Don't Share That Yard Track!

By James L. Pray | April 16, 2013

Does your ethanol plant share an industrial rail yard with another business? Do you move railcars for each other or does your industrial rail yard connect with more than one mainline railroad? If the answer to any of these questions is “yes,” you should be aware that there are a number of risks to consider before combining rail operations. Even seemingly harmless tasks such as sharing a dual-purpose railcar mover or agreeing to push the neighbor's cars onto the neighbor's rail siding when the mainline railroad delivers a car, can turn your ethanol operation into a federally regulated railroad. These federal obligations can include, but are not limited to, federal approval for changes in ownership or changes in track layout, long and expensive environmental impact studies, having to purchase mainline-certified locomotives, and the necessity to hire or train locomotive engineers. 

The Surface Transportation Board was created after the Interstate Commerce Commission was abolished by Congress in 1996. Although the STB's role in regulating railroads is much smaller than that of its predecessor, it exercises preemptive jurisdiction over all railroad operations other than safety. Once a track falls under STB jurisdiction, most material changes to the track or even the track’s ownership must be approved by the STB. 

If ethanol plants are careful, they can easily avoid triggering the limited jurisdiction of the STB, which extends to the mainline and shortline (i.e., common carrier) railroads but not to "construction, acquisition, operation, abandonment, or discontinuance of spur, industrial, team, switching, or side tracks." For most ethanol plants, this is a crucial distinction because this means that their private spur tracks and industrial rail yards are generally not going to be subjected to STB jurisdiction. But what is a "spur, industrial, team, switching, or side track?" Although the statute does not specifically define these terms, the courts and the STB itself have issued rulings that provide guidance. 

First, the STB looks to the actual use of the track, and not its label, to determine what it is. If the track in question is only used as a spur, side or an industrial track then it is more likely that the STB will determine that it has no jurisdiction. As an example of a use for a spur track that would fall under the STB's jurisdiction, let's assume that a given industry track is extended through the rail yard to transport train cars to another mainline. If cars for other shippers traverse that connection, then the track has a mixed use; one of the uses is functionally the same as that of a short line railroad.  The STB will likely assert jurisdiction. Other facts that the STB look at include the length of the track involved and how many different shippers share the same exempt industry track. The longer the track and the more shippers who use that industry track, the higher the risk that the STB will assert jurisdiction. 

Some tracks can also be regulated by the Federal Railroad Administration, which only oversees railroad safety. The FRA exercises jurisdiction over any railroad operating on the "general railroad system of transportation," which is defined as "the network of standard gage track over which goods may be transported throughout the nation." The FRA has, as a matter of policy, excluded from its regulations certain categories of rail operations, including railroads whose entire operations are confined to an industrial installation and where the only connection is by a switch for the receipt of shipment. 

However, the FRA has taken the position in numerous cases that if one shipper switches a car for a different shipper on a shared industrial track that the shipper is subject to FRA jurisdiction. This can trigger onerous safety requirements, including the inability to use a dual-use railcar mover, having to purchase locomotives certified for mainline use and having to establish worker training, engineer certification, safety inspection programs and policies for the shipper. Avoid FRA jurisdiction by adopting a strong policy that each shipper must move its own cars or that the common carrier must handle the spotting and delivery of cars for shippers who do not have their own railcar mover.

Before you agree to a neighborly request to help out another industry move its cars in or through your yard, be certain that you are not going to trigger federal jurisdiction for both you and your neighbor. 

Author: James L. Pray
Attorney, BrownWinick Law Firm