There’s a famous quote, attributed to Lincoln, that “The Constitution is not a suicide pact” — meaning, of course, that the Executive Branch can always justify ignoring the Constitution by saying that to follow it would be so harmful to the nation as to amount to suicide.
That quote comes to mind when reading the Oregon Land Use Board of Appeals (LUBA) recent decision striking down the City of Portland’s kinda-sorta ban on fossil fuel terminals (FFTs). Portland’s ban was only kinda-sorta because it was designed so that it would not impede the use of fossil fuels by Portlanders or Oregonians in the slightest. It was primarily virtue signaling to the world as written, allowing Portlanders to continue to enjoy the use of fossil fuels unimpeded, while erecting a slight barrier — not even a speed bump — to the export of fossil fuels from facilities in Portland.
Which is why LUBA struck it down under the arcane branch of Constitutional analysis known as “dormant Commerce Clause” jurisprudence.
To review, recall that the US Constitution’s Commerce Clause says that only Congress can regulate interstate commerce. Of course, forming a single “free trade zone” within the 13 post-Revolutionary states was — along with ensuring that the wealthy individuals who bought debt and scrip to fund the Revolution were paid, come hell or high water — a major reason that the interests represented in Philadelphia insisted on forming a new federal system of government and junking the Articles of Confederation.
But it wasn’t long before this clear grant of authority ran into some other Philadelphia lawyering, where states would pass laws that were little more than ways to get around Congress’s authority over interstate commerce. Which is why the Supreme Court invented the “dormant Commerce Clause,” finding that the Commerce Clause also included a power, dormant within it, to smack down any attempts by states to game the system so as to benefit the home team in a way that appeared to be completely neutral.
The problem for the present moment is that this kind of analysis — which is 100% legally sound when applied to trade in the ordinary sorts of goods that first shape and then eventually shackle the thinking of the law students who become judges later — means that no state can serve as a laboratory of environmental sanity and experiment with ways to address planetary scale threats to human civilization if Congress won’t. And a bought and sold Congress dominated by corporate interests won’t. Ever.
Thus, given the nature of the US Senate, where Wyoming, with its sparse population and abundant coal deposits, has the same number of Senators as California, the upshot is that Lincoln was quite wrong and, alas, the Constitution is indeed a suicide pact. Not because it leaves us vulnerable to insurrection but because it means that only those environmental actions that can win approval in states such as Wyoming and Oklahoma are possible.
That such actions are inconsistent with the continued presence of human civilization on Earth beyond this century is simply more evidence that using an 18th Century framework for facing 21st Century threats is bound to end in tears and suffering. And so it goes.
Here is how this suicidal analysis goes (taken from the LUBA final opinion in the recent decision.
NINTH ASSIGNMENT OF ERROR
In the ninth assignment of error, petitioners argue that the FFT amendments violate the dormant Commerce Clause of the United States Constitution because the ordinance impermissibly discriminates against or unduly burdens interstate trade in fossil fuel.For the following reasons, we agree with petitioners.
The Commerce Clause of the United States Constitution provides that “Congress shall have Power * * * [t]o regulate Commerce * * * among the several states.” US Const Art I, § 8, cl 3.Where Congress has explicitly exercised that grant of power, states are of course bound to conform to federal law. The “dormant” aspect of the Commerce Clause protects Congress’s latent ability to regulate interstate commerce, even in areas where Congress has not spoken, by prohibiting states (including the municipal arms of a state) from adopting legislation that, by design or effect, regulates or burdens interstate commerce in certain impermissible ways. Or. Waste Sys. v. Dep’t of Envtl.Quality, 511 US 93, 114 S Ct 1345 (1994); Fort Gratiot Sanitary Landfill v.Michigan Dep’t of Natural Resources, 504 US 353, 361, 112 S Ct 2019 (1992) (“[A] State (or one of its political subdivisions) may not avoid the Commerce Clause’s strictures by curtailing the movement of articles of commerce through subdivisions of the State, rather than through the State itself.”)
The courts have generally adopted a two-tiered approach to Commerce Clause challenges: When a state or local law directly regulates or facially discriminates against interstate commerce, or when its purpose or practical effect is to favor in-state economic interests over out-of-state interests, courts have generally struck down the law without further inquiry, under an elevated level of scrutiny. Rocky Mt. Farmers Union v. Corey, 730 F3d 1070, 1087 (9th Cir 2013) (a law may violate the dormant Commerce Clause if it “discriminates against out-of-state entities on its face, in its purpose, or in its practical effect[.]” (citing Maine v. Taylor, 477 US 131, 138, 106 S Ct 2440 (1986))). Discrimination “means differential treatment of in-state and out-of-state economic interests that benefits the former and burdens the latter.” Id. (quoting Or. Waste Sys., Inc., 511 US at 99). Where a law is discriminatory in practical effect, the government must demonstrate that the law is supported by a legitimate local purpose that cannot be adequately served by reasonable nondiscriminatory alternatives. Hunt v. Wash. State Apple Adver. Comm’n, 432 US 333, 353, 97 S Ct 2434 (1977) (“When discrimination against commerce of the type we have found is demonstrated, the burden falls on the State to justify it both in terms of the local benefits flowing from the statute and the unavailability of nondiscriminatory alternatives adequate to preserve the local interests at stake.” (Internal citations omitted.)).
On the other hand, where the law is facially non-discriminatory, and does not discriminate against out-of-state economic interests in its purpose or practical effect, the courts engage in a balancing test, subject to a lesser level of scrutiny, that weighs the state’s interest against the indirect burden on interstate commerce. Such a law will only be struck down when the burden on interstate commerce is “clearly excessive” in relation to the local benefits. Pike v. BruceChurch, 397 US 137, 142, 90 S Ct 844 (1970).
Petitioners argue, and we agree, that the city’s FFT amendments fail the Commerce Clause analysis under either test.
- Discriminatory Purpose or Practical Effect
In the present case, no party argues that the FFT amendments facially discriminate against interstate commerce. The FFT amendments are silent regarding the origin or final destination of fossil fuels stored or transloaded in the affected FFTs. Petitioners argue, however, that it is clear from the record that one of the purposes of the amendments, if not the primary motivating force, was to forestall the possibility that a particular vehicle of interstate and international commerce—fossil fuel export terminals—would be established within the city. The apparent impetus for the FFT amendments was a recent proposal to site a propane export terminal in a north Portland industrial area, the Pembina proposal. As the city mayor explained in the proceedings leading to adoption of the FFT amendments:
“The rapid development of fossil fuel resources in the western part of our country and Canada has put a lot of pressure on Portland and other cities and has sought to transport and move huge quantities of fossil fuels through and into our communities. As we all experienced with the [P]embina proposal last year, the zoning code actually allows fossil fuel terminals as a warehouse and freight movement use in our zoning code today without any limit on the size of these terminals. We, of course, passed [Resolution 37168] saying we’re going in a different direction and today is the proposal to put that into city law, into our code.” Record 206.
The Pembina proposal in north Portland was ultimately abandoned in the face of significant local opposition. However, as the mayor notes, one consequence of the Pembina proposal was adoption of Resolution 37168, which resolved that the city council would actively oppose expansion of infrastructure whose primary purpose is the transporting or storing of fossil fuels in Portland or adjacent waterways. The city council later adopted a new comprehensive plan policy, Policy 6.48, which states that the city’s policy is to “[l]imit fossil fuel distribution and storage facilities to those necessary to serve the regional market.” Record 3317.
Even though Policy 6.48 is not yet in effect, the city’s findings state that the FFT amendments “specifically implement” Policy 6.48. Record 324. As adopted, the FFT amendments have the practical effect of precluding the siting of new fossil fuel export terminals within the city, and indeed it is clear that the city intended that result.28
28 As noted earlier, the city’s findings explain:
“The energy distribution market in the Pacific Northwest is changing. Production of crude oil and natural gas, particularly from North Dakota, has substantially increased in the U.S. since 2009, as shown in Figure 1. In turn, several large new fuel distribution terminals have been proposed in the Pacific Northwest to access West Coast and export markets, as shown in Figure 2. Similar trends have occurred in Alberta and British Columbia.
“[The FFT amendments] propos[e] a prompt, focused response to these market changes. The recommended code amendments will restrict development of new fossil fuel terminals and limit the expansion of existing terminals, consistent with City and State objectives on climate change and public safety.” Record 316 (emphasis added).
Notwithstanding the facial neutrality of the amendments regarding the origin or destination of fossil fuels, it is clear that the city intended the amendments to preclude construction of new or expanded terminals that store and transload fossil fuels to serve interstate or international markets, such as the Pembina proposal (i.e., demand beyond that “necessary to serve the regional market.”).As the commentary to the definition of “Bulk Fossil Fuel Terminal” explains, terminals subject to the FFT amendments function as “regional gateway facilities, where fossil fuels enter and exit the region.” Record 370. Further evidence of the intent to preclude fossil fuel export terminals is the fact that the size of terminals subject to the amendments was deliberately set to capture facilities large enough to handle “unit trains,” i.e., trains with a single load of a bulk fossil fuel that is transported as a unit and not intended for local distribution, but for transloading for more distant markets. See n 6.In the amendments, the city implements Policy 6.48 and attempts to freeze the status quo, in which the city’s existing FFTs serve only local, regional and intrastate markets for fossil fuels.29
29 It is true, as the city argues, that nothing in the FFT amendments expressly prohibits changing the 11 existing large FFTs into export terminals, i.e., using existing facilities to store and transship fossil fuels to interstate or international markets, rather than store and transship fossil fuels for local or regional markets, as is the current state of affairs. However, the city cites no evidence that such redevelopment would be a practical or economic reality. Such changes would likely require new facilities and changes in modality, e.g., shifting from a train to truck modality to a train to ship modality, and perhaps different fuels (e.g., petroleum to coal) with different storage and handling characteristics. It seems unlikely that it would be economically feasible to abandon long-standing investments in existing facilities serving local and regional markets in order to redevelop those facilities to handle different modalities or types of fossil fuels.
The question before us is whether legislation with that intent and that practical effect is consistent with the dormant Commerce Clause. The parties cite a number of dormant Commerce Clause cases, discussed below, to support their respective positions. Before turning to that discussion, we first note that the city emphasizes that the stated purposes of the FFT amendments include (1) addressing safety issues stemming from vulnerability of many existing FFTs to seismic events in the city’s northwest industrial area, and (2) reducing the city’s contributions to climate change. The city argues that these are legitimate local interests that outweigh any incidental impact on interstate commerce. We address the cited purposes below, both under the discriminatory practical effect analysis, and under the Pike balancing test. However, in evaluating discriminatory purpose or practical effect, we note that the Ninth Circuit states that it will “assume that the objectives articulated by the legislature are the actual purposes of the statute, unless an examination of the circumstances forces us to conclude that they could not have been a goal of the legislation. But we will not be bound by the stated purpose when determining the practical effect of the law.” Rocky Mt. Farmers, 730 F3d at 1097-98 (citing Minnesota v. Clover Leaf Creamery, 449 US 456, 463 n 7, 101 S Ct 715 (1981); Hughes v. Oklahoma, 441 US 332, 336, 99 S Ct 1727 (1979) (internal citations and quotation marks omitted)).Similarly, in the present case, even if the two purposes stated above are among the actual purposes of the FFT amendments, it does not follow that they are the exclusive purposes, or that those two stated purposes limit the analysis of the practical effect of the FFT amendments.
We make one other preliminary observation. Most of the dormant Commerce Clause cases cited to us involve claims of economic protectionism in one guise or another. The present case does not involve economic protectionism in the classic sense of a state or municipality trying to favor local economic interests by restricting or burdening competition from out-of-state actors. See, e.g., Hunt v. Wash. State Apple Adver. Comm’n, 432 US 333, 351 (regulations that burdened out-of-state apple growers, to the indirect economic benefit of in-state growers). The city, and Oregon, have no local refineries or sources of fossil fuel to promote or protect against competitors. Nonetheless, we believe that the FFT amendments embody elements of economic protection for local interests—protections from the burdens that the city is willing to impose on interstate commerce—and the city’s attempt to shield local interests from the burden of obstacles it places in the path of interstate commerce is one of the fatal flaws of the FFT amendments. Raymond Motor Transportation,Inc. v. Rice, 434 US 429, 445-47, 98 S Ct 787 (1978) (exceptions in favor of local interests “weaken the presumption in favor of the validity of [a regulation], because they undermine the assumption that the State’s own political processes will act as a check on local regulations that unduly burden interstate commerce.”)
In the FFT amendments, the city attempts to limit its participation in the traffic of fossil fuels, which the city clearly deems to be an undesirable commodity. The city is indifferent to the sources of that commodity (none of which are local), but is concerned with the ultimate destinations for fossil fuels that enter the city for storage or transloading.As Policy 6.48 indicates, the city’s policy goal is to limit fossil fuel storage and transloading to the quantities needed to meet local and regional demands. The concomitant (and expressly-stated) goal is to preclude establishment or expansion of FFTs that would store or transload fossil fuel for destinations outside the state. Because the status quo at present is that the city’s FFTs adequately serve current local and regional demands, the city chose to advance both these policy goals together by simply prohibiting new and expanded FFTs. To shield local users from the consequences of a more comprehensive ban on new or expanded FFTs, the city adopted a number of exceptions and exclusions, listed in the margin.30
30 PCC 33.920.300.D. lists exceptions to the definition of “bulk fossil fuel terminal,” (FFTs) many of which appear calculated to shield local fossil fuel storage facilities and end users from harm that could otherwise be inflicted by the FFT amendments. The exceptions include:
“2. Truck or marine freight terminals that do not have transloading facilities and have storage capacity of 2 million gallons or less are classified as Warehouse and Freight Movement uses. However, multiple fossil fuel facilities, each with 2 million gallons of fossil fuel storage capacity or less but cumulatively having a fossil fuel storage capacity in excess of 2 million gallons, located on separate parcels or land will be classified as a Bulk Fossil Fuel Terminal when two or more of the following factors are present:
“a. The facilities are located or will be located on one or more adjacent parcels of land. Adjacent includes separated by a shared right-of-way;
“b. The facilities share or will share operating facilities such as driveways, parking, piping, or storage facilities; or
“c. The facilities are owned or operated by a single parent partnership or corporation.
“3. Gasoline stations and other retail sales of fossil fuels are not Bulk Fossil Fuel Terminals.
“4. Distributors and wholesalers that receive and deliver fossil fuels exclusively by truck are not Bulk Fossil Fuel Terminals.
“5. Industrial, commercial, institutional, and agricultural firms that exclusively store fossil fuel for use as an input are not Bulk Fossil Fuel Terminals.
“* * * * *
“7. The storage of fossil fuels for exclusive use at an airport, surface passenger terminal, marine, truck or air freight terminal, drydock, ship or barge servicing facility, rail yard, or as part of a fleet vehicle servicing facility are not Bulk Fossil Fuel Terminals.
“8. Uses that recover or reprocess used petroleum products are not Bulk Fossil Fuel Terminals.”
The net effect is that the city has done all it can, short of an express prohibition on export terminals, to effectively restrict interstate or international commerce in fossil fuels, while at the same time shielding its citizens and local end-users to some extent from the adverse consequences of the restrictions on new or expanded terminals.31
31 The city’s ability to significantly impact interstate and international commerce in fossil fuels is, of course, limited. Export terminals can still be located in other cities throughout the region. Indeed, as the findings note, at least eight export terminals have been proposed in the region in places other than Portland. Record 317. Nonetheless, as Ordinance No. 188142 recognizes, the city enjoys several geographical and logistical advantages, including a location at the western end of a low-gradient railroad and barge route for heavy cargo through the Cascades, a corridor that is an economical conduit for fossil fuels from interior states for transshipment to overseas destinations. Record 48. Few other cities in the region are as well-placed as Portland to disturb the flow of fossil fuels in interstate commerce.
While not a classic form of economic protectionism vis-a-vis out-of-state competitors, in our view a law that embodies the above goals represents a species of protectionism and burden-shifting that infringes on Congress’s latent authority under the Commerce Clause. Pac. Merch. Shipping v. Goldstene, 639 F3d 1154, 1177 (9th Cir 2011) (“[T]he whole objective of the dormant Commerce Clause doctrine is to protect Congress’s latent authority from state encroachment.”)
With those observations, we turn to the cases cited by the parties. Dormant Commerce Clause jurisprudence is highly fact-specific, and the analysis often turns on identifying the most analogous fact patterns. In general, the cases cited by the city are distinguishable.The city relies heavily on Chinatown Neighborhood Ass’n v. Harris, 794 F3d 1136 (9th Cir 2015), in which the United States Court of Appeals for the Ninth Circuit upheld the State of California’s “Shark Fin Law,” which made it unlawful for any person to possess, sell, trade, or otherwise distribute shark fins anywhere in the state. The plaintiffs argued that the law violated the dormant Commerce Clause by curbing commerce in the flow of shark fins through the state to out-of-state markets. Id. at 1145. The Ninth Circuit rejected that argument, concluding that the law simply regulates conduct within the state, and any extraterritorial impacts of the law are incidental. Id. at 1146. The city argues for the same conclusion here: the FFT amendments simply regulate conduct within the state, and any extraterritorial impacts are incidental.
However, a critical difference between the present case and Chinatown Neighborhood Ass’n, is that in the latter case the state law did not purport to shield state residents from the impacts of an otherwise comprehensive prohibition. We believe it doubtful that the Ninth Circuit would have affirmed a statute that allowed state residents to possess, sell, or trade shark fins, and thus protected the existing domestic market in shark fins, but had the intent and effect of restricting the storage or transport of shark fins for interstate or international markets.32
32 Another significant difference is that in Chinatown Neighborhood Ass’n, the Ninth Circuit noted that Congress had adopted legislation prohibiting “finning” or the taking of shark fins in all U.S. waters. Id. at 1140. Thus, the state law prohibiting the possession, etc., of shark fins of any origin within the state was entirely consistent with federal legislation. Id. at 1144. Indeed, the Ninth Circuit first had to determine whether congressional legislation had already preempted or occupied the field of shark finning. Id. In the present case, as far as we are informed Congress has passed no law restricting interstate or international commerce in fossil fuels. If anything, it is more probable that federal statutes foster the free flow of fossil fuels in interstate (and international) commerce. See Raymond Motor Transp., Inc., 434 US at 440 (“[I]t never has been doubted that much state legislation, designed to serve legitimate state interests and applied without discrimination against interstate commerce, does not violate the Commerce Clause even though it affects commerce. In areas where activities of legitimate local concern overlap with the national interests expressed by the Commerce Clause—where local and national powers are concurrent—the Court in the absence of congressional guidance is called upon to make delicate adjustment of the conflicting state and federal claims.” (Internal citations and quotation marks omitted.)); see also Pac. Merch. Shipping Ass’n, 639 F 3d at 1178 (“The foreign commerce context places further constraints on state power because of ‘the special need for federal uniformity.’”).
Similarly, in the present case, we think the Ninth Circuit would not affirm regulations that are intended and have the practical effect of prohibiting the storage or transloading of fossil fuel for interstate and international markets, but which largely protect the local fossil fuel economy and local end-users from the impacts of those regulations.
Another Ninth Circuit case cited by the city, Rocky Mt. Farmers Union v. Corey, 730 F3d 1070, is also distinguishable. In Rocky Mt. Farmers Union, the California Air Resources Board adopted a low carbon fuel standard regulation for ethanol, an additive in fossil fuel. Id. at 1079-83. To comply with the fuel standard, a fuel blender had to keep the average carbon intensity of its total volume of fuel below the fuel standard’s annual limit, taking into account various credits available under a cap-and-trade scheme. Id. Out-of-state suppliers filed suit, arguing that the fuel standard violated the dormant Commerce Clause. Id. at 1086. The district court concluded that the fuel standard facially discriminated against out-of-state energy firms, because it took into account the origin of the fuel and the distance fuel travels to reach California. Id.
The Ninth Circuit disagreed, concluding that the fuel standard did not facially discriminate against interstate commerce, because the state based its standards on the carbon intensity of fuel sold in the state, not on the fuel’s origin. 730 F3d at 1078. The Ninth Circuit remanded to the district court for a determination of whether the regulation’s ethanol provisions discriminated in purpose or practical effect. Id. If not, it was to apply the Pike balancing test. Id.
The city argues that, like the state fuel standard at issue in Rocky Mt. Farmers Union, the FFT amendments are facially neutral regarding the origin of fossil fuels, with no motive to protect local economic actors from out-of- state competition. However, we have already concluded that the FFT amendments are not facially discriminatory, or designed to protect in-state economic actors from direct out-of-state competition. The question is whether the FFT amendments discriminate against interstate commerce in purpose or practical effect. We fail to see how the holding or facts in Rocky Mt. Farmers Union assists the city. The facts in Rocky Mt. Farmers Union would be closer to all fours with the present case if the fuel standard had limited fuel terminals in the state in a manner that effectively prohibited storage or transloading of high-carbon fuels intended for other states or to international markets, but allowed high-carbon fuels to continue to be stored, transloaded and sold at current levels to California residents, with numerous exemptions to protect local economic actors from the impacts of the restriction on commerce in high-carbon fuels effectively imposed on fuel that passes through to other states.33
33 In addition, the Ninth Circuit recognized that the federal Clean Air Act expressly authorizes California to adopt its own fuel standards. 730 F 3d at 1078. Again, in the present case, no party cites us to any act of Congress authorizing a city or state to regulate the size or number of fossil fuel transportation facilities in a manner that has the practical effect of prohibiting export terminals.
One of the signal characteristics of a law that discriminates in purpose or practical effect in violation of the dormant Commerce Clause, and is thus subject to elevated scrutiny, is unequal treatment between in-state and out-of- state economic actors or markets. Or. Waste Sys., 511 US at 99 (discrimination “means differential treatment of in-state and out-of-state economic interests that benefits the former and burdens the latter); see also Philadelphia v. NewJersey, 437 US 617, 628, 98 S Ct 2531 (1978) (“It does not matter that the State has shut the article of commerce inside the State in one case and outside the State in the other. What is crucial is the attempt by one State to isolate itself from a problem common to many by erecting a barrier against the movement of interstate trade.”). Despite the facial neutrality of the FFT amendments, the city has done all it can to effectively eliminate any city role in the export of fossil fuels, while continuing to provide for existing and projected local consumption of fossil fuels. Hunt v. Wash. State Apple Adver. Comm’n, 432 US 333, 350, (referring to “the Commerce Clause’s overriding requirement of a national ‘common market’” (internal citations omitted)). Nothing cited to us in Rocky Mt. Farmers Union, or any other case, suggests that a law with that purpose and that practical effect can avoid elevated levels of scrutiny under the dormant Commerce Clause analysis.
Among the dormant Commerce Clause cases cited to us are two cases involving zoning or land use regulations. The city relies on Wal-Mart Stores,Inc. v. City of Turlock, 483 F Supp 2d 987, 991-92 (E D Cal 2006), which involved a city zoning text amendment that created three new categories of commercial retail land uses: discount stores, discount clubs, and discount superstores. Under the amendments, the first two categories were allowed as conditional uses in commercial zones, but the last category, discount superstore, was not allowed in any city zone. Id. Wal-Mart, which operated a discount store in the city but sought to establish a discount superstore, argued that the prohibition on establishing a discount superstore in any zone discriminates against interstate commerce in practical effect, because it prevents Wal-Mart, an out-of-state retailer, from operating within the city in Wal-Mart’s preferred superstore format. Id. at 1009-14. However, the district court rejected those arguments, concluding that the facially neutral ordinance did not discriminate against interstate commerce because any retailer, in-state or out-of-state, can locate retail operations in the city, and offer any products, except in the discount superstore format. Id. The court held that the Commerce Clause does not protect the preferred structure or methods of a retail operation, or the right to conduct business in the most efficient manner. Id. In the present case, the city argues likewise that FFT owners are not entitled to establish terminals in any preferred format or conduct terminal operations in the most efficient manner.
Like the present case, Wal-Mart Stores, Inc., involved creation of a new land use category, which the ordinance then prohibits within the city. However, the resemblance mostly ends there.In the present case, the city deems a particular commodity in interstate commerce (fossil fuels) to be undesirable and therefore adopts steps to freeze the number and size of facilities that meet local demands for that undesirable commodity, and to preclude facilities that would store and transload the undesirable commodity for further shipment to interstate and international markets. In Wal-MartStores, Inc., the commodities at issue were desirable, it was only the size and format of the building in which the goods would be sold to which the city objected. 483 F Supp 2d at 1012. Before and after the zoning amendments in Wal-Mart Stores, Inc., the same type and quantity of goods flowed from the stream of interstate commerce to enter the city and be sold. Id. The only difference was that after the amendments those goods would have to be sold in smaller retail outlets, not in the larger superstore format that Wal-Mart preferred. Id. at 1016. By contrast, in the present case, if the FFT amendments achieve the city’s several goals, the amendments strongly affect the type and quantity of fossil fuels that could potentially flow into and out of the city from the stream of interstate commerce. Prior to the FFT amendments, a new propane or coal export terminal could be sited within the city, to transload those types of fossil fuels from North Dakota or Montana for shipment to overseas markets. Under the FFT amendments, such facilities are effectively prohibited, and the types and quantities of fossil fuels that are stored and transloaded in the city are, as a practical matter, limited to those needed to satisfy the current and projected future local or regional demand.34
34 The city’s findings recognize that the establishment of fossil fuel terminals in the region would significantly increase the quantity of fossil fuels flowing into, and out of, the state. As the findings note:
“[T]here is a wide margin between the size of recently proposed crude oil, coal, and (LNG) terminals in the Pacific Northwest and the scale of expected growth of existing Portland fuel terminals that generally serve the regional market area * * *.” Record 330.
In other words, due to the large volumes of fossil fuel that could be transported via fossil fuel export terminals (like the Pembina project), if established in the city or elsewhere in the region or state, these export terminals would significantly increase the amount of fossil fuel that enters the state, compared to any increase attributed to local or regional consumption. Record 46 (Figure 7). Conversely, if the city succeeds in discouraging the establishment of fossil fuel export terminals in the city, that could effectively reduce the quantity of fossil fuels that would otherwise cross state lines, and which is intended to again cross state lines on its way to interstate or international markets. Generally, a law with the intent and the effect of reducing the free flow of commerce across state lines is viewed with suspicion under the dormant Commerce Clause. See Hughes v. Oklahoma, 441 US 322, 337-38, 99 S Ct 1727 (1979) (statute prohibiting the transport of minnows out of the state violates the dormant Commerce Clause, because it “overtly blocks” the flow of interstate commerce at the state’s borders); but see Maine v. Taylor, 477 US 131 (state law prohibiting import of baitfish in order to protect health of unique and fragile state fisheries survives Commerce Clause challenge because the prohibition serves a legitimate local purpose that cannot be adequately served by available nondiscriminatory alternatives).
To put the circumstances in Wal-Mart Stores, Inc. on a closer footing with the present case, imagine that the City of Turlock objects to the import of goods manufactured overseas, and adopts amendments that prohibit new distribution centers that receive and transfer foreign-made goods to stores across the United States, but nonetheless the amendments allow local retailers to continue to sell foreign-made goods in city stores to meet the local demand. While a comprehensive and even-handed embargo on importation of foreign goods to local markets might survive scrutiny under a dormant Commerce Clause analysis, if the ban did not unduly impact interstate commerce, the above-described selective approach would not, because it does not evenhandedly distribute benefits and burdens, but instead concentrates the bulk of its impacts on interstate commerce, while attempting to shield local interests from those impacts.35
35 Indeed, the Eastern District of California rejected a similar argument made by Wal-Mart. As the court stated: “[The ordinance] leaves the market open to all local or foreign retailers of all local or foreign products, except in the discount superstore format. The Commerce Clause does not protect the particular structure or methods of operation of a retail market.”) Wal-Mart Stores Inc., 483 F Supp 2d at 1012.
The FFT amendments suffer the same flaw.
Petitioners argue, and we agree, that the circumstances in Island Silver Spice, Inc. v. Islamadora, 542 F3d 844 (11th Cir 2008), bear a closer resemblance to the present circumstances.In Island Silver Spice, Inc., a municipality adopted zoning amendments that effectively prohibited establishment of new “formula” restaurants and retail establishments, defined as a retail sale establishment required by contract to provide a standardized array of services or merchandise, décor, architecture, layout or similar standardized features, by limiting street level frontage and total square footage only for “formula” establishments, but not for similar retail uses. Id. at 845. The apparent target of the zoning prohibition was nationally and regionally branded formula retail stores, such as chain pharmacies. Id. The zoning Amendment did not facially discriminate against out-of-state stores; nonetheless, the Eleventh Circuit concluded that by limiting the square footage and street frontage for “formula” establishments, the amendment had the practical effect of discriminating against interstate commerce, because it effectively eliminated the establishment of new regionally and nationally branded retailers, a quintessential type of interstate commerce. The Eleventh Circuit therefore applied the elevated scrutiny test and ultimately concluded that the amendment failed that test. Id. at 847.36
36 The Eleventh Circuit also affirmed findings that the zoning amendment failed under the Pike balancing test. Id. at 847 n 2.
The present circumstances are similar to those in Island Silver Spice, Inc., in that in both cases the city objects to a particular article or aspect of commerce that is intrinsically interstate in nature (nationally branded retail stores on the one hand, fossil fuels on the other hand), and adopts a zoning amendment that prohibits establishment of such uses, or the expansion of existing uses above a certain size, but allows existing undesirable uses to continue in the city essentially as nonconforming uses. 542 F3d at 846-47 (noting the municipality’s existing zoning allowed the use of the subject property as a retail use comprising over 12,000 square feet of floor area, greatly exceeding the ordinance’s dimensional limitations for “formula retail” businesses). In Island Silver Spice, Inc., the Eleventh Circuit had no trouble concluding that a municipality’s efforts to prohibit new and expanded nationally branded formula retail uses (by limiting square footage and street frontage) had a discriminatory practical effect on interstate commerce. Id.
The Eleventh Circuit then considered whether the zoning amendment was supported by a legitimate local purpose that could not be adequately served by reasonable nondiscriminatory alternatives. 542 F3d at 847. In Island SilverSpice, Inc., the stated purposes of the zoning ordinance prohibiting “formula” retail included the protection of the municipality’s small town character. Id. The Eleventh Circuit concluded that while preserving small town character is a legitimate purpose, the municipality had no small town character to preserve, because the town already included a number of pre-existing formula retailbusinesses, and had no historic district or affected historic buildings. Id. Further, the Eleventh Circuit noted that the zoning ordinance included exceptions that would allow smaller formula retail stores, as well as large non-formula retail establishments, none of which furthered preservation of a small town character. Id. at 847-48. Because the municipality failed to identify a legitimate local purpose to justify the amendment’s discriminatory practical effects, the Eleventh Circuit invalidated the amendments without considering whether the municipality could show that adequate, nondiscriminatory methods were available to achieve the legitimate local purpose. Id.
In the present case, the city argues that its stated interests in reducing vulnerability to seismic damage and reducing the city’s contribution to climate change caused by fossil fuel consumption are both legitimate local interests, and we agree. However, as explained below, the FFT amendments do not, in fact, appear to further those interests. Moreover, the city makes no effort to demonstrate that adequate, nondiscriminatory methods are unavailable to meet those interests.
With respect to vulnerability of existing FFTs to seismic events, the FFT amendments appear to do nothing to reduce that vulnerability.37
37 The PSC recommended draft offered existing FFTs an incentive to upgrade to current seismic standards, in exchange for a 10 percent expansion. However, the city council eliminated that incentive.
With respect to new or expanded FFTs, such facilities would presumably comply with modern seismic codes, and it is not clear how a blanket ban on new or expanded FFTs serves the purpose of reducing vulnerability of FFTs to seismic events. It is also not clear why the city could not continue to allow new or expanded FFTs in industrial areas of the city that are not located on soils subject to liquefaction, instead of broadly prohibiting new and expanded FFTs everywhere in the city. Further, the FFT amendments allow without restriction (1) small fossil fuel terminals below two million gallons in size, (2) unlimited size mono-modal fossil fuel terminals served only by trucks, as well as (3) terminals of any size that handle non-fossil fuels such as bio-diesel and ethanol, in the same industrial areas that are vulnerable to seismic shocks. We are cited to no evidence that seismic damage to a bio-diesel tank farm would be any less catastrophic than seismic damage to a tank farm of petro-diesel, or that an intermodal petroleum terminal is any more susceptible than a similarly sized mono-modal petroleum terminal served only by trucks. There is no evidence presented to us that the express target of the FFT amendments, intermodal terminals, is uniquely vulnerable to seismic damage compared to mono-modal facilities.
In short, although reducing vulnerability to seismic damage is a legitimate local interest, the FFTs amendments appear to do very little, if anything, to reduce that vulnerability, and are riddled with exceptions that appear to undermine any steps toward reducing vulnerability to seismic damage that the amendments might achieve.Further, and most importantly for our analysis here, the amendments appear to favor local interests, to the detriment of interstate and international market interests. Finally, as noted, the city makes no attempt to demonstrate that there are no adequate, nondiscriminatory alternatives to serve the local interest in reducing vulnerability to seismic damage to FFTs. Based upon the record before us, it is not clear that such a showing can be made.
The city’s other stated goal—reducing the city’s contribution to global warming and climate change—is an entirely laudable goal. However, the city identifies nothing in the FFT amendments directed at actually accomplishing that goal. The FFT amendments include no provisions designed to reduce the local consumption of fossil fuels, and thus the local emission of greenhouse gasses. In implementing Policy 6.48, the city attempted to limit local FFTs to serve only the regional demand for fossil fuels, but the amendments do not propose anything to reduce local or regional demand. As discussed with regard to Goal 12, the city’s working assumption is that local demand for fossil fuels will plateau and even decline in the foreseeable future, making new or expanded FFTs unnecessary. But the city does not identify anything in the FFT amendments that would cause or contribute to any plateau or decline in local fossil fuel demand and therefore reduce local greenhouse gas emissions. In other words, although the amendments prohibit new or expanded FFTs, under the city’s assumptions—that local demand will plateau or decline—there is no basis to assume that new or expanded FFTs would ever be necessary to meet increased local demand. The prohibition on new or expanded FFTs appears to do little or nothing to further the city’s interest in reducing local consumption or the carbon content of locally consumed fossil fuels.
The only scenario we can understand that could causally connect the prohibition on new or expanded FFTs with a reduction in local demand for fossil fuel (and a resulting reduction in local greenhouse gas emissions) would require that the city’s working assumptions be incorrect, and in fact local demand for fossil fuel will increase in coming years beyond the capacity of the existing FFTs and of new small or mono-modal FFTs to accommodate. In that circumstance, the shortage of FFT capacity might cause a local shortage of fossil fuel that could raise prices, thus discouraging consumption and encouraging a transition to non-fossil fuel sources. However, that speculative chain of causation, contrary to the city’s working assumptions, is a thin basis for meeting the city’s burden of demonstrating the existence of a legitimate local purpose that cannot be adequately served by reasonable nondiscriminatory alternatives.
In any case, the most important impact of the FFT amendments for purposes of the dormant Commerce Clause analysis is the fact that the amendments are intended to and have the practical effect of precluding the establishment of new fossil fuel export terminals. We question whether the city’s desire to preclude establishment of fossil fuel export terminals reflects a legitimate local interest. As noted, the city may well take responsibility for itsown greenhouse gas emissions from local consumption of fossil fuels without running afoul of the dormant Commerce Clause (if those efforts create only incidental impacts on interstate commerce). However, we do not believe the city can, consistent with the dormant Commerce Clause, deliberately attempt to slow or obstruct the flow of fossil fuels from other states to consumers in other states or countries with the apparent goal of reducing generation of greenhouse gases elsewhere in the world, and justify that attempt as a legitimate local interest.
Finally, even if reducing fossil fuel consumption and emissions elsewhere in the world can be viewed as a legitimate local interest for purposes of the discriminatory practical effect analysis, as noted the city makes no effort to demonstrate that that purpose cannot be adequately served by reasonable nondiscriminatory alternatives.
In sum, we conclude that the FFT amendments are discriminatory in practical effect, and that the city has failed to demonstrate that the amendments serve a legitimate local interest or purpose that cannot be adequately served by reasonable nondiscriminatory alternatives. Accordingly, the FFT amendments violate the dormant Commerce Clause.
- Pike Balancing Test
In the event that the FFT amendments are deemed to be nondiscriminatory and to have only indirect impacts on interstate commerce, we consider whether the FFTs amendments survive under the so-called “Pike balancing test.” Under Pike, “nondiscriminatory regulations that have only incidental effects on interstate commerce are valid unless ‘the burden imposed on interstate commerce is clearly excessive in relation to the putative local benefits.’” Or. Waste Sys., 511 US 93, 99 (quoting Pike, 397 US 137, 142).
As explained above, the FFT amendments appear to provide little if any local benefits with respect to reducing seismic vulnerability and reducing the city’s local contributions to global warming. The city’s other express goal of precluding export terminals is arguably the FFT amendments’ most potentially significant burden on interstate commerce. It is difficult to evaluate how much of a burden the city’s prohibition on new or expanded FFTs would have on the establishment of new export terminals, or on the flow of fossil fuels into and through any future export terminals in the city or region, because the record includes no attempt to conduct that evaluation. Nonetheless, it is clearly the city’s intent that the impact on the interstate and international market in fossil fuels will be significant, and that few or no fossil fuel export terminals will become established in the city or perhaps even in the region. See Record 206 (“As we all experienced with the [P]embina proposal last year, the [city’s] zoning code actually allows fossil fuel terminals as a warehouse and freight movement use in our zoning code today without any limit on the size of these terminals. We, of course, passed [Resolution 37168] saying we’re going in a different direction and today is the proposal to put that into city law, into our code.”)
Weighed against that burden are the putative local benefits. We understand the city and Riverkeeper to argue that precluding fossil fuel export terminals will provide local benefits in the form of reducing harm to its citizens caused by fossil fuel consumption in other countries, which are the final destination for fossil fuels that would be transloaded onto ships at the export terminals that the amendments effectively prohibit. The city argues that simply because “climate-change risks are ‘widely-shared’ does not minimize” a government’s interest in reducing contributions to global warming. Massachusetts v. EPA, 549 US 497, 522, 127 S Ct 1438 (2007) (concluding that Massachusetts has standing to file suit challenging denial of a petition for EPA rulemaking to adopt rules to reduce U.S. emissions that contribute to global warming and climate change). The city cites Rocky Mt. Farmers Union, 730 F3d at 1103, to argue that a state is free to regulate in-state commerce with the goal of influencing out of-state choices of market participants. The city also cites Pac. Merch. Shipping Ass’n, 639 F 3d 1154, for the proposition that a state’s interest in protecting the health of its residents from air pollution far outweighs the federal interest in the free flow of commerce.
However, none of the cited cases support the proposition that a city or state can take steps to slow or block the flow of commerce to other states or countries, in an effort to prevent the blocked commodities from being consumed in those countries, causing air pollution in those countries that contribute to global warming, which in turn will adversely impact the citizens of the city or state (along with everyone else in the world). We do not believe that such attenuated benefits, which would literally apply to every person on the planet, can be reasonably described as “local” benefits, for purposes of the Pike balancing test.
The Massachusetts case held that the impacts of global warming on the state (e.g., increased erosion to coastlines) gave the state standing to challenge denial of a petition for the EPA to issue rulemaking directed at reducing national carbon emissions, given the United States’ role as one of the world’s biggest contributors to carbon emissions. 549 US 497, 521-526. However, nothing in the case suggests that the state has a uniquely “local” interest or benefit in preventing the flow of fossil fuels across the state to other countries, in order to reduce the consumption of fossil fuels in those other countries, for purposes of the Pike balancing test.
As noted, Rocky Mt. Farmers Union involved state rules imposing low carbon fuel standards on fuel sold in the state. 730 F3d 1070. The standards took into account the full carbon costs of producing and transporting ethanol intended for the California market, and in so doing, also considered the origin of the ethanol. 730 F3d at 1088-93. As Riverkeeper argues, the Ninth Circuit observed that carbon emitted in manufacturing ethanol in Iowa or Brazil impacts Californians as much as carbon emitted in Sacramento, given the widespread impacts of global warming. Id. at 1081.38
38 However, the Ninth Circuit also found that California is “uniquely vulnerable to the perils of global warming,” due to its long coastline, and dry fragile forests and deserts. 730 F3d 1070, 1106.
The Ninth Circuit concluded that the fuel standards did not facially discriminate or discriminate in practical effect, but remanded to the District Court to determine if the impacts on interstate commerce clearly exceeded the putative local benefits under the Pike balancing test. Id. at 1100. The Ninth Circuit did not, of course, reach the remanded issue, but there is certainly language in the opinion suggesting that the “local benefits” to be balanced under Pike could include reducing the state’s unique vulnerability to the impacts of global warming, achieved in part using the state’s economic leverage to persuade out-of-state ethanol producers to reduce the carbon used to produce and transport fuel for the California market. Id.
However, the salient difference between Rocky Mt. Farmers Union, and the facts presented to us here is that California’s regulatory efforts were entirely directed at fuel intended for consumption in California. 730 F3d at 1079-80. In the present case, the city’s effective prohibition on fossil fuel export terminals (like the proposed Pembina project) is intended to slow or obstruct the flow of fossil fuel from other states to international markets, presumably to discourage the consumption of fossil fuels in other countries. At best, that effort, if successful, might slightly reduce consumption of fossil fuels in other countries, but there is no evidence or argument that the city would receive any particular local benefit in doing so. The city does not argue that it is “uniquely vulnerable” to global warming, or that it stands to gain or lose more than any other city in the world from infinitesimal reductions or increases in global warming.
Finally, Pac. Merch. Shipping Ass’n, 639 F 3d 1154, also does not assist the city. In Pac. Merch. Shipping Ass’n, the Ninth Circuit upheld under the Pike balancing test state rules requiring vessel operators calling at a California port to use low-sulfur marine fuels within the state’s territorial waters—rules intended to reduce coastal air pollution caused by burning high-sulfur marine bunker fuel that the record showed directly affected the health of the state’s citizens. Id. at 1159. Notably, the rules included an express exemption for vessels traveling through territorial waters toward non-state ports or markets (known as the “innocent passage” provision). Id. at 1158. The Ninth Circuit held that the impacts on interstate or international commerce did not clearly exceed the well-documented local benefits of preserving the health of the state’s citizens against coastal air pollution. Id. at 1180-1182. The present case differs, again, in that the FFT amendments do little or nothing to reduce or change local consumption of fossil fuels or local contributions to global warming, and the effective ban on fossil fuel export terminals would have, at best, only the most attenuated connection to reduced global warming and concomitant effects on the health of the city’s citizens.
Reduced to essentials, the FFT amendments represent the city’s attempt to isolate itself to some extent from the national and international economy in fossil fuels. See Chemical Waste Management v. Hunt, 503 US 334, 341-42, 112 S Ct 2009 (1992) (“The Court has consistently found parochial legislation of this kind to be constitutionally invalid, whether the ultimate aim of the legislation was to assure a steady supply of milk by erecting barriers to allegedly ruinous outside competition,” or a tax discriminating against interstate commerce even when such tax was “designed to encourage the use of ethanol and thereby reduce harmful emissions,” for “in all of these cases, a presumably legitimate goal was sought to be achieved by the illegitimate means of isolating the State from the national economy.” (Internal citations omitted.)). Given the city’s geographic and strategic position astride a major trade route, its attempts to isolate itself from the national and international market in fossil fuels have far greater potential impact on those markets than would the same efforts by a more geographically isolated city. Weighed against those potentially significant burdens on interstate commerce are local benefits from the legislation that, based on this record, appear to be attenuated at best. We conclude therefore that the burdens on interstate commerce are “clearly excessive” in relation to the putative local benefits, and the FFT amendments also fail under the Pike balancing test.
The ninth assignment of error is affirmed.
OAR 661-010-0071 provides that LUBA shall reverse a land use decision when the Board finds that the decision is unconstitutional. We concluded under the ninth assignment of error that the FFT amendments are inconsistent with the dormant Commerce Clause. Accordingly, reversal is the appropriate disposition.
The city’s decision is reversed.