The Surface Transportation Board has ordered backers of southeast Montana's Tongue River Railroad to submit a new application for the coal-carrying line.
The board also said it will conduct another environmental study of the line proposed between Miles City and Ashland.
The 9th U.S. Circuit Court of Appeals last year rejected a previous environmental study. The court said federal officials failed to consider the impact of Arch Coal's proposed Otter Creek mine near Ashland.
The railroad company is jointly owned by Arch, BNSF Railway and billionaire candy magnate Forrest Mars, Jr.
Mars is a former opponent whose Montana ranchland was in the path of the line until he bought a one-third interest in the railroad. The line has since been shortened from 130 miles to 80 miles.