36294

EBNumber range CHAPTER SERVICE DATE -- LATE RELEASE NOVEMBER 18, 2005

SURFACE TRANSPORTATION BOARD

DECISION

STB Docket No. AB-862X

TWIN STATE RAILROAD COMPANY---ABANDONMENT EXEMPTION---IN CALEDONIA AND
ESSEX COUNTIES, VT

Decided: November 17, 2005

On September 7, 2005, Twin State Railroad Company (TSRR) filed a request
for clarification, seeking the Board's guidance on questions referred to
the Board by theNumber range CHAPTER United States District Court for
the District of Massachusetts in [Twin State Railroad Corp. v. Maine
Central Railroad Company]{.underline}, Civil Action No. 04-12292-JLT. On
September 21, 2005, Maine Central Railroad Company (MEC) replied to
TSRR's request for clarification.

This case arises out of a lease entered into in 1984 between TSRR and
MEC. The lease gave TSRR authority to operate a line running from
Gilman, VT, to St. Johnsbury, VT

In 2004, TSRR sought an exemption that would give it authority to
abandon the line and salvage the physical plant. MEC challenged the
exemption, arguing that, as TSRR was only a lessee, it was entitled to
no more than discontinuance authority. In a decision served October 12,
2004 (October 2004 decision), the Board granted TSRR a conditional
abandonment exemption, but it also required the parties to leave the
line, track, ties and other track materials intact and undisturbed until
certain issues regarding TSRR's legal rights to the line's assets were
resolved.

TSRR then instituted a court proceeding, seeking a declaration that,
pursuant to a 1984 lease agreement (Lease) between it and MEC, it had
the right to remove the ties, track, equipment and other property on the
line. MEC filed a motion to dismiss the complaint, arguing that TSRR's
claims are preempted by the Interstate Commerce Act (ICA) and, in the
alternative, asking the court to refer the matter to the Board under the
doctrine of primary jurisdiction. In its referral order issued on
August 3, 2005, the court asked that we determine whether the
October 2004 decision preempts the court from adjudicating any claims
related to the line's underlying assets or otherwise preempts it from
declaring the rights and liabilities of the parties under the Lease.

Congress gave the Board exclusive and plenary authority over rail line
abandonments, and Board authority is required before a railroad line can
be lawfully abandoned. [Chicago & N.W. Transp. Co. v. Kalo Brick & Tile
Co.]{.underline}, 450 U.S. 311, 319-21 (1981). Any party seeking the
abandonment of a rail line, or discontinuance of rail service, must
first obtain appropriate authority from the Board, [see]{.underline}
[Consolidated Rail Corp. v. ICC]{.underline}, 29 F.3d 706 (D.C. Cir.
1994), notwithstanding any contractual arrangement between parties
regarding provision of rail service or use of a rail line,
[see]{.underline} [Thompson v. Texas Mexican R. Co.]{.underline},
328 U.S. 134, 147 (1946). In the October 2004 decision, the Board
required that the line remain intact and undisturbed until the parties
resolved their disagreement over their respective legal rights to the
line. By conditioning the abandonment in this way, the Board retained
jurisdiction over the line, its abandonment and its salvage until that
condition (and other routine conditions imposed in that decision) were
met.

The condition at issue here requires TSRR to resolve two issues before
TSRR could remove track materials from the line. First, TSRR must show
that it is more than a typical lessee, holding a sufficient property
interest in the line to abandon it. Second, TSRR must show that MEC has
no common carrier obligation on the line (because a line of railroad
cannot be abandoned if any party retains a common carrier obligation to
serve it).

Concerning TSRR's property interest in the line, MEC contends that TSRR
is a non-exclusive lessee without property or contractual rights
sufficient to abandon the line. Typically, a lessee does not acquire a
sufficient ownership interest in the line to allow a lessee to abandon
it. Despite its opportunities to resolve this condition, TSRR has not
shown that its lease is exclusive or that it is more than a typical
lessee of the line. It argues that it has a right to the physical assets
underlying the line when it is retired, but this right, even if the
court finds it exists, can be exercised only after the Board has
authorized full abandonment of the line.

MEC contends that the Lease gives it the right to operate over the line
contemporaneously with TSRR and that it retains a common carrier
obligation to provide rail service over the line. Generally, a railroad
lessor retains a common carrier obligation, residual or otherwise, over
the rail line that it leases out. TSRR has not shown otherwise. Thus, it
appears that MEC retains a common carrier obligation to service the
line, and, until TSRR can demonstrate that MEC does not have a common
carrier obligation, exercise of the abandonment authority granted in
October 2004 is premature. Accordingly, the conditional abandonment
exemption granted in the October 2004 decision will be revoked, and TSRR
will be granted discontinuance authority only, subject to the conditions
previously imposed in this proceeding, including employee protective
conditions.

While the court may interpret the Lease as to parties' ownership
interests in the line's assets, in these circumstances, the physical
assets underlying the line may not be removed for salvage until the
Board has authorized full abandonment (including the apparent need to
authorize MEC's abandonment of the line). But TSRR is not without a
process for pursuing the relief it seeks. If the court determines, or
the parties agree, that TSRR holds title to the line's assets, TSRR may
file for adverse abandonment authority. Through that filing TSRR may
seek a Board finding that the public convenience and necessity require
or permit MEC's abandonment so that the Board's jurisdiction would not
shield MEC from TSRR's legal enforcement of its rights to remove the
line's assets through the salvage process. Adverse abandonments are
often contentious matters and cannot be obtained through the Board's
exemption procedures. Instead, TSRR would need to file an application
for such adverse action under 49 U.S.C. 10903 and the Board's
regulations.

In sum, the ICA preempts any court order that would require or allow the
removal of the ties, track, equipment and other property on the line
before full abandonment authority is issued and any and all conditions
are met. Otherwise, there is nothing that would preempt the court from
determining and declaring the rights and liabilities of the parties
under the Lease.

This action will not significantly affect either the quality of the
human environment or the conservation of energy resources.

[It is ordered]{.underline}:

1\. The conditional abandonment authority granted in the October 2004
decision is revoked.

2\. TSRR is granted authority to discontinue operations over the line,
subject to the conditions imposed previously in this proceeding.

3\. This decision is effective on the date of service.

By the Board, Chairman Nober, Vice Chairman Buttrey, and Commissioner
Mulvey.

Vernon A. Williams

Secretary