Federal Register, Volume 86 Issue 5 (Friday, January 8, 2021)

[Federal Register Volume 86, Number 5 (Friday, January 8, 2021)]
[Notices]
[Pages 1564-1573]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-00175]

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SURFACE TRANSPORTATION BOARD

[Docket No. FD 36284]

Seven County Infrastructure Coalition--Rail Construction &
Operation Exemption--In Utah, Carbon, Duchesne, and Uintah Counties,
Utah

On May 29, 2020, the Seven County Infrastructure Coalition
(Coalition) filed a petition for exemption under 49 U.S.C. 10502 from
the prior approval requirements of 49 U.S.C. 10901 for authorization to
construct and operate an approximately 85-mile rail line connecting two
termini in the Uinta Basin near South Myton Bench, Utah, and Leland
Bench, Utah, to the national rail network at Kyune, Utah. The Coalition
asks that the Board issue a preliminary decision addressing the
transportation aspects of the project while the environmental review is
ongoing.
The Board received filings both supporting and opposing the
petition. Several government officials have filed in support, as
discussed below. The opponents include the Center for Biological
Diversity (Center), the Argyle Wilderness Preservation Alliance
(Argyle), and numerous individuals. These commenters argue, among other
things, that the requested preliminary decision is not appropriate,
that the transportation aspects of the petition do not satisfy the
section 10502 standards, and that the Board should reject the petition
and require an application under section 10901.
As discussed below, the Board concludes that an application is not
necessary and that the requested approach of issuing a preliminary
decision on the transportation merits is appropriate here. The Board
preliminarily concludes, subject to completion of the ongoing
environmental review, that the proposed transaction meets the statutory
standards for exemption under section 10502. This decision only
addresses the transportation merits, however, and does not grant the
exemption or allow construction to begin. After the Board has
considered the potential environmental impacts associated with this
proposal, and weighed those potential impacts with the transportation
merits, it will issue a final decision either granting the exemption,
with conditions, if appropriate, or denying it.

Background

The Coalition explains that it is an independent political
subdivision of the State of Utah, whose member counties include Carbon,
Daggett, Duchesne, Emery, San Juan, Sevier, and Uintah Counties. (Pet.
5.) It was formed to, among other things, identify and develop
infrastructure projects that will promote resource utilization and
development. (Id.) The Coalition is proposing to construct a rail line
that would extend generally southwest from terminus points in the Uinta
Basin to a connection with an existing rail line owned by Union Pacific
Railroad Company (UP) near Kyune, Utah (the Whitmore Park Alternative).
The rail line would generally parallel U.S. Route 191 through Indian
Canyon and would be located within Utah, Carbon, Duchesne, and Uintah
Counties in Utah. (Id. at 8-9, 43.)
The Coalition asserts that goods produced or consumed in the Uinta
Basin today can be transported only by truck and that the proposed
project would give shippers an additional freight transportation
option, eliminating longstanding transportation constraints. (Pet. 13-
15.) The Coalition claims that adding a rail transportation option
would provide local industries the opportunity to access new markets
and increase their competitiveness in the national marketplace, and the
removal of transportation constraints would benefit oil producers,
mining companies, ranchers, farmers, and other local industries. (Id.
at 15.)
The Coalition argues that regulation of the construction and
operation of the proposed line under section 10901 is not needed to
carry out the rail transportation policy (RTP) at 49 U.S.C. 10101, that
the project would promote several provisions of the RTP, and that an
application under section 10901 is not required to protect shippers
from an abuse of market power. (Pet. 21-22.) As noted above, the
Coalition requests that, in considering the petition, the Board follow
a two-step approach, addressing the transportation aspects of the
project in advance of the environmental issues. (Id. at 26-28.) \1\
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\1\ Based on a request from Argyle, the Board extended the due
date for comments on the petition for an additional 20 days to July
7, 2020.
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On July 7, 2020, the Center filed a reply \2\ arguing that the
Coalition has failed to justify its request for a preliminary decision
on the transportation merits and that the Board should reject the
petition and require the Coalition to seek its authority through an
application under section 10901. (Ctr. Reply 1.) On the same day,
Argyle also filed a reply, likewise arguing that the Board should
reject the

[[Page 1565]]

petition for exemption and require greater scrutiny of the proposed
project through an application. (Argyle Reply 9, July 7, 2020.) Argyle
argues that, if it is not rejected, the petition for exemption should
be denied because the project undermines various RTP goals. (Id.)
Argyle also claims that the Coalition has failed to justify its
requested two-step review process. (Id. at 14.) Additionally, by
separate filings submitted on July 7, 2020, Argyle submitted numerous
letters from individuals opposing the project.\3\
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\2\ On July 13, 2020, the Center submitted a supplemental filing
consisting of the references cited in its reply.
\3\ Letters were also filed separately by individuals Julie Mach
on July 6, 2020, Powell T. Wood on July 8, 2020, and Alan T.
Robinson on July 16, 2020.
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On July 21, 2020, the Coalition filed a response to the various
filings and filed a motion asking that the Board accept its reply.\4\
Argyle filed in opposition to that motion on August 10, 2020. On
September 14, 2020, Argyle filed a letter asking that the Board take
notice of Texas Central Railroad & Infrastructure, Inc--Petition for
Exemption--Passenger Rail Line Between Dallas & Houston, Tex., FD 36025
(STB served July 16, 2020), a decision Argyle claims supports its
position that an application is warranted here.
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\4\ The Coalition filed a letter on July 22, 2020, updating its
response.
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The Board has also received several letters in support of the
Coalition's proposal. On November 20, 2019, Governor Gary R. Herbert
submitted a letter stating that the proposed rail line represents an
important opportunity to enhance the rural economies in eastern Utah
and improve the state's energy infrastructure and environmental
stewardship. On December 1, 2020, a joint letter supporting the
Coalition's project was filed by U.S. Senators Mitt Romney and Mike Lee
and U.S. Representatives Rob Bishop, Chris Stewart, and John Curtis. On
December 7, 2020, Utah State Senate President J. Stuart Adams and Utah
State House of Representatives Speaker Brad Wilson separately filed
letters in support of the project. Also on December 7, 2020, Governor
Herbert, Lieutenant Governor Spencer J. Cox, Utah State Senate
President Adams, and Utah State House of Representatives Speaker Wilson
submitted a joint letter supporting the project.

Preliminary Matters

On August 26, 2020, the Director of the Office of Proceedings
instituted a proceeding under 49 U.S.C. 10502(b). That decision stated
that the Coalition's July 21 motion for leave to file and other late-
filed submissions would be addressed in a subsequent decision.
The Board will grant the Coalition's motion for leave to file and
accept its July 21, 2020 filing. Although 49 CFR part 1121 does not
provide for rebuttals and the Board struck such filings in the cases
Argyle cites, the Board's action in those cases was primarily focused
on the fact that the rebuttals there were filed shortly before a
regulatory deadline, a factor that is not present here. See Burlington
N. & Santa Fe Ry.--Aban. of Chi. Area Trackage in Cook Cnty., Ill., AB
6 (Sub-No. 382X), slip op. at 1-2 (STB served Sept. 21, 1999) (filing
rejected where regulatory deadline precluded protestants' response);
Cent. R.R. of Ind.--Aban. Exemption--in Dearborn, Decatur, Franklin,
Ripley, & Shelby Cntys., Ind., AB 459 (Sub-No. 2X), slip op. at 3 (STB
served May 4, 1998) (filing rejected four days before regulatory
deadline). In light of the arguments raised here regarding the
appropriateness of the exemption process and the request for a
preliminary decision on the transportation merits, the Coalition's
filing provides a more complete record for the Board to consider these
arguments. Also in the interest of a more complete record, the Board
will accept all of the comments and letters that have been filed with
the Board.

Discussion and Conclusions

The construction of new railroad lines that are to be part of the
interstate rail network requires prior Board authorization, either
through issuance of a certificate under 49 U.S.C. 10901 or, as
requested here, through an exemption under 49 U.S.C. 10502 from the
formal application procedures of section 10901. Section 10901(c)
directs the Board to grant rail construction proposals ``unless the
Board finds that such activities are inconsistent with the public
convenience and necessity.'' See Alaska R.R.--Constr. & Operation
Exemption--A Rail Line Extension to Port MacKenzie, Alaska, FD 35095,
slip op. at 5 (STB served Nov. 21, 2011), aff'd sub nom. Alaska
Survival v. STB, 705 F.3d 1073 (9th Cir. 2013) (addressing the Board's
construction exemption process). Thus, Congress has established a
presumption that rail construction projects are in the public interest
unless shown otherwise. See Lone Star R.R.--Track Constr. & Operation
Exemption--in Howard Cnty., Tex., FD 35874, slip op. at 3 (STB served
Mar. 3, 2016.).
Under 49 U.S.C. 10502(a), however, the Board, ``to the maximum
extent'' consistent with 49 U.S.C. 10101-10908, ``shall exempt'' a
transaction (including a construction proposal) from the prior approval
requirements of section 10901 when it finds that: (1) Regulation is not
necessary to carry out the RTP of 49 U.S.C. 10101; and (2) either (a)
the transaction is of limited scope or (b) application of the statutory
provision is not needed to protect shippers from the abuse of market
power. Ken Tenn Reg'l Rail Partners--Constr. & Operation Exemption--in
Fulton Cnty., Ky. & Obion Cnty., Tenn., FD 36328, slip op. at 3 (STB
served Dec. 1, 2020.) Congress thus has directed the Board to exempt a
rail construction proposal from the requirements of the full
application process--even if significant in scope--so long as the
application of section 10901 is not necessary to carry out the RTP and
there is no danger of market power abuse. See Alaska Survival, 705 F.3d
at 1082-83; Vill. of Palestine v. ICC, 936 F.2d 1335, 1337, 1340 (D.C.
Cir. 1991).

Application vs. Petition for Exemption

The Center argues that the Board should reject the petition and
require the Coalition to seek its authority through an application
under section 10901. Among other reasons, the Center claims greater
scrutiny is required because the project would not be financially
viable and could pose significant financial risk to public entities and
taxpayers, the most likely source of funding through the issuance of
municipal bonds.\5\ (Ctr. Reply 2, 7, 12, 20-21.)
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\5\ The Center also argues that greater scrutiny is necessary
here because there were irregularities in the selection of a
developer and the award of a $27.9 million grant from the Utah
Permanent Community Impact Board. (Ctr. Reply 12-16.) The Center
further claims that the Coalition has failed to provide the public
information or solicit its input as part of the Coalition's
decisionmaking regarding the rail project. (Id. at 16-19.) These
concerns, however, appear to be based on Utah state law and should
be raised in a different forum.
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The Center maintains that there are insufficient proven oil
quantities in the Uinta Basin to justify the project's construction,
and that there is a limited portfolio of potential industries and
shipping commodities that the railway could service. (Id. at 2.)
Furthermore, it argues that the ``collapse'' in the global oil market
and the American shale industry as well as weak market forecasts make
it unlikely that a real need for new crude oil transportation capacity
exists in the Basin. (Id.) Therefore, the Center contends, the public
might be ``on the hook'' for a multibillion-dollar project unable to
pay for itself. (Id.)
The Center also notes that the 2018 pre-feasibility study, prepared
for the Coalition by R.L. Banks & Associates, Inc. (R.L. Banks),
provides an analysis of the proposed line, but the Center asserts

[[Page 1566]]

that the Coalition has refused to release an unredacted version of that
study. (Id. at 22-23, 25.) In redacted versions of the study, which the
Center submits in its July 13, 2020 supplement, the Coalition redacted
the market forecast, transportation rate, and other data underlying the
study's conclusions on the economic feasibility of the project. (Id. at
25.) The Center argues that such data should be made publicly available
so that the Board and the public can determine whether assertions of
the proposed line's viability are based on reasonable assumptions.
(Id.)
Finally, the Center states that the construction cost of a rail
line similar to the Coalition's preferred route here was projected in
2015 to cost $4.5 billion, but the Coalition's projections for the
current preferred route are now one-third of that 2015 estimate,
raising questions as to the reliability of the Coalition's cost
projections. (Id. at 19.) The Center further states that the required
financing for the project has not yet been secured and asserts that it
appears increasingly unlikely that financing can be achieved for a
potentially multibillion-dollar project. (Id.)
Similarly, Argyle opposes the project proceeding by exemption. It
claims that such an approach is not appropriate where, as here, the
proposal is vigorously contested and highly controversial. (Argyle
Reply 3-4, July 7, 2020.) Argyle also claims that there is neither
evidence of financial ability to complete the proposed construction nor
evidence of public need for the project. (Id. at 4-9.) For these
reasons, it argues that the Board should reject the petition and
require a full application. In its September 14, 2020 filing, Argyle
notes that the Board required an application for the construction
proposed in Texas Central Railroad & Infrastructure, Inc., FD 36025,
slip op. at 13-15. The individual commenters raise concerns similar to
Argyle's and claim, among other things, that the there is no need for
the rail line and that constructing it would needlessly disrupt
landowners use of their land and adversely affect the rural area in
which the proposed line would be constructed.
The Coalition responds that the opposition has raised no serious
question showing that the project should not be decided under the
exemption criteria at section 10502. (Coalition Reply 3-4, July 21,
2020.) The Coalition adds that controversy does not preclude use of the
exemption process, (id. at 6), and that questions raised by opponents
regarding the project's financial viability are based on speculation
rather than fact, (id. at 8). The Coalition further asserts that Texas
Central Railroad & Infrastructure, Inc., is inapposite. (Rebuttal 10.)
The arguments presented by the opponents do not warrant rejecting
the petition and requiring an application. There is nothing in the
language of section 10502 to suggest that an exemption proceeding is
inappropriate if the viability of the proposed rail line is questioned.
See Alaska Survival, 705 F.3d at 1082 (affirming the Board's exemption
proceeding where financial viability of the line was questioned).
Furthermore, the Board's grant of authority to construct a line
(whether under section 10901 or by exemption under section 10502) is
permissive, not mandatory--that is, the Board does not require that an
approved line be built. See U.S. Dep't of Energy--Rail Constr. &
Operation--Caliente Rail Line in Lincoln, Nye & Esmeralda Cntys., Nev.,
FD 35106, slip op. at 3 (STB served June 27, 2008); Dakota, Minn. & E.
R.R. Corp. Constr. Into the Powder River Basin, FD 33407, slip op. at
19 (STB served Feb. 15, 2006). As a result, the Board has repeatedly
recognized that the ultimate decision to go forward with an approved
project is in the hands of the applicant and the financial marketplace,
not the agency. See Mid States Coal. for Progress v. STB, 345 F.3d 520,
552 (8th Cir. 2003) (noting the insight and expertise of financial
institutions and agreeing with the Board that the ultimate test of
financial fitness will come when the railroad seeks financing); U.S.
Dep't of Energy, FD 35106, slip op. at 3. Simply put, the Board's grant
of authority permits a new rail line to be built if the necessary
financing is obtained. Without moving forward with the process needed
to obtain Board authority, however, no new rail lines could be built,
regardless of how viable the projects might be.
In addition, the Coalition recognizes that conditions beyond its
control can affect the amount of rail traffic on the proposed line,
(Pet. 15), and, prior to seeking authority from the Board for this
project, the Coalition asked R.L. Banks to prepare a detailed 2018
feasibility study addressing the viability of the line. Moreover, the
Utah Petroleum Association, Enefit Oil Company, Utah Royalty Owners
Association, National Oil Shale Association, and Western Energy
Alliance have expressed support for the project. (Coalition Reply 16,
July 21, 2020.) \6\ Such support, and the information submitted in this
record, indicates the proposed line could be viable. And, despite
claims by the opponents that there is no public need for the line, the
support that this project has received suggests otherwise.
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\6\ The Center asserts that the Basin holds only approximately
five years' worth of oil at the most by pointing to a U.S. Energy
Information Administration estimate from 2019. (Ctr. Reply 23-24.)
This figure, however, only covers ``proved reserves,'' (Ctr. Supp.
662), and, as the Center itself admits, estimates of the amount of
oil in the Basin ``vary widely,'' (Ctr. Reply 23). Indeed, the 2018
pre-feasibility study from R.L. Banks lists a much higher range.
(Ctr. Supp. 392.)
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It is well settled that, because the Board's authority is
permissive, the Board may grant authority to construct a line even if
all outstanding issues related to the proposed construction, such as
financing, have not yet been resolved or if factors beyond the Board's
control might ultimately prevent consummation of authority for a
proposed construction. See Mid States Coal. for Progress, 345 F.3d at
552; Cal. High-Speed Rail Auth.--Constr. Exemption--in Fresno, Kings,
Tulare, & Kern Cntys., Cal., FD 35724 (Sub-No. 1), slip op. at 11 (STB
served Aug. 12, 2014) (with Board Member Begeman dissenting). The Board
does not find that the additional financial information sought by
Argyle is necessary in this proceeding.\7\
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\7\ For the same reasons, the Board does not need the material
currently redacted in the R.L. Banks 2018 feasibility study obtained
by the Center, despite the Center's claim to the contrary. (Ctr.
Reply 25.)
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The opponents' filings also do not lead to a conclusion that an
application is necessary here. To be clear, the agency has found the
exemption process suitable in considering other projects that have
drawn opposition.\8\ To the extent opponents here raise environmental
issues, the environmental review conducted by the Board does not depend
on whether the proposed construction is decided under section 10901 or
section 10502--the environmental review process is the same under
either scenario. See Cal. High-Speed Rail Auth., FD 35724 (Sub-No. 1),
slip op at 11 (STB served Aug. 12, 2014).
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\8\ See, e.g., Cal. High-Speed Rail Auth., FD 35724 (Sub-No. 1)
(STB served Aug. 14, 2014); Cal. High-Speed Rail Auth.--Constr.
Exemption--in Merced, Madera & Fresno Cntys., Cal., FD 35724 (STB
served June 13, 2013); Alaska R.R., FD 35095; and San Jacinto Rail
Constr. Exemption--Build Out to the Bayport Loop Near Houston,
Harris Cnty., Tex., FD 34079 (STB served Aug. 28, 2002).
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The Board's decisions in Ozark Mountain Railroad--Construction
Exemption, FD 32204 (ICC served Sept. 25, 1995), and Texas Central
Railroad & Infrastructure, Inc, FD 36025, slip op. at 13-15, do not
show that an application is necessary here. In Ozark Mountain Railroad,
the agency required an application under section 10901 for the proposed
construction of a highly controversial passenger excursion train

[[Page 1567]]

as part of a ``huge development plan.'' Ozark Mountain R.R., FD 32204,
slip op at 2. The agency decided that it would be inappropriate to move
forward without the financial information required in an application
because of significant concerns that the applicant there would not be
able to bring the project to fruition. Id. In Texas Central Railroad &
Infrastructure, Inc., FD 36025, slip op. at 13-15, the Board, in
requiring an application, explained that significant questions had been
raised surrounding the financial feasibility of that proposed passenger
rail project, namely the potential increase in cost from over $10
billion to over $20 billion (with one estimate over $30 billion) and
the funding sources to cover those increased costs. Indeed, in that
case, the record included a letter from a Texas Central official
indicating substantially higher project costs than those previously
presented to the Board, see Texas Central, FD 36025, slip op. at 13 &
n.24, and this discrepancy was not adequately addressed. Moreover, the
record indicated conflicting statements from individuals associated
with Texas Central as to the extent of nonmarket funding sources.\9\
See id. at 14 n.27. Here, not only is the projected cost of the project
far less than that of the projected cost of the Texas project, but,
based on the record, it has not dramatically increased as in the Texas
case.\10\ Although there is some uncertainty as to financing beyond the
$27.9 million that the Coalition has already received from a Utah
agency, the record does not, unlike the Texas case, include
inconsistent statements from the petitioner as to the project's costs
or its target future funding or financing sources, including from
nonmarket sources.
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\9\ That is not to say that any increase in project costs or
uncertainty about funding sources necessitate an application, given
that the ultimate test of financial fitness is in the hands of the
applicant and marketplace. However, when those two factors are both
substantial and inadequately or inconsistently addressed, combined
with other relevant factors, including the extent to which the
marketplace will assess financial fitness, additional scrutiny may
be warranted.
\10\ In fact, the Center questions whether the costs for the
project are too low because they are lower than a similar project
the Utah Department of Transportation studied in 2015. (Ctr. Reply
19.) As the Coalition explains, however, that project was different
because, among other things, it involved the reconstruction of an
existing highway, which is not part of the project at issue here.
(Coalition Reply 13, July 21, 2020.)
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In short, it is appropriate to consider the Coalition's
construction proposal under section 10502, and an application
proceeding under section 10901 is not required here.

Issuance of Preliminary Decision on the Transportation Merits

As noted above, the Coalition requests that the Board issue a
preliminary decision addressing the transportation aspects of the
project in advance of completing its review of the environmental
issues. The Coalition explains that streamlining the regulatory process
by issuing a preliminary decision on the transportation-related issues
would help hasten its recovery from the economic downturn stemming from
the pandemic. (Pet. 26-27.) Both Argyle and the Center oppose the
Coalition's request. The Center argues that based on prior Board
precedent a preliminary decision addressing the transportation merits
requires a ``showing of some unique or compelling circumstances'' and
that the Coalition has made no such showing here. (Ctr. Reply 5-6.) The
Center claims that the Coalition has failed to explain how addressing
the transportation merits before completing the environmental review
process and determining whether to allow construction to begin would
increase efficiencies in the process, mitigate the economic impacts of
the pandemic, or benefit the proposed rail line. (Id.) The Coalition
responds that examining the project in the two-step approach would
hasten its ability to secure financing for the line. (Rebuttal 14.)
The Board has considered requests for preliminary decisions
addressing the transportation merits of a project over the years.\11\
Although the Board indicated in 2007 that it would generally only issue
a preliminary decision on the transportation merits of a construction
proposal based on a showing of unique or compelling circumstances,\12\
the Board has only once since that time denied a request for a
preliminary decision on the transportation merits, see Cal. High-Speed
Rail Auth., FD 35724 (Sub-No. 1), slip op. at 2 (STB served Dec. 4,
2013).\13\ The Board recently used the two-step process in a
construction case. In that case, the applicant had received support
from state and local entities, the transportation merits of the project
were apparent, and there was no opposition to the request for
preliminary decision or the exemption itself at that time. Ken Tenn
Reg'l Rail Partners, FD 36328, slip op. at 3-4.\14\ Here, there is also
strong support from state and local entities (in addition to the seven-
county Coalition), and the transportation merits are convincing (as
described below). While the Board acknowledges opposition to the
project, the economic circumstances, exacerbated by the current
pandemic, are compelling, and, under the circumstances, issuing a
preliminary decision on the transportation merits will help ensure the
development and continuation of a sound rail transportation system,
foster sound economic conditions in transportation, and reduce barriers
to entry. See 49 U.S.C. 10101(4), (5) (7). Therefore, the Board finds
it appropriate to issue a preliminary decision on the transportation
merits while the Board continues the environmental review of the
proposed construction.
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\11\ See Six Cnty. Ass'n of Gov'ts--Constr. & Operation
Exemption--A Rail Line Between Levan & Salina, Utah, FD 34075 (STB
served Sept. 3, 2015); Alaska R.R.--Constr. & Operation Exemption--
Rail Line Between Eielson Air Force Base & Fort Greely, Alaska, FD
34658 (STB served Oct. 4, 2007).
\12\ See Alaska R.R. Constr., FD 34658, slip op. at 2. Prior to
2007, the Board did not use this standard when considering whether
to issue a preliminary decision on the transportation merits in rail
construction cases. See, e.g., Burlington N. & Santa Fe Ry.--Constr.
& Operation Exemption--Merced Cnty., Cal., FD 34305 (STB served Mar.
28, 2003); San Jacinto Rail Constr. Exemption, FD 34079, slip op. at
7.
\13\ In Texas Railway Exchange LLC--Construction & Operation
Exemption--Galveston County, Tex., FD 36186 et al., slip op. at 2, 5
(STB served Jan. 17, 2020), the Board denied as moot a request for a
preliminary decision on the transportation merits because the Board
was, in the same decision, granting the petition for exemption to
construct and operate the new rail line. A request for preliminary
decision on the transportation merits is currently pending in
Brookhaven Rail LLC--Construction & Operation Exemption--in Suffolk
County, N.Y., Docket No. FD 36398.
\14\ A petition for reconsideration has since been filed in that
docket.
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Rail Transportation Analysis

As noted above, the Board must exempt a proposed rail line
construction when it finds that application of the provisions of
section 10901 is not necessary to carry out the RTP and there is no
danger of market power abuse. Based on the record, the Board
preliminarily concludes that the proposed construction qualifies for an
exemption under section 10502 from the prior approval requirements of
section 10901.
First, regulation under section 10901 is not necessary to carry out
the RTP in this case. The record here shows that the proposed rail line
would provide an alternative, more cost-effective method of
transportation for shippers that are currently limited to shipping by
truck. (Pet. 13-15.) The proposed line would provide shippers in the
Basin the opportunity to enter markets they currently cannot access due
to cost constraints and the ability to import materials into the Basin
at a more economical cost. (Pet. 13-15; Coalition Reply 15-16, July 21,
2020.)

[[Page 1568]]

Accordingly, the proposed line would enhance competition by providing
shippers in the area with a freight rail option that does not currently
exist and foster sound economic conditions in transportation,
consistent with section 10101(4) & (5). Additionally, consistent with
sections 10101(2) and 10101(7), an exemption will minimize the need for
federal regulatory control over the rail transportation system and
reduce regulatory barriers to entry by minimizing the time and
administrative expense associated with the construction and
commencement of operations. (Pet. 21-22.)
Argyle claims that the RTP goals at section 10101(8), concerning
public safety, and section 10101(11), concerning safe working
conditions, would be undermined by the project. (Argyle Reply 9, July
7, 2020.) Argyle asserts that there will be a substantial increase in
local truck traffic if oil production were to increase to the extent
claimed by the Coalition. (Id. at 10.) Argyle also claims, among other
things, that rail activities could trigger forest fires and notes that
Argyle Canyon was heavily damaged by a fire in 2012. (Id.) The Board
takes important concerns such as these seriously, and they will be
examined as part of OEA's environmental review and further examined by
the Board in a subsequent decision considering the environmental
impacts of the project. Cf. Brookhaven Rail--Constr. & Operation
Exemption--in Suffolk Cnty., N.Y., FD 36398, et al., slip op. at 6 (STB
served Oct. 23, 2020) (rejecting petition seeking exemption from 49
U.S.C. 10909 and noting concerns stemming from section 10101(8), among
others).
Second, application of section 10901 is not necessary to protect
shippers from an abuse of market power.\15\ The proposed line would
enhance transportation service to shippers by providing an opportunity
to use rail service where none currently exists. Currently, the only
transportation option available to freight shippers in the Uinta Basin
is trucking along two-lane highways. (Pet. 13.) The proposed line, when
completed, would provide freight shippers in the Basin with rail
service and access to the interstate rail network and would result in
increased intermodal competition with commercial freight by truck.
Therefore, the proposed line would increase competitive options to
shippers and eliminate shippers' reliance on one option for freight
transportation.
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\15\ Because regulation of the proposed construction and
operation is not needed to protect shippers from the abuse of market
power, the Board need not determine whether the transaction is
limited in scope. 49 U.S.C. 10502(a)(2).
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Environmental Review.

As discussed above, the Board has preliminarily concluded that the
proposed construction meets the statutory standards for exemption on
the transportation merits, subject to completion of the ongoing
environmental review. The Board's Office of Environmental Analysis
(OEA) issued a Final Scope of Study for the Environmental Impact
Statement (EIS) on December 13, 2019, and a Draft EIS on October 30,
2020, for public review and comment. OEA also held six virtual public
meetings to receive oral comments, the last of which took place on
December 3, 2020. Following the conclusion of the comment period
(January 28, 2021), OEA will issue a Final EIS addressing the public
comments and environmental impacts and make its final recommendations
to the Board.
Following the conclusion of the environmental review process, the
Board will issue a further decision assessing the potential
environmental impacts of the proposal, weighing the potential
environmental impacts and the transportation merits, and determining
whether to make the exemption effective at that time, and if so,
whether to include appropriate mitigation conditions. See Mo. Mining,
Inc. v. ICC, 33 F.3d 980 (8th Cir. 1994).
The decision issued today is a preliminary determination that does
not prejudge the Board's final decision, nor diminish the agency's
environmental review process concerning the proposed Line's
construction. See Ill. Com. Comm'n v. ICC, 848 F.2d 1246, 1259 (DC Cir.
1988). Construction may not begin unless and until authorized by the
Board in a final decision, which may impose environmental mitigation as
appropriate, and until any such final decision has become effective.
It is ordered:
1. The Coalition's July 21, 2020 response and the late-filed
replies and letters are accepted into the record.
2. Under 49 U.S.C. 10502, the Board preliminarily exempts the
construction and operation of the above-described line from the prior
approval requirements of 49 U.S.C. 10901, subject to further
consideration of the potential environmental impacts of the proposal.
3. On completion of the environmental review, the Board will issue
a further, final decision addressing any potential environmental
impacts, weighing any environmental impacts with the transportation
merits, and determining whether the exemption should become effective
(subject to any appropriate mitigation conditions). Construction may
not begin unless and until the Board issues a final decision
authorizing the exemption and any such decision has become effective.
4. Notice of this decision will be published in the Federal
Register.
5. Petitions for reconsideration must be filed by January 25, 2021.
6. This decision is effective 30 days from the date of service.
Decided: January 4, 2021.
By the Board, Board Members Begeman, Fuchs, and Oberman. Board
Member Oberman dissented with a separate expression.

Board Member Oberman, dissenting:
The Board majority has reached a preliminary conclusion that the
transportation merits of the proposal of the Seven County
Infrastructure Coalition (the Coalition) to construct and operate the
approximately 85-mile line at issue (the project) in the Uinta Basin
meet the statutory exemption standard under 49 U.S.C. 10502. The
majority has reached this conclusion in a so-called two-step process,
in which it has preliminarily addressed the transportation merits prior
to considering the environmental impacts and any necessary mitigation
requirements.
I dissent from both aspects of this decision (Decision). I do not
conclude that the Board should find, today, that an application is
necessary here--only that the Board should not make a finding now that
an application is not necessary and should not and cannot reach a
conclusion on the transportation merits, even preliminarily, prior to
completing the environmental review and resolving issues concerning the
project's financial viability.
Introduction. Based on the instant record and publicly available
information affecting the potential success of this project, as
discussed below, serious questions have been raised about the
transportation merits of the project, especially concerning the
financial viability of the line. In addition, the Board's Office of
Environmental Analysis (OEA) has issued a Draft Environmental Impact
Statement (Draft EIS) which concludes that the project ``would result
in significant environmental impacts.'' (Draft EIS S-1.) Rather than
finding today both that a petition for exemption is the appropriate
procedure and preliminarily concluding that the statutory exemption
standard has been met, the Board should seek additional information
concerning the financial viability of and long-term need for this

[[Page 1569]]

project in order to provide clarity on the uncertainties surrounding
these two issues, and should allow the environmental review process to
be completed before making these decisions.
Given these uncertainties and the controversial nature of the
project, the transportation merits cannot properly be determined
without measuring them against whatever environmental degradation the
project will cause. In this case, the Board should not deviate from
precedent generally disfavoring such a two-step process.\1\ It is
therefore premature for the Board to reach a preliminary conclusion on
the transportation merits of this case, and it is equally premature for
the Board to decide now that an application is not necessary.
---------------------------------------------------------------------------

\1\ See, e.g., Alaska Railroad--Construction & Operation
Exemption--Rail Line Between Eielson Air Force Base & Fort Greely,
Alaska, FD 34658, slip op. at 2 (STB served Oct. 4, 2007).
---------------------------------------------------------------------------

Application vs. Petition for Exemption. Under 49 U.S.C. 10502, the
Board must exempt a proposed rail line construction from the
application procedures at 49 U.S.C. 10901 when the Board finds that:
(1) Those procedures are not necessary to carry out the rail
transportation policy (RTP) of section 10101; and (2) either (a) the
proposal is of limited scope, or (b) the full application procedures
are not necessary to protect shippers from an abuse of market power.
E.g., Ken Tenn Reg'l Rail Partners--Constr. & Operation Exemption--in
Fulton Cnty, Ky. & Obion Cnty., Tenn., FD 36328, slip op. at 3 (STB
served Dec. 1, 2020); Tex. Cent. R.R. & Infrastructure, Inc--Pet. for
Exemption--Passenger Rail Line Between Dallas & Houston, Tex. (Tex.
Cent. R.R. June 2020), FD 36025, slip op. at 5 (STB served June 20,
2020).
In considering a construction application under 49 U.S.C. 10901,
the Board ``shall'' grant such an application ``unless the Board finds
that such activities are inconsistent with the public convenience and
necessity.'' 49 U.S.C. 10901(c); e.g., Ken Tenn Reg'l Rail Partners, FD
36328, slip op. at 3. When measuring the public convenience and
necessity, the Board looks at ``whether: (1) the applicant is
financially able to undertake the project and provide rail service; (2)
there is a public demand or need for the proposed service; and (3) the
proposal is in the public interest and will not unduly harm existing
services.'' Tongue River R.R.--Constr. & Operation--W. Alignment, FD
30186 (Sub-No. 3) et al., slip op. at 13 (STB served Oct. 9, 2007).
While the majority correctly states that Board precedent holds that
there is a statutory presumption that construction projects should be
approved, Decision 4, such a presumption does not obviate the Board's
statutory obligation to determine whether regulation is necessary to
carry out the RTP of section 10101, and if so, whether the project is
consistent with the public convenience and necessity.
As detailed below, there are more than enough unanswered questions
about the financial viability of, and public need for, this project to
raise the serious potential that, after the development of a complete
record, the Board may find that regulation here is necessary to carry
out the RTP of section 10101, and that the presumption in favor of
approving construction may well be overcome.
In the past, the Board has rejected an exemption and required an
application in construction cases presenting significant controversy,
particularly where concerns have been raised about the project's
financial feasibility and its impact on the local area. See Tex. Cent.
R.R. & Infrastructure, Inc--Pet. for Exemption--Passenger Rail Line
Between Dallas & Houston, Tex. (Tex. Cent. R.R. July 2020), FD 36025,
slip op. at 14 (STB served July 16, 2020) (``[A]n application here
would provide the Board with additional information pertaining to the
financial condition of the applicant and financial feasibility of the
project that would assist the Board in considering the transportation
merits of the project.''); Ozark Mountain R.R.--Construction Exemption,
FD 32204, slip op. at 4-5 (ICC served Dec. 15, 1994) (revoking
conditional exemption and requiring application due to ``[s]ignificant
public opposition to the project'' including concerns that the
applicant ``will be unable to construct and operate the proposed
lines'').
Here, the majority declines to follow these precedents, see
Decision 7, finding that a petition for exemption is appropriate,
stating: ``[t]here is nothing in the language of section 10502 to
suggest that an exemption proceeding is inappropriate if the viability
of the proposed rail line is questioned'' because ``the Board's grant
of authority to construct a line . . . is permissive, not mandatory.''
Decision 5-6. Given the state of the instant record, I disagree with
the majority's decision finding, at this time, that a petition for
exemption is appropriate. Rather than ignoring the public opposition
and significant questions about the project's financial feasibility,
\the\ state of the instant record requires the Board to seek additional
information and clarify these important issues before concluding that
the full application procedures are not necessary to carry out the RTP
of section 10101.2
A two-step process involving preliminary approval. In particular, I
find it inappropriate and ill-advised for the Board to undertake a two-
step process here, reaching a preliminary conclusion on the
transportation merits of the Coalition's petition for exemption before
the completion of the environmental review process. From the
information currently in the record, the transportation merits of this
project--discussed in detail below--are not clear. In addition,
significant environmental issues have been raised. Though I have full
faith in OEA to conduct a rigorous and thorough environmental analysis
regardless of whether the Board reaches a preliminary conclusion on the
transportation merits of the project, the Board should withhold
judgment on the transportation merits until it also has the benefit of
OEA's environmental analysis.\3\
---------------------------------------------------------------------------

\3\ Furthermore, to the extent the standard for issuance of a
preliminary decision on the transportation merits requires a showing
of unique or compelling circumstances, see Six County Ass'n of
Governments--Construction & Operation Exemption--A Rail Line Between
Levan & Salina, Utah, FD 34075, slip op. at 2 n.4 (STB served Sept.
3, 2015); Alaska Railroad--Construction & Operation Exemption--Rail
Line Between Eielson Air Force Base & Fort Greely, Alaska, FD 34658,
slip op. at 2 (STB served Oct. 4, 2007), the Coalition has failed to
make that showing. The Coalition cites only ``the ongoing COVID-19
pandemic and its economic impacts'' in support of its argument that
there are unique or compelling circumstances here. (Pet. 26.) While
the significant impacts the pandemic has had across the country and
the world are self-evident, these impacts are also among the
principal reasons that further inquiry into the financial viability
of the project is necessary, as discussed, infra.
---------------------------------------------------------------------------

The instant case is easily distinguished from Ken Tenn Regional
Rail Partners, FD 36328, cited by the majority. Decision 4, 8. In that
case (in which I joined with the majority), the Board issued a
preliminary decision on

[[Page 1570]]

the transportation merits of a petition for exemption in a construction
case. But the facts in Ken Tenn were significantly different from the
instant case. There, on the record before the Board at the time,\4\ no
financial or environmental concerns had been raised (though, as here,
the environmental process is ongoing), and in fact it appeared there
was no opposition at all to either the request for a preliminary
exemption or the petition itself. Ken Tenn Reg'l Rail Partners, FD
36328, slip op. at 4. By contrast, here, though there is support from
state and local entities (including that the Coalition itself is an
independent political subdivision of the State of Utah, see Decision
2), there is also significant opposition, and that opposition has
raised both financial and environmental concerns. I will discuss the
transportation merits and the environmental concerns separately.
---------------------------------------------------------------------------

\4\ On December 21, 2020, a group of landowners filed a petition
for reconsideration in that docket alleging, among other things,
that the petitioner ``misrepresented to the Board that the Petition
is unopposed.'' Pet. for Recons. 2, Ken Tenn Reg'l Rail Partners, FD
36328. The petition for reconsideration is currently pending before
the Board.
---------------------------------------------------------------------------

Transportation merits. While the Coalition argues an exemption
should be granted because ``key economic activities in the Uinta Basin,
including farming, ranching, oil and gas production, and mineral
extraction, depend heavily on the transportation of goods and
commodities in and out of the region,'' (Pet. 12-13), there can be no
doubt that the singular rationale for constructing the proposed
railroad is to provide rail transportation to stimulate an increase in
oil production in the Basin, (id. at 13-17). It is beyond contradiction
that without the hoped-for increase in oil production, there is
virtually no possibility the railroad would be financially viable. But
reliance on future oil production to sustain the project, based on
currently available information and the record before the Board, is
problematic at best, as discussed below.
In 2018, the Coalition commissioned a consultant, R.L. Banks &
Associates, Inc. (R.L. Banks) to conduct a pre-feasibility study for
the project. However, in support of its petition, the Coalition failed
to mention this study and never submitted it to the Board. I find this
omission significant. Had the Banks study been persuasive in support of
the project, one would have expected the Coalition to enthusiastically
rely on it.
The Coalition ultimately mentioned the existence of the R.L. Banks
study in its reply only after it was submitted and referenced by the
objectors in their replies to the Coalition's petition.\5\ (See
Coalition Reply 16 n.46 & 17 n.51, July 21, 2020.) The inescapable
conclusion from a review of the R.L. Banks study is that the project's
success relies entirely on an increase in oil production in the Uinta
Basin, with that oil being shipped by rail; shipment of any other
commodities on the railroad would be insignificant in comparison to
oil. (See Pet. 15; id., V.S. McKee ] 17 (Executive Director of the
Coalition stating the line ``will primarily be used to ship crude oil
and fracking sand.'').) Non-oil shipments could never justify the cost
of constructing the project.\6\
---------------------------------------------------------------------------

\5\ The Board only received a copy of this study because, in its
opposition to the petition, the Center for Biological Diversity
(Center) submitted a version of the study. But that version was
redacted by the Coalition before it was made available to the
Center. (See Ctr. Supp. 387-469.)
\6\ The Center and the Argyle Wilderness Preservation Alliance
(Argyle) argue there is no evidence to support a claim of need for
the line outside the oil industry. (Ctr. Reply 31 (noting that prior
revenue forecasts for the project have not included products outside
the oil industry); Argyle Reply 9, 12 & Appx. 1 at 2, July 7, 2020
(arguing in particular that there are no agricultural producers who
would utilize the line).) The Draft EIS also points out that the
volume of non-oil traffic is likely to be low, stating that ``[t]he
Coalition does not anticipate that the volume of other commodities
would be large enough to warrant dedicated trains.'' (Draft EIS 2-
2.)
---------------------------------------------------------------------------

But the R.L. Banks study hardly is persuasive on the likelihood
that a projected increase in oil production will be large enough to
sustain the railroad. First, the only version of the study obtainable
by the Center is woefully incomplete. While R.L. Banks states that it
undertook to make detailed projections of the demand for Uinta Basin
oil and the number of carloads such demand would generate for the
proposed railroad, the Coalition has redacted every statistic and every
table in the R.L. Banks study released to the Center. Therefore, it is
impossible for the Board (or anyone) to evaluate the substance and
reliability of the conclusions purportedly reached by R.L. Banks
concerning the projected volume of shipments on the line. If those
statistics were persuasive of the transportation merits of the project,
again, one would have expected the Coalition to supply them to the
Board (which, if confidentiality was a concern, could have been
submitted under seal subject to a protective order). The Coalition's
failure to do so supports an inference that the statistics compiled by
R.L. Banks are either not persuasive or are no longer reliable.\7\
---------------------------------------------------------------------------

\7\ Surprisingly, the majority dismisses its own inability to
examine the redacted material in the R.L Banks study, concluding,
without explanation, that no additional financial information is
needed. Decision 6 n.8. Since there is virtually no financial
information in the record showing the viability of the project,
apparently, the majority concludes that financial viability is
unimportant.
---------------------------------------------------------------------------

Aside from this shortcoming, even the R.L. Banks study acknowledges
that the demand for the type of oil extracted from the Uinta Basin is
unknown. (Ctr Supp. 417 (``Unknown Demand--The demand for Uinta Basin's
waxy crude, which is not well known outside of Utah, in large part due
to lack of transportation infrastructure to ship product out of the
Uinta Basin, may not be as readily accepted as initial indications
would suggest.'').) More importantly, since the preparation of the R.L.
Banks study in 2018, the global demand for oil has changed
dramatically, both because of the pandemic and its long term
ramifications, and because of the changing progress in the world's
reliance on non-fossil fuel energy.
As a result, there are significant questions about the future
global demand for oil, which would affect the financial viability of a
rail line built primarily to move Uinta Basin oil, the demand for which
was unknown even prior to the pandemic. Further, while the Coalition
assumes the pandemic-related changes may be short-term (Pet. 10 n.28,
14 n.52), there are significant indications that this assumption may be
unwarranted.
These questions of future global demand were recently summarized by
former Vice President Al Gore:

As a former oil minister in Saudi Arabia put it 20 years ago,
``the Stone Age came to an end, not because we had a lack of stones,
and the oil age will come to an end not because we have a lack of
oil.'' Many global investors have reached the same conclusion and
are beginning to shift capital away from climate-destroying
businesses to sustainable solutions. . . . [S]ome of the world's
largest investment firms are now joining this movement, too, having
belatedly recognized that fossil fuels have been extremely poor
investments for a long while. Thirty asset managers overseeing $9
trillion announced on [December 11, 2020] an agreement to align
their portfolios with net-zero emissions by 2050.

Al Gore, Opinion, Al Gore: Where I Find Hope, New York Times (Dec. 13,
2020), https://www.nytimes.com/2020/12/12/opinion/sunday/biden-climate-change-al-gore.html.
Indeed, many of the world's major oil producers have written down
the value of their oil reserves--including shale oil reserves--by
multi-billions of dollars since the middle of 2020. These write-downs
have been based on longer term projections, only partly resulting from
pandemic fallout:

[[Page 1571]]

BP PLC, Hess Corp. and Occidental Petroleum Corp., have recently
taken multibillion-dollar [asset] impairments as a coronavirus-
induced economic slowdown adds pressure to an already struggling
shale sector. Chevron Corp. took a $10 billion write-down in
December, [2019] and Royal Dutch Shell PLC said Tuesday that it
would write down the value of its assets by up to $22 billion
because of lower energy prices. . . .
The U.S. shale industry has written down more than $450 billion
in assets since 2010, according to a June [2020] report by Deloitte,
reassessing holdings amid a global supply glut and growing investor
concerns about the long-term future of fossil fuels. The accounting
firm projects additional shale impairments of as much as $300
billion in coming months as the coronavirus holds down commodity
prices.

Christopher M. Matthews, Exxon Mobil Resists Write-Downs as Oil, Gas
Prices Plummet, Wall Street Journal (June 30, 2020), https://www.wsj.com/articles/exxon-mobil-resists-write-downs-as-oil-gas-prices-plummet-11593521685 (emphasis added); see also Christopher M. Matthews,
Exxon Slashes Spending, Writes Down Assets, Wall Street Journal (Nov.
30, 2020), https://www.wsj.com/articles/exxon-slashes-spending-writes-down-assets-11606774099 (``Exxon cut its expectations for future oil
prices for each of the next seven years by 11% to 17% . . . . The
sizable reduction suggests Exxon expects the economic fallout from the
pandemic to linger for much of the next decade.'').\8\
---------------------------------------------------------------------------

\8\ Further, as Argyle points out, changes in the foreign and
domestic oil markets ``recently resulted in a negative value of
crude oil for the first time in history.'' (Argyle Reply 8, July 7,
2020.)
---------------------------------------------------------------------------

To be clear, owners of oil assets generally distinguish between the
amount of their ``proven reserves'' and all other reserves. The term
``proven reserves'' refers to the quantity of oil which can be
extracted profitably at the prevailing price for that oil. Thus, if the
price of oil drops below the cost of extraction, then the amount of
``proven reserves'' must be reduced accordingly. Here, questions have
been raised about the quantity of oil reserves in the Basin, the demand
for the specific type of oil found there, and whether there are
sufficient proven reserves to provide long term business for the
proposed railroad. Estimates in the record of the amount of oil in the
Basin vary, in part depending on whether unconventional resources such
as oil produced from oil shale are included in the estimate.\9\ (Ctr.
Reply 23-24 (estimating 401 million barrels of ``proven'' conventional
reserves across the state of Utah at the end of 2018, or only
approximately five years' worth); Ctr. Supp 392 (R.L. Banks study
estimating ``between 50-321 billion barrels'' without further
description of type).) While the high-end estimates here would support
the prospect of a booming oil business in the Basin if the demand
exists, the low-end estimates would not--and there is little
information in the record that would enable the Board to determine even
a range of what might be realistic.
---------------------------------------------------------------------------

\9\ The R.L. Banks study looked at, among other commodities,
crude oil and shale oil production in the Basin to estimate
potential traffic volumes. While the study includes some unredacted
information about the estimated production of crude oil, (Ctr. Supp.
419-421 (estimating annual crude oil production in the Basin to be
between 225,000 barrels per day and 350,000 barrels per day)), the
actual data relating to potential shale oil traffic volumes is all
redacted, (Ctr. Supp 423).
---------------------------------------------------------------------------

Given the depression in the oil market since the R.L. Banks study
in 2018, there is no basis in the present record for the Board to
determine the amount of ``proven reserves'' in the Uinta Basin. But
surely, if in 2020, the world's major oil producers have been forced to
undertake major write-downs of the value of their oil reserves and
lower their expectations for the future of oil prices, as discussed
above, it is difficult to imagine that the Uinta Basin producers have
not been required to do the same, especially in view of the R.L. Banks
study's concession that the demand for Uinta Basin's waxy crude is
``unknown'' and ``may not be as readily accepted as initial indications
would suggest,'' (Ctr. Supp. 417).
If, as the foregoing sources suggest, the global demand for oil is
indeed depressed and does not bounce back to pre-pandemic levels as
quickly as the Coalition assumes \10\--or never rebounds entirely--the
viability of the Uinta Basin railroad is clearly thrown into question.
Understandably, even the R.L. Banks study caveats its traffic volume
forecasts, stating that ``[t]he viability of the [project] is grounded
on the assumption that oil markets will be stable or favorable . . . .
However, a significant and long-term downturn in the price of [West
Texas Intermediate crude oil], particularly in the early years of the
prospective railroad, could result in significant shortfalls from the
performance indicated herein.'' (Ctr. Supp. 416.) It takes no great
insight to observe that the oil markets have been anything but stable
or favorable, thus leaving R.L Banks' ``assumption'' at best
questionable.\11\
---------------------------------------------------------------------------

\10\ A further challenge to the Coalition's assumptions about
oil demand is the concern that office commuters, significant users
of petroleum products either through mass transit or automobile
travel, may never return to commuting at pre-pandemic levels. See,
e.g., Paul Wiseman and Alexandra Olson, Shift in Economic Landscape,
Chicago Tribune, Dec. 26, 2020, at 7 (``A McKinsey survey of 800
corporate executives worldwide found that 38% expect their employees
now working remotely to continue to do so at least two days a week
after the pandemic, up from 22% in surveys before the pandemic.'').
\11\ The R.L. Banks study states that, in 2018, experts expected
domestic oil production to grow at record pace, and that it was
expected that ``worldwide demand for oil also will continue to grow
over the next five years and the United States will supply most of
the production to answer that growing demand.'' (Ctr. Supp. 392.)
The study, of course, could not have anticipated the current
pandemic and the related drastic change in the global oil markets,
as reflected in 2020 by the write-downs undertaken by the world's
major oil producers.
---------------------------------------------------------------------------

The majority did not explore these significant changes in the
global oil market and dismisses concerns raised by the Center and
Argyle about the financial viability of the project, finding that,
because the Board's authority is permissive, ``the ultimate decision to
go forward with an approved project is in the hands of the applicant
and the financial marketplace,'' and thus the Board need not consider
such concerns.\12\ Decision 6.
---------------------------------------------------------------------------

\12\ But see, Tex. Cent. R.R. July 2020, FD 36025, slip op. at
13-15. In that case, the Board chose not to rely on the financial
marketplace to decide the viability of the project, instead
rejecting a petition and requiring an application due to the
financial feasibility concerns raised by commenters. Though the
projected cost estimates in that case were higher than in this case,
the cost of the project here is greater than a billion dollars,
(Pet. 11), and, as discussed herein, there is significant
uncertainty about the financial viability of a project of that
magnitude.
---------------------------------------------------------------------------

Even if relying on the financial marketplace to determine whether
this railroad should be built constituted a sufficient discharge of the
Board's duties in determining whether a project should be granted an
exemption from the full application process, here the record
establishes that the financial marketplace cannot be relied on. The
R.L. Banks feasibility study makes clear that the private sector will
not build this railroad; only a government can afford to build it:

[R.L. Banks] assumed that construction of the railroad would be
the responsibility of [the Coalition], another public entity, or a
consortium of public entities. While private/public partnerships
(``3Ps'') are not unprecedented in the freight rail industry, there
has never been such a partnership approaching the size and scope of
the [project]. Furthermore, given the generally conservative nature
of the rail freight industry, [R.L. Banks] believes any railroad
which may eventually service the line has relatively little
incentive to invest in the construction of the line, especially
given the high associated capital costs projected and lack of
current production levels sufficient to justify construction.

(Ctr. Supp 433 (emphasis added).) Further, R.L. Banks made clear that
the railroad financing could only be obtained through the issuance of
government bonds:

[[Page 1572]]

Given the large capital investment required to construct the
[project] . . . , [R.L. Banks] assumed that construction of the
railroad would be financed through the issuing of bonds.
Specifically, [R.L. Banks] assumed that the entire cost to construct
the [project] would be financed with capital generated from issuing
30-year bonds.

(Id. at 444.)
While the record (as submitted, not by the Coalition, but by the
objectors) refers to the possibility that the railroad construction
will be financed by ``municipal conduit bonds,'' \13\ there is no
indication of how such financing would be structured. Given the
uncertainty of demand for Uinta Basin oil, as discussed above, there is
every possibility that such bonds could only be sold if they were
backed not only by revenues from the railroad, but also by local tax
dollars. As former Vice President Gore observed, the world's largest
investment firms are withholding investments in fossil fuels and, if
that is true, it appears highly unlikely that private investors can be
found to invest in construction of a railroad dependent on harvesting
oil of the type found in the Basin, in light of all of the information
unknown from this record. Thus, the private financial marketplace is
not likely to be a determinant of the financial feasibility of the
railroad and should not be relied on by the Board to evaluate whether
to grant a petition or approve an application for this project. On the
contrary, the availability of public funding or public guarantees is
likely to be the determinant.
---------------------------------------------------------------------------

\13\ (Ctr. Reply 12; Ctr. Supp. 229 (Drexel Hamilton
Infrastructure Partners LP (DHIP) Request for Information Response
for the Commercialization, Financing, Construction, Operation, and
Maintenance of the Uinta Basin Railway by the Seven Counties
Infrastructure Coalition of Utah, dated Apr. 11, 2019); Ctr. Supp.
351 (Memorandum of Understanding Regarding the Development of the
Uinta Basin Railway between the Coalition and DHIP, dated May 10,
2019).)
---------------------------------------------------------------------------

Adding to the uncertainty at this time is the fact that the
Coalition has decided to rely on a private investment partner to
develop the financing. The Coalition is partnering with DHIP, (Pet. 6,
37-38), which it describes as ``an established independent
infrastructure investment company that is successfully developing and
financing projects across the United States. . . , '' (Coalition Reply
12, July 21, 2020). Nevertheless, now known as DHIP Group, the company
appears to be a small, young firm. Its website reflects that it
consists of two managing partners, and the firm lists no prior
experience in financing the construction of railroads. Home--DHIP
Group, http://dhipgroup.com/ (last visited Jan. 4, 2021). The firm's
website also lists only one other infrastructure project in which it
has been involved. Infrastructure--DHIP Group, http://dhipgroup.com/infrastructure/ (last visited Jan. 4, 2021). While DHIP Group may, in
fact, be well qualified to carry out this project, given all of the
above serious concerns with the future of the oil market, the Board
should insist on further information from DHIP Group on the
practicality of obtaining the necessary financial resources to complete
the project.
In sum, the current record before the Board is woefully inadequate
to permit the Board to evaluate and judge whether an exemption is
warranted under the RTP or whether an application should be required so
that the Board can determine whether the public convenience and
necessity are met for the construction of the Uinta Basin railroad.
Environmental review. As noted above, OEA concludes in the Draft
EIS that the project ``would result in significant environmental
impacts.'' (Draft EIS S-1; id. 1-1.) OEA also preliminarily concludes
there could be major ``significant and adverse impacts'' as a result of
the project on: Water resources; special status species (including
several threatened and endangered plant species and a bird species
managed by the Bureau of Land Management and the State of Utah);
wayside noise (train noise adjacent to a rail line other than that from
a locomotive horn); land use and recreation on public, private, and
tribal lands; socioeconomics, including beneficial impacts like the
creation of jobs, and adverse impacts like the displacement of
structures on private land and the severance of properties; and issues
of tribal concern affecting the Ute Indian Tribe of the Uintah and
Ouray Reservation, including impacts related to vehicle safety and
delay, rail operations safety, biological resources, air emissions,\14\
and cultural resources. (Draft EIS S-7 to S-9.) Mitigation measures
could reduce but not eliminate these impacts, and the route recommended
by OEA, the Whitmore Park Alternative, ``would result in the fewest
significant impacts on the environment,'' (Draft EIS 2-47), compared to
other alternative routes. In addition to these major impacts, OEA also
enumerates several minor impacts in the Draft EIS, which OEA states can
be mitigated if the recommended mitigation measures are adopted by the
Board, as well as downline and cumulative impacts. (Draft EIS S-9 to S-
12.) OEA states the Coalition has proposed 56 voluntary mitigation
measures to address the environmental impacts of the project, and OEA
preliminarily recommends an additional 73 mitigation measures for the
project. (Draft EIS S-23; see also Draft EIS ch. 4, Mitigation.)
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\14\ Argyle notes that the Coalition claims crude oil production
will increase by 400%, which, Argyle argues, ``would cause a
corresponding increase in local truck traffic between the oilwell
sites and the rail loading points.'' (Argyle Reply 10.) An increase
in truck traffic in the Basin would have its own environmental and
congestion-related impacts on the limited road infrastructure in the
Basin.
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Both Argyle and the Center argue against the Board's reaching a
preliminary conclusion on the Coalition's petition before the
environmental review process is complete. The Center states that
``development of the railway raises many significant environmental and
socioeconomic issues, which must be weighed[,] along with the project's
financial risks, against its highly speculative benefits.'' (Ctr. Reply
33; see also Argyle Reply 14, July 7, 2020.)
The Draft EIS clearly illustrates there are serious environmental
impacts that must be mitigated if the project is to proceed. What
remains to be determined is whether the mitigation measures identified
through the environmental review process will be sufficient to address
these impacts, or whether the overall environmental impact of the
project will outweigh the project's transportation merits which, as
discussed above, are at this time, at best, uncertain. The likely
significant cost of any imposed mitigation measures may also affect the
project's financial viability. The transportation merits and the
environmental impacts of this project are inherently interrelated and
should be considered in balance with each other, rather than even
preliminarily dealing with the transportation merits now. See Alaska
R.R.--Constr. & Operation Exemption--A Rail Line Extension to Port
MacKenzie, Alaska, FD 35095, slip op. at 22 (STB served Nov. 21, 2011)
(Commissioner Mulvey, dissenting) (``[T]he more severe the
environmental impacts, particularly those that cannot be fully
mitigated, the greater burden on the proponent of the rail line to show
that the transportation merits of its proposal outweigh those
impacts.'').\15\
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\15\ Though the majority states that it will weigh the
environmental impacts and the transportation merits of the project
following the conclusion of the environmental review process,
Decision 10, a preliminary decision on the transportation merits in
this case gives the merits of the project an endorsement that may
well not be warranted.
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Conclusion. Contrary to the majority's conclusions, the Board is
mistaken when it reaches a conclusion, preliminarily and via the
petition for

[[Page 1573]]

exemption process, on the transportation merits of a project presenting
serious questions like those raised here without more thoroughly
evaluating those issues. The record in this proceeding on the overall
financial viability of the project is significantly underdeveloped.
Neither I nor the Board majority should be required to rely on reports
in the media, which I have highlighted above, or on feasibility studies
with all relevant data redacted, to make such an important decision on
whether to approve construction of a rail line costing over a billion
dollars through an environmentally sensitive area.
Rather than determining at this time that the Coalition's petition
is ripe for decision, even preliminarily and piecemeal, the Board
should require the Coalition to submit a complete and unredacted
version of the R.L. Banks study, should insist that the Coalition
elaborate on the projected demand for Uinta Basin oil in light of the
global oil demand issues that have arisen since that study was
completed, as discussed above, and should obtain more detail from the
Coalition and DHIP Group on the reality of obtaining the necessary
financing for the project, with or without obligating public funds,
along with considering further input on these issues from the
objectors.
I therefore find it premature for the Board to issue the decision
the majority issues today. Though the Decision states that it ``does
not prejudge the Board's final decision, nor diminish the agency's
environmental review process concerning the proposed line's
construction,'' Decision 10, nevertheless, the far more prudent course
of action for the Board here would be to defer any decision on whether
an exemption is warranted and on the overall transportation merits
until the environmental review process is complete and until the
Coalition submits more persuasive evidence on the financial viability
of the entire project.
I respectfully dissent.

Jeffrey Herzig,
Clearance Clerk.
[FR Doc. 2021-00175 Filed 1-7-21; 8:45 am]
BILLING CODE 4915-01-P