Voting Conference, February 23, 2005

Statement of Timothy Strafford

Staff Attorney, STB Office of Proceedings

Central Illinois Railroad Company--Operation Exemption--Rail Line of the
City of Peoria and the Village of Peoria Heights in Peoria and Peoria
Heights, Peoria County, IL

STB Finance Docket No. 34518

Pioneer Industrial Railway Company

-   Petition for Declaratory Order

STB Finance Docket No. 34636

Good morning Chairman Nober, Vice Chairman Buttrey, and Commissioner
Mulvey. The draft decision before you addresses two proceedings that are
being considered together for administrative convenience because they
involve the same parties and interrelated issues.

Both proceedings concern an 8.29-mile rail line, known as the Kellar
Branch, owned by the City of Peoria, IL, and the Village of Peoria
Heights, IL. The City contracted with Peoria & Pekin Union Railway
Company (P&PU) for operations to serve shippers. The City subsequently
transferred to the Village a 25% ownership interest in the portion of
the Kellar Branch located within the Village's corporate limits. P&PU
assigned its operating rights under the agreement to Pioneer Industrial
Railway Company (Pioneer) in 1998, and Pioneer obtained authority to
operate the line.

By a notice served and published in the [Federal]{.underline}
[Register]{.underline} on July 28, 2004, Central Illinois Railroad
Company (Central Illinois) invoked the Board's class exemption at 49 CFR
1150.41 to operate the Kellar Branch at the request of the Cities. The
Cities assert that their existing operating agreement with Pioneer
terminated by its terms on July 10, 2004, but that Pioneer refuses
voluntarily to relinquish its authority. In response, the Cities have
filed an adverse application for discontinuance of service by Pioneer in
STB Docket No. AB-878.

Pioneer has asked the Board to reject Central Illinois' notice of
exemption or revoke its operation exemption because: (1) the notice does
not describe a transaction that is covered by 49 CFR 1150.41; (2) the
Cities lack the ability to enter into any agreement installing a new
operator; and (3) the notice does not meet the criteria of 49 CFR
1150.41 and is false and misleading.

Separately, Pioneer filed a petition for declaratory order in [Pioneer
Industrial Railway Co.--Petition for Declaratory Order]{.underline}, STB
Finance Docket No. 34636, asking the Board to institute another
proceeding to determine Pioneer's status on the line and to construe the
agreement between Pioneer and the Cities as conveying to Pioneer an
interest comparable to a permanent easement.

With regard to the petition to reject or revoke, the draft decision
finds that Pioneer has not demonstrated that Central Illinois' notice
contains false or misleading information, or that regulation is
necessary to carry out the transportation policy of 49 U.S.C. 10101. The
decision would conclude that, contrary to petitioner's claim, the
transaction at issue is contemplated by 49 CFR 1150.41, and that nothing
forecloses the ability of the Cities to contract with Central Illinois.

The draft decision also finds that there is no reason to institute a
declaratory order proceeding as the Board generally will defer in
questions of contract interpretation to the courts, and that the draft
decision already examines the arrangements between these parties to the
extent that the Board would do so in another proceeding.

Both Central Illinois and Pioneer have the right to operate on the line
until either of their rights is discontinued. Accordingly, the draft
decision reminds Central Illinois that it cannot operate the Kellar
Branch until coordination protocols with Pioneer are in place, and
advises the parties that they should jointly certify that such protocols
are in place.

This concludes my statement. We would be happy to answer any questions
that you might have.