PORTLAND PIPE LINE CORPORATION et al v. CITY OF SOUTH PORTLAND et al
ORDER and JUDGMENT By JUDGE JOHN A. WOODCOCK, JR. (jwr)
UNITED STATES DISTRICT COURT
DISTRICT OF MAINE
PORTLAND PIPE LINE
CORPORATION, et al.,
CITY OF SOUTH PORTLAND,
ORDER AND JUDGMENT
A pipeline operator challenges a local ordinance prohibiting loading crude oil
onto tankers and the construction of new structures for that purpose on the grounds
that it violates the dormant Commerce Clause and Foreign Commerce Clause of the
United States Constitution.
A state or local statute can violate the dormant
Commerce Clause if it (1) has an impermissible extraterritorial reach, (2)
discriminates against interstate or foreign commerce, (3) excessively burdens
interstate or foreign commerce, or (4) interferes with the federal government’s ability
to speak with one voice when regulating commerce with foreign nations. After a fourday bench trial, the Court concludes that the local ordinance does not violate the
dormant Commerce Clause or the Foreign Commerce Clause of the United States
The Complaint, Motion to Dismiss, and Answer
On February 6, 2015, Portland Pipe Line Corporation (PPLC) and the
American Waterways Operators (AWO) (collectively, Plaintiffs, PPLC) filed a
complaint with this Court against the city of South Portland (South Portland or the
City) and Patricia Doucette in her official capacity as the code enforcement officer of
South Portland (collectively, Defendants, the City).
Compl. for Declaratory and
Injunctive Relief (ECF No. 1) (Compl.). The Complaint contains nine counts: (1)
Supremacy Clause preemption of the Ordinance by the Pipeline Safety Act (PSA), 49
U.S.C §§ 60101 et seq.; (2) Supremacy Clause preemption of the Ordinance under the
President’s foreign affairs power; (3) Supremacy Clause preemption of the Ordinance
by the Ports and Waterways Safety Act, 33 U.S.C. Ch. 25 and 46 U.S.C. Ch. 37; (4)
preemption of the Ordinance under Article III, Section 2 of the United States
Constitution and the Constitution’s embedded principle of federal maritime
governance; (5) violation of the Commerce Clause of the Constitution; (6) violation of
the Due Process and Equal Protection Clauses; (7) deprivation of rights under the
Civil Rights Act, 42 U.S.C. § 1983; (8) inconsistency of the Ordinance with South
Portland’s comprehensive plan under Maine law, 30-A M.R.S. § 4352; and (9)
preemption of the Ordinance by Maine’s Oil Discharge Prevention Law, 38 M.R.S. §
On March 31, 2015, the Defendants filed a motion to dismiss the Complaint on
justiciability grounds. Defs.’ Mot. to Dismiss the Compl. Pursuant to Rule 12(b)(1)
(ECF No. 16); Mem. of Law in Supp. of Defs.’ Mot. to Dismiss Pursuant to Rule 12(b)(1)
(ECF No. 17). The Court denied the motion to dismiss on February 11, 2016. Order
on Defs.’ Mot. to Dismiss (ECF No. 29). Accordingly, the Defendants filed an answer
to the Complaint on February 29, 2016. Answer of Defs. City of South Portland and
Patricia Doucette (ECF No. 30).
Summary Judgment and Renewed Motions to Dismiss
On November 17, 2016, PPLC filed a motion for summary judgment. Pls.’ Mot.
for Summ. J. (ECF No. 87). That same day, the Defendants filed a consolidated
motion to dismiss pursuant to Rule 12(b)(1) and a cross-motion for summary
judgment. Defs.’ Consolidated Mot. to Dismiss Pursuant to Rule 12(b)(1) and Mot. for
Summ J. (ECF No. 88).
On May 11, 2017, the Court issued a second order on the justiciability issue,
ordering an evidentiary hearing. Interim Order (ECF No. 156). On August 24, 2017,
after a full day of testimony on August 9, 2017, the Court issued a third order on
justiciability, denying the motion to dismiss. Min. Entry (ECF No. 179); Order on
Defs.’ Consolidated Mot. to Dismiss under Rule 12(b)(1) (ECF No. 185) (Justiciability
Order). On October 20, 2017, the City filed another motion to dismiss after a public
announcement about the cancellation of a different pipeline project. Defs.’ Renewed
Mot. to Dismiss Pursuant to Rule 12(b)(1) (ECF No. 194). After oral argument on
November 21, 2017, on December 12, 2017, the Court issued its fourth ruling on the
justiciability issue the City first raised on March 31, 2015. Order on Defs.’ Renewed
Mot. to Dismiss (ECF No. 199).
Meanwhile, the Court received requests for leave to file amicus briefs on behalf
of both the Plaintiffs and the Defendants. On January 9, 2017, the Court granted the
motions of the amici curiae. Order on Mots. to File Briefs as Amici Curiae (ECF No.
135). Three briefs were filed on behalf of the Plaintiffs by the Chamber of Commerce
of the United States, the American Fuel and Petrochemical Manufacturers, the
American Petroleum Institute, the Association of Oil Pipe Lines, the International
Liquid Terminals Association, Portland Pilots, Inc., the Maine Energy Marketers
Association, and the Associated General Contractors of Maine. Brief of the Chamber
of Commerce of the U.S.A. as Amicus Curiae in Supp. of Pls.’ Mot. for Summ. J. (ECF
No. 136); Amici Curiae Brief of the Am. Fuel & Petrochem. Mfrs., the Am. Petro. Inst.,
the Ass’n of Oil Pipe Lines, and the Int’l Liquid Terminals Ass’n in Supp. of Pls.’ Mot.
for Summ. J. (ECF No. 138); Brief of Amicus Curiae Portland Pilots, Inc., Maine
Energy Mkt’rs Ass’n, and Associated Gen. Contractors of Me. in Supp. of Pls.’ Mot. for
Summ. J. (ECF No. 139). For the Defendants, the Conservation Law Foundation
filed a brief on January 10, 2017. Brief Amicus Curiae of the Conserv. Law Found.
(ECF No. 137). On January 23, 2017, PPLC and the City each filed a response to the
amicus briefs. Pls.’ Mem. of Law in Resp. to Amici Briefs (ECF No. 145); Defs.’ Resp.
to Briefs Amicus Curiae (ECF No. 146).
On December 29, 2017, the Court issued an order on the cross-motions for
summary judgment. Order on Mots. for Summ. J. (ECF No. 200) (Summ. J. Order).
The Court granted summary judgment in favor of the City on Count I (Supremacy
Clause—The Pipeline Safety Act), Count II (Supremacy Clause—Foreign Affairs),
Count III (Supremacy Clause—The Port and Waterways Safety Act), Count IV
(Maritime Preemption), Count VI (Due Process, Excessive Delegation, and Equal
Protection), Count VIII (Inconsistency with the City’s Comprehensive Plan), and
Count IX (State Preemption). Id. at 228. The Court denied summary judgment to
PPLC on all counts, and denied summary judgment to the City on Count V
(Commerce Clause) because there were genuine disputes of material facts. Id. The
Court preserved an ancillary issue by dismissing without prejudice on Count VII
(Civil Rights Violation) to the extent it demanded attorney’s fees and costs. Id.
The Bench Trial
Trial was scheduled for five days beginning on June 18, 2018. Notice of Bench
Trial (ECF No. 204). The parties filed four pre-trial motions on April 25 and May 11,
2018, which the Court addressed on June 1, June 13, and June 14, 2018. Defs.’ Mot.
for View (ECF No. 206); Pls.’ Mot. in Limine to Admit into Evidence Statements by
City Officials and Members of the Public (ECF No. 208); Defs.’ Mot. in Limine to
Exclude Irrelevant and Inadmissible Statements (ECF No. 209); Defs.’ Mot. in Limine
to Exclude New Summary Tables Produced by Pls.’ Without Underlying Data (ECF
No. 210); Order Deferring Ruling on Defs.’ Mot. for View (ECF No. 218); Order on
Mots. in Limine Concerning Statements of City Officials and Members of the Public
(ECF No. 230); Order on Mot. in Limine Concerning Summary Tables (ECF No. 232).
The parties also stipulated to certain evidentiary matters, including admitting into
evidence at trial virtually all of the testimony and exhibits admitted during the
August 9, 2017 hearing on justiciability. Joint Stipulation Concerning Trial (ECF
The Court presided over a bench trial from June 18 to June 21, 2018. Min.
Entry for Bench Trial (ECF Nos. 240, 242-44).
On July 13, 2018, the parties
submitted simultaneous post-trial briefs. Pls.’ Post-Trial Br. (ECF No. 251) (Pls.’ Br.);
Defs.’ Post-Trial Br. (ECF No. 252) (Defs.’ Br.). The parties responded to each other’s
briefs on July 23, 2018. Pls.’ Post-Trial Reply Br. (ECF No. 253) (Pls.’ Resp.); Defs.’
Post-Trial Reply Br. (ECF No. 254) (Defs.’ Resp.).
FINDINGS OF FACT
PPLC is pipeline company incorporated in Maine. Montreal Pipe Line Limited
(MPLL) is PPLC’s Canadian parent company.
Three Canadian companies own
MPLL: Shell Canada Limited, Suncor Energy Inc., and Imperial Oil Limited.
Imperial is ExxonMobil’s Canadian subsidiary. The American Waterways Operators
(AWO) is a nationwide trade organization that advocates for the interests of United
States tugboat, towboat, and barge owners and operators.
The city of South Portland is a municipal corporation organized pursuant to
the Constitution and general laws of the state of Maine. CITY OF SOUTH PORTLAND
CHARTER, http://www.southportland.org/files/4213/5994/7194/ CO_Charter.pdf. The
City is governed by a City Council of seven elected members serving staggered three
year terms, one of whom is elected to serve as mayor for one year. Id. §§ 207, 211.
The City Council appoints other officials like the City Manager. Id. § 227. Patricia
Doucette was the City’s Code Enforcement Director at the outset of this litigation.
In 1941, PPLC and MPLL began constructing and operating a twelve-inch
crude oil pipeline stretching from the harbor in South Portland, Maine (the Harbor),
through New Hampshire and Vermont and into Quebec, Canada, terminating at oil
refineries in Montreal East. Pls.’ Ex. 164. PPLC added to its pipeline system in 1950
by constructing and operating an eighteen-inch pipeline. PPLC added to its pipeline
system again in 1965 by constructing and operating a twenty-four-inch pipeline.
PPLC decommissioned and ceased operating the original twelve-inch line in 1982.
PPLC now uses the twelve-inch line as a sacrificial anode to protect its eighteen and
twenty-four-inch lines from external corrosion.
The nominal capacities of the
remaining eighteen and twenty-four-inch lines are approximately 192,000 barrels per
day and 410,000 barrels per day of crude oil, respectively. With a few exceptions of
short distances, all three of PPLC’s pipelines follow the same route, along the same
rights of way, and pass largely underground between South Portland and the
Montreal East oil refineries.
Since 1941, PPLC has operated the portion of the pipeline within the United
States, while MPLL has operated the portion within Canada. The only exception was
a period from 1987 to 1999, when PPLC and MPLL cleared the eighteen-inch line and
leased it to Granite State Gas Transmission, Inc., which operated the line for natural
gas transmission. The companies refer to this combined pipeline system as the
Portland-Montreal Pipe Line (PMPL).
In South Portland, PPLC maintains “Pier 2,” an oceanfront pier near Portland
Breakwater Light on the Harbor where tanker vessels historically have docked to
deliver crude oil. The crude oil is offloaded from marine tank vessels at Pier 2 and
transported to storage tanks in the City; four storage tanks are on two parcels close
to Pier 2 (the Waterfront Tanks) and nineteen are on Hill Street (the Main Tank
Farm) approximately 2.7 miles inland from Pier 2. The oil travels from Pier 2 and
the Waterfront Tanks through three lines running under Broadway and other streets
and Mill Cove to the Maine Tank Farm. PPLC’s eighteen-inch and twenty-four-inch
pipelines move the crude oil northward from the Main Tank Farm to refineries in
Montreal using six pumping stations across Maine, New Hampshire, and Vermont.
Access to the Harbor has been integral to PPLC’s success and longevity. The
Harbor is able to accommodate ships with up to fifty-two feet of draft and up to
170,000 deadweight tons of cargo. The Harbor has all-season ice-free conditions,
which permits shipment of cargo in and out of the Harbor year round. As recently as
2010—the last year the eighteen-inch line was in active service—PPLC accepted 132
deliveries from tankers. That year, PPLC transported 27,969,719 barrels of crude oil
northward to Montreal East through its eighteen-inch pipeline, an average of 76,629
barrels per day, as well as 72,231,154 barrels of crude oil northward to Montreal East
through its twenty-four-inch pipeline, an average of 197,894 barrels per day. At the
busiest times, the piers docked forty-one ships per month and the pipelines
transported 550,000 barrels per day. PPLC has been able to operate continuously
since 1941 in part due to its ability to respond and adapt to changing market
Geography and Zoning Districts
The City enacted a zoning ordinance. CITY
SOUTH PORTLAND CODE
ORDINANCES Ch. 27, available at http://www.southportland.org/our-city/codeordinance/. The City also maintains a map of its different development districts.
(Interactive City GIS Map).
Pier 2 is located in a district of the City zoned Shipyard (“S”) and within the
City’s Shoreland Area Overlay District. The City established the Shipyard zoning
to promote the Shipyard area in South Portland as a robust waterfront
center for office complexes, commercial uses, marine uses, and light
industrial activities. The Shipyard District S seeks to maintain the
conforming status of existing businesses, to prevent residential
development and associated land use conflicts, and to minimize the
impacts of development on adjacent zoning districts.
CITY OF SOUTH PORTLAND CODE OF ORDINANCES § 27-921.
The Waterfront Tanks are four above-ground floating roof oil storage tanks
proximate to Pier 2 on two separate parcels in the Shipyard zoning district. Pier 2
abuts Bug Light Park, a public waterfront park on Casco Bay. Bug Light Park
features a lighthouse on Casco Bay, parking facilities, and green space for dog
walking, children’s activities and general waterfront recreation. The Waterfront
Tanks abut residential neighborhoods zoned for residential use and designated by the
City’s Zoning Ordinance Residential (“G”).
The Main Tank Farm consists of nineteen above-ground floating roof oil
storage tanks occupying a 102-acre parcel at 30 Hill Street. The Main Tank Farm
parcel is zoned Commercial “C.” That commercially zoned area is composed of the
Main Tank Farm parcel only, surrounded by residential neighborhoods, schools, daycare centers, athletic facilities, and churches zoned “Residential Districts A & G.”
More specifically, the following are all adjacent to the Main Tank Farm:
The Community Center, which includes a recreational center, after-school
activities, and a summer camp with 500 children, is about 525 feet from the
nearest tank. Defs.’ Ex. 331; Interactive City GIS Map; Trial Tr. 567:12-25.
The High School building is about 775 feet from the nearest tank. Defs.’ Ex.
331; Interactive City GIS Map. The running track and football field are
about 225 feet from the nearest tank. Defs.’ Ex. 211, 213, 331; Interactive
Zoning Map; Trial Tr. 569:1-570:5
The South Portland Church of the Nazarene, which houses a preschool, is
about 400 feet from the nearest tank. Defs.’ Ex. 331; Interactive City GIS
Map; Trial Tr. 570:7-19.
The Dyer Elementary School is about 1,200 feet from the nearest tank.
Defs.’ Ex. 331; Interactive City GIS Map.
The Kaler Elementary School, which includes an outdoor playground area,
is about 275 feet from the nearest tank. Defs.’ Ex. 204, 331; Interactive City
GIS Map; Trial Tr. 570:20-571:11. The asphalt play area and basketball
hoop are about 190 feet from the nearest tank. Defs.’ Ex. 207; 331;
Interactive City GIS Map; Trial Tr. 571:16-572:4.
The 2008-2009 Oil Sands Proposed Project
In 2007-2008, PPLC determined that demand for transportation of crude oil
from the Harbor to the Montreal East refineries was likely to decline because the
boom in crude oil production in Alberta’s “oil sands” fields meant that Montreal East
refiners would need less foreign oil. Crude oil derived from “oil sands” is sometimes
referred to as “tar sands” or “tar sands oil.” In 2007-2008, PPLC moved to reverse
the flow of its eighteen-inch pipeline, but not its twenty-four-inch pipeline, to enable
the company to transport crude oil from Montreal to the Harbor and to load crude oil
onto tanker vessels for shipment to both United States and international
destinations. Defs.’ Ex. 64.
PPLC invested substantial money and effort in advancing its flow reversal
project, spending approximately $5 million on consultants to determine the necessary
changes to its infrastructure, to model the economics, and to identify necessary
permits. Modifications to PPLC’s existing pipeline infrastructure would be needed to
reverse the direction of the flow of its pipelines, including reversing and adding valves
to accommodate southbound crude oil transportation, installing pumping facilities,
and installing a vapor control system at the Harbor. PPLC later estimated the total
cost of a reversal project to be on the order of $100 million. Defs.’ Ex. 25 at 11.
Marketing the Proposed Reversal Project
In 2007-2008, PPLC began implementing its flow reversal project by
marketing its ability to deliver oil from Canada to the South Portland Harbor. PPLC
conducted a traditional “open season” process, whereby PPLC presented the details
of its pipeline capacity to interested shippers—oil companies who wished to move
their Canadian oil to the Harbor—to secure conditional offers for committed volumes
of crude oil. During the open season process, PPLC asked shippers to sign nondisclosure agreements to protect the confidentiality of PPLC’s plans, and many did.
Numerous shippers expressed interest in PPLC’s project during the open season
process. PPLC intended to obtain contractual commitments from interested shippers
to move specific volumes of oil. PPLC’s intention, consistent with industry practice,
was to use the contractual commitments to obtain financing to complete the
infrastructure changes associated with reversing the flow.
In late 2008, the financial crisis that caused the Great Recession crippled
financial markets and caused worldwide economic activity to decline. PPLC halted
work on the flow reversal project as a result of the financial downturn and a lack of
contractual commitments from shippers.
Permitting and the Vapor Destruction Units
PPLC contacted the U.S. State Department concerning permits for the flow
reversal project. The eighteen-inch line has operated under a permit since July 29,
1999, when the United States Department of State issued PPLC a permit
“Authorizing Portland Pipe Line Corporation to Convert an Existing Pipeline
Crossing the International Boundary Line Between the United States and Canada
from Natural Gas Service to Crude Oil Service” (Presidential Permit). Compl. Attach
2 Permit at 1-6 (ECF No. 1). The twenty-four-inch pipeline was the subject of a prior
Presidential Permit issued on January 13, 1965. Id. at 7-11. The President of the
United States issued this Permit concerning the construction and operation of PPLC’s
twenty-four-inch pipeline under his authority to regulate cross-border segments of
pipelines. The Presidential Permit for the eighteen-inch pipeline states:
Permittee shall comply with all applicable Federal and State laws and
regulations regarding the construction, operation, and maintenance of
the United States facilities and with all applicable industrial codes. The
permittee shall obtain requisite permits from Canadian authorities, as
well as the relevant state and local governmental entities and relevant
Id. at 3. The Presidential Permit focuses on the pipeline segment from “the vicinity
of North Troy, Vermont, to the international boundary line between the United States
and Canada . . .”, not the pipeline and its facilities south of the border crossing.
On July 18, 2008, the State Department responded that PPLC’s pipeline
reversal plan did “not constitute a substantial change from the scope of the
authorization” in the Presidential Permit previously issued to PPLC in 1999. Defs.’
Ex. 5. As such, the State Department informed PPLC that it was “not required to
seek a new or amended Presidential [P]ermit” in connection with the pipeline reversal
project; however, the State Department reserved the right to rescind its decision if
PPLC deviated significantly from the scope of its plan. Id.
On June 19, 2009, PPLC applied to the City’s Planning Board for Site Plan and
Shoreland Area zoning approval for various work associated with the 2008-2009
Project. Defs.’ Ex. 13. At the Main Tank Farm, PPLC sought to construct a new
building to house a 2,400 square-foot pump station, an outdoor electrical switchyard,
and related infrastructure for use as a “ship loading system.” Id. at 2. At Pier 2,
PPLC sought the City’s approval to drive new pilings and make other modifications
so that smaller barges and Handysize tank vessels could berth there, since Pier 2 was
designed for larger Aframax and Suezmax vessels. Id. On the approach to Pier 2,
PPLC sought to construct two Vapor Destruction Units (VDUs) to combust vapors
displaced from the holds of the marine tank vessels by the loading of crude oil. Id. at
VDUs control air emissions. As part of the 2009 proposed pipeline reversal
project, oil would be loaded onto a marine vessel, which causes air in the vessel’s
tanks to be displaced.
Because the displaced air contains petroleum vapors,
regulatory agencies require the removal of pollutants before the displaced air is
released into the atmosphere. Some vessels have their own air emissions control
equipment. The combustion stacks for the VDUs at Pier 2 were to be seventy feet tall
and twelve feet in diameter. Id.
PPLC received zoning approval from the City’s Planning Board for the work at
Pier 2 and the Main Tank Farm on August 25, 2009, but the City approval expired
on August 25, 2012, after an extension in 2011. Defs.’ Ex. 20. At no time during the
City’s 2009 processing of PPLC’s application for site review approval did city of South
Portland Planning and Development Director Charles Haeuser object to the VDUs
that PPLC proposed. Trial Tr. 562:10-25; Pls.’ Ex. 25 at 4. He suggested that the
VDUs might be decoratively lit as an aesthetic attraction. Trial Tr. 284:3-16.
The 2008-2009 Project required a New Source Review Air Emission License
and an amendment to PPLC’s existing Part 70 Air Emissions License from the Maine
Department of Environmental Protection to permit the increase in emissions over
previous operations. PPLC applied for the Licenses in February of 2009. Joint Ex.
43. On August 25, 2009, Maine DEP issued an Air Emissions License to PPLC
permitting additional air emissions from the two VDUs (the “2009 Air License”).
Defs.’ Ex. 14. The 2009 Air License set emissions limitations and authorized PPLC
to construct the VDUs based on emissions throughput capacities of the eighteen-inch
pipeline of 180,000 b/d of Syncrude (referred to as a light sweet crude because it is
less viscous and has a lower sulfur content) or 140,000 barrels per day of Cold Lake
crude (referred to as a heavy sour crude because it is more viscous and has a higher
sulfur content). Id. PPLC later voluntarily surrendered and voided the 2009 Air
Emissions License without beginning construction. Defs.’ Ex. 26.
PPLC identified other environmental permits it would need from various
Maine, Vermont, New Hampshire, Federal, and Canadian agencies. In 2009, without
having obtained all of the necessary permits, PPLC suspended further permitting on
the project. During the 2008-2009 process, no permitting authority denied PPLC any
of the permits it sought. PPLC did not seek all the permits that would have been
required, and did not receive approval for a pump station it proposed in Dunham,
Quebec. Of the thirteen permits PPLC initially sought, relevant authorities granted
ten and PPLC voluntarily ceased its pursuit of the other three.
The 2012-2013 Proposed Flow Reversal Project
When economic conditions improved in 2012 and 2013, as PPLC determined
that its prior forecasts had proved accurate concerning the increase in Canadian oil
production, PPLC once again considered reversing the flow of oil.
In 2011 and 2012, PPLC analyzed and considered several different design and
engineering characteristics of a potential project to reverse the flow of either the
eighteen-inch or the twenty-four-inch pipeline and to load crude oil onto marine tank
vessels in the City’s Harbor. PPLC considered modifying its earlier proposal to a
single stream light line of crude oil, instead of a design capable of carrying both heavy
and light crude oil. It considered ways to obviate the Dunham, Quebec pump station
for which PPLC never obtained approval from Canadian regulatory authorities.
PPLC considered using a vapor recovery unit (VRU) to capture hydrocarbon vapors
during the loading process, which would use different technology and have less
intrusive dimensions than the two 70-foot-tall John Zink VDUs proposed in 2009.
PPLC also considered omitting the Pier 2 upgrades that would have accommodated
smaller vessels such as barges.
Marketing the 2012-2013 Proposed Project
In 2011-2012, PPLC again began soliciting interest and held discussions with
numerous potential crude oil shippers, including Irving, Valero, Shell, Keyera,
Repsol, Suncor, Global, Imperial Oil, to attempt to obtain contractual volume
commitments on a reversed eighteen-inch or twenty-four-inch pipeline.
marketing efforts came on the heels of a potential announcement by Enbridge to
reverse its Line 9 to carry oil from west to east from Sarnia to Montreal. During this
time, PPLC was under less pressure to reverse the flow of its pipeline system because
it still was doing enough northbound business so that flow reversal had not become
In 2013, PPLC again solicited interest from potential crude oil shippers for
committed volumes of crude oil to be carried southward on the eighteen-inch or
twenty-four-inch pipeline. In 2013, PPLC received positive indications of interest
from potential shippers, many of whom signed non-disclosure agreements. In April
of 2013, PPLC sought to secure shareholder endorsement for PPLC to seek
expressions of interest from potential shippers concurrent with the TransCanada
PipeLines Limited’s Energy East Open Season then underway. PPLC’s Board of
Directors was not interested in pursuing a formal Open Season at that time.
For a variety of reasons, including insufficient market interest, PPLC did not
move forward with the reversal project. Sometime after April 2013 and before June
17, 2013, PPLC postponed seeking commercial support for any project to load crude
oil in the City. It considered writing off part or all of the $6.5 million it had already
spent planning and permitting the 2008 project.
The only portion of PPLC’s
investment it decided to write off concerned approximately $150,000 related to
PPLC’s work on the Dunham, Quebec pump station that did not result in approval.
PPLC monitored the progress of the Enbridge Line 9 reversal project, which did not
begin operating until December 2015.
Permitting the 2012-2013 Proposed Project
On July 27, 2011, the City approved PPLC’s application to extend its planning
board approval from 2009 for an additional year. Pls.’ Ex. 90.
Since the 2008-2009 project, the politics around a Presidential Permit for the
U.S.-Canada border crossing had shifted. Between 2012 and 2014, twenty-one
members of Congress, including U.S. Senator Susan Collins, U.S. Senator Angus
King, U.S. Representative Chellie Pingree, then-U.S. Representative Michael
Michaud, all representing Maine, as well as the entire Vermont Senate and House
delegation and the entire New Hampshire Senate and House delegation, requested
that the State Department require a new Presidential Permit and conduct an
Environmental Impact Statement should PPLC seek to transport Canadian tar sands
oil through the pipeline.
On August 13, 2013, a representative of the United States Department of State
sent a letter to counsel for PPLC backtracking on the 2008 letter which deemed flow
reversal to be a non-substantial change for purposes of a Presidential Permit. Defs.’
Ex. 23. The new letter explained that it was the State Department’s “understanding
that [PPLC] has no current plans to change the operation of either pipeline” and
instructed PPLC “to provide information for the Department for its review and
consideration in advance” before “execut[ing] any plans to change the operation of
either pipeline.” Id.
Other cross-border pipeline projects were also under review by the U.S. State
Department. The Keystone XL Pipeline proposes to transport western Canadian
crude oil from Hardisty, Alberta to Steele City, Nebraska. President Obama’s State
Department rejected the Keystone proposal in part because they determined it would
negatively impact foreign policy and national security. Defs.’ Ex. 131. President
Trump later reversed that decision and directed the State Department to issue a
presidential permit for the Keystone XL Pipeline. Presidential Mem. Re. Construction
PPLC ultimately ceased work on the 2012-2013 flow reversal project in 2013.
The Crude by Rail Proposal
In 2012, PPLC studied a potential project, proposed by Pan Am Railways, to
transport “Bakken/other U.S. sourced crude” by rail into Rigby Yard in the City.
Defs.’ Ex. 25 at 6-10, 171. The rail proposal would have connected the Rigby Yard
rail terminal with PPLC’s Main Tank Farm on Hill Street by a short newly
constructed pipeline on the Railroad’s existing Right of Way, which is theoretically
feasible from an engineering perspective. In 2013, PPLC was still contemplating the
proposal to transport crude oil by rail to the Main Tank Farm and then loading crude
oil onto marine tank vessels in the City. Defs.’ Ex. 91, 93, 98, 102. By June 2015,
PPLC informed its board of directors that “interest has diminished in developing new
rail capabilities.” Defs.’ Ex. 129 at 39.
PPLC never proposed transporting oil from the Maine Tank Farm to Rigby
Yard for transport out of South Portland via rail. While such a project would be
technically possible, it would cost more to construct the interconnection, and it would
be more expensive per barrel to transport oil from South Portland to most markets
by rail than by tanker.
The Waterfront Protection Ordinance
In 2013, political opposition began to develop to the flow reversal project from
environmental groups and the South Portland City Council. Advocates opposing the
flow reversal project, led by a group called Protect South Portland (PSP), obtained
sufficient signatures to place the “Waterfront Protection Ordinance” (WPO) on the
November 2013 ballot in South Portland. Pls.’ Ex. 8-9. The WPO proposed amending
the City’s zoning ordinance to (1) specify that petroleum facilities which are permitted
within the Shipyard District were those “for the unloading of petroleum products from
ships docking in South Portland . . . .” and (2) that “there shall be no enlargement or
expansion of existing” petroleum facilities in the Shipyard or Commercial Districts,
and (3) “no new or expanded facility shall be constructed on an existing pier. . . .” Pls.’
Ex. 9 at 3.
In 2013, PPLC sent an “Open Letter to the Residents of South Portland”:
Perhaps you signed a petition to get the WPO on the ballot, because you
were told the WPO is designed to “stop tar sands” and “smokestacks”.
These misleading references relate to a prior proposal which was never
initiated or completed, and are designed to scare you into thinking that
our company has an imminent project to bring tar sands to South
Portland or smokestacks to Bug Light Park. Let us be clear - there is no
such project proposed, pending or imminent. In fact, recently, as a good
faith measure, we took the rare step of voluntarily surrendering our
final permit relating to that prior proposal, as further reassurance to the
community we care so deeply about that there is no tar sands project.
Defs.’ Ex. 24.
Many supporters of the WPO expressed concerns to City officials about
heightened risk of spills of crude oil derived from tar sands, or more severe health
and environmental impacts of those spills as compared to other types of crude oil. For
[K]eep[ ] us from becoming the next Kalamazoo, Michigan, or
Mayflower, Arkansas, and I have a hard time pronouncing the
unfortunate town in, in Quebec, but I – that needs to be brought up as
well. Pls.’ Ex. 102 at 1:25:31-1:26:17.
I really have no quarrel with the pipeline and respect their efforts to
run a sound company. I just don’t want that pipeline up the street
carrying tar sands into our community to load ships besides Bug Light
Park. . . . Recent events across North America have alerted me and many
of my fellow citizens to the unacceptable risks involved in transporting
tar sands, via pipeline, through our communities and our watersheds.
In 1997 [PMPL] dumped 2500 gallons of fuel of oil, that leaked, that
spilled from their existing pipeline and at that point it was, what 45, 47
years old. We’re talking about a 62-year-old pipeline now. And to use
the analogy of a heart, were we to pump some sort of corrosive in to our
blood, in to our veins and arteries, pump through our heart at a faster
rate, I don’t think we’d last very long or as long as we normally would
were we not to do so. Pls.’ Ex. 103 at 2:36:37-2:37:50.
Many of the same supporters and others expressed concerns to City officials
about other goals and fears, including air pollution, aesthetics, climate change, nonindustrial redevelopment, and nuisances from pipeline operations:
“I face the Portland Pipe Line. I smell the fumes every single day, and
I raise two kids there.” Pls.’ Ex. 102 at 1:26:54-1:28:25.
“The extraction, transport and refinement of the oil that remains is
extremely damaging to our environment both in terms of its toxicity and
its contribution to global warming. Just as communities long ago had to
adapt when whaling was replaced by fossil fuels, we as a culture must
make this shift from fossil fuels to renewable energy. . . . Portland Pipe
Line is trying to bully us in to allowing a very toxic substance to pollute
and potentially contaminate South Portland.” Pls.’ Ex. 103 at 2:18:502:20:45.
“They won’t even reveal what’s in that mix. Storing it in a tank farm
where it will poison our school children and teachers and then sending
it through our city in very old pipes that are unmapped, no one knows
where those pipes run exactly, except the Pipeline of course, and hope
the Coastguard. I know our Fire Chief doesn’t have a map. They will
send that stuff to the pier when they plan to burn off toxic vapors to
pollute our air, it says dire implications for the land use and our
waterfront. And how dare they suggest that sending a product to Bug
Light Pier for export, the world’s dirty oil parts, remember none of this
stays in Maine, we’re a shipping corridor, that when it spills it weathers
quickly and it sinks in water to contaminate our special places and
poison our Casco Bay fisheries.” Id. 3:37:50-3:39:04.
Those threats include fouling our drinking water supply, endangering
our children and teachers adjacent to the Hill Street tank farm with
fumes from up to 126 million gallons of tar sands oil, polluting our air
by burning off toxic vapors on our waterfront and threatening Casco Bay
and our special spaces along the bay with a possible tar sands oil spill.
The Waterfront Protection Ordinance presents an opportunity for the
citizens and taxpayers of our City to create a stronger and diverse
economy, protect our investment in our schools, protect our property
values, and finally, have a seat at the table of power. Remember, that
if you do not have a seat at the table, you will be on the menu. Thank
you. Pls.’ Ex. 104 at 0:25:50-0:26:50.
My real estate expertise tells me that if you don’t pass the [WPO], you
will have unintended consequences which won’t bode well for South
Portland. The first consequence? Immediately diminished property
values if the pipeline reversal scheme goes ahead and loading of tar
sands oil starts at Bug Light Pier. I’ve discussed the issue with realtors,
[inaudible] residential neighbors near the proposed smokestacks will
take a significant, negative hit on their property values. The previously
approved smokestacks? They’re not small. 70 feet tall. That’s
equivalent to seven-story buildings. Those homes and condos closest
would naturally be hit the hardest, but entire neighborhoods will be
You also have a second unintended consequence of
diminishing the appeal of South Portland to new buyers. Can you
imagine the family of a child with asthma looking to relocate to South
Portland and learning of these smokestacks and the tank farms?
They’re draw to your beautiful city quickly lessens. And remember,
that’s 10% of all children. With Maine having a higher burden of asthma
than the rest of the nation, new smokestacks bring more air pollution
closer to home. By bringing in tar sands oil to South Portland, you have
other areas of town impacted as well. With tank farms abutting Kaler
School and in the vicinity of Dyer, the High School, the Light House
School, and the Community Center, those property values are affected
as well. As word gets out about benzene and other gases leaking out of
these tanks as children attend school right next to the facility 180 days
of the year? After all, the company is seeking to renew their license to
increase their emissions three-fold from 81.9 tons of VOCs to 220 per
year. Again, what person would want to move to a town knowing that
their child is becoming a statistic and an experiment in the new world
of tar sands oil spillage? In your own Comprehensive Plan, it states
South Portland’s overall property value, which dropped over 10% from
2009 to 2010, I believe the construction of these smokestacks and filling
in the Hill Street tank farm with tar sands oil will hinder that recovery
from those depressed valuations, as well as further suppress the real
estate market. . . . As a developer, I’m not going to buy a property in a
neighborhood that has smokestacks in its viewshed or is downwind of it.
As a result of South Portland’s unique connection and proximity to
Canada, local businesses may have the opportunity to profit greatly
from oil sands. The city may benefit from the tax income generated. A
relatively small number of long-term jobs may be created, and the
generous philanthropic activities of the petroleum industry may expand.
These are some of the local potential benefits and, as was stated earlier,
there are risks. Id. 1:09:30-1:10:54 (discussing risks from spills,
environmental impact of tar sands extraction).
As these examples indicate, a small number of those public comments preferred local
businesses or expressed greater skepticism of the reversal project because the oil
merely flowed through South Portland for export to other regions.
One of the WPO’s drafters explained why the proponents chose to focus on the
act of loading, rather than an outright prohibition on the shipment of oil derived from
Well, the original draft outright prohibited tar sand, we’re dealing with
stuff which goes through the pipeline and we’re dealing with safety
issues in large part over spills and alike. We even had a bonding
mechanism and all kind of other things which we were gonna do. But
the federal pipeline safety act seems to pre-empt all of that stuff. So, all
we can deal with is the local consequence of this stuff arriving through
the pipeline, we can’t actually regulate what’s in the pipeline or deal
with safety, even spills from the pipeline, we can’t even deal with that
while it’s in the pipeline. Pls.’ Ex. 103 3:54:30-3:55:27.
On August 19, 2013, the City Council opposed the WPO by a vote of five to one,
sending the proposal to the voters. Six of the seven City Councilors indicated that
they generally shared the WPO proponents’ concerns about the air quality, water
quality, aesthetics, odors, climate change, and property value impacts of crude oil
derived from tar sands and PPLC’s 2008-2009 project, but they did not agree with all
of the wording of the WPO and believed there were unintended consequences on other
businesses in South Portland.1
On November 5, 2013, South Portland residents voted against passage of the
WPO by a 4453 to 4261 margin, or 51.1% to 48.9%.
The City Council held a series of workshops beginning on November 6, 2013,
the day after residents voted against the WPO, to discuss a moratorium on the
importation of oil sands crude into South Portland. Pls.’ Ex. 14. City Counselors
made similar comments to those of the public during before the WPO vote about the
See generally, Summ. J. Order Part II - Statement of Facts. The Court briefly summarizes the
portions of the record it already addressed at summary judgment, such as the public statements of the
City Councilors. Given the length of the record, the Court gives a few representative examples of
public and official comments in this order.
air quality, water quality, aesthetics, and development impacts of PPLC’s proposal to
load crude oil derived from tar sands at the Harbor.
On December 16, 2013, the City Council approved a 180-day “Moratorium on
Development Proposals Involving the Loading of Oil Sands/Tar Sands Products onto
Tank Vessels Docking in South Portland.” Pls.’ Ex. 15. The stated goal of the
temporary Moratorium was to allow the City Council time to seek:
such professional advice and assistance as it deems necessary and
appropriate, [to] study the Code of Ordinances to determine the land
use, environmental and other regulatory implications of future proposed
development proposals involving the loading of oil sands/tar sands
products onto marine tank vessels docking in South Portland and
consider what regulations might be appropriate for such activity.
Id. at 5.
The Draft Ordinance Committee
The South Portland City Council created a “Draft Ordinance Committee”
(DOC), Pls.’ Ex. 16, charged with recommending ordinance amendments to:
protect the public health and welfare from adverse or incompatible land
uses, or adverse impacts to local air, water, aesthetic, recreational,
natural, or marine resources, that could result from modifications to
existing storage, handling, or processing facilities, or construction or
installation of new facilities or equipment intended to allow the
exportation of unrefined petroleum products, including the loading of
unrefined petroleum products onto marine tank vessels docking in
Pls.’ Ex. 21. In a Request for Qualifications, the City sought “a consulting firm or
individual to prepare and facilitate a committee based process to explore the
development of ordinance language to address development proposals involving oil
sands/tar sands products.” Pls.’ Ex. 13.
David Cyr, then-president of PPLC, sent a letter to the Mayor of the South
Portland City Council asking for a representative of PPLC to be included as a member
of any ordinance amendment study committee. Pls.’ Ex. 7. Many public commenters
opposed naming representatives from the petroleum industry as members of the
DOC. For example, one commenter said, “[B]y including oil company representatives
on a committee, and the goal of the committee is indeed to write a new ordinance that
will block tar sands, that’s like inviting people from the tobacco companies to help
write an ordinance that’s gonna block tobacco sales to minors.” Pls.’ Ex. 110 at
0:14:02-0:20:02. In the meetings leading up to the creation of the DOC, several City
Councilors expressed their desire that the DOC craft an ordinance that would keep
tar sands oil out of South Portland and stand up to an inevitable legal challenge. The
City Councilors sought an ordinance that would not be preempted by federal statutes
or invalidated under the dormant Commerce Clause.
The City appointed three individuals to be members of the DOC: Russell
Pierce, a Portland attorney and commercial litigator at Norman Hanson & DeTroy
who had represented the Natural Resources Council of Maine; Michael Conathan, the
Director of Ocean Policy at the Center for American Progress, a former staff member
to Sen. Olympia Snowe and the Republican majority on the U.S. Senate
Subcommittee on Oceans, Atmosphere, Fisheries, and Coast Guard within the
Committee on Commerce, Science, and Transportation, and Director of Ocean Policy
at the Center for American Progress; and David Critchfield, a financial professional,
environmental compliance manager at manufacturing facilities and timber sites, and
former environmental regulatory specialist for International Paper, including at the
Androscoggin Mill. Pls.’ Ex. 17-19. The City did not appoint a representative of PPLC
to the DOC and no PPLC representative served on the DOC. The DOC invited PPLC
to participate in the hearings and to provide it with comments and information, but
PPLC refused “to serve as a resource for the Draft Ordinance Committee,” or engage
with it because PPLC believed the DOC had prejudged the issue and their motives
were pretextual. Defs.’ Ex. 122.
The DOC held its first meeting on February 6, 2014. The DOC reconfirmed its
charge from the City Council by drafting a written mission statement. The DOC held
19 meetings totaling more than 60 hours. On July 1, 2014, the DOC presented the
text of the Ordinance and a report of its recommendations. Defs.’ Ex. 200. The DOC
recommended the City designate the Maine Tank Farm a non-conforming use within
the adjacent residential neighborhoods, and that the City Council work to install an
ambient air quality monitoring network. Id. at Part II, IV.
The Clear Skies Ordinance
Ordinance No. 1-14/15, the “Clear Skies Ordinance,” passed the City Council
on its first reading on July 9, 2014, by a vote of six to one, and passed the City Council
on its second reading on July 21, 2014, by a vote of six to one. Joint Ex. 6.
The Ordinance makes the “storing and handling of petroleum and/or petroleum
products” for the “bulk loading of crude oil onto any marine tank vessel” a prohibited
use in the Commercial “C” and Shipyard “S” zoning districts in the City. Id. 8-10.
The Ordinance states that “there shall be no installation, construction,
reconstruction, modification, or alteration of new or existing facilities, structures, or
equipment, including but not limited to those with the potential to emit air
pollutants, for the purpose of bulk loading of crude oil onto any marine tank vessel”
in the Commercial “C”, Shipyard “S”, and Shoreland Area Overlay zoning districts in
the City. Id. The Ordinance provides, “No building or structure shall be erected,
altered, enlarged, rebuilt, or used and no premises shall be used for the “bulk loading
of crude oil onto marine tank vessels” in the Industrial “I” and Non-Residential
Industrial “INR” zoning districts in the City. Id. 11-14.
The City Council made a series of legislative findings in the Ordinance,
The Community Vision as set forth in the Comprehensive Plan
“embraces a diverse mixed-use waterfront community; a green city that
protects its air quality; an education community where schools and a
waterfront college campus are not impacted by incompatible adjacent
uses, including new or expanded sources of significant air pollution; and
a city that is a desirable destination and a desirable, livable
community.” Id. at 2.
“The proposed bulk crude oil loading operation would have constituted
a new land use, which has never been a traditional land use within the
City, and which would have significantly impacted future development
of the City’s waterfront, air quality, scenic ocean views, and land-use
planning vision.” Id. at 3-4.
“The bulk loading of crude oil onto marine tank vessels would likely
result in an increase in emissions” of Hazardous Air Pollutants (HAPs)
and Volatile Organic Compounds (VOCs) from oil storage tank facilities
within the City,” some of which are known to be or may reasonably be
anticipated to be “acutely or chronically toxic, carcinogenic, mutagenic,
teratogenic, or neurotoxic” Id. at 4.
PPLC’s tank facilities are in close proximity to elementary schools,
preschools, the South Portland High School and athletic fields, a
community center, a large senior city housing facility, and numerous
residential districts and that these areas would experience air quality
impacts associated with the bulk loading of crude oil. Id. at 5.
The two proposed 70-foot VDUs to be constructed under PPLC’s 20082009 project would “be located in close proximity to city parks with
diverse recreational uses, including Bug Light Park, Willard Beach,
Fisherman’s Point, and the Greenbelt Walkway,” and would “likely be
among the tallest industrial structures on the South Portland
waterfront and, due to their size and character, would negatively impact
waterfront scenic values and property values.” Id. at 5-6.2
Among the Ordinance’s stated purposes are to “encourage the most appropriate
use of land throughout the municipality;” “to protect citizens and visitors from
harmful effects caused by air pollutants;” “to promote a wholesome home
environment;” and “to conserve natural resources.” Id. The City Council stated in
the Ordinance that “the City intends to protect its citizens and visitors from harmful
effects caused by air pollutants.” Id. at 4, 7.
Current Market Conditions and the Future of the Pipeline
If PPLC cannot reverse the flow of either the eighteen or the twenty-four-inch
line, or both, it likely cannot survive as a business. The recent increase in the
production of Alberta oil sands has reduced the need for Canadian oil refiners to
import crude oil. PPLC’s eighteen-inch line has been completely idle since 2011 as a
result of insufficient demand for northbound shipping. Although PPLC’s twenty-fourinch line remains active, a trickle flows through it.
With the exception of one
shipment PPLC arranged to perform an inspection required by regulation, there have
been no northbound shipments since August 4, 2017. As of July 2016, PPLC had only
One irony in this case is that Bug Light Park consists not only of city-owned land, but also of
PPLC-owned land that PLLC has allowed the City to use as a park in exchange for a City agreement
not to tax the PPLC portion of Bug Light Park. Bug Light Park necessarily attracts people, including
elderly and young people, who are more susceptible to respiratory problems. Here, the City cited the
public use of Bug Light Park as a reason to uphold the Ordinance. PPLC could be forgiven for
concluding that its good deed in allowing public use of its land at Bug Light Park is being punished.
ten of its twenty-three crude oil storage tanks in service, and it has taken more out
of service since then. There is no prospect of PPLC receiving significant shipments
of oil in the future, thanks to the glut of production in western Canada.
PPLC’s plan to reverse the flow of its pipeline faces some economic obstacles.
Financing will depend on commitments from shippers, which in turn depend on
certain key market conditions. There must be sufficient volumes of oil capable of
arriving at the Montreal end of PPLC’s pipelines for transport to South Portland, and
market prices must support southbound shipment.
Crude Supply in Montreal
Canada is currently in the midst of expanding and repurposing its pipeline
infrastructure to transport crude oil from western Canada to other markets.
Repurposing existing pipeline is increasingly more logical and valuable as an
alternative to new pipeline construction, given the substantial time and costs
associated with new pipeline construction. In December of 2015, Enbridge completed
a project to reverse the flow of crude oil in its Line 9 from Sarnia to Montreal. See
Defs.’ Ex. 185. The reversed Line 9 has a nameplate capacity to carry a maximum
300,000 b/d of crude oil from west to east. By Canadian law, five percent, or 25,000
b/d of that capacity must remain uncommitted to serve the spot market. That spot
market capacity could not be committed for southbound shipment on PPLC’s pipeline.
Enbridge Line 9 is the only pipeline currently constructed that could feed PPLC’s
pipeline reversal project. Line 9 currently carries a mix of U.S. sourced and Canadian
crude oil. Trial Tr. 183:7-193:21.
Historically, PPLC delivered crude oil to refineries in Montreal.
Montreal refineries include the 137,000 b/d capacity Suncor Refinery in Montreal,
Quebec, Canada and the 265,000 b/d capacity Valero Jean Gaulin Refinery in Levis,
The Suncor Refinery and Valero Jean Gaulin Refinery have
executed binding Transportation Shipping Agreements with “take or pay
commitments” for roughly 220,000 b/d.3 The actual flows through Line 9B confirm
these estimates: on average over the last twenty-eight months, roughly 219,000 b/d
flowed through Line 9 to Montreal. Pls.’ Ex. 4. Under the “take or pay” commitments,
if the Suncor Refinery or Valero Jean Gaulin Refinery does not take delivery of its
committed share from Line 9B, it still must pay the pipeline tariff regardless of actual
use. After subtracting 220,000 b/d that are currently committed to other contracts
and the 25,000 b/d that must remain uncommitted by Canadian law, this leaves
55,000 b/d presently available from Line 9’s nameplate capacity for PPLC to enter
into take or pay commitments with shippers for a reversal project.
On the one hand, Line 9’s nameplate capacity may overestimate the real
availability of crude oil capable of arriving in Montreal via pipeline.
maintenance and other down time, most oil industry infrastructure does not operate
at maximum capacity the whole year. A typical maximum sustainable volume rate
Sarah Emerson, the City’s expert, initially testified that there were three committed shippers
on Line 9 into Montreal, meaning that virtually all of Line 9’s 275,000 b/d of available capacity is
committed. The Court is no longer convinced by her conclusion. In its August 24, 2017 order, the
Court described Ms. Emerson as a “true expert.” Justiciability Order at 4. The Court continues to be
impressed with Ms. Emerson’s expertise.
But any expert opinion is only as good as the accuracy of the information upon which she relies.
As became apparent during cross-examination in June, 2018, this portion of her analysis was heavily
reliant on cobbled together sources which proved insufficient to reach a reliable conclusion about the
extent of the contractual commitments on Line 9.
is ninety percent of nameplate capacity. Trial Tr. 396:25-397:15; Defs.’ Ex. 223B.
While PPLC contemplated larger volumes of oil for its previous reversal projects, it
intends to serve even this limited flow because it has no alternative but to shut down
On the other hand, there is roughly 60,000 b/d of additional available capacity
to transport crude oil from Western Canada by rail to Montreal for southbound
shipment on PPLC’s pipelines. While the present cost of that rail transportation is
too high to compete with marine transportation of crude from alternate sources such
as the North Sea or West Africa, it may be economical in the future. Pipelines are
also capable of expanding their nameplate capacities by transporting less viscous oil,
modifying their pumping equipment, or using additives to boost flow rates. Similarly,
PPLC hoped TransCanada’s Energy East pipeline could feed a reversal project, and
while it could be revived in the future, that project is currently cancelled. The City’s
expert testified that new pipeline projects are expected to come online in Western
Canada in the next few years that will likely divert all new production in Western
Canada before it could reach Line 9 and a reversed PPLC pipeline. But as Energy’s
East’s cancellation indicates, the expected timelines or even the ultimate success of
those projects is not assured.
PPLC is willing to place a bet with its infrastructure to have the ability to ship
southward whatever volumes of crude oil become available.
Transport Costs and Price Differentials
The price differential between the Syncrude shipped through the pipeline and
a substitute crude, such as Brent, must also be wide enough to cover the
transportation costs, or purchasers will choose an alternate supply. The transport
costs from Western Canada through the PMPL system to refineries in North America
and Europe is roughly $12 per barrel. Defs.’ Ex. 223F. PPLC’s previous reversal
efforts in 2008 and 2012 closely correlate to periods of particularly favorable price
conditions. See Defs.’ Ex. 197. The 2012 average price spread between Brent and
Syncrude was sufficient to cover the transport costs, but the average price spread
declined in the years after 2012. Id. The 2018 year-to-date average spread is roughly
$7 per barrel, but the price over the last few months has been over $12 per barrel,
which would be sufficient to support a reversal project if those price conditions hold.
Trial Tr. at 421.
The Ordinance stands as an obstacle to PPLC’s efforts to obtain permits and
credibly market its services to transport crude oil from north to south. Without the
impediment of the Ordinance, PPLC would take immediate steps to implement its
desired flow reversal.
While it may not be a sure bet that global prices will
sustainably support the transportation costs of southbound pipeline shipping soon,
PPLC intends to place that bet and reverse its pipeline infrastructure. Oil prices are
volatile, and there is a substantial likelihood that prices will break in PPLC’s favor
so that it will succeed in reversing the flow.
Unknown Details Regarding a New Reversal Project
A future project to reverse the flow of the eighteen-inch or the twenty-four-inch
pipeline would likely be different from the 2008-2009 proposal. A future project to
load crude oil in the City would not necessarily use PPLC’s eighteen-inch pipeline, as
PPLC proposed in 2008-2009; it could use the twenty-four-inch pipeline or both
pipelines. PPLC continues to rely on the specific plans it developed in 2008-2009 as
the starting point for how it would implement any future flow reversal project.
If PPLC is legally allowed to pursue a flow reversal project, it will update its
previous plans in light of new technology and customer needs. A future project to
load crude oil in the City may not use the “John Zink” brand VDUs that were planned
and permitted by Maine DEP in 2009. A future project would reevaluate the best
technology for emissions control from crude oil loading, which has advanced since
2009. The 2009 proposal contemplated simultaneous northbound and southbound
operations, and thus required higher flow rates to move ships in and out of Pier 2
PPLC now expects a reversal project would only involve
southbound flow, allowing it to reduce the planned loading rates by as much as half.
By reducing loading rates, less vapor would be expelled per unit of time and smaller
VDUs may be sufficient. PPLC would also consider using VRUs, rather than VDUs.
If PPLC were to construct a project to load crude oil in the City, it would be willing to
move any type of crude, light or heavy.
Since 2013, other than pursuing this lawsuit, PPLC has not taken any formal
steps to activate its plan to reverse one or both pipelines, such as analyzing the
market demand for oil or the regulatory or economic feasibility. If PPLC were to
construct a project to load crude oil in the City, it would seek new permits from the
necessary state and local authorities in Maine, New Hampshire, Vermont, and
Canada. PPLC expects that it will not require a pump station in Dunham, Quebec
as originally planned in 2009. If PPLC is permitted to pursue a flow reversal project,
it will plan the infrastructure changes after determining the type of crude oil its
customers would like to move as well as the speed and capacity the company seeks to
achieve on its lines.
Air Emissions and Health Effects
PPLC’s existing Part 70 Air Emissions License regulates emissions from
PPLC’s twenty-three oil storage tanks and related boilers and emergency generators
and classifies it as a major stationary source of emissions. Defs.’ Ex. 30. Under its
existing Part 70 Air Emissions License, Maine DEP authorizes PPLC to emit 1.8 tons
per year (“tpy”) of Sulfur Dioxide (SO2), 5.1 tpy of Nitrogen Oxides (NOx), and 220 tpy
of VOCs. Id. PPLC’s oil storage tanks utilize a floating roof design, but some vapors
can still escape, termed “fugitive emissions.” VOCs in crude oil contain benzene,
toluene, ethylbenzene, and other contaminants classified by the Environmental
Protection Agency as “Hazardous Air Pollutants” (HAPs). A reversal project would
create increased VOCs and HAPs fugitive emissions from renewed usage of the Main
Tank Farm and Waterfront Tanks over the level of emissions in recent years, Trial
Tr. 770:9-17, but emissions would not necessarily be higher than the historic levels
when the tanks were more heavily utilized.
PPLC’s unloading operations do not require VDUs. Unloading crude oil into
pipelines does not require releasing air that has become laden with hydrocarbon
vapors. Loading crude oil onto ships requires releasing air laden with hydrocarbons
because the liquid crude oil displaces the air from inside the ship’s holds. To load
crude oil onto ships, VDUs or VRUs are needed to meet air emissions requirements.
PPLC’s 2008-2009 proposal called for the construction of two VDUs and would result
in higher concentrations of SO2, NOx, and HAPs (e.g., benzene, toluene, hexane, etc.)
emissions from vapor combustion. The Air License from the 2009 proposed project
would have permitted PPLC to emit from the VDUs 21.0 tpy of SO2, 18.7 tpy of NOx,
and 39.0 tpy of VOCs, in addition to the permitted emissions from the Main Tank
Farm. Defs.’ Ex. 14.
Helen Suh, Ph.D., an expert in environmental epidemiology, testified that
based on studies in locations where there have been oil refineries, increased VOC and
HAP emissions from the proposed VDUs and Main Tank Farm would present an
increased risk of hospital admissions and emergency department visits for City
residents for asthma and upper airway inflammation. Trial Tr. 768:14-23. Higher
concentrations of HAP emissions caused by the crude oil loading would also increase
City residents’ risks of developing cancer and other serious human health effects. Id.
762:1-14. Among the HAPs, in particular, benzene is “the most famous” of the known
human carcinogens. Id. 761:12-20, 763:7-21. There is no safe human exposure level
to benzene. Id.
Increases in SO2 and NOx emissions along the waterfront compared to existing
conditions will increase the risk of adverse respiratory outcomes, particularly for City
residents classified as “sensitive receptors”: young children, the elderly, and
underrepresented minority groups. Id. 758:13-25.
Any pipeline reversal project proposed by PPLC would have to demonstrate
compliance with federal and state air emissions standards in effect at the time of the
The National Ambient Air Quality Standards (NAAQS),
however, are not meant to be a zero-risk standard. Trial Tr. 754:18-23. For many of
the regulated pollutants, increased public health risks result from increased
emissions, even when the resulting ambient levels remain below the NAAQS. Id.
One way to portray the magnitude of air emissions impacts is to examine the
emissions licenses for facilities in South Portland and the surrounding towns of Cape
Elizabeth, Portland, Scarborough, and Westbrook.
There are sixty-two licensed
emissions sources located within those cities and towns. Pls.’ Ex. 43. A number of
these sources located within South Portland and the contiguous cities and towns have
emissions similar to or greater than PPLC’s. Id. Six of these facilities are terminals
for storage and distribution of petroleum products in South Portland, which comprise
a total of ninety bulk petroleum storage tanks with a total storage capacity of
approximately 338 million gallons of petroleum products, not including fourteen
smaller tanks at Sprague that store petroleum and other products. Pls.’ Ex. 75-95.
Five of these facilities are terminals for the storage and distribution of petroleum
products and have loading racks for petroleum products; three are served by VDUs;
and two by VRUs. Id. The CITGO facility in South Portland is licensed for marine
vessel loading of gasoline and includes a second VDU for this operation.
Within those cities and towns, the air emissions license for PPLC’s 2009
proposed pipeline reversal project would have increased the total licensed allowable
criteria air pollutants by 0.2% to 3.3%, depending on the pollutant, with an overall
increase in allowable criteria pollutant emissions of 0.7%. Pls.’ Ex. 43. The maximum
allowable additional HAP emissions listed in PPLC’s air emissions license application
for the 2009 proposed pipeline reversal project would constitute 1.3% of the total
licensed allowable HAP emissions in the South Portland and the surrounding cities.
Id. These comparison figures do not include existing area sources (commercial and
residential stationary emissions sources too small to require a license, including wood
stoves) and mobile sources (automobiles, trucks, aircraft, and other mobile
equipment) of emissions in South Portland and the surrounding cities. Id.
The contribution of mobile sources can only be compared for the summer
months. The increase in emissions from PPLC’s 2009 proposed pipeline reversal in
the summer months represents approximately 5.9% of the estimated summer mobile
source VOC emissions, 2.1% of the estimated summer mobile source NOx emissions,
and 1.6% of the estimated summer mobile source HAP emissions in the area of South
Portland and surrounding cities of Cape Elizabeth, Portland, Scarborough, and
At the other end of the methodological spectrum, taking the worst case
assumption about emissions from PPLC’s 2008-2009 project without exceeding its
permit, and comparing those maximum permitted emissions levels to the actual
reported emissions from the other permitted sources inside the boundaries of the city
of South Portland, the new emissions from the VDUs would represent a 21% increase
in VOCs, a 49% increase in NOx, a 106% increase in PM2.5, and a 486% increase in
SO2. Defs.’ Ex. 221. Those numbers overestimate the marginal emissions from a new
reversal project, because PPLC’s actual emissions levels would likely be lower than
the permitted levels, just as is often the case for the other permitted facilities in the
calculation, and because the 2008-2009 plan contemplated shipment of a high-sulfur
crude oil at higher loading rates than PPLC’s current expectations. PPLC could also
utilize newer, more efficient VDUs or VRUs that create less emissions.
The City has demonstrated that PPLC’s reversal project would be a significant
source of air pollutant emissions in the surrounding areas within the City relative to
current levels, but the magnitude of the increases for each pollutant is uncertain and
would probably be between the percentages calculated by the two sides’ experts.
The City’s Development Goals
On October 15, 2012, the City Council unanimously adopted a new Update to
its Comprehensive Plan, which serves as the basis for the City’s zoning regulations.
Defs.’ Ex. 94. Before October 15, 2012, the City’s Comprehensive Plan had not been
updated since 1992. A nineteen-person Comprehensive Plan Update Committee,
along with the City staff led by Charles Haeuser, Planning and Development Director
for the City, and Planning Decisions, Inc., a consultant, prepared the Comprehensive
Plan Update. John Christie Gillies, Secretary Treasurer of PPLC, was a member of
the Comprehensive Plan Update Committee that prepared the Comprehensive Plan.
The Comprehensive Plan Update has a number of goals for the relevant district
within South Portland:
Within [The Shipyard Development District], the City’s development
regulations should continue to allow existing marine and oil facilities to
upgrade or expand on parcels that are already used for this purpose.
The regulations also should encourage creative development/
redevelopment of the vacant or underutilized land within this district
by establishing flexible, performance-based standards that allow a wide
range of potential uses. This could include the use of “conditional
zoning” or the creation of a special development district tailored to a
specific development proposal. Any development that is well designed
and meets that following criteria could be allowed in this development
Id. at 6-21. The Plan’s vision for the future of South Portland says, “It encourages a
compact, higher-density, mixed-use pattern of development . . . While much of the
shoreline remains a working waterfront, the public’s access to the water expands.”
Id. at 4-2. A local economic goal of the Plan is “[t]o support the highest and best use
of . . . the City’s waterfront.” Id. at 5-3.
The Eastern Waterfront [which includes PPLC’s Pier 2 and other
properties in the Shipyard “S” zoning district] continues to evolve to
become a marine, mixed-use area that capitalizes on the access to the
waterfront and spectacular views of the harbor and inner Casco Bay.
Southern Maine Community College continues to improve its campus
primarily within its existing borders.
Id. at 6-20.
Numerous parcels surrounding PPLC’s waterfront tanks and Pier 2 facilities
in the Shipyard “S” zoning district are vacant. Several vacant parcels, which have
been assembled under the same controlling ownership and are contiguous, are in the
immediately vicinity of PPLC’s Waterfront Tanks.
This is referred to as the
Cacoulidis property. Id. at 6-21, Defs.’ Ex. 203. The Comprehensive Plan states that
these parcels have “significant potential to expand the City’s tax base and create
broad economic benefits for the community at large.” Defs.’ Ex. 94 at 6-21. It says
that “[w]ithin this area, the City’s development regulations should continue to allow
existing marine and oil facilities to upgrade or expand on parcels that are already
used for this purpose,” and also says that the City “should encourage creative
development/redevelopment of the vacant or underutilized land within this district
by establishing flexible, performance-based standards that allow a wide range of
potential uses.” Id.
With regard to the Eastern Waterfront, the Comprehensive Plan says that
“[t]he redevelopment of vacant and underutilized areas in a way that expands public
access and the diversity of uses while maintaining marine activities is a fundamental
land use objective.”
In the short term, the City’s marine terminals and related marine
industrial areas are maintained and improved while minimizing their
impact on adjacent residential neighborhoods. In the longer term, if
demand for these facilities declines or the type of activity needs to
change and the owners of these facilities desire to explore other uses for
these facilities, the City, in conjunction with the owners, should
reevaluate the best use of these waterfront sites.
Developers have presented preliminary proposals for at least two large mixed-use
projects on the vacant parcels that abut the Waterfront Tanks: (a) Liberty Village
(2005) would have constructed a large mixed-use commercial, residential, and
recreational space, Defs.’ Ex. 58, 148-49, and (b) Shipyard Village (2013) would have
included a marina, a waterfront hotel, a boat launch, residential space, office space,
an aquarium, and a parcel reserved for light industrial uses. Defs.’ Ex. 141, 173-74.
There also was a proposal to construct an outdoor amphitheater on the vacant parcels
that abut the Waterfront Tanks.
The Commercial Impact of PPLC’s System
PPLC’s Economic Value
If PPLC were to go out of business, the company’s twenty-eight employees and
numerous contract workers would lose their jobs. Also, the vendors with whom PPLC
contracts for support services would lose a source of revenue. In addition, the value
of PPLC’s pipeline assets and property would decrease significantly from the $120
million amount assigned to those assets and property by government taxation
authorities along the pipeline route. South Portland alone assigns a value of $44.7
million to the pipeline assets and property currently within the City and, again, this
valuation will be reduced significantly if PPLC can no longer transport crude oil. In
the 2015 tax year, PPLC paid property taxes amounting to $2 million to twenty-seven
different municipalities located along the pipeline route between South Portland and
the Canadian border, with South Portland receiving nearly $750,000. In 2010, the
last year PPLC’s eighteen-inch line was in active service, the company paid
approximately $7.1 million to the federal government, $1.4 million to Maine,
$209,000 to New Hampshire, and $273,000 to Vermont. PPLC has paid over $70
million to the Maine oil conveyance fund supporting government clean-up and
The American Waterways Operators
AWO is a trade organization that represents members across the United
States, which operate thousands of vessels licensed by the United States Coast Guard
to engage in coastwise, i.e., domestic, trade. Every year, AWO members and others
in the industry carry more than 800 million tons of cargo every year across U.S.
waterways, including 280 million tons of crude oil, and employ more than 50,000
people. Trial Tr. 82:3-84:13. AWO represents two-thirds of the industry. One of
AWO’s chief purposes is, and historically has been, to advocate for uniform federal
control over maritime activity, as such uniformity allows AWO’s members to avoid
the confusion, inefficiency, decreased safety and increased costs associated with
multiple and differing layers of regulation.
Portland Tugboat LLC (Portland Tugboat) is an AWO member that currently
operates four tugboats in the Harbor. Portland Tugboat’s operations in the Harbor
consist chiefly of assisting larger vessels arriving from another port and guiding them
into their final docket spaces in the Harbor, i.e., “ship assist” services. Historically,
Portland Tugboat has received a significant portion of its revenue from providing ship
assist services to tanker vessels docking at PPLC’s Pier 2 to have their cargos of crude
oil unloaded by PPLC into PPLC’s oil pipeline infrastructure. Up until 2008, Portland
Tugboat assisted approximately seventeen ships per month with docking at Pier 2.
As PPLC has received fewer and fewer shipments of oil over the past several
years, Portland Tugboat has had fewer and fewer opportunities to provide arriving
tankers with ship assist services, with a corresponding loss of revenue and
profitability for Portland Tugboat.
This financial result is also reflected on the
financial statements of its sole manager and member, McAllister Towing and
Transportation Co., Inc. (McAllister). Unless PPLC is able to reverse the flow of its
pipeline, and thereby attract empty ships seeking to be loaded with crude oil,
Portland Tugboat may permanently lose all of the business it previously received
from assisting ships seeking to dock at PPLC’s Pier 2. If PPLC’s operations do not
materially change, Portland Tugboat will be forced to downsize its operations in the
Harbor by reducing the number of tugboats it has operating in the Harbor from four
to three. Due to lack of business in the Harbor, predominantly as a result of PPLC’s
declining business, Portland Tugboat has already reduced its force of full-time
maritime employees from sixteen to eight. If PPLC’s operations do not materially
change, Portland Tugboat may be forced to further reduce the number of full-time
maritime employees servicing customers in the Harbor.
In 2008, when PPLC’s business operated at higher levels than it currently is,
McAllister commissioned the design and construction of a very specialized tugboat,
the Andrew McAllister, for Portland Tugboat to better serve tankers docking at
PPLC’s Pier 2. The Andrew McAllister arrived in 2008 at a cost of approximately $10
million. The Andrew McAllister was designed to meet the requirements of servicing
ships transporting crude oil for PPLC and to respond to oil fires on ships or on the
water. The Andrew McAllister is an escort tugboat equipped with 6,000 horsepower
engines and certified capable of generating eighty-three tons of bollard pull, which is
the specification needed to service tankers transporting crude oil for PPLC. It is the
most powerful tugboat on the Eastern Seaboard north of Boston.
The Andrew McAllister was also designed to have a specialized 11,000 gallonper-minute fire-fighting system, which is equivalent to three municipal fire trucks,
and is capable of creating foam to put out oil fires on water. There are very few boats
on the Eastern Seaboard with similar firefighting capabilities, and the Andrew
McAllister is the only one operating north of Boston. As a result of its firefighting
capabilities, Portland Tugboat is called upon by the cities of Portland and South
Portland to use the Andrew McAllister to provide backup firefighting assistance when
needed in the Harbor.
Given the decrease in PPLC’s business, the Andrew McAllister’s highest and
best use is not being realized. It is not being used to its full capacity in the Harbor
and the revenue it has been generating from delivering crude oil to PPLC is
insufficient to offset the costs of operating it there. The best way for the Andrew
McAllister to be employed is if it is used in the Harbor to service tankers delivering
crude oil to PPLC or being loaded with crude oil by PPLC.
The Andrew McAllister may be removed from the Harbor and redeployed
elsewhere. Several years ago, the Andrew McAllister prevented a major marine
casualty in the Harbor while it was escorting a tanker to a non-PPLC location in the
Harbor that required the tanker to pass under the Casco Bay Bridge. While the
Andrew McAllister was escorting the tanker, the Casco Bay Bridge failed to open and
the tanker was unable, on its own power, to change course and prevent a collision
with the Casco Bay Bridge. The Andrew McAllister was able to maneuver the tanker
to avoid a collision with the Casco Bay Bridge and to avoid it running aground. If the
Andrew McAllister had not been present, a major marine casualty may have occurred
from the tanker colliding with the bridge or running aground. Had the tanker
collided with the bridge or run aground, it could have resulted in severe damage to
the bridge or to the tanker, an oil spill, an onboard fire, or damage to assets on shore
from the tanker running aground.
In addition to Portland Tugboat, McAllister owns and operates tugboat
companies in twelve locations along the eastern seaboard, from Portland, Maine to
San Juan, Puerto Rico, including in New York, Philadelphia, and Baltimore. A
significant portion of the revenue generated by AWO members, including McAllister,
arises out of towing tank barges loaded with crude oil. This service consists of
tugboats pulling or pushing a tank barge that has been filled with crude oil from an
oil terminal to another location, such as an oil refinery. Pier 2, where PPLC receives
marine vessels, is not presently designed to accommodate tank barges. It only can
receive Aframax, Suezmax, and Panamax self-propelled tank vessels. For Pier 2 to
be able to berth tank barges, PPLC would be required to modify Pier 2. In 2011,
PPLC gave strategic consideration to developing a project while omitting the
upgrades to Pier 2 that would enable to it handle small tankers and barges.
If PPLC successfully reversed the flow of its pipeline so it can load crude oil
onto vessels in the Harbor and also chose to modify Pier 2 to accommodate tank
barges, McAllister would have the opportunity to tow tank barges from South
Portland to other locations, such as oil refineries located in Philadelphia, Houston,
and the New York/New Jersey area. AWO members like McAllister have profitably
provided this service elsewhere.
THE PARTIES’ POSITIONS
PPLC argues that the practical effect of the Ordinance is to control conduct
beyond the boundaries of South Portland because “by plugging one end of a crossborder pipeline, the Ordinance stops trade across three states and Quebec.” Pls.’ PostTrial Br. at 62. PPLC claims “[t]he Ordinance prevents the Canadian corporation
operating the pipeline on the Canadian side of the border from engaging in commerce
within Canada as it would choose.” Id. at 67.
The City contends that “the Ordinance only controls conduct within the borders
of South Portland . . . .” Defs.’ Post-Trial Br. at 61. The City also points out that the
Supreme Court and First Circuit have predominantly or exclusively applied the
extraterritoriality bar to state price-tying statutes. Id. at 61-62. The City cites a case
upholding a Chicago ban on foie gras, where the district court reasoned that the
economic effect of chipping away at the profits of out-of-state foie gras producers does
not amount to extraterritorial regulation. Id. at 63 (citing Ill. Rest. Ass’n v. City of
Chicago, 492 F. Supp. 2d 891 (N.D. Ill. 2007)). The City maintains that the focus of
the extraterritoriality prong is on the effect of the Ordinance, not its purpose. Even if
extraterritoriality were determined by examining the purpose of the Ordinance, the
City insists that the primary purpose of the Ordinance was to “protect the health,
safety and welfare of the City’s residents.” Id. at 62-63, 66.
PPLC responds that purpose is relevant to the extraterritoriality prong. Pls.’
Resp. at 31-32 (citing Nat’l Foreign Trade Council v. Natsios, 181 F.3d 38, 67 (1st Cir.
1999), aff'd sub nom., Crosby v. Nat’l Foreign Trade Council, 530 U.S. 363 (2000)).
PPLC also submits that several other circuits have found that the extraterritoriality
inquiry is not limited to pricing statutes. Id. at 32. PPLC points out that the Chicago
foie gras case was vacated due to mootness before appellate review and the parties in
another case reaching a similar outcome are presently seeking review before the
Supreme Court. Id. at 32-33 (citing See Ass’n des Éleveurs de Canards et d’Oies du
Québec v. Becerra, 870 F.3d 1140, 1143 (9th Cir. 2017), cert. petition pending and
solicitor General invited to share views, 2018 WL 3013816 (June 18, 2018).
The City reiterates its claim that the zoning ordinance regulates “wholly”
within its borders. Defs.’ Resp. at 21. The City also responds that many other
portions of its zoning ordinance prohibit specific commercial and industrial uses on
the waterfront, and that for purposes of this prong, the Ordinance is no different than
the zoning ordinances of many other municipalities in Maine and across the nation
that ban crude oil or all petroleum uses on their waterfronts. Id.
PPLC asserts that the Ordinance discriminates on its face because it “permits
unloading off of ships, but not loading on to ships at the Harbor.” Pls.’ Post-Trial Br.
at 46-47. PPLC also highlights the fact that the Ordinance discriminates between
crude oil and refined petroleum products. Id. PPLC contends that “the practical
effect of the Ordinance is to prevent the import of Canadian oil through pipelines for
further export through the Harbor, while allowing the import of non-Canadian crude
oil, and carefully imposing no burdens on other local oil-related businesses.” Id. at
47. It is irrelevant, according to PPLC, that some of the crude oil that would flow
southward would originate in North Dakota, because the flows would still constitute
foreign commerce, since they pass through Canada. Id. at 48-49. PPLC argues that
the purpose of the Ordinance is to target the pipelines in order to prevent their
reversal and stop the flow of oil from Canada, which makes that targeting “by
definition, not incidental.” Id. at 51. PPLC insists that the true purpose was simply
disguised with statements about other purposes such as air quality, but the City’s
claims are undermined because it did not enact an evenhanded air regulation. Id. at
54-57. PPLC also argues that the City cannot meet its burden of showing that the
Ordinance can pass strict scrutiny if the Court concludes the Ordinance is
discriminatory. Id. at 57-59.
The City argues that the Court has already concluded at summary judgment
that the Ordinance is not facially discriminatory. Defs.’ Post-Trial Br. at 41. The
City emphasizes that there are no “similarly situated” in-state and out-of-state
interests between which the Ordinance could discriminate because there are no instate oil producers or refineries and there are no other interstate pipelines in Maine.
Id. at 37-39. The City contends that PPLC has not shown that the Ordinance has or
will have a significant negative impact on crude oil markets. Id. at 40. The City
disputes PPLC’s argument about differential treatment of crude and refined
petroleum products because the two entities are not similarly situated or competitors,
and thus are not subject to the differential treatment analysis under the dormant
Commerce Clause. Id. at 40-42. The City acknowledges that the Foreign Commerce
Clause modifies the analysis somewhat, but argues that the Ordinance does not
amount to a ban on commerce with a specific foreign nation and does not prefer
national commerce over international commerce. Id. at 42-46. The City maintains
that the purpose of the Ordinance was to protect South Portland’s environment,
aesthetics, redevelopment potential, and air quality, and that the City Council
“objected to the loading of tar sands and all other crudes in its harbor because of the
nature of that activity. . . .” Id. at 48-56. The City argues that it was diligent about
trying to craft an Ordinance that was within its powers and would survive a legal
challenge, but disputes PPLC’s assertion that it sought to avoid scrutiny and hide its
purposes behind pretext, since it publicly televised all the meetings. Id. at 56.
PPLC argues that it does not matter that oil has traditionally flowed
northward and that the Ordinance never mentions the word “Canada” because the
Court should “peek behind the curtain and assess practical effect.” Pls.’ Resp. at 2628. PPLC claims, “Even if some City Councilors or Ordinance drafters harbored some
genuine concerns about air or land use subservient to their preempted concerns about
pipeline safety and directly regulating the pipeline to stop the flow of oil sands, such
air and land use concerns were not borne out in the actual substance of the Ordinance,
banning loading regardless of any air emissions or use of new infrastructure.” Id. at
The City contends that the findings of the Ordinance, the presentation of the
DOC report to the City Council, and the two City Council meetings where the
Councilors debated and voted upon the Ordinance constitute the most probative
legislative history; not isolated snippets from prior meetings. Defs.’ Resp. at 9. The
City reiterates that the primary purposes of the Ordinance were “protection of the
health of residents, protection of the environment from spills, decreases in property
values, and removal of an impediment to desired redevelopment.” Id. at 9-10. The
City also points out that both crude and refined oil products from Eastern Canada
flow into South Portland even today, which the Ordinance does not disturb,
“support[ing] the conclusion that the major concerns were the new land use proposed
by PPLC, its substantial increase in emissions, and where the new land use was to
be located – not the source of the oil.” Id. at 14-15. The City urges that the stated
goals of the Ordinance are not undermined simply because it does not address many
other potential sources of air and environmental risks. Id. at 15-16.
PPLC argues that the asserted local benefits from the Ordinance are “illusory.”
Pls.’ Post-Trial Br. at 68, 70 (citing Kassel v. Consol. Freightways Corp. of Delaware,
450 U.S. 662, 670 (1981)). PPLC alleges that the benefits are non-existent because
of a “lack of nexus between the air quality and zoning concerns announced in [the
Ordinance’s] preamble and its substantive provisions.” Id. at 69. PPLC claims that
only legitimate purposes or benefits count in the Pike balancing, so the City cannot
assert the benefits of preempted legislative purposes, like regulating pipeline safety
and operations. Id. at 70 (citing Rollins Envtl. Servs. (FS), Inc. v. St. James Parish,
775 F.2d 627, 635 (5th Cir. 1985). PPLC maintains that the burden on interstate and
foreign commerce is “utterly enormous,” particularly if similar measures were
enacted elsewhere, because it “brings export of crude oil in America to a standstill.”
Id. at 71.
The City emphasizes that the Pike inquiry involves “only the most minimal
sort of balancing,” not a straightforward assessment of the costs and benefits. Defs.’
Post-Trial Br. at 68-69. The City alleges that its interests are particularly strong
because the asserted benefits of the Ordinance are within the core police powers of
the state and local government, which are health, environmental regulation, and land
use control. Id. at 70-71. The City also claims that PPLC failed to establish any
burden on commerce because the availability and demand for southbound crude oil
shipment are too speculative. Id. at 71, 73-75. The City submits that the Ordinance
does not block commerce with Canada because it can still transport Eastern
Canadian crude oil northbound and Canadian crude oil southbound by connecting the
tank farm with the Rigby Yard terminal and shipping the crude out of South Portland
by rail. Id. at 72. The City maintains there is no need for a uniform rule and that
the local benefits are not illusory, distinguishing the Supreme Court’s highway
transportation cases. Id. at 75-76 (citing Kassel, 450 U.S. 662; Bibb v. Navajo Freight
Lines, Inc., 359 U.S. 520 (1959).
PPLC responds by reiterating that the “legitimate benefits achieved or
achievable . . . are minimal at best” and that “the City cannot simply incant ‘air’ and
‘zoning’ to ‘bullet proof’ the substance of its Ordinance from constitutional scrutiny.
Pls.’ Resp. at 34-35. PPLC explains that the Ordinance has a devastating burden on
interstate and foreign commerce and could have achieved its purported benefits with
far less burdensome means, like “an air emission standard” or “a size limit for
V[D]Us.” Id. at 35-36.
The City argues that it is irrelevant to the Pike balancing of the City’s asserted
environmental and safety benefits that a member of the DOC thought that local
pipeline siting restrictions were preempted. Defs.’ Resp. at 24. The City also portrays
PPLC’s claim that the Ordinance “provides no benefits” as “utterly disingenuous” in
light of Dr. Zemba’s, Dr. Suh’s, and Mr. Haeuser’s testimony. Id.
PPLC points out that the dormant Foreign Commerce Clause operates
independently from the foreign affairs preemption doctrine the Court addressed at
summary judgment. Pls.’ Post-Trial Br. at 60. PPLC asserts that the Ordinance
interferes with the federal government’s ability to speak with one voice in regulating
foreign commerce because it regulates loading crude oil onto ships, and commercial
shipping is an area requiring federal uniformity. Id. at 61-62. PPLC also contends
that federal uniformity in commercial relations with other nations is also needed in
the context of regulations governing cross-border pipelines, as reflected in PPLC’s
Presidential Permit and federal policies, such as the lifting of the federal crude oil
export ban. Id. at 62-64. PPLC argues that the Ordinance does not just regulate but
prohibits the import and export of crude oil from a foreign nation, Canada, which
means it cannot stand even though it was not enacted to influence the policies of that
foreign government. Id. at 64-65.
The City agrees that the “one voice” test of the dormant Foreign Commerce
Clause has a source distinct from foreign affairs preemption but argues that the same
analysis applies to both. Defs.’ Post-Trial Br. at 77. The City stresses that the Court
has already found the Ordinance has not invited embarrassment or retaliation from
Canada or any other foreign government. Id. at 77-78. The City maintains that
federal uniformity is not required here, because the federal government has expressly
concluded that PPLC must comply with all state and local restrictions regarding
construction, operation, maintenance, and permitting. Id. at 78-79.
PPLC responds that the City’s argument is “sophistry” because nothing in the
Presidential Permits “requires compliance with an unconstitutional regulation.” Pls.’
Resp. at 31. PPLC argues that federal authorities might contemplate local control
over the siting of transfer facilities or VDUs, but the Ordinance is not an evenhanded
siting regulation on all pipeline or transfer facilities. Id.
The City asserts that PPLC failed to carry its burden on this prong because
there is no evidence of the need for federal uniformity, since there is no conflicting
federal sanction, protests by other nations, or danger of “multiple taxation” that is
likely to offend other nations.
Defs.’ Resp. at 18-19.
The City points out that
“Plaintiffs cite no foreign Commerce Clause cases holding that local zoning of any
industry threatens our nation’s ability to speak with one voice.” Id. at 20.
Congress has the power “to regulate Commerce with foreign Nations, and
among the several States, and with the Indian Tribes.” U.S. CONST. art. I, § 8, cl. 3.
“[W]hile a literal reading [of this clause] evinces a grant of power to Congress,”
Wyoming v. Oklahoma, 502 U.S. 437, 454, (1992), “it has long been accepted” that the
clause also contains a “dormant” or “negative” aspect that “prohibits economic
protectionism” by state and local governments.
New Energy Co. of Indiana v.
Limbach, 486 U.S. 269, 273 (1988); West Lynn Creamery, Inc. v. Healy, 512 U.S. 186,
192 (1994); see also Welton v. State of Missouri, 91 U.S. 275, 276 (1875). The Framers
gave the federal government the authority to regulate interstate and international
commerce “to avoid the tendencies toward economic Balkanization that had plagued
relations among the Colonies and later among the States under the Articles of
Confederation.” Hughes v. Oklahoma, 441 U.S. 322, 325 (1979).
However, “[t]he law has had to respect a cross-purpose as well, for the Framers’
distrust of economic Balkanization was limited by their federalism favoring a degree
of local autonomy.” Dep’t of Revenue of Ky. v. Davis, 553 U.S. 328, 338 (2008). “In
the absence of conflicting federal legislation, the States retain authority under their
general police powers to regulate matters of legitimate local concern, even though
interstate commerce may be affected.” Lewis v. BT Inv. Managers, Inc., 447 U.S. 27,
36 (1980) (internal quotation omitted).
The Commerce Clause significantly limits the ability of States and
localities to regulate or otherwise burden the flow of interstate
commerce, but it does not elevate free trade above all other values. As
long as a State does not needlessly obstruct interstate trade or attempt
to place itself in a position of economic isolation, it retains broad
regulatory authority to protect the health and safety of its citizens and
the integrity of its natural resources.
Maine v. Taylor, 477 U.S. 131, 151 (1986) (internal quotations and citations omitted).
A state or local statute may violate the dormant Commerce Clause if it: (1) has
an impermissible extraterritorial reach, see Healy v. Beer Inst., Inc., 491 U.S. 324,
336 (1989), (2) discriminates against interstate or foreign commerce, see Oregon
Waste Sys., Inc. v. Dep’t of Envtl. Quality of State of Or., 511 U.S. 93, 99 (1994), (3)
excessively burdens interstate or foreign commerce, see Pike v. Bruce Church, Inc.,
397 U.S. 137, 142 (1970), or (4) interferes with the federal government’s ability to
speak with one voice when regulating commerce with foreign nations. See Japan
Line, Ltd. v. Los Angeles Cty., 441 U.S. 434, 449 (1979).
The Ordinance does not regulate extraterritorially.
“A state statute that purports to regulate commerce occurring wholly beyond
the boundaries of the enacting state outstrips the limits of the enacting state’s
constitutional authority and, therefore, is per se invalid.” All. of Auto. Mfrs. v.
Gwadosky, 430 F.3d 30, 35 (1st Cir. 2005). “[T]he Commerce Clause protects against
inconsistent legislation arising from the projection of one state regulatory regime into
the jurisdiction of another State.” Healy, 491 U.S. at 336-37. “A statute will have an
extraterritorial reach if it necessarily requires out-of-state commerce to be conducted
according to in-state terms.” Pharm. Research & Mfrs. of Am. v. Concannon, 249 F.3d
66, 79 (1st Cir. 2001) (PhRMA), aff’d, Pharm. Research & Mfrs. of Am. v. Walsh, 538
U.S. 644 (2003) (internal quotation omitted). When evaluating the practical effect of
the statute, the court should consider the statute itself, and “how the challenged
statute may interact with the legitimate regulatory regimes of other States and what
effect would arise if not one, but many or every, State adopted similar legislation.”
Id. (quoting Healy, 491 U.S. at 336).
The cases in which the United States Supreme Court determined the state was
regulating extraterritorially involved “price control, price affirmation or price tying
schemes.” PhRMA, 249 F.3d at 81. “The statutes in these cases involved regulating
the prices charged in the home state and those charged in other states in order to
benefit the buyers and sellers in the home state, resulting in a direct burden on the
buyers and sellers in the other states.” Id.
The Ordinance prohibits loading crude oil within the boundaries of certain
districts of the City. For purposes of this prong of the dormant Commerce Clause,
the Court sees little difference between the Ordinance and other zoning prohibitions.
Conduct is not controlled by the Ordinance if it occurs outside the state of Maine,
outside the boundaries of the City, or outside South Portland’s Shipyard, Commercial,
and Industrial districts. While it is likely true that PPLC’s ability to obtain financing
for a reversal project is contingent on its ability to load oil at the Harbor, and that
means the effect of the Ordinance is to influence the functions of its infrastructure
outside the City, that does not mean the Ordinance regulates extraterritorially.
Every local prohibition on particular goods or services has the effect of preventing
distant merchants from employing their capital and labor to sell those goods or
services within the boundaries of the restrictive locality, and local merchants with
distant contacts from doing the same. In the modern age of highly interconnected
commerce, there would be virtually no room for local historic police powers if this sort
of extraterritorial effect were enough to invalidate an ordinance under the dormant
Viewed in another way, PPLC would not be subject to inconsistent obligations
if other localities passed similar statutes. If other municipalities enacted similar
ordinances, there would simply be a smaller list of potential sites for loading crude
oil. That situation would be indistinguishable from the current state of affairs, where
some coastal localities devote their waterfronts to uses they deem inconsistent with
petroleum handling, forcing companies to pursue those uses in other localities where
the local government permits them. See e.g., PORTLAND, ME., CODE OF ORDINANCES
https://www.portlandmaine.gov/Document Center/View/1080/Chapter-14-Land-Use--Revised-7182018, (prohibiting petroleum refining as well as petroleum storage
yards and tank farms); CAPE ELIZABETH, ME., CODE
ORDINANCES § 19-6-11-D,
government/rules_regs/ordinances/zoning/zoning.pdf, (prohibiting petroleum storage
and sales). “The most apparent effect of similar [ordinances] being passed in other
[localities] would be a loss in profits for [petroleum companies]. It does not appear . .
. that [ordinances] similar to the [Clear Skies Ordinance], if enacted, would result in
[petroleum companies] having inconsistent obligations to [localities] . . . .” PhRMA,
249 F.3d at 82-83.
The Ordinance’s indirect economic effects on out-of-state
transactions is a natural implication of cross-border projects and local government
control, not an indication of unconstitutional extraterritorial regulation.
PPLC’s arguments about extraterritorial purpose, as opposed to effect, does
not alter this conclusion. There is evidence that some of the voting public and, more
importantly, some of the City Counselors actively considered that the impact from
the Ordinance would reach beyond the borders of South Portland. For example,
during consideration of the WPO, one member of the public said the citizen’s initiative
would “not only be helping to protect South Portland and Maine, but all the
communities that this pipeline runs through or near in the environment of northern
New England.” Pls.’ Ex. 104 at 1:38:50-1:39:22.
Another commenter expressed
concern about continued reliance on fossil fuels causing global climate change. Id.
But the vast majority of the evidence regarding WPO support focused on the
impacts within South Portland. PPLC has not shown that these isolated statements
of a few members of the public were so important as to motivate the majority of the
City Council when it later considered the Ordinance. The strongest evidence of
extraterritorial purpose came from Councilor Smith, who admitted that “I really care
about the indigenous people of Alberta” and South Portland’s neighboring towns and
said, “I know that what I see on paper is something that will protect the health and
safety of our residents and potentially the health and safety of other global residents.”
Pls.’ Ex. 159 3:18:02-3:32:04.
But even with that strongest indication of
extraterritorial motive, Councilor Smith also commented on her perception of the
beneficial impact of the WPO on South Portland itself.
As with the public pressure
on the City Council, the Court is not convinced that isolated comments about a
greater global purpose of the WPO from City Counselors and others establish that
extraterritorial impact was the primary purpose of the Ordinance.
Even if there were stronger indications of extraterritorial purpose, it would be
of little assistance to PPLC.
Unlike the discrimination prong of the dormant
Commerce Clause, where improper purpose matters, “[t]he ‘critical inquiry’ here is
‘whether the practical effect of the regulation is to control conduct beyond the
boundaries of the State.’” Nat’l Foreign Trade Council v. Natsios, 181 F.3d 38, 69 (1st
Cir. 1999), aff’d sub nom., Crosby v. Nat’l Foreign Trade Council, 530 U.S. 363 (2000)
(quoting Healy, 491 U.S. at 336). Courts have upheld other statutes more clearly
motivated by extraterritorial concerns, as long as the regulatory effect did not control
out-of-state transactions. See Rocky Mountain Farmers Union v. Corey, 730 F.3d
1070, 1084-85, 1101-06 (9th Cir. 2013) (rejecting extraterritoriality challenge to
California ethanol fuel standards enacted to combat global climate change). The
Court concludes that, while there was an ancillary background motive on the part of
some Councilors and citizens, the primary purpose of the Ordinance was not to create
impacts beyond the boundaries of South Portland or to prevent oil sands extraction
in other jurisdictions, and even if that were the primary purpose, the focus of this
inquiry on the effects of the Ordinance obviates further discussion. But see infra Part
V-B (legislative purpose is important for the discrimination prong).
“Because the regulation only applies to in-[city] activities, there is no
extraterritorial reach and the [Ordinance] is not per se invalid under the Commerce
Clause.” PhRMA, 249 F.3d at 82.4
The Ordinance does not discriminate against interstate or
foreign commerce on its face, in effect, or on purpose.
“A state statute that has no direct extraterritorial reach but that discriminates
against interstate commerce on its face, in purpose, or in effect receives a form of
strict scrutiny so rigorous that it is usually fatal.” Gwadosky, 430 F.3d at 35. If a
state statute discriminates against interstate or foreign commerce “[i]t will be
PPLC asserts that “direct” regulation of the “modes of cross-border transportation” or “in-state
segments of interstate transportation” when national uniformity is paramount is prohibited in the
same manner as extraterritorial regulations. Pls.’ Post-Trial Br. at 65-66 (citing Edgar v. MITE Corp.,
457 U.S. 624, 642 (1982)); Pls.’ Resp. at 32-33 (citing Legato Vapors, LLC v. Cook, 847 F.3d 825, 829
(7th Cir. 2017)). While it is true that courts occasionally refer to “direct regulations” of interstate or
foreign commerce, courts and scholars have noted that this adjective does not alter the substantive
tests of the “modern law of . . . the dormant Commerce Clause,” Davis, 553 U.S. at 337, which the
Court outlines and applies in this order. See Raymond Motor Transp., Inc. v. Rice, 434 U.S. 429, 441
n.15 (1978) (noting that “the Court has employed various tests to express the distinction between
permissible and impermissible impact upon interstate commerce,” and describing one such approach
as an attempt to “distinguish[ ] between state regulations that affect interstate commerce ‘directly,’
and those that affect it ‘indirectly.’” (citing Hall v. DeCuir, 95 U.S. 485, 488, 24 L.Ed. 547 (1878); Smith
v. Alabama, 124 U.S. 465, 482 (1888)); Grant’s Dairy--Maine, LLC v. Comm'r of Maine Dep't of Agric.,
Food & Rural Res., 232 F.3d 8, 19 (1st Cir. 2000) (“rebuff[ing] [a plaintiff’s] attempt to forge a new
mode of analysis” because “this reference to direct regulation as a basis for invalidation has not been
repeated in subsequent Supreme Court opinions, and it does not fit into the West Lynn framework”);
DANIEL FRANCIS, The Decline of the Dormant Commerce Clause, 94 DENV. L. REV. 255, 274-77 (2017)
(outlining the history of the dormant Commerce Clause jurisprudence and describing the “directness”
inquiry as the “second model” in the Supreme Court’s line of cases, which prevailed from the 1870s to
scrutinized under a ‘virtually per se invalid rule,’ which means that the statute will
be invalid unless the state can ‘show that it advances a legitimate local purpose that
cannot be adequately served by reasonable nondiscriminatory alternatives.’”
PhRMA, 249 F.3d at 79.
“Discrimination” in this context “simply means differential treatment of instate and out-of-state economic interests that benefits the former and burdens the
latter.” Oregon Waste, 511 U.S. at 99; see also Davis, 553 U.S. at 337; New Energy,
486 U.S. at 273 (“This ‘negative’ aspect of the Commerce Clause prohibits economic
protectionism—that is, regulatory measures designed to benefit in-state economic
interests by burdening out-of-state competitors”); Wyoming, 502 U.S. at 454 (same);
Family Winemakers of California v. Jenkins, 592 F.3d 1, 9 (1st Cir. 2010) (same);
Walgreen Co. v. Rullan, 405 F.3d 50, 55 (1st Cir. 2005) (“Under the dormant
Commerce Clause, if a state law has either the purpose or effect of significantly
favoring in-state commercial interests over out-of-state interests, the law will
routinely be invalidated unless the discrimination is demonstrably justified by a valid
factor unrelated to economic protectionism”) (internal quotations omitted).
The Ordinance is not facially discriminatory.
On its face, the Ordinance does not distinguish between out-of-state and instate interests. The Ordinance applies with equal force to any entity seeking to load
crude oil in the Shipyard and Commercial zoning districts. There is no explicit
mention of source, destination, or residency. Facially, it binds local entities to the
same extent as entities based in other Maine municipalities, as well as those based
outside the state of Maine; it applies with equal force to crude oil originating in
Canada and North Dakota; and if there were crude oil producers in Maine, it would
apply with equal force to crude oil originating in other Maine towns or even within
the city of South Portland.
PPLC has not shown that the Ordinance discriminates in
The fatal flaw in PPLC’s discrimination argument is that there can be no
disparate burden on interstate or foreign competitors when there are no such
“Conceptually, of course, any notion of discrimination assumes a
comparison of substantially similar entities.” Gen. Motors Corp. v. Tracy, 519 U.S.
278, 298 (1997); see also United Haulers Ass’n, Inc. v. Oneida-Herkimer Solid Waste
Mgmt. Auth., 550 U.S. 330, 342 (2007). “In the absence of actual or prospective
competition between the supposedly favored and disfavored entities in a single
market there can be no local preference, whether by express discrimination against
interstate commerce or undue burden upon it, to which the dormant Commerce
Clause may apply.” Tracy, 519. U.S. at 300.
It is undisputed that PPLC is the only pipeline company in South Portland and
the only company seeking to load crude oil onto tank vessels in the city of South
Portland. It is also undisputed that there are no crude oil producers or refiners in
South Portland or anywhere else in Maine. Regardless of whether one examines the
effects on competition between out-of-state and in-state crude oil producers or
between out-of-state and in-state crude oil purchasers or shippers, the Ordinance
does not confer any relative advantage or disadvantage. Judge Hornby faced a
similar situation in PhRMA:
There are no Maine drug manufacturers, and no suggestion on this
record that Maine is in the process of trying to establish a favorable
environment to bring them here. Instead, the rebate program applies to
any manufacturer, whether or not it is from Maine. Maine is trying to
benefit its residents, specifically those who are uninsured, in the
purchase of prescription medicines; but it is not trying to better their lot
PhRMA v. Commissioner, Maine Dept. of Human Services, CIV. 00-157-B-H, 2000 WL
34290605, at *4 (D. Me. Oct. 26, 2000), rev’d on other grounds but aff’d on commerce
clause issue, PhRMA v. Concannon, 249 F.3d 66 (1st Cir. 2001), aff’d, PhRMA v.
Walsh, 538 U.S. 644 (2003); see also All. of Auto. Manufacturers v. Gwadosky, 304 F.
Supp. 2d 104, 113 (D. Me. 2004) (“Applying these principles, [the Maine law] does not
discriminate against out-of-state manufacturers, because as a matter of fact, there
are no in-state manufacturers to be favored”). These cases make clear that when
there are no direct competitors to suffer a relative disadvantage from the supposedly
protectionist state law, there is no risk of the kind of economic protectionism that the
dormant Commerce Clause prohibits.
Even if there were interstate or international competitors with crude oil
transfer facilities in South Portland, PPLC’s stake in this case illustrates that there
is no discrimination because its lawsuit is premised on the fact that the Ordinance
prohibits PPLC—a local Maine corporation—from loading crude oil at the Harbor.
The second entity most directly affected by the Ordinance is another local Maine
corporation, Portland Tugboat.
The Ordinance cannot be said to favor in-state
commercial interests at the expense of out-of-state competitors when the entities
most directly harmed by the practical effects of the Ordinance are in-state, local
businesses. The Court agrees with PPLC that it bears the brunt of the Ordinance’s
force, but since PPLC is a local business, that fact undermines rather than bolsters
its assertion that the Ordinance was an economic protectionist measure intended to
discriminate against commerce with Canada.
PPLC argues that a statute need not favor local businesses to be invalid under
the dormant Foreign Commerce Clause, citing Kraft Gen. Foods, Inc. v. Iowa Dep’t of
Revenue & Fin., 505 U.S. 71, 79 (1992) and National Foreign Trade Council v.
Natsios, 181 F.3d 38, 67 (1st Cir. 1999). The Kraft Court considered an Iowa statute
that allowed a tax deduction for dividends from U.S. subsidiaries, but not for foreign
subsidiaries. 505 U.S. at 74. The Supreme Court noted that Iowa’s tax did not favor
Iowa subsidiaries over subsidiaries from other states but concluded that such local
favoritism is not an “essential element” for a violation of the Foreign Commerce
Clause. Id. at 79. The Natsios Court considered a Massachusetts statute that
prohibited state agencies from purchasing goods or services from companies that did
business with Burma (Myanmar). 181 F.3d at 45. The First Circuit concluded that
the law’s applicability to both foreign and domestic companies did not save it from
the discrimination ban of the Foreign Commerce Clause. Id. at 67.
Kraft and Natsios do not alter the Court’s conclusion that the Ordinance is not
discriminatory. Both state statutes in those cases made facial distinctions based on
the nationality of the commercial entity or the location of the commerce. Even if those
state statutes did not exhibit favoritism for local businesses over another state’s
businesses, they exhibited “a State’s preference for domestic commerce over foreign
commerce. . . .” Kraft, 505 U.S. at 79. In Kraft, the state statute created a distinction
between U.S. subsidiaries (including Iowa) and foreign subsidiaries, which benefited
the former and burdened the latter; in Natsios, the state statute created a distinction
between commerce with Burma and commerce with any other nation or state
(including Massachusetts), which burdened the former and benefitted the latter.
The Kraft and Natsios Courts found dormant Commerce Clause violations
despite that “the State’s own economy [was] not a direct beneficiary of the
discrimination.” Id. But those cases do not overrule the meaning of “discrimination”
defined in Oregon Waste and subsequent cases, nor the analysis outlined in Tracy.
Kraft and Natsios are consistent with Oregon Waste and Tracy because the Iowa and
Massachusetts statutes created relative differences between competitors. Kraft and
Natsios simply acknowledge that the subject of the favoritism or disfavoritism can
shift from the state or local level to the national level when analyzing for a violation
of the Foreign, as opposed to the Domestic, dormant Commerce Clause. Unlike the
state statutes in Kraft and Natsios, South Portland’s Ordinance does not create any
distinction or difference between competitors from different countries or states, which
means it creates no relative difference in treatment that implicates the dormant
Commerce Clause. The Ordinance does not target commerce with Canada, and the
prohibition applies equally to crude oil flowing through Line 9 into PPLC’s Montreal
terminus from North Dakota as it does to crude oil from Alberta.
The Court is skeptical of PPLC’s argument that the Ordinance discriminates
against Canadian commerce because PPLC believes it has the practical effect of
completely blocking flows of crude oil from Canada.
While PPLC is a Maine
corporation, it is true that the pipelines are connected with Canadian infrastructure
and some of the crude oil that would be shipped southward would originate in
Western Canada. But there are at least two major flaws in this argument. First, the
Ordinance has no impact on several major sources of Canadian oil entering South
Portland. A major source of PPLC’s northbound crude shipments was the Hibernia
oil field off the southeast coast of Newfoundland, in Eastern Canada, which the
Ordinance does nothing to inhibit. Trial Tr. 181:14-20. While market forces have
reduced those flows in recent years, there is no indication in the record that the City
has ever objected to that Canadian commerce. Similarly, refined oil products from
Canada still make their way to South Portland today, which the Ordinance also does
not block. See Pls.’ Ex. 106 at 2:16:30.
Second, PPLC’s argument stretches the dormant Commerce Clause too far.
Maine is the only state that shares a border with only one other state, and Maine also
shares a border with Canada. It may often be true, especially in small, rural, and
relatively geographically isolated states like Maine, that certain industries or
markets are comprised of a small number of firms or even a single firm. Just because
commerce in a market originates in another state or country does not mean that
otherwise evenhanded regulations or prohibitions on that market automatically have
the “practical effect” of discriminating against interstate or foreign commerce.
The logical implication of PPLC’s argument is that many perfectly ordinary
health and welfare regulations would violate the dormant Commerce Clause.5 In a
modern globalized economy, if this were enough to trigger strict scrutiny for local
restrictions that are otherwise agnostic as to the state or country of origin, there
would be scant room remaining for state and local police powers. On the contrary,
courts have carefully resisted the impulse to conflate neutral regulations that harm
interstate firms with the sort of economic protectionism that the dormant Commerce
Clause forbids. See Exxon Corp. v. Governor of Maryland, 437 U.S. 117, 125 (1978)
(the fact that a state prohibition fell “solely on interstate companies,” without more,
“does not lead, either logically or as a practical matter, to a conclusion that the State
is discriminating against interstate commerce”); see also Family Winemakers, 592
F.3d at 13; Norfolk S. Corp. v. Oberly, 822 F.2d 388, 402 (3d Cir. 1987) (“showing that
out-of-state firms happen to be the only ones currently interested in engaging in
activity foreclosed by facially evenhanded state regulation has not by itself been held
to trigger heightened scrutiny”).
PPLC has not shown that the primary purpose of the
Ordinance was to discriminate.
At the outset, the Court notes that PPLC’s argument that the Ordinance was
intended to discriminate is largely undercut by the fact that the practical effect is not
For example, in 2012, Maine repealed its sixty-three-year ban on fireworks, causing many
localities to prohibit them. OK to light that firecracker? Depends where you live. Better check this
interactive map., PORTLAND PRESS HERALD (July 3, 2018), https://www.pressherald.com/2018/07/03/okto-light-that-firecracker-depends-where -you-live/. If PPLC were correct, local prohibitions on
pyrotechnics or fireworks would be unconstitutional if the supply of fireworks flowed from another
state or nation, even if the prohibition were motivated entirely by the health and welfare risks of the
fireworks, regardless of their origin.
to discriminate. See Lewis, 447 U.S. at 37 (“The principal focus of inquiry must be
the practical operation of the statute, since the validity of state laws must be judged
chiefly in terms of their probable effects”); Gwadosky, 430 F.3d at 36 n.3 (despite that
Courts routinely cite the purpose and effect analyses in the disjunctive, “there is some
reason to question whether a showing of discriminatory purpose alone will invariably
suffice to support a finding of constitutional invalidity under the dormant Commerce
Clause” because of the analytical difficulty that arises if a law was motivated by
protectionist intent but fails to produce discriminatory effects). Nevertheless, the
Court inquires into the legislative purpose behind the Ordinance.
“Incidental purpose, like incidental effect, cannot suffice to trigger strict
scrutiny under the dormant Commerce Clause.” Gwadosky, 430 F.3d at 39. “[T]he
party challenging the validity of the [state or local statute], bears the burden of
demonstrating that the statute was animated by a discriminatory purpose.” Id. at 37
(citing Hughes, 441 U.S. at 336). The Court looks to the statute’s words, the context
of the statute as a whole, the legislative history, and whether the statute was closely
tailored to achieve the purpose the state asserted. Id. at 37-39; see also Family
Winemakers, 592 F.3d at 13. “[S]tatements by a law’s private-sector proponents
sometimes can shed light on its purpose” but the isolated correspondence of a single
proponent “has little (if any) probative value in demonstrating the objective of the
legislative body as a whole.” Gwadosky, 430 F.3d at 39.
PPLC presented limited evidence of lurking disaffection with out-of-state
businesses or favoritism for local or U.S. commerce over Canadian commerce. For
example, proponents of the WPO distributed campaign literature encouraging voters
to “stop out-of-state big oil companies from building a tar sands export terminal in
South Portland.” Pls.’ Ex. 11. A couple of public commenters reminded the City
Council “that tar sands, which is really the thing in question here isn’t even
American. It’s Canadian oil.” Pls. Ex. 158 at 01:43:23-01:45:30.
Several City Counselors also expressed their desire to see reduced reliance on
fossil fuels in the economy in general through more renewables like solar power, Pls.’
Ex. 104 at 4:25:50-4:57:44, but they also disclaimed an ability to accomplish that goal
with an ordinance such as the WPO and focused their comments on the
developmental and environmental impacts within South Portland. Id. For example,
Councilor Livingston said, “Would I like to see all the different counties trying to deal
with fossil fuels change and hopefully, in truth, I think they will have to eventually.”
Id. Councilor Livingston then rhetorically asked, “Is it our place here in South
Portland, Maine, to force that on them?”
This handful of anti-Canadian
comments and references to out-of-state interests in the voluminous record falls short
of establishing that the Ordinance’s primary purpose was to disfavor out-of-state
competitors or to favor in-state competitors.
For the vast majority of the public and official comments, the combined
evidence regarding the role of the crude oil’s country of origin is exemplified by
Councilor Blake’s comments after a last-minute amendment proposal by Councilor
Pock, who opposed the Ordinance, to distinguish between American crude oil and
non-American crude oil:
This is not about Canada; this is not about America. This is about the
health and the safety of our community. I don’t care if this crude comes
from Timbuktu. What’s important to all of us, and apparently Councilor
Pock has been missing the message, that this is about our people, our
air, our water, the quality of our lives. I support Canada and many
things they do, Mr. Pock. But this is very inappropriate this evening. It
misses the mark. And I have no interest in supporting this amendment.
Pls.’ Ex. 159 at 51:16. There is far a greater volume of more salient evidence that the
Ordinance was intended to address concerns about the air quality, water quality,
aesthetics, and redevelopment risks of crude oil loading in general, and the loading
of crude oil derived from tar sands in particular, regardless of the source location or
destination of that crude oil.
Councilor Blake’s comment at a council meeting
considering the Ordinance is representative:
They can’t say that this change is going to be more healthy. They can’t
say it. They can’t say it’s going to help our education system. They can’t
say it’s aesthetically pleasing. The only thing they can say is jobs. Well,
I believe that they’ve really stretched that . . . What this is really about
is health and safety. I spent 27 years as a firefighter/paramedic for this
community and the past seven years as your councilor at large. And I
inspected all the oil companies on a regular basis. I used to love to go
up on the oil tankers and learn. But what I learned mostly about my job
is that it’s health and safety. That’s why we’re here. That was my job
as a firefighter/paramedic was to take care of our citizenry. And every
time I make a decision at the city council level, the first thing that goes
through my mind is what’s best for our citizens? What is best for the
health and safety of our community? And then after that, what’s best
for all of our people? This is truly about the waters; it’s about the air;
it’s about the soils we stand on so that we can take care of ourselves. It’s
about Casco Bay, which I believe is in dire jeopardy. That’s what this is
Pls. Ex. 158 at 3:27:00.
Most public commenters exhibited consistent environmental, health, and
development concerns from PPLC’s proposal to reverse the pipeline and load tar
sands crude oil at the Harbor. See e.g., Defs.’ Exs. 227-328 (emails from residents to
Councilors from late 2013 to mid-2014 expressing concerns and thanks). Throughout
the legislative history, as far back as the initial WPO campaign, even when public
commenters discussed “out-of-state” interests, those concerns were almost always
ancillary to their local, non-economic concerns. The evidence establishes that most
of the public and the City Council was aware of a likely tradeoff between local
economic benefits and jobs and their desire to minimize risks from tar sands oil spills
and air emissions from crude oil loading, and they sought the restrictions anyway:
What may happen to my livelihood when tar sands are being shipped
here and toxins are being burned off into our air? What may happen to
you and your work and your health? I’m here tonight because I care
deeply about Maine and specifically Portland itself, South Portland, and
the working waterfront. I care about the quality of our air and water. I
see the importance of clean air and clean water over the possibility of
very large oil energy corporations getting the opportunity to make some
extra money and possibly create some local jobs. We always want to see
our local economy grow. Who doesn’t? At what cost? Have we
considered the long-term effects of storing over 1 million gallons of toxic
oils at Hill Street in the middle of our schools and processing this tar
sands export out of South Portland?
Id. at 0:54:27-1:02:21. The comments that indicate an economic protectionist purpose
are few and far between.
PPLC emphasizes the bulk of citizen and official comments focusing on the
desire to prevent PPLC from transporting crude oil derived from tar sands through
the Harbor. According to PPLC’s theory of the case, the primary purpose of the
Ordinance was to discriminate against foreign commerce because it was intended to
block PPLC’s reversal project, which seeks to transport crude oil from Canada to
South Portland. But the Court does not view the City’s claims about air quality,
water quality, aesthetics, and economic redevelopment as mutually exclusive goals.
What the parties present as competing goals are easily reconcilable: the City Council
enacted an ordinance that would block a tar sands project like the one PPLC proposed
because it had concerns about the air quality, water quality, aesthetics, and
redevelopment risks of crude oil loading in general, and the transporting and coastal
loading of crude oil derived from tar sands in particular.
Even though the Court agrees with PPLC that the City sought to alleviate its
concerns and those of the public by enacting an ordinance that would prohibit PPLC
from undertaking its reversal project, that does not imply that the Ordinance’s
primary purpose was discriminatory. The City feared the local risks of handling
crude oil derived from tar sands in South Portland and at the Harbor, but it does not
follow that the City was primarily concerned with the fact that the tar sands crude
oil originated outside South Portland and Maine.
The Court is left with the
impression that the City Council and the public supporters would have been equally
motivated to enact the Ordinance if the tar sands crude oil originated in Vermont,
New Hampshire, Bethel, Westbrook, or even western portions of South Portland. The
evidence is more consistent with a primary concern about the local impacts of crude
oil loading in general and the transport and loading of tar sands products more
In other words, PPLC has not explained why, even assuming the true purpose
of the Ordinance is what PPLC says it is—a disguised attempt to ban the handling of
tar sands derived crude oil, not other types of crude oil—that undisguised motive
would constitute discrimination offending the dormant Commerce Clause.
seminal case of City of Philadelphia v. New Jersey, 437 U.S. 617 (1978), is instructive.
The Supreme Court considered a New Jersey statute that banned the
importation of most solid or liquid waste which originated or was collected outside
New Jersey. Id. at 618. The Philadelphia Court acknowledged that “law[s] that
overtly block[ ] the flow of interstate commerce at a State’s borders” implicate the
dormant Commerce Clause, and struck down the New Jersey statute for “violat[ing]
th[e] principle of nondiscrimination.”
Id. at 624, 627.
The fatal flaw was the
disparate treatment of waste originating in New Jersey and waste originating
elsewhere: “The harms caused by waste are said to arise after its disposal in landfill
sites, and at that point, as New Jersey concedes, there is no basis to distinguish outof-state waste from domestic waste. If one is inherently harmful, so is the other.” Id.
at 619. The Supreme Court acknowledged New Jersey’s legitimate financial and
environmental goals and said that it “may pursue those ends by slowing the flow of
all waste into the State’s remaining landfills, even though interstate commerce may
incidentally be affected.” Id. at 627 (emphasis in original). The Philadelphia Court
distinguished a long line of cases upholding quarantine laws which block the flow of
commerce at the state’s border because “[t]hose laws . . . did not discriminate against
interstate commerce as such, but simply prevented traffic in noxious articles,
whatever their origin.” Id. at 629.
Applying Philadelphia, even if the City’s true purpose were to enact a
disguised but practically effective tar sands ban, there is evidence that the City
considered tar sands to be a dangerous article with greater health and environmental
risks than other types of crude oils and intended to alleviate the risks from
transporting and loading tar sands crude oil “whatever [its] origin.” That purpose is
not equivalent to the economic favoritism that the dormant Commerce Clause
A closely related disagreement between the parties centers on citizen and official concerns
about tar sands crude oil spills or pipeline safety. PPLC stresses that the City exaggerated its concerns
about non-spill-related environmental and health risks because its true fears involved pipeline spills
and the safety of pipeline facilities and marine transfer facilities. PPLC insists that the City cannot
assert these safety related concerns under the dormant Commerce Clause inquiry because that is an
improper purpose under preempting statutes like the Pipeline Safety Act, 49 U.S.C §§ 60101 et seq.
PPLC may be correct about the City’s desire to craft an ordinance that could survive legal challenge
and may also be correct about the City’s litigation strategy. But there is nothing nefarious about
crafting an ordinance capable of surviving judicial scrutiny. The problem PPLC identifies results from
a mistaken premise about the role of legislative purpose in the different contexts of federal statutory
preemption and the dormant Commerce Clause. While the dormant Commerce Clause prohibits the
improper purpose of discriminatory economic protectionism, federal statutes generally preempt certain
means or types of state statutes and their effects, not state legislative purposes.
As the Court explained at summary judgment, the Supreme Court instructs that it “obscure[s]
more than aid[s]” the preemption analysis to suggest “that the coexistence of federal and state
regulatory legislation should depend upon whether the purposes of the two laws are parallel or
divergent.” Fla. Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132, 142 (1963). Therefore, with the
exception of certain narrow areas of law—such as nuclear power siting, where there are indications
that the federal statute “defined the pre-empted field, in part, by reference to the motivation behind
the state law,” see English v. Gen. Elec. Co., 496 U.S. 72, 84-85, 110 (1990), Pac. Gas & Elec. Co. v.
State Energy Res. Conservation & Dev. Comm’n, 461 U.S. 190, 212 (1983)—federal preemption is a
matter of the consistency or inconsistency of the state statute’s effects with the preemptive scope of the
federal statute, not the consistency or inconsistency of the state and federal statutory purposes. See
Philip Morris Inc. v. Harshbarger, 122 F.3d 58, 76-77 (1st Cir. 1997) (“[T]he relevant inquiry focuses
not upon any relation between advertising and the motivation behind a state law, but upon the law
itself and any connection it might have with advertising activities . . . Thus, the mere suggestion that
state lawmakers sought passage of the [act] in part because of their discontent with federal regulatory
efforts does not affect our preemption analysis”); Associated Industries of Massachusetts v. Snow, 898
F.2d 274 (1st Cir. 1990).
The Ordinance is not preempted because it is not a “safety standard” for pipeline facilities or
transfer facilities, and it does not regulate the operations of those facilities within the meaning of the
statute. This is true even though the Ordinance was motivated in part out of concerns about the safety
of handling tar sands crude oil at the Harbor (in terms of environmental and public health risk from
spills). Statutes that preempt state safety standards for certain activities and facilities do not
generally remove local control over whether those activities and facilities are permitted in each
locality. Congress knows how to preempt local bans and siting authority, since it has done so for
nuclear power, liquefied natural gas terminals, and electric transmission lines. It has not done so for
pipeline facilities, and instead chose a more narrowly preemptive scope.
PPLC would have the Court draw the inference that the purpose of the
Ordinance was discriminatory because it was designed to create an “asymmetry”
between the direction of flow, or between the ability of shippers to import crude oil to
South Portland for northbound flow, and the ability of shippers to export crude oil
after southbound flow. But under historic northbound flow operations, domestic and
foreign sourced crude oil was imported to South Portland and immediately exported.
Under PPLC’s proposed southbound flow operations, domestic and foreign sourced
crude oil would be imported to South Portland and immediately exported.
Technically, the Ordinance does not distinguish between importation and
exportation. It only distinguishes between certain methods of transportation within
the borders of South Portland. Unlike the cases where Courts have found dormant
Commerce Clause violations, the alternative modes of operations here are
meaningfully different from one another. See Philadelphia 437 U.S. at 627 (The
dormant Commerce Clause prohibits disparate treatment of foreign and local
products “unless there is some reason, apart from their origin, to treat them
differently”). Crude oil unloading at the Eastern Waterfront does not expel air that
is saturated with hydrocarbon vapors, so it does not contribute to local air pollution
Since preemption bars certain types of statutes, not motives or legislative purposes, there is
no logical contradiction in concluding that the Ordinance is not a preempted safety standard and also
concluding that one purpose of the Ordinance was to alleviate perceived safety risks from tar sands
crude oil spills by blocking the loading of that crude oil at the Harbor. PPLC argues that, stripped of
its disguises, the Ordinance was truly an attempt to ban tar sands crude oil, but PPLC has not
convinced the Court that, even if the Ordinance were truly such a ban, it would either constitute a
preempted pipeline facility safety standard or a discriminatory ordinance enacted for an economically
at the Harbor and there is no need to construct vapor control devices. But crude oil
loading at the Harbor does create those local harms and does require those structures.
PPLC’s arguments regarding discriminatory purpose are also undermined by
the fact that a major source of northbound crude oil has been from Eastern Canada,
which the Ordinance does not obstruct. Similarly, refined oil products from Canada
are still transported to South Portland today, which the Ordinance also does nothing
to block. These facts bolster the Court’s finding that PPLC has not shown that the
Ordinance favors or was primarily intended to favor local commerce or to
discriminate against interstate or Canadian commerce. Canada would be a major
source of crude oil under southbound flow conditions, but Canada has always been a
source of crude oil flows under historic northbound flow conditions as well.
Finally, the Ordinance functions in much the same way as if the City had
simply removed pipeline facilities or crude oil handling facilities from the list of
approved activities while grandfathering in the existing facilities and uses. That
approach would permit PPLC to continue its current business when market
conditions support northbound flow, but would prevent it from installing the new
facilities and structures it would need in order to alter or expand its business
activities. The DOC explicitly recommended this change, and some council members
themselves made the same comparison. See e.g. Pls.’ Ex. 104 at 4:25:50-4:57:44 (“I
understand what happens when zoning ordinances are passed that make people’s
property non-conforming. I know that they can’t expand them”). There is little
question that such a straightforward zoning change, while narrowly grandfathering
an existing business model, would be permissible under the dormant Commerce
Clause, because there is no indication that it was intended to benefit local businesses
over their out-of-state competitors. See Rullan, 405 F.3d at 55 (Prohibitions and
grandfathering clauses can indicate prohibited purpose when they burden out-ofstate competitors and allow in-state competitors to persist) (citing Pac. Nw. Venison
Producers v. Smitch, 20 F.3d 1008, 1012 (9th Cir. 1994) (quoting Raymond Motor
Transp., Inc. v. Rice, 434 U.S. 429, 447 (1978) (“Exemptions of this kind, however,
weaken the presumption in favor of the validity of the general limit, 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”); S. Wine & Spirits of
Am., Inc. v. Div. of Alcohol & Tobacco Control, 731 F.3d 799, 812 (8th Cir. 2013)
(Prohibitions with grandfathering clauses “do not, in and of themselves, demonstrate
the invalidity of rules from which they are carved”); see also Locke v. Shore, 634 F.3d
1185, 1194 (11th Cir. 2011).
Accordingly, the Court does not apply heightened scrutiny and instead
examines the Ordinance under the Pike balancing test.
The Ordinance does not impose burdens on foreign and
interstate commerce that are clearly excessive in relation to the
putative local benefits.
“A state statute that regulates evenhandedly and has only incidental effects on
interstate commerce engenders a lower level of scrutiny.” Gwadosky, 430 F.3d at 35
(internal quotations omitted).
“Where the statute regulates even-handedly to
effectuate a legitimate local public interest, and its effects on interstate commerce
are only incidental, it will be upheld unless the burden imposed on such commerce is
clearly excessive in relation to the putative local benefits.” Pike v. Bruce Church, Inc.,
397 U.S. 137, 142 (1970) (citing Huron Portland Cement Co. v. City of Detroit, 362
U.S. 440, 443 (1960)). “State laws frequently survive this Pike scrutiny . . . .” Davis,
553 U.S. at 339.
The higher courts have expressed a significant degree of discomfort with the
speculative nature of this balancing test and with the role of the court in making such
See PhRMA, 249 F.3d at 84 (“It is necessary to recognize the
difficulty in foreseeing what events actually will occur from the enforcement of this
Act, which admittedly makes the Pike balancing test more challenging to apply. We
are forced to balance the possible effects, instead of the actual effects of the statute
There is a common thread to these arguments: They are invitations to
rigorously scrutinize economic legislation passed under the auspices of
the police power. There was a time when this Court presumed to make
such binding judgments for society, under the guise of interpreting the
Due Process Clause. See Lochner v. New York, 198 U.S. 45, 25 (1905).
We should not seek to reclaim that ground for judicial supremacy under
the banner of the dormant Commerce Clause.
United Haulers, 550 U.S. at 347.
What is most significant about these cost-benefit questions is not even
the difficulty of answering them or the inevitable uncertainty of the
predictions that might be made in trying to come up with answers, but
the unsuitability of the judicial process and judicial forums for making
whatever predictions and reaching whatever answers are possible at all.
Davis, 553 U.S. at 355. Accordingly, when conducting this balancing, courts are
warned to proceed with caution.
The burden of the Ordinance falls the hardest on one particular firm, PPLC.
There is a distinction between harms to a particular interstate firm and burdens on
interstate commerce. See PhRMA, 249 F.3d at 84 (“As the Third Circuit stated,
however, the fact that a law may have devastating economic consequences on a
particular interstate firm is not sufficient to rise to a Commerce Clause burden”)
(internal quotations omitted but quoting Instructional Sys., Inc. v. Computer
Curriculum Corp., 35 F.3d 813, 827 (3d Cir. 1994) and Ford Motor Co. v. Ins. Com'r
of Com. of Pa., 874 F.2d 926, 943 (3d Cir. 1989)). Despite this, the Court agrees with
PPLC that the Ordinance creates meaningful burdens on interstate and foreign
commerce. Without the Ordinance, there is a substantial likelihood that PPLC would
complete its reversal project and begin shipping some quantity of crude oil
southbound through its pipelines to markets in the Eastern U.S. and Europe.
Financial losses to shareholders and workers in the relevant industries will be
significant—for example, AWO receives roughly $100,000 per docking—and the
reduced flows will impact others in the supply chain. While the Ordinance will likely
have little impact on global oil prices, the dormant Commerce Clause is not limited
to burdens of that scale.
It is unrealistic for the City to argue that the Ordinance does not actually block
PPLC’s pipeline reversal project because PPLC could theoretically and legally move
crude oil out of South Portland via a new rail interconnection on PanAm’s existing
right of way. While that alternative would solve some of the environmental concerns
about tar sands oil near the South Portland waterfront, it would not address the
concerns about air pollution from increased utilization of the Main Tank Farm or
emissions from the VDUs, since loading crude oil onto rail cars expels the same
volumes of air laden with hydrocarbon vapors. Although the Court does not pretend
to grasp all of the details of the logistics of crude oil transfers, one would expect that
if anything, there would be a greater risk of leaks when transferring the same volume
of crude oil to hundreds or thousands of rail cars, as compared with a single
connection to a marine tanker. Even though consistency is not always a political
virtue, there is no evidence that either the City Council or the South Portland
residents who favored the Ordinance would support the transfer of large volumes of
oil onto railcars in the Rigby Yard. Even if PPLC could accomplish the City’s proposed
rail project, which the Court finds implausible, the City’s own expert testified about
the cost disadvantage in most circumstances from transporting crude oil via rail
instead of marine tankers.7 The City’s railcar argument is a sidetrack.
The Court agrees with the City, however, that the Ordinance creates ample
and weighty local benefits. The record demonstrates that the City Council and an
engaged and sizable portion of South Portland’s residents had sincere concerns about
(1) increased air emissions-related public health risk resulting from the proposed
VDUs, (2) increased air emissions-related public health risk resulting from renewed
utilization of the Main Tank Farm adjacent to sensitive locations, such as schools, (3)
increased odors resulting from renewed utilization of the Main Tank Farm at
adjacent sensitive locations like schools, (4) aesthetic and noise impacts at
One aspect of Sarah Emerson’s testimony that rings true is the periodic narrowness of the
margins in the oil business. It is ironic that the city of South Portland has spent so much time pressing
its argument that delivery of oil down a pipeline from Canada to oil tankers in its Harbor would be
economically unfeasible, but at the same time, arguing that PPLC could economically unload the same
oil onto railcars in Rigby Yard. The Court does not take seriously the City’s argument on this
recreational locations like Bug Light Park from the VDUs and renewed tanker traffic,
(5) reduced likelihood of redevelopment opportunities for vacant and underutilized
properties from renewed heavy industrial activity, and (6) increased risk to the local
land and coastal environment and elevated public health risks from pipeline
accidents or spills of crude oil derived from tar sands.8
PPLC argues that the City attempted to disguise its true motives by
incorporating lengthy legislative findings and adopting an air quality-related
moniker. Those accusations are not without foundation. There is evidence that the
City overemphasized or played up its air quality motives and sought to downplay the
spill-related concerns. The Court does not agree, however, that the purported local
air quality, aesthetics, and redevelopment benefits were pretextual, illegitimate, or
The public comments and official legislative history demonstrate that air
quality, aesthetics, and waterfront redevelopment goals pervaded the public and
official considerations during the WPO, the Moratorium, the DOC proceedings, and
the Ordinance vote.
They were not merely tacked-on justifications after savvy
The Court disagrees with PPLC’s contention about the illegitimacy of the City’s concerns about
the unique risks from transporting tar sands derived crude oil as compared with other types of crude
oil. As the Court explained in footnote 4, federal statutes preempt types of legislation or legislative
means and effects. Federal statutes normally do not preempt legislative purposes. The Pipeline Safety
Act does not permit the City to set its own safety standards or regulate pipeline or transfer facility
operations, but that does not mean that the City is prohibited from banning loading or new facilities
for loading simply because the ban was motivated in part by environmental and safety concerns that
overlap with the legislative purposes of a federal statute. If overlapping legislative purpose with a
preempting federal statute were ordinarily enough to destroy the legitimacy of state interests in the
Pike balancing, courts would likely have to strike down a huge swath of state legislation, such as the
Maine Oil Discharge Prevention and Pollution Control law, 38 M.R.S. §§ 541 et seq., that have long
been upheld under preemption and constitutional attacks. See Portland Pipe Line Corp. v. Envtl. Imp.
Comm’n, 307 A.2d 1, 23 (Me. 1973).
attorneys instructed the City Council to “bulletproof” the Ordinance, as PPLC insists.
For example, there is a WPO advocacy flyer that PPLC cites for its claim that the
City sought to disfavor “out-of-state big oil companies” predates the Moratorium and
DOC meetings. Pls.’ Ex. 11. Yet that WPO campaign flyer also focuses heavily on air
quality and aesthetics. The flyer features a large photo of PPLC’s DEP air emissions
permit for the project and states that PPLC will be allowed to “release tons of
additional toxic air pollution each year.” Id. at 1. It also features large aerial
photographs of the main tank farm with a bold caption claiming, “With a tar sands
project, these tanks could release triple the amount of toxic air pollution (220
tons/year!) right next to where our children learn and play. Compared to regular
oil, tar sands contains more toxic chemicals, including benzene which causes
cancer and triggers asthma.” Id. at 2. The flyer contains a photo rendering
depicting the two proposed VDUs with a bold caption describing the size of the
structures—“two proposed 70-foot-tall smokestacks next to Bug Light Park”—
and encouraging voters to help “stop this project before our air is polluted and Casco
Bay is put at risk.” Id. at 1.
The quotes in the flyer are consistent with the bulk of public comments and
the remarks of the City Council when it considered the WPO, which indicates that
air quality and aesthetic impacts from PPLC’s reversal proposal were legitimate
concerns before the WPO votes. Those concerns are also consistent with much of the
record of public pressure and official comments during the Moratorium and DOC
process. While air quality was increasingly emphasized over time, it not pretextual.
It was an evident and sincere goal from the beginning.
The City’s public health expert, Dr. Helen Suh, testified about the health risks
of VOC and HAP emissions from the Main Tank Farm and SOx and NOx emissions
from the proposed VDUs.
The specifics of her quantitative estimations of the
marginal risks from the VDUs were somewhat undermined by PPLC’s witnesses’
effective explanations regarding the highly conservative assumptions and
overestimations of the modeling employed by another of the City’s experts, Dr.
Stephen Zemba, upon which Dr. Suh relied. The actual pollutant concentrations
would almost certainly be substantially lower than Dr. Zemba’s worst-case model,
especially in light of new emissions control technology and lower flow rates for a
future project compared to the 2008-2009 proposal.9 However, the remainder of Dr.
Suh’s testimony regarding the public health benefits of reducing emissions from
loading operations and renewed tank farm use, even when a locality is in compliance
with federal and state air quality standards, was unrebutted.
PPLC argues that these benefits are inflated because the Ordinance does not
address other sources of local air pollution, including woodstoves and mobile sources,
The Court is similarly unconvinced by the City’s argument that Dr. Zemba’s modeling shows
that PPLC will be unable to get a Maine DEP air emissions permit to comply with the new federal
National Ambient Air Quality Standards for SO2 that have gone into effect after 2009. Dr. Zemba’s
modeling showed that, under the assumptions of the 2008-2009 project, several receptor locations
around Pier 2 would experience SO2 levels at certain points during the year that exceed the NAAQS.
See Defs.’ Exs. 189-90. But Dr. Zemba’s assumptions were more conservative than PPLC will be legally
required to meet, especially given the fact that PPLC can alter the details of its 2008-2009 proposal by
transporting sweeter crude oils, reducing the flow rate, and incorporating VRUs rather than VDUs.
The Court does not accept the City’s contention that PPLC would be unable to obtain a permit under
the new SO2 NAAQS to accomplish flow reversal and marine loading.
which represent far larger public health risks. See Pls.’ Ex. 45. This argument is
misplaced, however, because the Supreme Court “has made clear that a legislature
need not strike at all evils at the same time or in the same way, and that a legislature
may implement its program step by step, adopting regulations that only partially
ameliorate a perceived evil and deferring complete elimination of the evil to future
Minnesota v. Clover Leaf Creamery Co., 449 U.S. 456, 466 (1981)
(internal quotations, modifications, and citations omitted). Poor tailoring can suggest
that the asserted purposes are not the true purposes, but the rest of the record
establishes that the goal was legitimate and sincere, albeit somewhat overstated.
The City had real interests in reducing the visual, auditory, and olfactory
externalities of heavy industrial activities within its borders and encouraging
recreational and lower-impact development on the waterfront.
development interests are not undercut because some of a developer’s previous
proposals were outlandish. There is an inherently speculative nature to encouraging
redevelopment projects, but that does not defeat the City’s interest in pursuing them.
The evidence showed that the City has demonstrated a pattern of opposition to heavy
industrial projects in recent years, indicating that the touted local safety, aesthetic,
and redevelopment concerns of the public and City officials were bona fide. See e.g.,
Trial Tr. 641:24-655:6.
PPLC essentially raises the problem of NIMBY (Not In My Back Yard)
legislation. But the dormant Commerce Clause, and the Pike balancing inquiry in
particular, do not and were never intended to solve all governance problems that come
with a federal system of distributed local authority. Although local tendencies toward
NIMBY legislation present a common difficulty in our federal system, the remedy for
this collective action problem is federal legislation, not judicial intervention.
The Court does not agree with PPLC’s argument that the City’s purported local
benefits are analogous to the transportation cases where the Supreme Court struck
down state highway regulations because the defendants failed to establish that their
asserted safety justifications were anything more than “illusory.” See Kassel, 450
U.S. 662; Raymond, 434 U.S. 429; Bibb v. Navajo Freight Lines, Inc., 359 U.S. 520
(1959). Those cases involved state regulations of semi-truck mudguards and trailer
lengths, and the states could not show, in the face of contradictory evidence, that their
requirements were actually any safer than alternatives used by the other
surrounding states. See e.g., Raymond, 434 U.S. at 436 (“Appellants presented a
great deal of evidence supporting their allegation that 65-foot doubles are as safe as,
if not safer than, 55-foot singles when operated on limited-access, four-lane divided
PPLC argues that the air quality concerns are illusory because the air quality
is so good that DEP chose to stop operating their air monitoring station in the area.
See Pls.’ Ex. 45. But the American Lung Association explained to the City Council
and DOC that Cumberland County received a “C” air quality grade and has some of
the highest rates of respiratory ailments and lung disease in the state. See Defs.’ Exs.
114 at 270-274, 142 at 3; Pls.’ Ex. 135 at 0:52:50-0:56:10. More importantly, PPLC
did not rebut Dr. Suh’s testimony that there is no safe level of exposure to many of
the air pollutants that would be emitted from renewed use of PPLC’s tanks and the
proposed VDUs from crude oil loading operations. Neither did PPLC rebut the City’s
evidence about aesthetic and recreational benefits to deindustrializing the
Regarding the City’s spill-related safety concerns, PPLC’s frustration is
understandable given that the City downplayed those concerns and because there is
some reason to doubt the severity of any special risks associated with tar sands oil as
compared to other types of crude oil. See e.g. Pls.’ Ex. 96 (National Academy of Science
Report “Effects of Diluted Bitumen on Crude Oil Transmission Pipelines” finding no
significant increased risk of pipeline corrosion or ruptures from tar sands crude oil).
But there is also competing evidence that tar sands transportation and spills create
See e.g. Defs.’ Ex. 86 (report from Cornell University professors
discussing special environmental land and water cleanup costs and risks from tar
sands crude oil spills).
In light of copious conflicting evidence and scientific uncertainty regarding the
magnitude of the air quality benefits and the existence of the benefits from water
contamination risk reduction, along with the fact that the aesthetic and
redevelopment benefits were unrebutted, it is not the Court’s place to second-guess
the findings of South Portland’s political process. See Kassel, 450 U.S. at 670 (“the
incantation of a purpose to promote the public health or safety does not insulate a
state law from Commerce Clause attack” but “if safety justifications are not illusory,
the Court will not second-guess legislative judgment about their importance in
comparison with related burdens on interstate commerce” (quoting Raymond, 434
U.S. at 449 (Blackmun, J., concurring)).
The Court also notes that this is a case where the heaviest burdens fall on local,
in-state entities: PPLC and Portland Tugboat. The predominant impacts on jobs and
commercial revenues will fall on local Maine companies and their resident employees.
The Supreme Court has displayed more deference to legislative judgments under the
dormant Commerce Clause when the challengers are in-state, rather than out-ofstate, interests. See e.g., Clover Leaf Creamery, 449 U.S. at 473 (“[T]here is no reason
to suspect that the gainers will be Minnesota firms, or the losers out-of-state firms.
Indeed, two of the three dairies, the sole milk retailer, and the sole milk container
producer challenging the statute in this litigation are Minnesota firms”); West Lynn
Creamery, 512 U.S. at 200; Raymond, 434 U.S. at 444 n.18 (explaining deference to
nondiscriminatory state safety regulations when impacts fall on “local economic
interests as well as other States’ economic interests, thus insuring that a State’s own
political processes will serve as a check against unduly burdensome regulations”).
Accordingly, the Court concludes the PPLC has not shown that the burdens on
interstate or foreign commerce are excessive in relation to the asserted local benefits.
The Ordinance does not impermissibly interfere with the
federal government’s ability to speak with one voice when
regulating commerce with foreign governments.
In a series of state taxation cases implicating foreign commerce, the Supreme
Court explained that, in addition to the three prongs that apply in the interstate
commerce context, there is another requirement that a state law not interfere with
the federal government’s ability to “speak with one voice when regulating commercial
relations with foreign governments.” See Japan Line, 441 U.S. at 449; Container
Corp. of Am. v. Franchise Tax Bd., 463 U.S. 159, 193-97 (1983); Wardair Canada, Inc.
v. Florida Dep't of Revenue, 477 U.S. 1, 7-13 (1986); Barclays Bank PLC v. Franchise
Tax Bd. of California, 512 U.S. 298, 320-31 (1994). The implication of these cases is
that “the dormant Foreign Commerce Clause places stricter constraints on states
than its interstate counterpart.” Antilles Cement Corp. v. Fortuno, 670 F.3d 310, 328
(1st Cir. 2012); see also Japan Line, 441 U.S. at 448 (“Although the [Commerce
Clause] grants Congress power to regulate commerce ‘with foreign Nations' and
‘among the several States' in parallel phrases, there is evidence that the Founders
intended the scope of the foreign commerce power to be the greater.”). The First
Circuit regards the “one voice” concern as “equally vivid in non-tax dormant Foreign
Commerce Clause cases” as it does in the tax context. Antilles Cement Corp. v.
Acevedo Vila, 408 F.3d 41, 46 (1st Cir. 2005); see also Natsios, 181 F.3d at 68 (applying
the doctrine to the Massachusetts anti-Burma law, but without detailed analysis).
The “one voice” inquiry is reminiscent of federal preemption under the foreign
affairs powers. See Zschernig v. Miller, 389 U.S. 429, at 430-32 (1968). The First
Circuit explained that, because the Supreme Court’s previous applications of the
dormant Foreign Commerce Clause “one voice” analysis did not cite the foreign affairs
preemption cases, the Supreme Court “[kept] separate the analyses that apply when
examining laws under the Foreign Commerce Clause and under the foreign affairs
power.” Natsios, 181 F.3d at 59. Despite this, scholars have argued that the two
doctrines “involve[ ] the exercise of functionally identical judicial lawmaking powers.”
JACK L. GOLDSMITH, Federal Courts, Foreign Affairs, and Federalism, 83 VA. L. REV.
1617, 1630 (1997); see also LEANNE M. WILSON, The Fate of the Dormant Foreign
Commerce Clause After Garamendi and Crosby, 107 COLUM. L. REV. 746, 773 (2007)
(discussing Crosby, 530 U.S. 363; Am. Ins. Ass’n v. Garamendi, 539 U.S. 396, 396
(2003) and concluded that under the “one voice” prong, the Supreme Court looks to
expressions of intent from Congress and the Executive branch, so that “in reality the
Court is applying a form of strong preemption analysis and simply calling it
The scarcity of cases addressing these doctrines leaves the matter
opaque, but if there is any significant space between the two doctrines, it is a narrow
divergence and this case does not fit within it. The Court concludes that national
uniformity is not required and the Ordinance does not interfere with the federal
government’s ability to “speak with one voice” in regulating foreign commerce. The
Court reaches this conclusion for many of the same reasons the Court concluded the
Ordinance was not preempted by federal foreign affairs powers.
The Ordinance does not explicitly target any foreign countries. The AntiBurma law struck down in Natsios made a facial distinction about a particular foreign
country, whereas the Ordinance prohibits loading crude oil and new structures for
loading crude oil, regardless of either the source or ultimate destination. As such,
unlike the Anti-Burma law, the Ordinance has not and is unlikely to provoke
international objections and retaliation.
On the contrary, a Canadian locality,
Dunham, Quebec, imposed local restrictions that would have interfered with PPLC’s
ability to complete its 2008-2009 proposal, suggesting that other states and Canada
expect infrastructure projects like pipelines to satisfy local restrictions and avoid local
prohibitions if they wish to operate successfully. The policy of the federal government
appears to favor local control over whether pipelines can exist or operate within each
The Presidential Permits contemplate local restrictions, and
Congress has declined to prevent states and municipalities from exercising siting
authority over pipelines and transfer facilities, unlike with nuclear power plants,
liquefied natural gas terminals, and electric transmission lines. There does not
appear to be any direct conflict between the Ordinance and specific federal laws or
consistent policies, so there is no potential for embarrassment to the United States
PPLC asserts that there is risk of “retaliation” from Canada or other nations if
other jurisdictions enacted similar ordinances. See Japan Line, 441 U.S. at 451
(discussing risk of “retaliation” from “asymmetry in the international tax structure”).
The risk the Japan Line Court feared was the inconsistent taxation that would result
if a state was permitted to depart from the international norm that property taxes on
assets like tankers engaging in commerce on the high seas are taxed in their home
jurisdictions, not wherever they travel. Id. at 441-43, 450-51. Unlike Japan Line,
here, PPLC has not made the case that there is a realistic risk of inconsistent or
overlapping burdens on the same infrastructure. Even though PPLC has consistently
stressed the cumulative impacts of other jurisdictions enacting similar ordinances
prohibiting this particular industrial activity, not only is PPLC’s fear speculative, this
type of regulation is not the type of “asymmetry” or lack of uniformity that concerned
the Supreme Court in Japan Line. Even if enacted in many other jurisdictions, there
will be no inconsistent burdens requiring pipeline operators to choose between
complying with one state or local command or another. There is no risk of “multiple
taxation” arising from different ways of apportioning burdens on the same assets or
conduct. Id. at 449-51. The nightmare scenario PPLC presents is not perplexing
disuniformity, it is simply unfavorable uniformity.
Furthermore, PPLC’s argument proves too much. Consider the federal rule
that PPLC implies is necessary in order to avoid “impair[ing] federal uniformity in
an area where federal uniformity is essential.” Id. at 448. The uniform federal rule
apparently must prohibit localities from banning certain petroleum handling
activities like crude oil loading within their borders. To put it another way, according
to PPLC’s argument, the dormant Commerce Clause requires all coastal jurisdictions
to allow crude oil loading at their shores. Otherwise, oil markets would shut down if
many or all localities chose to prohibit such activities.
But the same could be said of nearly any local prohibition on any good, service,
or activity pursuant. If every jurisdiction prohibited handling fireworks, interstate
and international markets in fireworks would shut down. If PPLC were correct,
many of South Portland’s longstanding prohibitions on other industrial activities
would also be invalid, as would those of other localities, like Portland and Cape
Elizabeth. There is no indication in the caselaw that the “one voice” test requires all
coastal jurisdictions to permit all activities that might contribute to a significant
The Ordinance merely has “foreign resonances” because it impacts a piece of
cross-border infrastructure and a large industry. See Container Corp., 463 U.S. at
194 (upholding state tax and distinguishing Japan Line). Any local regulation or
prohibition on a large and important industry will inevitably touch on federal
commerce in a broad sense, given the realities of a modern globalized economy. But
that does not mean it impermissibly interferes with the government’s ability to
“speak with one voice” when regulating foreign commerce or impairs uniformity in an
area where federal uniformity is essential.
Supporters and opponents of the Ordinance may view the Court’s decision as
placing a judicial imprimatur on the wisdom of the Ordinance and a corresponding
disapproval of PPLC and its business. It is not. The Court’s job is a narrow one. It
is not charged with determining whether the city of South Portland should have
adopted the Ordinance; only whether it legally could do so. Whether the enactment
of a local law that effectively puts a lawful local business out of business is good public
policy falls within the aegis of the duly-elected representatives of the citizenry of
South Portland. The Court concludes only that the Ordinance survives the legal
challenges the business has mustered.
The Court GRANTS judgment in favor of the City of South Portland and
/s/ John A. Woodcock, Jr.
JOHN A. WOODCOCK, JR.
UNITED STATES DISTRICT JUDGE
Dated this 24th day of August, 2018
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