No. 85-603 INTHE SUPREME COURT OF THE STATE OF MONTANA 1986

BURLINGTON NORTHERN RAILROAD COMPANY, Petitionerand Appellant,

MONTANA DEPARTMENT OF PUBLIC SERVICE REGULATION, PUBLIC SERVICE COMMISSION, THOMAS J. SCHNEIDER, CLYDE T. JARVIS, JOHNDRISCOLL,HOWARD ELLIS AND DANNY OBERG

## , Respondents and Respondents.

APPEAL FROM: District Court of the Thirteenth JudicialDistrict, In and for the County ofYellowstone, The Honorable Charles Luedke, Judgepresiding.

COUNSEL OF RECORD:

ForAppellant: Crowley Law Firm;Michael E. Webster argued, Billings, Montana

For Respondent: Clay R. Smith argued,Asst. Attorney General, Helena, Montana

Submitted: M~Y 1411986 Decided: June 5, 1986 

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41 ClerkMr. Justice Fred J. Weber delivered the Opinionof the Court. After a hearing and submission of briefs, the Montana Public Service Commission (PSC) dismissed a petition by BurlingtonNorthernRailroad Company (BN)to close its operation at Lodge Grass,Montana. The dismissalwasbased on the PSC's conclusion that it lacked jurisdiction. Lodge Grass is

on the Crow Indian Reservation. BN sought review in the District Court forYellowstoneCounty,and the court affirmed the PSC's order. We reverse. The issue iswhether the PSCproperly determined that it does not have regulatory jurisdiction over the proposed closureof the Lodge Grass Station. BN's predecessor, Big Horn Southern Railroad Company,

was granted a right-of-way through the Crow Indian Reservation by Act of Congress in 1889. The purpose of the rightof-way was 

### "for the construction,operation,and maintenance of [Big Horn

### 's] railroad, telegraph, and telephone lines

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# .." Section 3 of theAct provided inpart that "the surveys, construction, and operation of such railroad shall be conducted with due regard for the rights of the Indians, and in accordance with such rules and regulations as the Secretary of the Interior may make to carry out this provision. 

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# ." The Act was amended in 1893 to expand the time frame for construction and to modify the legal description of the right-of-way. The Lodge Grass stationwas constructed on the right-of-way, and BN eventually succeeded to Big Horn's interestunder the 1889 and 1893Acts. In 1981,BN requested authority from the PSC to discontinue its station at Lodge Grass. The requestwasmade under A.R.M. S 38.4.301. The reasons given for the request were the lack ofbusiness atLodge Grass and the availability of astation at Hardin to take over the Lodge Grass station's remaining duties. On July 27, 1982, the PSC held a public hearing on the proposed closure. There was testimony that there had been no shipments into or out of the Lodge Grass station for over two years. There was also testimony about proposed Tribal business ventures which would use the station. At the end of the hearing, the PSC requestedbriefs on whether it had jurisdiction to decide upon BN's application. The Crow Tribe has since enacted a common carrier ordinance. The ordinancewas not relied upon by either the PSC

or theDistrict Court in theirdecisions. In concluding that it did not have jurisdiction over BN's petition, the PSC found that: (1)Burlington Northern had succeeded to Big Horn's interest under the 1889 and 1893 Acts; (2) the 1889 Act "provided generally that the surveying, construction, and operation of the right-of-waywas to be subject to the approval and/or regulations of the Secretary of Interior;" and (3)

### "[tlhe impact of the proposed abandonment will fall predominantly, if not exclusively, on the Lodge Grassagency and Tribal members dependent upon rail service to that station." Relying on White Mountain Apache Tribe v. Bracker (1980), 448 U.S. 136, 100 S.Ct. 2578, 65 IJ.Ed.2d 665, the PSC concluded that the propriety of its asserting jurisdiction over BN's application involvedbalancing State and federal/tribal interests and that federal/tribal interests predominated under these circumstances. The District Court affirmed this decision on cross-motions for summary judgment. The White MountainApache test applies where "a State assertsauthority over the conductofnon-Indians engaging in activity on the reservation." White MountainApache, 448U.S. at 144. BN argues that its interest in the railroad right-of-way is in thenature ofa fee interest,and that the balancing test set out in White MountainApache does not apply. BN's argument is not persuasive. The PSC cites United States v. Soldana (1918), 246 U.S. 530, as authority that the title of the Crow Tribe to the land within the Big Horn (now BN) right-of-way was not extinguished when the right-of-way wa.screated. We conclude that the Crow Tribe retains an interest in the land underlying the right-of-way and therefore, the White Mountain Apache balancing test applies. WhiteMountain A~acheconcerned the State of Arizona's efforts to apply its motor carrier license and use fuel taxes to a non-Indian enterprise operating solely on the Fort Apache Reservation. The Court held that the taxes were pre-empted by federal law, but distinguished the process it used to reach this conclusion from standardpreemption analysis. The Courtheld that: [wlhen on-reservation conduct involving only Indians is at issue, state law is generally inapplicable, for the State's regulatory interest is likely tobeminimal and the federal interest in encouraging tribal self-government is at its strongest

(citations omitted)

# . More difficult questions arise where, as here, a State asserts authority over the conductofnon-Indians engaging in activity on the reservation. In such cases we have examined the language of the relevant federal treaties and statutes in terms of both the broad policies that underlie them and the notions of sovereignty that have developed from historical traditionsof tribal independence. This inquiry is not dependentonmechanicalor absolute conceptions of state or tribal sovereignty, but has called for a particularized inquiry into the nature of the state, federal, and tribal interests at stake, an inquiry designed to determine whether, in the specific context, the exercise of state authority would violate federal law (citations omitted).White Mountain Apache, 448U.S. at 144-45. InWhite Mountain Apache a crucial factor in thebalance of State interests against federalltribal interests was the comprehensive scheme of federal regulation of the harvesting of Indian timber, in the form of Acts of Congress,detailed Interior Department regulations, and day-to-day supervisj.on by the Bureau of IndianAffairs. WhiteMountain Apache, 448 U.S. at 145-48. Also weighed in the Court's consideration

were the economic burden on the Tribe of the asserted taxes, and the "significantgeographical component of tribal sovereignty." White Mountain Apache, 448 U.S. at 151. On the other side of the balancewas the State's general interest in raising revenue. White Mountain Apache, 448 U.S. at 150. The Court held that the federalltribal interests outweighed the State's 'interest,and the Statewas denied jurisdiction. In the present case, in marked contrast, there is an absence of federal regulation of railroad rights-of-way over Indian land,although there is clearly authority for it. The absence of regulatory action by both the federal government and the Crow Tribe during a period of close to 100 years is highly significant. Itcould evenbe called acquiescence, in view of Montana1 s 70 years of regulation of railroads, including railroads running through this reservation. Montana has enacted a comprehensive regulatory scheme governing all railroads doing business in this state, at Title 69,Chapter 14,MCA. Second, and also in contrast to White Mountain Apache, the state jurisdiction soughthere is regulatory jurisdiction for the public good, not authority to tax. The PSC has the

same statutory obligation to consider the interests of theIndian people of Montana and of the Crow Reservation as of the non-Indian or off-reservationpeople. We accept the finding that the impact of closure of the Lodge Grass station would primarily affect tribal members, because that finding is not clearly erroneous. 

### - See City of Billingsv. Billings Firefighters (Mont. 1982), 651P.2d 627, 632,39 St.Rep. 1844, 1849. However,because of the testimony that the stationwas not used for over 2 years preceding BN's petition and was used very infrequently before that time,we do notweigh this factorheavily. Under White MountainApachewe haveweighed the interest of the State,which is represented by more than 70 years of comprehensive regulation of all railroads in Montana, both on-reservation and off-reservation, as compared to the federal/tribal interest, which is represented by an absence of federal statutory or administrative regulation and an absence of any action by the Crow Tribe in the nature of an ordinance or other attempt to regulate the railroads on the reservation. We emphasize that we are not ruling upon the Crow Tribe's common carrier ordinance, which is not properly before us. We conclude that the State's interest significantly outweighs the federal/tribal interest. We therefore reverse the decision of the PSC and the District Court. We order the PSC to assume jurisdiction and to proceed to rule upon BN's petition to close the Lodge Grass station.

We Concur:Mr. Justice John C. Sheehy, concurring specially and dissenting:

I agree of course that some governmental entity must have jurisdiction of subject matter here, the proposed closure of the railroad sta.tionat Lodge Grass, and that at the time of the proceedings here, the PSC had that jurisdiction. In the meantime though, the Crow tribe has adopted a regulatory ordinance applying to railroads which is the subject of an action in the federal district court to determine itsvalidity. Immediatelyupon remandby us to the PSC for further action relating to the closure, the question will undoubtedly arise whether, in view of the adoption of the tribal ordinance, the PSC has any further jurisdiction,

or whether it properly belongs in the Crow tribe. Undoubtedly the federal district courtwillbe called upon to decide that issue. Anticipating this, I would stay the effect of our decision here until a final determination is made in the federal district court as to whether the Crow tribe now has exclusive jurisdiction of the proposed closure under the tribal ordinance. In that way, we would avoid a potential conflict between the federal and state courts in thismatter. 

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