BREAKING: Surface Transportation Board rejects Valero petition

By Roger Straw, September 21, 2016

On Tuesday, September 20, the US Department of Transportation’s Surface Transportation Board (STB) issued a statement denying a Valero Benicia Refinery petition for a declaratory order. Valero’s petition asked the STB to rule that the Benicia Planning Commission’s unanimous February 11 decision denying Valero’s oil train proposal is preempted by federal law protecting the authority of rail carriers. Yesterday the STB denied Valero’s petition in no uncertain terms.

“The Board finds here that there is no preemption because the Planning Commission’s decision does not attempt to regulate transportation by a “rail carrier.” The Board’s jurisdiction extends to rail-related activities that take place at transloading (or, as here, off-loading) facilities if the activities are performed by a rail carrier, the rail carrier holds out its own service through a third party that acts as the rail carrier’s agent, or the rail carrier exerts control over the third party’s operations.8 The record presented to the Board in this case, however, does not demonstrate that Valero is a rail carrier or that it is performing transportation-related activities on behalf of UP or any other rail carrier at its off-loading facility.”

Citing arguably similar case law, the STB repeatedly points out that Valero is not a “rail carrier” and that Valero would not be “performing offloading under the auspices of a rail carrier.”

Further, the STB rules that “Valero has not demonstrated that the Planning Commission’s decisions unreasonably interfere with UP’s common carrier operations.”  Under federal law, “accordingly, this situation…does not reflect undue interference with ‘transportation by rail carriers’ within the Board’s jurisdiction.”

The STB ruling also provided guidance on the issue of preemption as it applies to any mitigations and conditions of approval that directly impact rail operations.  The ruling strongly restated federal preemptory powers on any mitigation measures or conditions of approval that would “regulate Union Pacific’s rail operations on its lines.”  But it went on to say, “State and local regulation is permissible where it does not unreasonably interfere with rail transportation….Localities retain their reserved police powers to protect the public health and safety so long as their actions do not discriminate against rail carriers or unreasonably burden interstate commerce. For example, local electrical, plumbing, and fire codes are generally applicable.”

The STB’s guidance continues, “State and local action, however, must not have the effect of foreclosing or unduly restricting the rail carrier’s ability to conduct its operations or otherwise unreasonably burden interstate commerce.”  And finally, “If the offloading facility were eventually to be constructed but the EIR or the land use permit, or both, included mitigation conditions unreasonably interfering with UP’s future operations to the facility, any attempt to enforce such mitigation measures would be preempted…”

The exact definition or meaning of “foreclosing or unduly restricting” and “unreasonably interfering with” was not spelled out in yesterday’s STB ruling.

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