SAN FRANCISCO – The U.S. Court of Appeals for the Ninth Circuit has reinstated counterclaims by Union Pacific Railroad on Feb. 7 centered on its leasing of land under 1,800 miles of its right of way to Santa Fe Pacific Pipeline LP to build a petroleum pipeline.

The decision is part various class action lawsuits dating back three years.

Railroad rights of way were established by Congress under the pre-1871 Acts and the General Railroad Right-of-Way Act of 1875 and have been challenged in court ever since.

According to the opinion of the Ninth Circuit and a three-person panel consisting of U.S. District judges Frederic Block, Stephen Reinhardt, and Jacqueline H. Nguyen, the Central District of California made an error when it dismissed Union Pacific’s counterclaims and denied an amendment request in an effort to support the argument that the pipeline served a railroad purpose.

The panel also stated a railroad easement “entitles Union Pacific to lease the subsurface as well as the surface of its right of way to SFPP as long as it continues to use the right of way to operate a railroad, regardless of whether the pipeline itself serves a ‘railroad purpose.’”

Block ruled, "Union Pacific’s proposed amendment alleges that the pipeline serves a railroad purpose because Union Pacific uses capacity on the pipeline to transport millions of gallons of fuel a year, purchased directly by Union Pacific from third-party refineries, via dedicated facilities to private terminals on the railroad line that Union Pacific owns."

According to the opinion, “We hold that the district court should have granted leave to amend because that allegation, if proven, is sufficient to establish a prima facie case that the pipeline serves a railroad purpose.”

The judges ruled, “We hold that the pre-1871 acts do not require a ‘railroad purpose.’ We hold that Union Pacific has plausibly alleged that the pipeline serves such a purpose. We therefore reverse the district court’s order granting the motion to dismiss Union Pacific’s counterclaims and remand with instructions to grant leave to amend.”

Michael Mills, a partner at Stole Rivves LLP, told the Northern California Record that those most affected by this decision are the railroads who can offer pipeline easements to pipeline companies, pipeline companies who can obtains such agreements from the railroads, and neighboring property owners.

Regarding the Ninth Court’s decision, Mills said, “I think it is legally correct based on the patents for the rights of way that were granted to the railroads pre-1871, as authorized by Congress.”

Mills said the decision can be appealed through a request for en band hearing to the Ninth Circuit, where a larger number of judges would reconsider the three-judge panel’s decision. “That is not an automatic appeal it is discretionary,” Mills said. “Also, it can be appealed to the U.S. Supreme Court via a writ of certiorari. That is also a discretionary appeal, meaning the court doesn’t need to hear it.”

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