PRIA, Government Policy, Made Personal

Summary

When a railroad asks to stop service or abandon a line, it must quickly give anyone thinking of helping, and the Board, key facts. The railroad must provide an estimate of the yearly subsidy or the lowest price to buy the line, recent reports on the line’s condition, traffic and revenue data, and any other information the Board needs. “Avoidable cost” means the expenses the railroad would not have if the line closed, including working capital, deferred maintenance, equipment costs, and lost tax benefits. “Reasonable return” means the railroad’s cost of capital as the Board decides, or, if the railroad is reorganizing, the average cost of capital for similar railroads. Any person has 4 months to file an offer to buy or subsidize the line with the Board. If the offer is lower than the railroad’s estimate, the offer must explain why. After the 4-month period, the Board has 15 days to say whether any responsible offers exist. If none, the railroad may proceed. If there are offers, abandonment is put on hold until the parties reach an agreement or the Board sets terms. Either side can ask the Board to set terms, and the Board must decide within 30 days. For sales the Board sets the price but not below fair market value. For subsidies the Board sets payment as revenues minus avoidable costs plus a reasonable return on the line’s value. The Board’s decision binds both sides, though an offeror can withdraw within 10 days of the decision. If there are multiple offers, the railroad picks an offeror and must finish a deal or ask the Board within 40 days after the 4-month window. A buyer may not stop service for 2 years or sell the line (except back to the seller) for 5 years. Subsidies last no more than 1 year unless both sides agree otherwise. Once a line is abandoned, the railroad’s duty to provide service on that line ends.

Title 49, §10904

Transportation, Source: USLM XML via OLRC

(a)In this section—

(1)the term “avoidable cost” means all expenses that would be incurred by a rail carrier in providing transportation that would not be incurred if the railroad line over which the transportation was provided were abandoned or if the transportation were discontinued. Expenses include cash inflows foregone and cash outflows incurred by the rail carrier as a result of not abandoning or discontinuing the transportation. Cash inflows foregone and cash outflows incurred include—

(A)working capital and required capital expenditure;

(B)expenditures to eliminate deferred maintenance;

(C)the current cost of freight cars, locomotives, and other equipment; and

(D)the foregone tax benefits from not retiring properties from rail service and other effects of applicable Federal and State income taxes; and

(2)the term “reasonable return” means—

(A)if a rail carrier is not in reorganization, the cost of capital to the rail carrier, as determined by the Board; and

(B)if a rail carrier is in reorganization, the mean cost of capital of rail carriers not in reorganization, as determined by the Board.

(b)Any rail carrier which has filed an application for abandonment or discontinuance shall provide promptly to a party considering an offer of financial assistance and shall provide concurrently to the Board—

(1)an estimate of the annual subsidy and minimum purchase price required to keep the line or a portion of the line in operation;

(2)its most recent reports on the physical condition of that part of the railroad line involved in the proposed abandonment or discontinuance;

(3)traffic, revenue, and other data necessary to determine the amount of annual financial assistance which would be required to continue rail transportation over that part of the railroad line; and

(4)any other information that the Board considers necessary to allow a potential offeror to calculate an adequate subsidy or purchase offer.

(c)Within 4 months after an application is filed under section 10903, any person may offer to subsidize or purchase the railroad line that is the subject of such application. Such offer shall be filed concurrently with the Board. If the offer to subsidize or purchase is less than the carrier’s estimate stated pursuant to subsection (b)(1), the offer shall explain the basis of the disparity, and the manner in which the offer is calculated.

(d)(1)Unless the Board, within 15 days after the expiration of the 4-month period described in subsection (c), finds that one or more financially responsible persons (including a governmental authority) have offered financial assistance regarding that part of the railroad line to be abandoned or over which all rail transportation is to be discontinued, abandonment or discontinuance may be carried out in accordance with section 10903.

(2)If the Board finds that such an offer or offers of financial assistance has been made within such period, abandonment or discontinuance shall be postponed until—

(A)the carrier and a financially responsible person have reached agreement on a transaction for subsidy or sale of the line; or

(B)the conditions and amount of compensation are established under subsection (f).

(e)Except as provided in subsection (f)(3), if the rail carrier and a financially responsible person (including a governmental authority) fail to agree on the amount or terms of the subsidy or purchase, either party may, within 30 days after the offer is made, request that the Board establish the conditions and amount of compensation.

(f)(1)Whenever the Board is requested to establish the conditions and amount of compensation under this section—

(A)the Board shall render its decision within 30 days;

(B)for proposed sales, the Board shall determine the price and other terms of sale, except that in no case shall the Board set a price which is below the fair market value of the line (including, unless otherwise mutually agreed, all facilities on the line or portion necessary to provide effective transportation services); and

(C)for proposed subsidies, the Board shall establish the compensation as the difference between the revenues attributable to that part of the railroad line and the avoidable cost of providing rail freight transportation on the line, plus a reasonable return on the value of the line.

(2)The decision of the Board shall be binding on both parties, except that the person who has offered to subsidize or purchase the line may withdraw his offer within 10 days of the Board’s decision. In such a case, the abandonment or discontinuance may be carried out immediately, unless other offers are being considered pursuant to paragraph (3) of this subsection.

(3)If a rail carrier receives more than one offer to subsidize or purchase, it shall select the offeror with whom it wishes to transact business, and complete the subsidy or sale agreement, or request that the Board establish the conditions and amount of compensation before the 40th day after the expiration of the 4-month period described in subsection (c). If no agreement on subsidy or sale is reached within such 40-day period and the Board has not been requested to establish the conditions and amount of compensation, any other offeror whose offer was made within the 4-month period described in subsection (c) may request that the Board establish the conditions and amount of compensation. If the Board has established the conditions and amount of compensation, and the original offer has been withdrawn, any other offeror whose offer was made within the 4-month period described in subsection (c) may accept the Board’s decision within 20 days after such decision, and the Board shall require the carrier to enter into a subsidy or sale agreement with such offeror, if such subsidy or sale agreement incorporates the Board’s decision.

(4)(A)No purchaser of a line or portion of line sold under this section may transfer or discontinue service on such line prior to the end of the second year after consummation of the sale, nor may such purchaser transfer such line, except to the rail carrier from whom it was purchased, prior to the end of the fifth year after consummation of the sale.

(B)No subsidy arrangement approved under this section shall remain in effect for more than one year, unless otherwise mutually agreed by the parties.

(g)Upon abandonment of a railroad line under this chapter, the obligation of the rail carrier abandoning the line to provide transportation on that line, as required by section 11101(a), is extinguished.

Notes & Related Subsidiaries

Editorial Notes

Prior Provisions

Provisions similar to those in this section were contained in section 10905 of this title prior to the general amendment of this subtitle by Pub. L. 104–88, § 102(a). A prior section 10904, Pub. L. 95–473, Oct. 17, 1978, 92 Stat. 1404; Pub. L. 96–448, title IV, § 402(b), Oct. 14, 1980, 94 Stat. 1941; Pub. L. 98–216, § 2(4), Feb. 14, 1984, 98 Stat. 5, related to filing and procedure for applications to abandon or discontinue railroad lines or rail transportation, prior to the general amendment of this subtitle by Pub. L. 104–88, § 102(a). See section 10903 of this title.

Statutory Notes and Related Subsidiaries

Effective Date

Section effective Jan. 1, 1996, except as otherwise provided in Pub. L. 104–88, see section 2 of Pub. L. 104–88, set out as a note under section 1301 of this title.

§10904 Offers of Financial Assistance to Avoid Abandonment and Discontinuance