Supreme Court ruling backs bond-financed Utah railway for oil transport

Bloomberg News

The U.S. Supreme Court on Thursday ruled in favor of a proposed bond-financed, crude oil-transporting Utah railway by reversing a 2023 appellate court decision that yanked federal approval for the project. 

The court's decision found the U.S. Court of Appeals for the Washington, D.C. Circuit erred in determining that the environmental impact statement for the 88-mile Uinta Basin Railway failed to consider environmental effects that could result from increased oil drilling in the basin and increased oil refining on the Gulf Coast.   

The National Environmental Policy Act requires agencies to focus on the environmental effects of the project at issue, according to the opinion from the high court, which heard oral arguments in December. 

Associate Justice Brett Kavanaugh wrote the opinion, joined by Chief Justice John Roberts, Clarence Thomas, Amy Coney Barrett and Samuel Alito.

Sonia Sotomayor wrote a concurring opinion, joined by Elena Kegan and Ketanji Brown Jackson. Neil Gorsuch did not participate in the case.

"The D. C. Circuit did not afford the substantial judicial deference required in NEPA cases," Kavanaugh's opinion said. "Second, the D. C. Circuit ordered the  (U.S. Surface Transportation Board) to address the environmental effects of projects separate in time or place from the construction and operation of the railroad line."

The public-private partnership behind the railway hailed the "landmark decision" and said it will pursue reauthorization from the board and complete an Endangered Species Act process, while also working with other federal agencies to reinstate right-of-way permits.

"It represents a turning point for rural Utah — bringing safer, sustainable, more efficient
transportation options, and opening new doors for investment and economic stability," Keith Heaton, director of the Seven County Infrastructure Coalition, a Utah public entity, said in a statement. "We look forward to continuing our work with all stakeholders to deliver this transformative project."

The coalition, which filed a petition for a Supreme Court review in March 2024, launched the P3 for the railway in 2019 with Drexel Hamilton Infrastructure Partners, which owns the Uinta Basin Railway limited liability company. 

Officials have said up to $2 billion in private-activity bond authorization from the U.S. Department of Transportation would be sought for the project. USDOT's private-activity bond program is close to reaching its $30 billion authorization cap.

Utah Permanent Community Impact Fund grants totaling $27.9 million funded coalition planning and studies.

Environmental groups that joined a lawsuit filed by Colorado's Eagle County challenging the surface transportation's board's December 2021 approval of the project said the high court's "disastrous" ruling severely limits NEPA's scope.

"It guarantees that bureaucrats can put their heads in the sand and ignore the harm federal projects will cause to ecosystems, wildlife and the climate," Wendy Park, a senior attorney at the Center for Biological Diversity, said in a statement. "What it doesn't guarantee is the ill-conceived Uinta Basin Railway's construction. The last thing we need is another climate bomb on wheels that the communities along its proposed route say they don't want. We've been fighting this project for years, and we'll keep fighting to make sure this railway is never built." 

Park told The Bond Buyer the case will go back to the D.C. Circuit Court of Appeals for potential further proceedings, adding that the Supreme Court decision does not affect the appellate court's rulings that the Surface Transportation Board did not comply with the Endangered Species Act or failed to consider the project's financial viability as required by the Interstate Commerce Commission Termination Act.