|SURFACE TRANSPORTATION BOARD DECISION DOCUMENT|
|K & E RAILWAY COMPANY--ABANDONMENT EXEMPTION--IN ALFALFA, GARFIELD AND GRANT COUNTIES, OK, AND BARBER COUNTY, KS|
|GRANTED AN EXEM. TO ABANDON AN ENTIRE LINE AND EXEMPTIONS FROM THE OFFER OF FINANCIAL ASSISTANCE AND PUBLIC USE REQUIREMENTS TO ABANDON TWO SMALL SEGEMENTS OF THE LINE THAT ARE TO BE DONATED, SUBJECT TO HISTORIC PRESERVATION AND ENVIRONMENTAL CONDS; AND SET A PROCEDURAL SCHED.|
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|Full Text of Decision|
By petition filed October 14, 1996, K & E Railway Company
(K&E) seeks to be exempted under 49 U.S.C. 10502 from the prior
approval requirements of 49 U.S.C. 10903 to abandon its entire
57.69-mile rail line between milepost 0.60, at or near Kiowa, in
Barber County, KS, and milepost 56.98, at or near Blanton, in
Garfield County, OK, and between milepost 299.88 and milepost
301.19, near the city of Cherokee, in Alfalfa County, OK. With
respect to two segments of the line, K&E also seeks to be
exempted from the offer of financial assistance requirements
(OFA) of 49 U.S.C. 10904 and the public use requirements of 49
U.S.C. 10905. The petition was accompanied by letters supporting
the proposed abandonment and urging expedition from the City
Manager, the Mayor, and a Councilman of the City of Cherokee.
Based on the evidence of record, we will grant the requested
exemptions subject to historic preservation and environmental
K&E acquired the line from The Atchison, Topeka and Santa Fe
Railway Company earlier this year. See K & E Railway Company--Acquisition and Operation Exemption--The Atchison, Topeka and
Santa Fe Railway Company, STB Finance Docket No. 32972 (STB
served June 13, 1996).(1) Historically, the line was used for
grain gathering, but no traffic had moved over it for at least 5
years prior to the acquisition by K&E, and K&E has subsequently
moved no traffic.(2) The line is K&E's only rail asset.
According to K&E, the track primarily consists of 90-lb.
rail installed between 1914 and 1921. The track is described as
generally in fair to poor condition, requiring replacement of
approximately 14% of the rail, 7% of the bars, and 46% of the
ties to resume service. In addition, several wash-outs and four
bridges are said to require repairs. K&E estimates that
necessary rehabilitation and maintenance would require an initial
expenditure of $318,000 and subsequent annual expenditures of
$296,000 for each of the next 4 years.
K&E states that the line's traffic potential is limited to
five former shippers, all Oklahoma grain elevators, identified
as: Burlington Co-op.; Farmers Grain (at Kremlin); Farmers Grain
(at Nash); Farmers Co-op. Exchange; and Farmers Co-op. Each
shipper is located on or near a state highway in a rural area
that is crisscrossed by a network of roadways and state highways
capable of handling any truck traffic the shippers might
generate. Because traffic volumes are relatively small and the
distances fairly short (the grain primarily moves to nearby Enid,
OK), K&E observes that truck service is a highly competitive
alternative to rail service.
K&E states that it met individually with each of the former
shippers to assess the feasibility of redirecting their traffic
back to rail. From these meetings, it concluded that the
shippers are satisfied with existing private or for-hire truck
service and have no interest in reactivating rail service except
at extremely low freight rates. K&E believes that the rates
shippers are willing to pay would not allow the line, even at its
maximum traffic potential, to cover its rehabilitation costs and
generate an operating profit.
Additionally, in an effort to reactivate rail service, K&E
met with local and state government officials but allegedly was
informed that there is no interest in subsidizing or otherwise
assisting K&E's reactivation of rail service.
Abandonment exemption. Under 49 U.S.C. 10903, a rail line
may not be abandoned without our prior approval. Under 49 U.S.C.
10502, however, we must exempt a transaction or service from
regulation when we find that: (1) continued regulation is not
necessary to carry out the rail transportation policy of 49
U.S.C. 10101; and (2) either (a) the transaction or service is
of limited scope, or (b) regulation is not necessary to protect
shippers from the abuse of market power.
Detailed scrutiny under 49 U.S.C. 10903 is not necessary to
carry out the rail transportation policy. Exempting the proposed
transaction will minimize the need for Federal regulatory control
over rail transportation, and, by eliminating the administrative
time and expense of processing an abandonment application, an
exemption will expedite regulatory decisions and reduce
regulatory barriers to exit [49 U.S.C. 10101(2) and (7)]. An
exemption will eliminate the need for K&E to expend significant
sums to rehabilitate, maintain, and operate a line that has no
potential for profitable operation and has lain dormant for more
than 5 years. Thus, an exemption will foster sound economic
conditions and encourage efficient management [49 U.S.C. 10101(5)
and (9)]. Other aspects of the rail transportation policy will
not be affected adversely. Under the proposed exemption, K&E
will be able to consummate the proposed abandonment more
expeditiously and transfer 5.69 miles of the right-of-way to
Cherokee for flood control use.
Regulation is not necessary to protect shippers from an
abuse of market power. There has been no interest in, or demand
for, rail service for more than 5 years, and the traffic that
formerly moved by rail has long since shifted to trucks or has
ceased to move. Thus, any potential for an abuse of market power
is mitigated by existing motor carrier service. Moreover, all
potential shippers were contacted, and they expressed neither
opposition to the proposed abandonment nor practical interest in
reactivating rail service.(3)
Although K&E notified all former shippers of the proposed
abandonment, to ensure that they are informed of our action, we
will require K&E to serve a copy of this decision on each of them
within 5 days after the service date and to certify to us that it
has done so.
Labor protection. Under 49 U.S.C. 10502(g), we may not use
our exemption authority to relieve a carrier of its statutory
obligation to protect the interests of its employees. However,
we do not normally impose employee protective conditions when a
carrier abandons its entire line unless the evidence shows the
existence of: (1) a corporate affiliate that will continue
substantially similar rail operations; or (2) a corporate parent
that will realize substantial financial benefits over and above
relief from the burden of deficit operations by its subsidiary
railroad. See Wellsville, Addison & Galeton R. Corp.--Abandonment, 354 I.C.C. 744 (1978); and Northampton and Bath R.
Co.--Abandonment, 354 I.C.C. 784 (1978) (Northampton). K&E has
never reactivated rail service, and now proposes to abandon its
entire line and go out of business. It does not appear to have
had any rail employees to protect nor any corporate affiliate or
parent who could benefit from the proposed abandonment. And no
one has even attempted to show that either situation under
Northampton exists for imposing labor protection in entire line
abandonments. Under the circumstances, we will not impose labor
protective conditions in this case.
Environmental conditions. K&E submitted an environmental
report with its petition and notified the appropriate Federal,
state, and local agencies of the opportunity to submit
information on the energy and environmental impact of the
proposed action. See 49 CFR 1105.11. Our Section of
Environmental Analysis (SEA) examined the environmental report,
verified its data, analyzed the probable effects of the proposed
action on the quality of the human environment, and served an
environmental assessment (EA) on November 26, 1996.
In the EA, SEA noted that the right-of-way may be suitable
for other public purposes following abandonment and salvage. It
also noted that the Kansas State Historical Society (KSHS) and
the Oklahoma Historical Society had requested additional
information regarding the bridges located along the right-of-way.
In response, SEA recommended that a condition be imposed
requiring K&E to retain its interest in and take no steps to
alter the historic integrity of all bridges on the right-of-way
that are 50 years old or older until the section 106 process of
the National Historic Preservation Act, 16 U.S.C. 470f, is
completed. SEA further noted that the National Geodetic Survey
(NGS) had identified 14 geodetic markers along the rail line and
requested 90-days' notice to relocate any markers that may be
disturbed or destroyed. Accordingly, SEA recommended that a
condition be imposed requiring K&E to consult with and provide
NGS with 90-days' notice prior to disturbing or destroying any
In response to the EA, K&E submitted correspondence from
KSHS in which KSHS determined that the proposed abandonment would
not affect any archeological or historic resources. Accordingly,
SEA now limits its recommended historic condition to bridges in
Oklahoma. Otherwise, SEA's recommendation remains the same. We
conclude that the proposed abandonment, if implemented subject to
the conditions discussed above, will not significantly affect
either the quality of the human environment or the conservation
of energy resources.
Other exemptions. K&E states that it was asked by Cherokee,
and agreed, to abandon the line and donate 5.69 miles of the
right-of-way, in two sections, between milepost 18.82 and
milepost 23.20, and between milepost 299.88 and milepost 301.19,
to the city for flood control. Cherokee apparently is prone to
flooding two or three times a year, and recent flooding covered
the downtown and outlying residential areas. With the two
segments of the right-of-way, Cherokee will be able to build a
channel and retention system that will complete its planned flood
To expedite the post-abandonment transfer of the portions of
the right-of-way needed by Cherokee, K&E requests that the
abandonment of the two segments also be exempted from the OFA
requirements of 49 U.S.C. 10904 and the public use requirements
of 49 U.S.C. 10905. Cherokee supports the proposed abandonment
and urgently requests that it be consummated before the end of
1996 to permit the right-of-way to be transferred and the flood
control project completed before the beginning of the next flood
Exemptions from 49 U.S.C. 10904-05 have been granted from
time to time, but only when the right-of-way is needed for a
valid public purpose and there is no overriding public need for
continued rail service.(4) K&E has agreed to donate portions of
the right-of-way to a public entity for a pressing public
purpose. There is no interest in continuing, and no likelihood
of reactivating, rail service. Moreover, the imposition of OFA
procedures or a public use condition with respect to the two
needed line segments could delay their transfer to Cherokee for a
valid, pressing public use and jeopardize the timely completion
of the flood control project. Accordingly, to accommodate K&E's
request for expedition, we will exempt the proposed abandonment
of the two line segments from the OFA and public use requirements
of 49 U.S.C. 10904-05.
The evidence of record establishes that the proposed
exemptions from 49 U.S.C. 10904-05 meet the criteria of
49 U.S.C. 10502. Applying the OFA or public use requirements, in
this instance, is not necessary to carry out the rail
transportation policy. Allowing the abandonment exemption to
become effective immediately, without first being subject to
these requirements, will minimize the need for Federal regulatory
control over the rail system, expedite regulatory decisions, and
reduce regulatory barriers to exit [49 U.S.C. 10101(2) and (7)].
We have already determined that regulation is not necessary to
protect shippers from an abuse of market power.
Other matters. Having exempted the abandonment of the two
line segments, between milepost 18.82 and milepost 23.20 and
between milepost 299.88 and milepost 301.19, from 49 U.S.C. 10904
and 10905, we have partially eliminated the need to extend the
effective date of the abandonment exemption to consider OFAs
under Exempt. of Rail Abandonment--Offers of Finan. Assist., 4
I.C.C.2d 164 (1987), and requests for public use conditions under
49 CFR 1152.28(a)(2). Therefore, as to these two segments, we
will make the decision effective on its date of service.
We will not provide an opportunity for interested persons to
file trail use/rail banking requests in connection with these two
line segments. Under section 8(d) of the National Trail Systems
Act, 16 U.S.C. 1247(d), trail use/rail banking is voluntary and
can only be implemented if an abandoning railroad agrees to
negotiate an agreement. To the extent K&E has already agreed to
donate these two segments of the right-of-way to Cherokee for
flood control, it can be expected to decline offers to negotiate
interim trail use.
With respect to the remainder of the line, between milepost
0.60 and milepost 18.82 and between milepost 23.20 and milepost
56.98, and in the absence of any demonstrated need for
expedition,(5) we will make the decision effective 30 days after
publication in the Federal Register.
SEA has indicated that the right-of-way may be suitable for
other public uses after abandonment, but no party has requested a
public use condition, and none will be imposed. Nevertheless, we
will provide a 10-day period after Federal Register publication
for interested persons to request a public use condition with
respect to the remainder of the line.
It is ordered:
1. Under 49 U.S.C. 10502, we exempt the abandonment of
K&E's entire line described above from the prior approval
requirements of 49 U.S.C. 10903 and the abandonment of the two
line segments described above from the requirements of 49 U.S.C.
10904-05, subject to: (1) the condition requiring K&E to retain
its interest in and take no steps to alter the historic integrity
of all bridges on the right-of-way in Oklahoma that are 50 years
old or older until completion of the section 106 process of the
National Historic Preservation Act, 16 U.S.C. 470f; and (2) the
condition that K&E consult with and provide NGS 90-days' notice
prior to disturbing or destroying any geodetic markers.
2. K&E must serve a copy of this decision on the line's
five former shippers within 5 days after the service date of this
decision and certify to the Board that it has done so.
3. Notice will be published in the Federal Register on
December 31, 1996.
4. With respect to the two line segments exempted from 49
U.S.C. 10904-05, the exemption will be effective on December 31,
1996, and petitions to reopen must be filed by January 27, 1997.
5. With respect to the remainder of the line, provided no
formal expression of intent to file an OFA is received, this
exemption will be effective on January 30, 1997; formal
expressions of intent to file an OFA(6) under 49 CFR 1152.27(c)(2)
and requests for a notice of interim trail use/rail banking under
49 CFR 1152.29 must be filed by January 10, 1997; petitions to
stay must be filed by January 10, 1997; requests for public use
conditions in conformity with 49 CFR 1152.28(a)(2) must be filed
by January 21, 1997; and petitions to reopen must be filed by
January 27, 1997.
6. If a formal expression of intent to file an OFA has been timely submitted, an OFA to allow rail service to continue must be received by the railroad and the Board within 30 days after publication, subject to time extensions authorized under
49 CFR 1152.27(c)(2)(ii)(C) and (D). The offeror must comply
with 49 U.S.C. 10904 and 49 CFR 1152.27(c)(2).
7. OFAs and related correspondence to the Board must refer
to this proceeding. The following notation must be typed in bold
face on the lower left-hand corner of the envelope: "Office of
By the Board, Chairman Morgan, Vice Chairman Simmons, and
Vernon A. Williams
1. Notice was simultaneously published in the Federal Register at 61 FR 30109.
2. 2 K&E states that it also was not aware of any overhead traffic that had moved over the line for at least 5 years. Thus, the proposed abandonment would have qualified for the 2-year out-of-service class exemption, 49 CFR 1152.50, but for the recent change in ownership.
3. 3 Given our market power finding, we need not determine whether the proposed abandonment of an entire rail line comprising 57.69 miles of track, primarily in a rural area of Kansas and Oklahoma, is limited in scope.
4. 4 See Southern Pacific Transportation Company--Discontinuance of Service Exemption--In Los Angeles County, CA, Docket No. AB-12 (Sub-No. 172X), et al. (ICC served Dec. 23, 1994); Missouri Pacific Railroad Company--Abandonment--In Harris County, TX, Docket No. AB-3 (Sub-No. 105X) (ICC served Dec. 22, 1992); Chicago & North Western Transportation Company--Abandonment Exemption--In Blackhawk County IA, Docket No. AB-1 (Sub-No. 226X) (ICC served July 14, 1989); and Iowa Northern Railway Company--Abandonment--In Blackhawk County, IA, Docket No. AB-284 (Sub-No. 1X) (ICC served Apr. 1, 1988).
5. 5 K&E had requested expedited consideration to permit the proposed abandonment to become effective before the end of 1996. Apart from the segments to be exempted from 49 U.S.C. 10904-05, for which expedition is based on the needs of the City of Cherokee, no generalized need for expedition has been shown.
6. See Exempt. of Rail Abandonment--Offers of Finan. Assist., 4 I.C.C.2d 164 (1987).