Padgett v. Surface Transp. Bd.

• Court: U.S. Court of Appeals — First Circuit
• Writing for the Court: DYK, Circuit Judge.
• Citation: Padgett v. Surface Transp. Bd., 804 F.3d 103 (1st Cir. 2015)
• Decision Date: 16 October 2015
• Docket Number: No. 14–2067.,14–2067.
• Parties: Brook A. PADGETT; Craig Dauphinais; Jennifer Thomas; Bruce W. Spinney, As They Are Members of the Board of Selectmen of the Town of Grafton, Petitioners, v. SURFACE TRANSPORTATION BOARD; United States, Respondents, Grafton & Upton Railroad Company, Intervenor.

804 F.3d 103

Brook A. PADGETT; Craig Dauphinais; Jennifer Thomas; Bruce W. Spinney, As They Are Members of the Board of Selectmen of the Town of Grafton, Petitioners

v. SURFACE TRANSPORTATION BOARD; United States, RespondentsGrafton & Upton Railroad Company, Intervenor.

No. 14–2067.

United States Court of Appeals, First Circuit.

Oct. 16, 2015.

Ginny Sinkel Kremer, Grafton Town Counsel, with whom Blatman, Bobrowski & Mead, LLC, were on brief, for petitioners.

Charles H.P. Vance, Attorney, Surface Transportation Board, with whom William J. Baer, Assistant Attorney General, Robert B. Nicholson and Shana Marie Wallace, Attorneys, Department of Justice, Craig M. Keats, General Counsel, and Evelyn G. Kitay, Deputy General Counsel, were on brief, for respondents.

John A. Mavricos, with whom Jonah M. Temple, Christopher, Hays, Wojcik & Mavricos, LLP, James E. Howard, Linda J. Morgan, and Nossaman, LLP, were on brief, for intervenor.

David F. Hassett and Hassett & Donnelly, P.C., on brief for Congressman James P. McGovern, amicus curiae in support of petitioners.

Jonathan S. Springer and Springer Law Office, PLLC, on brief for Propane Gas Association of New England, amicus curiae in support of respondents and intervenor.

Before TORRUELLA, SELYA, and DYK,^* Circuit Judges.

Opinion

DYK, Circuit Judge.

The Town of Grafton (the “Town” or “Grafton”) petitions for judicial review a declaratory order of the Surface Transportation Board (“Board”) finding that 49 U.S.C. § 10501(b) preempts state and local regulations with respect to Grafton & Upton Railroad Company's (“G & U”) liquid petroleum gas transloading facility (the “facility”). We deny the petition.

I.

As described in a companion case decided today, Del Grosso v. Surface Transportation Board, No. 15–1069, 804 F.3d 110, 113–14, 2015 WL 6108060 (1st Cir. Oct. 16, 2015), under the Interstate Commerce Commission Termination Act (“ICCTA”), Pub.L. No. 104–88, 109 Stat. 803, “the Board has jurisdiction over transportation by rail carrier.” 49 U.S.C. § 10501(a)(1) ; see also Fayard v. Ne. Vehicle Servs., LLC, 533 F.3d 42, 46 (1st Cir.2008). This jurisdiction is exclusive, and the ICCTA preempts “State law” governing “regulation of rail transportation”:

The jurisdiction of the Board over—(1) transportation by rail carriers ... and facilities of such carriers; and (2) the construction, acquisition, operation ... of ... facilities, even if the tracks are located, or intended to be located, entirely in one State, is exclusive. Except as otherwise provided in this part, the remedies provided under this part with respect to regulation of rail transportation are exclusive and preempt the remedies provided under Federal or State law.

49 U.S.C. § 10501(b). The question here is whether state and local regulation of G & U's propane (or liquid petroleum gas) transloading facility is preempted.

II.

G & U owns and operates a rail line extending approximately sixteen miles between a CSX Transportation, Inc. (“CSXT”) line in North Grafton, Massachusetts, and another CSXT line in Milford, Massachusetts. In January 2012, G & U purchased a parcel of land in North Grafton, located immediately adjacent to its rail line and existing rail yard and within a “Water Supply Protection Overlay District” under the Town's zoning regulations. G & U plans to construct a transloading facility on the parcel for transferring propane received by tank car in North Grafton to storage tanks and then to trucks for delivery across New England. In December 2012, G & U notified the Town of its intent to deliver four 80,000–gallon propane storage tanks to its rail yard to be used in constructing the facility. In response, the Town issued a cease and desist order requiring G & U to halt construction and filed a complaint in Massachusetts state court seeking to bar the construction, arguing that construction of the facility would violate state and local law.

The state and local laws at issue are zoning and permitting regulations. Massachusetts law provides that “[n]o person shall construct, maintain or use any tank or container of more than ten thousand gallons' capacity, for the storage of any fluid other than water, unless the same is located underground, without first securing a permit.” Mass. Gen. Laws ch. 148, § 37. The Grafton Zoning By–Law (“ZBL”) lists the following as “specifically prohibited” uses: “Storage, transport or sale of petroleum or other refined petroleum products in quantities greater than normally associated with household use....” ZBL § 7.4.C.9. The Town's zoning regulations also require a “special permit” for “any use involving secondary usage or storage of toxic or hazardous materials in quantities greater than normally associated with household use” and for “underground fuel or other storage tanks, including any tanks or collection pits.” ZBL § 7.4.D.1; id. § 7.4.D.7. G & U argued that these state and local regulations were preempted and removed the case to federal district court. That court determined it lacked jurisdiction and remanded the case back to the state court.

On June 12, 2013, the state court enjoined the delivery of the storage tanks, directed G & U to file a petition for a declaratory order with the Board to determine whether § 10501(b) preempts the application of state and local zoning and permitting ordinances, and stayed the state court proceedings pending the outcome of the Board proceeding. G & U filed a petition with the Board on July 24, 2013, and the Board instituted a declaratory order proceeding on January 24, 2014.

Before the Board, the Town argued that G & U's activities did not constitute transportation by rail carrier because of the involvement of several companies (the “Propane Companies”) with which G & U had previously contracted for the financing, construction, and operation of the facility. The Town's theory was that the facility would be constructed and operated by the Propane Companies (not rail carriers) rather than by G & U (a rail carrier). In a September 17, 2014, decision, the Board found that the state storage tank permit requirement and the Town's ordinances were preempted by § 10501(b) because G & U's construction and operation of the facility constituted “transportation by rail carrier.” 49 U.S.C. § 10501(a).

The Board concluded, based on G & U's July 2013 termination of the agreements with the Propane Companies, that G & U “can and will hire the people with the necessary expertise to properly operate the facility on its own” and that the record adequately demonstrated that the facility will be an integral part of G & U's operations as a rail carrier. The Board further found that state fire safety and construction codes would still apply to the construction and operation of the facility as long as they were applied in a non-discriminatory manner. The Board concluded by stating that “[t]his action will not significantly affect either the quality of the human environment or the conservation of energy resources.”

The Town petitions for judicial review. We have jurisdiction over final orders of the Board pursuant to 28 U.S.C. § 2342. See Citizens Awareness Network, Inc. v. United States, 391 F.3d 338, 346 (1st Cir.2004). Under the Administrative Procedure Act, a “reviewing court shall ... hold unlawful and set aside agency action, findings, and conclusions found to be ... arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” 5 U.S.C. § 706(2). The Board's decision is not arbitrary or capricious if there is a “rational basis” for the decision based on facts in the record. Granite State Concrete Co. v. Surface Transp. Bd., 417 F.3d 85, 91–92 (1st Cir.2005) (citation omitted). In the companion to this case, we established that we do not give Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984), deference to the Board's determination of preemption, but we do give Skidmore v. Swift & Co., 323 U.S. 134, 65 S.Ct. 161, 89 L.Ed. 124 (1944), deference, and we defer to the Board's factual findings. See Del Grosso, 804 F.3d at 117.

III.

At the outset the Town argues that the ICCTA preempts only state and not local regulation. This argument is meritless. The ICCTA's use of “State” clearly encompasses both state and local law. See Atl. Coast Line R.R. Co. v. City of Goldsboro, 232 U.S. 548, 555, 34 S.Ct. 364, 58 L.Ed. 721 (1914) (“A municipal by-law or ordinance, enacted by virtue of power for that purpose delegated by the legislature of the state, is a state law within the meaning of the Federal Constitution.”); see also City of Saint Louis v. Praprotnik, 485 U.S. 112, 125, 108 S.Ct. 915, 99 L.Ed.2d 107 (1988) (“[S]tate law ... may include valid local ordinances and regulations....”). Otherwise, the express preemption of state law would be completely ineffective. It is well established that the ICCTA preempts local as well as state regulation. See, e.g., Tex. Cent. Bus. Lines Corp. v. City of Midlothian, 669 F.3d 525, 530 (5th Cir.2012) (“Congress intended to preempt state and local laws that come within the Board's jurisdiction.” (emphasis added)); Norfolk S. Ry. Co. v. City of Alexandria, 608 F.3d 150, 160 (4th Cir.2010) (city ordinances preempted by ICCTA); City of Auburn v. U.S. Gov't, 154 F.3d 1025, 1031 (9th Cir.1998) (“We believe the congressional intent to preempt this kind of state and local regulation of rail lines is explicit in the plain language of the ICCTA and the statutory framework surrounding it.” (emphasis added)).

“Determining whether the ICCTA preempts a state or local law is a two-step inquiry. First, the law must seek to regulate ‘transportation,’ ”² and “second, that transportation must be conducted ‘by a rail carrier.’ ” Tex. Cent., 669 F.3d at 530 ; see also, e.g., Norfolk, 608 F.3d at 157–58 ; Fla. E. Coast Ry. Co. v. City of W. Palm Beach, 266 F.3d 1324, 1331 (11th Cir.2001). “Whether a particular activity constitutes transportation by rail carrier under section 10501(b) i...