California Rail Hazmat Fee Illegal, Railroads Say

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By Carolyn Whetzel

Aug. 2 — California's new fee on rail deliveries of crude oil and certain other hazardous materials is illegal, the nation's two largest railroad companies said in a lawsuit ( BNSF Railway Co. v. California State Board of Equalization, N.D. Cal., No. 16-cv-04311-JCS, 7/29/16 ).

Filed in federal court in San Francisco, the complaint challenges a newly approved regulation requiring railroad companies to collect from their customers $45 for each rail car carrying 25 specified hazardous materials into the state. To be paid to the state's Board of Equalization, the fee is earmarked to help the state prepare for hazardous material incidents.

The federal ICC Termination Act of 1995, the Hazardous Materials Transportation Act and the Railroad Revitalization and Regulatory Reform Act of 1976 preempt the fee implemented under S.B. 84, a budget bill enacted in 2015, the complaint said.

Plaintiffs want an order blocking the state from collecting the fee.

“This hazmat charge defies federal law and economic logic,” the complaint filed July 29 by BNSF Railway Co. and Union Pacific Railroad Co. said. “If exclusive federal jurisdiction over the economic relationship between railroads and their customers means anything, it means that a State cannot establish the charges to be collected for rail transportation, order a railroad to collect them from its customers, and depress rail revenues and customer demand in the process.”

Chemicals Covered by Fee

California's Office of Emergency Services adopted the fee regulation in June. Expected to take effect later this year, the fee applies to rail cars containing acetonitrile, certain alcohols, anhydrous ammonia, ammonium hydroxide and calcium hypochlorite.

It also applies to chlorine, certain corrosive liquids, diesel fuel, environmentally hazardous substances, ethanol, gasoline, hydrogen peroxide, liquefied petroleum gas, liquefied gas, methanol, methyl ethyl ketone, nitric acid, petroleum crude oil, phenol, phosphoric acid, potassium hydroxide, propylene, sodium hydroxide, sulfuric acid, toluene and vinyl acetate.

California's fee only applies to rail deliveries, no other type of delivery of hazardous materials. The Interstate Commerce Clause and the federal hazardous materials law forbid states from discriminating against interstate commerce, the complaint said.

Benjamin J. Horwich of Munger, Tolles & Olson LLP is representing BNSF Railway. Union Pacific's counsel are from Sidley Austin LLP and include Carol Lynn Thompson and in-house attorney Melissa B. Hagan.

To contact the reporter on this story: Carolyn Whetzel in Los Angeles at

To contact the editor responsible for this story: Larry Pearl at

For More Information

A copy of the complaint is available at

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