Pipeline serves a 'railroad purpose' as long as railroad operation continues and benefits, 9th Circuit rules

By Karen Kidd | Feb 13, 2018

PASADENA — A pipeline can suffice as a "railroad purpose" under right-of-way rules granted to railroads in the 19th century, as long as the railroad benefits, an appeals court ruled this month.

Union Pacific, which claims to benefit from a land lease to Santa Fe Pacific for a pipeline, benefits from incidental use of freight warehouses, fuel storage and power lines, as well as fuel, all of which as more amounts to a railroad purpose, the U.S. 9th Circuit Court of Appeals said in a ruling handed down Feb. 6. In its 28-page opinion, the 9th Circuit reversed and remanded a district court decision that granted a motion dismissing Union Pacific's counterclaims in class actions brought by landowners challenging the railroad's land lease in about 1,800 miles of its right of way to Santa Fe Pacific's petroleum pipeline.

The district court ruled in favor of the plaintiffs, landowners on either side of the right away, saying that the federally granted right of way authorized for Union Pacific to use only for a "railroad purpose" and the Santa Fe Pacific petroleum pipeline didn't qualify. The appeals court reversed that ruling, saying the pre-1871 acts that granted the right of way do not require such a purpose. 

"The panel also held that the pre-1871 Acts conferred a fee simple defeasible in everything except the mineral estate; and that interest entitled Union Pacific to lease the subsurface as well as the surface of its right of way to Santa Fe Pipeline as long as it continued to use the right of way to operate a railroad, regardless of whether the pipeline itself served a 'railroad purpose,'" the appeals court opinion said.

Much of the case has hinged on rights and privileges, including rights of way, granted by Congress during the 19th century to private railroad companies at the time to encourage the settlement and development of what then was considered the unsettled western United States. That in mind, Congress passed the General Railroad Right-of-Way Act of 1875, which granted through public lands. The 1875 Act remained in effect until 1976, when provisions for new rights of way were repealed by the Federal Land Policy and Management Act, but existing rights of way remained governed under the previous act.

Whether the pipeline served a railroad purpose under the 1875 act really wasn't at issue for the appeals court panel, which concluded Union Pacific "plausibly alleged" to have benefit Santa Fe Pacific's pipeline enough to satisfy the "incidental-use doctrine." That doctrine states that so long as a railroad derives some benefit while still continuing to use a right of way for its own operations, it may under the 1875 Act lease land within the right of way to a third party.

"The panel further held that the district court should have granted Union Pacific leave to amend to add facts supporting the contention that the pipeline served a railroad purpose," the opinion said.

The appeals court remanded the case back to the district court with instructions to grant leave to amend.

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