Posted by: Patricia Salkin | May 8, 2018

OR Appeals Court Holds Zoning Restrictions on Fossil Fuel Terminals Didn’t Violate the Dormant Commerce Clause

This post was authored by Amy Lavine, Esq.

The Oregon Court of Appeals held in January that zoning amendments restricting the size of fossil fuel terminals in the City of Portland did not discriminate against interstate commerce in violation of the dormant Commerce Clause. The Land Use Board of Appeals (LUBA) also erred in finding that the amendments violated Statewide Planning Goal 12, but the court affirmed LUBA’s finding that the amendments were inconsistent with Statewide Planning Goal 2. Columbia Pacific Building Trades Council v. City of Portland, 289 Ore. App. 739 (1/4/18)

Responding to concerns about the location of fossil fuel infrastructure in earthquake zones, and in the interest of reducing the city’s greenhouse gas emissions, the Portland City Council passed a resolution in 2015 stating that it would actively oppose the expansion of fossil fuel infrastructure along the city’s waterways. Several months later, the city also adopted a new comprehensive plan policy stating that the it would “[l]imit fossil fuel distribution and storage facilities to those necessary to serve the regional market.” Following these enactments, the city adopted several zoning amendments to implement its new fossil fuel policy. The amendments created a new land use classification for “Bulk Fossil Fuel Terminals,” which were defined as facilities with a capacity of more than 2 million gallons. New bulk terminals were then prohibited, and existing bulk terminals were prohibited from expanding. The amendments were challenged by the Columbia Pacific Building Trades Council, however, and LUBA found that they violated the dormant Commerce Clause as well as Statewide Planning Goals 2 and 12.

The first step in the dormant Commerce Clause analysis, the Court of Appeals explained, was to determine whether the amendments provided benefits to in-state economic interests or burdened out-of-state interests. Columbia Pacific didn’t claim that the amendments discriminated against commerce on their face, but rather argued their practical effect was to “disfavor out-of-state economic sellers” while simultaneously favoring “local, in-state purchasers and end users of bulk fossil-fuel shipments.” The court found that this comparison was flawed, however, as it was “inappropriate to compare out-of-state bulk exporters of fossil fuels (refineries and distributors of fuel) to in-state end users of bulk fossil fuels in a claim of economic discrimination.” The court explained that the correct comparison would have been between out-of-state and in-state bulk exporters of fossil fuels, except that there were no bulk fossil fuel exporters operating in Oregon. Accordingly, the court explained, “the amendments cannot disfavor out-of-state exporters… because there are no producers, refiners, or distributors in Portland or Oregon, much less ones that export fuel to national or international markets.”

Columbia Pacific and LUBA next argued that even if the amendments were not “classic” economic discrimination, they were a “species of protectionism” that improperly shielded the city from unwanted interstate and national commerce. This argument was based primarily on the Supreme Court’s decision in Philadelphia v. New Jersey, which struck down a New Jersey law that prohibited the disposal of out-of-state waste in New Jersey landfills. But unlike Philadelphia v. New Jersey, the court found that the amendments in this case did not prohibit the delivery of out-of-state fossil fuels; rather, they merely placed restrictions on the size of fossil fuel terminals that could be used as export facilities. Nor did the amendments violate the dormant Commerce Clause by providing an advantage to in-state consumers, the court found.

Having determined that the amendments didn’t discriminate against interstate commerce, the next step in the dormant Commerce Clause analysis was to consider whether they nevertheless imposed excessive burdens on interstate commerce under the Pike balancing test. The court noted preliminarily that the burden was on Columbia Pacific to demonstrate that the amendments had an excessive impact on interstate commerce, and LUBA had erred by placing that burden on the city instead. As to the test itself, the court noted that the amendments’ putative local benefits included the city’s legitimate interest in limiting fossil fuel infrastructure in earthquake zones, and they also sought to protect the public health by limiting exposure to coal and chemicals related to fossil fuels. The court was unable to compare these benefits to the amendments’ impacts on interstate commerce, however, because there was no evidence in the record to demonstrate how the absence of large fossil fuel terminals would affect interstate commerce in fossil fuel distribution.

The court next addressed LUBA’s determination that the amendments were not supported by an “adequate factual basis,” as required by Statewide Planning Goal 2. Columbia Pacific challenged, in particular, the city’s finding that the use of fossil fuels was likely to “plateau or decline” due to changing modes of transportation and more fuel-efficient vehicles. LUBA agreed with Columbia Pacific that this finding was essential to the city’s decision to approve the amendments, but that it “essentially ignored” uncontradicted evidence projecting moderate growth in the demand for fossil fuels. Noting that its judicial review was limited to matters of legal correctness, the court found that LUBA’s decision under Goal 2 had articulated and applied the correct legal standard, and the evidence was not “so at odds with” LUBA’s determination as to indicate that LUBA had misapplied the standard.” The court accordingly affirmed LUBA’s determination on this point, noting that “while the city may, in fact, be correct that demand for fossil fuels may plateau or decline… the city fails to point to anything in the record that indicates that that may actually be the case.”

Finally, the court agreed with the city that fossil fuel terminals were not “transportation facilities” under Goal 12, and thus LUBA erred by finding that the city failed to adequately consider the transportation considerations specified in Goal 12. As the court explained, “if a land use regulation does not ‘[d]egrade the performance of an existing or planned transportation facility such that it would not meet the performance standards identified in the [transportation system plan] or comprehensive plan,’ as LUBA concluded the amendments did not in this case, that regulation also necessarily must not degrade those transportation facilities’ ability to ‘facilitate the flow of goods and services so as to strengthen the local and regional economy’ in a way that violates Goal 12.”

Columbia Pacific Building Trades Council v. City of Portland, 289 Ore. App. 739 (1/4/18)

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