Choo-Choo Strain

Railroads that operate trackside solid waste processing facilities are exempt from state regulations aimed at controlling conditions, activities and practices at such sites, according to a ruling by a New Jersey federal district court. Solid waste handling facilities on or near railroad lines are on the rise, particularly in the Northeast. The railroads insist that federal law preempts state and local governments from regulating these operations. Indeed, the Interstate Commerce Commission Termination Act (ICCTA), enacted in 1996, created the Surface Transportation Board and gave it exclusive jurisdiction over “transportation by rail carriers.”

The New York, Susquehanna and Western Railway (NYS&W) has a 400-mile railroad network, including trackage in the township of North Bergen, N.J. There, at some five sites, waste materials are delivered by truck, dumped on the ground, sorted, processed and loaded into rail cars for shipment to out-of-state disposal facilities. For the most part, these sites are operated by a contractor known as a “loading agent.”

To ensure that these operations would meet reasonable standards for public health and safety, New Jersey enacted rules governing the transfer of solid waste to and from rail cars. The regulations purposely exempt rail carriers from the permitting process and impose less onerous requirements on containerized solid waste. Figuring it could ignore state regulation altogether, NYS&W instead decided to selectively comply with the rules.

After the state issued a compliance order and assessed a $2.5 million penalty against NYS&W, the railroad filed suit in federal district court seeking a determination that the state rules are preempted by federal law and unenforceable. After considering the testimony and legal arguments, U.S. District Judge Katherine Hayden ruled that the federal law trumps state regulation.

As the ICCTA preempts state regulation of “transportation by rail carriers,” the court needed to answer two questions: (1) Do the activities at the sites amount to “transportation”? and (2) Are the activities being performed by “common carrier railroad transportation”?

The state argued that the facilities were sites for “solid waste disposal” because the loading agents extracted certain materials on the premises. Rejecting this contention, the district court found that the facilities constitute “transportation” under the ICCTA because they are used primarily to load cargo for interstate shipment. “[T]he extraction of non-compliant materials occurs during the loading process — it is not a separate process,” the opinion stated.

The state further argued that the sites are not “common carrier” facilities because (a) each of them is limited to a specific customer and (b) the activity involves transportation to a rail carrier and not transportation by a rail carrier. But the court brushed aside these claims as contrary to case law.

“[The regulations] … address as many aspects of the transloading activity as possible,” Hayden concluded.

“[T]heir impact on transloading is serious … too large an impact on transportation by rail carriers to pass muster …,” the judge added.

The state says it will appeal the ruling.

[New York Susquehanna and Western Railway Corp. v. Jackson, No. 05-4010, D.N.J., Feb. 20, 2007]

The legal editor welcomes comments from readers. Contact Barry Shanoff via e-mail:

The columnist is a Rockville, Md., attorney and serves as general counsel of the Solid Waste Association of North America.