August 7, 2020

Texas High-Speed Railroad Found to Be Subject to Federal Jurisdiction

Holland & Knight Transportation Blog
Jameson B. Rice | William P. Byrne | Paul R. Hitchcock
Transportation Blog

A proposed high-speed passenger railroad between Dallas and Houston has successfully convinced the federal Surface Transportation Board (STB) that it has jurisdiction over the proposed Texas rail line. While STB jurisdiction will greatly aid the rail line by generally preempting state and local regulation, the STB's order has added federal requirements that will have to be addressed. FD 36025 (STB Served July 16, 2020)

Texas Central Railroad and Infrastructure Inc. and its subsidiary, Texas Central Railroad LLC (Texas Central), had lost an initial effort to secure federal jurisdiction over its planned line of railroad in 2016. That's when the STB found that Texas Central's operation, as then presented, would be purely in intrastate commerce. With this most recent decision, the STB rules that Texas Central's new plans will make it part of the "interstate rail network" and place it squarely in the realm of interstate commerce and the STB's exclusive jurisdiction.

Two changes in circumstances convinced the STB to alter its conclusions. Texas Central now has an agreement with Amtrak for through-ticketing. This arrangement would allow passengers to purchase a ticket for service on Amtrak with connecting transfer service on Texas Central, or vice versa. Further, Texas Central has offered more specifics about how passengers would connect to or from Amtrak. Texas Central's Dallas terminus is 0.8 miles from the Dallas Amtrak station, and its Houston terminus is approximately seven miles from the Houston Amtrak station. In the first proceeding at the STB, Texas Central was not very clear on how these stations would connect. It now has more specific plans. Connecting bus shuttle service would be provided in both Dallas and Houston, using electric busses running on city streets. The STB ruled that the Dallas connection was sufficient to demonstrate connection to the interstate rail network. It found no need to rule on the Houston connection (perhaps a tacit recognition that a seven mile bus connection would be more tenuous).

This STB action can be contrasted with previous decisions involving the inter- or intrastate nature of proposed passenger operations. In 2013, the California High-Speed Rail Authority had sought a determination that it was not a part of the interstate rail network. The STB disagreed, determining that it was part of the interstate rail network and regulated by the STB, despite having track only in California, because of its "extensive interconnectivity with Amtrak." FD 35724 (STB Served Jun 13, 2013). However, the STB determined that under 49 U.S.C. § 10502, the rail line was exempt from prior approval of construction.

In 2012, All Aboard Florida (now Virgin Trains USA), seeking to provide passenger service between Miami and Orlando, sought a decision that it was not part of the interstate rail network. The STB ruled 2-1, finding no jurisdiction. FD 35680 (STB Served Dec. 21, 2012). The dissenting opinion focused on the airport connection in Orlando and marketing to out-of-state tourists, including cruise ship passengers. Interestingly, neither the California High-Speed Rail Authority nor Texas Central have relied upon connections to other modes of interstate travel as a basis for their position on federal jurisdiction.

With less than 250 miles between the nation's fourth- and fifth-largest metropolitan statistical areas, the desire to connect Dallas and Houston by rail is understandable. However, Texas Central's plans can only (and conservatively) be considered ambitious. It proposes to build a 240-mile-long proprietary line of railroad between Dallas/Ft. Worth and Houston dedicated exclusively to passenger train operations. Using Japanese "Bullet Train" technology, the line would provide 90-minute service between the two cities at top speeds in excess of 240 miles per hour. By separating all rail-highway crossings with bridges, it would eliminate crossing accidents that have plagued other passenger rail operations. With only a single stop midway between the two cities, it hopes to be able to sustain high speeds for the majority of the trip.

New Hurdles with STB Oversight

Facing state and local permitting requirements would be a daunting — and potentially deal-killing — challenge. By resolving that it would be part of the national rail network, and thus engaged in interstate commerce, all such issues will be debated at a single government agency, significantly removed from the local political pressures that meet any such large project. STB jurisdiction does not, however, impact whether or not Texas Central may acquire land by eminent domain, which is a matter of state law and has already presented a challenge to Texas Central. A Texas trial court had ruled that Texas Central was not a railroad under Texas law. That decision was overturned earlier this year by an appellate court. The Texas Supreme Court may ultimately weigh in on the issue. Without eminent domain authority, acquiring the necessary land for the rail line may prove prohibitively expensive.

Perhaps federal jurisdiction was necessary to make the project viable, but the STB decision added some further complications for Texas Central. It had hoped that the STB would consider its plans for construction and operation under the more expedited process of a petition for exemption from prior approval requirements. This would have been minimally burdensome, yet given Texas Central the benefit of preemption. However, the STB noted that in this reopened proceeding, commenters had raised significant questions surrounding the financial viability of the project. The projected cost of the enterprise has risen over the years, beginning with an estimate of $10 billion, and now being described as between $16.5 billion and $20 billion. The project was originally presented as entirely privately funded, but opponents contend that it now hopes to receive federal loans or stimulus funds.

Given the magnitude of the cost, the questions over funding, the impact of an uncompleted project on landowners and the substantial public interest (and perhaps being mindful of the cost overruns and indefinite suspension of portions of the California high speed rail project), the STB determined that Texas Central will now need to file a full application under its regulations. This will undoubtedly draw additional comments from the public and members of Congress. Every infrastructure project faces hurdles, but the unique nature of Texas Central's vision of a high speed railroad (combined perhaps with the recent challenges encountered in implementing California high speed rail) seems to have conspired to add a few additional hurdles for Texas Central to clear.

Related Insights