American Coatings Association

Judge Blocks California HazMat Rail Car Fee on Shippers


A recent federal judicial order is blocking California from imposing a $45 fee on shippers of hazardous materials transported by rail in the state. Judge Richard Seeborg of the U.S. District Court for the Northern District of California granted the preliminary injunction sought by BNSF Railway Co. and Union Pacific Railroad Co. in BNSF Ry. Co. v. Cal. State Bd. of Equalization.

The railroads had asked the court to bar implementation and enforcement of the hazardous material charge provisions of California Senate Bill 84 (SB 84), California’s Fee Collections Procedures Law, and its applicable regulations.

The Oct. 28 judicial order states that the railroads have shown a likelihood of success on the merits; that imposition of the law may inflict irreparable harm; and that the public interest doesn’t weigh against granting the preliminary injunction.

California’s Fee Collections Procedures law mandates the fee on shippers of hazardous materials transported by rail. The law establishes the Regional Railroad Accident Preparedness and Immediate Response Fund, and the collected fee is to be used to provide local and state first responders with monies for training and equipment related to incidents involving hazmat shipped by rail.

ACA and its California Paint Council had opposed SB 84, arguing that the fee would duplicate funds already provided by a similar federal fee on hazardous materials. Most ACA members would have had to pay this fee as almost all manufacturers receive raw materials and ship certain materials by rail, including finished goods, which is defined as hazardous materials under the law.

The fee applies to rail cars containing acetonitrile, certain alcohols, anhydrous ammonia, ammonium hydroxide, calcium hypochlorite, 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.

The railroads argued that the Interstate Commerce Commission Termination Act of 1995 preempts the state law, and that it violates the federal Hazardous Materials Transportation Act, which allows states to impose fees for hazardous materials transport if they are “fair.” The railroads maintain that the new fee isn’t fair because it discriminates against railroads in relation to trucking and violates the Dormant Commerce Clause, which provides that states can’t unduly burden interstate commerce.

California’s Fee Collections Procedures law provides for the railroads to collect the fee from shippers and give it to California State Board of Equalization, which would then place the collected fees in the Regional Railroad Accident Preparedness and Immediate Response Fund.

Notably, the collected fees are intended to cover repayment of a $10 million loan to the Office of Emergency Services to start the Regional Railroad Accident Preparedness and Immediate Response Fund and keep the funding going.

Contact ACA’s Heidi McAuliffe for more information.