First Circuit Considers Federal Preemption of Rail Regulation

In a pair of cases involving railroad transloading activities, the First Circuit Court of Appeal confirmed that federal law preempts state and local regulation of rail transportation, but remanded one of the cases back to the Surface Transportation Board for a more robust analysis of whether state and local law is preempted.

In Padgett v. Surface Transportation Bd., 804 F.3d 103 (2015), the court rejected efforts by the Town of Grafton, Massachusetts to require a special permit to transfer liquid petroleum gas from railcars to a storage tank facility and then to trucks for delivery. Central to the Court’s determination was its finding that the transloading facility involved “transportation by rail carrier” because the rail carrier took responsibility for financing and operating the facility.

In a companion case decided on the same day, Grosso v. Surface Transportation Bd., 804 F.3d 110 (2015), neighbors challenged a rail company’s proposal to construct a wood pellet transloading facility without first securing a discretionary local permit. The court focused on whether the activity in question – vacuuming, screening, bagging, and palletizing wood pellets delivered in hopper cars – was “manufacturing” and therefore not preempted, or “transportation” to which local regulations do not apply. 804 F.3d at 118-120. The First Circuit remanded to the Surface Transportation Board to consider, factually, whether the activities in question “facilitated the physical movement of ‘passengers or property’” (a necessary element of “transportation”).

The two cases illustrate that federal preemption of railroad regulations is a fact-dependent inquiry, as this court demanded a thorough, consistent and persuasive agency analysis to support its preemption determination.

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