Borough of Columbia; Shawnee Run Greenway, Inc. v. Surface Transportation Board; United States of America

PRECEDENTIAL
Filed August 26, 2003
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 02-2599
BOROUGH OF COLUMBIA;
SHAWNEE RUN GREENWAY, INC.,
Petitioners,
v.
SURFACE TRANSPORTATION BOARD;
UNITED STATES OF AMERICA,
Respondents,
FRANK SAHD SALVAGE,
Intervenor Respondent.
Appeal from the Surface Transportation Board
1411 Corp. — Abandonment Exemption —
in Lancaster County, PA
STB Docket Nos. AB-529X & AB-581X
Argued: April 10, 2003
Before: BARRY and ROSENN, Circuit Judges,
POLLAK, District Judge*
(Filed August 26, 2003)
*Honorable Louis H. Pollak, District Judge for the United States
District Court for the Eastern District of Pennsylvania, sitting by
designation.

-- 1 of 34 --

Robert Pfannebecker
Zimmerman, Pfannebecker, Nuffort
& Albert
22 South Duke Street
Lancaster, PA 17602
Counsel for Petitioner Borough of
Columbia
Charles H. Montange (Argued)
426 Northwest 162nd Street
Seattle, WA 98177
Counsel for Petitioner Shawnee Run
Greenway
Marilyn R. Levitt (Argued)
Surface Transportation Board
Office of the Secretary
1925 K Street, NW, Suite 700
Washington, DC 20423
Counsel for Respondent Surface
Transportation Board
Robert J. Wiggers
Room 10528
John J. Powers, III
Room 10535
United States Department of Justice
Antitrust Division
601 D Street, NW
Patrick Henry Building
Washington, DC 20530
Counsel for Respondent United
States of America
Jeffrey O. Moreno
Thompson Hine
1920 N Street, NW
Suite 800
Washington, DC 20036-1600
Counsel for Intervenor Respondent
Frank Sahd Salvage
2

-- 2 of 34 --

OPINION OF THE COURT
POLLAK, District Judge.
This case represents the latest chapter in the complex
history of a two-and-a-half-mile stretch of rail line located
in Lancaster County, Pennsylvania. The track had remained
unused for over a decade when petitioner Shawnee Run
Greenway, Inc. (“Shawnee”), on April 10, 2001, acquired an
option to purchase the rail line from its owner, 1411
Corporation (“1411” — not a party to this proceeding), and
operator, Middletown & Hummelstown Railroad Company
(“M&H” — not a party to this proceeding).1 Shawnee
planned to remove the rails and develop a trail and
greenway along the route. Shawnee’s plan was thwarted,
however, when the intervenor-respondent Frank Sahd
Salvage Center, Inc. (“Sahd”) proffered an “offer of financial
assistance” (“OFA”) to the respondent Surface
Transportation Board (“STB”), and sought to purchase the
line from 1411 and M&H with the expressed intent to
resurrect the dormant line for freight shipping. The STB
approved Sahd’s OFA and set the conditions and
compensation for Sahd’s purchase of the rail line.
Shawnee and petitioner Borough of Columbia take issue
with the STB’s decision to permit Sahd to purchase the
line. The challenge to the decision is based on contentions
that (1) the STB acted arbitrarily and capriciously in
determining that there was a likelihood that Sahd would
actually restore the rail line to use, and (2) the transfer of
the line to Sahd amounts to an unconstitutional taking.
Having reviewed the proceedings before the STB, we decline
1. While the option contract (dated September 7, 1999) creating the
rights assigned to Shawnee makes no mention of M&H, the final
purchase contract (dated September 17, 2001) purports to permit
Shawnee to “acquire the property from owner [1411] and operator
[M&H].” We note that, in different portions of the record, M&H and 1411
are referred to interchangeably as the seller or owner of the property. For
purposes of discussion, we will refer to 1411 and M&H as the entities
from whom the line was to be acquired.
3

-- 3 of 34 --

to disturb the agency’s decision to allow Sahd to purchase
the line.
I. STATUTORY SCHEME
Before describing further the underlying facts of this
case, we pause to outline the statutory scheme pursuant to
which the STB acted. For almost a century, the federal
government has exercised plenary and exclusive authority
over the abandonment of freight railroad lines. Chicago &
N.W. Transp. Co. v. Kalo Brick & Tile Co., 450 U.S. 311,
320-21 (1981). Beginning with the Transportation Act of
1920, ch. 91, 41 Stat. 477-478 (1920), that authority was
vested in the Interstate Commerce Commission (“ICC”).
Through the vehicle of the ICC Termination Act (“ICCTA”),
Pub. L. No. 104-88, 109 Stat. 803 (codified in scattered
sections of 49 U.S.C.), Congress on January 1, 1996
abolished the ICC and created the STB to perform functions
similar to those previously assigned to the ICC. 49 U.S.C.
§ 10501. Pursuant to the ICCTA, the STB has broad
regulatory jurisdiction over “transportation by rail carrier.”
Id. § 10501(a). The term “rail carrier” is defined, in relevant
part, as “a person providing common carrier railroad
transportation for compensation.” Id. § 10102(5). A line or
railroad may not be taken out of the national rail system,
and a railroad may not be relieved of its common carrier
obligation, unless the carrier first obtains abandonment
authority from the STB. Id. § 10903(a)(1).
The procedures by which a carrier applies to the STB for
abandonment of a railroad line are captured in 49 U.S.C.
§ 10903. The STB may permit a proposed line
abandonment upon determining that the “present or future
public convenience and necessity require or permit the
abandonment.” Id. § 10903(d). Alternatively, the STB may
conduct rail abandonment proceedings through the
exemption procedures authorized by 49 U.S.C. § 10502.
One of the exemption procedures utilized by the STB
provides a streamlined mechanism for the abandonment of
a rail line if (a) the line has not been used for local traffic
for at least two years; (b) overhead traffic on the line can be
rerouted; and (c) no shipper has filed a complaint regarding
cessation of service over the line. 49 C.F.R. § 1152.50(b).
4

-- 4 of 34 --

Abandonment pursuant to this exemption is justified by the
STB’s finding that (1) “its prior review and approval of these
abandonments . . . is not necessary to carry out the rail
transportation policy of 49 U.S.C. § 10101”; and (2) “these
transactions are of limited scope and continued regulation
is unnecessary to protect shippers from abuse of market
power.” 49 C.F.R. § 1152.50(c)(1-2).
Under 49 C.F.R. § 1152.50(d), a carrier seeking
authorization for abandonment files a “notice of exemption”
with the STB. Within twenty days of the filing, the STB
publishes “notice” of the proposed abandonment in the
Federal Register. Id. § 1152.50(d)(3).
That a carrier has sought STB permission for
abandonment often does not end the story. While Congress,
in establishing procedures for the abandonment of lines,
has sought to assist carriers wishing to be free of lines
operating at a loss, it has also recognized the competing
interest of maintaining established lines (or at least the
right-of-way) to meet shippers’ present and future needs for
railroad freight service. See Hayfield N. R.R. Co. v. Chicago
& N.W. Transp. Co., 467 U.S. 622, 630 (1984) (referring to
“Congress’ efforts to accommodate the conflicting interests
of railroads that desire to unburden themselves quickly of
unprofitable lines and shippers that are dependent upon
continued rail service”); Preseault v. ICC, 494 U.S. 1, 5
(1990) (describing “congressional efforts to preserve
shrinking rail trackage”). When a line is abandoned, the
property upon which the tracks are laid — property the
carrier commonly holds by an easement — commonly
reverts to owners of the properties adjoining the former
track area. Preseault, 494 U.S. at 8. This means that it may
be very difficult to cobble together a contiguous strip of
land for a future rail line once abandonment is
consummated.2 Therefore, Congress has charged the STB
2. This practical problem has been succinctly described:
When railroad lines are abandoned, they do more than simply fall
into disrepair; if the grants of land are in the form of an easement
(which terminates in favor of the servient estate when abandoned) or
fee simple determinable (which triggers a future interest) the
5

-- 5 of 34 --

with administering certain statutory “remedies” that avoid
the abandonment of rail lines. For the purposes of the
instant litigation, two remedies are of particular
importance: (1) offers of financial assistance (“OFAs”) under
49 U.S.C. § 10904; and (2) “railbanking” under 16 U.S.C.
§ 1247(d).
A. Offers of Financial Assistance
When a carrier has applied to abandon a rail line, “any
person” may file an OFA, which is an offer to purchase or
subsidize a rail line and so to facilitate continued freight
rail service. 49 U.S.C. § 10904(c); 49 C.F.R. § 1152.27(f).
When a timely OFA is filed and the STB finds that the
offeror is “financially responsible,” the STB must postpone
abandonment authority pending completion of the OFA
process. 49 U.S.C. § 10904(d)(2).
When an OFA is on the table, the offeror and the rail
carrier are free to negotiate the terms of the putative
transaction. Id. § 10904(d)(2). If they fail to reach an
agreement, either the offeror or the rail carrier, within thirty
days of the OFA, may request that the STB set the
conditions and amount of compensation for the
transaction. Id. § 10904(e). Within thirty days of the request
to establish conditions and compensation amount, the STB
renders its decision. Id. § 10904(f)(1)(A). Once the STB sets
the conditions and compensation, the railroad is bound to
those terms, but the OFA proponent has ten days to
withdraw the OFA before being bound to the STB’s
decision. Id. § 10904(f)(2).
Once the offeror purchases the rail line, whether through
a negotiated agreement or pursuant to the conditions and
compensation set by the STB, the abandonment proceeding
possessory estate is transformed into fee simple absolute. In such
cases, the railroad loses all right to the easement upon
abandonment. Railroads fear that should demand for rail transport
rise in the future, the lost easements would be extremely difficult
and expensive to regain.
Emily Drumm, Note, Addressing the Flaws of the Rails-to-Trails Act, 8
Kan. J.L. & Pub. Pol’y 158, 159 (1999) (footnotes omitted).
6

-- 6 of 34 --

is dismissed. 49 C.F.R. § 1152.27(f)(2). When an offeror
acquires a line under § 10904, it may not seek to transfer
or discontinue service on the line for at least two years. 49
U.S.C. § 10904(f)(4)(A).
B. Railbanking
The second relevant method of preserving a rail line
right-of-way is referred to as “railbanking” — a process in
which an entity willingly assumes responsibility for a line
and establishes a public trail along the route. 16 U.S.C.
§ 1247(d) (known as the “Rails-to-Trails Act”). The interim
trail use “shall not be treated, for purposes of any law or
rule of law, as an abandonment of the use of such rights-
of-way for railroad purposes,” and is subject to restoration
or reconstruction for railroad purposes. Id.
The STB’s regulations implementing § 1247(d) comprise
procedural steps somewhat analogous to those involved in
an OFA. 49 C.F.R. § 1152.29. Each entity seeking trail use
files a “Statement of Willingness To Assume Financial
Responsibility” with the STB. Id. § 1152.29(a)(3). These
“statements” must be filed within ten days of publication of
the notice of exemption in the Federal Register. Id.
§ 1152.29(b)(2). If the railroad agrees to negotiate regarding
prospective trail use, then the STB issues a Notice of
Interim Trail Use or Abandonment (“NITU”), which permits
the railroad to discontinue service in favor of interim trail
use, subject to future restoration of rail service. Id.
§ 1152.29(d)(1-2). Importantly, unlike OFA offers,
railbanking requests are not binding upon the rail line —
accepting a railbanking offer is at the discretion of the
carrier.
II. FACTUAL AND PROCEDURAL HISTORY
Having set forth a summary of the statutory framework
governing abandonment, OFAs, and railbanking, we now
turn to the facts of the instant case and their place in that
framework.
This case involves a two-and-a-half-mile stretch of
railroad located in Lancaster County, running from an
urban setting into open farmlands, and terminating in a
7

-- 7 of 34 --

field about 250 feet north of a highway. The right-of-way
along the span of the line fluctuates between twenty and
sixty feet in width.
The line has changed hands a number of times in the
many decades of its existence. On April 1, 1864, the
Reading & Columbia Railroad (“R&C”) opened a 39.5-mile
line (which included the 2.5-mile section at issue here).
R&C was merged into the Reading Company on December
31, 1945. Consolidated Rail Corporation (“Conrail”)
acquired the 39.5-mile line on April 1, 1976. Conrail, in
1982, transferred the relevant 2.5-mile portion of the line to
ITT Grinnell, and abandoned the remainder of the line
(subsequent references to the “line” refer only to the 2.5-
mile stretch). ITT Grinnell, in turn, transferred the line to
its wholly owned subsidiary, 1411. 1411 was then sold to
M&H in 1986. The last carload of freight on the line was
transported in December of 1990.
As the line lay fallow, changes in its physical
characteristics and legal status distanced it from
usefulness as an interstate railroad. In 1994, the Borough
of Columbia (“Columbia”) removed the rails at a railroad
crossing and repaved the street at the intersection. In 1997,
Conrail removed the connecting switch to the main line,
thereby severing the link to the interstate tracks. In 2000,
the Commonwealth of Pennsylvania paved over another
crossing, and the line was embargoed.3
In the early 1990s, Sahd — which operates a salvage
yard immediately adjacent to the tracks and had, at times,
shipped on the line — expressed interest in acquiring the
line, but the deal fell through. According to the verified
statement of Wendell J. Dillinger, the president of M&H and
1411, Sahd expressed no interest in the line between 1993
and 2000. In 1999, Mr. Dillinger described the line as
“unproductive” and advocated a “rails-to-trails” plan so that
3. An embargo, as described by the Supreme Court, “is a temporary
emergency suspension of service initiated by filing of a notice with the
[STB].” Chicago & N.W. Transp. Co. v. Kalo Brick & Tile Co., 450 U.S.
311, 314 n.2 (1981). If justified, an embargo relieves the carrier of
liability for failing to provide transportation. ICC v. Chicago, Rock Island,
& Pac. R.R. Co., 501 F.2d 908, 911 (8th Cir. 1974).
8

-- 8 of 34 --

M&H and 1411 might avoid selling the line piecemeal to the
adjacent property owners.
On September 7, 1999, Michael Stark, a local
businessman, purchased an option to acquire the line from
M&H and 1411 and establish a greenway. Mr. Stark then
assigned the option to petitioner Shawnee. Shawnee, in
preparing to establish the greenway, made payments
toward the purchase price and commissioned boundary
surveys and environmental analysis. A “Master Plan” for the
greenway was prepared in January 2001 under the
auspices of the Pennsylvania Department of Conservation
and Natural Resources, Columbia, West Hempfield
Township, and the Columbia Downtown Development
Corporation. The Master Plan noted that “[o]ne property
owner [presumably Sahd] indicated that they would like to
see rail with trail [as opposed to a trail established after
removing the rails].” However, after considering the
requirements for operating the rail, the drafters of the
Master Plan concluded that “a rail with trail alternative in
all likelihood would be economically and institutionally
infeasible.”
M&H and 1411 filed a notice of exemption under 49
C.F.R. § 1152.50 on March 23, 2001, thus initiating
abandonment proceedings. Shawnee then, on April 17,
2001, invoked the railbanking statute, 16 U.S.C. § 1247, by
filing a timely “Statement of Willingness To Assume
Financial Responsibility,” as prescribed by 49 C.F.R.
§ 1152.29(a)(3). Three days later, on April 20, 2001, Sahd
filed a timely notice of intent to file an OFA. Sahd requested
and received from the STB an extension of time for filing
the OFA. On July 5, 2001, Shawnee filed a motion
requesting the STB to exempt the abandonment
proceedings from the OFA provisions and to bar Sahd’s
OFA. Nonetheless, Sahd filed its OFA on July 11, 2001. On
July 16, 2001, the STB found Sahd to be a financially
responsible entity and further postponed the effective date
of the abandonment exemption. Soon thereafter, on July
30, 2001, Shawnee filed a motion to dismiss the OFA.
Shawnee’s motion to exempt the abandonment
proceedings from the OFA process and its motion to
dismiss Sahd’s OFA were denied on September 6, 2001.
9

-- 9 of 34 --

The September 6 decision found that the OFA submitted by
Sahd was bona fide, and that there was “no basis for
undercutting the Congressional objective of maintaining rail
service.” Although Sahd had not used the line since 1990,
the STB found credible Sahd’s explanation that a shift in its
customer base in recent years had made shipping by rail
more attractive than truck service.
Even as the proceedings before the STB transpired,
Shawnee, on September 17, 2001, exercised the option it
had acquired from Mr. Stark and entered into a contract to
purchase the line from M&H and 1411 for $125,000.
Meanwhile, its own private negotiations for the
acquisition of the line having borne no fruit, Sahd, on
September 17, 2001, filed a request for conditions and
compensation for the transaction to be set. By letter of
September 25, 2001, Shawnee asked the STB to require
Sahd to reimburse Shawnee for its equitable interest in the
line. On October 18, 2001, the STB established a purchase
price of $125,000, and did not address Shawnee’s request
for reimbursement. Sahd accepted the conditions and
compensation on October 29, 2001, and the sale was
approved by the STB on November 6, 2001. Sahd
submitted a “petition for clarification” on November 29,
2001, so that the STB might resolve uncertainty regarding
environmental liability issues associated with the OFA. STB
postponed the due date for closing until 45 days after it
reached a decision on the petition for clarification.
While the petition for clarification was pending, Columbia
filed a motion with the STB seeking an extension of time to
file a response. In the submission, Columbia expressed
itself as “extremely concerned that Sahd Salvage Company
in fact is employing the OFA process as nothing more than
a means to shield the property in question in this
proceeding from the legitimate process of federal, state or
local law, at great cost and expense to the citizens of the
Borough, and with no countervailing public benefit.” The
STB denied the motion, opining that Columbia was
attempting to reopen the administratively final decision to
grant an OFA, rather than responding to the petition for
clarification. Later, on April 12, 2002, the STB granted the
10

-- 10 of 34 --

petition for clarification, and resolved the environmental
liability issues in favor of Sahd.
Columbia, on May 2, 2002, filed with the STB a “Notice,
Appeal and Petition” that again challenged Sahd’s good
faith. In the submission, Columbia asserted that Sahd “has
refused to disclose any plans or data showing how it would
use the line for rail purposes, or whether it will use the line
for rail purposes at all.” Columbia also reported that it had
made a proposal to Sahd in April of 2002 — which proposal
Sahd rejected. The terms of the proposal called for Sahd
withdrawing its OFA, Columbia acquiring the property, and
Sahd operating the rail line. On May 30, 2002, the STB
treated the May 2, 2002 submission as a motion to reopen,
and “conclude[d] that Columbia [had] failed to demonstrate
any grounds for reopening [the] April decision.”
Sahd purchased the line from M&H and 1411 on May 30,
2002. Columbia and Shawnee filed the instant petition for
review on June 11, 2002.
III. DISCUSSION
Columbia and Shawnee argue that: (1) the STB departed
from its own established precedent without reasoned
explanation; and (2) the STB’s approval of the OFA effected
an unconstitutional “taking” of Shawnee’s property.
A. Did the STB depart from its own precedent without
reasoned explanation?
Under the Administrative Procedure Act, reviewing courts
are to “hold unlawful and set aside agency action, findings,
and conclusions found to be . . . arbitrary, capricious, an
abuse of discretion, or otherwise not in accordance with
law.” 5 U.S.C. § 706(2). If an agency departs from its own
precedent without a reasoned explanation, the agency may
be said to have acted arbitrarily and capriciously. Donovan
v. Adams Steel Erection, Inc., 766 F.2d 804, 807 (3d Cir.
1985).
In this case, the petitioners contend that the STB’s
decision to accept Sahd’s OFA represents an unreasoned
departure from established STB precedent requiring an
adequate demonstration of a bona fide intent to continue
11

-- 11 of 34 --

freight rail service. That established precedent, it is argued,
is reflected primarily in a recent appellate decision
upholding an STB ruling — Kulmer v. STB, 236 F.3d 1255
(10th Cir. 2001).
The Tenth Circuit in Kulmer, and the Ninth Circuit in a
similar case, Redmond-Issaquah Railroad Preservation Ass’n
[RIRPA] v. STB, 223 F.3d 1057 (9th Cir. 2000), weighed STB
determinations which were, procedurally, the obverse of the
case at bar. In each instance, the STB had denied the OFA
presented to it, and the offeror petitioned the circuit court
for a holding that the STB was acting outside the scope of
its statutory authority by weighing the probability of
continued rail service. In both instances, the circuit courts
deferred to the STB and held that the agency was entitled
to pursue such an inquiry. While Kulmer and RIRPA
involved claims that the STB acted improperly by
considering the likelihood of continued rail service, the
petitioners in this case, by contrast, claim that the STB
shirked its supposed duty to conduct a searching
evaluation of that likelihood. Distilled to its essence, the
petition now before this court seeks findings that: (1) the
STB is obliged to evaluate the likelihood of continued rail
service; and (2) the STB’s determination that Sahd
genuinely contemplated continuing rail service was, as a
matter of law, without adequate evidentiary support. We
will address these two propositions in turn:
1. Is the STB obliged to evaluate the likelihood of continued
rail service?
In the order reviewed by the Tenth Circuit in Kulmer, the
STB denied an OFA that proposed to purchase an
abandoned rail line. The agency found that the offerors did
not have good-faith plans to provide continued rail service
on the line. The STB stated:
The OFA process is designed for the purpose of
continuing to provide freight rail service, and is not to
be used to obstruct other legitimate processes of law
(whether Federal, state, or local) when continuation of
such service is not likely. [citations omitted]
Accordingly, when disputed, an offeror must be able to
demonstrate that its OFA is for continued rail freight
12

-- 12 of 34 --

service. [citations omitted] Where, as here, the line is
not currently active, there must be some assurance
that shippers are likely to make use of the line if
continued service is made available, and that there is
sufficient traffic to enable the operator to fulfill its
commitment to provide that service. [citations omitted]
Roaring Fork R.R. Holding Auth. — Abandonment
Exemption — in Garfield, Eagle, and Pitkin Counties, CO,
STB Docket No. AB-547X at *2 (served May 21, 1999)
(available at 1999 WL 323347).
The STB found lacking the Kulmer offeror’s evidence of
projected rail use, and pointed to three specific deficiencies
in the OFA. First, although five potential shippers were
identified, three were not in a position to use the line and
the traffic projections for the remaining two were “too
indefinite and insufficient to support continued freight rail
operations.” Second, the offeror had acknowledged “that
continued freight service would not be self-sustaining.”
Finally, the offeror did not intend to use the line for
continued freight service, but instead, for passenger service
— the same use planned by the existing owner of the line.
Id. at *3.
The Tenth Circuit affirmed the STB’s decision and
rejected the offeror’s claim that the STB was statutorily
barred from considering rail-service continuation as a factor
in approving an OFA. Kulmer, 236 F.3d at 1257. The court
noted that “while Congress has not specifically required the
STB to consider continued rail service as a factor, there is
no basis in the statute for concluding that Congress has
specifically prohibited the STB from doing so.” Id.
In RIRPA, the Ninth Circuit upheld a similar dismissal of
an OFA in which the applicant, according to the STB
decision that formed the basis for the petition for review,
did nothing more than “merely hold[ ] out the possibility of
service at some unspecified future time.” The Burlington N.
& Santa Fe Ry. Co. — Abandonment Exemption — in King
County, Wa. in the Matter of an Offer of Fin. Assistance,
STB Docket No. AB-6 (Sub-No. 380X) at *4 (served Aug. 5,
1998) (available at 1998 WL 452837). The Ninth Circuit
opined that, given “the STB’s exclusive province to draw
13

-- 13 of 34 --

legitimate inferences from the evidence,” the conclusion
that “there was no potential for future traffic and that
RIRPA was not interested in offering rail service” was
reasonable. Redmond-Issaquah Railroad Preservation Ass’n
[RIRPA] v. STB, 223 F.3d 1057, 1064 (9th Cir. 2000).
Accordingly, the court affirmed the denial of the OFA.
Kulmer and RIRPA are persuasive authority that the STB
may evaluate the likelihood of continued rail service when
presented with an OFA. We see no reason to disagree. We
need not today decide whether the STB must conduct such
an evaluation, because in this case the agency expressly
considered the evidence bearing on Sahd’s announced
expectation to resume freight service. With respect to
Sahd’s interest in continued rail service, the STB wrote:
Shawnee’s main argument is that the Line is not
needed because it has not been used in recent years.
The fact that a line has not carried any traffic in a
decade could support the argument that there is no
call for continued rail service. Here, however, Sahd has
offered a convincing explanation for its recent reliance
on trucks and its desire to resume using rail service,
and it points to its past use of the Line and its previous
attempts to buy the Line. Shawnee notes that Sahd
has not documented its claim by submitting contracts
with the southern customers that it has named, but we
do not believe that such evidence is needed here.
Shawnee argues that Sahd’s line of work necessarily
impeaches the bona fides of its commitments and
shows that Sahd is only interested in scrapping the
Line. But Sahd did not find the Line by canvassing
likely candidates to buy and liquidate. Sahd has been
located on the Line for many years, and has made
extensive use of it for transportation service in
connection with its business. Moreover, Sahd would
have to purchase all the assets of the line, including a
fee simple interest in the underlying real estate, and
would be precluded from disposing of the Line for at
least 2 years. The high price of the real estate relative
to the price of the rail and the restrictions in section
10904 on disposal of the assets of a rail line make
14

-- 14 of 34 --

acquisition of the M&H Line solely to obtain the rail an
unattractive and therefore unlikely proposition.
Shawnee argues that restoration of rail service would
be uneconomic because rehabilitation and
maintenance costs would be prohibitively expensive.
But, although Shawnee offers a list of costs (such as
reconnecting the Line with the adjacent through track,
reestablishing crossings at four streets, and
reconditioning the line), Shawnee offers no support for
its assertion that these costs will add up to $300,000.
1411 Corp. — Abandonment Exemption — in Lancaster
County, PA, STB Docket No. AB-581X at *3 (served Sept. 6,
2001) (available at 2001 WL 1016782) (footnotes omitted).
Because the STB undertook to weigh the bona fides of
Sahd’s OFA, and because that weighing was in harmony
with past STB precedent, it follows that the limited role of
this court is to determine, once the STB has accepted the
bona fides of an OFA, whether a certain quantum of
evidence need support the result.
2. As a matter of law, was the STB’s determination that
Sahd genuinely contemplated continuing rail service
without adequate evidentiary support?
The language quoted from the STB’s discussion of Sahd’s
probability of resuming rail service reveals that the agency
thought it unlikely that Sahd was purchasing the line for
its scrap value, and, further, was satisfied that Sahd
intended to resume use of the line to ship to named
southern customers.
In challenging the sufficiency of the STB’s evaluation, the
petitioners have leveled a barrage of criticism at the
agency’s conclusion, arguing that: (1) Sahd’s acquisition of
the line amounts to nothing more than “railbanking,” for
which an OFA is not the appropriate mechanism; (2) “Sahd
presented no rail plans, no time table to reactivate service,
no means to finance restoration of crossings and
rehabilitation of the embargoed track, no economic
forecasts, no guarantees of service, no contracts with
shippers, no showing of any railroad management
experience or skills, and no showing of any rail equipment
15

-- 15 of 34 --

or anyone to operate the equipment”; and (3) the STB failed
to “require Sahd to show that its projections of traffic were
reasonable and that the level of rail traffic projected would
be sufficient to sustain rail service.” To be sure, the STB
has, in Roaring Fork, 1999 WL 323347 at *2, stated that
where a “line is not currently active, there must be some
assurance that shippers are likely to make use of the line
if continued service is made available, and that there is
sufficient traffic to enable the operator to fulfill its
commitment to provide that service.” But it must be
remembered that the STB is engaging in a comprehensive
examination of the facts in each OFA/abandonment
proceeding. For this court to hold as a matter of law that
the STB must require a certain level of evidence in one
segment of that examination would be to ignore that
Congress has tasked that agency, not this court, with
factfinding responsibilities. In Roaring Fork, the STB found
that the shipping projections were too “indefinite and
insufficient.” Here, the STB found no such deficiencies in
Sahd’s proof. Evaluating and comparing minutiae in the
evidence such as the definiteness and sufficiency of one
projection relative to others would be neither a desirable
nor a practicable level of review for this court to undertake
— especially when it is the STB’s “exclusive province to
draw legitimate inferences from the evidence.” RIRPA, 223
F.3d at 1064.
Moreover, we are not convinced that the body of STB
precedent requires, in every instance, a showing of financial
feasibility or a roster of committed shippers. We quote here
at some length from the Ninth Circuit’s RIRPA opinion,
which sheds useful retrospective light on prior ICC and STB
pronouncements on OFA evidentiary requirements:
Most significantly, RIRPA argues that the STB failed
to distinguish the decision here from its ruling in
Illinois Cent. R.R. Co. — Abandonment Exemption — in
Perry County, IL, STB Docket No. AB-43 (Sub-No.
164X) (served Nov. 8, 1994) [(available at 1994 WL
613355)], wherein it held that recent actual service is
not required for OFA approval. In Perry County, the
ICC considered an OFA, submitted by Freeman United
Coal Mining Company (“Freeman”), to purchase a 6.2
16

-- 16 of 34 --

mile line being abandoned by the Illinois Central
Railroad Company (“Illinois Central”) due to low
demand for coal and expiration of long-term supply
contracts. Freeman owned a coal mine at the terminus
of the line and wanted to preserve rail freight service
pending the return of favorable market conditions.
Illinois Central opposed the OFA, arguing that the line
had been inactive for three years. While acknowledging
Illinois Central’s opposition, the ICC countered that it
had never required recent actual service for OFA
approval and explained that its role was to preserve the
potential for transportation. The ICC therefore
approved the OFA based on its finding that Freeman
was offering to subsidize the line with a view to
securing it for rail purposes in order to tender coal for
transport as soon as it had coal to offer.
The STB, in denying RIRPA’s OFA, distinguished the
instant case from Perry County on the facts:
RIRPA’s reliance on Perry County is misplaced.
There, the owner of an inactive coal mine was willing
to make payments to the railroad to preserve a line
from which the mine owner received no immediate
benefit whatever. The offeror’s willingness to do so
manifested a strong intent to use the line for rail
service in the future if the mine were again to
become active. No other reason existed for the mine’s
owner to make the payments. Here, there is no
evidence to suggest that RIRPA has a similar interest
in acquiring the line to preserve the line for future rail
service. The issue is not whether service is currently
being provided, but whether the circumstances in
their entirety indicate that the financial assistance is
being offered for rail service. The evidence in Perry
County indicated that the answer was yes. The
evidence here indicates that the answer is no.
[The Burlington N. & Santa Fe Ry. Co. —
Abandonment Exemption — in King County, Wa. in
the Matter of an Offer of Fin. Assistance [Burlington],
STB Docket No. AB-6 (Sub-No. 380X) at *4 (served
Aug. 5, 1998) (available at 1998 WL 452837).]
17

-- 17 of 34 --

RIRPA, 223 F.3d at 1063-64 (emphasis added by RIRPA
court).
It is worth emphasizing that the STB in Burlington
(quoted by RIRPA in the italicized language supra) noted
that it looks to the “circumstances in their entirety” to
determine whether an OFA is supported by a genuine
possibility of the implementation of rail service in the
future. The Perry County case cited in Burlington shows
that the STB precedent does not require the sort of
demonstration that the petitioners would have the agency
require — “rail plans,” a “time table to reactivate service,”
“means to finance restoration of crossings and
rehabilitation of the embargoed track,” “economic
forecasts,” “guarantees of service,” “contracts with
shippers,” “showing of railroad management experience or
skills,” “rail equipment,” “personnel to operate the
equipment,” and “projections of rail traffic” that are deemed
“reasonable.” To be sure, those factors may all be
considered by the STB, but they represent only a small
cross-section of the types of evidence that aid in evaluating
the “circumstances in their entirety.” We find persuasive
the STB’s characterization of its own precedent, as stated in
the decision challenged by the instant petition for review:
Roaring Fork does not set out a rigid test requiring
an offeror to demonstrate that the line would be viable.
It merely requires a sufficient showing to support a
finding that an offer is, indeed, for continued freight
service and not for some other purpose. As to that
requirement, we believe that Sahd has met its burden.
Sahd, which would be the principal shipper on the line,[4
] ships 15,000 to 25,000 tons of scrap metal annually,
and it has projected that it will ship 70-90 cars per
year. While it has not yet nailed down firm contracts
for other traffic that is apparently available, a party
filing an OFA does not need to prove in advance that
its efforts to revive a failing line will without question
succeed.
4. The STB also found persuasive the fact that Sahd was not just the
proponent of the OFA, but also the primary shipper on the line. See 1411
Corp., 2001 WL 1016782 at *3 n.7.
18

-- 18 of 34 --

1411 Corp. — Abandonment Exemption — in Lancaster
County, PA, STB Docket No. AB-581X at *3 n.9 (served
Sept. 6, 2001) (available at 2001 WL 1016782).
We do not suggest that the evidence supporting the STB’s
decision is overwhelming. It is, manifestly, modest. A
reasonable factfinder could have found Sahd’s
demonstration in support of the OFA unpersuasive. Indeed,
it is not inconceivable that the members of this panel, had
we been members of the STB, would have arrived at a
conclusion different from that arrived at by the STB. But as
members of a reviewing court we are limited to inquiring
whether the STB’s decision had some evidentiary support
and was reasonably consistent with the agency’s own
precedent. And we hold that the STB has not acted
arbitrarily and capriciously in this case, since the decision
has some support in the record and the agency’s
explanation of how its decision comports with agency
precedent is not unreasonable. In fact, Sahd’s situation
appears analogous to that of the OFA offeror in the Perry
County matter: the STB in that case approved the OFA
submitted by the owner of an inactive coal mine who
intended to use the line in the future should the mine later
become active. In Sahd’s case, the STB approved the OFA
submitted by the owner of a salvage yard who intends to
use the line should it become cost-effective to ship to
southern customers. Far from departing from past
precedent, the STB’s approval of Sahd’s OFA is in lock-step
with the precedent of Perry County. A different result
obtained in RIRPA because the STB determined that there
was “no evidence” that RIRPA had an interest in preserving
the line for future rail service, and in Kulmer because the
STB found the projections of future rail service “too
indefinite and insufficient to support continued freight rail
operations.” Here, the factfinder — STB — found convincing
evidence — evidence which it identified — of genuine
interest in returning the rail line to use, and this court is
without authority to disturb that conclusion.5 We decline
5. The Kulmer case further supports this court’s deference to the STB.
The Tenth Circuit observed that the STB can and will require different
types of proof in different types of cases:
19

-- 19 of 34 --

the petitioners’ invitation to this court to reassess the
record evidence relied on by the STB. Because we do not
today disturb the STB’s conclusions, the petitioners’
corollary argument — that Sahd’s proposal amounted to
nothing more than railbanking, and so should not have
been given preference over Shawnee’s railbanking proposal
— is beside the point. The STB found that the OFA was for
continued freight service, a finding that clearly signified
that Sahd’s OFA represented more than a mere attempt at
railbanking.
B. Did the STB violate the Fifth Amendment by effecting an
unlawful taking?
The petitioners also contend that the STB violated the
Fifth Amendment by effectively taking property for non-
public use when it accepted Sahd’s OFA. Our decision that
the STB did indeed weigh the bona fides of Sahd’s intent to
resume rail operations erodes the foundation for such an
argument. The Supreme Court has counseled in favor of
deference to legislative decisions when determining what
constitutes “public use,” Haw. Hous. Auth. v. Midkiff, 467
U.S. 229, 241 (1984) (“In short, the Court has made clear
that it will not substitute its judgment for a legislature’s
It is true that OFA approval does not require proof of some
minimum amount of rail traffic. The ICC (the STB’s predecessor)
expressed the view that such a requirement “could impose an
obstacle to rail service in some cases.” Exemption of Rail Line
Abandonments or Discontinuance — Offers of Fin. Assistance, 4
I.C.C.2d 164, 167 (1988) (emphasis added). For instance, where
there is credible evidence that an OFA would result in continued rail
service despite the fact that the service would not be self-sustaining,
a minimum traffic requirement would be prohibitive. To illustrate, in
[Perry County], the offeror, who owned an inactive coal mine along
the rail line in question, wanted to subsidize the rail carrier to
maintain freight rail service although the line was inactive and it
was unknown when anyone, including the offeror, would use it in
the future. Under the circumstances, the offeror’s willingness to
subsidize a line from which it could derive no benefit besides
potential freight rail service persuaded the STB that the OFA was, in
fact, for continued rail service.
Kulmer, 236 F.3d at 1258.
20

-- 20 of 34 --

judgment as to what constitutes a public use ‘unless the
use be palpably without reasonable foundation.’ ” (quoting
United States v. Gettysburg Elec. Ry. Co., 160 U.S. 668, 680
(1896))), and this court has heeded that direction, Hughes
v. Consol-Penn. Coal Co., 945 F.2d 594, 612 (3d Cir. 1991)
(citing Midkiff). We have expressly noted that even if “the
motive for taking is to give to a private party,” it “can still
fall within . . . public use,” for “under the United States
Constitution ‘public use’ is a broad concept.” Hughes, 945
at 612-13. The OFA procedure avoids abandonment of rail
lines and so comports with the expressed policy of
Congress to “ensure the . . . continuation of a sound rail
transportation system . . . to meet the needs of the public
and the national defense.” 49 U.S.C. § 10101(4); see also 49
U.S.C. § 10904 (statute’s caption reads “Offers of financial
assistance to avoid abandonment and discontinuance”).
The STB applied the OFA statutory provisions established
by Congress to serve the public use. In light of the
precedent granting Congress a wide berth in determining
what constitutes public use, we are loath to second-guess
the factual determinations of the agency to which Congress
has assigned decision-making responsibility in OFA
proceedings.
When asked at oral argument which of the two
petitioners bore the brunt of the allegedly unconstitutional
taking, petitioners’ counsel suggested that Shawnee,
because it had purportedly invested $30,000 to $40,000 in
the project and had entered into a contract to buy the line,
suffered a taking as the “equitable owner.”
The Supreme Court has instructed that “[c]ontracts,
however express, cannot fetter the constitutional authority
of the Congress. Contracts may create rights of property,
but, when contracts deal with a subject-matter which lies
within the control of the Congress, they have a congenital
infirmity. Parties cannot remove their transactions from the
reach of dominant constitutional power by making
contracts about them.” Norman v. Baltimore & Ohio R.R.
Co., 294 U.S. 240, 307-08 (1935) (quoted in Connolly v.
Pension Benefit Guar. Corp., 475 U.S. 211, 223-24 (1986)).
21

-- 21 of 34 --

In determining if a taking occurred, we are to engage in
an “ad hoc, factual” inquiry into the circumstances of this
particular case, guided by three factors of particular
significance: (1) “the extent to which the regulation has
interfered with distinct investment-backed expectations”; (2)
“the economic impact of the regulation on the claimant”;
and (3) “the character of the governmental action.”
Connolly, 475 U.S. at 224-25.
We begin with the element most crucial to this case —
“the extent to which the regulation has interfered with
distinct investment-backed expectations.” Even a cursory
examination of the context in which the contractual
negotiations took place makes clear that Shawnee’s
investment-backed expectations necessarily included the
understanding that unfavorable STB actions might scuttle
the railway deal. That the negotiating parties were
continually aware that any agreement reached was subject
to the outcome of STB proceedings is evident from the face
of the two contracts executed.6 The 1999 contract by which
Michael Stark acquired an option to buy the railway
specified that “[t]he final sale shall be contingent upon
completion of all processes necessary for a ‘Rails to Trails’
conversion, including successful abandonment of the rail
line.” (emphasis added) Eventually, the Stark option was
assigned to Shawnee, and Shawnee in turn entered into a
contract to purchase the line. That contract, too,
contemplated that the road to the sale’s consummation led
through the STB: “Purchaser and Railroad shall cooperate
in, and use their best efforts to complete all necessary
filings at the [STB] for notices of interim trail use
(railbanking) or abandonment for the line . . . .” A
subsequent clause provides that the “[p]urchaser shall not
be obligated to proceed to closing unless an order rendering
[16 U.S.C. § 1247(d)] applicable to the premises is effective.”
It is thus apparent that Shawnee’s actions were all taken
6. The two contracts to which we refer are those discussed in the factual
recital supra — the contract by which Michael Stark obtained an option
to purchase the line on September 7, 1999, and the contract to purchase
the line executed by Shawnee on September 17, 2001 (after Shawnee
had been assigned Mr. Stark’s option).
22

-- 22 of 34 --

against the backdrop of a statutory and administrative
environment in which certain STB actions were needed
before either contract’s purpose could be effected. Shawnee
cannot be said to have been surprised that the STB’s
decisions might thwart its goals — the option contract
Shawnee acquired and the purchase contract it executed
both provided for that contingency.7 Shawnee knew it was
contracting for a privilege that would only be available if the
STB issued certain orders.8 When those orders were not
forthcoming, Shawnee’s contract was not taken from it;
rather, one of the conditions to contractual performance
was simply not met. Far from improperly destroying or
usurping Shawnee’s contractual rights, the STB merely
acted out of its acknowledged discretion within the
framework described by the contracts themselves.
The second and third elements need only passing
mention, given our finding that Shawnee had no right to
expect STB to permit abandonment of the line. We find the
economic impact on Shawnee to be minimal — the
contingency clauses in the option contract and the final
contract absolved Shawnee of obligation to purchase the
line if the attempt at railbanking failed. The $30,000 to
$40,000 Shawnee reports to have spent on the project was
spent at Shawnee’s own risk, given the uncertainties
inherent in the transaction. Finally, the government action
here was taken with the implicit goal of preserving a railway
for the common good. As discussed supra, we will not
7. At the time it signed the second contract, Shawnee had to be aware
that the prospects of abandonment were in doubt — Shawnee executed
the contract to purchase the line on September 17, 2001, eleven days
after Shawnee’s motion to dismiss Sahd’s OFA was denied by the STB.
8. Shawnee argues that “[t]he evidence below is unequivocal that
Shawnee had a reasonable investment-backed expectation,” based on the
verified statement from Mr. Dillinger that “[i]n 1999 [when the contract
was first signed], there was no reason why Michael Stark, [Shawnee], or
[M&H/1411] should have thought that Sahd Salvage would again be
interested in rail service.” The limitation of Mr. Dillinger’s statement lies
in its specificity — even if nobody thought in 1999 that Sahd might
submit an OFA, it has not been suggested why it might not be
reasonably anticipated that Sahd might change his mind or that
someone else might come along and submit an OFA.
23

-- 23 of 34 --

disturb the STB’s conclusion that Sahd’s OFA was an
appropriate means for accomplishing that goal.
The petition for review is DENIED.
24

-- 24 of 34 --

ROSENN, Circuit Judge, dissenting:
In this heated controversy over a 2.5 mile long dead-end
rail track, the Surface Transportation Board (STB) has
accepted an “Offer of Financial Assistance” (OFA) from a
company engaged in the scrap metal business. The offer is
neither to assist an existing distressed railroad nor to assist
an impoverished railroad in resuming operation. Rather,
the offer is to enable the offeror to obtain a valuable piece
of land on the basis of a three-fold speculation that it can
rehabilitate a dismantled railroad, that it has the ability to
operate a railroad, and finally that it may have in the future
customers or shippers who will use the railroad. The OFA
is from a company without any experience in operating a
railroad and is based solely on the vague and unsupported
statement of Ronald G. Sahd (Ronald), its president.
Without credible evidence to support its decision, the Board
acted arbitrarily and capriciously. I, therefore, respectfully
dissent.
I.
A brief statement of the pertinent facts preceding the OFA
may be helpful in putting this dispute in perspective. The
dead-end track on land (hereinafter “the corridor”) owned
by the Middletown and Hummelstown Railroad Co. (M&H)
and the 1411 Corporation runs through the center of
Columbia Borough and terminates in an open field in West
Hempfield Township, Lancaster County, Pennsylvania. At
one time, it formed part of a branch line acquired by
Consolidated Rail Corporation (Conrail) in 1976 to serve
one customer, ITT Grinnell, for its outbound shipments. ITT
Grinnell subsequently acquired a small part of the line from
Conrail (milepost 39.3 to milepost 37.2) in 1982. Grinnell,
having no interest in operating a railroad, transferred the
line to a wholly owned subsidiary, 1411 Corporation. When
Grinnell converted its coke-fired furnaces to electricity in
1986, rendering the line unnecessary, it sold 1411 to M&H.
M&H Railroad purchased it in the expectation that it, too,
would serve one customer, Colonial Metals. Colonial Metals,
however, made only one outbound shipment in the year
1990. There has been no service since 1990 and what
remains of the line is a 2.5 mile remnant that is the subject
25

-- 25 of 34 --

of this litigation. Since 1990, no shipper has utilized the
line.
Frank Sahd Salvage Center (Sahd) on occasion had used
the line to ship scrap metal. The President of the M&H
Railroad and 1411 Corporation averred that Sahd’s last
shipment of scrap was in February 1988 and it received two
carloads of machinery in 1990. In November 1992, Sahd
indicated some interest in purchasing the line. On August
5, 1993, Sahd’s attorney informed M&H that it was “no
longer interested in acquiring 1411.” In the ensuing years,
the remnant was dismantled without objection from
anyone. Conrail removed the interchange switch, Columbia
Borough removed the track from the in-town Fourth Street
Crossing, and the Commonwealth of Pennsylvania paved
over the Route 462 crossing.
Having no information of any shipping interest in the
remaining trackage, 1411 Corp. and M&H entered into an
option agreement to sell it and the adjoining land to
Michael Stark, a local businessman. Stark planned to use
the rail stub for railbanking and trail/greenway purposes.
He paid $4872 for the option and assigned it in April 2001
to Shawnee Run Greenway, Inc. (Shawnee), a Pennsylvania
non-profit corporation. Shawnee made an additional $4872
payment toward the purchase price to keep the option open
until M&H Railroad and 1411 Corporation obtained STB
approval for the abandonment of the remnant line.
Shawnee also spent $17,000 for boundary surveys and
environmental analysis.
For several years prior to the option contract, important
local, county, and State figures recognized the desirability
of preserving the corridor for open space, conservation
purposes, and as part of a countywide greenway system.
Columbia Borough’s 1995 Comprehensive Plan
recommended that the land be preserved as open space.
Lancaster County’s 1992 Regional Open Space Plan, which
includes Columbia Borough, contemplated the potential
conversion of the corridor to a trail as part of the
countywide greenway system.
Likewise, the Commonwealth of Pennsylvania envisioned
the corridor as a component of the state’s greenway
26

-- 26 of 34 --

network. The County’s 2000 Bicycle & Pedestrian Plan also
cited the corridor as a future component of a county bicycle
trail system. Columbia Borough, West Hempfield Township,
and the Pennsylvania Department of Conservation and
National Resources funded a comprehensive Master Plan
completed in 2001 for the preservation of the corridor as a
vehicle-free linear open space. The Plan included the
corridor as public open space for walking, biking, and
jogging, where “visitors of all ages and abilities will observe
historic, cultural, and environmental elements traversing a
diverse palette of landscapes.” The planning process
provided for public input. No party, including Sahd,
informed any of the planners of an interest in preserving
the land for railway purposes.1
Shawnee ultimately converted its option into a contract
to purchase the corridor for $125,000. 1411 and M&H filed
public notices of exemption to abandon service on April 12,
2001 effective May 12, 2001. On July 11, 2001, Sahd filed
its OFA which stayed the effective date of the exemption.
On April 8, 2002, Columbia Borough reaffirmed by
Council Resolution the consistency of the trail and
greenway use with local and regional land use plans. It also
noted that “possible future rail needs can be amply served
by preserving the inactive line intact pursuant to the
federal interim trail use and railbanking statute [16 U.S.C.
§ 1247(d)].” The Resolution expressly supported the
development of a greenway and trail line consistent with
local land use plans.
The STB ultimately rejected Shawnee’s challenge to
Sahd’s offer and denied Shawnee’s alternative request to
exempt the line under 49 U.S.C. § 10502 from the forced
sale provisions of 49 U.S.C. § 10904. STB based its
approval of the OFA solely on Sahd’s “convincing
explanation for its recent reliance on trucks and its desire
to resume using rail service.” The STB emphasized that
“Sahd has been located on the line for many years, and has
made extensive use of it for transportation service in
connection with its business.” Sahd last shipped over the
1. Ronald Sahd states that he approached Dillinger in the fall of 2000
and expressed a desire to purchase the corridor for rail use.
27

-- 27 of 34 --

line in 1988. In 1990, it received two carloads of
machinery. Since then, the line has been dismantled and
nothing remains of it except this 2.5 miles of track and the
land on which it rests. Thus, Sahd has not used the line or
any part of it for the past thirteen years. The STB noted
that the value in this purchase is not the track, but in the
fee simple title to the land.
II.
The burden of proof in this dispute is on the offeror,
Sahd. Kulmer v. STB, 236 F.3d 1255, 1256 (10th Cir.
2001). Sahd had to show by credible evidence that: (1) the
OFA was for continued rail use; (2) the offeror’s projections
of traffic were reasonable; and (3) the level of rail traffic
projected would be sufficient to sustain rail service. Id.;
Roaring Fork R.R. Holding Auth. — Abandonment Exemption
— In Garfield, Eagle & Pitkin Counties, STB dkt No. AB
547X, 1999 STB LEXIS 299, at *8 (STB May 21, 1999).
The Board acknowledged that this was the relevant
standard, but departed from its own precedent in failing
meaningfully to require Sahd to meet its burden of proof.
The STB finding that the OFA was a bona fide effort to
continue rail service was based only on bald, unsupported
assertions. As to the second and third Roaring Fork
requirements, the STB has no evidence whatsoever and M
& H submitted a verified statement indicating that the
hypothetical levels of use projected by Sahd would be
insufficient to justify the restoration expenses.
In effect, the STB erroneously placed the burden on
Shawnee and Columbia to prove that the OFA was not a
bona fide effort to provide rail service. The STB required
greater evidentiary support for Shawnee’s assertions than
for Sahd’s. For example, Shawnee offered a list of costs to
rehabilitate the line, including reconnecting the stub with
the adjacent through track, reestablishing crossings at four
streets, and reconditioning the line. Shawnee reasonably
estimated these costs at $300,000. The STB rejected this
estimate, stating that “Shawnee offers no support for its
assertion that these costs will add up to $300,000.” The
STB recognized that Shawnee cited the Columbia Greenway
28

-- 28 of 34 --

Master Plan as its authority for the proposition that
restoring service would be economically and institutionally
infeasible, but the STB rejected this projection as a
conclusion unsupported by analysis. On the other hand,
the STB blindly accepted Sahd’s less plausible calculations,
although Sahd offered no underlying support other than his
own self-serving statement.
Nor has Sahd furnished any convincing evidence that it
has any use for rail service. It has not furnished any
evidence whatsoever except for the self-serving statement of
its president, Ronald G. Sahd. Ronald also states that rail
service “will contribute to Sahd’s continued financial
success by allowing Sahd Salvage to reach mills throughout
the United States and to follow market demand for scrap
metal.” This broad, wishful statement is not supported by
a single affidavit or statement of any prospective customer.
In his unsupported statement, Ronald states that there
are mills in the South, particularly in North Carolina and
Virginia, that have “expressed an interest” in buying scrap
metal from his company. Sahd names five mills, which he
says are rail accessible, but in this hotly contested
proceeding, he provides no supporting proof from any of
them of an interest or intention to purchase Sahd’s scrap
metal. Sahd has not produced a single letter of interest
from them, or a letter of intent or a contract to support an
interest in purchasing scrap metal from Sahd. Not one of
them has been deposed, and Ronald’s statement has not
been tested by cross-examination. At best, his statement is
vague and highly speculative; at worst, it is fantasy. The
Board has not a shred of information as to how much metal
these mills would require on an annual basis, the
foreseeable duration of their requirements from Sahd, and
where and how they are obtaining scrap metal at the
present time. Sahd has not even produced a supporting
statement to show that they are rail accessible.
A close reading of Roaring Fork demonstrates that the
STB was bound by its precedent to reject Sahd’s offer. In
Roaring Fork, the STB criticized the offeror’s lack of tangible
evidence that other providers were interested in using the
line. The offeror identified five potential Southern shippers
but the STB found that three were not in a position to use
29

-- 29 of 34 --

the line and the traffic projections for the remaining two
were “too indefinite and insufficient to support continued
rail service.” Likewise, in the instant case, we have no
information whatsoever from any of the five potential
shippers mentioned in passing by Sahd as to what use a
rail line will have for any of them, or of what their traffic
projections might be.
Sahd did submit two letters from Anvil International,
Inc., which it refers to as a potential shipper. However,
these letters have scant evidentiary value. The first letter
consists merely of several vague sentences:
. . . The utilization of rail as a delivery made for some
type of raw material at several similar plants within
our company, has demonstrated that it can be an
effective method of transportation.
In the event that we determine that this would be a
favorable freight alternative for our plant, I believe that
we could utilize three to fifteen rail cars per week.
This letter is innocuous, non-committal, and has no
evidentiary value of transportation need. That rail “can be
an effective method of transportation” is an obvious
generalization that has no significance. Nothing in this
vague letter makes any commitment; it merely expresses a
possibility at some undetermined future time.
Sahd submitted a follow-up letter from Anvil dated
August 8, 2001. This letter was almost as vague and
indefinite as its first letter. It states that Sahd recently
acquired a new product line at its Columbia facility,
without stating what it is. It also states that rail delivery
“has become more viable” and it is currently investigating
ways to reduce its freight and traveling costs. It is a
perfunctory, feeble statement; it furnishes no information
as to whether it has a railroad siding, whether it has used
the line in the past, or what its traffic requirements may be.
Again, Anvil makes not the slightest commitment to use the
line.
The experienced president of a railroad that formerly
operated this very line, Wendell J. Dillinger, stated in his
sworn statement that neither Sahd nor Anvil had
30

-- 30 of 34 --

committed themselves to ship over his line, and had “M&H
Railroad/1411 felt there was serious interest in keeping the
line running, no abandonment authorization would have
been requested.” Dillinger further stated that “Anvil has not
contacted us since 1987.” Dillinger’s objectivity is beyond
dispute. His company will receive the same amount of
money whether the corridor is purchased by Sahd or
Shawnee.
Likewise, Colonial Metals informed the STB by letter
dated July 18, 2001 that it owns a twelve-acre site directly
adjacent to the planned Shawnee Run Greenway. Colonial
stated that “we see no realistic current rail need for the
line.” It expressed the view at the same time that it did not
“anticipate that railbanking the line is necessary to keep
this line available for reasonable future needs.” Colonial,
therefore, notified the Board that it had no objection to
exempting this proceeding from further OFA procedures.
STB recognized that the failure of the line to carry any
traffic in a decade “could support the argument that there
is no call for continued rail service.” STB relied, however,
on Sahd’s wishful statement that it desires to resume rail
service, its previous attempts to buy the Line, and its
unsupported potential for rail service. The Interstate
Commerce Commission, STB’s predecessor, held that
“[t]hose situations in which a purchaser of rail properties
has no affirmative plans for continuation or resumption of
service, but merely holds out the possibility of continuation
or resumption of service at some unspecified future time,
are not properly to be considered offers of financial
assistance and do not fall within the scope of 49 U.S.C.
10905.” Abandonment of R.R. Lines & Discontinuance of
Service, Ex Parte No. 274 (Sub-No. 6), 365 I.C.C. 249, 260
(I.C.C. 1981).
Sahd may have used the line in the past, but not in the
last thirteen years. Sahd may “desire to resume using rail
service” but mere desire is not proof of feasibility, a need for
the service, that there is sufficient traffic for a viable line,
and that Sahd has the capability to operate a railroad.
Sahd’s unsupported wish is a feeble basis on which to
reject important and bona fide local, county, and state
plans for trails and open space.
31

-- 31 of 34 --

III.
The STB’s failure to follow Roaring Fork requires reversal
in this case. It is arbitrary and capricious for an agency to
depart from its own precedent without reasoned
explanation. Donovan v. Adams Steel Erection, Inc., 766
F.2d 804, 807 (3d Cir. 1985). The STB’s decision is entitled
to a presumption of regularity but “that presumption is not
to shield [its] action from a thorough, probing, in-depth
review.” See Citizens to Preserve Overton Park v. Volpe, 401
U.S. 402, 415 (1971).2 Scrutiny of the facts does not end
with the determination that the STB has acted within the
scope of its statutory authority. Rather, the Administrative
Procedure Act (A.P.A.) requires a finding that the actual
choice made was not “arbitrary, capricious, an abuse of
discretion, or otherwise not in accordance with law.” 5
U.S.C. § 706 (2)(A).3
In making this finding, we consider whether the decision
was based on “a consideration of the relevant factors” and
“whether there has been a clear error of judgment.” Overton
Park, 401 U.S. at 416. This Court’s inquiry into the facts is
to be “searching and careful.” Id. The majority
acknowledges that the evidence supporting the STB
decision is “manifestly[ ] modest.” Maj. op. at 19. The
evidence is not only modest, but so paltry, wishful, and
speculative that the acceptance of its OFA was arbitrary
and capricious.
The scope of review under the arbitrary and capricious
standard is narrow. Although a court is not to substitute its
2. Arbitrary and capricious review is not always as deferential as the
majority suggests. For example, in Ethyl Corp. v. EPA, 541 F.2d 1 (D.C.
Cir.), cert. denied, 426 U.S. 941 (1976), the majority and dissenting
opinions collectively devoted thirty-eight pages to a detailed analysis of
factual studies relied upon by an administrative agency.
3. Since the OFA statute makes no reference to a hearing on the record,
this is an informal adjudication and no formal hearings are required.
However, “in their application to the requirement of factual support the
substantial evidence test and the arbitrary and capricious test are one
and the same.” Ass’n of Data Processing v. Fed. Reserve, 745 F.2d 677,
683 (D.C. Cir. 1984); accord Sevoian v. Ashcroft, 290 F.3d 166, 174 (3d
Cir. 2002).
32

-- 32 of 34 --

judgment for that of the agency, “[n]evertheless, the agency
must examine the relevant data and articulate a
satisfactory explanation for its action including a ‘rational
connection between the facts found and the choice made.’ ”
Motor Vehicles Mfrs. Assoc. v. State Farm Mut. Auto. Ins.
Co., 463 U.S. 29, 43 (1983) (internal citation omitted). The
STB here has failed to provide a satisfactory explanation for
accepting Sahd’s OFA, particularly in light of the strong
evidence to the contrary.
As the Supreme Court stated when it set aside an order
of the Interstate Commerce Commission:
There are no findings and no analysis here to justify
the choice made, no indication of the basis on which
the Commission exercised its expert discretion. We are
not prepared to and the Administrative Procedure Act
will not permit us to accept such adjudicatory practice.
Expert discretion is the lifeblood of the administrative
process, but “unless we make the requirements for
administrative action strict and demanding, expertise,
the strength of modern government, can become a
monster which rules with no practical limits on its
discretion.”
Burlington Truck Lines, Inc. v. United States, 371 U.S. 156,
167 (1962) (note and citations omitted) (emphasis in
original).
The STB’s judgment in this case has the effect of
seriously obstructing the public interest. If the STB had
followed its own precedent and required Sahd to prove all
three of the Roaring Fork requirements, it would have been
compelled to conclude that Sahd had not carried its
burden. As it now stands, there is no evidence to suggest
that the track will be used for the public benefit, either for
environmental and recreational purposes or for continued
rail service.
IV.
Accordingly, I would reverse the Board’s decision and
grant the petition for review.
33

-- 33 of 34 --

A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
34

-- 34 of 34 --