Seven County Infrastructure Coalition-Rail Construction & Operation Exemption-In Utah, Carbon, Duchesne, and Uintah Counties, Utah, 1564-1573 [2021-00175]

Agencies

• Surface Transportation Board

[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, https://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, https://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