Texas Central Partners is a private company hoping to build a high-speed rail line between Dallas and Houston. In 2014, the company needed to share some documents with the state transportation agency. But it didn’t want those documents to become discoverable by the public.
So Texas Central executed a nondisclosure agreement with the Texas Department of Transportation, allowing it to withhold records. The agreement is based on a 2015 state Supreme Court ruling, known as the Boeing decision, that allows private businesses with government contracts to withhold from public release records that allegedly contain trade secrets.
To build the 240-mile line, Texas Central also needs to buy a lot of land, including some from people who don’t want to sell. And so, Texas Central has also claimed in court documents that the partnership is, in some ways, a public entity – which, it argues, should give it the right to use eminent domain to take land, at an allegedly fair market price.
It’s a stance familiar to some other businesses, like pipeline companies, that in some instances have been given the right to use eminent domain – formerly a power available only to governments, but that in recent years has been extended to businesses more and more often, with the help of government.
The upshot: Texas Central is asking to use government powers to build its railroad, but also asserting a private company’s privilege of denying public requests for records about its project – a privilege that may become problematic for taxpayers if Texas Central wins the right to take land in an 11-county stretch through the center of Texas.
The company announced late last month an agreement with Mass. Electric Construction to work on signaling and communications for the rail line. The company estimates that the project will cost between $15 billion and $18 billion.
Last month, in court records, Texas Central declared that the railway plan is now “shovel ready,” even though the company is still raising money and fighting for eminent domain rights.
So far, Texas courts have denied the company the right to take land. But other courts have backed the Texas Department of Transportation and the state attorney general’s office in allowing the company to withhold documents requested by journalists and by Texans Against High Speed Rail, a group that is fighting to stop the rail line.
The eventual decision may come down to whether a company that hasn’t yet built a railroad can be defined as a railroad.
TxDOT released a limited number of redacted documents when a lawyer representing the anti-rail group filed a public records request in 2015. The request sought any records at TxDOT regarding the high-speed rail.
TxDOT and Texas Central appealed the remainder of the request to the state AG’s office, contending that many of the records sought could be withheld under state law, citing the Boeing decision.
Among other things, Texas Central claimed its ridership projections constitute a trade secret and that release of that information would make it harder for the group to find investors. It also says that release of specific financial information would put it at “a competitive disadvantage relative to the airline industry.”
“Since TCR has not yet begun service, competitors would have ample opportunity to use this information to undercut TCR’s pricing before TCR even enters the market,” Texas Central said in a legal brief.
Texas Central President Tim Keith has told reporters that obtaining funding for the project will be no problem.
“This project is so pioneering, it’s attracting Texas big-idea investors — and catching the eye of the global [private equity] world,” he told a D Magazine reporter in 2016.
The AG’s office ruled the records could be kept private; the anti-rail group sued the AG’s office and recently lost the case.
The most important document sought was a feasibility study, which details ridership potential and other key metrics, said Patrick McShan, an attorney representing the requestors.
“It was the guts of the case,” McShan said. “My main obstacle was Boeing, and that opinion is so bad, mostly because it’s a get-out-of-jail-free card for business.”
McShan noted that numerous parties have seen the feasibility study, including Japanese business partners, investors and various consultants, “but the people who are not allowed to see it are the people who are being impacted by the project” – in particular the landowners in the 11-county corridor from whom Texas Central wants to buy land. Some of the owners are members of Texans Against High Speed Rail.
In more than three dozen cases since 2016, judges have been sympathetic to the pleas of the landholders who don’t want to sell to the rail partnership.
So far, the courts have not allowed Texas Central to even begin surveying – a necessary precursor to eminent domain — because they don’t recognize the company as a railroad.
By statute, established railroads in Texas, including those that are privately owned, have the power of an eminent domain. Because Texas Central has not yet laid tracks, it is not legally seen as a railroad.
“…[E]ven the Federal Government is regulating Texas Central as a railroad,” the company notes in one court filing.
Holly Reed, Texas Central’s director of external affairs, did not return phone calls for this story.
In recent court documents in those cases, as well as in documents filed with the federal government, Texas Central has said that “the state government is involved” in its project, potentially making Texas Central a quasi-public operation.
The high-speed rail line is backed by a sizable group of politicians, social-media mavens and pollsters. Texas Central also claims to have millions of dollars in private funding in place.
“While they can’t get a judge to say they are a railroad, it’s written in Texas law that a railroad does have eminent domain power,” said Texas Central supporter Peter LeCody, president of Texas Rail Advocates, which for 16 years has hosted the Southwestern Rail Conference in Dallas, a trade show for freight and passenger train service both public and private.
He said that any effort to take private property is an obstacle for a private company but noted that had been done in the past for things like shopping malls or other large, public projects including pipelines.
Texans Against High Speed Rail and its nonprofit arm, the Land Defense Fund, have so far proved to be formidable opponents, collecting $426,000 in donations through the end of 2017, according to the most recent tax records available.
Steve Miller can be reached at [email protected].