Washington State Crude-by-Rail Law Raises Preemption Questions

The boom in Bakken crude oil production – and the infrequent but serious crude-by-rail accidents associated with it – have led to a corresponding effort by the State of Washington to prohibit the transportation of crude oil through the state. This effort cumulated in the passage of Washington’s Engrossed Substitute Senate Bill 5579 (“Crude Oil By Rail—Vapor Pressure”), which went into effect on July 28, 2019. Under this law, only crude oil with a maximum vapor pressure of 9 psi may be loaded in or unloaded from railroad tank cars within the State. The practical effect of this vapor pressure cap has been to significantly reduce the transportation of Bakken crude into Washington for refining.

North Dakota and Montana argue that SB-5579 amounts to a de facto ban on Bakken crude and is preempted by federal hazardous material transportation law, 49 U.S.C. 5101 et seq. They filed a Petition with PHMSA in Docket No. PHMSA-2019-0149, seeking to overturn the Washington law. PHMSA, in turn, issued a public notice and invitation for comment. See 84 Fed. Reg. 35,707 (July 24, 2019).

Energy companies, trade associations, and the Attorneys General of nearly a dozen other oil-producing states provided comments in support of North Dakota and Montana’s position that federal law preempts SB-5579. They claimed that the law could lead to higher fuel prices and increased reliance on foreign oil. Environmental advocates, in contrast, emphasized that an oil train derailment or explosion would expose residents, emergency responders, and the environment to risks, and defended the law on the basis that Bakken crude oil tends to be more volatile – that is, to have a higher vapor pressure – than crude produced in other regions.

The debate surrounding Washington’s SB-5579 highlights a broader issue in transportation law – the tension between state and local government attempts to limit the impacts of freight rail transportation on residents and communities, and the federal government’s interest in facilitating interstate commerce and the free exchange of raw materials and finished goods that support our society. PHMSA has historically taken a fairly aggressive position in overturning state and local actions that may interfere with the federal transportation network, and I would anticipate we will continue to see that approach with respect to the Petition filed by North Dakota and Montana.

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