STB Policy Statement Weakens Local Hand Against Rail-Served Projects

The Surface Transportation Board has put state and local governments on notice: restrictions aimed at rail customers, not just railroads, may now face federal preemption — and the agency's new policy statement becomes final on Nov. 9.

The sweeping statement, published in the Federal Register, questions aspects of the board's own precedents on privately owned terminals and other rail-served projects. It consolidates existing law on preemption under the ICC Termination Act of 1995, which gives the STB broad, exclusive jurisdiction over transportation by rail carriers and certain related infrastructure. But it stops short of binding decisions.

"The Board is not making any binding determinations in this policy statement," the agency says. Individual disputes will still turn on their facts, circumstances and applicable law.

Still, the signal matters. Cities and counties that regulate a railroad's customer — a transloader, a refinery, a grain elevator — may find those rules pulled into federal preemption analysis in ways earlier decisions avoided.

What does the new framework ask?

The board admits its precedents "have not always been entirely consistent" on how far federal protection reaches when a local government regulates a customer rather than the railroad. It now offers a modified framework built on two threshold questions:

• Is the facility developed or used to receive or tender common-carrier rail service, such as a transloading or off-loading facility?
• Does the government action restrict or dictate that service — including its volume, frequency, timing, configuration or commodity mix?

If both answers are yes, the action may be subject to the board's preemption analysis.

The mechanism is simple. Directing a restriction at a customer doesn't make it different from directing the same restriction at the railroad. A cap on how much rail traffic a facility can receive can constrain the carrier's service just as effectively as an order addressed to the carrier itself.

Which earlier decisions take the hit?

Two cases illustrate the shift: SEA-3, decided in 2015, and Valero Refining, decided in 2016.

In SEA-3, the board declined to preempt a city's challenge to a zoning decision allowing an existing rail customer to expand from three rail berths to eight. In Valero, the board held it lacked jurisdiction over an existing customer's construction of an off-loading facility intended to receive common-carrier unit-train service; state and local authorities had denied a construction permit based at least partly on the effects of increased rail service and the commodity involved.

The new statement takes issue with how those cases framed the question. "SEA-3 and Valero read 'transportation by rail carrier' to ask what is the stated object of the regulation, whereas a better reading might ask what was regulated in effect," the board writes.

Blocking the SEA-3 expansion, the statement reasons, would effectively dictate how many cars the railroad could deliver at a time — potentially forcing more trips, different scheduling and changes to yard storage. In Valero, denying the permit constrained both the type of train service and the commodities the carrier could deliver.

The board stresses these observations don't overturn the earlier outcomes. But they hand railroads and customers a potential basis to challenge restrictions previously understood as outside the STB's jurisdiction.

What about taking railroad land outright?

The statement also reexamines attempts to take exclusive possession of railroad property through eminent domain, adverse possession or similar state-law claims. Such disputes have sometimes been evaluated under an "as-applied" test — a fact-specific inquiry into whether the taking would unreasonably interfere with present or future rail operations.

The board now identifies "strong policy arguments" for categorical preemption when a taking would exclude rail use from a validly held right-of-way or other transportation property, avoiding a detailed case-by-case inquiry. Its logic is blunt: it makes little sense to prohibit a locality from blocking a rail facility through zoning while giving it greater latitude to take the property outright.

Routine, nonexclusive uses — road crossings, underground utility easements — may still get case-by-case review.

Why it matters for investment and local control

The board says greater clarity could reduce disputes and litigation costs and remove inappropriate impediments to rail service serving manufacturing, agriculture and energy facilities. The initiative followed a September 2025 request from six railroad and shipper organizations, including the Association of American Railroads, the American Short Line and Regional Railroad Association, the American Chemistry Council and the National Grain and Feed Association.

For communities, the document reinforces a hard limit on local leverage: a requirement can be preempted even when the STB does not actively regulate the activity or offer an alternative remedy. Ancillary tracks, which fall within the board's exclusive jurisdiction but generally don't require its construction authorization, are one example. Local environmental permitting cannot necessarily fill that gap. Preemption can also reach some common-law damages claims, not just ordinances and permits, when those claims effectively regulate rail operations.

Not a blanket exemption

The board expressly rejects the idea that every rail-connected business gains federal protection. Rail customers are not directly under its jurisdiction, and a manufacturing facility with an incidental rail component generally remains subject to local zoning, absent discriminatory treatment of rail transportation. Federal environmental and safety statutes — the Federal Railroad Safety Act, Clean Air Act, Clean Water Act — should be harmonized where possible, not automatically displaced.

And the agency warns that legal strength doesn't excuse bad community relations. "Railroads should not use ICCTA preemption as an excuse to be unresponsive to local public officials," the board writes, urging communication and cooperation even where local regulatory authority is limited.

With the statement final Nov. 9, expect railroads and shippers to test the new reasoning quickly against local restrictions that previously seemed untouchable.