On November 23, 2016, the U.S. Court of Appeals for the Ninth Circuit issued a unanimous ruling that the Surface Transportation Board has exclusive jurisdiction over “railroad repair work done at the direction of a federally regulated rail carrier but performed by a contractor rather than the carrier itself.” The case is Oregon Scenic Coast Railway, LLC v. State of Oregon Department of State Lands.

The Oregon Coast Scenic Railroad, LLC (OCSR) is a non-profit operator of tourist trains which has entered into an agreement with the Port of Tillamook Bay, a federally-recognized railroad, to repair a railroad track owned by the Port that was damaged in 2007 as the result of a winter storm. In 2012, the Port and OCSR entered into a five-year agreement which allowed OCSR to continue leasing the damaged portion of the track, but instead of paying the Port for use of the track, it would use those funds for deferred maintenance and upgrading of the track. Once the repairs were completed, the parties expressed their intention to allow the tourists trains to run alongside of the Port’s anticipated railway freight traffic.

However, the State of Oregon intervened before the repairs had been completed, issuing a cease and desist order, and asserting that the repair work was violating an Oregon environmental law governing removal fill rules and a state permit to conduct these repairs was essential. The permit would authorize the removal of any amount of material from water designated by the state as being an “Essential Salmonid Habitat.”

OCSR then challenged this requirement, asserting that this repair work was preempted in favor of the Surface Transportation Board by the Interstate Commerce Commission Termination Act, 49 U.S.C. §§ 10101 et seq. (ICCTA). The district court concluded that the removal-fill law was not preempted because OCSR’s tourist train activities “were not sufficiently related to interstate commerce to bring [OCSR] within the exclusive federal jurisdiction provision of the ICCTA.” The district court also concluded that the Port’s and OCSR’s agreement “was insufficient to establish federal preemption as to [OCSR] on the basis of the Port’s status as a federally licensed carrier.” Having reached these conclusions, the district court held that OCSR’s claims failed on the merits, denied OCSR’s requests for preliminary and permanent injunctions and for declaratory relief, and dismissed the case.

On appeal, the Ninth Circuit concluded otherwise. Reviewing the ICCTA, the Ninth Circuit held that this activity is not subject to state jurisdiction, and the state’s permitting requirements in this area are preempted.