Railroad transportation of raw petroleum, often referred to as “crude-by-rail,” has received increasing media attention in recent months, due to health and environmental concerns. California took a stab at legislating rail transport through Senate Bill 861 (“SB 861”), which the State Legislature passed in June 2014 and the Governor subsequently signed into law. On Tuesday, October 7, 2014, a group of railroad companies, led by Union Pacific Railroad Company, filed a complaint the United States District Court, Eastern District of California, alleging that SB 861 is preempted by federal law.
SB 861 imposes requirements on railroads operating within California that are duplicative of federal regulations. For example, the law mandates oil spill prevention measures including reporting the quantity and substance of transported materials, and a map of track routes and facilities, both which are already required under federal law. (See Gov. Code § 8670.29.) Additionally, railroad operators must submit and gain approval of an oil spill contingency plan before they can legally operate throughout California.
The railroad companies’ complaint points out two federal agencies with a “sweeping set of intricate” statutes and regulations that govern rail transport of petroleum materials: the Pipeline and Hazardous Materials Safety Administration (“PHMSA”) and the Federal Railroad Administration (“FRA”). Both are agencies within the Department of Transportation (“DOT”), and both have promulgated comprehensive rules to regulate rail transport substances and processes. For example, the PHMSA issued a Notice of Proposed Rulemaking for rail transport of crude oil and ethanol on July 23, 2014. Additionally, Congress has enacted two laws that extensively govern railroad safety and operations: the Federal Railroad Safety Act (“FRSA”) and the Locomotive Inspection Act and the ICC Termination Act (“ICCTA”).
The rules produced by the PHMSA and FRA are federal regulations that apply to all 50 states uniformly, unlike SB 861, a state law that only governs activity in California. As the railroad company plaintiffs, alleged, if each state legislated rail transport individually, this would result in a “patchwork of 50 divergent, sometimes conflicting, State regulatory regimes,” making it impossible for national railroad companies to comply as interstate shipments crossed state lines. According to the Constitution’s Supremacy Clause, when a state law conflicts or overlaps with a federal regulation, the federal regulation will govern. (U.S. Const. Art. VI.) As such, the railroads argued that the federal laws and regulations preempt SB 861 because both sets of laws govern the same subject matter.
Other states, including North Dakota and Minnesota, have considered following California’s lead in state railroad regulations. However, they are likely to face similar preemption claims.