Federal Pre-emption Under ICCTA and Its Impact on State and Local Regulation Craig J. Staudenmaier, Esquire Nauman, Smith, Shissler & Hall, LLP

What is ICCTA Pre-emption? 49 U.S.C. §10501 (a)(1)Subject to this chapter, the Board has jurisdiction over transportation by rail carrier that is-- (A)only by railroad;... (2)Jurisdiction under paragraph (1) applies only to transportation in the United States between a place in-- (A)a State and a place in the same or another State as part of the interstate rail network;... (b)The jurisdiction of the Board over -- (1)transportation by rail carriers, and the remedies provided in this part with respect to rates, classifications, rules (including car service, interchange, and other operating rules), practices, routes, services, and facilities of such carriers; and

What is ICCTA Pre-emption? (2)the construction, acquisition, operation, abandonment, or discontinuance of spur, industrial, team, switching, or side tracks, or facilities, even if the tracks are located, or intended to be located, entirely in one State, is exclusive. Except as otherwise provided in this part, the remedies provided under this part with respect to regulation of rail transportation are exclusive and preempt the remedies provided under Federal or State law. (9)“transportation” includes – (A)a locomotive, car, vehicle, vessel, warehouse, wharf, pier, dock, yard, property, facility, instrumentality, or equipment of any kind related to the movement of passengers or property, or both, by rail, regardless of ownership or an agreement concerning use; and (B)services related to that movement, including receipt, delivery, elevation, transfer in transit, refrigeration, icing, ventilation, storage, handling, and interchange of passengers and property

What does ICCTA Pre-empt?  it preempts “regulation” by state or local authorities---that is, it preempts those state or local laws, ordinances that can reasonably be said to have the effect of “managing” or “governing” rail transportation  it does not preempt state laws or local ordinances that have a “remote or incidental impact” on rail transportation

Types of State or Local Regulation Pre-empted: 1)Zoning and subdivision ordinances 2)Most permitting laws or ordinances especially ones that are largely discretionary with the issuing body and are or can be used to delay or interfere with construction or related rail operation 3)“Buffer zone” requirements 4)Blocked crossing statutes or ordinances(FRSA preemption usually primary) 5)Certain state environmental laws 6)This may even apply to “off-site” permitting such as haulage permits for trucks using the rail facility

Types of state or local regulation generally not pre-empted: -----general police power type regulation such as local building, electrical, fire and plumbing codes (safety type regulation generally left to local authorities that only marginally impact rail operations) Example: a local municipality cannot require you to submit zoning application for a building to be used at a rail yard but can require you to obtain a tap in permit for the sewer system and to comply with fire and building codes for the structure— cannot unreasonably withhold this or make it so onerous as to now have a direct impact on rail operations.

Transloading----can ICCTA preempt attempts by state and local authorities to regulate transloading? Yes, but… ICCTA preemption is tied directly to the railroad involved which must qualify under ICCTA and only applies if done by or on behalf of a railroad.

The Good News: Green Mountain Railroad Corp. v. State of Vermont, 404 F.3d 638(2d Cir. 2005)  railroad challenged Vermont’s land use statute that required a “pre-clearance permit” before any land development could be done under ICCTA  railroad wanted to construct several buildings including silos for use in a cement transloading facility. The construction would have infringed on a state required 100 foot buffer zone  Court held statute was preempted under ICCTA as it 1) unreasonably burdened interstate commerce and 2) unduly restricted rail activities

NOTE: 1) railroad had sought approval on several previous occasions under the statute but no waiver of right to assert ICCTA preemption 2) railroad was doing the transloading itself 3) court indicated railroad would have to submit its plans to state and local authorities for review but they could not require the permitting 4) pre-construction permitting is one of the “red flag” requirements where preemption is most often found 5) court noted other Federal environmental laws may apply (i.e. Clean Air & Water Acts)

The Bad News: New York & Atlantic Railway Co. v. STB, 635 F.3d 66 (2d Cir. 2011)  railroad and transloader entered in an agreement to operate a facility where construction and demolition debris was transloaded onto railcars  local zoning officer cited them for violation of zoning ordinances which did not permit such a facility in the location (land leased by railroad from a cemetery)  railroad and transloader brought an injunction action in federal court asserting ICCTA preemption as a defense to the zoning restrictions  town and cemetery brought action before the STB asserting it had no jurisdiction here because of nature of relationship between railroad and transloader and therefore no ICCTA preemption. STB agreed three times.

The Circuit Court agreed and dissolved the injunction. In doing so, it found these factors regarding the relationship between the railroad and transloader demonstrated that the railroad lacked the required control of the facility to make it “directly related to rail operations” and thus outside the protections of ICCTA: 1)although NYARR was a licensed rail carrier, Coastal(transloader) was not 2)NYARR’s responsibility and liability for rail cars delivered ended when uncoupled from its locomotives 3)Transloader operated with almost total control over the facility(solely responsible for construction and maintenance of facility and railcars) 4)Transloader’s fees charged totally by its determination and NYARR had no control over it 5)Transloader negotiated directly with customers and negotiated fees, payed its own bills and collected fee separately from NYARR’s transportation fees 6)Transloader maintained its own insurance and was responsible to indemnify NYARR for its use of the facility

Court held that ICCTA preemption “extends to the rail-related activities that take place at transloading facilities if the activities are performed by a rail carrier or the rail carrier holds out its own service through the third-party as an agent or exerts control over the third party’s operations”.

Are You Preemption Worthy?  there must be “transportation” by a “rail carrier” and the operation must be closely linked to the rail operations  the rail carrier must exercise sufficient control over the facility  the rail carrier must exercise sufficient control over the rail equipment  negotiation, billing and collection of fees from shipper should be done by the railroad  the facility itself should be held out as that of the railroad and not of the transloader Does this fit your business model?

You catch more flies with honey than with vinegar Even though preemption may apply, the more prudent business tactic may be to work with the local authorities while not compromising your rights you should share with local officials building plans you may wish to consider cost/benefit of a “preemption fight” over negotiating with local authorities some minor permitting, so long as it has clear requirements and is not largely discretionary with local officials or can be used as a means to unreasonably delay or interfere with construction or operation may be acceptable you will have to comply with local building, fire, electric and similar codes so go in prepared to meet or exceed these and use them as a method to build dialogue and goodwill if you do believe you are going to have to assert a preemption defense, make sure you meet the criteria for same

Contact Information Craig J. Staudenmaier, Esquire Nauman, Smith, Shissler & Hall, LLP