§831. Guarantee of obligations

(a) General

The Secretary may, in accordance with the provisions of this section, guarantee and make commitments to guarantee the payment of the principal balance of, and any interest on, an obligation of an applicant prior to, on, or after the date of execution or the date of disbursement of such obligation, if the proceeds of such obligation shall be or have been used (1) to acquire or to rehabilitate and improve facilities or equipment (which includes but is not limited to computerized car management systems), (2) to develop or establish new railroad facilities, or (3) to acquire, rehabilitate, improve, develop, or establish high-speed rail facilities or equipment. Each guarantee of such an obligation shall be made in accordance with the provisions of sections 831 through 833 of this title and such rules as the Secretary may prescribe to protect reasonably the interest of the United States. Each application for the guarantee of such an obligation or for a commitment to guarantee such an obligation shall be made in writing to the Secretary in such form and with such content as the Secretary prescribes. Such application shall be granted, in whole or in part, if the Secretary determines that the proposed, negotiated, or executed obligation is eligible for such guarantee. Each such guarantee or commitment to guarantee shall be extended in such form, under such terms and conditions, and pursuant to such regulations as the Secretary deems appropriate, consistent with the purposes of this subchapter. Such a guarantee or commitment to guarantee shall inure to the benefit of the holder of the obligation to which such guarantee or commitment to guarantee applies.

(b) Fund

An obligation guarantee fund shall be established and administered by the Secretary as a revolving fund to carry out the provisions of sections 831 through 833 of this title. Moneys in the obligation guarantee fund shall be deposited in the Treasury of the United States to the credit of such fund or invested in bonds or other obligations of the United States approved by the Secretary of the Treasury.

(c) Full faith and credit

All guarantees entered into by the Secretary under this section shall constitute general obligations of the United States of America backed by the full faith and credit of the United States of America.

(d) Modifications

The Secretary may approve any modification of any provision of a guarantee, or of a commitment to guarantee an obligation, including the rate of interest, time of payment of interest or principal, security, or any other terms and conditions, if the Secretary makes a finding in writing that such modification is equitable and is in the overall best interests of the United States under this subchapter, and that the holder of such obligation consents to such modification.

(e) Extent of authority

The aggregate unpaid principal amounts of obligations which may be guaranteed by the Secretary under this section shall not exceed $1,000,000,000 at any one time.

(f) Rate of interest

The rate of interest (exclusive of premium charges for a guarantee and service fees) which shall be paid on the unpaid principal balance of each obligation guaranteed by the Secretary under this section, shall not exceed an annual percentage rate which the Secretary determines to be reasonable, taking into consideration the prevailing interest rates for similar obligations in the private market.

(g) Prerequisites for guarantees

No obligation shall be guaranteed and no commitment shall be made to guarantee any obligation under this section, unless and until the Secretary makes a finding in writing that-

(1) an obligation for equipment acquisition, rehabilitation, or improvement is secured (A) by the particular equipment which is to be financed or refinanced by such obligation, or (B) in the case of the rehabilitation or improvement of leased equipment, by the lease;

(2) payment of the obligation is required by its terms to be made within 25 years from the date of its execution;

(3) the financing or refinancing is justified by the present and probable future demand for rail services or high-speed rail services to be rendered by the applicant and will serve to meet demonstrable needs for rail services or high-speed rail services and to provide shippers or passengers with improved service;

(4) the applicant has given reasonable assurances that the facilities or equipment to be acquired, rehabilitated, improved, developed, or established with the proceeds of the obligation will be economically and efficiently utilized;

(5) the prospective earning power of the applicant, or the value or prospective earning power of any equipment or facilities to be acquired, rehabilitated, improved, developed, or established (or any combination of the foregoing), together with any other security offered by the applicant, is sufficient to provide the United States with reasonable security and protection, except that if the value or prospective earning power of such equipment or facilities is equal to or greater than the amount of the obligation to be guaranteed, the Secretary may not, on the basis of the lack of prospective earning power of the applicant, find that the United States will not be provided with the reasonable security and protection referred to in this paragraph;

(6) the transaction will result in an improvement in the ability of any affected railroad or high-speed rail carrier to transport passengers or freight; and

(7) in the case of high-speed rail facilities and equipment, at least 85 percent of such facilities and equipment are mined, produced, or manufactured in the United States, unless the Secretary finds in writing that-

(A) such requirement would be inconsistent with the public interest;

(B) such facilities and equipment could not be mined, produced, or manufactured in the United States in sufficient and reasonably available quantities of a satisfactory quality;

(C) such a requirement would increase the cost of the facilities and equipment by more than 25 percent; or

(D) such a requirement would result in a violation of obligations of the United States under international trade agreements.

(h) General requirement

The recipients of any guarantees of, or of any commitments to guarantee, an obligation under this section, shall, consistent with their capital resources, maintain their facilities, on a continuing basis, in accordance with standards promulgated under this subsection. The Secretary shall assure compliance with this requirement by regular periodic inspection.

(i) Conditions of guarantees

(1) The Secretary shall, before making, approving, or extending any guarantee or commitment to guarantee any obligation under this section, require the obligor to agree to such terms and conditions as are sufficient, in the judgment of the Secretary, to assure that, as long as any principal or interest is due and payable on such obligation, such obligor-

(A) will not make any discretionary dividend payments, except as provided in paragraph (2) of this subsection; and

(B)(i) will not use any funds or assets from railroad operations for nonrail purposes; and

(ii) will not use any funds or assets from high-speed rail operations for purposes other than high-speed rail purposes,

if such payments or use will impair the ability of such obligor to provide rail services or high-speed rail services in an efficient and economic manner or will adversely effect the ability of such obligor to perform any obligation guaranteed by the Secretary.

(2) An obligor shall not be restricted with respect to making dividend payments from its net income for any fiscal year, if such payments do not exceed-

(A) when compared to the net income of such obligor for such fiscal year, the ratio which aggregate dividends paid by such obligor, during the 5 fiscal years prior to the granting of the earliest loan guarantee then outstanding under this section, bore to aggregate net income of such obligor for such period; or

(B) 50 per centum of the total additions to the retained income of such obligor (computed on a cumulative basis and giving cognizance to dividends paid) during the period commencing with the fiscal year prior to the granting of the earliest loan guarantee then outstanding under this section,

whichever is greater.

(3) The restrictions set forth in paragraphs (1) of this subsection shall not apply with respect to an obligation guaranteed under this section if, in the event of a default by the obligor, the Secretary would be subrogated to the rights of the lender under section 77(j) of the Bankruptcy Act.

(j) Breach of conditions

The Attorney General shall commence a civil action in any appropriate district court of the United States to enjoin any activity which the Secretary finds is in violation of any requirement or condition specified in subsection (i) or (j) ¹ of this section, and to secure any other appropriate relief, including termination, suspension, and punitive damages.

(k) Investigation charge

The Secretary shall charge and collect from each applicant such amounts as he deems reasonable for the investigation of any application submitted under this section, for appraisal of the value of the equipment or facilities involved, and for making the necessary determinations and findings. Such charges shall not aggregate more than one-half of 1 percent of the principal amount of the obligation with respect to which the applicant seeks a guarantee or commitment to guarantee.

(l) Premium charge

The Secretary shall assess and collect from the obligor an annual premium charge on each obligation guaranteed under this section. The amount of such premium may not exceed an annual rate of 1 percent on the unpaid principal balance of such obligation at the time payment is due. Payment is due initially when the obligation is guaranteed by the Secretary, and, thereafter, on the anniversary date of such guarantee.

(m) Administrative costs

All moneys received by the Secretary under this section shall be deposited in the obligation guarantee fund, and to the extent provided in appropriation acts, may be used by the Secretary to pay administrative costs and expenses incurred by him pursuant to this section.

(n) "High-speed rail" defined

As used in this section, the term "high-speed rail" means all forms of nonhighway ground transportation that run on rails providing transportation service which is-

(1) reasonably expected to reach sustained speeds of more than 125 miles per hour; and

(2) made available to members of the general public as passengers.

Such term does not include rapid transit operations within an urban area that are not connected to the general rail system of transportation.

( Pub. L. 94–210, title V, §511, Feb. 5, 1976, 90 Stat. 76 ; Pub. L. 94–555, title II, §§215, 220(e), (f), Oct. 19, 1976, 90 Stat. 2625 , 2629, 2630; Pub. L. 96–448, title IV, §405(e), Oct. 14, 1980, 94 Stat. 1947 ; Pub. L. 99–509, title IV, §4033(c)(5), Oct. 21, 1986, 100 Stat. 1909 ; Pub. L. 102–240, title I, §1036(e), Dec. 18, 1991, 105 Stat. 1986 .)

References in Text

Section 77(j) of the Bankruptcy Act, referred to in subsec. (i)(3), was classified to section 205(j) of former Title 11, Bankruptcy. The Bankruptcy Act (act July 1, 1898, ch. 541, 30 Stat. 544 , as amended) was repealed effective Oct. 1, 1979, by Pub. L. 95–598, §§401(a), 402(a), Nov. 6, 1978, 92 Stat. 2682 , section 101 of which enacted revised Title 11. For current provisions relating to railroad reorganization, see subchapter IV (§1161 et seq.) of chapter 11 of Title 11.

In subsec. (j), "subsection (i) or (j)" probably should be "subsection (h) or (i)" to reflect the redesignation of subsecs. (h) to (n) as (g) to (m) by section 215(d) of Pub. L. 94–555.

Amendments

1991-Subsec. (a). Pub. L. 102–240, §1036(e)(1), inserted "(1)" before "to acquire", substituted "(2)" for "or", and inserted before period at end of first sentence ", or (3) to acquire, rehabilitate, improve, develop, or establish high-speed rail facilities or equipment".

Subsec. (g)(3). Pub. L. 102–240, §1036(e)(2)(A), (B), inserted "or high-speed rail services" after "rail services" in two places and "or passengers" after "provide shippers".

Subsec. (g)(4). Pub. L. 102–240, §1036(e)(2)(C), substituted "improved, developed, or established" for "or improved".

Subsec. (g)(5). Pub. L. 102–240, §1036(e)(2)(D), (E), substituted "acquired, rehabilitated, improved, developed, or established" for "improved, rehabilitated, or acquired" and struck out "and" at end.

Subsec. (g)(6). Pub. L. 102–240, §1036(e)(2)(F), (G), inserted "or high-speed rail carrier" after "affected railroad" and substituted "; and" for the period at end.

Subsec. (g)(7). Pub. L. 102–240, §1036(e)(2)(H), added par. (7).

Subsec. (i)(1). Pub. L. 102–240, §1036(e)(3), in subpar. (B), designated existing provisions as cl. (i) and added cl. (ii), and in concluding provisions inserted "or high-speed rail services" after "provide rail services".

Subsec. (n). Pub. L. 102–240, §1036(e)(4), added subsec. (n).

1986-Subsec. (e). Pub. L. 99–509 struck out par. "(1)" designation, struck out ", of which not to exceed $150,000,000 may be guaranteed for the purposes described in paragraph (2) of this subsection" after "time", and struck out par. (2) which read as follows: "Obligations may be guaranteed for the purpose of improving rail properties designated in the final system plan pursuant to section 716(c)(1)(C) of this title, if the proceeds of such obligations shall be or have been used to acquire or rehabilitate and improve facilities or equipment in a manner that returns the most public benefits for the costs involved."

1980-Subsec. (a). Pub. L. 96–448 inserted "(which includes but is not limited to computerized car management systems)" after "facilities or equipment".

1976-Subsec. (a). Pub. L. 94–555, §220(e), inserted "or to develop or establish new railroad facilities" after "improve facilities or equipment".

Subsec. (c). Pub. L. 94–555, §215(a), substituted provisions relating to full faith and credit backing of guarantees entered into by Secretary for provisions relating to valuation of equipment and facilities to be financed or refinanced.

Subsec. (g). Pub. L. 94–555, §220(f), redesignated subsec. (h) as (g) and substituted "Prerequisites for guarantees" for "Prequisites for guarantees" after "(g)". Former subsec. (g), which related to publication in the Federal Register of notice of application for the guarantee of an obligation and invitation for public comments on such application, was struck out by Pub. L. 94–555, §215(d).

Subsec. (g)(1). Pub. L. 94–555, §215(b)(1), inserted "(A)" after "is secured" and ", or (B) in the case of the rehabilitation or improvement of leased equipment, by the lease" after "by such obligation".

Subsec. (g)(5). Pub. L. 94–555, §215(b)(2), substituted provisions relating to the prospective earning power of applicant or value and prospective earning power of equipment and facilities, alone or in combination, as a prerequisite for guarantees for provisions dealing only with probable value of equipment and facilities to be improved, acquired, or rehabilitated, and inserted exception that if prospective earning power of facilities and equipment is greater than amount of obligation guaranteed, Secretary may not find lack of security and protection on basis of absence of prospective earning power of applicant.

Subsec. (h). Pub. L. 94–555, §215(d), redesignated subsec. (i) as (h). Former subsec. (h) redesignated (g).

Subsec. (i). Pub. L. 94–555, §215(d), redesignated subsec. (k) as (i).

Pub. L. 94–555, §215(c), inserted provisions relating to the payment of dividends by obligor, struck out requirements that obligor obtain prior written approval of Secretary before making discretionary payment of dividends and that a public hearing be held before Secretary may give such approval; made specific Secretary's duty in respect to making, approving, or extending any guarantee or commitment to guarantee obligations, and inserted provision that par. (1), as amended, shall not apply if obligor defaults on obligation and Secretary is subrogated to the rights of lender. Former subsec. (i) redesignated (h).

Subsecs. (j) to (m). Pub. L. 94–555, §215(d), redesignated subsecs. (k) to (n) as (j) to (m), respectively.

Effective Date of 1991 Amendment

Amendment by Pub. L. 102–240 effective Dec. 18, 1991, and applicable to funds authorized to be appropriated or made available after Sept. 30, 1991, and, with certain exceptions, not applicable to funds appropriated or made available on or before Sept. 30, 1991, see section 1100 of Pub. L. 102–240, set out as a note under section 104 of Title 23, Highways.

Effective Date of 1980 Amendment

Amendment by Pub. L. 96–448 effective Oct. 1, 1980, see section 710(a) of Pub. L. 96–448, set out as a note under section 10101 of Title 49, Transportation.

Effective Date of 1976 Amendment

Amendment by Pub. L. 94–555 effective Oct. 1, 1976, see section 303 of Pub. L. 94–555, set out as a note under section 702 of this title.

Annual Report on Application of This Section to High-Speed Rail Facilities and Equipment

Section 1036(f) of Pub. L. 102–240 provided that: "The Comptroller General, within 2 years after the date of the enactment of this Act [Dec. 18, 1991], and annually thereafter, shall analyze the effectiveness of the application of section 511 of the Railroad Revitalization and Regulatory Reform Act of 1976 [45 U.S.C. 831] to high-speed rail facilities and equipment, and report the results of such analysis to the Committee on Energy and Commerce [now Committee on Commerce] of the House of Representatives and the Committee on Commerce, Science, and Transportation of the Senate."

Loan Guarantees for Second Rail Carrier Serving Powder River Coal Region; Chicago and North Western Connector Line; Use of Agricultural Lands; Private Grade Crossings; Claims; Judicial Review; Expedited Hearings

Section 702 of Pub. L. 96–448 provided that:

"(a) To promote competition in the transportation of coal, the Secretary of Transportation shall, no later than 75 days after the date of the issuance of the final environmental impact statement with respect to the loan application, take final action on any application for loan guarantees, under section 511 of the Railroad Revitalization and Regulatory Reform Act of 1976 [this section], to be used in connection with joint ownership, construction, or rehabilitation of any facilities (including support facilities) for a second rail carrier to serve the Powder River Coal Region in Montana and Wyoming.

"(b)(1) The Secretary of Transportation shall review the proposed Chicago and North Western connector line route and shall not approve any route which requires the use of any agricultural land unless (A) there is no feasible and prudent alternative to the use of such land, and (B) the proposed route construction plan requires all possible planning to minimize harm to such agricultural land resulting from such use. The Secretary of Transportation may not otherwise disapprove a proposed route for the Chicago and North Western line under the authority of this subsection. This review of a proposed route shall be conducted within 90 days after the final action specified in subsection (a) of this section.

"(2)(A) The Secretary shall review the use of any agricultural land used in any route for newly constructed line and shall require, to the maximum extent prudent and feasible, that such railroad provide a private grade crossing for the convenience of each landowner whose agricultural holdings are divided by such newly constructed line when the Secretary finds that such division of property will cause a substantial disruption to the agricultural use of such land. The owners of such property shall file a request for such grade crossing with the Secretary within 180 days of the final determination of the route. The finding of the Secretary under this subsection shall be final.

"(B) The Secretary shall render a decision on each request for grade crossing under this paragraph within 180 days of its receipt. Such review shall not require the delay of construction of new line under subsection (a) of this section.

"(c)(1) Notwithstanding any other provision of law, the actions of the Secretary of Transportation taken pursuant to subsections (a) and (b) of this section shall not be subject to judicial review except as provided in this section.

"(2) A claim alleging the invalidity of this section may be brought no later than the 60th day following the date a final action is taken pursuant to subsections (a) and (b) of this section.

"(3) A claim challenging an action of the Secretary of Transportation under subsection (a) or (b) of this section may be brought only on the grounds that such action will deny rights under the Constitution of the United States, is arbitrary, capricious, or an abuse of discretion, exceeds statutory jurisdiction, authority, or limitations, or is short of statutory right. Such a claim may be brought not later than the 60th day following the date of such action.

"(4) A claim under paragraph (2) or (3) shall be barred unless prior to the expiration of such time limits, a complaint is filed in the United States Court of Appeals for the District of Columbia acting as a special court. Such court shall have exclusive jurisdiction to determine such proceeding in accordance with the procedures hereinafter provided, and no other court of the United States, of any State, territory, or possession of the United States, or of the District of Columbia, shall have jurisdiction of any such claim in any proceeding instituted prior to or on or after the date of enactment of this Act [Oct. 14, 1980].

"(5) Any such proceeding shall be assigned for hearing and completed at the earliest possible date, and to the greatest extent practical shall take precedence over all other matters pending on the docket of the court at that time, and shall be expedited in every way by such court, and such court shall render its decision relative to any claim within 90 days from the date such claim is brought unless such court determines that a longer period is required to satisfy requirements of the Constitution of the United States.

"(d) Notwithstanding any other provision of law, the Secretary shall take the final action described in subsection (a) of this section without regard to the consent, or lack thereof, of any Committee of the Congress."

Section Referred to in Other Sections

This section is referred to in sections 721, 832, 833, 838, 914 of this title; title 49 section 308.

¹ See References in Text note below.