Fee derailed:
Court says state can’t make just railroads pay for chemical cleanup costs
Rejecting a 2015 state law, a federal appeals court ruled Thursday that California cannot charge railroads a $45per-car fee for carrying crude oil, gasoline and other hazardous materials into the state to help pay for cleanup costs resulting from environmental accidents.
The fee, part of a companion bill to the state budget, was intended to raise up to $10 million a year to pay for state and local emergency-response programs for spills of hazardous substances. But the Ninth U.S. Circuit Court of Appeals in San Francisco said federal law allows states to charge such fees only if they are “fair,” and this fee applies only to railroads and not to trucks, which carry about the same amount of potentially dangerous substances into the state.
“Because the fees authorized by (the state law) favor trucking companies over railroads, they are not ‘fair,’ ” Judge William Fletcher said in
“Because authorized state law) the favor by fees (the trucking companies over railroads, they are not ‘fair.’ ” Judge William Fletcher
the ruling, which upheld a 2016 decision by a San Francisco federal judge that halted enforcement of the fees.
One member of the three-judge panel, Sandra Ikuta, reached the same result but contended federal law does not allow states to regulate railroad rates, fairly or otherwise.
The 2015 law, SB84, imposed $45 fees on rail cars containing any of 25 substances, including diesel fuel, chlorine, ethanol, methanol and toluene as well as crude oil and gasoline. The nation’s two largest rail carriers, BNSF and Union Pacific, challenged SB84 in a lawsuit.
The court said spills from railroad cars are far less frequent than trucking spills but can be much larger in scale. For example, a 1991 Union Pacific derailment in Dunsmuir (Siskiyou County) poured 19,000 gallons of gasoline into the Sacramento River, killing fish and vegetation for 40 miles and causing widespread local health problems. A lawsuit against the railroad was settled for $38 million.
The state imposed fees on both trucking companies and railroads for hazardous shipments from 1991 to 1995 to fund an earlier version of the emergency-response program, and considered but rejected a similar approach in the 2015 law, Fletcher said.
Fletcher rejected the railroads’ argument that federal law prohibited all state fees on railroads, noting that a 1994 federal law allows state or local governments to impose levies for transporting hazardous substances “if the fee is fair and used for a purpose relating to transporting hazardous material.”
But he agreed with the railroads that it was unfair to single them out for a payment for each shipment. California charges a $100 licensing fee, and a $75-per-year renewal, for trucks carrying hazardous material, but those amounts “are trivial in comparison to the per-rail-car fee hazardous material shipments under SB84,” Fletcher said.
California’s fire and rescue chief, Kim Zagaris, said Thursday that the state has been able to fund all 12 of its hazardous-response units so far, despite the court setbacks, and will work with the Legislature on long-term funding.
BNSF Railway said the ruling supported its view that SB84 put California railroads “at a competitive disadvantage with other surface transportation providers and created a state-sponsored incentive for trucks to carry hazardous products.”