Tuesday, April 21, 2020
For farmers and ranchers (and other rural landowners) owning agricultural land adjacent to railroads, the abandonment of an active rail line presents a number of real property issues. What is the legal effect of the abandonment? Does state or federal law apply? What about fencing? These (and others) are all important questions when a railroad abandons a line.
Abandoned rail lines and legal issues – that’s the topic of today’s post.
Legal Effect of Abandonment
During the nineteenth century, many railroad companies acquired easements from adjoining landowners to operate rail lines. In some instances, railroads acquired a fee simple interest in rights-of-way and in those situations, can sell or otherwise dispose of the property. In most situations, however, a railroad was granted an easement for railroad purposes, usually acquired from adjacent property owners. The general rule is that a right-of-way for a railroad is classified as a limited fee with a right of reverter if received from Congress on or before 1871, but is classified as an exclusive use easement if the right of way is received after 1871.
If the railroad held an easement, the abandonment of the line automatically terminates the railroad's easement interest, and the interest generally reverts to the owners of the adjacent land owning the fee simple interest from which the easement was granted. See, e.g., Penn. Central Corp. v. United States Railroad Vest Corp., 955 F.2d 1158 (7th Cir. 1992).
After abandonment, state law controls the property interests involved. Once abandonment occurs, federal law does not control the property law questions involved. The only exception is if the United States retained a right of reverter in the abandoned railway. Under the Abandoned Railroad Right of Way Act (43 U.S.C. § 912), land given by the United States for use as a railroad right-of-way in which the United States retained a right of reverter had to be turned into a public highway within one year of the railroad company’s abandonment or be given to adjacent landowners. Later, the Congress enacted the National Trails System Improvement Act of 1988 under which those lands not converted to public highways within one year of abandonment would revert back to the United States, not adjacent private landowners.
What About Recreational Trails?
In 1976, the Congress passed the Railroad Revitalization and Regulatory Reform Act (Act) in an effort to promote the conversion of abandoned lines to trails. Under the Act, the Secretary of Transportation is authorized to prepare a report on alternate uses for abandoned right-of-ways. The Secretary of the Interior can offer financial, educational and technical assistance to local, state and federal agencies. In addition, the Interstate Commerce Commission (ICC) was authorized to delay disposition of railroad property for up to 180 days after an order of abandonment, unless the property was first offered for sale on reasonable terms for public purposes including recreational use. The National Trails System Act amendments of 1983 authorized the ICC to preserve for possible future railroad use, rights-of-way not currently in service and to allow interim use of land by a qualified organization as recreational trails. Effective January 1, 1996, the Congress replaced the ICC with the Surface Transportation Board (STB) and gave the STB authority to address rail abandonment and trail conversion issues. The organizations operating the corridors as trails assume all legal and financial responsibility for the corridors. This is known as railbanking.
Under the 1983 amendments, a railroad must follow a certain procedure if it desires to abandon a line. A potential trail operator must agree to manage the trail, take legal responsibility for the trail and pay any taxes on the trail. The STB engages in a three-stage process for railroad abandonment. First, a railroad must file an application with the STB and notify certain persons of its planned abandonment. The application must state whether the right-of-way is suitable for recreational use. In addition, the application must notify government agencies and must be posted in train stations and newspapers giving the public a right to comment. Second, the STB then determines whether “present or future public convenience and necessity” permit the railroad to abandon. A trail organization then must submit a map and agreement to assume financial responsibility and the STB will then determine whether the railroad intends to negotiate a trail agreement. Third, if such a determination is made, the STB will issue a “certificate of interim trail use” or a certificate of abandonment. The parties have 180 days to reach this agreement. If no agreement is reached, the line is abandoned. Abandonment of a railroad right-of-way cannot occur without the prior authorization of the STB. See, e.g., Phillips Company v. Southern Pacific Rail Corp., 902 F. Supp. 1310 (D. Colo. 1995). But, once abandonment occurs, the STB no longer has any jurisdiction over the issue. See, e.g., Preseault v. Interstate Commerce Commission, 494 U.S. 1 (1990).
Before passage of the 1983 amendments, it was clear that when a railroad ceased line operation and abandoned the railway, the easement interest of the railroad in the line reverted to the adjacent landowners of the fee simple. See, e.g., Consolidated Rail Corp. Inc. v. Lewellen, 682 N.E.2d 779 (Ind. 1997). However, as noted, the 1983 amendments established a more detailed process for railroad abandonment and gave trail organizations the ability to operate an abandoned line. While most railroads hold a right-of-way to operate their lines by easement specifying that the easement reverts to the landowner upon abandonment, after passage of the 1983 amendments, a significant question is when, if ever, abandonment occurs. One court has held that the public use condition on abandonment does not prevent the abandonment from being consummated, at which time STB jurisdiction ends, federal law no longer pre-empts state law, and state property law may cause the extinguishment of the railroad's rights and interests. See, e.g., Fritsch v. Interstate Commerce Commission, 59 F.3d 248 (D.C. Cir. 1995), cert. denied sub. nom. CSX Transportation v. Fritsch, 516 U.S. 1171 (1996).
A more fundamental issue is whether a preclusion of reversion to the owner of the adjacent fee simple is an unconstitutional taking of private property. I will analyze the constitutional takings issue is a subsequent post. Suffice it to say, however, in 1990 the U.S. Supreme Court upheld the 1983 amendments as constitutional. Preseault v. Interstate Commerce Commission, 494 U.S. 1 (1990). But see Swisher v. United States, 176 F. Supp.2d 1100 (D. Kan. 2001).
A recent federal case involved adjacent landowners’ taking claim when a railroad abandoned its line and sought to transfer the abandoned line to a city for the use as a recreational trail. The landowners claimed that full ownership of the line should have been in their hands but the city disagreed, and the court was left to sort it out.
In Anderson v. United States, Court of Federal Claims, No. 17-668L, 2020 U.S. Claims LEXIS 526 (Fed. Claims Apr. 10, 2020), the plaintiffs were a group of 24 landowners who own real property adjacent to a rail line near Waco, Texas. The line was acquired in 1902 by Texas Central Railroad Company, the predecessor to the current owner Union Pacific Railroad Co. Texas Central acquired its right-of-way through various methods, including a declaration of trust, court-ordered condemnation, and four deeds. In 2015, Union Pacific indicated its intention to abandon the 2.45-mile line, and stated their intention to salvage the limited amount of track material and transfer the right-of-way to the City of Waco as a utility corridor and for possible trail use. In 2017, the plaintiffs filed a complaint alleging a Fifth Amendment taking on the basis that the railroad only had an easement in the rail line and that the abandonment of the line and reverted to them upon abandonment. The plaintiffs requested just compensation for their property in the form of fair market value of the taken property.
The Court examined the underlying deeds granting the line to Texas Central and noted that they didn’t contain any right-of-way language but rather conveyed a fee simple subject to a condition subsequent that benefited the original grantors solely. As a conveyance of a fee simple, there was no property right that reverted to the adjacent owners, and their taking claim failed. State property law determined the outcome.
Abandoned rail lines create numerous legal issues for adjacent landowners, including a mix of federal and state law. In addition, fencing issues get involved and those may be handled not under the general fence laws of the particular state, but in accordance with fencing provisions specific to the conversion of abandoned rail lines to trails. In any event, for those that believe they have been negatively impacted by a rail line abandonment, seeking good legal counsel is a must to protect whatever landowner rights remain.