On Oct. 28, Northern District of California Judge Richard Seeborg granted Union Pacific Railroad Co. and BNSF Railway Co.’s request for a preliminary injunction barring California from implementing SB 84, a law that seeks to impose a $45 charge on each railcar carrying certain hazardous materials operating through California. Pursuant to the law, the railroads are required to collect the charge from shippers and remit the funds to the state.
Union Pacific and BNSF challenged the charge as preempted by a number of provisions of federal law because: (1) the requirement that the railroads collect the charge from shippers on behalf of the state constitutes impermissible interference with the Surface Transportation Board’s exclusive jurisdiction to regulate rates pursuant to the ICC Termination Act (ICCTA); (2) the charge is unfair under the Hazardous Materials Transportation Act (HMTA) and Dormant Commerce Clause principles, because it is a flat charge imposed solely on transport by rail, rather than other modes of transportation, even though the state can use the charges collected to purchase emergency response equipment appropriate for responding to trucking accidents; and (3) the charge is an illegal discriminatory tax under the 4-R Act.
Judge Seeborg found that the railroads raised serious questions about whether the state charge unlawfully interferes with interstate commerce under the ICCTA and whether the charge is fair as required by HMTA. In particular, the opinion questioned the state’s decision to impose the charge solely on transport by rail. Judge Seeborg found that the railroads made an adequate showing that they will suffer irreparable harm if they are required to collect charges under SB 84 during the pendency of the suit. The judge noted that the railroads had established that “the fees will drive at least some business to trucking—damages that they will not be able to recover against the state.”