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March 2015



Rail News: Rail Industry Trends

What can states do to promote rail safety? (guest comment)



By Kevin Sheys, a partner in the law firm of Nossaman LLP

In June 2014, California enacted SB 861, which purports to grant California's Office of Spill Prevention and Response (California OSPR) authority to regulate crude-oil rail shipments in the state. SB 861 requires railroads to demonstrate financial fitness as a precondition to operating within the state, and to submit spill contingency plans and other reports to the state. Failure to comply with these requirements makes railroads liable for civil and criminal fines.

In October 2014, the Association of American Railroads (along with BNSF Railway Co. and Union Pacific Railroad) sued California OSPR in federal court to strike down SB 861. According to the AAR, SB 861 is preempted by federal law "several times over." For its part, California OSPR argues the lawsuit is premature because without implementing regulations, there is no threat of enforcement and the court cannot assess whether SB 861 overlaps with federal law. The briefs are in, and the case is now before a judge. Industry watchers eagerly await a decision.

Under the federal Railroad Safety Act, once the U.S. Secretary of Transportation (acting through the Federal Railroad Administration) issues a railroad safety rule or order covering a subject, states may adopt and enforce their own railroad safety laws only when that law is necessary to address a local safety hazard, is not incompatible with the federal safety law and does not unreasonably burden interstate commerce. These are very narrow circumstances. (The Hazardous Materials Transportation Act has a more detailed, but equally potent preemption provision.)

An 'Audacious' Attempt

We have a comprehensive array of federal railroad safety laws, enforced by the FRA and the Pipeline and Hazardous Materials Safety Administration, covering a broad range of activities related to railroad safety and hazardous materials transportation, including oil spill contingency planning. We have laws and rules covering design and operation of locomotives and rail cars, and soon will have new federal rules governing the design of tank cars used to move crude by rail and operation of certain crude oil unit trains.

SB 861 is by no means the only recent attempt by a state to regulate interstate rail transportation, but it is the most audacious attempt since 2005, when the District of Columbia passed an ordinance banning all rail (and truck) hazardous material shipments within 2.2 miles of the U.S. Capitol. The D.C. Circuit held that the ordinance was preempted by the federal Railroad Safety Act. The D.C. ordinance was doomed from inception and SB 861 is, too. It is possible the judge will want to wait for the implementing regulations, but either now or later, SB 861 will be struck down.

Enough about law and SB 861 — my question is about policy and good government. All states want to promote rail safety, particularly the safe movement of crude oil by rail in light of the tragic Lac-Megantic derailment. But this prompts a few states to enact railroad safety laws that are obviously preempted under our Constitution and federal system. This seems futile. So I ask: What can states do instead to promote rail safety?

Under the federal State Rail Safety Participation Program, states are eligible to perform inspections and investigations to ensure that railroads are adhering to federal railroad safety requirements. The FRA can delegate all or part of its investigatory and surveillance authority to the states. The federal government retains authority to establish the standards, but states can play a significant role in enforcing those standards, and many states do. However, the State Rail Safety Participation Program is underutilized. Twenty states do not participate at all and the states that do participate together provide only 179 inspectors (at last count). The program has had its ups and downs over the years, but presently is very strong.

California participates in the program. Would the money spent to defend doomed SB 861 have been better spent to expand California's participation in the program? Perhaps. To elected state officials and program administrators tempted to follow California's path, I respectfully suggest that instead, you take a look (or a new look) at the State Rail Safety Participation Program.

Kevin Sheys is a partner in the law firm of Nossaman LLP and focuses his practice on railroad infrastructure projects and regulatory issues. Nossaman does not represent any party in the Association of American Railroads suit mentioned in this article and views expressed herein are those of the author. Contact him at ksheys@nossaman.com.



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