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Vermont Railway, Inc. v. Town of Shelburne

United States District Court, D. Vermont

December 7, 2017



          William K. Sessions III District Court Judge

         This case arises out of Plaintiff Vermont Railway's (“Railway”) development of property located in Shelburne, Vermont for use as a salt transloading facility (“transloading facility” or “facility”). Currently before the Court is the Railway's Motion for Preliminary Injunction (ECF 209), which has been converted to a request for a permanent injunction. Among other things, the Railway now seeks an order permanently enjoining Defendant Town of Shelburne (“Town”) from enforcing its recently enacted Ordinance Regulating the Storage, Handling and Distribution of Hazardous Substances (“Storage Ordinance”).

         The Town passed the Storage Ordinance along with an Ordinance to Regulate Motor Trucks on Town Highways (“Trucking Ordinance”) on August 8, 2017.[1] The Trucking Ordinance was passed with an immediate effective date, and the Storage Ordinance had an effective date of October 7, 2017. On August 9, 2017, the Town stated in a court filing that it would enforce these new ordinances as well as the Town's Zoning Bylaws[2] and Subdivision Regulations against the Railway. ECF 199.

         Among other actions, the Storage Ordinance allows the Town to impose daily fines on the Railway for violations of its salt storage and release restrictions, to issue “health orders” directing the Railway to remove the road salt, and to limit the amount of fuel and other commodities the Railway can temporarily store. The Court previously found that the facility would be used primarily for unloading bulk salt arriving by rail for local distribution by truck and for temporary storage in sheds pending distribution. ECF 84, p. 19. These regulations would impose severe restrictions on the Railway's ability to conduct its business.

         The Court began a preliminary injunction hearing on September 25, 2017, but ultimately postponed the hearing and entered a Temporary Restraining Order (“TRO”) preventing the Town from enforcing the Storage Ordinance during the intervening time.[3] ECF 224. The Court held a two-day permanent injunction Hearing on November 1-2, 2017.

         After considering the evidence and testimony presented at the hearing, as well as the post-hearing memoranda, the Court concludes that the Storage Ordinance is preempted by the Interstate Commerce Commission Termination Act (“ICCTA”). The Storage Ordinance does not fit within the police power exception to preemption, as detailed in Green Mountain R.R. Corp. v. Vt., 404 F.3d 638, 643 (2d Cir. 2005) and Norfolk S. Ry. Co. v. City of Alexandria, 608 F.3d 150, 160 (4th Cir. 2010), because (1) it discriminates against the Railway and (2) the significant burden it places on the Railway outweighs the Town's inconclusive and overstated public health and safety concerns. The Railway has satisfied the requirements for a permanent injunction because it has suffered an irreparable injury, remedies such as monetary damages will not suffice, the balance of the hardships tilts in its favor, and the public interest is not disserved by a permanent injunction. See eBay v. MercExchange, L.L.C., 547 U.S. 388, 391 (2006). Thus, the Court permanently enjoins the enforcement of the Storage Ordinance against the Railway and its facilities.

         In the summer of 2016, the Court ordered the Town to identify precisely the regulations it intended to enforce against the transloading facility. ECF 84. Over a year later, the Town identified 21 pages of its Zoning Bylaws and Subdivision Regulations that it is seeking to enforce.[4] ECF 199. For many of these provisions, it is impossible for the Court to conduct preemption and injunction analyses since it is not clear precisely which regulations the Town is seeking to enforce or which regulations the transloading facility is violating. Therefore, the Court is generally not going to address the Zoning Bylaws and Subdivision Regulations. However, these 21 pages the Town submitted to the Court include a section of the Zoning Bylaws entitled “Performance Standards, ” and §§ 1950.1 and 1950.2(A) under that heading have a very similar focus to that of the Storage Ordinance. See ECF 199, Ex. 6, p. 8. Thus, because §§ 1950.1 and 1950.2(A) of the Performance Standards are so similar to the Storage Ordinance, these two sections are preempted and permanently enjoined.


         On June 29, 2016, the Court granted the Railway's request for a declaratory judgment that the ICCTA preempts the Town's pre-construction zoning regulations as applied to the facility.[5]ECF 84. The Court held that “the construction and operation of the Railway's planned intermodal facility constitute ‘transportation by [a] rail carrier[]' as defined by the ICCTA.”[6]Id. at 25. The Court denied the Town's request for contrary declaratory relief and a preliminary injunction. On September 17, 2016, the Town moved the Court for a temporary restraining order, for relief from this Court's June 29, 2016 Opinion and Order, for a stay of its appeal of that order, and for expedited discovery and a hearing. ECF 90. The Court held a five-day evidentiary hearing on the Town's motions on March 27-29 and April 3 and 5, 2017. On June 28, 2017, the Court issued an Opinion and Order denying the Town's motions and reaffirming its finding that the activity on the Shelburne property constitutes transportation by a rail carrier and is thus subject to preemption under the ICCTA. ECF 191.

         In its June 29, 2016 order, the Court stated that “[w]hen the Railway has finalized its plans for development, and when the Town has indicated precisely which zoning regulations it intends to enforce, the Court will determine whether those regulations can survive ICCTA preemption pursuant to the police power exception.” ECF 84, p. 3. The Railway produced copies of the final plan for development (ECF 85) on July 22, 2016, and requested that the Town identify which police powers, if any, it intended to enforce against the project. The Railway then constructed the first of the two planned salt storage sheds at the facility and began operations in late fall 2016. The Railway completed construction of the second salt shed in June 2017.

         After the Town failed to specify the ordinances it intended to enforce for over a year, the Railway filed a Motion to Enforce on July 24, 2017 requesting an order that the Town comply with the Court's June 29, 2016 Order. ECF 196. The Town requested an extension of time to file its response until August 9, 2017, the day after the Town Selectboard's next meeting. ECF 197. At the August 8, 2017 meeting, the Town Selectboard enacted the Storage Ordinance that is the subject of the present Motion for Preliminary Injunction. On August 9, 2017, the Town filed its Response to the Railway's Motion to Enforce and stated that it would enforce the Storage Ordinance, the Trucking Ordinance, and provisions contained in the Town of Shelburne Zoning Bylaws and Subdivision Regulations with respect to the Railway's facility. ECF 199. The Town identified the Storage Ordinance as falling under the post-construction police powers it intends to enforce against the Railway, as requested by the Court's June 29, 2016 Order.

         The Railway filed a Reply to the Town's Response on August 11, 2017, arguing that “[w]ith respect to the Zoning Bylaws and the Ordinance Regulating Motor Trucks on Town Highways, the Town has failed to comply with the Court's Order by indicating ‘precisely' the regulations it intends to enforce.” ECF 200. The Railway requested an order requiring the town to identify the provisions in these regulations it intends to enforce. Id. The Railway also argued that the Storage Ordinance is preempted and noted that it would be challenged in a separate filing (the present Motion for Preliminary Injunction). Id.

         On August 21, 2017, the Court entered Final Judgment on the June 29, 2016 Declaratory Order. ECF 204. The Court stated that “[i]n accordance with that Order dated June 29, 2016 (ECF 84), and the Opinion and Order dated June 28, 2017 (ECF 191), the Interstate Commerce Commission Termination Act of 1995 (“ICCTA”) preempts the Town of Shelburne's pre-construction permit requirement and related zoning regulations as to the Shelburne transload facility.” Id. The Town did not appeal Final Judgment and the deadline to do so has now passed.

         The Railway filed the present Motion for Preliminary Injunction on September 1, 2017. ECF 209. The Town responded to the Motion on September 18, 2017. ECF 216. At the beginning of the September 25, 2017 preliminary injunction hearing, it was apparent that the parties were not ready to proceed, and the Court decided to postpone the hearing. After the parties conducted discovery, the hearing was converted to a permanent injunction hearing, which was held on November 1-2, 2017.


         Pursuant to its municipal charter, as codified in 24A V.S.A. § 147, the Town adopted the Storage Ordinance on August 8, 2017, with an effective date of October 7, 2017. The Town subsequently enacted an amended Storage Ordinance on October 24, 2017 with an immediate effective date. Storage Ordinance § 15.0. The Storage Ordinance states that it is being adopted by the Town “pursuant to its police powers, ” with the aim of “protecting the health, safety and welfare of its citizens from the inherent risks associated with the storage, handling and distribution of hazardous substances, which may be ignitable, corrosive, reactive and/or toxic.” Id. § 1.0.

         The Storage Ordinance sets quantity, duration, and location restrictions as to the storage of certain substances. A substance is deemed to be stored when it is located on a site or in a facility for more than seventy-two hours.[7] Id. § 5.0 The Storage Ordinance prohibits the storage of substances above specified quantities within 250 meters of any school or waterway.[8] Id. § 6.0. Those specified quantities are: 550 tons[9]of Sodium Chloride (road salt), Calcium Chloride, Magnesium Chloride, or Potassium Chloride; 2, 000 gallons[10] of Hydraulic Oil, Diesel Fuel, Unleaded Fuel, Heating Oil, Propane, Motor Oil, Natural Gas, or Petroleum Crude Oil; and 34, 500 gallons[11] of Ammonia, Chlorine, or Hydrogen Fluoride. Id. Table 1: Storage Limitations.

         The Storage Ordinance also prohibits the release or discharge of the substances listed above within the Town of Shelburne (except for specified purposes such as road and driveway de-icing).[12] Id. § 5.0, 6.0.

         The Storage Ordinance permits the inspection of facilities[13]by either the Town's Health Officer or other designated official in order to enforce the provisions of the Ordinance. Id. § 9.0. It institutes a process whereby the Town Health Officer and the Town Selectboard can issue “Health Orders” to require non-complying sites to come into compliance and/or take action to remove the non-complying substance. Id. The Storage Ordinance also institutes a fine of $800.00 per day for violation of the ordinance, with each day of the violation constituting a separate offense. Id. § 10.0. If the local Board of Health brings an action in Superior Court for a violation, the Storage Ordinance states that the violator may be subject to civil penalties not to exceed $10, 000.00 per violation, with each day constituting a separate violation. Id. Finally, the Storage Ordinance notes that these penalties may be in addition to any costs and fees incurred by the town to “conduct the removal, remediation or monitoring of the site itself.” Id.


         The Railway has undergone an extensive permitting process for its transloading facility through the State of Vermont and has implemented a sophisticated environmental monitoring and mitigation plan. The Railway hired a professional environmental consultant, Mr. Jeffrey Nelson of VHB, to oversee its Multi-Sector General Permit (“MSGP”) application. As mandated by the MSGP, the Railway prepared a Storm Water Pollution Prevention Plan (“SWPPP”) and applied for an authorization to discharge from the Vermont Department of Environmental Conservation (“DEC”). The Town was invited to, and did, participate in the SWPPP process. The DEC, in consultation with the Vermont Department of Fish and Wildlife and other State agencies, considered the plan for the facility and its potential impact on water quality, wetlands, and endangered species. Following this review, the DEC approved the SWPPP and issued an authorization to discharge on November 21, 2016.[14] See Railway Ex. 30. An annual report must be filed with the DEC disclosing any SWPPP compliance issues as well as any corrective action taken. See Railway Ex. 30.

         The SWPPP mandates groundwater and surface water monitoring as well as adherence to numerous environmentally-focused best management practices (“BMPs”). Importantly, compliance with the SWPPP is required by the DEC. See Tr. 523:12-25; Railway Ex. 30 § 4; Vermont SWPPP Instruction Booklet, p. 18;[15] Vermont SWPPP Template, p. 20 and Appendix F.[16] Several monitoring wells were installed around the transloading facility as well as in the LaPlatte River. See Railway Ex. 29 and 31.

         VHB is monitoring the LaPlatte River both upstream and downstream of the facility, and the measurements have shown no impact from the facility downstream in the river. See Tr. 176:16-19. Increased levels of sodium chloride were recently detected in Monitoring Wells 301 and 306 on the facility site itself. Mr. Nelson and other VHB employees immediately investigated the cause of this increase. See TR. 155:14-16; 166:12-25. They concluded that salt had spilled during the transloading process[17] and a problem with the pitch of the pavement in one area of the facility had caused some stormwater to flow into the wetland (where these monitoring wells are located) instead of into the stormwater basin. VHB and the Railway quickly worked to correct the problem. Tr. 156:12-159:11. This example demonstrated how the SWPPP functions-the monitoring requirements caught the problem and prompted corrective action.


         I. PREEMPTION

         A. Legal Standard

         In its June 29, 2016 Order, the Court discussed at length the Supremacy Clause of the United States Constitution, the history of the ICCTA, and the limited police powers local bodies retain to protect public health and safety. ECF 84. A brief recapitulation of that discussion is warranted here in order to assess the validity of the Storage Ordinance.

         The Supremacy Clause of the United States Constitution provides that federal law “shall be the supreme Law of the Land . . . any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.” U.S. Const. Art. VI, cl. 2. Accordingly, “[u]nder the doctrine of preemption, a corollary to the Supremacy Clause, any state or municipal law that is inconsistent with federal law is without effect.” Greater New York Metro. Food Council, Inc. v. Giuliani, 195 F.3d 100, 104-05 (2d Cir. 1999) (abrogated on other grounds). “Federal law may preempt state and municipal law expressly or impliedly, ” id. at 105, and express preemption occurs “when a federal statute expressly ...

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