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PENNSYLVANIA R.R. CO. v. READING CO.

June 30, 1955

The PENNSYLVANIA RAILROAD COMPANY
v.
READING COMPANY



The opinion of the court was delivered by: CLARY

This action is one to restrain the Reading Company from constructing and operating railroad facilities into the plant of the Philadelphia Electric Company, located near Cromby, Pennsylvania, on the west bank of the Schuylkill River, one mile north of Phoenixville, Pennsylvania. The complaint was filed on May 19, 1955; an answer was filed on June 8, 1955, and final hearing was held on June 9th and 10th, 1955. An order of this Court was entered in this case on June 14, 1955 denying plaintiff's motion for an injunction and dismissing the complaint. The reasons therefor will be discussed in this opinion.

The Schuylkill valley, extending from Philadelphia to above Reading, Pennsylvania, is a highly developed industrial area. The earliest industrial transportation through the valley between Philadelphia, Reading and the anthracite coal regions of central Pennsylvania was inaugurated in 1820 via a canal built and operated by a wholly-owned subsidiary of defendant Reading Company. The Reading Company itself was first chartered in 1833, began work on its main line between Reading and Philadelphia in 1835, and began operations between Philadelphia and Reading in 1839. Since that time it has provided the valley with complete multiple line railroad service consisting of passenger, freight, mail and express. The canal above referred to was operated by the Schuylkill Navigation Company and was in operation between Philadelphia and Reading from 1820 to 1927. In 1947 the canal property was turned over to the Commonwealth of Pennsylvania to enable the Commonwealth to carry out the Schuylkill River desilting program. Part of the land so turned over by the Schuylkill Navigation Company was acquired from the Commonwealth of Pennsylvania by the Philadelphia Electric Company for its Cromby plant on July 9, 1951.

The Pennsylvania Railroad Company's Schuylkill branch was opened for operation in 1883 between Frazier and Phoenixville and in 1884 was completed between 52nd Street, Philadelphia, and Reading, Pennsylvania. It is a single track branch line with passenger service operating only as far as Norristown. From Norristown to Reading only freight service is supplied. At different places in a relatively short distance as the Schuylkill River meanders through the valley, each railroad crosses and recrosses it via bridges. Each railroad serves the industrial plants adjacent to its lines and in a 20 mile area of the valley wherein Cromby is located, both railroads have sidings into fourteen large industrial plants. Each renders simultaneous siding delivery service to these same plants. Although Reading Company with its main line was serving the valley for a period of forty-five years before Pennsylvania Railroad Company started its operations via a branch line, for a period of upwards of seventy years both railroads have served the industries located in the Schuylkill valley as need for service arose.

 The Philadelphia Electric Company has owned property at Cromby, Pennsylvania, since 1903. Early in the century two small steam units were operated at that site. Due to changed requirements and consolidations the plant was closed in 1928 and demolished. In 1950 the company, recognizing that additional electrical energy would be needed in the valley and in southeast Pennsylvania generally, determined to construct a large plant at its former site. Increased acreage was needed for that purpose and some of it was acquired from the Commonwealth, as aforesaid. The particular site had sufficient water in the river to condense steam for a total of 350,000 kilowatts of generating capacity. Construction was started in 1951 and the first machine went into service in July of 1954. The site is located on the west bank of the Schuylkill River. Adjoining it was the Pennsylvania branch line. In 1952 the Pennsylvania Railroad Company made switching connections at the north and south ends of the plant; the switch at the north end being completed on November 27, 1952, and the switch at the south end being completed on December 19, 1952. The cost of switching connections was $ 18,545 and supporting tracks were constructed near the site at a cost of $ 288,529. Since that time the Pennsylvania Railroad has been the only rail carrier serving the plant and its revenue from coal deliveries from June 1, 1954 to May 31, 1955 amounted to $ 1,042,000.

 When the construction of the Cromby plant was decided upon in 1951, the purchasing agent of the Philadelphia Electric Company, Vice-President H. Nedwill Ramsey, visited the Reading Company and urged it to construct a track connection from its main lines on the east side of the Schuylkill River to the projected plant on the west side of the Schuylkill River. The proposed construction was the latest and most efficient type of generating equipment in the Philadelphia Electric Company's system. The plant was designed to operate on bituminous coal. The most economic and advantageous sources of bituminous coal are located in the Fairmont Field, in the northern part of West Virginia, comprising principally the Counties of Monongalia, Marion, and Harrison. Under existing railroad rate conditions the only coal for delivery to the Cromby plant which the Philadelphia Electric Company could then and can now presently purchase originates on the Monongahela Railway. Other mines are served by the Western Maryland Railway and the Baltimore and Ohio Railroad. It was to tap these two latter sources that the Philadelphia Electric Company was interested in obtaining direct railway service from the Reading Company. At that time the projected annual consumption was a maximum of 375,000 net tons. After several conferences between officials of the two companies, the Reading Company declined to make the requested connection. Thereafter, due to conditions arising out of the Korean War situation, the Company determined to install a second machine at Cromby, Pennsylvania. The first machine generated 150,00 kilowatts and the second machine, which will be completed in the Fall of 1955, is designed to generate 200,000 kilowatts, or a total of 350,000 kilowatts for the entire operation. The expected coal consumption for the new operation is 525,000 net tons annually, or a total consumption for the entire station of 900,000 net tons annually. The Cromby plant will consume about 30% of the total bituminous coal requirements of the Philadelphia Electric Company and it will be the third largest generating plant in its entire system.

 Some time in 1953 the principal supplier of coal to the Cromby plant undertook a contract to supply an atomic energy commission plant in Ohio with 1,500,000 tons of coal per year. Learning of this and fearing that the supplier would be unable to furnish enough coal to the Cromby plant to keep it in operation, Mr. Ramsey visited the offices of the Pennsylvania Railroad Company in February of 1954, told officials of that company of the discussions with the Reading Company in 1951, and asked advice as to how the Philadelphia Electric Company might secure delivery of coal originating on the Baltimore and Ohio Railroad to its Cromby plant. He was advised to 'see the Baltimore and Ohio Railroad' and inform the officials of that railroad that the Pennsylvania Railroad was 'sympathetic and would cooperate'. Mr. Ramsey visited the main offices of the Baltimore and Ohio Railroad and interviewed the Vice-President in charge of freight traffic. He received no reply directly from that official of the Baltimore and Ohio Railroad but did receive a letter from H. B. Light, Vice-President of the Reading Company in June, 1954, offering to extend a railroad connection from the Reading Company's main line to the property line of the Philadelphia Electric Company. This offer was made on condition that the Philadelphia Electric Company build connecting trackage on its own property. Mr. Ramsey immediately relayed this information to the Pennsylvania Railroad Company and was requested by that company to do nothing pending discussions between the two railroads, which request Mr. Ramsey honored. A further conference was held in January of 1955, at which time the Pennsylvania Railroad Company requested the Philadelphia Electric Company to appeal to the Baltimore and Ohio Railroad to establish joint rates with it for delivery of coal originating on the Baltimore and Ohio lines to Cromby. The Philadelphia Electric Company refused to make any further overtures to the Baltimore and Ohio Railroad, since a connection with the Reading Company's main line at Cromby would solve all its difficulties. Mr. Ramsey set March 15, 1955 as a deadline for action by the Pennsylvania Railroad Company. He heard nothing from that company and an exchange of correspondence between the Philadelphia Electric Company and the Reading Company ensued, and an agreement was reached by exchange of letters dated March 31, 1955 and April 4, 1955. The Reading Company then started construction of its connecting trackage which it scheduled for completion at approximately the time set for the beginning of operations of the second unit at Cromby, Pennsylvania. This action to restrain the construction was then filed by the Pennsylvania Railroad Company (hereinafter called 'Pennsylvania') against the Reading Company (hereinafter called 'Reading').

 The proposed track connections which the Court has found will be an industrial spur will start on the main line of the Reading Company's tracks on the east bank of the Schuylkill River approximately opposite the north end of the Cromby plant. It then will curve over part of the desilting basin of the Schuylkill River and cross the Schuylkill by what appears from Exhibit D-3 a 7-abutment bridge. The final abutment of Reading's trackage will be at the edge of and on the property of the Philadelphia Electric Company which has granted a permanent easement to the Reading Company for that purpose. From that point the Philadelphia Electric Company has agreed to construct switching connections on its own property to its already extensive track sidings located entirely within its property. The spur will be 1,877 feet in length. The Reading Company also plans to construct adequate supporting tracks on land already owned by it on the east bank of the Schuylkill River. There are no right-of-way problems involved since all necessary permissions for the construction have been obtained from the Commonwealth of Pennsylvania. There is no necessity for any condemnation of a right-of-way nor will there be any necessity for public financing to complete the construction of the spur.

 The law applicable to the instant case is found in Section 1(18), (20), (22) of the Interstate Commerce Act, 49 U.S.C.A. § 1(18), (20) and (22), which read as follows:

 ' § 1, par. (20) Issuance of certificate by commission; unlawful extension or abandonment of lines. The commission shall have power to issue such certificate as prayed for, or to refuse to issue it, or to issue it for a portion or portions of a line of railroad, or extension thereof, described in the application, or for the partial exercise only of such right or privilege, and may attach to the issuance of the certificate such terms and conditions as in its judgment the public convenience and necessity may require. From and after issuance of such certificate, and not before, the carrier by railroad may, without securing approval other than such certificate, comply with the terms and conditions contained in or attached to the issuance of such certificate and proceed with the construction, operation, or abandonment covered thereby. Any construction, operation, or abandonment contrary to the provisions of this paragraph or of paragraph (18) or (19) of this section may be enjoined by any court of competent jurisdiction at the suit of the United States, the commission, any commission or regulating body of the State or States affected, or any party in interest; and any carrier which, or any director, officer, receiver, operating trustee, lessee, agent, or person, acting for or employed by such carrier, who knowingly authorizes, consents to, or permits any violation of the provisions of this paragraph or of paragraph (18) of this section, shall upon conviction thereof be punished by a fine of not more than $ 5,000 or by imprisonment for not more than three years, or both.'

 ' § 1, par. (22) Construction, etc., of spurs, switches, etc., within State. The authority of the commission conferred by paragraphs (18) to (21) both inclusive, shall not extend to the construction or abandonment of spur, industrial, team, switching, or side tracks, located or to be located wholly within one State, or of street, suburban, or interurban electric railways, which are not operated as a part or parts of a general steam railroad system of transportation.'

 The contention of Pennsylvania is that by the proposed construction, Reading is extending its lines; that before it may extend its lines a certificate of necessity must be secured from the Interstate Commerce Commission under the provisions of Section 1(18), supra; that having failed so to do Pennsylvania is entitled to an injunction halting the construction by Reading under the provisions of Section 1(20), supra. In support of its contention that it is an extension of lines, Pennsylvania points to the length of the spur; the fact that it must cross a river; the cost of the construction -- $ 772,000 of which $ 533,000 is the estimated cost of the spur, plus an estimated cost of $ 239,000 for supporting tracks on the east side of the river; and finally that Reading is extending its lines into an 'area' presently served by Pennsylvania.

 Pennsylvania in presenting its evidence merely showed that the Reading was starting the construction of the rail connections into the Cromby plant; that Pennsylvania had made rail connections with the plant in 1952 and had been the sole rail carrier servicing the plant since that date; its investment in the switching connections and supporting ...


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