Southern Pacific Transportation Company v. Interstate Commerce Commission United States of America, County of El Dorado, Respondent-Intervenor

The Interstate Commerce Commission rejected Southern Pacific’s application to abandon its 38.573-mile Placerville Branch serving El Dorado County, California, near Lake Tahoe, essentially on the ground that abandonment would be premature. Southern Pacific petitions for review pursuant to 28 U.S.C. §§ 2321 (a) and 2342(5). We deny the petition.

I.

Southern Pacific claimed that present and estimated future traffic levels did not justify continued operation of the Placer-ville Branch. The railroad reported that a steady decline in the lumber industry and the loss of traffic from two major business concerns had resulted in a decline in traffic from 2,500 carloads in 1975 to 548 a decade later and to only 64 in the first six months of 1987.

Southern Pacific acknowledged that despite the traffic decline the Placerville Branch continuously earned a net profit, totaling $165,616 in 1984, $231,240 in 1985 and $184,019 in the base year of July 1986 through June 1987. 1 However, the carrier projected a continuation of the traffic decline and an increase in the cost of necessary repair and maintenance, and predicted a one-year operating loss of $121,735, which abandonment would avoid.…

concurring.

I join Judge Browning’s excellent opinion, which correctly resolves this case according to established principles of administrative law. I write separately to comment on a more general problem raised by Judge Beezer’s thoughtful dissent.

Judge Beezer is concerned that the ICC has accorded more weight to intangible factors (the community’s future need for rail transportation) than to hard financial data (the fact that Southern Pacific could earn a greater return by investing its money elsewhere). He is also troubled because the ICC has failed to provide “a thorough explanation of why the factors of continued profitability, adverse community and shipper impact, and alternate transportation services outweigh an opportunity cost to SPT of $1,442,637 per year.” Dissent at 3015. Judge Beezer’s concern is well-founded, but the problem he raises is not unique to this case; it accompanies all judicial review of economic regulation.

If there were no ICC, railroads would abandon lines when they decided that they could make more money investing their resources elsewhere. Such market-based decisions allocate resources to their highest-valued use. Almost by definition, an ICC…

dissenting:

Southern Pacific Transportation Co. (“SPT”) petitions this court for reversal of an Interstate Commerce Commission (“ICC”) order denying SPT’s application to abandon a branch railroad line. I would reverse and remand, on the grounds that the ICC’s decision failed to establish a rational link between facts found and decision made on two issues: Opportunity costs, and prospects for growth in traffic.

I

From Folsom Junction, California, near Sacramento, a branch railroad line winds some thirty-eight miles into the foothills of Sierra Nevada mountains to the small town of Placerville. A century ago, the line carried gold-seekers into the hills. Today, it carries more prosaic cargoes of lumber. Approximately two freight trains per week use the Placerville branch, which is serviced by SPT.

Traffic on the line has declined precipitously, from 2,500 carloads of freight in 1975 to 341 in 1986. Believing the decline irreversible, SPT filed an application with the ICC to abandon the line on December 30, 1986. Pursuant to 49 U.S.C. § 10904 , the ICC has the authority to decide whether a railroad may abandon any part of its system. SPT based its application on data regarding…

871 F.2d 838 SOUTHERN PACIFIC TRANSPORTATION COMPANY, Petitioner, v. INTERSTATE COMMERCE COMMISSION; United States of America, Respondents, County of El Dorado, Respondent-Intervenor. No. 88-7009. United States Court of Appeals, Ninth Circuit. Argued and Submitted Jan. 10, 1989. Decided March 29, 1989. Gary A. Laakso, San Francisco, Cal., for petitioner. Louis Mackall, I.C.C., Washington, D.C., for respondents. Charles H. Montange, Washington, D.C., for respondent-intervenor. Petition for Review of an Order of the Interstate Commerce Commission. Before BROWNING, BEEZER and KOZINSKI, Circuit Judges. JAMES R. BROWNING, Circuit Judge: 1 The Interstate Commerce Commission rejected Southern Pacific's application to abandon its 38.573-mile Placerville Branch serving El Dorado County, California, near Lake Tahoe, essentially on the ground that abandonment would be premature. Southern Pacific petitions for review pursuant to 28 U.S.C. Secs. 2321 (a) and 2342(5). We deny the petition. I. 2 Southern Pacific claimed that present and estimated future traffic levels did not justify continued operation of the Placerville Branch. The railroad reported that a steady decline in the lumber industry…