comments, which we will

consider in our final decision on the application.

As part of the proposed operation over the Stampede Pass

line, BNRR apparently is also planning to repair and upgrade

46a

Appendix C

portions of the Stampede Pass line within the County, including:

(1) replacing track sidings; (2) replacing maintenance-of-way

buildings; (3) raising heights of tunnels; (4) replacing

snowsheds and (5) installing communications towers. The

County contends that some of the line repairs planned by BNRR

would ordinarily require permits after environmental review

under state environmental laws. It asserts that while BNRR

initially submitted permit applications for the line

improvements, the carrier now contends that the County’s

review process is preempted by the Board’s authority under

the ICCTA.

On May 8, 1996, the County asked the Board for an

informal opinion as to whether the ICCTA preempts the

County’s authority to evaluate or condition BNRR’s proposed

operations of the Stampede Pass line within the County and

to issue grading, building or conditional use permits for

construction. BNRR joined the County’s request on May 31,

1996.

On June 20, 1996, the Secretary of the Board issued an

informal opinion indicating that the County’s permitting process

appeared to be preempted by the ICCTA. The Secretary noted

that the County, through the permitting process, could deny

BNRR authority to undertake the improvements to the Stampede

Pass line and thus could inhibit BNRR from carrying traffic on

the line. As a result, he concluded that the state or local

permitting process appeared to interfere with the federal

licensing program and unreasonably burden interstate

commerce. The opinion further stated that, under its local police

powers, the County could nonetheless continue to police certain

deleterious actions, such as dumping waste and could issue

citations or seek damages if there were a spill of harmful

47a

Appendix C

substances while a railroad line was being constructed or

upgraded.

The County states that shortly after the informal opinion

was issued, BNRR withdrew its pending permit applications in

the County.

In its petition for declaratory order, the County submits

that the Secretary’s informal opinion has not resolved the

question of preemption in this case. It requests that the Board

clarify whether and to what extent the County is preempted

from permit review and directing mitigating measures for

construction associated with the Stampede Pass project.?

Specifically, the County asks us to clarify whether it is

preempted from requiring permit applications from BNRR: (1)

to mitigate noise impacts of rail line operations in residences

located near the line by installing natural or artificial noise

barriers; (2) to mitigate traffic congestion impacts of rail line

operations by building Overpasses or underpasses or other

means; (3) to demonstrate the structural integrity of snowsheds

to be built at Stampede Pass tunnel; (4) to provide contingent

mitigating plans for potentia! discharge or spill of material

transported along lakes and streams and other segments of the

line; and (5) to Study and mitigate impacts on wetlands, streams,

or other natural systems along the rail right-of-way within the

County.

DISCUSSION AND CONCLUSIONS

The Board’s authority under 5 U.S.C. 554(e) and 49 U.S.C.

721 to issue a declaratory decision is discretionary. We will

3. The Cities of Kent and Auburn also have requested a ruling from

us on local government preemption.

48a

Appendix C

exercise that authority here to eliminate controversy and remove

uncertainty over our view of the appropriate role of state and

local government entities and this Board in regulating the

environmental effects of BNRR’s planned reactivation of its

Stampede Pass line.

We agree with the Secretary’s informal opinion that the

County’s permitting process for prior approval of this project

of necessity impinges upon the federal regulation of interstate

commerce. The power to authorize the construction of rail lines

and the power to authorize railroads to operate over them has

been vested exclusively in the Board by section 10901 of the

ICCTA. The ICCTA abolished the ICC, established the Board

as the successor to the ICC, and revised the Interstate Commerce

Act, all effective January 1, 1996. The Board now has exclusive

jurisdiction over the construction and operation of rail lines

that are part of the interstate rail network, pursuant to 49 U.S.C.

10501 and 10901. The ICC and court precedents cited herein

regarding the ICC’s preemptive authority now apply to the

Board’s authority. See ICCTA Section 205.

In the Transportation Act of 1920, Congress established a

comprehensive scheme of federal regulation of track additions

and deletions by interstate railroads like BNRR.* Chicago &

N.W. Tr. Co. v. Kalo Brick & Tile Co., 450 U.S. 311, 320 (1981)

(Kalo Brick) (ICC abandonment authority is “plenary” and

“exclusive”); Transit Comm'n v. United States, 289 U.S. 121

(1933) (Transit Comm'n) (same for construction). Thus, any

state or local statute that requires a railroad to obtain state or

4. The BNRR line through Stampede Pass was built before

Congress gave the ICC the authority to approve the construction of rail

lines, but authority for the line was “grandfathered” under the provisions

of the statute.

RSET UN CS Coa eC LOE ae RY ae a a

49a

Appendix C

local approval before construction (or abandonment) of a line

would appear, on its face, to conflict with the ICCTA and is

preempted.

Moreover, under the Commerce and Supremacy Clauses

of the United States Constitution, direct regulation of interstate

commerce by the states is prohibited. E.g., Edgar v. MITE

Corp., 457 U.S. 624, 640 (1982); Kalo Brick, 450 U.S. at 318;

Missouri Pac. R.R. y. Stroud, 267 U.S. 404, 408 (1925) (“there

can be no divided authority over interstate commerce . .. the

Acts of Congress on that subject are supreme and exclusive’’),

Indeed, Congress in the ICCTA has confirmed that the

jurisdiction of the Board over transportation by rail carriers

like BNRR is exclusive and preempts the remedies provided

under federal or state law. 49 U.S.C. 10501(b).

Preemption, however, does not withdraw from the states

the “power to regulate where the activity regulated [is] a merely

peripheral concern” of federal law, San Diego Building Trades

Council v. Garmon, 359 U.S. 236, 243 (1959). In other words,

the ICCTA does not usurp the right of state and local entities

to impose appropriate public health and safety regulation on

interstate railroads. But the local law is preempted when the

“challenged state statute ‘stands as an obstacle to the

accomplishment and execution to the full purposes and

objections of Congress.’ ” Perez y. Campbell, 402 U.S. 637,

649 (1971), quoting Hines y. Davidowitz, 312 U.S. 52, 67

(1941).

A key element in the preemption doctrine is the notion

that only “unreasonable” burdens are stricken down. Not all

state and local regulations that affect interstate commerce fail.

Only those that “conflict with” federal regulation, “interfere

50a

Appendix C

with” federal authority, or “unreasonably burden” interstate

commerce are preempted.

In short, where the state or local law can be applied without

interfering with the federal law, the courts have done so. Thus,

in Hayfield Northern R.R. v. Chicago & N.W. Transp. Co., 467

U.S. 622 (1984), the Supreme Court held that a state proceeding

to condemn railroad property did not interfere with the Interstate

Commerce Act because the state process followed the

abandonment of the line pursuant to the ICC’s process and the

line was no longer part of the national rail network.

While it is difficult to draw the line between what type of

regulation is, and is not, preempted without a thorough analysis

of the particular ordinances at issue, it appears that requiring a

permit for BNRR’s operations or maintenance and upgrading

plans for the Stampede Pass line would go too far. An incident

of a carrier’s receipt of authority to construct a line is the right

to maintain and improve it to keep it in operable condition.

This 1s necessary to remecy wear and tear and to meet the

changing needs of the market for rail services by, for example,

enlarging or raising tunnels to accommodate bigger cars, raising

towers to employ new communications systems, or replacing

sidings to accommodate more traffic.

Moreover, the permitting process implies the power to deny

authorization and thereby to frustrate the activity that must be

sanctioned. If BNRR were unable to undertake the projects, or

if its ability to commence projects to maintain and upgrade its

facilities were substantially delayed pending resolution of

environmental issues, its ability to carry rail traffic over the

Stampede Pass line could be greatly inhibited, if not foreclosed.

Given these circumstances, it appears that the county permitting

Sla

Appendix C

process contemplated for this project would both interfere with

the federal licensing program and unreasonably burden

interstate commerce. Accordingly, it would be preempted by

the ICCTA.

In addition to reiterating the overall question of federal

preemption that the County propounded in its request for an

informal opinion, the County asked five specific questions on

Board preemption of County permitting requirements directed

at mitigating 5 specific environmental impacts. Although the

objects of each request differ, the method to be employed is

the same: obtaining a permit from the County. Because, as

noted, the permitting process by its nature impinges upon

federal regulation, that process itself is objectionable, regardless

of its objectives.

It should be noted that the Board is conducting an

environmental review of BNRR’s Proposed operation of the

entire Stampede Pass line in STB Finance Docket No. 32974,

including the segment within the County. The Board has thereby

assumed the exclusive role in imposing mitigating conditions

in connection with its consideration of the application before

it. The EA, which was issued on September 4, 1996, considered

the environmental impacts of BNRR’s proposed operation of

the Stampede Pass line. Among the impacts considered in the

EA were those on traffic, noise, safety, and other matters, which

are the same impacts the County seeks to regulate through

its permitting process. The EA has recommended certain

mitigating conditions addressing traffic and safety concerns,

which would require BNRR to notify towns along the line of

its expected schedule of train Operations and work with them

on emergency response measures. BNRR also would be required

to consult with appropriate state and local government agencies

52a

Appendix C

to discuss funding options and develop a priority list for

upgrading crossing signals and to transport all hazardous

materials in compliance with federal standards. The County

has the opportunity to comment on SEA’s recommendations

for mitigation as well as other aspects of the EA by October

4, 1996.° SEA will consider these comments and the

environmental record in making its final recommendations. The

Board will then consider those recommendations in imposing

environmental conditions upon any final decision approving

the application. Absent conditions imposed by the Board,

requiring approval by a state or local government agency,

such agencies are totally preempted from regulating the

environmental consequences of the transaction.

The informal opinion issued by the Secretary presupposed

that there would be no federal approval of the proposal to

upgrade and modernize the Stampede Pass line. Had BNRR’s

proposal not required federal approval, we agree with the view

expressed therein that a state or local government has a limited

role under other federal statutory schemes, such as the Clean

Air Act, involving protection of the environment and, to some

extent, as a result of the state’s recognized police powers, to

protect the health and welfare of its citizens. But outside of

that limited role, a state or local government may not use its

5. We note that SEA extended to October 4, 1996, the original

time period for filing comments to the EA. This extension has been made

to ensure that petitioner has the opportunity to comment on the EA, and

SEA’s recommended mitigating conditions, as well as to propose

additional mitigating conditions that it believes are necessary. This

extension of the EA comment period will delay our decision in STB

Finance Docket No. 32974 by 10 days. We now expect to issue a final

decision on the application by October 25, 1996, with an effective date

of October 30, 1996.

53a

Appendix C

permitting authority to impede or unreasonably interfere with

interstate commerce. However, where, as here, approval of a

transaction is required at the federal level with the result that

the environmental effects of that approval are required to be

assessed at the federal level, there is no role for state and local

agencies to play other than by participation in the Federal

environment review process.

Accordingly, we will deny the County’s petition.

This action will not significantly affect either the quality

of the human environment or the conservation of energy

resources.

It is ordered:

1. The County’s petition for declaratory order in STB

Finance Docket No. 33095 is denied.

2. This decision is effective on the service date.

By the Board, Chairman Morgan, Vice Chairman Simmons,

and Commissioner Owen.

Vernon A. Williams.

Secretary

54a

APPENDIX D — DECISION OF THE SURFACE

TRANSPORTATION BOARD DATED AND

DECIDED OCTOBER 24, 1996

SURFACE TRANSPORTATION BOARD'

DECISION

STB Finance Docket No. 32974

BURLINGTON NORTHERN SANTA FE CORPORATION,

BNSF ACQUISITION CORP., AND BURLINGTON

NORTHERN RAILROAD COMPANY — CONTROL —

WASHINGTON CENTRAL RAILROAD COMPANY

Decided: October 24, 1996

By application filed June 17, 1996, the Burlington Northern

Santa Fe Corporation (BNSF), BNSF Acquisition Corp.

(Acquisition), Burlington Northern Railroad Company (BNRR)

and Washington Central Railroad Company (Washington

Central) (collectively, Applicants) seek approval under 49

U.S.C. 11323-25 for BNSF to continue in control of

Acquisition, its non-carrier subsidiary, after Acquisition

acquires the common stock of and subsequently merges with

Washington Central. Applicants also seek approval, under 49

U.S.C. 11323, for BNRR to operate the Washington Central’s

151-mile main line between Pasco and Cle Elum, WA, and the

1. The ICC Termination Act of 1995, Pub. L. No. 104-88, 109

Stat. 803 (ICCTA), which was enacted on December 29, 1995, and took

effect on January |, 1996, abolished the Interstate Commerce

Commission (ICC) and transferred certain functions to the Surface

Transportation Board (Board). This decision relates to railroad

acquisitions that are subject to Board jurisdiction pursuant to 49 U.S.C.

11323-25.

LN eee aay MMe ay Po Pe Be Ye

5Sa

Appendix D

following connecting branch lines: (1) the 28.6-mile branch

line between Gibbon and Granger, WA; (2) the 13. 1-mile branch

line between Yakima and Naches, WA; (3) the 8. 1-mile branch

line between Yakima and Moxee City, WA; and (4) the

18.7-mile branch line between Kennewick and Richland, WA.

BNRR also Proposes to assume Washington Central’s

obligations to operate over the Yakima Branch line of the Union

Pacific Railroad Company (UP) between Kennewick and

Yakima, WA.?

In a notice served and published on July 17, 1996 (61 FR

37313), we accepted the application and determined that this

is a minor transaction as defined in 49 CFR 1180.2(c).3 We

2. Applicants also Propose to lease WCRC’s remaining lines to

the Columbia Basin Railroad Company (CBRC). Those lines are from:

(1) Connell (MP 186.9) to Wheeler, WA (MP 147.3); (2) Bassett Junction

(MP 0.0) to Shrag, WA (MP 12.50); and (3) Moses Lake (MP 18.3) to

Sieler, WA (MP 5.0). In addition, BNRR Proposes to grant CBRC

trackage rights to provide local service over BNRR’s 13-mile line

between Warden (MP 1976.0) and Othello, WA (MP 1989.0). The

Applicants state that authority for the lease and trackage rights would

be sought in a Separate proceeding before the Board.

3. This transaction is subject to the standards of 49 U.S.C. 11324(d),

because the transaction does not involve the merger or control of two

Class I railroads. Section 204(a) of the ICCTA provides that all ICC

rules in effect on the date of the enactment of the ICCTA “shall continue

in effect according to their terms until modified, terminated, superseded,

set aside, or revoked in accordance with law by the Board. . . or operation

of law.” While the standards and procedures of former sections | 1343-45

and current sections 1 1323-25 are substantially similar insofar as minor

transactions are concerned, the procedures of current section 11325(d)

differ slightly from those at 49 CFR 1180.4 and shall govern. Otherwise,

the use of the regulations at 49 CFR part 1180 for this Proceeding appears

proper.

56a

Appendix D

invited comments from interested parties, including the

Secretary of Transportation and the Attorney General of the

United States, by August 16, 1996. We gave the Applicants

until August 30, 1996, to reply to any comments.

Comments were filed by: the Washington State Department

of Transportation (WSDOT); the Ports of Seattle and Tacoma,

WA (collectively, the Ports); North Dakota Public Service

Commission (NDPSC); The Beach Co-operative Grain

Company, Berthold Farmers Elevator, North Dakota Farm

Bureau, North Dakota Grain Dealers Association, North Dakota

Grain Growers Association, and North Dakota Wheat

Commission (collectively, ND Grain Producers); Cities of Kent

and Auburn, WA (Cities); Rail Services Update (Update);

United Transportation Union (UTU); and John D. Fitzgerald,

General Chairman for the United Transportation Union located

in Vancouver, WA (WA-UTU).‘ Applicants replied.

4. In addition, on October 17, 1996, the Board received a letter

from Representative Jennifer Dunn of the Eighth Congressional District

of Washington. Representative Dunn refers to the “Board’s decision not

to hold a hearing on this matter” and asks that the Board refrain from

issuing a decision in this case “until the issues raised in this proceeding

are addressed in a hearing.” Like almost all proceedings before the Board,

this case is being considered on a written record. Representative Dunn

has given no reason why a written record is inadequate in this proceeding,

and has noted no deficiencies in the record before us. Nor have we

received such an argument from any party to the proceeding. We will

therefore deny the request.

57a

Appendix D

BACKGROUND

Overview

Applicants state that the transaction will enable BNRR to

reestablish its former Stampede Pass route as a third main line

for traffic to and from the ports of Seattle and Tacoma and the

area around Puget Sound. Prior to 1983, BNRR operated three

overhead main lines serving the area: (1) the Cascade route

from Spokane, WA, through Wenatchee, WA, to Seattle and

Tacoma, WA; (2) the Columbia River route between Spokane

and Seattle and Tacoma via Pasco and Vancouver, WA; and

(3) the Stampede Pass route between Auburn and Pasco, WA.

In 1983, BNRR downgraded the Stampede Pass route by

limiting it to the carriage of local traffic, assertedly because

the railroad had adequate capacity on its two other routes. In

1986, BNRR sold a 151-mile portion of the Stampede Pass route

between Cle Elum and Pasco, and several branch lines to the

Washington Central, which was then a new short-line carrier.

BNRR continued to operate the remaining 77.9-mile portion

of the Stampede Pass route between Cle Elum and Auburn to

provide limited local service.

Applicants indicate that they now propose that BNSF

reacquire the segment it sold to Washington Central to

reestablish the Stampede Pass route as a main line for through

traffic. They project that intermodal and grain traffic wil] soon

exceed BNRR’s capacity on the Cascade and Columbia River

routes. BNSF also expects traffic to increase because of the

recently approved BNRR/ATSF consolidation. The Applicants

indicate that reestablishing the Stampede Pass route is the

lowest-cost alternative to improve capacity to handle increased

58a

Appendix D

business and meet expected demand. Applicants propose to

accomplish this by having BNSF acquire operational and

financial control over Washington Central’s lines.

The Applicants

BNSF is a non-carrier corporation, which indirectly owns

BNRR‘° and The Atchison, Topeka, and Santa Fe Railway

Company (ATSF).° BNSF’s control of the BNRR/ATSF system

was approved in Burlington Northern, Inc. & Burlington

Northern Railroad Company — Control & Merger — Santa Fe

Pacific Corporation, and The Atchison, Topeka and Santa Fe

Railway Company, _ 1.C.C.2d __ (served Aug. 23, 1995).

BNSF also contro!s several rail carriers and holds stock interest

in other regional operating and terminal railroads subject to

our jurisdiction.

Acquisition is a non-carrier, wholly owned subsidiary of

BNSF. Acquisition was formed to acquire Washington Central.

BNRR is a Class I railroad that operates approximately

25,000 miles of railroad in the United States and Canada.

5. BNRR is directly owned by Burlington Northern, Inc. (BNI).

Applicants indicate that BNI has not been made an applicant to this

proceeding because it is not a party to the merger agreement. BNI will

not acquiré control of Acquisition or WCRC and will not operate

WCRC’s lines.

6. ATSF is directly owned by Santa Fe Pacific Corporation (SFP),

a non-carrier holding company. Applicants indicate that ATSF and SFP

are not included as applicant carriers in this transaction because neither

is a party to the merger agreement nor would they effect control over

WCRC’s lines. Moreover, they state, ATSF’s lines do not connect with

and will not be consolidated with WCRC’s lines.

Bi aaa

59a

Appendix D

BNRR’s principal routes run from the Pacific Northwest across

Montana, North Dakota, Minnesota and the western edge of

Wisconsin to Chicago; from the Powder River Basin in

Wyoming through Lincoln, NE, to Chicago, IL and Kansas City,

MO; from the Powder River Basin to Denver, CO, and Fort

Worth, TX; from the Powder River Basin to Bismarck, ND

and Minneapolis/St. Paul, MN, with an auxiliary line to the

Head of the Lakes; from Denver, CO to Chicago with a junction

at Lincoln, NE; from Avard, OK east to Memphis, TN and

Birmingham, AL; and from Chicago to Houston, TX through

Kansas City and Dallas, with an auxiliary line from St. Louis,

MO to a junction point east of Tulsa, OK.

Washington Central is a Class III rail carrier that operates

approximately 303.2 miles of rail line within the State of

Washington. Washington Central acquired its lines from BNRR

in 1986.’ » addition, Washington Central serves customers on

UP’s Yakima Branch under a trackage rights and haulage

agreement dated April 7, 1992.8

The Proposed Transaction

The terms of the transaction are contained in an agreement

among BNSF, Acquisition and Washington Central dated April

18, 1996. The agreement provides that Acquisition will acquire

7. See Washington Central Railroad Company, Inc. — Exemption

Acquisition and Operation — Burlington Northern Railroad C. ompany,

~ Finance Docket No. 30916 (ICC served Oct. 3, 1986).

8. The trackage rights agreement was the subject of a notice of

exemption in Washington Central Railroad Company — Trackage Rights

— Union Pacific Railroad Company, Finance Docket No. 32051 (ICC

; served June 1, 1992).

60a

Appendix D

all the common stock of Washington Central, and it will be

merged into Acquisition. Each share of Washington Central’s

common stock will be canceled and converted into the right to

receive an adjusted fraction of a share of BNSF common stock.

Immediately prior to the closing of the merger agreement,

Washington Central will buy out all shares of the Washington

Central’s preferred stock (and common stock, if any) owned

by the Washington Central Railroad Employee Stock

Ownership Trust (ESOP). The ESOP will repay to Washington

Central the outstanding amount of principal and interest due as

of that time pursuant to the ESOP Loan and Pledge Agreement,

dated May 4, 1994, between Washington Central and the

Washington Central ESOP.

Applicants will consolidate the railroad operations of

BNRR and Acquisition. Although Acquisition and BNRR will

be marketed as part of the BNSF rail system, BNSF says that

Acquisition will retain its separate existence and will not be

merged into BNRR at the present time. After the merger, BNRR

will operate the Washington Central’s segment of the Stampede

Pass route and connected branch lines.

According to Applicants, this transaction will not lessen

competition. Reestablishing the Stampede Pass route will

assertedly enable the BNSF system to improve capacity and

reduce congestion in the Pacific Northwest area. The

transaction, they say, will also provide additional routing and

service options to shippers, improve transit times and car

supply, and result in a more efficient operation. Applicants also

expect to serve customers on BNSF’s recently combined system

more efficiently, thus enhancing competition for transportation

into and out of the PNW. Additionally, shippers on the

Washington Central will allegedly continue to have the same

}

6la

Appendix D

competitive options available to them, and their points of

connection will remain the same. Applicants maintain that the

transaction will improve the competitive balance that currently

exists today, but will not create a monopoly or restrain trade in

freight surface transportation in any particular region of the

United States.

BNRR states that, for the reasonably foreseeable future,

it intends to use the Stampede Pass route for a total of

approximately 10 daily overhead trains that are presently

operating over the Cascade and Columbia River routes. The 10

trains include 4 merchandise trains, 3 loaded grains trains, and

3 empty grain trains.

The 4 merchandise trains operate over 4 separate routes.

One east-bound merchandise train currently operates between

Seattle and Pasco over the Columbia River route and moves

through the cities of Auburn and Kent. After the merger, this

train will continue to move through Kent and Auburn and then

turn east on the Stampede Pass route to Pasco. A second

east-bound merchandise train presently operates between

Tacoma and Pasco via the Columbia River route. After the

merger, this train will operate north from Tacoma to Auburn

and then east across the Stampede Pass route to Pasco. It will

not operate through Kent. A third west-bound merchandise train

presently operates between Pasco and Seattle over the Columbia

River route through both Auburn and Kent. After the merger,

this train will operate from Pasco over the Stampede Pass route

to Auburn and then north through Kent to Seattle. The fourth

west-bound merchandise train presently operates between Pasco

and Tacoma, and does not operate either through Auburn or

Kent. After the merger, this train will operate from Pasco over

the Stampede Pass route to Auburn and then south to Tacoma.

It will not operate through Kent.

62a

Appendix D

The 3 loaded grain trains currently operate over 2 routes.

Two of the loaded west-bound grain trains presently operate

between Pasco and Tacoma over the Columbia River route and

do not move through either Auburn or Kent. After the merger,

the trains will operate from Pasco west over the Stampede Pass

route to Auburn and then south to Tacoma. They will not move

through Kent. The third loaded west-bound grain train presently

operates from Pasco to Seattle over the Columbia River route

through Auburn and Kent. After the merger, this train will

operate west from Pasco over the Stampede Pass route to

Auburn and then north through Kent to Seattle.

The 3 empty grain trains now also operate over 2 routes.

Two of the empty east-bound grain trains presently move over

the Cascade route from Tacoma to Spokane through both

Auburn and Kent. After the merger, these trains will operate

north from Tacoma to Auburn and then east over the Stampede

Pass route to Pasco. They will no longer move through Kent.

The third east-bound empty grain train presently moves from

Seattle to Spokane over the Cascade route. It does not move

through either Auburn or Kent. After the merger, the train will

operate south from Seattle through Kent to Auburn. At Auburn,

the train will move east over the Stampede Pass route to Pasco.

Additionally, BNRR proposes to provide local service

between (1) Pasco and Cle Elum; (2) Gibbon and Granger; (3)

Yakima and Naches; (4) Yakima and Moxee City; and (5)

Kennewick and Richland. BNRR’s local service will essentially

be the same as is provided today by Washington Central, but

operations could change if additional traffic becomes available.

BNRR will provide local service at Kennewick out of its Pasco

Yard.

63a

Appendix D

Acquisition will also assume Washington Central’s

obligations under the trackage rights agreement with UP. BNRR

will operate UP’s Yakima Branch to serve UP customers on

that line. Washington Central’s trackage rights with UP will

be assigned to BNRR. BNRR will perform the same level of

Switching that Washington Central performs today for those

UP customers.

BNRR niitially had considered using the Stampede Pass

route for scheduled double-stack intermodal service, and had

planned to expand the Stampede Pass tunnel to accommodate

this traffic. BNRR states that it has since determined that it

will not use the Stampede Pass route for double-stack

intermodal traffic for the reasonably foreseeable future, but will

use its other lines for this traffic. Rerouting a total of

approximately 10 trains over the Stampede Pass route will

assertedly free up track Capacity on BNRR’s other Pacific

Northwest routes for movements of double-stack traffic. BNRR

states that it has no plans to expand the Stampede Pass tunnel

for the reasonably foreseeable future, and that no Capital funds

to expand the tunnel have been allocated through 1999.

Applicants expect that BNRR will realize significant

operating benefits by using the Stampede Pass Route. Because

of the shorter distances over the route, rerouting the

merchandise and loaded grain trains will reduce ton miles, car

miles, locomotive unit miles, and train miles. The 3 empty grain

trains, however, will have to travel a longer distance over the

Stampede Pass route than over the Cascade route. BNRR

expects to realize annual savings of $15.24 million as follows:

64a

Appendix D

Category Miles Saved Savings

Train Miles 226,260 $1,241,010

Locomotive Miles 495,786 768,187

Car Miles 21,751,997 2,451,602

Ton Miles 3,468 ,970,909 7,958,686

$12,419,485

The train reroutes will also produce substantial fuel savings of

approximately 4.5 million gallons of diesel fuel per year. At

current fuel prices of an average of $.63 per gallon, the reroutes

described above will produce annual savings of about $2.83

million, resulting in the total savings figure of $15.24 million.

Applicants state that the reroutes will also enable the

Columbia River route to handle an additional 7 trains per day

to carry traffic to and from points such as Portland, OR,

Vancouver, WA, and Kalama, WA. Rerouting the empty grain

trains is expected to improve BNRR’s ability to provide

intermodal service over the Cascade route. The rerouted empty

grain trains will move directly into the Pasco Yard for

classification before movement to loading points on the BNRR

system. BNRR has indicated a preference for classifying empty

grain cars at its Pasco Yard because its facilities at Spokane

and Hauser, ID, were not designed for this function and are

often congested during the periods of heavy grain movements.

Comments

WSDOT states that the transaction would be in the best

interests of shippers in the State of Washington. It believes

that the proposal would enhance rail service and increase main

line rail capacity across the state. WSDOT indicates that the

65a

Appendix D

rail network is an important element of the State’s multimodal

transportation network. WSDOT contends that container traffic

through Puget Sound ports is projected to increase substantially.

It notes that this traffic is highly time sensitive and requires

top quality rail service for these ports to be competitive.

WSDOT maintains further that large increases are also projected

for grain traffic exported through its ports. It views the

reopening of the Stampede Pass route as meeting the growth

needs by providing a third corridor across the state.

Both Ports support the application. They note that the

BNRR Cascade and Columbia River routes are nearing capacity.

Each views the reopening of the Stampede Pass route as being

important for increased rail capacity. They contend that the

proposal will benefit shippers and improve service. In their

view, growth of business at their ports depends on

corresponding growth in rail capacity to transport traffic. They

see BNSF’s acquisition of Washington Central lines as vita] to

their interest.

NDPSC and ND Grain Producers support the proposal

because it would Open a new route for grain shipped to Pacific

Northwest ports. They state that a lack of capacity has disrupted

traffic to the Ports and has delayed the return of empty cars to

meet shipper demands. They also note that congestion prevents

grain shippers from shipping grain at the most opportune time

of high demand and has been costly for producers.

The Cities, while not opposing the merger, express concern

about the potential environmental impacts that could result from

increased traffic. They have requested that we impose

conditions to mitigate these impacts.

66a

Appendix D

Update, a newsletter that deals with rail matters, supports

the application. It notes that the Cascade and Columbia River

lines are nearing capacity, and that the proposal will enable

BNRR to acquire an additional route to handle the predicted

growth of traffic in the Pacific Northwest without a large

expenditure of capital.

UTU and WA-UTU seek the imposition of employee

protective conditions. In addition, WA-UTU asserts that the

transaction is not an end-to-end acquisition, but should be

considered a parallel transaction, because BNRR will be

diverting traffic from other routes.” WA-UTU asks that we deny

the transaction.

Applicants respond that none of the commenters raise any

competitive concerns. They note that many of the commenting

parties recognize the benefits to be derived from BNRR’s ability

to offer a shorter route for certain traffic and, at the same time,

reduce congestion of other BNRR routes for time-sensitive

traffic.

DISCUSSION AND CONCLUSIONS

Statutory criteria. Under 49 U.S.C. 11323(a)(2), the

purchase by rail carriers of property of another rail carrier

requires prior approval by the Board. The criteria for approval

9. WA-UTU also contends that this proceeding should be deferred

until CBRC files for authority to lease WCRC lines and acquire trackage

rights from BNRR. WA-UTU had previously raised this contention in a

petition requesting reopening of the July 17, 1996 procedural decision.

We denied WA-UTU’s request as unwarranted in the August 12, 1996

decision, and WA-UTU does not present any new reasons in its comments

to reconsider our decision.

hore re

Sy Sk

67a

Appendix D

are set forth in section 11324. Because this transaction does

not involve the merger or control of at least two Class I railroads,

section 11324(d) governs and requires approval of the

application unless the Board finds that:

(1) as a result of the transaction, there is likely to be a

substantial lessening of competition, creation of a monopoly,

or restraint of trade in freight surface transportation in any

region of the United States; and

(2) the anticompetitive effects of the transaction outweigh

the public interest in meeting significant transportation needs.

In transactions subject to section 11324(d), the primary

focus is on the probable competitive effects. We consider the

public interest factor only if we find significant anticompetitive

effects. Any adverse competitive impact must be both “likely”

and “substantial.” Even then, the transaction may not be

disapproved unless the anticompetitive impacts outweigh the

public interest factors and cannot be mitigated through

conditions. '° See Wilmington Terminal RR, Inc. — Pur & Lease

— CSX Transp., Inc., 6 1.C.C.2d 799, 803 (1990), and cases

cited therein, 7 1.C.C.2d 60 (1990), aff'd sub nom. Railway

Labor Executives Ass'n v. LC. C., 930 F.2d 511 (6th Cir. 1991)

(Wilmington Terminal).

There is nothing on record indicating any anticompetitive

effects from this transaction. The WCRC lines to be operated

by BNRR service two types of markets: (1) overhead, east-west

10. The quoted language from section | 1324(d) is identical to the

language in former section 11344(d). Therefore, in interpreting section

11324(d), we are guided by the case law interpreting former section

11344(d).

on MLS AAR ST Nip of ERO NOS RETR

68a

Appendix D

grain and other traffic between the Pacific Northwest and other

regions; and (2) local traffic which originates and terminates

on the lines. The only change affecting overhead traffic brought

about by the transaction is to open a new route to the Puget

Sound area for BNRR. No other carrier is configured to make

such use of these lines.

All Washington Central loca

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