Moneybox

Will Texas Law Trip up a $10 Billion High-Speed Rail Project?

This is Tokyo, but it could be Texas.

Carl Court/Getty Images

In the heady days of his first term, President Obama dreamed of a series of high-speed rail lines in the U.S., and included $8 billion in the 2009 stimulus package for that purpose. Seven years later, GOP governors in Wisconsin, Ohio, and Florida have all rejected the money. Only California seems poised to develop public high-speed rail, which won’t be complete for more than a decade. Florida has a private passenger rail line under construction, but its 125 mph max speed does not hold up to global HSR standards.

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The best hope for true high-speed rail in the United States is in Texas, between two cities where hardly anyone travels without a car.

Texas Central Partners, a private company incorporated in 2012, plans to build Shinkansen-style passenger rail between Dallas and Houston, shortening a four-hour drive to a 90-minute train ride. One of TCP’s advisers is the Central Japan Railway Co., and the line would make use of trains just like those that speed salarymen between Tokyo and Osaka.*

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What better place to test the theory that the private sector can always do it better than in the Lone Star State?

As the $10 billion project moves toward an anticipated 2017 groundbreaking and 2021 service, however, it has exposed a fault line in Texas politics between two factions that traditionally run strong here: pro-business and pro-property rights.

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Dallas and Houston are two of the fastest-growing metro regions in the United States, but the I-45 corridor between them remains rural, and those counties have been generally opposed to high-speed rail—and particularly to the possibility that a private railroad might use eminent domain, the taking of private property for public use, for a project connecting the state’s biggest cities.

Railroad companies, of course, have long been an example of a type of private corporation that can use eminent domain. Without the power to seize parcels from obstinate landowners, it would be very, very hard to lay any track at all. But can Texas Central be a railroad company if it hasn’t built a railroad?

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That’s the question that State Rep. Byron Cook, who hails from Corsicana, Texas, 50 miles south of Dallas, is asking. According to a letter from Cook to Texas Attorney General Ken Paxton, surveyors from Texas Central have been requesting the right to scope out private land in the counties between Dallas and Houston.

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Cook has asked Paxton to issue an opinion on whether or not Texas Central has the right of eminent domain, whose parameters vary from state to state, and he argues a half-dozen ways that it does not. He puts forth a couple of duds, like the idea that the state legislature could not have intended to allow high-speed rail because trains didn’t go that fast when the laws were made. His most convincing argument is that while the Texas Transportation Code gives eminent domain power to railroads, Texas Central isn’t yet a railroad.

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The Texas Transportation Code allows for two types of railroad companies:

            1. A railroad incorporated before September 1, 2007 [under a previous law], or

            2. “Any other legal entity operating a railroad…”

Texas Central, which was incorporated in 2012, doesn’t conform to the first definition. Or, Cook alleges, the second: “High Speed Rail is not a railroad company because it is not currently operating a railroad,” Cook writes. “The verb ‘operating’ is a present tense verb meaning that the company claiming to be a railroad company has to be operating a railroad today.”

I asked Texas Central for a response.

“Yes, Texas Central is currently operating as a railroad,” said Holly Reed, the managing director for external affairs at the company, “as the operation of the railroad involves more than the final stage of running railroad cars. To read it otherwise would suggest the legislature intended that no more railroad companies could ever be created in the State of Texas.”*

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But several lawyers I spoke to wondered if the odd narrowness of that clause could create a stumbling block—or at least grounds for a time-consuming lawsuit. There are 30 railroad companies that Texas allows to practice eminent domain. Most are more than a century old. Perhaps the closest comparison is to the Lone Star Rail District, an organization planning rail between Austin and San Antonio. But the Lone Star was explicitly authorized by the Texas Legislature.

There’s just not that much modern precedent for new railroad companies, said Judon Fambrough, an expert at the Texas A&M Real Estate Center. For pipelines, the procedure is much more developed, and still fraught with disputes.

“If you and I decided we wanted to start a railroad and we had $50, can we call ourselves the Henry and Fambrough railroad and start condemning property?” he asked. “It would certainly clarify this thing if they did get some more legislative direction on building railroads.”

Presumably the qualifications for “operating a railroad” fall between that hypothetical and Central Japan Railway. But do they cover Texas Central?

*Correction, June 24, 2016: This article originally misidentified Central Japan Railway Co. as an investor in the project. The company is a technical adviser. It also originally misattributed a quote to a public-relations firm employee, when in fact it was from Holly Reed, the managing director for external affairs from Texas Central Partners.

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