A three-person panel of judges determined that the Surface Transportation Board’s review of a planned project to construct an 85-mile-long rail line in the Uinta Basin in Utah that would carry crude oil was insufficient and lacked substance in part because it didn’t delve deeply into the project’s environmental ramifications. The decision puts the project into timeline limbo.

“Despite its protestations to the contrary, the Board cannot ignore and, in the past, has not ignored serious concerns about financial viability in determining the transportation merits of a project,” said the court’s opinion Friday written by Robert L. Wilkins, a judge with the U.S. Court of Appeals for the District of Columbia Circuit, on plans by the Seven County Infrastructure Coalition in Utah to construct the Uinta Basin Railway.

Wilkins later wrote that “the poor environmental review alone renders arbitrary the Board’s consideration of the relevant Rail Policies and the final order’s exemption of the Railway. Yet, the Board also failed to conduct a reasoned application of the appropriate Rail Policies as required under the [Interstate Commerce Commission Termination] Act [ICCTA]. The Board failed to weigh the Project’s uncertain financial viability and the full potential for environmental harm against the transportation benefits it identified.”

By rejecting the environmental impact statement (EIS) compiled by STB’s Office of Environmental Analysis, as well as rejecting the biological opinion (BiOp) report that STB put together in consultation with the U.S. Fish and Wildlife Service on the railway’s potential impacts on endangered species and critical habitats, the court is calling for STB to review its prior decision and conduct the analyses it should have conducted earlier.

In response to the appeals court decision, the project’s proponents, which include the Seven County Infrastructure Coalition and the DHIP Group, a developer and financier of infrastructure projects, said in a joint statement that they would work with STB to ensure the additional reviews and press on with the project without delay, according to news reports. 

“The Uinta Basin Railway team remains committed to the successful planning, construction, and operation of the railway. While we disagree with the D.C. Circuit Court’s recent decision, we respect the authority of the U.S. Court of Appeals,” the railway’s developers said in a statement to FreightWaves.

“We firmly believe that the railway’s Environmental Impact Statement (EIS) contains appropriate and thorough analysis of the highlighted concerns, as it stands today. Nonetheless, we are ready, willing, and capable of working with the U.S. Surface Transportation Board to ensure additional reviews and the project’s next steps proceed without further delay. We look forward to bringing this railway to the Basin in a safe and cost-effective way to enable economic stability, sustainable communities and an enriched quality of life to Utahns and beyond.”

Meanwhile, environmental groups following the case before the appeals court praised the court’s decision.

“This decision is a win for public health and the environment,” Jonny Vasic, executive director for Utah Physicians for a Healthy Environment, said in a Friday news release. “The court ruled the Surface Transportation Board conducted an environmental review that failed to meet the requirements of the law. The people of Utah can breathe a sigh of relief. Hopefully this is the beginning of the end for the Uinta Basin Railway.”

What the Uinta Basin Railway project is about

Project organizers have said that the purpose of the railway is to provide a viable transportation alternative besides trucks to ship locally produced crude oil. The railway would extend from South Myton Beach, which is located near the Uinta Basin in Utah, and Leland Beach to Kyune, Utah, where it would connect with the wider U.S. rail network via Union Pacific (NYSE: UNP). The crude oil potentially would head to refineries on the Gulf Coast. 

According to environmental groups, since the purpose of the proposed railway is to transport crude oil from the region to Gulf Coast refineries, the construction of the railway could result in crude oil production of an estimated 350,000 barrels per day. 

Project funding would come from public sources such as mineral lease fees that companies pay to the government, as well as the Utah Permanent Community Impact Fund, which had planned to give $27.9 million toward the project, according to the website for the Seven County Infrastructure Coalition. Funding of $1.2 billion to $1.5 billion would come from private sources, such as contracts and service fees for the railway. 

What the appeals court decided and why

Friday’s appeals court decision was in response to two lawsuits filed against STB in February 2022 that the court subsequently turned into one proceeding. One lawsuit was from five environmental groups — Center for Biological Diversity, Living Rivers, Sierra Club, Utah Physicians for a Healthy Environment and WildEarth Guardians — and the other was from Eagle County, Colorado, which described itself in legal filings as being “downline” to potential environmental impacts that could come from the project. 

These two separate lawsuits were filed after STB approved a request by Seven County Infrastructure Coalition and others for an expedited review of the project instead of the typical review that occurs and involves a more extensive review of a project’s adherence to the National Environmental Policy Act. STB approved this request in December 2021 on a 4-1 vote, with STB Chairman Marty Oberman dissenting. 

Projects typically obtain STB’s permission to proceed by submitting an application that ensures the project’s adherence with National Environmental Policy Act (NEPA), as well as provides information on the proposed use of the line, including operational, financial, environmental and energy data. 

But projects can also opt to seek an exemption from the more stringent review, provided that the project meets certain conditions. The coalition had sought the exemption option during the COVID-19 pandemic, citing the economic distress of local communities. 

When the court issued its decision on Friday, it determined that STB’s review was insufficient because the two supporting documents that the board produced for the application, the EIS and the BiOp, didn’t adequately explore potential issues in depth. These issues include the potential hazards that additional freight trains — particularly trains carrying crude oil — could bring to local communities. 

“While we recognize that the Board relied on additional factors in analyzing downline wildfire risks — such as technological improvements in the rail industry and historic data on train-induced wildfires — its assertion that an increase in rail traffic of up to 9.5 new trains a day would not result in a significant wildfire risk because it would not be a qualitatively ‘new ignition source’ is utterly unreasoned,” the court decision said. 

“A significant increase in the frequency of which existing ignition sources travel this route equally poses an increased risk of fire. … Because the Board appears to have underestimated the accident risk for downline trains as noted in the prior section, it necessarily underestimated the wildfire risk from downline derailments. This is not the ‘hard look’ that NEPA requires.” 

The court also said STB should have delved more deeply into the environmental impacts that come not only from increasing crude oil production in the Uinta Basin but also what the nation’s role should be in increasing oil production.

“The ‘cumulative’ effects within the Uinta Basin of a major expansion of oil drilling there, on Gulf Coast communities of refining the oil, and the climate effects of the combustion of the fuel intended to be extracted are foreseeable environmental effects of the project. These are effects the Board ultimately has the authority to prevent. The Board was required not only to identify those effects under NEPA, as discussed above, but also to weigh them in its ICCT Act analysis. Its failure to do so contributes to our conclusion that the Board’s order is arbitrary and capricious,” the court said. 

In conclusion, the court decision said: “The deficiencies here are significant. We have found numerous NEPA violations arising from the EIS, including the failures to: (1) quantify reasonably foreseeable upstream and downstream impacts on vegetation and special-status species of increased drilling in the Uinta Basin and increased oil-train traffic along the Union Pacific Line, as well as the effects of oil refining on environmental justice communities the Gulf Coast; (2) take a hard look at wildfire risk as well as impacts on water resources downline; and (3) explain the lack of available information on local accident risk. … The EIS is further called into question since the BiOp failed to assess impacts on the Colorado River fishes downline.” 

Friday’s appeal court decision echoed many of the reasons why Oberman said in December 2021 that he was voting against approving the project’s environmental impact statement. 

“The critical question presented in this proceeding is whether the Line would serve the public interest given its centrality to oil development in the Basin and the broader and dire global warming crisis, as well as the very serious, significant, and unavoidable environmental impacts that Today’s Decision does in fact attribute to the project,” Oberman wrote in December 2021. “Absent some particularized national need for increased oil from the Basin, of which there is none, I cannot support construction of the Line.”

Oberman also expressed concern in December 2021 of the financial viability of the project, given its reliance on private funding sources and the uncertain global market for crude oil.

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