STB Signals Broader Federal Preemption Over State and Local Rail Restrictions

What the STB's New Policy Statement Actually Changes for Rail-Served Projects

The Surface Transportation Board (STB), the federal agency that oversees rail transportation in the United States, has issued a policy statement that could significantly expand federal protection for rail-served projects against state and local restrictions. The statement, which becomes final on November 9, consolidates existing law and signals that the agency may take a broader view of its preemption authority—the principle under which federal law overrides conflicting state or local rules. While not binding, it questions aspects of earlier decisions and outlines stronger arguments for treating certain local actions as categorically preempted.

At the heart of the statement is a long-debated question: how far does federal protection reach when a local government regulates not the railroad itself, but its customer? The STB acknowledges that its past decisions have not been entirely consistent. It proposes a new analytical framework that asks two threshold questions: Is the facility used to receive or tender common-carrier rail service, such as a transloading or off-loading facility? And 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 board illustrates its reasoning through two earlier cases: SEA-3 (2015) and Valero Refining (2016). In SEA-3, the agency declined to preempt a city's challenge to a zoning decision that allowed a rail customer to expand its facility. In Valero, the board held it lacked jurisdiction over an existing customer's construction of an off-loading facility. The new statement questions an approach focused on the stated target of regulation rather than its operational effect. It argues that preventing the SEA-3 expansion would effectively dictate how many cars the railroad could deliver at a time, and denying the Valero project constrained both the type of train service and the commodities the carrier could deliver.

The statement also reexamines attempts to take exclusive possession of railroad property through eminent domain, adverse possession or similar state-law claims. It identifies strong policy arguments for using categorical preemption when a taking would exclude rail use from a validly held right-of-way, rather than requiring a fact-specific inquiry. However, it distinguishes exclusive takings from routine, nonexclusive uses like road crossings or utility easements, which may remain subject to case-by-case review. The STB emphasizes that it is not making binding determinations, and individual disputes will still turn on their facts and applicable law.

Why the STB Is Reopening the Customer-Owned Terminal Question

Why the STB Is Reopening the Customer-Owned Terminal Question

The STB's policy statement is a direct response to a September 2025 request from six railroad and shipper organizations, including the Association of American Railroads (AAR), the American Short Line and Regional Railroad Association, the American Chemistry Council and the National Grain and Feed Association. These groups have long argued that a patchwork of state and local regulations—often aimed at rail customers rather than railroads—creates uncertainty and delays for projects serving manufacturing, agriculture and energy facilities. By questioning the reasoning in SEA-3 and Valero, the board is signaling that it may be willing to treat restrictions on customers as de facto regulation of rail service, giving railroads and shippers a stronger legal basis to challenge local actions.

What This Means for Railroads and Their Customers

For railroads and shippers, the statement offers a potential new tool: if a local rule effectively limits the volume, frequency or commodity mix of rail service, it could be preempted even if it targets the customer. This could reduce the ability of communities to block or limit projects such as transloading terminals, chemical plants or grain elevators that rely on rail. The AAR's president, Ian Jefferies, welcomed the statement, saying it can help communities, shippers, railroads and public officials better understand the federal framework and resolve disputes more efficiently. The statement also suggests that categorical preemption may apply to takings of railroad property, which could lower litigation costs for railroads facing eminent domain or adverse possession claims.

Where Local Governments Still Have Leverage

The STB is careful to note that not every rail-connected business gains federal protection. Rail customers themselves are not directly under its jurisdiction, and much regulation of their facilities remains outside it. A manufacturing facility with an incidental rail component generally remains subject to local zoning, absent discriminatory treatment of rail transportation. Requirements governing portions of a project unrelated to receiving or tendering common-carrier service may also remain enforceable. Federal environmental and safety laws—such as the Federal Railroad Safety Act, Clean Air Act and Clean Water Act—are not automatically displaced, and the board says overlapping statutes should be harmonized where possible. The statement also warns railroads not to use preemption as an excuse to be unresponsive to local officials, urging communication and cooperation.

The Broader Trend: Federal vs. Local Control

This policy statement is the latest development in a long-running tension between federal authority over interstate rail transportation and local control over land use and environmental permitting. For context, the ICC Termination Act of 1995 gave the STB broad, exclusive jurisdiction over rail carriers, but the boundaries of that jurisdiction—especially regarding customer facilities—have been tested in courts and agency proceedings for decades. The STB's new framework, if adopted in future cases, could shift the balance further toward federal preemption, potentially reducing the ability of states and localities to impose conditions on rail-served projects. However, because the statement is not binding, its real impact will depend on how the board applies it in individual disputes and how courts interpret its reasoning.

Winners and Losers

Clear winners include railroads and shipper organizations, who gain a stronger legal argument against local restrictions, and industries like chemicals, agriculture and energy that rely on rail-served facilities. Communities and local governments may lose leverage, as their zoning, permitting and even common-law damages claims could be preempted if they effectively regulate rail operations. However, the statement stops short of a blanket exemption, so local authorities retain power over projects with only incidental rail components and over aspects unrelated to rail service. The ultimate outcome will depend on future STB decisions and court rulings.

What Shippers, Railroads and Local Governments Should Do Next

The STB's policy statement is not binding, but it provides a roadmap for challenging local restrictions on rail-served projects—and a warning to communities that their leverage may be more limited than they think.

For railroads and shippers, the statement offers a new analytical framework to argue that local rules targeting customers are preempted if they effectively dictate rail service. Companies planning rail-served facilities should document how local restrictions would affect the volume, frequency, timing, configuration or commodity mix of common-carrier rail service, as these are the factors the STB identifies. They should also be prepared to cite the SEA-3 and Valero examples to show that the stated target of a regulation is less important than its operational effect.

For local governments and community groups, the statement reinforces that preemption can reach ordinances, permits and even some common-law damages claims. However, it also clarifies that regulation of facilities with only an incidental rail component, or of portions of a project unrelated to rail service, may remain enforceable. Local officials should focus on distinguishing their actions from rail service regulation and consider whether federal environmental and safety laws provide independent authority.

In the near term (0–6 months), watch for the STB's final statement on November 9 and any immediate legal challenges that cite it. In the medium term (6–24 months), monitor how the board applies the framework in new cases and whether courts defer to its reasoning. Over the longer term (2–5 years), the statement could lead to fewer local impediments to rail-served projects, but also to continued litigation over the boundaries of preemption. Key metrics to watch include the number of preemption disputes filed with the STB, the outcomes of cases involving customer-owned terminals, and any congressional action to clarify or amend the ICC Termination Act.