ORAL ARGUMENT

If a railroad company uses but does not own a railroad line, should it pick up some of the bill when a neighboring structure is demolished? That was essentially the question before the state Supreme Court last week in Philadelphia. And the Pennsylvania Public Utility Commission, along with three intervening parties, all told the high court that freight company Norfolk Southern Railway Co. should bear some of the cost to remove a bridge that was once suspended over the East Hempfield Township railroad crossing that its trains frequently traverse.

The PUC’s attorney, Elizabeth A. Lion Januzzi, argued that the commission’s jurisdiction and ability to allocate costs was "not merely an esoteric legal principle," but rather a matter of safety. Januzzi said the Commonwealth Court had improperly divested Norfolk of the $78,816 — or 15 percent of the total cost — the PUC allocated against it for the cost of removing the bridge at issue.

Januzzi argued the language of Section 2704(A) of the Public Utility Code, on damages related to construction or demolition of crossings, controlled the case of Norfolk Southern Railway v. PUC, not Pennsylvania case law tying allocation of cost to ownership interest.

The railroad at issue is owned by Amtrak, which is federally exempt from being assessed for railway maintenance costs.

In its December 2011 ruling in the instant case, the Commonwealth Court had relied on its previous decision in City of Chester v. PUC in deciding that Norfolk was not a "concerned party" subject to cost allocation under the factors set forth in Section 2704(a) of the Public Utility Code.

But in the PUC’s view, Norfolk’s use of the railway crossing alone was enough for it to meet the relevant factors the code allows the commission to consider, which Januzzi said the Supreme Court approved in AT&T v. PUC in 1999.

Norfolk, on the other hand, argued that determining who was a concerned party did not limit the relevant factors the commission may consider in allocating costs — it just limited the entities against which the cost may be allocated.

"There has to be a place where you draw the line on PUC’s authority," argued Benjamin C. Dunlap Jr. of Nauman, Smith, Shissler & Hall on behalf of Norfolk.

"Where do you draw the line on ownership?" Justice Max Baer asked him.

Dunlap responded that the Pennsylvania General Assembly already had drawn that line, namely in Section 2702(a) of the Public Utility Code. Dunlap said the law limited the commission’s jurisdiction to crossings where the utility has constructed "its facilities" across a highway or where a highway has been built across the "facilities of any such public utility."

By using the word "its," the General Assembly had exempted Norfolk, as a non-owner of the crossing, from cost allocation in the instant case, Dunlap said, arguing that Section 2704(a) and its "relevant factors" provision must be read in conjunction with Section 2702(a).

According to the Commonwealth Court’s opinion, East Hempfield ordered the bridge to be demolished in 2008 and the township, Amtrak, Lancaster County, Norfolk and the Department of Transportation were called in to an allocation hearing.

While Amtrak is federally exempt from being assessed for railway maintenance costs, the administrative law judge who first heard the case determined the exemption did not apply to Amtrak’s protection of its own operations. The ALJ assigned it financial responsibility for $59,130 in such costs. Of that amount, the ALJ directed Amtrak to reimburse East Hempfield Township for $15,088 in costs charged to it.

The ALJ first hit Norfolk with its allocable costs for the demolition, finding that the bridge permitted freight to move over the rail line and reduced the risks of accidents associated with "at-grade" crossings. According to the panel’s opinion, the ALJ determined Norfolk also stood to benefit from the removal of the bridge, whose deteriorating structure posed a safety and operational threat to Norfolk.

Norfolk, the county and PennDOT filed exceptions to the ALJ’s recommendation, which the PUC denied.

It was that PUC order that the Commonwealth Court reversed, at least with respect to Norfolk.

Finding in Norfolk’s favor, the unanimous panel decided the court’s 2002 decision in City of Chester divested Norfolk of any responsibility, despite the ALJ’s finding that Norfolk reaped the benefit of the existence, and eventual removal, of the bridge.

As a non-owner, Norfolk pays for its use of the railway through a "freight operating agreement" with Amtrak.

Section 2704(a) allows for private cost agreements, such as the one between Norfolk and Amtrak, to stand in place of PUC-mandated cost allocations. Norfolk had argued in front of the Commonwealth Court its agreement with Amtrak covered all of its costs, but the panel agreed with the ALJ, who determined the private agreement was inapplicable.

Following the Commonwealth Court’s December 1, 2011, decision, the $78,816 the PUC allocated to Norfolk fell to East Hempfield Township, which already bore 70 percent — or $367,809 — of the cost. The township has intervened in the case.

Attorneys for PennDOT, East Hempfield Township and Lancaster County (in which East Hempfield Township resides) all argued as interveners at last Wednesday’s arguments.

East Hempfield Township’s attorney noted she did not object to the 70 percent allocation. Instead, Theresa A. Mongiovi of Blakinger, Byler & Thomas in Lancaster, said Norfolk should have to cover its allocated 15 percent of the demolition costs because the company benefited from the existence of the bridge and its eventual removal.

Justice J. Michael Eakin appeared to take issue with Mongiovi’s position because the bridge, as Eakin read the record, never impeded Norfolk, despite concerns about its structural stability.

PennDOT, which footed 5 percent under PUC’s allocation, said its position was that if there was an exemption for non-owners, it should apply across the board.

Before the attorney representing Lancaster County could even introduce himself, Chief Justice Ronald D. Castille asked him: "How much did they pin on you guys?"

Ben Present can be contacted at 215-557-2315 or bpresent@alm.com. Follow him on Twitter@BPresentTLI. •