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07/22/82 Mobil Oil Corporation, v. Te Commerce Commission and

July 22, 1982

MOBIL OIL CORPORATION, PETITIONER

v.

INTERSTATE COMMERCE COMMISSION AND UNITED STATES OF AMERICA, RESPONDENTS; CHICAGO AND NORTH WESTERN

ASSOCIATION, ET AL., PETITIONERS

v.

INTERSTATE COMMERCE COMMISSION AND UNITED STATES OF AMERICA, RESPONDENTS; UNION



Before the Commission, Mobil contested the refusal of the ALJ to authorize North Western to operate on Burlington track to the north of the Coal Creek Junction northern terminus of the joint line. They reassert their position here, claiming that the Commission ruled contrary to the public interest by refusing to reopen the 1976 Decision.

UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT

TRANSPORTATION COMPANY, et al., STATE OF TEXAS, WESTERN

FUELS ASSOCIATION, INC., BURLINGTON NORTHERN RAILROAD

COMPANY, UNION PACIFIC RAILROAD COMPANY, SUNOCO ENERGY

DEVELOPMENT COMPANY, INTERVENORS; WYOBRASKA LANDOWNERS

PACIFIC RAILROAD COMPANY, CHICAGO and NORTH WESTERN

TRANSPORTATION CO., STATE OF TEXAS, SUNOCO ENERGY

DEVELOPMENT COMPANY, INTERVENORS

Nos. 81-2037, 81-2038 1982.CDC.193

Petition for Review of an Order of the Interstate Commerce Commission.

APPELLATE PANEL:

Tamm, MacKinnon and Robb, Circuit Judges. Opinion for the Court filed by Circuit Judge MacKinnon.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE MACKINNON

Two railroads, the Burlington Northern, Inc. (Burlington) and the Chicago and North Western Transportation Company (North Western), were authorized jointly in a 1976 decision (1976 Decision) of the Interstate Commerce Commission (the Commission) to construct and operate a "joint line" of track from the southern terminus of Burlington's track at Coal Creek Junction, Wyoming, south of Gillette, to a point about 100 miles further south to connect with the North Western's existing east-west line at Shawnee, Wyoming and the Burlington line in the same vicinity. *fn1 The purpose was to enable both railroads to transport coal from recently developed mines in the fabulous coal-producing regions of the Powder River Basin (the Basin) in Wyoming.

The North Western originally intended to transport such coal over its east-west line from Shawnee. It subsequently determined, however, that its track, roadbed and bridges were incapable of handling the anticipated coal traffic which would be much heavier and greater in volume than existing traffic. North Western thus proposed an additional plan to rehabilitate its line from Shawnee to a joint about 50 miles east at Van Tassell, Wyoming, and from there to construct a new "connector line" 56 miles south to connect with the line of the Union Pacific Railroad Company (Union Pacific) at Joyce Station, Nebraska. This would permit the North Western to carry coal for over 100 miles via the joint line and an additional 100 miles eastward and south via Van Tassell to the junction with the Union Pacific at Joyce Station.

In a decision in 1981 (1981 Decision) the Commission (1) approved North Western's application to construct the "connector line," (2) refused to reopen the 1976 Decision, and (3) approved a "Joint Line Agreement" between the Burlington and North Western to govern operations of the joint line. *fn2

These two decisions by the Commission have led to two petitions which are here consolidated. First, Mobil Oil Corporation, the petitioner in No. 81-2037, and intervenor Western Fuels Association, Inc. (jointly referred to hereinafter as "Mobil"), primarily challenge the Commission's refusal to reopen the 1976 Decision. Mobil owns and is developing a coal mine located beyond its northern terminus of the joint line which means that its mine is presently served by a single railway, Burlington. Mobil urges that North Western be given trackage rights over Burlington's existing line north of Coal Creek Junction to provide competitive rail service above the northern terminus of the joint line.

The petitioners in No. 81-2038 are the Wyobraska Landowners Association and Finley Company (jointly referred to hereinafter as "Wyobraska"), landowners whose land and ranching operations will be affected by the construction of the connector line that the Commission has approved. The landowners have raised a number of procedural and environmental arguments in an effort to thwart the construction of the proposed connector line.

We disagree with the arguments advanced by the petitioners in both proceedings. We hold that the Commission's refusal to reopen its earlier proceedings on the joint line did not constitute an abuse of discretion. We further hold that there is substantial evidence in the record to support the Commission's approval of the construction of the connector line and of the Joint Line Agreement. I. BACKGROUND

Burlington in October 1972 filed an application with the Commission, seeking authority to construct a 126-mile line to connect its two existing east-west lines in Wyoming, one of which is located in the northern part of the Powder River Basin and the other to the south thereof. 1981 Decision, supra at 910. In May 1973, North Western sought Commission authority to build a 76-mile line that would extend north from its existing east-west line which runs south of the Basin. Id. The Commission was reluctant to authorize two new lines that would roughly parallel each other and strongly encouraged the two railroad companies to submit a proposal for a joint line. The two railroads subsequently submitted a joint proposal and in January 1976, the Commission authorized the joint construction and ownership of a single line. *fn3 The Commission's decision expressly provided that Burlington would solely own and operate a nine mile stretch of track located between the northern terminus of the joint line at Coal Creek Junction and the southern tip of the pre-existing Burlington Gillette Branch at Amax Junction. 1976 Decision, supra at 389. See accompanying map. Mobil's coal mine is located adjacent to this nine mile line.

PROPOSED JOINT AND CONNECTOR LINE

While the Commission was still considering the construction application, the two carriers in May of 1975 executed a "Joint Line Agreement" to implement the joint project. The Agreement provided that each would pay half the cost of the construction. Id. at 393. North Western did not seek Commission approval of the Joint Line Agreement until June 1979. At the time of the 1976 Decision, which approved only construction of the joint line, the source of financing for North Western's portion of the cost was unknown. Id. at 395, 402, 406. Nevertheless, the Commission did not withhold its approval of the joint application because it believed that the anticipated heavy use of the railway to carry Basin coal would result in a highly profitable operation, id. at 401-02, and could be easily financed. Furthermore, the Commission assumed that it would have opportunity later to pass upon North Western's financing arrangements if securities were to be issued. Id.

It subsequently developed that the North Western was unable to obtain financing to pay its share of the construction costs but Burlington went ahead anyway and built the joint line, except the North Western's spur from Shawnee Junction to Shawnee, at its own expense. See Verified Statement of Louis T. Duerinck, p. 23, in North Western's Petition for Order to Show Cause Why Terms of Joint Line Agreement, Except as Previously Modified by the Commission, Should Not Now be Prescribed. On June 1, 1976 Burlington agreed to extend the payment deadline for North Western until November 30, 1977. North Western failed to meet that deadline and on January 1, 1978 the carriers negotiated a "Second Supplemental Agreement," granting North Western an additional two years in which to pay its share of costs, estimated at about $60 million. This supplemental agreement also provided that North Western would be deemed to have withdrawn from the joint project in the event it failed to pay by November 30, 1979. 1981 Decision, supra at 911.

In August 1978, North Western and one of its subsidiaries filed for financial assistance from the Federal Railroad Administration. Id. North Western sought the funds to pay its share of the joint line costs and to finance the rehabilitation and upgrading to coal handling capacity of its already existing east-west line (the Fremont Line). The railway administration was not satisfied with North Western's proposal and suggested that the carrier explore other alternatives.

North Western's financial difficulties prevented it from properly maintaining its Fremont Line which extends from the joint line eastward 519 miles to Fremont, Nebraska. North Western had intended to use this line for the transport of coal obtained from mines along the joint line. The necessary upgrading along the 519-mile Fremont Line would have required the replacement of all ties and rail together with the strengthening or replacing of 417 bridges. Faced with the cost of that prospect, North Western proposed to rehabilitate only a portion of the Fremont Line and to build a 56 mile connecting line (the connector line) between its line at Van Tassell, Wyoming and Union Pacific's line at Joyce Station, Nebraska. 1981 Decision, supra at 911. Union Pacific's line meets North Western's line at Fremont, Nebraska and Council Bluffs, Iowa, thereby delivering considerable traffic to the Union Pacific, and permitting the possible return of some traffic in coal to the North Western east of Fremont. Under North Western's present plan the Union Pacific will provide the initial financing for the connector line, which will allow North Western to build up its capital, meet its obligations on the joint ...


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