Will court rulings discourage rail investment

Railway Age, May, 2004

Court rulings delaying two rail construction projects approved by the Surface Transportation Board could discourage investment in rail expansion, STB Chairman Roger Nober told attendees of the National Industrial Transportation League's spring forum. According to Nober, the U.S. Court of Appeals for the Eighth Circuit sent back for further proceedings a portion of the Board's decision approving Dakota, Minnesota & Eastern Railroad Corp.'s new line to Wyoming's Powder River Basin.

The court was primarily concerned about the environmental effects of an increase in coal consumption. For the first time, Nober said, the ruling "raised the possibility that the agency would need to examine the effects of transporting a certain commodity carried by the regulated business." The court denied an appeal for a rehearing. Nober also described a delay in a rail construction project approved by the Board for BNSF subsidiary San Jacinto Rail Ltd. and four chemical shippers for a 12.8-mile line near Houston, Texas, with BNSF providing service over it. Some of the line's property must be obtained through the state's eminent domain statutes, but a Texas state court ruled that those statutes preclude taking the land. The ruling is under appeal. "Stepping back," concluded Nober, "I am concerned about the larger implications that these rulings may have on the decisions of railroads and shippers to try to improve their competitive positions by building-in. Since these types of projects are privately-funded, I worry that companies may decide that it is too risky tie up capital on a build-in project and no longer look to these as private-sector solutions to railroad competition."