This is the determination
of the Railroad Retirement Board concerning
the status of Sierra Pacific Industries, Incorporated,
Quincy Railroad Division (Sierra Pacific);
the Quincy Railroad Company (Quincy Railroad);
and Sierra-Pine LLP, as employers under the
Railroad Retirement Act (45 U.S.C. 231 et
seq.) and the Railroad Unemployment Insurance
Act (45 U.S.C. 351 et seq.). The Quincy Railroad
has previously been determined to be a covered
employer (BA 3731) under the Railroad Unemployment
Insurance Act and the Railroad Retirement
Acts of 1974 and 1937, with service creditable
from November 1917 to date. The status of
Sierra Pacific and Sierra-Pine have not previously
been the subject of formal consideration by
the Board.1
Sierra Pacific is a privately held California
corporation formed in 1969 which owns timber
land and lumber mills. See: “Profile
of Sierra Pacific Industries”, George
Draffan, Endgame Corporate Profile website.
Sierra Pacific ranks among the Forbes 500
list of private corporations, and has over
3,000 employees. The company’s own internet
site states that it owns approximately 1.5
million acres, making Sierra Pacific the largest
private timberland owner in North America.
The evidence is that Sierra Pacific has also
acquired three lines of railroad: the Quincy
Railroad, the Amador Central Railroad, and
the Susanville-Wendel line.
In a letter dated December 17, 2002, Sierra
Pacific stated that in May 1976, it purchased
a lumber mill located in Quincy, California
from the DiGiorgio Lumber Company. Sierra
Pacific acquired in that transaction the plant
itself, title to the 60 acre mill site. and
the Quincy Railroad Company. The Quincy Railroad
consisted of three miles of track from the
lumber mill at Quincy to a junction with a
trunk line now operated by the Union Pacific
Railroad, the entire line lying within Plumas
County. Because there was no other shipper
on the line other than the lumber mill, DiGiorgio
Lumber and Sierra Pacific believed the line
to be a private track, and did not seek approval
of the sale by the former Interstate Commerce
Commission. On December 21, 1995, Sierra Pacific
filed a certificate of ownership with the
California Secretary of State which certified
as sole owner that it had merged Quincy Railroad
into Sierra Pacific. Sierra Pacific sought
no approval of this transaction from the ICC
or the Surface Transportation Board (STB)
as well. Sierra Pacific continues to use the
line to bring lumber from the mill to the
junction with the Union Pacific, operating
as the Quincy Rail Road division of Sierra
Pacific. No notices have ever been filed with
the STB regarding Sierra Pacific’s conduct
of this operation.
In a separate letter also dated December
17, 2002, Sierra Pacific stated that on April
21, 1986 the Quincy Railroad began leasing
from the Southern Pacific Transportation Company
(now the Union Pacific Railroad) a 25 mile-long
rail line running from Susanville to Wendel
in Lassen County, California. The line serves
a lumber mill owned by Sierra Pacific and
a millwork plant operated by Jeld-Wen, both
located in Susanville, and interchanges with
the Union Pacific at Wendel. Following merger
of Quincy Railroad into Sierra Pacific in
December 1995, operation of the line has been
conducted by the Quincy Railroad division
of Sierra Pacific. There is no physical connection
between the Susanville-Wendel rail line and
the Quincy rail line, which lie approximately
30 miles apart. There is no record that the
ICC ever approved the original lease between
the Southern Pacific and Quincy Railroad,
or that the STB has ever been notified of
the continued lease between the Union Pacific
and Sierra Pacific.
In Surface Transportation Board (STB) Finance
Docket No. 33378, decided April 3, 1997, Sierra
Pacific did file a verified notice of exemption
to acquire and operate an approximately 12
mile line of track between Ione and Martel,
California formerly owned and operated by
the Amador Central Railroad Company. See:
Sierra Pacific Industries; Acquisition and
Operation Excemption—Amador Central
Railroad Company 62 Fed. Reg. 17284, April
9, 1997. By letter dated August 19, 1997,
Sierra Pacific notified the Board that when
it acquired the Amador Central from its prior
owner, Georgia Pacific Corporation, it hired
none of the former Amador Central employees,
and did not intend to conduct rail operations
itself. On November 7, 1997, the Board determined
that following sale of the line to Sierra
Pacific, Amador Central “no longer possesses
the characteristics of an operating railroad
company” and therefore ceased to be
an employer under the Acts. B.C.D. 97-101,
Amador Central Railroad Company. No determination
was rendered by the Board regarding the status
of Sierra Pacific.
Consistent with its August 1997 letter to
the Board, Sierra Pacific filed a notice with
the STB that it intended to sell the Amador
Central line to the Sierra Railroad, an unrelated
short line. See: Sierra Railroad Company---Acquisition
and Operation Exemption—Sierra Pacific
Industries 62 Fed. Reg. 63747, December 2,
1997, However, the sale was not completed.
Sometime during 1998, SierraPine LLP, which
is evidently a California limited partnership
between Rockland Timber Co., a Delaware corporation,
Sierra Pacific, and others2,
purchased a particle board plant located in
Martel. On
December 15, 1998, SierraPine leased the
line of the Amador Central from Sierra Pacific.
SierraPine filed a notice of this transaction
with the STB. See SierraPine—Lease and
Operation Exemption—Sierra Pacific Industries,
Finance Docket No. 33679, 63 Fed. Reg. 68505,
December 11, 1998. Later, SierraPIne sought
to revoke the STB determination that the line
was subject to its jurisdiction on grounds
that the line of rail was actually a private
switching line. Id., November 21, 2001. The
STB denied the petition to revoke, and subsequently
denied reconsideration of the denial. Id.,
August 22, 2002.
Section 1(a)(1) of the Railroad Retirement
Act (45 U.S.C. § 231(a)(1)), insofar
as relevant here, defines a covered employer
as:
(i) any carrier by railroad subject to the
jurisdiction of the Surface Transportation
Board under Part A of subtitle IV of title
49, United States Code;
Section 1 of the RUIA contains essentially
the same definition, as does section 3231
of the Railroad Retirement Tax Act.
Decisions of the Board in prior cases have
concluded that where a short line of track
is operated as a common carrier, the operator
is a rail carrier employer under the Acts.
B.C.D. 96-19 GWI Switching Services, L.P.
Whether the operator owns the rail line, or
leases the line from another company does
not affect the outcome, but where the operator
does not hold itself out as a common carrier,
the Board has concluded that the track is
operated as a private carrier, and consequently
is not a covered rail carrier employer. See,
e.g., B.C.D. 94-29 Hardin Southern Railroad
Company; B.C.D. 94-105.2 Great Miami &
Western Railway.
Regulations of the Board at 20 CFR 202.2
provide that “Any company or person
principally engaged in carrier business is
an employer” within the meaning of section
1(a)(1) of the RRA and 1 of the RUIA. Where
the principal business of a company is not
carrier business, Board regulations further
provide that the Board will consider whether
some identifiable and separable enterprise
is considered to be the employer. See: 20
CFR 202.3(a). That regulation further provides
that in determining whether a segregable portion
of a business may be determined to be a rail
carrier employer, the Board will consider
evidence such as:
(1)
The primary purpose of the company or person
on and since the date it was established;
(2) The functional dominance or subservience
of its carrier business in relation to its
non-carrier business;
(3) The amount of its carrier business and
the ratio of such business to its entire business;
(4) Whether its carrier business is a separate
and distinct enterprise.
Where a line of railroad is owned by one
entity but operated as a rail carrier by a
second, unrelated entity, the RRA, the RUIA
and the agency’s regulations do not
directly address the status under the Acts
of the lessor company as an employer. In November
2000, the Board defined the circumstances
under which it would consider that the lessor-owner
of a rail line leased to another would be
a rail carrier employer under the Acts. See
Board Coverage Decision 00-47, Railroad Ventures,
Inc., (reconsideration decision). Pursuant
to that decision, the Board will determine
the lessor to be an employer unless:
(1) the lessor does not have as a primary
purpose to profit from railroad activities;
(2) the lessor does not operate or retain
the capacity to operate the rail line; and
(3) the operator of the rail line is already
a covered employer under the RRA and RUIA.
See: B.C.D. 02-13, Bellingham International
Railroad, LLC (decision on reconsideration).
Applying these standards to the companies
under consideration here, the evidence regarding
the Quincy Railroad is that it merged with
its parent corporation Sierra Pacific in December
1995 and ceased to exist as a corporate entity.
Regulations of the Board provide that the
status of a company as an employer covered
by the Acts ends “whenever such company
or person loses any of the characteristics
essential to the existence of an employer
status.” 20 CFR 202.11. Accordingly,
the Board determines that the status of the
Quincy Railroad as a covered employer ended
December 21, 1995, when it lost its corporate
identity. Moreover, from at least the time
of sale to Sierra Pacific in May 1976 and
continuing to the present, the Quincy lumber
mill owned by Sierra Pacific has been the
only shipper on the line. The switching operation
conducted by the Quincy Railroad division
of the Sierra Pacific is in reality the movement
of rail cars for itself over track it owns
to a junction siding connecting to a trunk
carrier. The Board concludes that effective
December 22, 1995, Sierra Pacific has engaged
in private carriage over the former Quincy
Railroad which is not rail carrier service
within the meaning of the RRA and RUIA.
As noted above, the Board previously determined
that Amador Central Railroad Company ceased
to be an employer under the Acts effective
with the sale to Sierra Pacific of all its
rail assets March 31, 1997. There is no evidence
contradicting Sierra Pacific’s assertion
at the time of sale that it would not operate
the Amador Central line itself. Rather, the
record shows Sierra Pacific immediately sought
to resell the line to a rail carrier. When
that transaction failed, Sierra Pacific then
entered into the operating lease with SierraPine.
However, since at least the time of the SierraPine
purchase of the particle board plant in Martel,
the Amador Central rail line has served two
shippers. The record also shows that over
the objection of SierraPine, the STB has twice
determined that SierraPine’s operation
of the Amador Central rail line remains subject
to STB jurisdiction. In the words of the STB:
Here, SierraPine sought and acquired authority
via exemption to provide common carrier service
over a line that has historically been operated
as a regulated line of railroad. Petitioner
cannot unilaterally extinguish its common
carrier obligation on the basis that it did
not in the past, and does not now, require
regulatory authority to conduct what it describes
as its primarily private carrier, switching
operations. SierraPine—Lease and Operation
Excemption—Sierra Pacific Industries,
Finance Docket No. 33679, August 26, 2002.
As the matter stands, the STB has determined,
reviewed and re-determined that SierraPine
is a rail carrier subject to its jurisdiction.3
Of course, section 1(a)(i) of the
RRA and section 1 of the RUIA define a covered
rail carrier employer as “any carrier
by railroad subject to the jurisdiction of
the Surface Transportation Board under Part
A of subtitle IV of title 49, United States
Code”. Based on the STB decision that
SierraPine is a rail carrier with respect
to the operation of the Amador Central line
under lease, the Board therefore determines
that SierraPine is a rail carrier employer
under the RRA and RUIA, effective December
15, 1998, the date SierraPine assumed operations
on the Amador Central line. However, it is
clear that SierraPine is primarily in the
lumber business rather than a common carrier
by rail. Pursuant to section 202.3(a) of the
Board’s regulations regarding segregation
of the rail carrier portion of a company’s
business (20 CFR 202.3(a)), SierraPine is
an employer only with respect to its operation
of the former Amador Central rail line.
It remains to consider the status of Sierra
Pacific as operator of the Susanville-Wendel
line, and as owner-lessor of the Amador Central.
The circumstances of Sierra Pacific’s
operation of the Susanville-Wendel line are
similar to those of SierraPine’s operation
of the former Amador Central in that both
lines serve another shipper in addition to
the plant of the rail line operator. Unlike
the Amador Central, however, at the time of
transfer of ownership, the Susanville-Wendel
rail line was only a spur of a trunk rail
line rather than a complete short line railroad.
Although no decision of the former Interstate
Commerce Commission has been located, the
transfer of ownership from the Southern Pacific
Railway to one of the two shippers on the
line would appear to be an abandonment, potentially
within jurisdiction of the ICC. See, The Atchison,
Topeka and Santa Fe Railway Company—Abandonment
Exemption—In Lyon County, KS, Docket
AB-52 (Sub-No. 71X)(June 17, 1991). Absent
a decision to the contrary by the ICC or STB,
in the Board’s view, the abandonment
by the Southern Pacific and subsequent Sierra
Pacific operation of the Susanville-Wendel
rail line for itself and Jeld-Wen renders
the operation private rather than common carriage.
An operator of a rail line as a private carrier
is not a rail carrier employer under the Acts.
Hardin Southern Railroad Company, supra.
The last matter for consideration is the
status of Sierra Pacific as an employer by
reason of its lease of the Amador Central
line to SierraPine. The Board is satisfied
that the Railroad Ventures factors noted above
are met. The size of Sierra Pacific’s
lumber business in relation to the rail line,
and the location of its mill on the line evidence
that the primary purpose for obtaining the
Amador Central was to maintain rail access
to the mill, not to profit from railroad activities.
Under the second factor, it is noteworthy
the
STB determined SierraPine to be a rail carrier
on the basis of STB’s analysis of the
lease as leaving the lessor without recourse
to operate the line itself upon lessee SierraPine’s
default. See: SierraPine—Lease and Operation
Excemption—Sierra Pacific Industries,
Finance Docket No. 33679, August 26, 2002.
The Board defers to the STB’s finding
that Sierra Pacific does not retain the capacity
to operate the Amador Central line itself.
Under the final Railroad Ventures factor,
the Board has with this decision determined
that SierraPine is an employer with respect
to operation of the line. As all three of
the factors required by Railroad Ventures
are present, the Board consequently determines
that Sierra Pacific is not a lessor rail carrier
employer under the Acts.
