City of Alexandria, VA
US Court of Appeals Affirms Lower Court Decision on City Regulation of Ethanol Trucks
Norfolk Southern has maintained that truck hauling permits issued by the City for transporting ethanol inside the City limits are preempted by Federal law, and that the City did not follow certain procedural steps in establishing a hazardous materials route. The City filed an answer and counterclaim, maintaining it is regulating trucks on its streets, not rail operations; and that the half-mile path the trucks must take from the terminal is not subject to the type of procedures that Norfolk Southern contended.
On June 16, 2010, the U.S. Court of Appeals for the Fourth Circuit in Richmond affirmed the April 15, 2009 decision by the lower court, the U.S. District Court of the Eastern District of Virginia, that the City’s attempt to regulate trucks leaving the Norfolk Southern ethanol transloading facility was pre-empted by federal law.
City Receives Ruling in Norfolk Southern Lawsuit
Norfolk Southern maintained that truck hauling permits issued by the City for transporting ethanol inside the City limits are preempted by Federal law, and that the City did not follow certain procedural steps in establishing a hazardous materials route. The City filed an answer and counterclaim, maintaining it is regulating trucks on its streets, not rail operations; and that the half-mile path the trucks must take from the terminal is not subject to the type of procedures that Norfolk Southern contended.
On April 15, the City received United States District Court Judge James C. Cacheris’ ruling. The Court found for the City in some respects, but generally found that the City's permitting system for the trucks entering and leaving the transloading facility is preempted by federal law. The City disagrees with certain aspects of the opinion, and is evaluating its appellate rights, but also believes that the Court's ruling still allows the City to pursue regulation of the trucks. There will be more coming from the City as we have time to work through this decision.
Surface Transportation Board Rules Norfolk Southern Transloading Facility is Exempt from Most State and Local Laws
On February 17, the Surface Transportation Board (STB) ruled that the Norfolk Southern ethanol transloading facility is engaged in rail operations and is therefore protected by federal preemption from most local regulation.
The City had argued that transloading was not covered by federal preemption and that Norfolk Southern should have applied for a special use permit before opening the facility.
On June 17, 2008, Alexandria petitioned the STB for a declaratory order, which was granted on November 5, 2008. The action instituted a proceeding to determine whether the operation of an ethanol transloading facility constitutes transportation by rail carrier and, therefore, is covered by the federal preemption provision. The summary of the results of this proceeding is as follows:
First, the STB found that Norfolk Southern's ownership of the facility, along with its payments for construction of improvements, were important. Second, the STB found that Norfolk Southern's relationship with RSI (the contractor that actually performs the transloading from rail cars to tanker trucks) did not give RSI control of the transloading business. The STB placed particular reliance on the fact that RSI is paid a fee by Norfolk Southern for services while RSI does not pay a lease or license fee to Norfolk Southern. Norfolk Southern, not RSI, collects fees from and markets the facility to shippers of ethanol.
Most of these facts were not known to the City when the initial petition to the STB was filed, as Norfolk Southern refused the City's early requests to share operational information that was ultimately relied upon by the STB, including Norfolk Southern’s contract with RSI. It is only because of this case, along with the haul route litigation that is still pending in federal district court, that any of this material was exposed.
Norfolk Southern Lawsuit Update: City of Alexandria Files Reply Papers in Federal Court
Norfolk Southern maintains that truck hauling permits issued by the City for transporting ethanol inside the City limits are preempted by Federal law, and that the City did not follow certain procedural steps in establishing a hazardous materials route. In July, the City filed its answer and counterclaim, maintaining it is regulating trucks on its streets, not rail operations; and that the half-mile path the trucks must take from the terminal is not subject to the type of procedures that Norfolk Southern contends.
On September 18, the City and Norfolk Southern appeared at a pre-trial conference in the U.S. District Court; the parties and the court agreed that the matter could be resolved on cross-motions for summary judgment. The City of Alexandria and Norfolk Southern filed their opening briefs and their cross-motions for summary judgment by midnight on November 24.
As required by the briefing schedule, the City filed reply papers on December 15; oral arguments will take place on December 18.
Norfolk Southern Documents
Alexandria, Norfolk Southern Complete Legal and Factual Briefing Ordered by Surface Transportation Board
Two additional documents relate to the final issue discussed in the STB's order: The application of the Hazardous Material Regulations (HMR, codified at 49 CFR 105 et seq.) to this facility. These regulations govern the manner (rail tank car vs. permanent storage tank) and timing (period that laden tank cars may be stored at the facility) of operation for this facility. Norfolk Southern obtained an ex parte letter from the federal enforcement agency, the Pipeline and Hazardous Materials Safety Administration (PHMSA), stating that the railroad could off-load directly from rail tank cars to tank trucks. The PHMSA letter is conclusory and devoid of analysis. The City's contention, as supported by the text of applicable regulations, is that a railroad (the only entity not subject to local zoning) can only off-load to a permanent tank structure.
With respect to the federal HMR, enforcement authority is confined to the federal government, and case law makes clear that the City lacks enforcement authority, and hence lacks standing to file a formal challenge to the PHMSA letter, either with the agency or in federal court.
However, federal law allows the states to adopt the HMR as state law, and enforce the same substantive provisions as state regulations. Virginia has adopted the federal regulations verbatim. The Virginia State Police (and local law enforcement officers who have received special training) are authorized to enforce these Virginia HMR regulations. (See 9 VAC 20-110-90, 9 VAC 20-110-110.) Currently, certain fire marshals in Fairfax County have this authority; Alexandria's fire marshals do not. The City's Fire Department has been diligently pursuing the necessary training, but, unfortunately, the constraints engendered by the current budget environment have impeded this effort. Were the City, through its fire marshals, empowered to enforce the state HMR regulations, Alexandria would have standing to challenge the PHMSA's interpretation of the substantive HMR storage tank provisions, as well as to address locally the HMR storage timing issue.
Whatever the relative merits of local HMR enforcement as an overall budget priority, the City Attorney has determined that having this authority is critical to continuing the City's administrative and judicial strategy to regulate the transloading facility. Accordingly, he has requested that his staff work with the Fire Department to secure the necessary training for one or two fire marshals, using currently appropriated funding, so that the City can, as directed by Council, continue effectively and aggressively to pursue this matter.
Independent Review of City's Actions Regarding Norfolk Southern Facility
Vice Mayor Redella S. "Del" Pepper and Councilman Ludwig Gaines, in collaboration with the Norfolk Southern Community Monitoring Group, developed qualifications and scope of review for the independent reviewer search. David LaBahn and Steven A. Jansen, former prosecutors with more than 32 years of combined legal experience, were selected to conduct the independent inquiry.
Their review was based on an examination of 2,500 pages of documents, e-mails, City letters, memos, timelines, and letters from the community; management reports; and interviews with City staff and key individuals. The review findings, presented to the City Council on December 13, show deficiencies and inactions by City personnel and their failure to notify City Council and the public of the proposed and actual use of the facility. The report also makes six recommendations to the City for improving communications, policies for handling special issues, accountability procedures, and community outreach and notification of critical issues.
Note: The recommendations and observations contained in the report are based on the findings and opinions of the report authors. They do not represent a legal opinion, or legal counsel to the City.