SACRAMENTO -- A California judge has granted a preliminary injunction against the new tax scheme scheduled to be imposed on trains carrying hazardous materials, pointing out that the petitioners’ arguments merited a day in court.

U.S. District Judge Richard Seeborg halted the implementation of a new state law that aimed to charge fees against rail cars that transport hazardous materials. According to the federal judge, the arguments set forth by the companies had merits and are likely to find a positive response before a jury. Prior to his ruling, the charges were set to take effect in October.

“At this juncture, the railroads have presented the more persuasive argument that ICCTA preemption precludes the state from imposing fees in the manner contemplated by S.B. 84,” wrote Judge Seeborg, according to Law 360.

The new Haz-Mat law, otherwise known as S.B. 84, sought to collect $45 for every railcar loaded in or coming into California. The vehicles covered by this included trains carrying hazardous materials such as ethanol, crude oil, diesel fuel, ethanol, gasoline and chlorine. State’s attorneys explained that S.B. 84 would ensure that the state would have the necessary budget to provide an emergency response system and raise their preparedness level when handling accidents involving these hazardous materials. BNSF Railway and Union Pacific filed a lawsuit against the state in August to halt the implementation of the new Haz-Mat law.

In their arguments against the state, the petitioners stated that the new law would force railroads and their customers to finance for services that should be part of the general budget. They noted that the state could not implement such changes because only the federal government has the authority to regulate interstate railroads.

The state assured the petitioners that the fees collected would be solely for the expenses incurred by the industry and any amount left unspent would be given back to the companies. The state also pointed out that the vehicles carrying hazardous materials require a different set of emergency response systems due to the nature of the loads. 

In his ruling, Seeborg wrote that the state failed to comply with the Hazardous Materials Transportations Act as California only sought to charge railroads. He also agreed with the petitioners who claimed that the new law is unfair because it would be an additional tax burden to the railroads. The federal judge disputed the proposed reimbursement scheme of the state.

"As the railroads point out, merely requiring reimbursement of equipment operating expenses does not excuse saddling the rail industry with the cost of acquiring equipment that very well could be used by the trucking industry as much or more than by the rail industry," explained Seeborg, according to Courthouse News Service.

No comment has been provided by the state nor BNSF Railway and Union Pacific regarding the ruling.

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State of California Union Pacific

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