Decision 03-01-042 January 16, 2003

Before The Public Utilities Commission Of The State Of California

The City of St. Helena, Town of Yountville, County of Napa, Napa Valley Vintners Association, Complainants, vs. Napa Valley Wine Train, Inc., Defendant.

Case 88-03-016 (Filed March 7, 1988)

ORDER GRANTING REHEARING OF DECISION 01-06-034

In D.01-06-034, we granted, in part, the petition filed by the City of St. Helena ("St. Helena"), for modification of prior decisions concerning the Napa Valley Wine Train, Inc. ("Wine Train"). We concluded that the Wine Train's passenger excursion service does not constitute regulated transportation and, in providing such service, the Wine Train is not functioning as a public utility.

On July 19, 2001, Wine Train filed an application for rehearing of

D.01-06-034, alleging that (1) the decision unlawfully reverses prior, final adjudicatory determinations and unlawfully gives retroactive effect to such revised findings; (2) the decision violates Public Utilities Codes section 1709 by its failure to apply the doctrine of res judicata to the subject controversy; (3) the decision violates Public Utilities Code sections 211 and 216 by finding that the Wine Train's passenger services do not constitute regulated transportation; (4) the decision violates Public Utilities Code section 1705 by making findings for which there is no substantial evidentiary support; and (5) the decision purports to modify a decision in a manner that was not the subject of the petition before the Commission. In response, the City of St. Helena contends that the Wine Train is not a public utility and that its claims of legal error are without merit.

We have reviewed each and every allegation of error raised in the application for rehearing and are of the opinion that applicants have demonstrated good cause for rehearing.

I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

This case has a long and complicated history. On March 7, 1988, St. Helena, City of Napa, Town of Yountville, County of Napa, and Napa Valley Vintner's Association ("complainants") filed a complaint against the Wine Train alleging violations of the Public Utilities Code, the Commission's Rules of Practice and Procedure, the Federal Railroad Safety Act of 1970 ("FRSA"), and the California Environmental Quality Act ("CEQA").¹ Complainants argued that the Wine Train was a public utility and that the Commission should assert jurisdiction over the Wine Train. In D.88-04-015, the Commission ordered the Wine Train to show cause why it should not be required to submit to the jurisdiction of the Commission with respect to its proposed passenger train service. (City of St. Helena, et al. v. Napa Valley Wine Train, Inc. [D.88-04-015] (1988) 1988 Cal. PUC LEXIS 217.)

During this same period of time, the Interstate Commerce Commission ("ICC") (now the Surface Transportation Board) was considering a petition filed by the Wine Train for an order declaring that its operations were not subject to the Commission's jurisdiction. The Commission participated in that proceeding, arguing that the Wine Train passenger service was purely intrastate and, thus, was subject to the Commission's economic regulation. (See Napa Valley Wine Train, Inc. - Pet. for Declaratory Order (1988) 4 I.C.C.2d 720, 1988 ICC LEXIS 216.) Ultimately, the ICC and the Commission issued conflicting orders on the same date, July 8, 1988.

The ICC held that the Wine Train was an interstate carrier and that, even if its passenger operations were purely intrastate, there was complete federal preemption of any economic regulation of the Wine Train. The Commission's authority was limited to enforcing compliance with local safety, zoning, land use and "other so-called non-economic regulation." (Napa Valley Wine Train, Inc. - Pet. for Declaratory Order (1988) 4 I.C.C.2d 720, 1988 ICC LEXIS 216, *14.) Although the decision refers to preemption of "economic" regulation, this encompassed more than just setting rates. The ICC stated that under 49 U.S.C. 11501(b)(2), as amended by the Staggers Rail Act, the only way a state could regulate intrastate rail operations by interstate carriers was to obtain federal certification. Because California had not sought certification, California was precluded from exercising its jurisdiction over the franchising, scheduling, and pricing of freight or passenger operations. (Napa Valley Wine Train, Inc. - Pet. for Declaratory Order (1988) 4 I.C.C.2d 720, 1988 ICC LEXIS 216, *14-*15.)

In response to the Commission's argument that CEQA required an environmental review of the Wine Train, the ICC pointed out that CEQA requires state agencies to take into account environmental considerations in their decision-making process. "However, since the CPUC had no power to regulate the Wine Train's operations and thus no decision making role here, CEQA is inapplicable." (Napa Valley Wine Train, Inc. - Pet. for Declaratory Order (1988) 4 I.C.C.2d 720, 1988 ICC LEXIS 216, *15.) ²

In contrast, the Commission's decision held that the Wine Train's passenger service was subject to the Commission's jurisdiction with respect to economic, safety, and environmental matters. (City of St. Helena, et al. v. Napa Valley Wine Train, Inc. [D.88-07-019] (1988) 1988 Cal. PUC LEXIS 364, *9, *16.) The Commission ordered the Wine Train to refrain from instituting passenger service until it complied with all applicable requirements of CEQA, as well as all other applicable rules, regulations, and general orders of the Commission, and until it was authorized to commence service by the Commission. (Id. at p. *17.)

The Wine Train appealed the Commission's decision to the California Supreme Court. The Commission argued that the Wine Train was subject to its jurisdiction. Among other things, the Commission asserted that the Wine Train was a project under CEQA because the Commission has discretionary authority over safety, rates, and the type and quality of service offered by the Wine Train. Although, as a railroad corporation, the Wine Train was not required to obtain a certificate of public convenience under Public Utilities Code section 1001, the Commission asserted broad discretionary authority over the Wine Train pursuant to Public Utilities Code sections 761, 762 and 763. (See Answer of Respondent to Petition for Writ of Review in Napa Valley Wine Train v. Public Utilities Commission, No. S007919, filed December 19, 1988.)³

After the California Supreme Court granted review, but before it issued its decision on the merits, the Wine Train, the Commission, and the complainants entered into a Limited Settlement Agreement. (See City of St. Helena, et al. v. Napa Valley Wine Train, Inc. [D. 89-08-054] (1989) 1989 Cal. PUC LEXIS 869.) Pursuant to that agreement, the Wine Train was permitted to institute limited passenger services and would prepare an environmental impact report on those services, regardless of the outcome of the court case. However, the settlement agreement excused the Wine Train from compliance with any mitigation measures unless the Supreme Court upheld the Commission's prior order. (See Limited Settlement Agreement, dated August 23, 1989, at p. 13.)

On February 8, 1990, the D.C. Circuit granted the ICC's request to remand the Wine Train case for reopening and further consideration. (Napa Valley Wine Train, Inc. - Pet. for Declaratory Order (1991) 7 I.C.C.2d 954, 1991 ICC LEXIS 195, *6, fn. 10.) The ICC was prompted to re-open the case after the D.C. Circuit Court of Appeals issued Illinois Commerce Comm'n v. ICC (D.C. Cir. 1989) 879 F.2d 917. In Illinois Commerce, the court rejected the ICC's broad interpretation of the preemption provisions of 49 U.S.C. § 11501(b)(2) and the Staggers Rail Act. The court pointed out that the central concern of the Staggers Rail Act was reformation of economic regulation of railroads and, thus, 49 U.S.C. § 11501(b)(2) must be interpreted to apply only to intrastate ratemaking. The court held that that the Staggers Act does not preempt state authority to regulate the abandonment of intrastate spur tracks.

On March 19, 1990, the Supreme Court held that the Wine Train passenger service was exempt from CEQA pursuant to Public Resources Code section 21080(b)(10),⁴ an express statutory exemption that applies to projects for the institution of passenger service on rail rights-of-way already in use. (Napa Valley Wine Train v. Public Utilities Commission (1990) 50 Cal.3d 370, 383.) Accordingly, the court annulled D.88-07-019. The court noted that the case also involved a jurisdictional dispute between the ICC and the Commission, and that the ICC was reconsidering its decision at the time the court's opinion was filed. However, the court stated that, to resolve this case, the court did not need to resolve the jurisdictional conflict. "Even if the PUC had the power to regulate Wine Train's passenger service, the passenger-service exemption would nevertheless make CEQA inapplicable." (Napa Valley Wine Train v. Public Utilities Commission, supra, 50 Cal.3d at p. 373, fn. 2.)⁵

On May 10, 1990, in response to the Supreme Court ruling, Assembly Member Hansen proposed a bill that would abrogate the court's decision. A.B. 4370, also known as the "Hansen Bill," was signed into law on September 30, 1990. The Hansen Bill added section 21080.4 to the Public Resources Code, which abrogated the Supreme Court ruling by stating that CEQA applies to the Wine Train and that the Commission is the lead agency.

In May 1990, the consulting firm of Earth Metrics completed a draft environmental impact report ("EIR") that was initiated pursuant to the limited settlement agreement. Comments on the EIR raised issues about the adequacy of the EIR.⁶

On July 18, 1991, the ICC reversed its prior rulings regarding the Wine Train. Again, the Commission participated in that proceeding. The Commission argued that the Wine Train's passenger service is wholly intrastate and that the Stagger's Act does not preempt California's authority to regulate the Wine Train's passenger service. (See Opening Statement of the Public Utilities Commission of the State of California, Finance Docket No. 31156, filed May 24, 1990.) The ICC held that the Wine Train's passenger operations are essentially intrastate, and that its freight operations do not make its intrastate passenger operations subject to ICC jurisdiction. The ICC also noted that, just as states could regulate the discontinuance of passenger trains, they might also regulate the commencement of intrastate passenger trains as well as other aspects of service. However, the ICC stated that whether state approval is needed to start up passenger operations is a question for the CPUC and the California courts to decide. (Napa Valley Wine Train, Inc. - Pet. for Declaratory Order (1991) 7 I.C.C.2d 954, 1991 ICC LEXIS 195, *31, fn. 38.)

In July 1991, the Commission and the Wine Train signed a Memorandum of Understanding with the Wine Train regarding a second EIR. The second EIR was to be prepared by the consulting firm of Environmental Science Associates. In August 1991, CACD formed a Technical Advisory Committee ("TAC") of responsible agencies (including St. Helena, the Town of Yountville, and the City and County of Napa) and interested parties to provide input on the EIR. Although this was not required by CEQA, the TAC was formed to allow interested parties greater participation in the EIR process. The TAC met monthly during the period of the preparation of the EIR.

On July 21, 1993, the Commission certified a final EIR ("FEIR") for the Wine Train project. (See City of St. Helena, et al. v. Napa Valley Wine Train, Inc. [D.93-07-046] (1993) 50 Cal.P.U.C.2d 377, 50 Cal. PUC LEXIS 566.) Among other things, the preferred alternative in the FEIR contemplated that the Wine Train would stop at stations along the way.

Three years after the FEIR had been certified, on June 19, 1996, the Commission approved the project and ordered the Wine Train to comply with extensive mitigation measures. (City of St. Helena, et al. v. Napa Valley Wine Train, Inc. [D.96-06-060] (1996) 66 Cal.P.U.C.2d 602.) In that decision, the Commission specifically addressed the issue of state versus local jurisdiction. ALERT, a coalition formed by complainants, had recommended that language be included in the decision on the respective role of state and local authorities. The Commission stated: "We declare the interurban operation of the Wine Train between Napa and St. Helena, including the stops provided in the Proposed Project, to be one of statewide, rather than merely municipal concern." (D.96-06-060, 66 Cal.P.U.C.2d at p. 610.)

Relying on Harbor Carriers, Inc. v. City of Sausalito (1975) 46 Cal.App.3d 773 and Orange County Air Pollution Control District v. Public Utilities Commission (1971) 4 Cal.3d 945, the Commission further stated:

[W]e view our authority in this proceeding as concurrent with that of any local agency affected by operation of the Wine Train. That is, we may approve this project pursuant to CEQA, . . . with the expectation that a local agency may impose reasonable local ordinances, such a relate to building code restrictions; but such local agency (municipality or otherwise) may not deny the Wine Train the right to perform such operations or stops.

(D.96-06-060, 66 Cal.P.U.C.2d at p. 610.)

On rehearing, the Commission addressed ALERT's contention that the Commission had erred in asserting paramount jurisdiction over the Wine Train. In a detailed discussion of jurisdictional principles, the Commission once again concluded that "the stops connected with the Wine Train are a matter of statewide concern." (City of St. Helena, et al. v. Napa Valley Wine Train, Inc. [D.96-11-024] (1996) 69 Cal.P.U.C.2d 243, 245.) The Commission then clarified its prior decision by replacing the above-quoted paragraph with the following:

Considering the Harbor Carriers decision, we view our authority in this proceeding as paramount to that of any local agency affected by operation of the Wine Train. However, local agencies may exercise concurrent jurisdiction over the Wine Train's operations to the extent that that regulation is not inconsistent with the holdings of the Commission.

(Id. at 246.)

On January 14, 1999, St. Helena filed a complaint with the Commission (C.99-01-020) alleging that the Wine Train was not operating as a public utility pursuant to Public Utilities Code section 212, and that, even if the Wine Train were to operate in the manner authorized by the Commission in D.96-06-060 and D.96-11-024, it would not be a public utility. According to the complaint, the Wine Train was demanding that the city approve a proposed train station in St. Helena on the ground that the city was preempted by authority of the Commission. St. Helena objected to the proposed station, based on the negative impacts it would have on St. Helena. On August 6, 1999, the Commission dismissed the complaint on the basis that St. Helena was seeking an advisory opinion. (See City of St. Helena, et al. v. Napa Valley Wine Train, Inc. [D.99-08-018] (1999) 1999 Cal. PUC LEXIS 515.) St. Helena then filed an application for rehearing of D.99-08-018, which is still pending.⁷

On September 16, 1999, St. Helena filed a petition for modification of D.96-11-024, which is the focus of the instant decision. The specific modifications requested by St. Helena actually modified both D.96-06-060 and D.96-11-024. St. Helena's petition asked the Commission to declare that Wine Train's passenger service is not "transportation" under Public Utilities Code section 211 and, thus, the Wine Train is not a public utility under section 216. St. Helena also urged the Commission to delete language in the 1996 decisions relating to the Commission's "paramount jurisdiction," to state that the Commission's authority is limited to the role of lead agency for purposes of environmental review, and to conclude that local agencies have paramount jurisdiction. (See D.01-06-034, mimeo, at pp. 3-4.)

On June 19, 2001, we issued D.01-06-034. Although we found that St. Helena failed to make a case that the underlying facts had changed in any material way, we modified prior decisions in this case based, in large part, on our decision in Re California Western Railroad, Inc. [D.98-01-050] (1998) 78 Cal.P.U.C.2d 292, 1998 Cal. PUC LEXIS 189.⁸ We declared that the Wine Train's passenger service is not public utility transportation. In addition, we modified D.96-11-026 and D.96-06-060 to indicate that local agencies may exercise concurrent jurisdiction over the Wine Train's operations. (See D.01-06-034, mimeo, at pp. 17-18.)

On July 19, 2001, the Wine Train filed the instant application for rehearing of D.01-06-034. St. Helena filed its response on August 3, 2001.