Updated Sept. 22 at 5 p.m.:

The San Luis Obispo County Planning Commission has elected to hear more public comment on the Phillips 66 crude-by-rail proposal in light of new findings from the U.S. Surface Transportation Board regarding preemption and a revised proposal.

The Surface Transportation Board recently commented on a similar project being deliberated in the city of Benicia. The STB determined that the train offloading facility wasn’t going to be operated by a rail carrier, it would be operated by the applicant Valero, and, therefore, the city would have ultimate jurisdiction over the project, said Tim McNulty, SLO County assistant county counsel. The Benicia City Council rejected Valero’s appeal of the commission’s denial on Sept. 22.

Phillips 66 plans to build a rail spur at its Nipomo refinery that would connect its refinery to Union Pacific’s major interstate railroad so it can import tar sands crude oil from Canada and other crude throughout North America. Central to the debate is the issue of federal preemption, which dictates how the project is regulated.

Since Union Pacific owns the railroads that fall under the regulation of federal authorities per the Interstate Commerce Commission Termination Act of 1995, Phillips 66 argues that state and local jurisdictions do not have authority over its interstate track operations. County counsel says that interpretation is too broad.

Congress deregulated the historically monopolistic rail industry so it could compete with the more successful trucking industry. It was intended to control the rates and schedules of rail carriers and does not apply to non-carriers, said Deborah Sivas, an environmental law professor at Stanford University. The ICCTA was not meant to usurp traditional health, safety and land-use powers that protect local communities, she previously told the Business Times.

Phillips 66 contends that reducing the trains to three per week from the originally proposed five eliminates all significant environmental impacts outside of the preempted main line operations. County staff argues there is one remaining class one impact in exceeding the threshold for daily particulate diesel matter emissions.

The Environmental Impact Report found 11 significant impacts in the original proposal including emissions exceeding SLO County Air Pollution Control District standards, agricultural, health and safety risks posed by potential derailments, biological resource impacts and first responders who are not equipped to deal with a derailment, among others.

The project’s benefits would not outweigh the hazards, county staff said in its recommendation to reject the proposal.

The company recently committed to using DOT 117 cars, which would mitigate some environmental impacts, according to the EIR.

The meeting was continued to Oct. 5. The Sept. 22 meeting marks the seventh public meeting on the project that has included dozens of hours of public input.

During the meeting, there was question of who will be paying for the extended meeting process. Typically, the applicant pays for the cost but one commissioner said Phillips has “run through available funds” and the cost would fall on the taxpayer. Another commissioner refuted that point saying that the meetings would be paid for by Phillips even though the company has “neglected to pay certain fees” – so who will bear the cost remains unclear.

In related news, U.S. Coast Guard responded to reports of two oil sheens in San Pablo Bay near the Phillips 66 refinery in the Bay Area on Sept. 21. Officials have not determined how much oil spilled or the source.

• Contact Alex Kacik at akacik@pacbiztimes.com.