                      PUBLISHED


UNITED STATES COURT OF APPEALS
             FOR THE FOURTH CIRCUIT


MARYLAND TRANSIT                      
ADMINISTRATION,
                        Petitioner,
                v.                       No. 11-1412
SURFACE TRANSPORTATION BOARD;
UNITED STATES OF AMERICA,
                    Respondents.
                                      
          On Petition for Review of an Order of
            the Surface Transportation Board.
                          (32609)

               Argued: September 19, 2012

               Decided: November 21, 2012

   Before NIEMEYER and DIAZ, Circuit Judges, and
 Max O. COGBURN, Jr., United States District Judge for
         the Western District of North Carolina,
                 sitting by designation.



Petition for review denied by published opinion. Judge Nie-
meyer wrote the opinion, in which Judge Diaz and Judge
Cogburn joined.
2    MARYLAND TRANSIT ADMIN. v. SURFACE TRANSPORTATION
                           COUNSEL

ARGUED: W. Eric Pilsk, KAPLAN KIRSCH & ROCK-
WELL, LLP, Washington, D.C., for Petitioner. Erik G. Light,
SURFACE TRANSPORTATION BOARD, Washington,
D.C., for Respondents. ON BRIEF: Charles A. Spitulnik,
Allison I. Fultz, KAPLAN KIRSCH & ROCKWELL, LLP,
Washington, D.C., for Petitioner. Ignacia S. Moreno, Assis-
tant Attorney General, John E. Arbab, UNITED STATES
DEPARTMENT OF JUSTICE, Washington, D.C.; Raymond
A. Atkins, General Counsel, Evelyn G. Kitay, Associate Gen-
eral Counsel, SURFACE TRANSPORTATION BOARD,
Washington, D.C., for Respondents.


                            OPINION

NIEMEYER, Circuit Judge:

    The Maryland Transit Administration ("MTA"), as the
owner of the railroad right-of-way running between Clayton,
Delaware, and Easton, Maryland, applied to the Surface
Transportation Board ("STB" or "Board") (formerly, the
Interstate Commerce Commission) to abandon freight trans-
portation use of the right-of-way and to convert it to a recre-
ational trail, as authorized by the National Trails System Act
("the Trails Act"), 16 U.S.C. § 1247. The Trails Act autho-
rizes owners of railroad rights-of-way to enter into agree-
ments with entities, called sponsors, under which the sponsors
agree to convert the right-of-way into recreational trails, so
long as they agree to reserve to the railroad the right to return
the right-of-way to railroad use. As part of the application for
conversion to trail use, the sponsors must agree to "assume
full responsibility . . . for any legal liability arising out of such
. . . use" or agree to indemnify the railroad for "any potential
liability" and assume responsibility for the payment of all
taxes assessed with respect to the right-of-way. 16 U.S.C.
§ 1247(d); 49 C.F.R. § 1152.29(a).
     MARYLAND TRANSIT ADMIN. v. SURFACE TRANSPORTATION           3
   The MTA submitted to the STB interim user agreements it
had reached with two sponsoring governmental agencies, in
which the sponsors agreed to indemnify the MTA for poten-
tial liability, subject to limitations of state sovereign immunity
and to future legislative appropriations. The STB rejected the
MTA’s application, concluding that instead of assuming full
responsibility for legal liability or indemnifying the MTA for
any potential liability, the proposed sponsors conditioned their
undertakings by subjecting them to sovereign immunity and
to future state legislative appropriations. The STB explained
that instead of assuming "full responsibility," the proposed
sponsors "offer[ed] the possibility of no" responsibility.

   The MTA filed this petition for review, contending (1) that
the conditions imposed by the sponsors do "not narrow the
scope of the indemnity" that would be undertaken and that the
limitations of sovereign immunity and legislative appropria-
tions were necessary; (2) that by requiring an unqualified
indemnity clause, the STB’s regulation is, in any event, "an
unreasonable and impermissible construction of the Trails Act
because it infringes on state sovereignty without clear expres-
sion of congressional intent to do so"; and (3) that the STB
inappropriately refused to exercise its duty to evaluate the
substance of the sponsors’ undertakings by interpreting its
responsibilities to be only ministerial.

  For the reasons we give herein, we find the MTA’s argu-
ments unpersuasive, especially in light of its burden to dem-
onstrate that the STB acted arbitrarily and capriciously. See 5
U.S.C. § 706(2). Accordingly, we affirm the decision of the
STB and deny the MTA’s petition for review.

                                 I

   The MTA acquired the 54.1-mile railroad right-of-way
between Clayton, Delaware, and Easton, Maryland, from the
trustees of the Penn Central Transportation Company in 1982
and later, for several years, tried to use it as a railroad through
4    MARYLAND TRANSIT ADMIN. v. SURFACE TRANSPORTATION
an operations agreement with the Chesapeake Railroad Com-
pany. After the Chesapeake Railroad Company failed, how-
ever, the MTA filed a notice with the STB that it intended to
abandon the use of the right-of-way for railroad transportation
and to covert the right-of-way to a recreational trail. As
required by the Trails Act and regulations under it, the MTA,
at the time also acting as a potential trail sponsor, included in
its notice a "statement of willingness" to assume "full respon-
sibility" for any legal liability arising out of the recreational
trail use and for the payment of any taxes that might be
assessed against the right-of-way.

   The STB duly issued a "certificate of interim trail use"
("CITU") to the MTA in January 2006, thus giving MTA 180
days to negotiate a trail use agreement. Under the STB’s regu-
lations, any sponsor was required "to assume full responsibil-
ity . . . for any legal liability arising out of the use of the right-
of-way (unless the user is immune from liability, in which
case it need only indemnify the railroad against any potential
liability)" and "for the payment of all taxes assessed against
the right-of-way." 49 C.F.R. § 1152.29(a)(2).

   After several extensions, in September 2008, the MTA
shifted course. Rather than assume direct responsibility as a
trail sponsor, the MTA submitted two new interim trail use
agreements to the STB, one with the Delaware Department of
Natural Resources and Environmental Control and one with
the Maryland Department of Natural Resources. The MTA
asked the Board to vacate the existing CITU and issue new
CITUs reflecting the new sponsors’ assumption of responsi-
bility. In each agreement the sponsor conditioned its under-
taking to indemnify the MTA from liability. The agreement
between the MTA and the Delaware sponsor provided:

     Notwithstanding the requirements of subsection (a)
     [providing for indemnity and liability], nothing con-
     tained in this Agreement shall constitute or be
     deemed to constitute an obligation of future appro-
     MARYLAND TRANSIT ADMIN. v. SURFACE TRANSPORTATION          5
    priations by the Delaware General Assembly. MTA
    acknowledges that Licensee must obtain appropria-
    tions prior to payment of any damages. A lack of
    funds to perform any aspect of this Agreement due
    to insufficient appropriation by the Delaware Gen-
    eral Assembly shall not constitute a breach of this
    Agreement.

(Emphasis added). In its "statement of willingness to assume
financial responsibility" submitted with the agreement, the
Delaware Department of Natural Resources reiterated the lim-
itation of its undertaking, stating that it "is entitled to sover-
eign immunity, and accordingly, will indemnify MTA against
any potential liability provided that such indemnification shall
not constitute or be deemed to constitute an obligation of
future appropriations by the Delaware General Assembly."

  The agreement between the MTA and the Maryland spon-
sor provided similarly:

    In order to establish interim trail use and rail banking
    under 16 USC 1247(d) and 49 CFR 1152.29, Lessee
    is willing to assume, under the provisions of the
    Maryland Tort Claims Act, responsibility for . . . any
    legal liability arising out of the Lessee’s use of the
    Area as a public recreation rail trail.

                               ***

    Subject to appropriations by the Maryland General
    Assembly and to the extent permitted by law (if at
    all), Lessee shall protect, indemnify, defend and hold
    harmless . . . Lessor . . . against and with respect to
    any and all liabilities arising out of or in any way
    connected with (a) the exercise or performance by
    Lessee . . . , (b) the use or operation by Lessee
    . . . , or (c) work performed by or on behalf of the
    Lessee upon the Trail.
6    MARYLAND TRANSIT ADMIN. v. SURFACE TRANSPORTATION
(Emphasis added).

   At the first level of review, the STB’s Acting Director of
the Office of Proceedings denied the MTA’s application to
convert the right-of-way to a trail because the sponsors failed
to comply with the undertakings required by Regulation
1152.29(a)(2). The Acting Director noted that subjecting the
sponsors’ agreements to indemnify the MTA to future appro-
priations and making any liability subject to sovereign immu-
nity could negate the required indemnification.

   On appeal to the STB, the Board affirmed the Acting
Director. The Board noted that under the Trails Act, prospec-
tive trail sponsors are required to assume full responsibility
for "any legal liability" arising out of the use of the right-of-
way as a trail or, as authorized by regulation, to indemnify the
railroad for "any potential liability." It explained,
"[r]ecognizing that many States and their subdivisions enjoy
sovereign immunity, the Board’s regulations allow them to
satisfy the Trails Act by agreeing to indemnify the railroad
against ‘any potential liability.’" (Quoting 49 C.F.R.
§ 1152.29(a)(2)). The Board noted, however, that the Dela-
ware and Maryland sponsors "d[id] not satisfy the require-
ments of the Trails Act and [the STB’s] regulations." With
respect to the Delaware sponsor’s undertaking, the Board
pointed out that the sponsor’s willingness to indemnify the
MTA was "subject to the requirements of Delaware law" and
that the Delaware General Assembly "might not provide
funds in sufficient amounts to discharge [the sponsor’s] obli-
gations." And with respect to the Maryland sponsor’s under-
taking, the Board identified similar conditions, pointing out
that the Maryland sponsor would indemnify the MTA only
"under the provisions of the Maryland Tort Claims Act" and
"subject to appropriations by the Maryland General Assem-
bly." Further, the Maryland sponsor included the qualification
that it would indemnify the MTA only "to the extent permit-
ted by law (if at all)." Finally, the Board noted that the Mary-
land sponsor failed to include any undertaking to pay taxes
     MARYLAND TRANSIT ADMIN. v. SURFACE TRANSPORTATION         7
that might be assessed against the right-of-way. In conclusion,
the Board explained that both sponsors "offer[ed] the possibil-
ity of no indemnification for the abandoning railroad" and
accordingly found that their undertakings did not comply with
the Trails Act and Regulation 1152.29(a)(2).

   From the decision of the Board, dated February 24, 2011,
the MTA filed this petition for review. See 28 U.S.C. § 2344.

                               II

   The MTA argues first that it satisfied the requirements of
the Trails Act and Regulation 1152.29(a)(2) insofar as it
included in its agreements with the two sponsors "indemnity
clauses that indemnified MTA for any legal liability MTA
might face due to the use of the right-of-way as a trail." It
asserts that the clauses did so in "plain language." But as
quickly as the MTA makes this assertion, it acknowledges, as
it must, that its agreements included "language to make clear
that the obligations of the [sponsors] were subject to the avail-
ability of funds pursuant to an appropriation from the legisla-
ture." It asserts that such language was "necessary to reflect
state constitutional limits." And it concludes:

    Being unable to commit to a future payment does not
    reduce the scope of the indemnity provision, nor
    does it reduce [the sponsors’] liability under the
    indemnity agreement. At most, the reservation
    means that there may be a time in the future when
    [the sponsors] would have to wait for a future appro-
    priation before [they] could pay MTA’s indemnity
    claim. But [the sponsors] have still undertaken to
    indemnify MTA for any potential legal liability, as
    the Trails Act requires. The limitations regarding the
    ability to pay any indemnity claim are not inconsis-
    tent with the Trails Act requirement that a trail spon-
    sor assume responsibility for any "legal liability."
8    MARYLAND TRANSIT ADMIN. v. SURFACE TRANSPORTATION
   It can hardly be argued that a requirement demanding that
a party assume full responsibility for any liability or indem-
nify the railroad for any potential liability is satisfied by a
promise to indemnify only if the principles of sovereign
immunity so allow or if the money becomes available pursu-
ant to future appropriations. As the Maryland sponsor can-
didly provided in its undertaking, its promise was "subject to
appropriations by the Maryland General Assembly and to the
extent permitted by law (if at all)." (Emphasis added).

   We cannot conclude that the STB acted arbitrarily and
capriciously in concluding that the MTA user agreements,
which included qualifications to the undertakings, did not sat-
isfy the statutory and regulatory obligations that the sponsors
assume full responsibility for any liability or indemnify the
MTA for any potential liability.

                               III

   As an alternative position, the MTA contends that "the
STB’s construction of the Trails Act would result in an imper-
missible requirement that States waive their sovereign immu-
nity." As it explains, "[T]he STB’s construction of the Trails
Act would require states to modify, waive, or ignore sover-
eign limits on their authority, as well as sovereign immunity
. . . . [T]he STB would require state agencies to execute an
unqualified indemnity provision even if doing so would vio-
late state constitutional limits." The MTA argues that Regula-
tion 1152.29, but not the Trails Act itself, requires the States
to waive sovereign immunity by including the alternative that
States and state agencies give unqualified indemnity. There-
fore, it maintains, the regulation is an unreasonable applica-
tion of the Trails Act.

   The Trails Act provides that a sponsor must "assume full
responsibility . . . for any legal liability" arising from the use
of the right-of-way as a trail. 16 U.S.C. § 1247(d). The statute
thus conditions participation on the trail sponsor’s agreement
     MARYLAND TRANSIT ADMIN. v. SURFACE TRANSPORTATION          9
to fully protect the railroad from liability arising from the use
of the right-of-way as a recreational trail. The STB, through
its Regulation 1152.29, found that the statutory requirement
could, for sponsors having immunity, be satisfied by the spon-
sor’s indemnifying the railroad for "any potential liability." 49
C.F.R. § 1152.29(a)(2). The indemnity agreement effectively
limits any state agency’s undertaking to a contractual obliga-
tion, much like the contractual undertaking a state agency
would make in any agreement into which it enters to rent
office space. Contrary to the MTA’s suggestion, the regula-
tion’s indemnity option is not an additional, more burdensome
condition; it addresses no more than the statute requires—the
full-protection of the railroad. The language of both the stat-
ute and the regulation requires state sponsors to protect the
railroads. If anything, the indemnity option is more friendly
to agencies having immunity than is the Trails Act, because
the Act, standing alone, would require a state to assume tort
liability directly. The regulation’s indemnity option thus
implements, in a reasonable manner, the Trails Act’s require-
ment that railroads be fully protected while also softening the
statute’s impact on sovereign immunity. Accordingly, we
reject the MTA’s claim that the regulation is unreasonable.

   More importantly, however, the requirement to protect the
railroad does not, as the MTA suggests, impose on a sponsor-
ing state agency an unconstitutional requirement to waive its
sovereign immunity. That requirement is made a condition of
a federal benefit or gift that the state agency voluntarily elects
to receive, and we have long recognized that a state may be
required to "waive its sovereign immunity by accepting from
Congress a ‘gift’ or a ‘gratuity,’ the receipt of which is made
conditional on the State’s waiver of immunity." Bell Atl. Md.,
Inc. v. MCI WorldCom, Inc., 240 F.3d 279, 291 (4th Cir.
2001), vacated on other grounds sub nom. Verizon Md., Inc.
v. Pub. Serv. Comm’n of Md., 535 U.S. 635 (2002); see also
MCI Telecomm. Corp. v. Bell Atl.-Pa., 271 F.3d 491, 505 (3d
Cir. 2001).
10   MARYLAND TRANSIT ADMIN. v. SURFACE TRANSPORTATION
   In the case of the Trails Act, Congress created the volun-
tary federal rails-to-trails program, authorizing but not requir-
ing railroad right-of-way owners and recreational trail
sponsors to agree to convert railroad rights-of-way into recre-
ational trails. For those electing to participate in the program,
the Act provides two main benefits. First, through the applica-
tion of federal law, the Act prevents reversionary property
interests from vesting, as it normally would following the
abandonment of the railroad use, thus preserving the right-of-
way for a trail use. See Preseault v. I.C.C., 494 U.S. 1, 8
(1990). Second, by authorizing the conversion, albeit on a
temporary basis, the federal government, not the States,
remains potentially liable to land owners for takings chal-
lenges based on the delayed vesting of reversionary interests
involved in railroad rights-of-way. See Nat’l Ass’n of Rever-
sionary Prop. Owners v. S.T.B., 158 F.3d 135, 139 (D.C. Cir.
1998). Because Congress had no obligation to bestow these
benefits on the States but made them available to the States
on a voluntary basis, they qualify as a federal gift. See Coll.
Sav. Bank v. Fla. Prepaid Postsecondary Educ. Expense Bd.,
527 U.S. 666, 686 (1999) ("Congress has no obligation to use
its Spending Clause power to disburse funds to the States").
Indeed, the MTA has acknowledged the voluntary basis of the
program in its brief, stating that "participation in the Trails
Act program and its decision to enter into trail use agreements
with [the sponsors] are strictly voluntary."

   In short, even if the MTA is correct in its understanding
that the Trails Act and Regulation 1152.29 mandate a waiver
of sovereign immunity, the waiver would only be required as
a condition of participating in the rails-to-trails program, a
voluntary program in which no State—and indeed, no railroad
—is forced to participate. See Nat’l Wildlife Fed’n v. I.C.C.,
850 F.2d 694, 696 (D.C. Cir. 1988) (upholding a regulation
that interpreted the Trails Act as requiring all transfers of
rights-of-way to be voluntary).
     MARYLAND TRANSIT ADMIN. v. SURFACE TRANSPORTATION        11
                               IV

   Finally, the MTA contends that the STB improperly dis-
charged its duties under the Trails Act by functioning only
ministerially, refusing to evaluate the substance of its prof-
fered indemnity provisions in the light of applicable state law.
It relies on the STB’s explanation of its role given in its deci-
sion to deny the MTA’s application, where the STB stated:

    To fulfill our ministerial role under the Trails Act,
    we need not parse the intricacies of Maryland and
    Delaware immunity law. Rather, we merely verify
    that the prospective trail sponsor has submitted the
    required documentation to comport with the statute
    and regulations.

(Emphasis added).

   But the STB did not function as mechanically as the MTA
claims. In its 11-page opinion, the Board, in some detail,
expressed not only its reasons for concluding that the MTA
did not satisfy the requirements of the Trails Act and Regula-
tion 1152.29, but it explained the various policies underlying
the requirements and making them important. In addition, the
Board considered separately each of the MTA’s arguments
and explained why it found the arguments to be unpersuasive.
To be sure, the Board did explain that it was functioning min-
isterially, but it said so in the context of recognizing that it
could not alter the plain requirements of the Trails Act and
Regulation 1152.29. In reviewing the Board’s thorough deci-
sion, we conclude that the MTA’s argument is not well taken.

   Moreover, there would be nothing to render illegal an agen-
cy’s adoption of regulations that restrain the degree of discre-
tion it exercises. See Am. Hosp. Ass’n v. NLRB, 499 U.S. 606,
612 (1991) ("[E]ven if a statutory scheme requires individual-
ized determinations, the decisionmaker has the authority to
rely on rulemaking to resolve certain issues of general appli-
12   MARYLAND TRANSIT ADMIN. v. SURFACE TRANSPORTATION
cability unless Congress clearly expresses an intent to with-
hold that authority"). If the agency, through rulemaking,
decides to remove discretion from its determinations, then it
appropriately relegates to itself a ministerial role. See Swan v.
Clinton, 100 F.3d 973, 977 (D.C. Cir. 1996) ("A ministerial
duty is one that admits of no discretion, so that the official in
question has no authority to determine whether to perform the
duty") (citing Mississippi v. Johnson, 71 U.S. (4 Wall.) 475,
498 (1866)).

   Here, in promulgating 49 C.F.R. § 1152.29, the Board par-
roted the language of the Trails Act but included, as an alter-
native to assuming full responsibility for any liability, the
right of a state sponsor to indemnify the railroad for any
potential liability. The need for assuming full financial
responsibility by either means was, however, demanded by
the Act. Thus, when the Board made the individualized deci-
sion in this case, it simply confined its role to verifying the
trail sponsors’ undertakings and concluding that because the
trail sponsors qualified their indemnifications of the railroad,
they did not provide the railroad with the protection required
by the Trails Act. We cannot conclude that this decision man-
ifested an improper discharge of the agency’s duties.

  For the reasons given, we affirm the decision of the STB
and deny the MTA’s petition for review.

                                         IT IS SO ORDERED.
