Last October, the City of Fort Bragg filed a lawsuit challenging Mendocino Railway's status as a Class III railroad and a public utility, with power of eminent domain - that the railroad used last year to complete its purchase of Fort Bragg's oceanfront millsite - and exemption from state and local regulation in some cases.
The City of Fort Bragg v. Mendocino Railway could have broad implications for how development can proceed on Fort Bragg's millsite, and for what say local government — and by extension the local community — has about what happens there. The case is still in pre-trial hearings — one to consider a notice of demurrer and motion to strike filed by Mendocino Railway is scheduled for 2 p.m. Feb. 24 in Mendocino Superior Court in Ukiah.
But a number of documents received as part of a public records request to the City of Fort Bragg, asking for all material related to Mendocino Railways' activities and plans on the millsite over the past two years, shed light on many of the issues the court will likely be considering.
All the documents responding to the request can be viewed on the City of Fort Bragg's website (Public Records Request section, Request No. 21-277.)
The basic questions involving state and local jurisdiction on the millsite are: is the Skunk Train a Class III railroad, commonly defined as freight-carrying and part of the interstate rail system, and therefore regulated as a public utility by the State of California, with powers of eminent domain and exemption in some cases from state and local regulation?
Second, if it is considered a Class III railroad, how would it be regulated and which of its activities would be considered “railroad operations” and therefore exempt from state local oversight?
The only document that relates directly to the Skunk Train's rail status is a letter from California Transportation Commission Utilities Engineer David Stewart dated Dec. 7, 2018, in response to a request for clarification by Skunk Train President Robert Pinoli. Stewart states in the brief letter “Mendocino Railway is regarded as a Class III railroad by the California Public Utilities Commission,” citing state code and a website.
There is a lot more material — mostly in the form of correspondence between attorneys and officials for Sierra Energy, Mendocino Railway, the City of Fort Bragg and the California Coastal Commission — on the question of the Skunk Train's status and what activities on the millsite would be exempt from state and local regulation.
A key letter that addresses many of the particulars and sheds light both on the Coastal Commission's view of the issues, and the consternation those issues have caused officials so far, is worth quoting at length.
On Dec. 21, 2018, Cristin Kenyon, Coastal Commission Supervising Analyst, wrote to Marie Jones, then Fort Bragg's Community Development Director, about Mendocino Railway’s request for an exemption from a Coastal Development Permit for a lot line adjustment while buying property from Georgia-Pacific:
”It is our understanding,” Kenyon writes “the Mendocino Railway (also referred to in this letter as the Skunk Train) is claiming that the contemplated lot line adjustment does not need a CDP (Coastal Development Permit) because Mendocino Railway intends to purchase one of the resultant lots and extend railroad operations onto that resultant lot, and Mendocino Railway's status as a railroad subject to Surface Transportation Board regulation exempts Mendocino Railway from state and local regulation (i.e. a claim of federal pre-emption).
”However, there is no existing railroad service, facilities or operations on the subject property. It is our understanding that the STB [Federal Surface Transportation Board] has not authorized any railroad activities on the property. The property is the site of a former lumber mill and is largely vacant except for a 67,500 square foot structure known as Dry Shed #4. Dry Shed #4 was used for storage, drying and curing of timber for several decades and is currently vacant. Further, the property in question, including all the parcels implicated in the lot line adjustment, is owned by the Georgia-Pacific Corporation. None of the property is owned by Mendocino Railway or any other railroad, nor do we know of any legal right, entitlement or any other entitlement the railroad has to use the property.
”I received an email from you on Nov. 28, 2018 stating it was the city attorney's opinion that the subject lot line adjustment requires a CDP. The email stated in relevant part, ‘The Skunk Train is a local tourism train and is claiming exemption from the Coastal Act under the Interstate Commerce clause of the U.S. Constitution. Our attorney maintains that as a local serving tourist train, they are not engaged in interstate commerce and thus are not exempt from…land use regulations including the Coastal Act and the LCP.’
“On Dec. 19, 2018, I received another email from you with a contrary decision. The email stated that the city's attorney had determined that the Skunk Train is exempt from the requirement to obtain a CDP to process a lot line adjustment on the millsite. The email stated in relevant part, ‘The city's attorney has determined that the Skunk Train as a public utility is exempt from the process to obtain a CDP to process a LLA adjustment for the transfer of property between G-P and the Skunk Train.’
“A subsequent email from you yesterday indicated that you are ‘not at liberty to share the city's legal opinion at this time.’
“This letter officially requests that the City justify, in writing, its basis for 1) revising its Nov. 28, 2018 decision that the proposed LLA requires a CDP, and 2) instead taking the position that the contemplated lot line adjustment would not require a CDP from the City, including providing the specific basis for any determination that the City would be pre-empted by federal law from requiring a CDP in this case.”
Russell Hildebrand, then Fort Bragg's City Attorney, answered a month later, on Jan. 17, 2019. His three page letter basically states that the city got a statement from the California Public Utilities Commission that the Skunk is legally considered a Class III (freight) railroad. That, Hildebrand argued, along with a California State Supreme Court ruling in the case ‘Friends of the Eel River v. North Coast Rail Authority,’ settled whether the Skunk Train was subject to federal regulation and exemption in the case.
The exchange was prompted by another letter two months earlier from Thomas Cregger of Cregger and Chalfant LLP, a Sacramento law firm, to Torgny Nilsson, Chief Operating Officer of Sierra Energy, sister company to Sierra Railroad. Both Sierra Energy and Sierra Railroad are owned by Mike and Chris Hart. Sierra Railroad is parent company of Mendocino Railway. The letter was forwarded to the City of Fort Bragg.
In it, Cregger lays out the basic legal arguments for the claim that the Skunk Train is exempt from state and local land use and environmental regulation when its activities relate to “railroad operations.”
“As to the question of whether Mendocino (Railway) is required to comply with the Subdivision Map Act, the answer is no,” Cregger writes. “Mendocino's status as a railroad corporation and public utility, and Mendocino's intended use of the property to extend Mendocino's track and develop related rail facilities (considered to be rights of way) specifically exempts Mendocino from any requirement under the Subdivision Map Act regarding filling of a parcel map.
“The related, and more complex issue, raised by both the City and the surveyor, is whether the City can require that Mendocino submit to the approval process of a CDP, under the California Coastal Act…
“Under the Interstate Commerce Commission Termination Act…the STB exercises jurisdiction over the operation and regulation of railroads, such that in many instances state and local regulation of railroads is pre-empted by federal law. See, generally, Friends of the Eel River v. North Coast Rail Authority (2017).”
Summarizing the pre-emptive effect of the ICCTA with regard to environmental regulation, the California Supreme Court observed:
“More specifically, the rule seems well accepted in federal courts that the ICCTA preempts state and local environmental regulation requiring private railroad companies to acquire permits or preclearance as a condition to operating the railroad, as well as remedies that would prohibit the conduct of railroad business pending compliance with state or local environmental requirements.”
The matter was not resolved by Feb. 11, when Anthony LaRocca, counsel for Mendocino Railway, wrote John Ainsworth, Executive Director of the California Coastal Commission. LaRocca seems to argue that any confusion about Mendocino Railway's federal status was just a mistake by City Hall staff: “In subsequent discussions with the City, Mendocino learned that the City has not changed its view on federal preemption of the permit requirement in this case, but it is now reluctant to allow the sale to proceed, given the possibility of litigation arising between the City and the Commission over this matter.”
This was answered on June 11, 2019 with a 14-page brief from Ann Cheddar, the Coastal Commission's senior legal counsel. Cheddar does not say whether a Coastal Development Permit should be required in that particular case. Basically, she writes, it depends on what the land would be used for, and her opinion was that Mendocino Railway hadn't given enough information to show that it would be for “railroad operations.”
Cheddar, though, rejected the idea of any blanket exemption from state and local oversight “including for a land division that does not appear to be undertaken as part of the interstate rail network. Federal regulation of railroads is not limitless.”
Cheddar's (and presumably the Coastal Commission's) overall position was: “both caselaw and STB (Surface Transportation Board) decisions support the continuing application of Coastal Act requirements prior to engaging in development in situations where the ICCTA does not preempt the Coastal Act, including the expansion of intrastate transportation that is not part of the interstate rail network and the implementation of federal law that preserves state power.”
Later on, Cheddar states “Mendocino Railway's Skunk Train is not being operated as part of the interstate rail network,” a position she argues is supported by a 2007 Surface Transportation Board decision — “The 2007 STB decision also states that the line has been severed from, and is no longer linked to, and part of, the Interstate rail system.” Cheddar takes issue with applying the State Supreme Court decision allowing exemption from state environmental regulation under the Interstate Commerce clause, saying the court “expressly cautioned that their opinion ‘should not be read to suggest the ICCTA preemption clause is so sweeping as to displace other state powers preserved under other federal provisions’.”
After stating that “we are unable to conclude that the ICCTA results in preemption of Coastal Act permitting requirements for the contemplated railway development, including a land division that does not appear to be undertaken as part of the interstate rail network.”
Cheddar concludes: “Also, before conducting any development in the Coastal Zone, we request that Mendocino Railway coordinate with Coastal Commission staff (and local government, as applicable) to determine if the particular action may require either a CDP or a CZMA (Coastal Zone Management Act) Review.”
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