                    United States Court of Appeals
                           FOR THE EIGHTH CIRCUIT
                                   ___________

                                   No. 04-3453
                                   ___________

City of Lincoln,                        *
                                        *
            Petitioner,                 *
                                        *
      v.                                * Petition for Review of an Order of
                                        * the Surface Transportation Board.
Surface Transportation Board;           *
United States of America,               *
                                        *
            Respondents.                *
                                   ___________

                             Submitted: May 13, 2005
                                Filed: July 12, 2005
                                 ___________

Before MORRIS SHEPPARD ARNOLD, LAY, and MURPHY, Circuit Judges.
                         ___________

MURPHY, Circuit Judge.

       The City of Lincoln, Nebraska sought to acquire a portion of the right of way
of a rail line owned by Lincoln Lumber Company (LLC) to use as a bicycle and
pedestrian trail and to improve the city's storm drainage system. Lincoln planned to
acquire the property through state eminent domain law and petitioned the Surface
Transportation Board for a declaratory order that the proposed acquisition would not
be federally preempted as state regulation of rail transportation under 49 U.S.C. §
10501(b). The Board determined that the proposed taking was preempted, and
Lincoln seeks review of this order. We affirm.
        The rail line at issue runs between 19th Street and 24th Street in Lincoln and
has a 100 foot right of way. LLC acquired this segment from the Union Pacific
Railroad Company in 2000 through the offer of financial assistance procedures
provided in 49 U.S.C. § 10904. LLC is currently the only rail customer on the dead
end line and receives approximately 50 carloads annually. The Omaha, Lincoln &
Beatrice Railway Company (OLB) owns a connecting line and provides rail service
to LLC pursuant to an operating agreement. LLC has leased portions of the right of
way to neighboring entities which have primarily used the space for parking, but LLC
is trying to terminate these long term leases. LLC uses other portions of the right of
way for storage.

       Lincoln wants to acquire a 20 foot strip along the northern edge of the right of
way to improve its storm drainage system and complete the Husker Link Trail, a
commuter trail for pedestrians and bicyclists. The storm sewer project would run
along the whole five block length, but the Husker Link Trail would not since alley
space between 23rd Street and 24th Street is available for the trail. The completed
trail would connect the University of Nebraska main campus to its east campus and
connect downtown Lincoln to the Mo Pac East Trail, which extends from Lincoln to
Omaha. Lincoln planned to erect a chainlink fence along the edge of the trail to
separate it from the rest of the right of way.

       After LLC indicated to Lincoln that it would argue federal preemption if
Lincoln instituted state condemnation proceedings, Lincoln sought a declaratory
order from the Board that it would not be preempted. In its petition Lincoln asserted
that LLC's rail operations would be unaffected by its proposed projects and cited
other Board decisions in which railway property was converted to public use. The
city also included the verified statement of Walter Schuchmann, a rail operations
consultant. Schuchmann had reviewed the city's plans; examined various maps,
photos, and surveys; conducted interviews; and made a site visit. His statement
focused on existing obstructions of the right of way, including use of the leased

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portions for parking, a utility line running between the rail and the proposed trail, and
lumber storage in the area foreseen for the trail. He concluded that these existing
obstructions interfered with rail operations more than the city's projects would.

       LLC originally did not oppose the storm sewer project or construction of the
trail between 19th Street and 22nd Street, but it changed its position about the trail
after the Board commenced proceedings. In its reply brief it stated that it would not
be able to get equipment to the tracks for maintenance or to handle derailments if its
right of way were narrowed. LLC expressed concerns about the safety of trail users
in the case of a derailment or while I joists or large pieces of lumber were being
unloaded from center beam cars. These concerns were heightened by the fact that its
calculations showed that at one point the trail would be only 7.5 feet from the rail.
LLC also projected significant increases in rail traffic and described its plans to
develop a railroad terminal area and rebuild a sidetrack. It proposed several
alternative routes for the trail.

       Lincoln stated in its rebuttal that the possibility of alternative routes was
irrelevant to whether the trail would interfere with LLC's operations and that the
alternative proposals were unworkable. It contested LLC's claims that the trail would
be too close to the rails for safety, asserting that the trail would generally be more
than 30 feet from the center line and that the fence running along the trail would
never be closer than 10 feet from the center line. Lincoln contended that the northern
20 feet of the right of way between 22nd Street and 23rd Street, which LLC said it
needed for unloading, has been used for storage and that LLC was only receiving on
average one carload per year of I joists.

       Included with the rebuttal was another statement from Schuchmann, the city's
consultant, suggesting that the I joist shipments could be unloaded by different
methods and that the current trackage could accommodate LLC's projected increase
in rail traffic. He believed it unlikely LLC's line would be used by anyone else

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because other users would more likely use the nearby OLB facilities to avoid paying
both rail servers. LLC sought to file a surrebuttal, and Lincoln's opposition to that
motion included a statement by Schuchmann in which he addressed LLC's plans in
more detail, explaining that in his view there would be no rail operation or business
reason to reactivate a sidetrack or construct a terminal facility. The Board denied
LLC's motion for leave to file a surrebuttal.

       In its order the Board framed the issue as whether the proposed taking would
prevent or unduly interfere with railroad operations and interstate commerce. If so,
it would be preempted by 49 U.S.C. § 10501(b), as broadened by the ICC
Termination Act of 1995 (ICCTA). The Board distinguished the cases relied on by
Lincoln. It said that State of Texas1 dealt with a relocation of a right of way instead
of a narrowing and that the railway in Sacramento Regional Transit District2 had
voluntarily sold the right of way to the local government entity. The Board found that
Lincoln had not adequately refuted LLC's contention that it needed all of the right of
way to satisfy its present and future rail needs. LLC had argued to the Board that it
currently used the space to move freight, store lumber, unload railroad cars, and stage
unloaded freight for further movement into shipper facilities, and it asserted that it
might rebuild a sidetrack and construct a terminal facility. According to the Board
all of these activities are part of transportation by rail as defined in 49 U.S.C. §
10102(9), and the proposed trail could interfere with these transportation activities.
Additionally, the Board determined that Lincoln had not adequately refuted LLC's
contentions that the trail would create safety hazards. In conclusion it urged the
parties to renew negotiations to resolve their dispute.


      1
      State of Texas, Department of Transportation–Petition for Declaratory Order
Regarding Highway Construction in Tarrant County, TX, Finance Docket No. 32589
(ICC served Feb. 7, 1995).
      2
      Sacramento Regional Transit District–Petition for Declaratory Order
Regarding Carrier Status, STB Finance Docket No. 33796 (STB served July 5, 2000).

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       In its petition for review of the order, Lincoln advances several arguments with
respect to the Husker Link Trail. Lincoln contends that the Board's decision is not
supported by substantial evidence and is arbitrary and capricious, that it misallocated
the burden of proof, and that it violated precedent. Lincoln also states that it needs
clarification on the Board's action regarding the storm sewer project because it does
not believe the disposition is clear from the order. It argues that the decision should
be vacated if the Board intended to deny relief because acquisition of the right of way
for that project is not federally preempted.

       Under the Administrative Procedure Act the Board decision can be overturned
only if it is arbitrary, capricious, an abuse of discretion, unsupported by substantial
evidence, or otherwise not in accordance with law. 5 U.S.C. § 706(2). The scope of
judicial review is therefore quite narrow, and we are not allowed to substitute our
judgment for that of the Board. Middlewest Motor Freight Bureau v. ICC, 867 F.2d
458, 460 (8th Cir. 1989). As long as the Board's findings of fact are supported by
substantial evidence in the record as a whole, we will accept its findings and the
reasonable inferences it drew from them. Trans-Allied Audit Co. v. ICC, 33 F.3d
1024, 1030 (8th Cir. 1994).

      The Board has broad authority over the operation of railways and associated
property. The ICCTA gives the Board exclusive jurisdiction over rail transportation:

      The jurisdiction of the Board over –
                (1) transportation by rail carriers and the remedies provided in
        this part with respect to rates, classifications, rules (including car
        service, interchange, and other operating rules), practices, routes,
        services, and facilities of such carriers; and
                (2) the construction, acquisition, operation, abandonment, or
        discontinuance of spur, industrial, team, switching, or side tracks, or
        facilities, even if the tracks are located, or intended to be located,
        entirely in one State,


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      is exclusive. Except as otherwise provided in this part, the remedies
      provided under this part with respect to regulation of rail transportation
      are exclusive and preempt the remedies provided under Federal or State
      law.

49 U.S.C. § 10501(b).

       The statute also defines rail transportation expansively to encompass any
property, facility, or equipment related to the movement of passengers and property
by rail and any related services, including "receipt, delivery, elevation, transfer in
transit, refrigeration, icing, ventilation, storage, handling, and interchange of
passengers and property." 49 U.S.C. § 10102(9). Courts have recognized that
Congress intended to give the Board extensive authority in this area. See City of
Auburn v. United States, 154 F.3d 1025, 1029-31 (9th Cir. 1998) (reviewing the
history of railway preemption, text of the ICCTA, and court decisions to reject the
argument that preemption is limited to economic regulation). We consider Lincoln's
arguments in the context of the Board's broad authority over rail transportation and
our narrow review of its decisions.

       Lincoln contends that the Board ignored its evidence that the project would not
interfere with railway operations and focused instead on LLC's unsubstantiated claims
and opposition. By doing so, Lincoln argues, the Board acted arbitrarily and
capriciously and against the weight of substantial evidence. Lincoln says the Board's
safety concerns are unfounded because the plans and surveys submitted by Lincoln
indicate that the closest the trail comes to the rail's centerline is 23 feet in one spot,
not the 7.5 feet claimed by LLC. Lincoln also complains that the Board credited
LLC's statements about its future needs even though the city's expert stated that the
current trackage offers ample capacity for the projected growth, that the development
of a terminal is unlikely given the proximity of OLB's facilities, and that the
reactivation of a sidetrack is unnecessary and prohibitively expensive.


                                           -6-
       We disagree with Lincoln's assessment of the Board's decision making. The
Board is entitled to rely on its own expertise in rail operations and that of the rail user
to determine that losing a 20 foot strip from the right of way along four blocks of the
line would leave insufficient room for storage, loading, and unloading, as well as
access to the track for maintenance and derailment response. Although the ICCTA
classifies storage of materials moved by rail as part of "transportation," 49 U.S.C. §
10102(9)(B), Lincoln's consultant characterized storage of lumber as one of LLC's
"nontransportation" obstructing uses of the right of way. The Board could
legitimately consider that Lincoln's evidence about use of the right of way for such
storage weighed against its petition instead of supporting it. LLC's representation to
the Board that at one point there would only be 7.5 feet of clearance was based on its
president's measurements and a conversation with the lead surveyor. While there was
some conflicting evidence about the clearance distance from which the Board could
have drawn varying inferences, we cannot say that its stated safety concerns are
unsupported by substantial evidence in the record as a whole. See Consolo v. Fed.
Mar. Comm'n, 383 U.S. 607, 620 (1966).

       Finally, the Board can consider the railway's future plans as well as its current
uses and make its own evaluation of how likely it is that the plans will come to
fruition. Condemnation is a permanent action, and "it can never be stated with
certainty at what time any particular part of a right of way may become necessary for
railroad uses." Midland Valley R.R. Co. v. Jarvis, 29 F.2d 539, 541 (8th Cir. 1928).
We conclude that the Board did not act arbitrarily or capriciously or make a decision
unsupported by substantial evidence on the record as a whole.

       Lincoln argues that federal preemption is an affirmative defense and that the
burden falls on the party asserting it, but by statute the burden of proof is on the
petitioner seeking a declaratory order from an administrative agency. See 5 U.S.C.
§ 556(d). Lincoln's citation to Iowa, Chicago & Eastern Railroad Corp. v.
Washington County, Iowa, 384 F.3d 557 (8th Cir. 2004), does not help it. Although

                                           -7-
the burden was placed on the railroad in that case, the matter had started as a judicial
proceeding rather than an administrative one. The railroad, rather than a
governmental entity, had sought a declaratory judgment that a state statute was
preempted by the ICCTA. We conclude that the Board did not err by placing the
burden of proof on Lincoln.

       Lincoln also argues that the Board's order violates its own precedents. In
ruling on Lincoln's petition, the Board distinguished Sacramento Regional Transit
District by pointing out that the railroad in that case had voluntarily transferred
property because it thought it could operate with a reduced right of way. Lincoln
objects to this distinction, arguing that consent is not the same as showing
noninterference with operations and that the Board's reliance on this factor indicates
that it is simply acceding to LLC's wishes. We disagree. Although the railroad's
position is a factor that may be considered by the Board, there is also evidence in
these proceedings of interference with railway operations. The difference between
this case and Sacramento Regional Transit District is significant and justifies different
results.

       In State of Texas the state sought to relocate tracks and acquire a parcel of
railroad property for highway improvements, and the Board's predecessor agency, the
Interstate Commerce Commission (ICC), determined that it did not have jurisdiction
to preempt condemnation proceedings for either project. Lincoln argues that
relocation of tracks interferes more than narrowing a right of way, but the ICC found
in State of Texas that replacement track would be available in a timely fashion and
that rail operations would not be hindered. Lincoln speculates that the right of way
must have been narrowed in some spots to complete the second State of Texas
project, which involved replacing an overpass, constructing ramps, and elevating a
portion of the highway. It does not appear from the ICC's order that the railroad
specifically objected to any narrowing, however, and we conclude that the Board's
action in this matter is not inconsistent with State of Texas.

                                          -8-
       Lincoln also asserts that state and local governments are not preempted from
regulating the safe interaction of railroads and other transportation systems, giving
as an example a state's ability to require that a railroad upgrade a crossing at its own
expense. This argument does not address interference with rail operations, which was
the issue before the Board here.

       Finally, Lincoln says that it needs clarification of the Board's action about the
storm sewer project because the Board's disposition was not clear from its order.
Lincoln acknowledges that LLC has stated on the record that it does not oppose the
project, but it seeks a remand and a ruling that the condemnation for the storm sewer
will not be an acquisition or abandonment of a rail line for purposes of 49 U.S.C. §§
10901-10903. The Board responds that there was no need to rule on that project
because there was no dispute and that it is well established that nonconflicting,
nonexclusive easements across railroad property are not preempted if they do not
hinder rail operations or pose safety risks. To the extent that the Board's intentions
were ambiguous, they have now been clarified, making a remand unnecessary.

      For these reasons the petition is denied.
                      ______________________________




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