United States Court of Appeals
For the First Circuit
No. 14-2067
BROOK A. PADGETT;
CRAIG DAUPHINAIS; JENNIFER THOMAS; BRUCE W. SPINNEY,
AS THEY ARE MEMBERS OF THE BOARD OF SELECTMEN OF THE
TOWN OF GRAFTON,
Petitioners,
v.
SURFACE TRANSPORTATION BOARD; UNITED STATES,
Respondents,
GRAFTON & UPTON RAILROAD COMPANY,
Intervenor.
PETITION FOR REVIEW OF A FINAL ORDER OF
THE SURFACE TRANSPORTATION BOARD
Before
Torruella, Selya, and Dyk,*
Circuit Judges.
Ginny Sinkel Kremer, Grafton Town Counsel, with whom Blatman,
Bobrowski & Mead, LLC, were on brief, for petitioners.
Charles H.P. Vance, Attorney, Surface Transportation Board,
with whom William J. Baer, Assistant Attorney General, Robert B.
Nicholson and Shana Marie Wallace, Attorneys, Department of
Justice, Craig M. Keats, General Counsel, and Evelyn G. Kitay,
Deputy General Counsel, were on brief, for respondents.
John A. Mavricos, with whom Jonah M. Temple, Christopher,
Hays, Wojcik & Mavricos, LLP, James E. Howard, Linda J. Morgan, and
Nossaman, LLP, were on brief, for intervenor.
David F. Hassett and Hassett & Donnelly, P.C., on brief for
*
Of the Federal Circuit, sitting by designation.
Congressman James P. McGovern, amicus curiae in support of
petitioners.
Jonathan S. Springer and Springer Law Office, PLLC, on brief
for Propane Gas Association of New England, amicus curiae in
support of respondents and intervenor.
October 16, 2015
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DYK, Circuit Judge. The Town of Grafton (the “Town” or
“Grafton”) petitions for judicial review a declaratory order of the
Surface Transportation Board (“Board”) finding that 49 U.S.C.
§ 10501(b) preempts state and local regulations with respect to
Grafton & Upton Railroad Company’s (“G&U”) liquid petroleum gas
transloading facility (the “facility”). We deny the petition.
I.
As described in a companion case decided today, Del
Grosso v. Surface Transportation Board, No. 15-1069, slip op. at 3
(1st Cir. Oct. 16, 2015), under the Interstate Commerce Commission
Termination Act (“ICCTA”), Pub. L. No. 104-88, 109 Stat. 803, “the
Board has jurisdiction over transportation by rail carrier.” 49
U.S.C. § 10501(a)(1); see also Fayard v. Ne. Vehicle Servs., LLC,
533 F.3d 42, 46 (1st Cir. 2008). This jurisdiction is exclusive,
and the ICCTA preempts “State law” governing “regulation of rail
transportation”:
The jurisdiction of the Board over—(1) transportation by
rail carriers . . . and facilities of such carriers; and
(2) the construction, acquisition,
operation . . . of . . . facilities, even if the tracks
are located, or intended to be located, entirely in one
State, is exclusive. Except as otherwise provided in
this part, the remedies provided under this part with
respect to regulation of rail transportation are
exclusive and preempt the remedies provided under Federal
or State law.
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49 U.S.C. § 10501(b). The question here is whether state and local
regulation of G&U’s propane (or liquid petroleum gas) transloading
facility is preempted.
II.
G&U owns and operates a rail line extending approximately
sixteen miles between a CSX Transportation, Inc. (“CSXT”) line in
North Grafton, Massachusetts, and another CSXT line in Milford,
Massachusetts. In January 2012, G&U purchased a parcel of land in
North Grafton, located immediately adjacent to its rail line and
existing rail yard and within a “Water Supply Protection Overlay
District” under the Town’s zoning regulations. G&U plans to
construct a transloading facility on the parcel for transferring
propane received by tank car in North Grafton to storage tanks and
then to trucks for delivery across New England. In December 2012,
G&U notified the Town of its intent to deliver four 80,000-gallon
propane storage tanks to its rail yard to be used in constructing
the facility. In response, the Town issued a cease and desist
order requiring G&U to halt construction and filed a complaint in
Massachusetts state court seeking to bar the construction, arguing
that construction of the facility would violate state and local
law.
The state and local laws at issue are zoning and
permitting regulations. Massachusetts law provides that “[n]o
person shall construct, maintain or use any tank or container of
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more than ten thousand gallons’ capacity, for the storage of any
fluid other than water, unless the same is located underground,
without first securing a permit.” Mass. Gen. Laws ch. 148, § 37.
The Grafton Zoning By-Law (“ZBL”) lists the following as
“specifically prohibited” uses: “Storage, transport or sale of
petroleum or other refined petroleum products in quantities greater
than normally associated with household use . . . .” ZBL
§ 7.4.C.9. The Town’s zoning regulations also require a “special
permit” for “any use involving secondary usage or storage of toxic
or hazardous materials in quantities greater than normally
associated with household use” and for “underground fuel or other
storage tanks, including any tanks or collection pits.” ZBL
§ 7.4.D.1; id. § 7.4.D.7. G&U argued that these state and local
regulations were preempted and removed the case to federal district
court. That court determined it lacked jurisdiction and remanded
the case back to the state court.
On June 12, 2013, the state court enjoined the delivery
of the storage tanks, directed G&U to file a petition for a
declaratory order with the Board to determine whether § 10501(b)
preempts the application of state and local zoning and permitting
ordinances, and stayed the state court proceedings pending the
outcome of the Board proceeding. G&U filed a petition with the
Board on July 24, 2013, and the Board instituted a declaratory
order proceeding on January 24, 2014.
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Before the Board, the Town argued that G&U’s activities
did not constitute transportation by rail carrier because of the
involvement of several companies (the “Propane Companies”) with
which G&U had previously contracted for the financing,
construction, and operation of the facility. The Town’s theory was
that the facility would be constructed and operated by the Propane
Companies (not rail carriers) rather than by G&U (a rail carrier).
In a September 17, 2014, decision, the Board found that the state
storage tank permit requirement and the Town’s ordinances were
preempted by § 10501(b) because G&U’s construction and operation of
the facility constituted “transportation by rail carrier.” 49
U.S.C. § 10501(a). The Board concluded, based on G&U’s July 2013
termination of the agreements with the Propane Companies, that G&U
“can and will hire the people with the necessary expertise to
properly operate the facility on its own” and that the record
adequately demonstrated that the facility will be an integral part
of G&U’s operations as a rail carrier. The Board further found
that state fire safety and construction codes would still apply to
the construction and operation of the facility as long as they were
applied in a non-discriminatory manner. The Board concluded by
stating that “[t]his action will not significantly affect either
the quality of the human environment or the conservation of energy
resources.”
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The Town petitions for judicial review. We have
jurisdiction over final orders of the Board pursuant to 28 U.S.C.
§ 2342. See Citizens Awareness Network, Inc. v. United States, 391
F.3d 338, 346 (1st Cir. 2004). Under the Administrative Procedure
Act, a “reviewing court shall . . . hold unlawful and set aside
agency action, findings, and conclusions found to
be . . . arbitrary, capricious, an abuse of discretion, or
otherwise not in accordance with law.” 5 U.S.C. § 706(2). The
Board’s decision is not arbitrary or capricious if there is a
“rational basis” for the decision based on facts in the record.
Granite State Concrete Co. v. Surface Transp. Bd., 417 F.3d 85,
91–92 (1st Cir. 2005) (citation omitted). In the companion to this
case, we established that we do not give Chevron U.S.A., Inc. v.
Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984), deference to the
Board’s determination of preemption, but we do give Skidmore v.
Swift & Co., 323 U.S. 134 (1944), deference, and we defer to the
Board’s factual findings. See Del Grosso, slip op. at 11.
III.
At the outset the Town argues that the ICCTA preempts
only state and not local regulation. This argument is meritless.
The ICCTA’s use of “State” clearly encompasses both state and local
law. See Atl. Coast Line R.R. Co. v. City of Goldsboro, 232 U.S.
548, 555 (1914) (“A municipal by-law or ordinance, enacted by
virtue of power for that purpose delegated by the legislature of
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the state, is a state law within the meaning of the Federal
Constitution.”); see also City of Saint Louis v. Paprotnik, 485
U.S. 112, 125 (1988) (“[S]tate law . . . may include valid local
ordinances and regulations . . . .”). Otherwise, the express
preemption of state law would be completely ineffective. It is
well established that the ICCTA preempts local as well as state
regulation. See, e.g., Tex. Cent. Bus. Lines Corp. v. City of
Midlothian, 669 F.3d 525, 530 (5th Cir. 2012) (“Congress intended
to preempt state and local laws that come within the Board’s
jurisdiction.” (emphasis added)); Norfolk S. Ry. Co. v. City of
Alexandria, 608 F.3d 150, 160 (4th Cir. 2010) (city ordinances
preempted by ICCTA); City of Auburn v. U.S. Gov’t, 154 F.3d 1025,
1031 (9th Cir. 1998) (“We believe the congressional intent to
preempt this kind of state and local regulation of rail lines is
explicit in the plain language of the ICCTA and the statutory
framework surrounding it.” (emphasis added)).
“Determining whether the ICCTA preempts a state or local
law is a two-step inquiry. First, the law must seek to regulate
‘transportation,’”2 and “second, that transportation must be
2
The ICCTA broadly defines “transportation” to include a
“facility, instrumentality, or equipment of any kind related to the
movement of passengers or property, or both, by rail,” and
“services related to that movement, including receipt, delivery,
elevation, transfer in transit, refrigeration, icing, ventilation,
storage, handling, and interchange of passengers and property.” 49
U.S.C. § 10102(9). The facility here provides “storage, handling,
and interchange of . . . property,” id., and therefore clearly
satisfies the first step of the § 10501(b) inquiry. See Green
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conducted ‘by a rail carrier.’” Tex. Cent., 669 F.3d at 530; see
also, e.g., Norfolk, 608 F.3d at 157–58; Fla. E. Coast Ry. Co. v.
City of W. Palm Beach, 266 F.3d 1324, 1331 (11th Cir. 2001).
“Whether a particular activity constitutes transportation by rail
carrier under section 10501(b) is a case-by-case, fact specific
determination” based on a series of factors including “(1) whether
the rail carrier holds out transloading as part of its business,
(2) the degree of control retained by the [rail] carrier, (3)
property rights and maintenance obligations, (4) contractual
liability, and (5) financing.” Tex. Cent., 669 F.3d at 530–31
(internal quotation marks, citations omitted).
The Town challenges the Board’s finding that the facility
constituted transportation by rail carrier because G&U failed to
establish that it would actually operate the facility. But there
is no basis for reversing the Board’s finding that G&U would
operate the proposed facility. The Board properly relied on
evidence submitted by G&U, including the relevant contracts and
termination agreements with the Propane Companies, and verified
statements from G&U’s fire safety consultant, G&U’s president and
CEO, and G&U’s vice president of business development. There is no
Mountain R.R. Corp. v. Vermont, 404 F.3d 638, 642 (2d Cir. 2005)
(“Certainly, the plain language [of the ICCTA] grants the
Transportation Board wide authority over the transloading and
storage facilities undertaken by Green Mountain.”); see also N.Y.
Susquehanna & W. Ry. Corp. v. Jackson, 500 F.3d 238, 248 (3d Cir.
2007).
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evidence that G&U lacked the ability to finance, construct, and
operate the facility without the significant involvement of third
parties. We appropriately defer to the Board’s factual findings.
See Del Grosso, slip op. at 12. Whatever role the presumption
against preemption may play in the analysis under the statute, we
are confident it does not have the effect of overcoming deference
to the Board’s factual findings.
Alternatively, the Town argues that the Board erred in
denying discovery on whether the facility was operated by G&U.
While Board regulations allow parties to obtain discovery
“regarding any matter, not privileged, which is relevant to the
subject matter involved in a proceeding,” 49 C.F.R.
§ 1114.21(a)(1), the Town neither sought discovery from G&U nor
filed a motion to compel such discovery. Understandably, the Board
did not address this discovery issue. In any event, the Town has
not shown that such discovery was necessary, given the Town’s
access to the relevant contractual documents. See Del Grosso, slip
op. at 19. The mere fact that G&U reorganized its operations to
shift responsibility for the financing and operation of the
facility from the Propane Companies to itself is not a basis for
discovery.
IV.
While regulation of railroad transloading facilities is
generally preempted by the ICCTA, Del Grosso, slip op. at 3, the
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Town belatedly argues that preemption is not applicable to health
and safety regulations. In this connection, it relies on the
presumption against preemption and the general rule that
traditional police power regulation is not preempted. See, e.g.,
Norfolk, 608 F.3d at 158–60 & n.12; Green Mountain, 404 F.3d at
643. But as the Town acknowledges, “[t]he issue before the [Board]
was whether G&U had demonstrated that the proposal as set forth
would constitute ‘transportation’ undertaken ‘by a rail carrier’
within the meaning of § 10501(b).” The Town did not raise before
the Board the argument that the ICCTA did not preempt health and
safety regulations.3
The failure to raise an argument before an agency
constitutes a waiver of that argument on judicial review. See
Lopez v. Holder, 740 F.3d 207, 211 n.4 (1st Cir. 2014) (“[W]e are
barred from considering [arguments] because they were not presented
to the agency.”); Mazariegos-Paiz v. Holder, 734 F.3d 57, 62 (1st
Cir. 2013) (“Were the court free to delve into the merits of issues
not presented to the agency, it would effectively usurp the
3
The Town argues that it raised the presumption against
preemption argument before the Board, relying on a brief reference
in a proposed ruling of law that had been submitted to the district
court and was attached to the Town’s reply brief before the Board.
But the phrase “presumption against preemption” appears nowhere in
the Town’s briefing before the Board, and this single reference in
a filing to another court attached as an exhibit to a reply brief
is insufficient to “forcefully present[]” an argument for agency
consideration. Vt. Yankee Nuclear Power Corp. v. Nat. Res. Def.
Council, Inc., 435 U.S. 519, 553–54 (1978).
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agency’s function.”); see also Vt. Yankee Nuclear Power Corp. v.
Nat. Res. Def. Council, Inc., 435 U.S. 519, 553–54 (1978)
(requiring arguments be presented to an agency in a manner that is
not “cryptic and obscure”). Because the Town failed properly to
raise the health and safety argument before the agency, we decline
to address it for the first time.
V.
The Town also argues, for the first time in this
proceeding, that the Board violated the National Environmental
Policy Act (“NEPA”), 42 U.S.C. § 4321 et seq., by failing to
conduct any analysis of the environmental aspect of its decision.
NEPA applies to “major Federal actions significantly affecting the
quality of the human environment.” 42 U.S.C. § 4332(C). This
court has summarized NEPA’s requirements as follows:
[NEPA] obligates agencies . . . to evaluate the
environmental impacts of its proposed actions. To comply
with NEPA, the [agency is] first required to determine
whether [the proposed project] would have a significant
environmental impact. A detailed environmental impact
statement (“EIS”) is required whenever proposed actions
will “significantly affect the quality of the human
environment.” If uncertain about impact, the agency may
start with a less detailed Environmental Assessment
(“EA”). If the EA finds a significant impact, a full EIS
must be prepared; if not, the agency makes a “Finding of
No Significant Impact” (“FONSI”), which exhausts its
obligation under NEPA.
Sierra Club v. Wagner, 555 F.3d 21, 24 (1st Cir. 2009) (citations
omitted). The Town argues that NEPA applies here because the
Board’s preemption decision constitutes a “major Federal action,”
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as G&U could not construct the facility absent the Board’s
preemption determination. According to the Town, the Board’s
statement that “[t]his action will not significantly affect either
the quality of the human environment or the conservation of energy
resources” constitutes a FONSI, which was produced without the
preparation of an Environmental Assessment, in violation of NEPA.
The Board responds that NEPA is inapplicable because the
declaratory order here is not a “major Federal action,” as neither
federal funding nor Board licensing was involved, relying on this
court’s holding that the test for major federal action under NEPA
is “whether federal approval is the prerequisite to the action
taken by the private actors and whether the federal agency
possesses some form of authority over the outcome.” Mayaguezanos
por la Salud y el Ambiente v. United States, 198 F.3d 297, 302 (1st
Cir. 1999).
The Board is correct that NEPA does not apply to its
declaratory order, because the order was not a “major Federal
action” under 42 U.S.C. § 4332(C). The Board made a legal
determination concerning preemption of the Town’s zoning and
permitting ordinances. The Board did not provide federal funds,
approve or license the transload facility, or otherwise manifest
“indicia of control” over G&U that would be sufficient to establish
a “major Federal action.” Mayaguezanos, 198 F.3d at 302.
Moreover, declaratory orders are categorically exempted from
13
environmental documentation requirements under the Board’s NEPA
regulations absent “extraordinary circumstances.” 49 C.F.R. §
1105.6(c) (“No environmental documentation will normally be
prepared . . . for the following actions . . . (iii) [d]eclaratory
orders . . . .”). The petitioners have failed to demonstrate any
“extraordinary circumstances” that could overcome the categorical
exemption. 40 C.F.R. § 1508.4. Therefore, petitioners have not
established that the Board violated NEPA.
We note, however, that since the Board’s view is that
such declaratory orders are not subject to NEPA, there is no reason
for its gratuitous statement, apparently a “standard environmental
disclaimer . . . found in virtually all [Board] decisions,” about
the lack of an environmental impact. Such boilerplate disclaimers
do nothing but foster confusion.
PETITION DENIED
Costs to respondents and intervenor.
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