Cases That Could Broaden Railroads' Path Through CEQA Gather Steam

Considering their importance, the public hasn't heard much about Friends of Eel River v. North Coast Railroad Authority and Kings County v. Surface Transportation Board. The two cases, respectively before the California Supreme Court and the Ninth U.S. Circuit Court of Appeals, could end California environmental review of public rail projects in California most notably the High Speed Rail project and might indirectly affect private rail operations including oil trains.

The cases shaped up this winter into tests of whether the Surface Transportation Board (STB) can block environmental reviews of rail projects under the California Environmental Quality Act (CEQA). The STB and two state rail agencies contend that CEQA review crosses onto the STB's exclusive regulatory turf under the 1995 Interstate Commerce Commission Termination Act (ICCTA), 49 U.S.C. 10101 et seq. 


The state Supreme Court granted review December 10 in the Eel River case on the proposed revival of a coastal freight rail line by the public North Coast Railroad Authority. The Kings County case is a February 9, 2015 appeal of a December 12 STB ruling that declared California's High-Speed Rail (HSR) line was "categorically exempt" from CEQA review. Because STB rulings are appealed directly to federal circuit courts, that case is already before the Ninth Circuit as No. 15-70386. (Dignity Health, a participant in ongoing HSR disputes, appealed the same STB ruling to the District of Columbia Circuit as Case No. 15-1030.)

Ironically, the cases pit a broad alliance of CEQA petitioners against not only the STB, but also against two state rail authorities that have argued for federal limits to their own power. The Eel River petitioners are environmental groups while the Ninth Circuit petitioners are a mix of municipal, farm, community, environmental and transit-specific groups involved in litigation against the HSR system, and significantly including CEQA attorney Stuart Flashman. 

Although the emphasis is on review of public rail projects, projects that are fully private could be affected indirectly as well. Rulings in Eel River or Kings County could clarify, and might broaden, the scope of the existing recognized rule that ICCTA preempts state and local environmental regulation for private rail operations. 

Partner Donald Sobelman of Barg Coffin Lewis & Trapp LLP suggested projects that could be affected include crude-by-rail operations, and freight rail operations in connection with intermodal facilities and capacity expansions. (Sobelman co-wrote a commentary last November with associate Nicole Martin suggesting that Eel River could help freight rail projects; as of the interview for this article he was not assisting any clients with amicus briefing on the matter.)

Eel River and Atherton

In taking up Eel River, the California Supreme Court justices announced they would address a split between state appellate districts on whether the "market participant" doctrine shields a CEQA process from preemption where a state agency is itself a participant in a rail project. Additionally they planned to consider whether the ICCTA preempted "a state agency's voluntary commitments to comply with CEQA as a condition" for using state funds or property. 

In the Eel River appellate decision, the state First District court of Appeal upheld a Marin County Superior Court ruling that the ICCTA preempted CEQA review of a project by the state-created North Coast Railroad Authority (NCRA). The NCRA planned to reopen the Northwest Pacific Railroad line  from Napa County to Arcata. The court found CEQA review was preempted although NCRA's agreement with its private contractor, the Northwestern Pacific Railroad Company, required that NCRA comply with CEQA.

The Third District in Town of Atherton v. California High-Speed Rail Authority, on appeal from litigation in Sacramento County Superior Court, upheld the HSR planning process but also ruled that the Authority's public status invoked the "market participant" exemption, making it unnecessary to consider whether CEQA review was preempted. The "market participant" doctrine distinguishes the role of the state when it conducts CEQA reviews not to regulate private activity, but to guide its own participation in the transportation "market".

The HSR Authority, though substantively the winning party, asked the state Supreme Court to depublish the case last fall. The high court refused, allowing the "market participant" exemption ruling to stand. (See CP&DR's December 2014 PDF issue, Page 17.)

The facts in Eel River sharpen what's at stake, according to the directors of two law school clinical programs working with petitioners. Prof. Helen Kang, director of the Environmental Law and Justice Clinic at Golden Gate University, wrote that the project itself, a "300-mile rail line," was "monumental" in itself. She wrote that the project "will likely disturb toxic chemicals along the rail line and rail facilities where chemicals are stored; and since the line traverses some of the most ecologically sensitive areas of California, including the Eel River, a wild and scenic river, environmental review is particularly important." 

Prof. Deborah Sivas, director of Stanford's environmental law clinic, noted the case had a complex history in which early disputes concerned the adequacy of the EIR, not whether to prepare one at all. A disputed EIR was prepared on one segment of the proposed rail line project. But as of the CEQA preemption ruling, no EIR had begun on a long remaining segment that includes the sensitive Eel River Canyon. If the state Supreme Court finds CEQA is preempted, no such review will be conducted. Since there is no federal role in the project beyond STB permitting, review is not required under the National Environmental Policy Act (NEPA). So neither state nor federal environmental review would happen.

STB declaratory relief

The Ninth Circuit case will test the STB's December 2014 holding that CEQA review was "categorically preempted" by the ICCTA on California's entire high-speed rail line. If allowed to stand, that ruling could wipe out the seven HSR lawsuits at a stroke, and would broaden the federal road that ICCTA cuts through CEQA review of public or private rail projects alike.

The STB majority, outgoing chair Daniel R. Elliott III and Deb Miller (now acting chair), reviewed federal preemption case law and the current California disputes in detail; they noted the California Supreme Court had granted review in Eel River just two days earlier. The majority acknowledged the HSR Authority wasn't asking for full CEQA preemption, only an order to prevent injunctions so work could continue during CEQA litigation. But the decision kept things simple anyway: "As a practical matter, we find it difficult to separate the prohibitive injunctive remedy available under CEQA from a California state court's ability to enforce compliance with CEQA itself." 

The dissenting member, vice chair Ann Begeman, protested, "In other words, there is now no means of enforcing CEQA with respect to the Project. Authority claims of CEQA compliance will be merely claims, and deviations from any of the CEQA provisions included in the Board's own-approved EIR/EISs will not be challengeable."

Sobelman noted that the Ninth Circuit should trump the state Supreme Court in interpreting federal law, but it's not clear what scope the Ninth Circuit will choose for its decision.

The question is, how simple is the question?

If CEQA simply doesn't apply to rail projects, there's little more to say. Likewise the analysis is simple if state or local action becomes preempted as soon as it stops or delays a rail project that the STB regulates.

That kind of simplicity might come as a relief for planners wearied by problematization -- but for petitioners a lot rides on persuading the California Supreme Court and Ninth Circuit that detailed case-by-case preemption analysis is appropriate. 

Kang wrote, "Hopefully, it's an opportunity for the Ninth Circuit to right where it went wrong with the City of Auburn decision that came out shortly after the [ICCTA] was enacted." She meant City of Auburn v. U.S. Government (9th Cir. 1998) 154 F.3d 1025, which is the awkwardly placed eight-ball on the table from petitioners' point of view. Like Eel River, the Auburn case involved a planned rehabilitation of a lapsed rail line, through the Stampede Pass in Washington state. Unlike in Eel River, the project was private, without state agency participants. Auburn held state and local regulation of the project were broadly preempted. 

The 1998 Auburn decision rejected an argument that "Congress only intended preemption of economic regulation of the railroads" as opposed to environmental review. But Sivas argued the court did not consider legislative history. She contended that, when Congress passed the ICCTA in its "deregulatory mood" of 1995, its focus was on standardizing economic regulation. She wrote that other courts have agreed that for preemption purposes "regulation" should be understood as "'managing' or governing rail transportation." And she said some courts have acknowledged local governmental authority in areas such as public safety issues at railroad crossings. 

Sivas said: "It can't be that everything that has some potential out there to affect some future operation of a rail line is preempted." The petitioners raise Tenth Amendment arguments along those lines as a separate matter from the "market participant" exemption; for example, the Ninth Circuit appeal argues the STB ruling infringes on a state's power "to oversee its own subordinate governmental entities." 

Sivas argued that as a state agency the NCRA rail agency had a right to use CEQA as a "decision tool" in evaluating its own proposed choice to authorize a private contractor to run the railroad for the state agency and to support rehabilitation of the line with $60 million in state funds. 

Rather than consider CEQA's effects of delaying and possibly blocking projects, petitioners emphasize CEQA's purpose of gathering information about the project rather than telling the operators how to run a railroad. The HSR petitioners' appeal to the Ninth Circuit argues that the STB order "ignores the fact that CEQA is not a regulatory statute, but an informational statute" meant to inform decision makers and the public. 

Private rail projects too

As Sobelman and Martin's article suggested, the Eel River/Atherton/King County clutch of cases could have indirect effects on oil trains, transport of supplies such as "frac sand", and other elements of plans to move crude oil by rail from inland hydraulic-fracturing zones to processing sites nearer the coast.

Sobelman also saw implications for intermodal container transportation projects, which he noted often face CEQA challenges: "A clear and broad preemption ruling would remove this litigation risk and make it more efficient and less expensive to complete these projects." He saw similar effects for capacity-building projects such as building new lines, better access to ports, rerouting, or replacing bridges or outmoded crossings.

Stuart Flashman wrote, "It is pretty clear already that local/state regulation of private rail projects is preempted - at least in most cases." But he wrote, "It is less clear whether CEQA's application to a private rail shipment would be precluded, because I think a good argument can be made that CEQA, like NEPA, is basically an informational, rather than a regulatory statute."

Sobelman noted two current lawsuits on crude-by-rail shipment projects in Richmond and Bakersfield, saying these were among the first of their type, and further crude-by-rail proposals would likely also face CEQA challenges. 

The Richmond terminal case pitted environmental groups against the Bay Area Air Quality Management District and corporate entities of Kinder Morgan and Tesoro. The petition contested the air district's choice to approve increased crude-by-rail operations without an EIR but Superior Court Judge Peter J. Busch dismissed it on timeliness grounds. The petitioners' appeal is before the First District.

The Bakersfield case, filed this fall, challenges an EIR by the Kern County Supervisors and Planning Department on plans for expanding crude-by-rail operations at the Alon Bakersfield Refinery. Environmental groups' opening petition specifically protests the EIR's choice not to review "mainline rail transportation impacts... on the assumption that CEQA is preempted by federal law regulating mainline rail activities."

Sivas had heard of informal arguments made to regulators even that an oil terminal at the end of a new rail spur was under STB jurisdiction, precluding other environmental review "or any kind of local control." In that case, she asked, where does STB jurisdiction stop? "That's the monster that eats the whole world, right? Because we're all at the end of some rail line."