2017 Law Student Writing Competition Winning Article: the Future of Drones Is the Railroad

• Publication year: 2018
• Author: Jonathan R. Kathrein

2017 Law Student Writing Competition Winning Article: The Future of Drones is The Railroad

Jonathan R. Kathrein

Jonathan Kathrein is a California attorney with a passion for business and real estate law, especially transactions. He spent his law school years researching real property and regulatory issues for the Northwestern Pacific Railroad. Jonathan would like to thank Erythean Martin for suggesting the idea, Tyson Winarski for encouraging him to write about it, Douglas H. Bosco for his mentorship, and the wonderful students at University of San Francisco School of Law for editing his work. This article was originally published in the Spring 2017 edition of the University of San Francisco Intellectual Property and Technology Law Journal (Volume 21, Issue 2, Page 127).

I. INTRODUCTION

Amazon, Google/Alphabet, FedEx, UPS, 7-Eleven, and others are developing a system of drones to deliver packages.¹ These drone delivery companies (operators) believe drone delivery can significantly reduce their shipping costs and increase the speed of their deliveries.² In July 2016, 7-Eleven completed the first retail drone delivery in the United States.³In December 2016, Amazon Prime Air, the Amazon drone delivery service, completed its first delivery in England.⁴Now, Amazon is planning airborne warehouses.⁵

Federal Aviation Administration (FAA) regulations, private property rights, state property laws, and local ordinances are a few of the hurdles these operators will have to overcome before they can provide drone delivery service. At the federal level, drone travel at high altitude is currently restricted by the FAA. At the state level, travel at low altitude over private property requires agreements from a patchwork of property owners.

Against this complex legal framework, the question is: where and how will drone systems operate? There is a solution. Drone operators can use the low altitude airspace above railway corridors, escaping federal regulation by traveling over long stretches of private property. Operators avoid local regulation by obtaining the property owner's permission. They gain efficiency by obtaining permission from one property owner to vast amounts of private property, rather than the inefficiency of obtaining permission from many private property owners. Railroads already have the rights to corridors in place. Furthermore, railroads have enough property that operators can use the railroads' airspace for both movement and warehousing.

II. THE BUSINESS CASE FOR RAILROAD CORRIDORS

Drone operators should see a business opportunity in utilizing railroad corridors for three reasons: increased economic efficiency, increased safety, and regulatory arbitrage.

A. Increased Economic Efficiency

Economically, railroads and drones can help each other. Railroads have an uneven stream of revenue, dependent on the economy and the price of the various commodities they ship. Their most important expense is fuel cost. A weak economy and low commodity prices, paired with high fuel prices, can be crippling, especially for smaller railroads. The California State Rail Plan indicates that operating costs for small railroads range from about 75% to 110% of revenue, and that these small railroads depend on other income sources, such as rental properties and utility leases, to survive.⁶ In addition, small railroads rely on the 45G tax credit, which can provide up to $3,500 of credit to the railroad for each mile of track owned or leased.⁷ The supplemental income and steady, predictable revenue stream that could come from leasing airspace could mean survival for some railroads.

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For drone operators, the speed of acquisition means savings. There is a much lower cost to negotiating a single, large agreement rather than many small individual ones. Sharing the land for multiple uses similarly reduces costs. An additional economic benefit is that drone and train transportation will not compete with each other. Trains are efficient with heavy freight. Drones will primarily be used for lightweight objects. It is a mutually beneficial economic relationship.

Allowing drone operators to have flyover rights does not impact railroad operation and gives railroads a chance to make more money by leasing their air corridors. For drone operators, this could be a way to penetrate markets and cities safely without inconveniencing drivers or residential landowners, providing a realistic opportunity for operation and delivery.

B. Increased Safety

The public and the FAA are especially concerned with drone safety.⁸ Concerns include drones crashing into each other, into other objects, and into people. Using railroad rights-of-way as drone corridors enhances safety, both for the public and for the drones. A train, especially a freight train, is a rugged piece of equipment. A thirty- to fifty-five-pound, mostly plastic drone crashing into a train would have little impact on the train. On a railway corridor, drone operators will have more fear of what happens to their drones in a collision than the liability of crashing into a plane, person, or vehicle.

In addition to reducing the drone operators' liability, railway corridors reduce the obstacles a drone might encounter, like trees, utility poles, and buildings that would damage the drone. Trains are of predictable heights. Railroad corridors are free of obstacles blocking the tracks. Geographic features, like tunnels, can be predictably mapped. All of these factors make these paths safer for the drones as well.

One option would be to use a sliver of airspace, just above the train cars, for drone travel. For example, a rail car may be 15.5 feet high. Railroad guidelines require 22.5 feet of clearance, free of bridges, poles, and other structures, over the top of a railcar, along the entire length of the track.⁹ This leaves a 22.5 foot space that could be used by drones, free of obstacles.

C. Regulatory Arbitrage

Drone operators face a long regulatory rule-making process at the federal level. But there is a grey area. First, there is unsettled law where state and federal jurisdiction collide. Second, it is unclear which federal agency would have authority, and the authority of multiple agencies may conflict.

Is low altitude unmanned flight over railroad corridors railroad operation, aviation, or something else? There is an opportunity for the first actors to shape the unsettled regulatory landscape, or to encourage Congress to create new law or even a new agency. In the meantime, an opportunity exists for regulatory arbitrage, and to get a few years of operation underway.

III. TURNING CHALLENGES INTO OPPORTUNITIES

Drone operators are eager to take advantage of the cost and time savings of making deliveries by drone. They should be just as excited to use railroad corridors to achieve their drone delivery goals more efficiently, more safely, and without the burdens of heavy regulation. To gain these benefits, operators will have to overcome the following challenges and turn them into opportunities.

The first challenge is that there is no bright line answer for where the lower limit of the federal airspace ends and where the upper limit of private property begins. There is also a regulatory grey area, because it is unclear what agencies would have authority over which spaces.

The second challenge is that, assuming one is within private property airspace, the case law and statutes focus on the right to exclude others. What about the right to possess airspace and the concurrent right to transfer such possession under state law?

Third, railroads are unique holders of real estate, and there are many subtleties to their property ownership of which a drone operator should be aware.¹⁰

A. Aviation Law and the Grey Area

Airspace can be broken into two categories: federally regulated airspace and private property. Federal regulation has traditionally focused on navigability of manned aircraft. Conceptually, the federal airspace, sometimes called the public domain, must have an upper and lower limit. Yet those limits are hard to define. The lower limit, which is important for moving goods by drone, is unclear. Aviation cases relating to private property are usually about the property owner's desire to exclude air travel, especially at low altitude.

Jurisdiction over low altitude airspace is complex and unsettled. The statutes, regulations, and court decisions have historically focused on manned aircraft and come from a time when drones did not exist. Recreational, hobby drone use fits within the FAA's existing Special Rule for Model Aircraft.¹¹ Commercial drone use does not fit within the Special Rule for Model Aircraft, and the FAA developed a new rule for Small Unmanned Aircraft Systems, effective June 2016.¹²

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The FAA rules continue to evolve, but the process is time consuming.¹³ While the FAA is setting rules for how commercial drones should operate in federally regulated airspace, it is possible for an operator to exist outside the federal government's jurisdiction and start operating more quickly.

1. Federal Jurisdiction

The United States Government has exclusive sovereignty of U.S. airspace and a U.S. citizen has a public right of transit through navigable airspace.¹⁴ Congress has delegated the administration and regulation of "navigable airspace" to the FAA, part of the Department of Transportation.¹⁵ The regulations promote efficient use of the airspace and also protect people and property on the ground. This leaves open the question—what is "airspace" and is that the same as "navigable airspace?"

The statutes do not define airspace, but do define navigable airspace as the "airspace above the 'minimum altitudes' of flight prescribed by regulations . . . including airspace needed to ensure safety in the takeoff and landing of aircraft."¹⁶

The federal regulations set out a "minimum safe altitude" for flight over various areas.¹⁷ While these regulations do not limit the federal government's jurisdiction, they do limit the...