Where is the line between manufacturing and transportation? That question was explored in a recent U.S. Court of Appeals decision. (Del Grosso v. Surface Transportation Board. 1st Circuit. No. 17-1794. August 6. 2018.)
The case revolves around wood pellets, a growing industry. According to a June 2017 report by IEA Bioenergy, wood pellet production in the United States grew from 1.8 million tonnes in 2008 to 7.4 million tonnes in 2015. Most U.S. pellets are exported — 4.7 million tonnes in 2015. Canada is another big exporter — 1.6 million tonnes in 2015, with most originating in British Columbia.
The same report said globally a third of the 26 million tonnes of pellets consumed in 2015 were intercontinentally traded. Some ports that have loaded wood pellets on ships are Brunswick, Ga.; Wilmington, N.C.; Chesapeake, Va.; Mobile, Ala.; Vancouver and Prince Rupert, British Columbia; and Belledune, New Brunswick.
While the U.S. Industrial Pellet Association cites a U.K. Environment Agency statement that switching from coal to bioenergy for electric power results in a reduction of between 74 percent and 90 percent in net carbon emissions, an investigation published by Climate Central in 2015 said the pellet trade is driven by a European law that “assumes climate pollution released directly by burning fuel made from trees doesn’t matter because it will be reabsorbed by trees that grow to replace them.” It says the law “ignores the decades it can take for a replacement forest to grow to be as big as one that was chopped down for energy — or the possibility that it won’t regrow at all.”
The lawsuit in this controversy involved not a seaport but a facility for transloading wood pellets that opened in 2011 in Upton, Mass., by the Grafton & Upton Railroad Co., a 16.5-mile Massachusetts shortline.
Some of the facility’s neighbors said they were harmed by exposure to excess glare, light intrusion, noise and diminution of property values and that such harms would be prevented by enforcement of Upton’s zoning bylaws.
The Upton Board of Selectmen concluded that regulation of the terminal was pre-empted by the 1985 Interstate Commerce Commission Termination Act (ICCTA) that gave the Surface Transportation Board (STB), an independent federal agency, exclusive jurisdiction over interstate transportation by rail carriers.
The ICCTA defines “transportation” broadly to encompass both the facilities and equipment “related to the movement of passengers or property, or both, by rail” as well as “services related to that movement.”
The petitioners sought a declaratory order from the STB that the wood pellet activities were not part of “transportation by rail carrier” and that state and local regulations were therefore not pre-empted.
The 1st Circuit said while federal regulation of railroads is “pervasive and comprehensive,” there are limits to the STB’s jurisdiction.
Examples of services related to rail transport include receipt, delivery, elevation, transfer in transit, refrigeration, icing, ventilation, storage, handling and interchange of cargo.
While other countries use wood pellets as fuel for power plants, the court said, “New Englanders use them as home-heating fuel in wood-burning stoves.”
The pellets were made at plants in Georgia and British Columbia from raw materials like small logs, wood chips and sawdust. The manufacturers “chip, dry, pulverize and steam the materials and then press them through dies to form uniformed pellets.”
After being transported to the G&U facility in bulk railcars, the pellets are bagged, palletized and shrink-wrapped, then sold to distributors that sell to either retailers or homeowners.
During the rail journey to Upton, the vibration and pounding of the cars causes 5 percent to 10 percent of the pellets “to deteriorate or break into smaller pieces.”
G&U unloads the cars with vacuum hoses, uses a screen to separate the broken and unbroken pellets from those that are intact and then represses the broken pellets into whole pellets.
The dispute in this case revolved around whether this “repelletizing” as well as the bagging, palletizing and shrink-wrapping was transportation or manufacturing.
The STB ruled these activities were transportation rather than manufacturing since they facilitate the rail transportation of the pellets by making it more efficient.
Reviewing the STB’s decision, the 1st Circuit ruled in 2015 that “the ICCTA does not pre-empt all state and local regulation of activities that has any efficiency-increasing relationship to rail transportation.”
It remanded the petition by the plant’s neighbors to the STB, saying that the board should have focused on whether activities such as vacuuming, screening, bagging and palletizing facilitated the transfer of the pellets from rail to truck instead of zeroing in on “cost efficiency.”
G&U argued repelletizing was similar to “spot repairs that might be made on freight that is delivered damaged.”
In a second go-around, the STB again sided with G&U and ruled the complained-about activities qualified as transportation under the ICCTA because they make it “easier to load the pellets onto the trucks.”
It distinguished the initial manufacture of the pellets from the work done by G&U, saying the Upton operation was “intended not to create new pellets but “merely to restore broken pellets to the size they were when they left the manufacturer.”
However, one STB board member said she found “it difficult to conclude that pressing broken pieces of wood through a die is ‘part of rail transportation.’”
In a second decision this summer, the 1st Circuit found “G&U repelletizes to remedy problems (dust and broken pellets) to the already-completed pellets — problems chiefly caused by the movement of pellets by rail.”
While the petitioners argued “the repair of transported items is not included in the statutory list of services ‘related to’ the movement of passengers or property by rail,” the 1st Circuit held activities cited by the ICCTA as transportation was representative, not exclusive.
It said the STB’s decision about what constitutes transportation is a case-by-case, fact-specific determination. Under that test, the 1st Circuit found the STB’s “ruling passes muster. … Because petitioners have not shown that the STB acted arbitrarily or capriciously, abused its discretion or otherwise infracted the law, we reject their petition for review.”
The case revolves around wood pellets, a growing industry. According to a June 2017 report by IEA Bioenergy, wood pellet production in the United States grew from 1.8 million tonnes in 2008 to 7.4 million tonnes in 2015. Most U.S. pellets are exported — 4.7 million tonnes in 2015. Canada is another big exporter — 1.6 million tonnes in 2015, with most originating in British Columbia.
The same report said globally a third of the 26 million tonnes of pellets consumed in 2015 were intercontinentally traded. Some ports that have loaded wood pellets on ships are Brunswick, Ga.; Wilmington, N.C.; Chesapeake, Va.; Mobile, Ala.; Vancouver and Prince Rupert, British Columbia; and Belledune, New Brunswick.
While the U.S. Industrial Pellet Association cites a U.K. Environment Agency statement that switching from coal to bioenergy for electric power results in a reduction of between 74 percent and 90 percent in net carbon emissions, an investigation published by Climate Central in 2015 said the pellet trade is driven by a European law that “assumes climate pollution released directly by burning fuel made from trees doesn’t matter because it will be reabsorbed by trees that grow to replace them.” It says the law “ignores the decades it can take for a replacement forest to grow to be as big as one that was chopped down for energy — or the possibility that it won’t regrow at all.”
The lawsuit in this controversy involved not a seaport but a facility for transloading wood pellets that opened in 2011 in Upton, Mass., by the Grafton & Upton Railroad Co., a 16.5-mile Massachusetts shortline.
Some of the facility’s neighbors said they were harmed by exposure to excess glare, light intrusion, noise and diminution of property values and that such harms would be prevented by enforcement of Upton’s zoning bylaws.
The Upton Board of Selectmen concluded that regulation of the terminal was pre-empted by the 1985 Interstate Commerce Commission Termination Act (ICCTA) that gave the Surface Transportation Board (STB), an independent federal agency, exclusive jurisdiction over interstate transportation by rail carriers.
The ICCTA defines “transportation” broadly to encompass both the facilities and equipment “related to the movement of passengers or property, or both, by rail” as well as “services related to that movement.”
The petitioners sought a declaratory order from the STB that the wood pellet activities were not part of “transportation by rail carrier” and that state and local regulations were therefore not pre-empted.
The 1st Circuit said while federal regulation of railroads is “pervasive and comprehensive,” there are limits to the STB’s jurisdiction.
Examples of services related to rail transport include receipt, delivery, elevation, transfer in transit, refrigeration, icing, ventilation, storage, handling and interchange of cargo.
While other countries use wood pellets as fuel for power plants, the court said, “New Englanders use them as home-heating fuel in wood-burning stoves.”
The pellets were made at plants in Georgia and British Columbia from raw materials like small logs, wood chips and sawdust. The manufacturers “chip, dry, pulverize and steam the materials and then press them through dies to form uniformed pellets.”
After being transported to the G&U facility in bulk railcars, the pellets are bagged, palletized and shrink-wrapped, then sold to distributors that sell to either retailers or homeowners.
During the rail journey to Upton, the vibration and pounding of the cars causes 5 percent to 10 percent of the pellets “to deteriorate or break into smaller pieces.”
G&U unloads the cars with vacuum hoses, uses a screen to separate the broken and unbroken pellets from those that are intact and then represses the broken pellets into whole pellets.
The dispute in this case revolved around whether this “repelletizing” as well as the bagging, palletizing and shrink-wrapping was transportation or manufacturing.
The STB ruled these activities were transportation rather than manufacturing since they facilitate the rail transportation of the pellets by making it more efficient.
Reviewing the STB’s decision, the 1st Circuit ruled in 2015 that “the ICCTA does not pre-empt all state and local regulation of activities that has any efficiency-increasing relationship to rail transportation.”
It remanded the petition by the plant’s neighbors to the STB, saying that the board should have focused on whether activities such as vacuuming, screening, bagging and palletizing facilitated the transfer of the pellets from rail to truck instead of zeroing in on “cost efficiency.”
G&U argued repelletizing was similar to “spot repairs that might be made on freight that is delivered damaged.”
In a second go-around, the STB again sided with G&U and ruled the complained-about activities qualified as transportation under the ICCTA because they make it “easier to load the pellets onto the trucks.”
It distinguished the initial manufacture of the pellets from the work done by G&U, saying the Upton operation was “intended not to create new pellets but “merely to restore broken pellets to the size they were when they left the manufacturer.”
However, one STB board member said she found “it difficult to conclude that pressing broken pieces of wood through a die is ‘part of rail transportation.’”
In a second decision this summer, the 1st Circuit found “G&U repelletizes to remedy problems (dust and broken pellets) to the already-completed pellets — problems chiefly caused by the movement of pellets by rail.”
While the petitioners argued “the repair of transported items is not included in the statutory list of services ‘related to’ the movement of passengers or property by rail,” the 1st Circuit held activities cited by the ICCTA as transportation was representative, not exclusive.
It said the STB’s decision about what constitutes transportation is a case-by-case, fact-specific determination. Under that test, the 1st Circuit found the STB’s “ruling passes muster. … Because petitioners have not shown that the STB acted arbitrarily or capriciously, abused its discretion or otherwise infracted the law, we reject their petition for review.”