January 21, 2009
NEW JERSEY DEPARTMENT OF ENVIRONMENTAL PROTECTION, PLAINTIFF-APPELLANT,
J.P. RAIL, INC., D/B/A SOUTHERN RAILROAD CO. OF NEW JERSEY; SRNJ LOGISTICS; AND MAGIC DISPOSAL, INC., DEFENDANTS-RESPONDENTS.
On appeal from the Superior Court of New Jersey, Chancery Division - General Equity, Atlantic County, Docket No. C-41-06.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued December 17, 2008
Before Judges Cuff, Fisher and Baxter.
Plaintiff, the Department of Environmental Protection (DEP), appeals from an August 14, 2007 order that sharply limited DEP's enforcement rights at a solid waste transfer station (the facility) owned by defendant J.P. Rail, Inc. and its subsidiary, defendant SRNJ Logistics, and operated by defendant Magic Disposal, Inc. At issue was the scope of federal preemption under the Interstate Commerce Commission Termination Act (ICCTA), 49 U.S.C.A. §§ 10101 to 16106. The trial judge found that because federal preemption applies, DEP's regulatory activities are limited to enforcement of regulations promulgated pursuant to the Solid Waste Management Act (SWMA), N.J.S.A. 13:1E-1 to -48, namely N.J.A.C. 7:26-2D.1 ("the 2D regulations").
In this appeal, we are presented with the issue of whether the transloading activities conducted at the facility constitute "transportation by rail carrier" within the meaning of 49 U.S.C.A. § 10501(b) of the ICCTA, thereby triggering federal preemption, or whether, as DEP contends, any railroad activity is merely incidental to the operation of a widescale waste processing facility that is, and should be, subject to the full regulatory powers of DEP. However, the scope of this appeal has been dramatically altered by the recent enactment of the Clean Railroads Act (CRA), effective on October 16, 2008. Clean Railroads Act of 2008, Pub. L. No. 110-432, §§ 601-605, 122 Stat. 4900 (codified as amended at 49 U.S.C.A. §§ 10501(c)(2), 10908 to 10910).
The CRA clarified the ICCTA's preemptive scope by requiring all solid waste rail facilities, which J.P. Rail asserts that the facility is, to comply with all federal--and of even greater significance--all state solid waste and environmental requirements, both procedural and substantive, "to the same extent required for any similar solid waste management facility . . . that is not owned or operated on behalf of a rail carrier[.]" 49 U.S.C.A. § 10908(a). Therefore, the CRA amended the ICCTA and effectively resolved a majority of the issues that are the subject of DEP's appeal.
DEP now argues in effect that the enactment of the CRA has so altered the applicable "legal landscape" that the trial judge's comprehensive written opinion has become almost superfluous. For that reason, DEP filed a motion on December 15, 2008, seeking a stay of the instant appeal to enable the parties to pursue the administrative mechanisms established by the CRA. We agree with DEP's assessment of the enormous impact of the CRA; however, we disagree with its proposal that we stay the instant appeal. Having carefully reviewed the record and applicable law in light of the parties' contentions, we conclude that this appeal should be dismissed.
The record, as developed during a three-day non-jury trial in July 2007, reveals the following facts. Magic is licensed by DEP as a solid waste hauler. In the latter part of 2005, at the request of J.P. Rail, Magic constructed a facility on land owned by J.P. Rail in Pleasantville. Magic provided all the materials and labor used in the construction of the facility, which has no fire suppression system or any method to control air pollution. The building is constructed above a pre-existing railroad track that runs through the property. The building is covered by a roof, with walls on three sides and openings at each end to permit railcars to move through the facility.
Magic contracted with builders and demolition companies to collect their construction and demolition debris. Magic's trucks entered the building and dumped the debris onto the floor, where objects that can be sold as recycled materials were extracted. The remaining debris was then transloaded, or transferred, to J.P. Rail's railcars for eventual disposal at landfills. Magic provided an excavator, wheel loader, grappler, and small skid machine that it used for processing and loading the construction debris onto those railcars. Magic was the only entity that brought such solid waste to the facility. Despite that exclusive arrangement, no written agreement between J.P. Rail and Magic has ever existed.
According to the testimony provided by DEP witnesses, the materials dumped onto the facility floor included metals, wooden palettes, cardboard, tires, cans of paint, and newspapers. These items contained insecticides and rodenticides, paint-laden dust, glues and adhesives, which can affect "human health as a respiratory irritant" and have the potential to adversely affect surface water or ground water quality.
Because the facility is located within a coastal zone, DEP contends the facility is subject to environmental review and permitting requirements under the Coastal Area Facility Review Act (CAFRA), N.J.S.A. 13:19-1 to -33. This is significant because neither J.P. Rail nor Magic ever obtained permits pursuant to CAFRA to construct or operate the facility. Additionally, DEP asserted that defendants' operation of the facility violated both the SWMA registration and approval requirements and the 2D regulations promulgated pursuant to the SWMA.*fn2 Accordingly, on May 8, 2006, DEP filed a three-count complaint, asserting in count one that defendants violated the Coastal Zone Management Act and CAFRA by failing to obtain appropriate permits prior to constructing and operating the facility. The second count alleged that defendants violated SWMA by failing to undertake proper environmental mitigation and failing to obtain DEP approval prior to beginning operation at the facility. The third count alleged violations of the 2D regulations. DEP sought and obtained an interlocutory injunction against further operation of the facility on June 22, 2006.
Shortly after the trial concluded, Judge William C. Todd issued a comprehensive written opinion and judgment. He addressed the issue of ICCTA preemption as it relates to SWMA, the 2D regulations promulgated thereunder, and CAFRA. He observed that the relevant federal case law and Surface Transportation Board (STB)*fn3 administrative decisions present "somewhat conflicting analyses," and that "the type of fact sensitive and case specific analysis" suggested by various reported decisions "may not be necessary."
After reviewing the 2D regulations, the judge found that "New Jersey's regulatory scheme, as implemented through NJDEP's own [2D] regulations, does not subject [rail] carriers to the permitting process. The permitting issue, under SWMA, [was] not before th[e] court." Furthermore, Judge Todd disagreed with NJDEP's attempt to regulate the facility under the SWMA as "a solid waste transfer station being operated by Magic," a non-rail carrier. He concluded that because "J.P. Rail has retained control over the facility itself and the transloading process, . . . it is appropriate to treat this as a railroad facility exempt from permitting under the regulations in question."
Next, Judge Todd held that although federal preemption barred DEP from requiring defendants to obtain permits and approvals before beginning operations, DEP was entitled to enforce the 2D regulations, which were not preempted by the ICCTA. The judge found that "the 2D Regulations would appear to be an appropriate exercise of New Jersey's authority and responsibility in that area" even though the facility was found to be a railroad operation. Specifically, Judge Todd found that "it would be appropriate to treat the 2D regulations as the type of limited regulation permitted under the [Court's] analysis in Ridgefield Park."*fn4
The judge concluded that defendants' violations of the 2D regulations were not so extensive as to warrant enjoining further operation of the facility:
NJDEP did establish there were some violations of those regulations at the  facility while it was operating.*fn5 Those violations, however, were relatively limited and would not justify an order prohibiting continued operations. The entry of such an order would clearly be problematic. Portions of the regulations in question govern the actual transloading operation. . . . [I]n the context of this case, the entry of an order prohibiting operation until there was full compliance with the regulations would be the equivalent of requiring permitting, which is not appropriate under the regulations themselves.
Judge Todd also held that the "ICCTA does preempt the type of permitting generally required under CAFRA, with respect to railroad property." He concluded that:
Unlike SWMA, CAFRA does not regulate a specific activity. It regulates the development of property within certain specific areas. It is akin to the zoning and land use regulations at issue in Ridgefield Park. This court is satisfied the New Jersey Supreme Court's opinion in that case bars the state from requiring the issuance of permits prior to the development of railroad property located within areas that are otherwise subject to CAFRA. Plaintiff has not established a right to injunctive relief under CAFRA.*fn6
Thus, the judge vacated the June 22, 2006 interlocutory injunction that he had previously issued against J.P. Rail, and allowed the facility to reopen without prior approval from DEP; however, he included the following condition: "To the extent J.P Rail elects to involve Magic in the transloading of materials at [the facility], [it must] be done pursuant to a written agreement clearly defining Magic's role and the financial arrangements between Magic, J.P. Rail and SRNJ Logistics."
The judge also held that the future operation of the facility would be subject to the 2D Regulations, and that DEP would have the "right to enforce those regulations prospectively . . . [and] shall have the right to visit and inspect the facility at any time. To the extent DEP concludes defendants do violate the 2D Regulations in the future, it may proceed against defendants under the enforcement provisions of SWMA."
Two weeks later, as required by the judge's order, J.P. Rail and CIGMA, a "pass-through" of Magic, entered into an agreement entitled "Independent Loading Contractor Agreement." The agreement designates J.P. Rail as the "Owner" and CIGMA as the "Independent Loading Contractor" for a term of five years. The agreement provides that CIGMA will: receive construction and demolition debris and municipal solid waste; "sort and remove any and all materials appropriate for transportation by rail as may be directed by owner;" and "[l]oad all materials into rail cars in accordance with acceptable industry standards as may be directed by [J.P. Rail] . . . in accordance with J.P. Rail instructions. . . ." The record is devoid of any facts describing how the facility has operated in the nineteen months that have elapsed after the judge permitted the facility to reopen once he vacated the interlocutory injunction on August 14, 2007.
On appeal, DEP initially asserted the trial court failed to recognize that: 1) the facility does not involve transportation by railroad; 2) the numerous solid waste activities that take place at the facility are not integrally related to waste movement by rail, and therefore are not "transportation" under ICCTA; 3) the activities and facilities are not "by rail carrier" under ICCTA; and 4) ICCTA does not preempt compliance with the Coastal Zone Management Act and CAFRA. These assertions do not challenge the judge's findings of fact but rather his application of those findings to the law. As we have discussed, in light of the enactment of the CRA, DEP now also asserts that this appeal should be stayed while DEP seeks an administrative remedy before the STB.
In New Jersey, "pre-emption is not to be lightly presumed and  the historic police powers of the States are not to be superseded by federal law unless that was the clear and manifest purpose of Congress." Ridgefield Park, supra, 163 N.J. at 453. (2000). In addition, "the primary source of Congress' intent is the language of the preemptive statute and the statutory framework surrounding it." Id. at 453.
In this case, the controlling provisions of the preempting statute, the ICCTA, were significantly altered by the enactment of the CRA while this appeal was pending. Therefore, although we do not address the merits of DEP's appeal, we set forth this State's law regarding ICCTA preemption and the applicable two-pronged test as a basis for our conclusion that dismissal of this appeal is warranted.
The Court last interpreted the preemptive scope of the ICCTA in Ridgefield Park in a setting that involved only railroad maintenance activity, and involved neither solid waste nor transloading. Id. at 450-51. In addressing the preemptive scope of the ICCTA, the Court first analyzed and gave weight to the STB's decision in Borough of Riverdale, 1999 S.T.B. Lexis 531, STB Finance Docket No. 33466 (September 10, 1999), where the STB also addressed the preemptive scope of the ICCTA, as follows:
[T]he ICCTA does not preempt "non-discriminatory" public health and safety regulations that do not foreclose or restrict a railroad's ability to conduct its operations. . . . [A]lthough states cannot require permits as prerequisites to the maintenance or construction activities of railroads, states can enforce local fire, health, safety and construction regulations against railroads and can inspect railroad facilities." [Id. at 459 (internal citation omitted).]
Ultimately, the Court held that Ridgefield Park could not require permits of the railroad, id. at 460, and could not require approval of a site plan as a condition for the railroad's continued use of the facility. Id. at 462.
The Court's interpretation of the preemptive scope of the ICCTA must be read against the ICCTA itself. Pursuant to the ICCTA's "General Jurisdiction" provision, the STB maintains jurisdiction over "transportation by rail carrier that is . . . only by railroad[.]" 49 U.S.C.A. § 10501(a)(1)(A). Regarding preemption, this same provision of the ICCTA also provides for the exclusive jurisdiction of the STB over activities that constitute "transportation by rail." 49 U.S.C.A. § 10501(b). Furthermore, the ICCTA broadly defines the terms "transportation" and "railroad," see 49 U.S.C.A. §§ 10102(9) and 10102(6), and defines "rail carrier" as "a person providing common railroad transportation for compensation . . . ." 49 U.S.C.A. § 10102(5).
We recently described the ICCTA preemption issue as being "highly nuanced," "fraught with doubt," and "highly 'fact intensive.'" Waste Mgmt. of N.J. v. Union County Util. Auth. and IWS Transfer Sys. of N.J., Inc., 399 N.J. Super. 508, 527-28 (citation omitted) (App. Div. 2008). In Waste Management, we overturned the trial judge's issuance of a permanent injunction that enjoined the defendant's transportation by rail transloading activities*fn7 , and found that an interlocutory injunction was also improper because the plaintiff had failed to demonstrate a likelihood of success on the merits of its claim of non-ICCTA preemption. Id. at 515.
A two-pronged test applies to determine whether the activities conducted at the facility seeking ICCTA preemption do, in fact, qualify for preemption. First, the activities must qualify as "transportation" under the ICCTA. Id. at 530.*fn8
Second, the activities must also constitute "transportation by a rail carrier." N.Y. Susquehanna & W. Ry. Corp. v. Jackson, 500 F.3d 238, 249 (3d Cir. 2007); see also Hi Tech Trans, LLC v. New Jersey, 382 F.3d 295, 308-310 (3d Cir. 2004).
As we observed in Waste Management, in making this second determination, a court must focus on: "whether the [rail] carrier 'operate[s] the transloading facility itself' and whether 'virtually all of its hauling capacity at each facility' is granted to 'one shipper.'" Waste Mgmt., supra, 399 N.J. Super. at 530 (citation omitted). A related issue that must be determined is whether J.P. Rail "holds itself out to the public as providing waste transport services in the manner common in the industry." N.Y. Susquehanna, supra, 500 F.3d at 251.
In a recent administrative decision, the STB found that if a railroad holds its own transloading service out to the public through a third party, and the railroad either exerts control over the third party or the third party acts as the railroad's agent, then the activities constitute transportation by rail and the STB has exclusive jurisdiction over the transloading process. Twp. of Babylon, STB Finance Docket No. 35090, 2008 STB LEXIS 58, 13-14 (Served on February 1, 2008).
With this two-prong test for determining whether the STB has exclusive jurisdiction over the facility's transloading activities as background, we turn now to an evaluation of the impact that the newly-enacted CRA may have on the issues in this appeal. First, the relevant provisions of the CRA apply only to "solid waste rail transfer" facilities. See 49 U.S.C.A. §§ 10908 and 10909. The CRA defines a "solid waste rail transfer facility," in part, as "the portion of a facility owned or operated by or on behalf of a rail carrier [as defined in 49 U.S.C.A. § 10102.]" 49 U.S.C.A. § 10908(e). Therefore, the primary issue in determining whether a solid waste transfer facility qualifies as a rail facility under the CRA is whether the activities conducted there: (1) qualify as transportation under the ICCTA; and (2) are integrally related to transportation by rail carrier.
Second, as we have observed, the CRA requires all solid waste rail facilities to comply with federal and state solid waste and environmental laws to the same extent as would be required for any similar solid waste facility.*fn9 49 U.S.C.A. § 10908(a). DEP now maintains--and defendants do not dispute--that if the Pleasantville facility qualifies as transportation by rail carrier, then it is a solid waste facility and must come within the purview of the CRA. Therefore, assuming the facility does qualify, then it is now subject to the above provision of the CRA. 49 U.S.C.A. § 10908(a).
Thus, with this same assumption in mind, it follows that by April 19, 2009, the facility must submit completed applications for the issuance of all necessary non-siting permits. 49 U.S.C.A. § 10908(b)(2)(A)(i). So long as the applications are submitted on a timely basis, the facility will be allowed to continue to operate until DEP has approved or declined the permit applications. 49 U.S.C.A. § 10908(b)(2)(ii).
The CRA further provides that although existing solid waste rail facilities are not required to obtain a "siting permit," the Governor of the State in which the facility is located or the Governor's designee may petition the STB to require the facility to apply for a "land-use exemption" as provided under the CRA. 49 U.S.C.A. §§ 10908(b)(2)(B) and 10909. Such action by the Governor triggers the requirement for the facility to be granted an STB-issued land-use exemption in order to continue to operate. Ibid. The STB is authorized to issue a land use exemption only if it determines that the proposed location does not pose an unreasonable risk to public health, safety or the environment. 49 U.S.C.A. § 10109(c).
In this case, DEP recognizes that the CAFRA requirements now applicable to solid waste rail transfer facilities have siting permit aspects. Therefore, DEP has advised us and J.P. Rail that it intends to file a petition with the STB to require J.P. Rail to obtain a land-use exemption for the Pleasantville facility once the STB publishes its land use exemption procedures, which must be accomplished by January 14, 2009.*fn10
However, as noted above, a prerequisite to the land-use exemption process is a determination by the STB that the facility is actually a solid waste rail transfer facility, i.e. that the facility is integrally related to transportation by rail carrier. DEP intends to submit this issue to the STB as a threshold issue, along with its petition. Because the jurisdiction of the ICCTA is the precise issue that DEP originally appealed, DEP has now moved for a stay of its appeal pending its application to the STB for an order requiring the facility to obtain a land-use exemption.*fn11
DEP urges us to continue the stay until such time that the STB acts on DEP's application. We recognize, and DEP acknowledges, that the STB's authority to consider any land-use exemption petition DEP may file hinges upon the STB first finding that the facility is a "solid waste rail transfer facility." 49 U.S.C.A. § 10909(a). If the stay is granted, and the STB answers that question in the negative, then the STB will have no jurisdiction, and DEP would then have the option of continuing its appeal of the CAFRA issue before us. If the STB answers that question in the affirmative, then the STB would proceed to decide whether the facility should be permitted to operate at its present location, pursuant to the land-use exemption process.
DEP also recognizes that the STB's determination of its jurisdiction is not binding upon us. Nonetheless, courts have issued stays of litigation to permit the parties to proceed before the STB. See Grafton & Upton R.R. Co. v. Town of Milford, 337 F. Supp. 2d 233, 240-41 (D. Mass. 2004). DEP urges us to issue a stay for two reasons, the first of which is to promote judicial efficiency, asserting that "the overlapping issues are substantial." Second, DEP emphasizes that the stay will cause no prejudice to defendants because the facility remains open and operational by reason of Judge Todd's order, and argues that staying this appeal avoids the risk of inconsistent decisions by this court and the STB on the question of whether the facility is, or is not, "transportation by rail carrier."
For its part, J.P. Rail urges us to deny DEP's request for a stay of this appeal, arguing that "the proposed changes to New Jersey's regulatory scheme" by DEP's rescission of the 2D regulations "and DEP's proposed application to the STB are not sufficiently ripe to warrant as stay" because "[t]here will likely be an extended period of time before the enactment of the amendment to the NJDEP regulations," and "[t]here is no just cause to delay review of the lower court's determination under these uncertain and indefinite conditions." Other than asserting the risk of undue and unfair delay, J.P. Rail points to no other reason why DEP's request for a stay should be denied.
We are not persuaded by J.P. Rail's argument concerning indefinite delay. As we have observed, the STB was required to issue its jurisdictional and procedural rules pertaining to the land use exemption on January 14, 2009. Additionally, DEP has already proposed new rules to implement the CRA. See 40 N.J.R. 6507(b) (November 17, 2008). Furthermore, because the CRA amended the ICCTA, effectively resolving most of the outstanding issues of DEP's original appeal, we see no reason to address the merits of this matter. In addition, our decision to dismiss this appeal leaves J.P. Rail able to continue to operate, which it has been doing ever since Judge Todd issued his opinion.
We also are not persuaded by DEP's arguments in support of its request for a stay. We conclude that the STB--the agency chosen by Congress to oversee the siting of solid waste rail transfer stations--should be afforded the opportunity to determine the jurisdictional issue and any ensuing siting decision that would result from an affirmative decision on the jurisdictional issue. The STB, an agency with special expertise, should be permitted to proceed with the land use exemption procedures Congress has now enacted. If the STB determines that it has jurisdiction, its ensuing decision will directly determine whether the facility is required to seek a CAFRA permit, the very obligation that Judge Todd's preemption ruling spared J.P. Rail from fulfilling. By dismissing the appeal and permitting the federal administrative mechanism to take effect, we also avoid the risk of inconsistent decisions by the STB and this court.
Stated differently, the enactment of the CRA has made it unnecessary for us to address and resolve the central issue presented by this appeal, namely whether DEP has the authority to insist that J.P. Rail comply with state environmental and solid waste laws. Now that the CRA has answered that question in the affirmative, see 49 U.S.C.A. § 10908(a), there is no longer a reason for us to determine whether Judge Todd correctly decided that the ICCTA preempted DEP's right to do so. As such, the fact-intensive test for determining whether the facility's activities constitute "transportation by rail" is irrelevant for the purpose of this appeal.
Therefore, because there are no practical benefits in addressing the merits of this appeal, it follows that DEP's concerns regarding judicial efficiency and inconsistent decisions coincide with a dismissal of the present appeal, as opposed to a stay. If either party is dissatisfied with the STB's decision regarding its own jurisdiction and the land-use exemption procedures, its remedy is an administrative appeal before a federal administrative judge. See 29 C.F.R. § 1614.110(a). Leaving this appeal inactive while the parties pursue any such remedies, which is the course DEP urges, serves no purpose because by the time the parties may choose to reactivate this appeal, the facts and circumstances are likely to have changed yet again. Moreover, dismissal of this appeal impacts neither J.P. Rail's ability to continue to operate the facility nor DEP's ability to enforce the new rights conferred upon it by the CRA.