SCPRC_Protest.dh.doc

BEFORE THE
SURFACE TRANSPORTATION BOARD

CAMAS PRAIRIE RAILNET, INC.  ABANDONMENT  BETWEEN SPALDING AND GRANGEVILLE IN LEWIS, NEZ PERCE AND IDAHO COUNTIES, ID )
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DOCKET NO.
AB564

PROTEST AND OPPOSITION STATEMENT

SAVE THE CAMAS PRAIRIE
RAILROAD COMMITTEE */
c/o JOHN BENNETT
SHEARER LUMBER COMPANY
Route 1, Box 2L
Grangeville, ID 83530

Protestants

By: THOMAS F. McFARLAND, JR.
McFARLAND & HERMAN
20 North Wacker Drive, Suite 1330
Chicago, IL 606062902
[phone]

Attorney for Protestants

DUE DATE: July 10, 2000
PUBLIC VERSION

BEFORE THE
SURFACE TRANSPORTATION BOARD

CAMAS PRAIRIE RAILNET, INC.  ABANDONMENT  BETWEEN SPALDING AND GRANGEVILLE IN LEWIS, NEZ PERCE AND IDAHO COUNTIES, ID )
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DOCKET NO.
AB564

PROTEST AND OPPOSITION STATEMENT

Pursuant to 49 C.F.R. § 1152.25(a), SAVE THE CAMAS PRAIRIE RAILROAD COMMITTEE (“SavetheRail Committee”) hereby submits this Protest and Statement in Opposition to the abandonment application filed by Camas Prairie RailNet, Inc. (“CSPR”) on May 26, 2000.
IDENTITY AND INTEREST OF PROTESTANT
SavetheRail Committee is an ad hoc association of local interests in the area of the rail line between Spalding and Grangeville, ID (“the Grangeville line”), who are opposed to abandonment of that line. The Committee consists of the seven largest shippers on the line; communities located along the line; representatives of grain producers, whose farms are located in rural areas near the line; and numerous citizens residing in the area, whose standard of living would be adversely affected if the line were to be abandoned. Members of the Committee (except for those citizens) are listed in Appendix 1 attached to this Protest and Opposition Statement. Appendix 2 consists of the signatures of 1,277 local citizens, denoting their opposition to the proposed abandonment. As reflected in those appendices, local opposition to the proposed abandonment is broad and unified.
SUPPORTING VERIFIED STATEMENTS
This Protest and Opposition Statement is supported by the facts contained in the following verified statements, which appear as appendices in the order noted:
Verified Statement of: Affiliation Appendix No. Paul Wyatt Former General Manager of CSPR 3 Carl Younce Lewiston Grain Growers 4 Russell Braun Columbia Grain Int’l, Inc. 5 Brad Bower US Timber Co. 6 Bill Roper Union Warehouse & Supply Company 7 John Bennett Shearer Lumber Company 8 Jay G. Eimers Idaho County Light & Power Cooperative Assn., Inc. 9 Ronald Jensen Atlas Sand & Rock, Inc. 10 Steve Johnson Idaho Grain Producers Assn. 11 Lori Cox Grangeville Chamber of Commerce 12

ADOPTION OF PROTEST OF IDAHO PUBLIC UTILITIES COMMISSION
In addition to the evidence and argument contained in this Protest and Opposition Statement, SavetheRail Committee hereby endorses and adopts the evidence and argument contained in the Protest being submitted by the State of Idaho through the Idaho Public Utilities Commission (IPUC). The Committee and IPUC worked closely together in preparing their respective Protests. The Committee especially endorses and relies on the evidence in the IPUC Protest on harm to rural and community development from the proposed abandonment, including the detailed study performed by representatives of the University of Idaho. That evidence corroborates and validates extensive anecdotal evidence of such harm in individual verified statements filed as part of the Committee and IPUC Protests.
OVERVIEW
This Protest and Opposition Statement demonstrates that abandonment of the Grangeville line is not permitted by public convenience and necessity because abandonment would have a serious adverse impact on rural and community development in the area of the rail line; because alternate transportation for traffic currently moving by rail to or from points on the line is economically and/or logistically infeasible; because abandonment would cause substantial and irreparable harm to shippers and receivers using the rail line; and because CSPR has not proven that continued operation of the line would be unduly burdensome. Harm to local interests from abandonment decidedly outweighs harm to CSPR and interstate commerce from continued operation.
APPLICABLE LEGAL PRINCIPLES
Pursuant to 49 U.S.C. § 10903(d), a rail carrier can abandon a rail line only if the Board finds that “the present or future public convenience and necessity require or permit the abandonment”. The statute does not define what is meant by “public convenience and necessity”. With one exception identified below, neither does the statute specify factors that the Board is to consider in determining whether a proposed abandonment is permitted by public convenience and necessity. The meaning of the statutory terms has been developed through case law.
The leading case is Colorado v. United States, 271 U.S. 153 (1926), in which Justice Brandeis authored the opinion for a unanimous Supreme Court. That case establishes that the Board is to determine whether a proposed abandonment is permitted by public convenience and necessity through what is referred to as a “balancing test ” or “weighing process”. The harm to local interests that would result from abandonment is to be weighed against the harm to the rail carrier and interstate commerce that would result from a requirement of continued operation of the line. Id. at 168. In his typically perceptive manner, Justice Brandeis recognized that in some cases the result of that weighing would be readily apparent, but in others that would not be so, viz. at 168169:
. . . In many cases, it is clear that the extent of the whole traffic, the degree of dependence of the communities directly affected upon the particular means of transportation, and other attendant conditions, are such that the carrier may not justly be required to continue to bear the financial loss necessarily entailed by operation (footnote omitted). In some cases, although the volume of traffic is small, the question is whether abandonment may be justly permitted, in view of the fact that it would subject the communities directly affected to serious injury while continued operation would impose a relatively light burden upon a prosperous carrier (footnote omitted) . . . Whatever the precise nature of these conflicting needs, the determination is made upon a balancing of the respective interests  the effort being to decide what fairness to all concerned demands . . .

In 1976, the abandonment statute was amended to require specific consideration of the effect of abandonment on “rural and community development”. (That is the exception referred to above). The following provision was added to what is now 49 U.S.C. § 10903(d):
. . . In making the finding (about public convenience and necessity), the Board shall consider whether the abandonment or discontinuance will have a serious adverse impact on rural and community development.

That provision is sometimes referred to as the Humphrey Amendment after its sponsor, Senator Hubert Humphrey of Minnesota. As explained by Senator Humphrey, the intent of the provision is to require recognition of the fact that often the adverse effect of abandonment is felt disproportionately by local citizens in small communities and family farmers in rural areas (in comparison to shippers), who lack the resources and mobility to easily relocate to other areas when the rail line in their area disappears. See 121 Cong. Rec. 38486 (Dec. 4, 1975).
Courts have been vigilant in ensuring that the criterion of rural and community development receive adequate consideration in the abandonment weighing process. In Georgia Public Service Com’n v. United States, 704 F.2d 538 (11th Cir. 1983), the Board’s predecessor, in authorizing a proposed abandonment, gave the following short shrift to the issue of effect on rural and community development (as quoted by the Court, id. at 546):
Harm to shippers and local communities. Under 49 U.S.C. 10903(a)(2), we are required to consider whether the proposed abandonment will have a serious adverse impact on rural and community development. Here, protestants allege that the termination of service on the Murphy Branch will have a devastating effect on the local stone and pulpwood industries and, concomitantly on the entire economy of an already depressed region. We agree that the loss of service over the Murphy Branch may burden shippers with increased costs, and thereby cause some of them to close or relocate. However, this situation is not atypical of most abandonments, and inconvenience or increased costs to shippers, standing alone, do not warrant continuation of a losing operation.

Although the local communities served by the Murphy Branch may also be adversely affected by this abandonment, we cannot deny the application solely on this basis. We must weigh the harm which abandonment causes against the burden on the carrier which continued operation imposes. Colorado v. United States, supra. Here, any potential loss of employment will be mitigated by possible relocation of pulpwood yards and transloading of shipper ’s commodities at an alternate railhead. The local economy also has industries that are not rail dependent and, in any event, a portion of the area will continue to be served by L & N’s other line. We conclude that on balance, the continued drain on L & N of operating the line outweighs any adverse effect on the local community which abandonment would cause.

The Court held that such consideration was inadequate, viz., emphasis added (id. at 546547):
This passage of the Commission’s opinion suffers a number of fatal defects. First, the record is devoid of evidence of anything other than passing reference to “other industries that are not rail dependent.” There is no testimony concerning the jobs provided by the “other industries,” or the contribution of these “other industries” to the local community. This is in contrast to record evidence noted by the ALJ that the industries the Commission callously suggests will “relocate” provide essential jobs to a community whose rate of unemployment approaches twenty percent. Second, service by another L & N line is irrelevant if the affected shippers cannot use the alternative line. (footnote omitted). Finally, we fail to see how “possible relocation” of the pulpwood or decorative stone industries can mitigate, or have anything to do with the injury to these communities. The Commission’s conclusion is inadequate under the “arbitrary and capricious” standard.

In amending the statute to require specific consideration of a serious adverse impact on rural and community development, Congress clearly intended that any such impact be a strong factor militating against approval of abandonment.
A related factor in determining whether there would be significant harm to local interests from abandonment is whether there would be effective alternative transportation for users of the rail line. Georgia Public Service Com’n v. United States, supra, is also a leading case on that subject matter. The Court here held that in order to be effective, alternative transportation must be both logistically and economically feasible. 704 F.2d at 545. A finding of the Board’s predecessor that shippers had alternative means of distributing their products was set aside as arbitrary and capricious in that case in the absence of evidence of logistic and economic feasibility of such transportation, id. at 545546; see, also, Busboom Grain Co., Inc. v. ICC, 856 F.2d 790, 795796 (7th Cir. 1988) (ICC finding that alternative transportation is readily available set aside as not adequately supported or explained where there was evidence that truck transportation would result in an increase in one shipper’s costs by $69,000 per year and by $6,000 per year for another shipper); Southern Pacific Transp. Co. v. ICC, 871 F.2d 838, 843 (9th Cir. 1989) (ICC finding that alternative transportation was not feasible upheld where such alternative would increase shippers’ costs by as much as 30 percent and decrease their revenue by as much as 10 percent  enough to force some of them out of business); and People of State of Ill. v. United States, 666 F.2d 1066, 1080 (7th Cir. 1981) (ICC findings regarding alternative transportation set aside where ICC failed to determine whether alternative transportation was feasible).
In view of the above judicial determinations, it is safe to say that an absence of alternative transportation that is logistically and/or economically feasible is also a strong factor militating against authorization of abandonment.
Harm to a rail carrier and interstate commerce can take one or more of three forms. Most serious is operating losses, i.e., failure of revenues attributable to the line to cover the line ’s operating costs. Severe and permanent operating losses can compel a determination that abandonment is permitted by public convenience and necessity because a requirement of continued operation could be constitutionally confiscatory in that circumstance. However, where operating losses are small and sporadic or where there is a reasonable prospect for profitable operation in the foreseeable future, even a substantial operating loss can be outweighed by serious harm to communities, rural interests and shippers.
A second form of carrier harm is rehabilitation costs, i.e., capital costs for repair or replacement of infrastructure on the line that cannot be recovered from operating profits within a reasonable period of time. Minimum safety standards promulgated by the Federal Railroad Administration (FRA) determine whether such rehabilitation is required. A reasonable period for amortization of rehabilitation costs takes into account the useful lives of the assets under consideration.
The third and least severe form of carrier harm is opportunity costs, i.e., the extent to which a profit from operating a line fails to provide a costofcapital return on the net liquidation value of the rail line assets. Opportunity costs alone can justify an abandonment where there is no evidence of harm to local interests. Chicago and North Western Transp. Co.  Abandonment, 366 I.C.C. 373, 380 (1982). However, significant harm to local interests has consistently been found to outweigh even substantial opportunity costs. Southern Pacific Transp. Co. v. ICC, supra, 871 F.2d at 843; CSX Transportation, Inc.  Abandonment between Dayton and Arcanum  in Darke, Preble and Montgomery Counties, OH, ICC Docket No. AB55 (SubNo. 336), decision served July 31, 1990 (not printed), at 19 and cases there cited.
APPLICATION OF LEGAL PRINCIPLES TO THE FACTS
A.SERIOUS ADVERSE IMPACT ON RURAL AND COMMUNITY DEVELOPMENT

The record in this proceeding compels a finding that the proposed abandonment would have a serious adverse impact on rural and community development in the area of the Grangeville line. Indeed, this record undoubtedly contains the most specific and extensive evidence of harm to rural and community development from abandonment of any abandonment proceeding decided by this Board or its predecessor. In that respect, a very scholarly and thorough study and research report submitted by representatives of the University of Idaho corroborates and validates extensive anecdotal evidence that this abandonment would have enormous adverse regional economic impacts.
Increased costs of about 6 cents per bushel for transporting wheat by truck instead of rail would be passed along by elevator operators to area wheat farmers in the form of correspondingly lower prices paid for their wheat. (VS Peterson, Attach. 1 at 12; Appendices 4, 5 and 7 attached hereto). That would be a very significant hardship for those family farmers, who have not participated in the booming economy in the United States in the past decade. In 1989, the average price for wheat in Idaho was $3.67 per bushel. In 1998, that average price was $2.25 per bushel, a decline of 39 percent! (Appdx. 11 at 1). The further reduction in farm prices resulting from abandonment would exacerbate this alreadydepressed rural farm economy.
Of equal or greater importance to the distressed farm economy of the region, abandonment would put an end to premiums paid by malting houses and breweries for highquality malting barley grown in the local area. (VS Scoville at 2; Appendices 4, 5 and 7). The receivers of malt barley require that it be transported by rail. Consequently, if the Grangeville line were to be abandoned, malt barley would have to be transloaded from truck to rail at an offline point. That would add costs of approximately $5 per ton for trucking, handling and shrinkage. Increased costs of that magnitude would make barley producers in the area of the Grangeville line uncompetitive with producers in other areas, who would continue to enjoy direct rail service. Loss of premiums paid for malting barley would be especially harmful for area farmers because they have offset to some extent declining market prices for wheat. (VS Scoville at 2; Appdx. 11 at 2).
Abandonment of the Grangeville line would preclude agricultural infrastructure improvements that are essential for progress in the regional farm economy. For example, Lewiston Grain Growers’ (LGG) plan to expand and improve its grain elevator at Ferdinand, ID, has been put on hold because of the pendency of the abandonment application. (Appdx. 4).
The same kind of serious adverse impact would be felt by those in the region who rely on the local lumber industry. Substantiallyincreased costs resulting from abandonment would jeopardize the continued existence of US Timber Co.’s lumber mill at Craigmont, ID. (Appdx. 6 at 1). That mill is the largest private employer in Craigmont, and among the largest employers in all of Lewis County. (VS Gov. Kempthorne at 12; Appdx. 6 at 1). That mill directly employs 18 persons, and the financial wellbeing of numerous others is largely dependent on the continued operation of that mill. (Appdx. 6 at 1). Loss of employment at the US Timber Co. mill would be devastating for Craigmont and for the rural economy of the surrounding area. It would add a full percentage point to the unemployment rate in Lewis County, which, at 6.7 percent in 1999, is already 2.6 percentage points higher than the 4.1 percent national average. (VS Peterson, Attach. 2 at 9, Fig. 213).
Abandonment of the Grangeville line would deprive the communities along the line and the surrounding rural economy of significant income from touristrelated activities. Based on actual experience in 1999, the local economy derives $200,000 to $300,000 per year in revenue as a result of spending by participants in “speeder car” tours over the line (speeder cars are motorized railroad maintenance cars designed to operate over railroad lines). The infusion of that revenue into the local economy is extremely beneficial to rural and community development in the local area; correspondingly, loss of that revenue would have a very serious adverse effect on rural and community development. (Appdx. 12 at 12). To make matters worse, that adverse effect would be felt primarily in the community of Grangeville, and in the surrounding rural area of Idaho County, where the unemployment rate in 1999 was 10.8 percent, more than double the national and Idahostatewide average rates. (VS Peterson, Attach. 2 at 9, Fig. 213).
Abandonment would deprive the local economy of substantial revenue from spending that occurs when the Grangeville line is used for filming railroad scenes in Western motion pictures. Approximately $1 million was spent in the local area while railroad scenes from “Wild Wild West” were being filmed on the line in 1998. (Appdx. 12 at 3). The local economy is in dire need of large revenue infusions such as that. Except for the proposed abandonment, the Grangeville line would likely be used for filming of Western railroad scenes in additional motion pictures. The project manager of “Wild Wild West” was very pleased with the scenic nature of the Grangeville line for filming such scenes. (Id.).
Abandonment would preclude the very beneficial effect on the local economy that occurs when a rail line is used for passenger dinnertrain and/or excursion train service. There is a strong current demand for such service. (Appdx. 12 at 4). Moreover, the predicted influx of 5 million to 12 million tourists in the area during the celebration of the Lewis & Clark Centennial during 2002-2006 will ensure a demand for ridership in the foreseeable future. (Id.; Appdx. 3). Contrary to CSPR’s claim, passenger service on the Grangeville line is not precluded by the length and curvature of tunnels on the line in relation to the passenger cars that would be used in the service. (Appdx. 12 at 4).
Abandonment of the Grangeville line would preclude the kind of industrial development that is essential for diversification and improvement of the local and regional economy. The complete rebuilding of the lumber mill at Craigmont would not have occurred unless CSPR had stated to US Timber Co. (falsely) that closing of the rail line was not foreseen. (Appdx. 6 at 1). Abandonment would threaten the continued existence of that plant. (Id.). The availability of rail service is an important factor in determining whether a lumber plant expansion project by Shearer Lumber Company at Grangeville will go forward. (Appdx. 8 at 3). It is highly unlikely that a strawboard plant now considering locating at Grangeville would do so if the rail line were to be abandoned. (Appdx. 12).
A very scholarly and thorough study and research report by Steven Peterson, Research Economist, and Mike DiNoto, Professor of Economics, both of the University of Idaho, establishes that abandonment of the Grangeville line would have enormous negative impacts on the regional economy. (VS Peterson). For every $1 of costs to the region from abandonment, there would be only 23 to 24 cents of offsetting benefits. Based on thorough analysis and using CSPR’s prediction of forecast year traffic, the PetersonDiNoto study concludes that abandonment would result in the following:
(1) $1.249 million in direct lost income to regional producers from increased transportation costs, plus an indirect (multiplier) effect of $1.511 million in lost sales and $280,000 in lost labor income;
(2) $388,642 in lost railroadrelated tourism sales, causing lost labor income of $170,546;
(3) an increase of approximately 18,000 trucks per year on US Highway 95, causing a regional loss of at least $114,980 in annualized sales and $50,456 in labor income from additional vehicle accidents;
(4) $6.4 million in lost sales and $1.57 million in labor income as a result of closure of the US Timber Co. lumber mill at Craigmont, ID;
(5) a total of $8.428 million in lost sales and $2.071 in lost labor income. (VS Peterson at 12).
B.ECONOMIC INFEASIBILITY OF ALTERNATIVE TRANSPORTATION
The record establishes clearly that alternative transportation for shipments currently moving to and from the Grangeville line by rail is economically infeasible.
US Timber Co. (UST) would incur increased costs of approximately $648,000 per year as a result of use of truckrail alternative transportation for the 720 carloads that it would ship or receive by rail at Craigmont in the forecast year. (Appdx. 6 at 2). Competitive conditions in the lumber industry would force UST to absorb those increased costs. Increased costs of that magnitude would jeopardize the continued existence of the Craigmont mill. (Id.).
Shearer Lumber Company (ShearerBennett) would incur increased costs of approximately $100,000 per year as a result of use of truckrail alternative transportation for the 208 carloads that it would ship by rail from Grangeville in the forecast year. (Appdx. 8 at 2). That would greatly reduce the profitability of its lumber mill at Grangeville. (Id. at 3).
Alternative truckrail transportation would be wholly inadequate for barley shipped by Lewiston Grain Growers (LGG) by rail from the Grangeville line because the extra costs associated with the truckrail alternative would make LGG uncompetitive with suppliers having direct rail service. (Appdx. 4 at 5). As a result, LGG would lose profitable malt barley sales amounting to approximately $150,000 per year. In addition, LGG would incur approximately $20,000 in additional costs per year to ship wheat by truck and added costs of about $13,000 per year to receive fertilizer by truck. (Id.).
Atlas Sand & Rock, Inc (Atlas) would incur added costs of approximately $12,150 per year to receive magnesium chloride by truck compared to receipt by rail. (Appdx. 10 at 2). The higher cost of truck service might well prevent Atlas from successfully bidding on road projects in the area. (Id.).

In summary, in addition to the increased costs that would be passed on to farm
families and other citizens in the region, abandonment of the Grangeville line would cause shippers on the line to suffer reduced sales and/or to absorb increased costs totaling nearly $1 million per year (i.e., $943,150 per year).
*/ Members of Save the Camas Prairie Railroad Committee are identified in Appendices 1 and 2 of this Protest and Opposition Statement.