RAIL BANKING

Testimony of Rails to Trails Conservancy
Before the Committee on the Judiciary
Subcommittee on Commercial and Administrative Law
U.S. House of Representatives
June 20, 2002


Legislative Background of Federal Railbanking Program
In 1976, Congress recognized the need to create a “national rail bank” of railroad corridors as a way of ensuring that our nation’s built rail corridor infrastructure, which was frequently assembled at great public cost through state or federal land grants or loan guarantees and powers of eminent domain, remained dedicated for transportation purposes, although these corridors were not needed for present or foreseeable future railroad operations. The Railroad Revitalization and Regulatory Reform Act of 1976 (4-R Act)provided for mandatory transfers of corridors proposed for abandonment to other carriers, and directed the Interstate Commerce Commission (ICC), which regulates railroad abandonments, to impose conditions barring the disposition of railroad rights of way for 180 days in order to allow for possible transfers for public use, including for trails.

Notwithstanding these regulatory tools, the declining fortunes of the rail industry began to result in an increasing loss of railroad corridor through abandonment. Then in 1980, Congress passed the Staggers Rail Act, Pub. L. No. 96-448, 94 Stat. 1895 (1980). which required the ICC to exempt most rail abandonments from regulation. As a result, the rate of rail abandonments by major carriers accelerated to between 4,000 to 8,000 miles per year Association of American Railroads, Railroad Facts (1992). This alarming rate of rail abandonments made corridor preservation a critical issue of national policy.

Section 8(d) of the National Trails System Act is the legislative centerpiece of the federal “Rails to Trails Program..” This law was enacted by Congress and signed into law by President Ronald Reagan in 1983 to provide an effective mechanism for preserving railroad rights-of-way for future rail service and for energy efficient alternative transportation use, without imposing additional burdens on rail carriers. The law allows railroads to transfer inactive railroad corridors to qualified trail managers for interim use as trails, until such time as these rights-of-way are needed for future rail service on the condition that trail managers assume all carrying costs (liability, maintenance, and taxes) of the rights of way. By pairing railbanking with interim trail use, Congress created a mechanism that allows for the preservation of our nation's built rail corridor infrastructure for future railroad purposes without burdening the railroads with unwanted property or the communities through which these corridors run with vacant and derelict land. This process is known as “railbanking.”

A key feature of the Railbanking Law is its continuation of the STB’s pre-emptive jurisdiction of conflicting state law during the “railbanking” period during which the right of way is managed as an interim trail. Normally, the STB’s preemptive authority is terminated once the railroad petitions to “abandon” its common carrier obligation and the STB finds that abandonment does not interfere with the “public convenience and necessity.” Once such abandonment authorization is consummated by the railroad, state law principles may apply to divest the railroad of any ability to transfer the corridor for uses other than active railroad service. As the legislative history of the federal railbanking law explains, “The concept of attempting to establish trails only after the formal abandonment of a railroad right of way is self-defeating; once a right-of-way is abandoned for railroad purposes there may be nothing left for trail use.” The federal railbanking law solves this problem by continuing the STB’s pre-emptive jurisdiction over the corridor where a voluntary agreement between the railroad and a trail manager in which the trail manager agrees to assume all legal and financial responsibility for maintaining the corridor.

Conclusion

In sum, the compensation cases arising from the Railbanking Law are not presently, and are not likely to become, a financial burden to the federal treasury. While the pace of railroad abandonments is slowing, the federal Railbanking Law remains an important component of our national policy favoring rail corridor preservation. The law needs to remain in place in order to ensure that the short-term needs of private railroads do not result in the dismantling of a valuable national resource critical to our nation’s long-term economic and national security/national defense needs. Indeed, the importance of rail corridor preservation efforts as a way to achieve needed redundancy in our national transportation network was tragically demonstrated by the curtailment of national air travel following September 11th. The importance of preserving our nation’s built rail corridor infrastructure clearly justifies any internalized costs in defending the program in court. The Railbanking Program is not broken, and does not need fixing.

IN REGARDS TO HOW THIS EFFECTS US:

8. RAIL BANKING RIGHTS.
When the Landlord acquired the Rail Corridor in 1996, Union Pacific Railroad (or its predecessor) reserved the right to reacquire the Rail Corridor should it (or its successors) decide to reactivate freight rail service. In the event Union Pacific Railroad exercises its right to reacquire all or any portion of the Premises, Landlord and Tenant shall consult and cooperate with one another in regards to the impacts and effects thereof. In the event the Lease is terminated as to all or a portion of the Premises due to Union Pacific Railroad’s exercise of rail reactivation rights, or in the event Tenant's rights are materially adversely affected as a result thereof, Landlord will pay to Tenant any amounts Landlord receives from Union Pacific Railroad on account of the unamortized cost associated with any improvements made to the Premises by the Tenant, or deferred maintenance performed by Tenant to make the Premises operable at the outset of the Lease. Apart from the foregoing, Landlord shall have no liability to Tenant by reason of the reactivation of rail service by Union Pacific Railroad, its successors or assigns.