1. Federal Preemption: Litigation Involving State Regulation of Shipping Green Pacific Conference, September 22, 2010 Jeffrey Orenstein jorenstein@reedsmith.com 202-414-9217

2. The Supremacy Clause: The starting point for all preemption discussions  “This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.” (US Const. art VI, § 1, cl.2)

3. Types of Preemption  Express Preemption  Implied Preemption  Field Preemption  Conflict Preemption  Impossibility  Frustration of Purpose

4. Preemption Issues Arise in Various Contexts  Federal/State tensions increase wherever there is disagreement over the proper level of regulation or enforcement. For example…  Immigration: Are provisions of Arizona law enforcing immigration law field preempted as infringing on a comprehensive federal scheme?  Health Care: Is a Virginia law barring the compulsory purchase of health insurance conflict preempted by federal health care reforms?

5. Tank Vessel Regulation: Who decides?  State & local governments have strong interest in protecting environmental resources and local marine industry  Federal authorities and interstate industry stress need for coherent—not balkanized—regulatory scheme  The balance Congress stuck allows for some local regulation, but gives the US Coast Guard (CG) very broad authority

6. Ports & Waterways Safety Act (PWSA)  Ray & Locke Preemption Framework  Title I subjects (e.g., tug escorts): State regulation allowed if no conflict with CG judgments (“conflict preemption”)  Title II subjects (e.g., tank vessel design): States forbidden to regulate because Congress mandated CG regulation of these fields (“field preemption”)

7. United States vs. Massachusetts  In 2004 after an oil spill from the Bouchard in Buzzards Bay, the Commonwealth enacted new tank vessel regulations:  State-licensed pilot mandatory  Design requirements for tank vessels  Drug & alcohol testing  Routing requirements  Manning requirements for barges and tugs  Tug escorts for single and double hull vessels  $1 billion financial assurance; decreased if vessel meets certain design requirements

8. United States vs. Massachusetts Massachusetts RequirementFederal law State-licensed pilots requiredExpressly preempted by 46 USC § 8501(d) Drug & Alcohol testing for crewField preempted by 46 USC § 2303 Double hull design requirementsVessel design is field preempted by PWSA Title II Manning requirementsConflicting CG requirements Mandatory routeCG rule: only recommends Tug escort for double hullsCG rule: only single hulls Financial Assurance with design exception Exception indirectly regulate design?

9. United States vs. Massachusetts  All 7 challenged provisions enjoined in 2006  Commonwealth appealed only 3 (tug escort, manning and financial assurance)  1 st Cir remands: Did CG intent to preempt?  CG issued new Buzzards Bay regulations expressly preempting non-federal manning and tug escort schemes  Court invalidated manning & tug escort rules  On appeal now for second time

10. United States vs. Massachusetts  “The law of preemption... leaves the last word under Federal law regarding the formulation of regulations to control vessel traffic, to enhance vessel safety and to decrease environmental hazards in Buzzards Bay to the Coast Guard” Order, March 31, 2010 (D.Mass, Judge Woodlock)  Take away: Having “the last word” means when the CG sets the bar, states can neither raise it nor lower it

11. AWO v. Massachusetts  After 2004 statute was enjoined, the state tried a less direct approach in 2008:  Triple fines in the event of an oil spill if vessel failed to “voluntarily” request state pilot and provide 24hr notifications to state authorities  Tug escort for double hull vessels mandatory, but state-provided  2009 Amendments create ambiguity

12. San Pedro Ports “Clean Air Action Plan”  Innovative and aggressive emission reduction plan targeting…  Drayage trucks (CTP)  Ocean-going vessels  Cargo handling equipment  Harbor Craft  Locomotives in port complex

13. Clean Truck Program (CTP)  “Truck ban”: Phase out old “dirty” drayage trucks and help finance new “clean” trucks  Drayage on Concession basis. Concession agreement terms included:  Employee driver requirement (Port of LA only)  Off-street parking restrictions  Maintenance plans  Financial assurances  Placard requirement

14. Legal Challenges to the Clean Truck Program (“CTP”)  FMC v. Ports of Los Angeles & Long Beach  Alleged CTP violates Shipping Act (dismissed)  FMC Administrative Investigation  Alleged CTP violates Shipping Act (dismissed)  ATA v. Ports of Los Angeles & Long Beach  Alleging CTP concession agreements are… 1.Preempted by FAAA Act (Federal Aviation Administration Authorization Act); and 2.Burden interstate commerce

15. ATA v. Ports  ATA claimed drayage concession agreement was preempted by FAAA Act which expressly preempts state regulations “related to a price, route, or service of any motor carrier.” 49 USC §14501(c)(1)  Port defenses: 1.Concession terms don’t “relate to price, route, or service.” 2.Safety Exception applies: Act does not “restrict the safety regulatory authority of a State with respect to motor vehicles…” 49 USC §14501(c)(2)(A) 3.Market Participant Doctrine applies: state action is not preempted if it is proprietary, rather than regulatory, in nature (i.e., it reflects the state interest in efficient procurement of needed goods and services, much like private parties in similar circumstances)

16. ATA v. Ports: recent decision  Market participant exception saves concession agreement terms from preemption  Even though the Port does not itself procure drayage services, the market exception applies when a government entity, like the Port, acts as a proprietor would, even though it is not buying anything  Because court found all the concession terms advanced the Port’s economic interests as a provider of port services, they are saved from preemption under the FAAA Act.  Under this decision, government-owned ports are entitled, as participants in the market for “port services,” to place restrictions on services essential to the functioning of its commercial enterprise  Decision pending appeal

17. Ports’ Ocean-going Vessel Program  Ocean-Going Vessels are the largest source of emissions at the ports  Ports’ Program calls for:  Voluntary speed reduction: 12knts within 40nm  Provide shore power instead of using auxiliary engines  Financial incentives to use low sulfur Marine Gas Oil

18. Ports’ Ocean-going Vessel Program  Preemption issues have yet to arise with the Ports Ocean-going vessel program.  Federal, state, and municipal authorities, along with industry have worked together:  United States EPA  California Air Resources Board (CARB)  Ports and SCAQMD  Pacific Merchant Shipping Assoc (PMSA)

19. CARB Vessel Emission Regulations  California Air Resources Board enacted regulations to limit emissions from vessels in California waters.  CARB’s rules challenged on preemption grounds:  PMSA v. Goldstene (9th Cir. 2008):  Clean Air Act preempts CARB’s Marine Vessel Rules limiting auxiliary engine emissions  PMSA v. Goldstene (E.D. Cal. 2009):  Submerged Lands Act does not preempt CARB’s requirement that vessels use cleaner fuel types in waters up to 24 nm offshore  On appeal

20. CARB Vessel Emission Regulations  It is possible for international, federal and state law to dovetail:  MARPOL Annex VI:  Compatible with port state action  US implementing statute has savings clause  Clean Air Act:  EPA can permit California standards that are at least as protective as federal standards  CARB Regulations  Focus on “in-use” rules

21. “The Last Word”  If the States can second- guess federal authority, “it will exist in every State but as a poor dependent on State permission. It must borrow leave to be; and will be, no longer than State pleasure, or State discretion, sees fit to grant the indulgence, and to prolong its poor existence.” Hayne-Webster debate, 1830