Surface Transportation Board Acts to Prevent a Patchwork Quilt of State Regulatory Requirements

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The Surface Transportation Board (STB) has issued a comprehensive decision that will likely forestall years of litigation over the scope of the Clean Water Act's (CWA) application to the interstate rail network.

In December 2019, this blog reported on a Petition for Declaratory Order filed by the Association of American Railroads (AAR) with the STB seeking an order that the preemption provisions of the Interstate Commerce Commission Termination Act (ICCTA) preclude the application of the Clean Water Act's Point Source discharge provisions to railroad operations. (Please see Holland & Knight's previous Transportation Blog post, "Railroads Seek to Avoid a Patchwork Quilt of Regulatory Requirements," Dec. 19, 2019.) On Dec. 30, 2020, the STB issued a decision that declined to actually issue such a declaratory order. However, the agency provided a detailed, well-reasoned analysis of the legal issues and effectively signaled that any effort to impose state point source permitting on railroads would be held to be preempted as interfering with the free flow of interstate commerce.

To understand the significance of this action, it's helpful to understand the pertinent aspects of the CWA's National Pollutant Discharge Elimination System (NPDES) permitting program, 33 U.S.C. § 1342, and the related discharge prohibition, 33 U.S.C. § 1311. The CWA prohibits the discharge of any "pollutant" from a "point source" into navigable waters. Recognizing, though, that the hugely wide variation in discharges by facilities throughout the country makes setting a single standard wholly impracticable, the CWA provides that each facility must obtain a permit to discharge, and that the permit as granted will set the standard to be met for each point source. Responsibility for the permitting process has been ceded to almost all states by the U.S. Environmental Protection Agency (EPA) under another provision of the CWA.

As reported in the prior blog, the AAR's initiative was prompted by a district court decision finding that a rail car moving in interstate commerce could be a point source. (Please see Sierra Club v. BNSF Railway, No. 2:13-cv00967, slip op. at 17-18 (W.D. Wash. Oct. 25, 2016)). The case was settled before the court could consider the issue of federal preemption. The resulting uncertainty created the specter of every state establishing its own standards for the emission of many different materials from a rail car. Indeed, a state might establish different standards at different locations within that state. Accordingly, AAR brought the undecided issue before the STB in late 2019 with its petition for a declaratory order.

The STB declined to issue a declaratory order, finding it to be premature. Nonetheless, recognizing the importance of the matter, it proceeded to offer guidance on the preemption question. It concluded that if the NPDES permitting requirements were to be applied to discharges from the "incidental operation of rail cars in transit," it would likely lead to a patchwork quilt of regulatory constraints that would impose tremendous burdens on railroads operating in interstate commerce. As such, it stated that application of NPDES to rail operations cannot be harmonized with the ICCTA's preemption statute, 49 USC Sec. 10501(b).

A single rail shipment can easily pass through a half dozen, or even a dozen, states. That rail car's next trip may pass through a dozen different states. A shipper needs the flexibility to load any suitable car to any destination within the contiguous 48 states, Canada and Mexico. And, railroads have few routing options – sometimes none. Further, a very considerable percentage of the railcar fleet is owned or leased by shippers. One state might seek to enforce rules against the car owner, while another might look to the operating railroad as the responsible party. The opportunities for complexity and possible conflict in regulation are endless. Even one state adopting an overly restrictive standard could bring commerce in some lanes to a halt.

Multiple conflicting standards could be impossible to meet. The agency fully appreciated this. The STB described the purpose of § 10501(b) thusly: "to provide uniform regulation of rail transportation and to ensure the free flow of interstate commerce, particularly by preventing a patchwork of differing regulations across states."

The STB's position as the primary national regulator of railroad rates and practices will likely have an increasingly important role in resolving these kinds of questions of conflicting state and local regulatory requirements and the national interest in the free flow of commerce and uniform transportation regulation.

Surface Transportation Board Docket No. FD 36369, Association of American Railroads—Petition for Declaratory Order, Served Dec. 30, 2020.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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