|SURFACE TRANSPORTATION BOARD DECISION DOCUMENT|
|UNION PACIFIC RAILROAD COMPANY--ABANDONMENT--PLAINVILLE BRANCH (PLAINVILLE-COLBY LINE) ROOKS, GRAHAM, SHERIDAN AND THOMAS COUNTIES, KS|
|PERMITED UP TO ABANDON 99.0 MILES OF RAILROAD KNOWN AS THE PLAINVILLE-COLBY LINE, IN ROOKS, GRAHAM, SHERIDAN AND THOMAS COUNTIES, KS.|
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|Full Text of Decision|
Decided: March 21, 1997
By application filed December 6, 1996, Union Pacific
Railroad Company (UP) seeks authority to abandon its line of
railroad known as the Plainville-Colby Line between milepost
102.0 near Plainville and milepost 201.0 near Colby, a distance
of 99.0 miles, in Rooks, Graham, Sheridan and Thomas Counties,
KS. Public notice was properly given.
Protests were filed by Sheridan County, KS, Hoxie Implement
Company, Inc., the Kansas State Corporation Commission, Graham
County Commissioners, and the City of Hoxie, KS. Comments in
opposition were filed by Rex Carswell, Vista Roth, Alfred and
Barbara Rietcheck, and Lawrence Wark on behalf of CO-AG Co-operative. The United Transportation Union (UTU) filed comments
seeking labor protection.
On review of the protests, the Board, by order of the
Director of the Office of Proceedings, served January 17, 1997,
instituted an investigation into the proposed abandonment under
the modified procedure. UP was asked to submit additional
evidence or supporting documentation on various issues.
UP filed its opening statement on February 3, 1997.
Although protestants' initial and reply statements were due on
February 13, 1997, no statements in opposition were filed on or
after that date. Upon review of the record, the abandonment
application will be granted.
UP's 99-mile Plainville-Colby Line is used principally for
the carriage of grain and farm machinery. Service on the line is
provided by a three-man crew out of Oakley, KS, on an as-needed
basis, averaging about one train a week. UP identifies six
significant users on the line: Continental Rail, Collingwood
Grain, J I Case Hoxie Implement, Midland Marketing Coop, Midwest
Coop, and Co Ag. These users shipped 338 carloads during 1995.
According to UP, the line is a financial drain and there is
no prospect that traffic will increase in the future. UP says
that it believes that traffic on the line has declined because
shippers are using alternative truck and rail service to meet
their transportation requirements. Applicant indicates that,
except for two short segments operated at Federal Railroad
Administration (FRA) class 1, the line is classified as FRA class
2 with a maximum speed of 25 m.p.h.
In the Board's investigation decision served January 17,
1997, UP was asked to explain why it projected a decrease in
freight revenues for the forecast year ($648,228) from the base
year ($1,002,796), but projected that carload traffic would
remain static at 323 carloads. UP explained in its February 3
statement that the base year traffic was for only a 10-month
period. UP's actual 12-month base year traffic, detailed in the
carrier's work papers, was 484 carloads, generating revenues of
$1,002,796. UP now projects its forecast year traffic to be 343
carloads, generating revenue of $686,428. Total revenues for the
forecast year are set at $745,329. Applicant's details presented
for the forecast year appear reasonable compared to the actual
base year data, and no one challenges UP's revised traffic and
revenue figures. Thus, we will accept UP's revised forecast year
figures for these items.
UP projects its on-branch costs for the forecast year to be
$613,900. These consist largely of maintenance-of-way and
structure costs, estimated at $495,338. Applicant estimates
normalized track maintenance costs to be $477,957, or $4,828 per
mile, for the base year, and $495,338, or $5,003 per track mile,
for the forecast year, in order to maintain the track at FRA
class 1 standards. Review of applicant's maintenance-of-way
calculations indicates that the quantities and unit costs used to
develop the estimates are reasonable. Because virtually all the
line is classified at FRA class 2, no rehabilitation is required
which would add to the cost of continuing operations over the
UP estimates that its total off-branch avoidable costs are
$487,411. Applicant's off-branch cost data comport with the
applicable abandonment rules and they are therefore acceptable.
We therefore accept both UP's on-branch and off-branch costs for
the forecast year.
Opportunity costs (or total return on value) reflect the
economic loss experienced by a carrier from forgoing a more
profitable alternative use of its assets. Under Abandonment
Regulations - Costing, 3 I.C.C.2d 340 (1987), the opportunity
cost of road property is computed on an investment base that is
the sum of: (1) allowable working capital; (2) the net
liquidation value (NLV) of the line; and (3) current income tax
benefits (if any) resulting from abandonment. The investment
base, also called the "valuation of road properties," is then
multiplied by the nominal rate of return, which is 17.5%.
UP estimates its opportunity costs to be $705,994, computed
by multiplying the 1995 pre-tax cost of capital rate of 17.5%
times the valuation of road property ($3,773,888) dedicated to
train operations over the line. The greater part of the line's
property value is the net salvage value of track structure. UP
estimates salvage value to be $4,627,192, based on current market
value, and $4,581,628 for the base year. UP submitted detailed
supporting information for salvaged track materials and removal
costs, and the unit costs used to develop the net salvage value
Land is valued at $69,276 for non-reversionary parcels. Its
marketability is based on UP records indicating the method of
acquisition of the right-of-way, and its valuation is developed
from information on the sale of comparable parcels obtained from
a local appraiser, which is acceptable. Thus, on this record, we
find the net liquidation value for the line to be $4,696,468 for
the base year and $4,650,904 for the forecast year.(1)
As shown in the following table, UP estimates for the
forecast year that, the subject line will generate avoidable
losses of $355,983 that can be curtailed by abandonment. The
costs are based on a projected volume of 343 carloads. Total
revenues for the forecast year are $745,329. Total avoidable
costs are estimated at $1,101,312 (including off-branch costs of
$487,411). Total return on value is estimated at $705,994. The
parties have not contested UP's revenue and cost estimates,
including return on value, and we accept them on this record.
They are as follows:
Total Revenue $745,329
Total On-Branch Costs $613,900
Total Off-Branch Costs $487,411
Total Avoidable Costs $1,101,312
Avoidable Loss From Operations,
Excluding Return On Value $355,983
Return on Value $705,994
Avoidable Loss, Including
Return on Value $1,061,977
The subsidy required to cover all costs and make the
railroad whole during the forecast year is estimated to be
$1,069,430, computed by subtracting from total revenue of
$745,329, total costs of $1,814,759 (consisting of avoidable
costs of $1,101,312, subsidization costs of $7,453, and return on
value of $705,994).
As noted above, protests to the abandonment were initially
filed by Sheridan County, KS, Hoxie Implement Company, Inc., the
Kansas State Corporation Commission, Graham County Commissioners,
the City of Hoxie, KS, and five individuals on behalf of CO-AG
Sheridan County and the City of Hoxie contend that UP's
abandonment of the Plainville-Colby Line will deprive them of
needed tax revenues and will result in increased traffic
congestion and maintenance costs on area roads and bridges.
Sheridan County also seeks a condition requiring UP to repair or
rebuild public road bridges adjacent to UP's right-of-way and to
grant the county permission to perform future maintenance on
these bridges. Hoxie Implement maintains that the abandonment
will increase its shipping costs and force it to reduce its
payroll and employment. The individuals appearing on behalf of
CO-AG Co-operative state that they fear that their grain income
will decline if the abandonment is permitted.
Protestants did not respond to the Board's investigation
order nor did they reply to UP's evidence filed pursuant to that
UP contends that there is substantial alternative rail and
motor carrier transportation available to shippers. The railroad
states that grain shippers in the area can easily truck their
products to three large grain elevators located on UP's KP Line
that parallels the Plainville-Colby Line proposed for
abandonment. UP also states that there are numerous for-hire
motor carriers available to transport grain shipments directly to
The statutory standard governing abandonments is whether the
present or future public convenience and necessity require or
permit the proposed abandonment. 49 U.S.C. 10903(d). In
implementing this standard, we must balance the potential harm to
affected shippers and communities against the present and future
burden that continued operations would impose on the railroad and
on interstate commerce. Colorado v. United States, 271 U.S. 153
(1926). Essentially, the Board must determine whether the burden
on the railroad from continued operation is outweighed by the
burden on the shippers and public parties from the loss of rail
The record shows that continued operation of the line will
impose a substantial economic burden on UP, involving a forecast
year operating loss of $355,983. When opportunity costs of
$705,994 are factored in, UP's annual loss increases to
$1,061,977. The record does not reveal any realistic prospect
for increased traffic levels in the future. Accordingly, we must
conclude that the line will continue to suffer heavy losses if
abandonment is denied.
Local communities and individual protestants have expressed
general concerns that abandonment would have an adverse economic
impact on the area served by the line. They also express
concerns that tax revenues will decline and traffic congestion
and maintenance costs on area roads and bridges will increase.
The potential for these adverse effects must, however, be weighed
against the certainty that UP is incurring losses on the line.
Continuing to incur those losses would adversely affect the
railroad's ability to provide adequate service throughout its
Sheridan County seeks a condition requiring UP to repair or
rebuild public road bridges adjacent to UP's right-of-way and
grant the county permission to perform future maintenance on
these bridges. Because these are apparently public bridges owned
by the county, we have no basis for requiring UP to maintain them
or grant easements over its right-of-way as conditions to the
On balance, we conclude that any harm to shippers and the
community from the abandonment of the subject line is outweighed
by the demonstrated harm to UP and the burden on interstate
commerce through continued operation of the line. We will
therefore grant the abandonment application.
In approving this application, we must ensure that affected
rail employees will be adequately protected. 49 U.S.C.
10903(b)(2). We have found that the conditions imposed in Oregon
Short Line R. Co.--Abandonment--Goshen, 360 I.C.C. 91 (1979),
satisfy the statutory requirements, and we will impose those
The Board's Section of Environmental Analysis (SEA) issued
an environmental assessment on January 8, 1997, and requested
comments. In its EA, SEA examined the environmental impacts of
the proposal. Areas of consideration included, but were not
limited to, energy consumption, air and water quality, noise
levels, endangered species, and public safety. SEA concluded
that, subject to certain salvage conditions it recommends below,
abandonment will not significantly affect the quality of the
SEA noted that the Kansas Department of Health and
Environment (KSDHE) is concerned about the potential water
quality impacts of the abandonment and that UP may be required to
obtain a water quality certification from KSDHE and prepare a
Nonpoint Source Pollution Control Plan. KSDHE is also concerned
about properly removing storage batteries, and the potential
release of environmentally damaging materials during salvage and
their proper clean up.
SEA also noted that the National Geodetic Survey (NGS) has
identified 42 geodetic station markers along the rail line and
requests 90 days' notice in order to plan relocation of any
markers which may be disturbed or destroyed.
We agree with SEA's recommendations and will adopt them.
1. The present and future public convenience and necessity
permit the abandonment of the above-described line of railroad,
subject to: (1) the employee protective conditions outlined in
Oregon Short Line R. Co.--Abandonment--Goshen, 360 I.C.C. 91
(1979); (2) the requirement that UP shall consult with the Kansas
Department of Health and Environment (KSDHE), and, if necessary,
comply with KSDHE requirements regarding a water quality
certification and a Nonpoint Source Pollution Control Plan, and
the removal of storage batteries and potential release of
environmentally damaging materials during salvage; and (3) the
requirement that UP shall consult with the National Geodetic
Survey and provide NGS with 90 days' notice prior to disturbing
or destroying any geodetic markers.
2. Abandonment of the line will not result in a serious
adverse impact on rural and community development.
3. As conditioned, this action will not significantly
affect the quality of the human environment or the conservation
of energy resources.
It is ordered:
1. Notice of these findings will be published in the Federal
Register on March 28, 1997. Offers of Financial Assistance
(OFAs) must be filed with the Board and the railroad by April 7,
1997. An OFA must comply with 49 U.S.C. 10904 and 49 CFR
1152.27(c).(3) Each OFA must be accompanied by a filing fee of
$900. See 49 CFR 1002.2(f)(25).
1. Offers of financial assistance and related
correspondence to the Board must refer to this proceeding. The
following notation must typed in bold face on the lower left-hand
corner of the envelope: "Office of Proceedings, AB-OFA."
2. Unless otherwise ordered by the Board, this decision will be effective and abandonment may be carried out on April 28, 1997, unless, prior to that date, the Board finds that one or more financially responsible persons have offered financial assistance (through subsidy or purchase) regarding the line.
By the Board, Chairman Morgan and Vice Chairman Owen.
Vernon A. Williams
1. 1 UP inadvertently transposed the base year and forecast year net liquidation values in its Exhibits 1 & 1A--Revised.
2. 2 In a letter filed March 4, 1997, the Sheridan County Board of Commissioners requests an opportunity to respond to any Board action concerning UP's "rebuttal" evidence. Our records show that officials of both Sheridan County and Hoxie, KS, the county seat, were served with copies of UP's evidentiary statement in response to our January 17, 1997 investigation decision. Our decision gave protestants until February 13, 1997, to file their replies. No replies have been filed.
3. 3 We note that the ICC Termination Act of 1995 has made changes and additions to the previous law regarding the processing of abandonments and OFAs. To implement these changes, we have issued final rules in Abandonment and Discontinuance of Rail Line and Rail Transportation Under 49 U.S.C. 10903, STB Ex Parte No. 537 (STB served Dec. 24, 1996), effective January 23, 1997. Because we have processed UP's abandonment application under the former regulations, we will continue to use the former regulations in this proceeding to process an OFA, if one is filed.