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Portland Pipe Line Corporation v. City of South Portland

United States District Court, D. Maine

February 11, 2016

PORTLAND PIPE LINE CORPORATION, et al., Plaintiffs,
v.
CITY OF SOUTH PORTLAND, et al., Defendants.

ORDER ON DEFENDANTS’ MOTION TO DISMISS

JOHN A. WOODCOCK, JR. UNITED STATES DISTRICT JUDGE.

South Portland enacted an Ordinance prohibiting the loading of crude oil in Portland Harbor. The Ordinance’s practical effect is to prevent Portland Pipe Line from using its infrastructure to transport oil by pipeline from north to south, i.e., from Canada to South Portland. Portland Pipe Line brought suit seeking declaratory and injunctive relief, and South Portland moved to dismiss the suit on the justiciability grounds that the suit was unripe, that Portland Pipe Line lacked standing, and that the Court must not render an advisory opinion. The Court, however, finds the dispute to be ripe because Portland Pipe Line has expressed its intention to import oil and cannot do so as long as the Ordinance remains in place. Other approvals may be required, but Portland Pipe Line has won these approvals in the past and should not be made to pursue them again while the question of the Ordinance’s legality remains unanswered. The Defendants’ standing and advisory opinion claims are similarly unavailing. The Court denies South Portland’s motion to dismiss.

I. BACKGROUND

A. Procedural History

On February 6, 2015, Portland Pipe Line Corporation (PPLC) and The American Waterways Operators (AWO) filed a nine-count complaint in this Court against the city of South Portland (South Portland or City) and Patricia Doucette (Doucette), South Portland’s Code Enforcement Officer. 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. § 556. Compl. for Declaratory and Injunctive Relief (ECF No. 1) (Compl.).

On March 31, 2015, South Portland and Ms. Doucette filed a motion to dismiss the Complaint. 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) (Defs.’ Mot.). The Plaintiffs responded on April 21, 2015. Pls.’ Opp’n to Defs.’ Mot. to Dismiss Pursuant to Rule 12(b)(1) (ECF No. 18) (Pls.’ Opp’n). The Defendants replied on May 5, 2015. Reply Mem. of Law in Supp. of Defs.’ Mot. to Dismiss Pursuant to Rule 12(b)(1) (ECF No. 19) (Defs.’ Reply). On May 12, 2015, the Plaintiffs filed an unopposed motion for oral argument, Pls.’ Req. for Oral Argument (ECF No. 20), which the Court granted on May 14, 2015. Order Granting Without Obj. Mot. for Oral Argument/Hr’g (ECF No. 21).

On January 21, 2016, the Court held oral argument on the motion to dismiss. Min. Entry (ECF No. 24). At oral argument, the Plaintiffs brought to the Court’s attention a case the First Circuit decided after the parties submitted their written argument: Town of Barnstable v. O’Connor, 786 F.3d 130 (1st Cir. 2015). The Court asked the parties to brief Barnstable. The Defendants filed a memorandum on Barnstable on January 28, 2016, Post-Hr’g Mem. in Supp. of Defs.’ Mot. to Dismiss Pursuant to Rule 12(b)(1) (ECF No. 25) (Defs.’ Post-Hr’g Mem.), and the Plaintiffs did so on February 2, 2016. Pls.’ Resp. to Defs.’ Post-Hr’g Mem. in Supp. of Defs.’ Mot. to Dismiss Pursuant to Rule 12b(1) (Pls.’ Post-Hr’g Mem.).

The Court has federal question jurisdiction over this action pursuant to 28 U.S.C. § 1331 and pendant jurisdiction over the Maine law claims pursuant to 28 U.S.C. § 1367.

II. THE FACTUAL ALLEGATIONS OF THE COMPLAINT

A. The Parties

PPLC is a Maine corporation with its principal place of business in South Portland. Compl. ¶ 3. It is a wholly-owned subsidiary of Montreal Pipe Line Limited, a privately-held corporation located in Canada, and is engaged in the international transportation of hydrocarbons via pipeline and associated facilities located in a continuous transportation corridor running from the harbor in South Portland, Maine, through three states, across the Canadian border, to facilities located in Montreal, Quebec.[1] Id.

PPLC owns and operates the United States portion of a transportation system that includes, without limitation, 12-inch diameter, 18-inch diameter, and 24-inch diameter pipelines and associated facilities extending from South Portland, Maine to Montreal, Quebec. Id. ¶ 11. PPLC’s transportation system was first established with the construction of the 12-inch diameter pipeline in 1941 during World War II for national security purposes to transport crude oil by pipeline as an alternative to direct international marine shipments by crude oil tankers. Id. ¶ 16. The 18-inch diameter pipeline, built in 1950, transported oil until 1986, when it converted to natural gas transmission, importing gas from Canada to the United States pursuant to Executive Order 10485 (Sept. 3, 1953) and Executive Order 12038 (Feb. 3, 1978). Id. In 1999, the 18-inch diameter pipeline converted back to oil transportation, as authorized by a Presidential Permit issued in accordance with Executive Order 11423 (August 16, 1968), Executive Order 12847 (May 17, 1993), and Department of State (“State Department”) Delegation of Authority No. 118-1 (April 11, 1973). Id. The 24-inch diameter pipeline was built pursuant to a Presidential Permit issued January 13, 1965. Id. PPLC’s Presidential Permits and approvals were issued as an exercise of the President’s authority over foreign affairs and as Commander in Chief, and are consistent with, advance, and are issued as an exercise of United States foreign policy and to facilitate the cross-border trade in hydrocarbons between Canada and the United States. Id. ¶ 17.

Currently, approximately forty-eight ships offload at PPLC annually, and PPLC transports crude oil to Quebec via pipeline and associated facilities at a rate of approximately 2.4 million barrels of oil per month. Id. ¶ 11. PPLC holds submerged land leases with the state of Maine upon which are located two piers it owns at the harbor in South Portland. Id. ¶ 12. PPLC’s pipeline transportation system includes, without limitation, one of the two piers (Pier 2), tanks located both at the waterfront and at a tank farm within South Portland, as well as the pipes, additional infrastructure, and facilities needed to transport petroleum products from tankers berthing at Pier 2 to their ultimate cross-border destination. Id.

AWO is a national trade association for the nation’s inland and coastal tugboat, towboat, and barge industry. Id. ¶ 5. The industry employs more than 33, 000 American seamen and owns and operates over 4, 000 tugboats and towboats and more than 27, 000 barges throughout the country. Id. AWO represents the largest segment of the U.S.-flag domestic fleet. Id. Its 350 member companies carry more than 800 million tons of domestic cargo every year, operating vessels on the inland rivers, Atlantic Ocean, Pacific Ocean, the Gulf Coast, the Great Lakes, and in ports and harbors around the country, including the Portland Harbor, incorporating the harbor in South Portland. Id. AWO’s member companies operate numerous vessels licensed by the United States Coast Guard to engage in coastwise trade, such as the transportation of crude oil products. Id. AWO has consistently supported federal control over harbor-related activities, noting that to move critical cargo in interstate and international commerce safely and efficiently, the maritime industry needs uniform safety and environmental standards established by one engaged and experienced federal agency, the United States Coast Guard, and that subjecting vessel operators to duplicative or conflicting federal and state standards creates confusion, adds inefficiency, and increases costs to shippers who rely on water transportation. Id. By prohibiting the loading of crude oil at the harbor in South Portland, the Ordinance interferes and conflicts with its members’ federal licenses; eliminates a market for its member vessels’ services in transporting such products from the harbor; and sets a precedent for inconsistent local harbor regulation that could cripple import and export activities nationally and invite reciprocal commerce curtailment from other nations. Id.

The city of South Portland is a municipality located in Cumberland County, Maine, on Portland Harbor. Id. ¶ 6. Portland Harbor is the second largest oil port on the east coast of the United States, serving as a key center for shipping by both land and sea. Id. The Harbor has the capability of handling some of the largest and deepest draft marine tankers on the east coast, with up to fifty-two feet of draft and 170, 000 deadweight tons of cargo. Id. ¶ 10.

Patricia Doucette, is South Portland’s code enforcement director, and is charged under South Portland Code Sec. 27-131 with enforcing the City’s ordinances, including the Ordinance at issue in this case. Id. ¶ 7.

B. The Harbor and its Role in Regional and International Commerce

The petroleum-handling facilities and operations on South Portland’s waterfront constitute a vital hub for the interstate and international delivery of petroleum products, providing the interstate region with a reliable supply of products necessary for heating homes and businesses, among other uses. Id. ¶ 36. By curtailing oil-handling activities at the South Portland waterfront, and by permitting the importation but prohibiting the exportation of petroleum products, contrary to market conditions, the Ordinance cripples the commercial activities not only of the named plaintiffs but of all harbor-related actors. Id. By purposely and effectively legislating that crude oil may be imported but may not be exported, the Ordinance, as intended, precludes any such exportation commerce in the harbor and affects petroleum-based commerce outside South Portland, outside Maine, across the interstate region, and across the United States-Canada border, and, if copied in other United States harbor municipalities, would have profound adverse precedential impacts. Id.

A recent economic report provided that the total impact of commercial petroleum-handling activities on just South Portland and its regional economy amounts to over $64 million in sales, supporting 335 jobs earning over $20 million in pay and benefits, and that the oil terminal industry serves as the anchor for the entire Port of Portland, accounting for 84% of the port’s cargo vessels and 94% of its total cargo. Id. ¶ 35.

C. Cross-Border Oil Transportation and Transboundary Management

Oil cargo is transferred from a tank vessel to the pipeline and is overseen by the Coast Guard’s Captain of the Port (COTP). Id. ¶ 14. This process entails hydraulically connecting pipeline equipment at a flange on the ship, with the oil pumped from the ship. Id.

The tank and pipeline equipment used is tested and inspected by the Coast Guard, must adhere to Coast Guard regulations, and the transfer operations and activities are regulated and overseen by the Coast Guard. Id. The same regulatory framework applies to loading a tank vessel as applies to unloading; Coast Guard regulations apply to cargo “transfer, ” i.e., loading and unloading, and adjustments to operations and equipment with respect to the transfer would be overseen and regulated by the Coast Guard. Id. ¶ 15.

Next, the oil is pumped using pump stations located along the route from South Portland to Montreal, spaced twenty-five to forty miles apart. Id. ¶ 13. These six pump stations are located in South Portland, Raymond, and North Waterford, Maine; Shelburne and Lancaster, New Hampshire; and Sutton, Vermont. Id.

In a Transit Pipe-lines Agreement (TPA) between the United States and Canada, effective October 1, 1977, 28 UST 7449, TIAS 8720, both governments agreed to measures designed to ensure the uninterrupted transmission of hydrocarbons, including crude oil, by pipeline through the territory of one country for delivery to the territory of the other. Id. ¶ 18. In Article II of the TPA, the two countries expressly promised: “No public authority in the territory of either [country] shall institute any measures, other than those provided for in Article V [relating to emergencies], which are intended to, or which would have the effect of, impeding, diverting, redirecting or interfering with in any way the transmission of hydrocarbons in transit.” Id. ¶ 19.

At a subsequent summit in Quebec, the President and the Canadian Prime Minister signed Joint Canada-United States Declarations on Trade and International Security, dated March 18, 1985, agreeing to strengthen Canada-United States energy trade “by reducing restrictions, particularly those on petroleum imports and exports, and by maintaining and extending open access to each other’s energy markets, including oil.” Id. ¶ 20. The President further entered findings confirming “the objective of liberalizing energy trade, including crude oil, between the United States and Canada. Id. Both Governments recognized that substantial benefits would ensue from broadened crude oil transfers and exchanges between these two historic trading partners and allies. Id. These benefits would include increased availability of reliable energy sources, economic efficiencies, and material enhancements to the energy security of both countries.” Id.

D. Changing Market Conditions and PPLC’s Request to Reverse the Flow of the Pipeline

No crude oil is produced within the state of Maine. Id. ¶ 23. Currently, PPLC uses its 24-inch diameter pipeline, with a capacity of 410, 000 barrels a day, to transport crude oil unloaded from oil tankers at the harbor in South Portland north to Canada in far smaller amounts than its capacity can serve. Id. PPLC’s pipelines are currently underutilized due to market conditions that favor the transportation of oil south from Canada to the United States and other international markets, instead of from Portland Harbor north to Canada. Id. For example, the 18-inch diameter pipeline is currently idle and being maintained to protect the integrity of the pipeline in a condition that allows PPLC to return the line to service when market demands so warrant. Id.

In 2008, PPLC requested authorization from the State Department to reverse the flow of the 18-inch diameter international pipeline, in order to transport oil south from Canada to be loaded onto tankers in Portland Harbor, instead of transporting oil north to Canada, as had occurred since the conversion from natural gas back to oil in 1999. Id. ¶ 21. The State Department responded that PPLC’s 1999 Presidential Permit was sufficient, so that no further approvals or amendments were needed, and the State Department has continued thereafter to monitor PPLC’s pipeline activities. Id. Recent correspondence from the State Department asks that PPLC keep the department informed as to PPLC’s pipeline operations, noting that such information “will assist the Department in carrying out its policies, as they relate to pipeline permitting, including with regard to energy, environmental, and safety considerations.” Id. ¶ 22.

As the historical use of PPLC’s pipelines reflect, in order to react promptly to international and national market conditions in the cross-border trade of hydrocarbons, the type of and the direction in which hydrocarbons may flow through PPLC’s pipelines changes, as overseen by the President implementing his foreign affairs powers given, inter alia, national strategic interests surrounding the cross-border flow of hydrocarbons. Id. ¶ 24. The Ordinance’s interference with these foreign affairs powers and with the exclusive federal authority over the flow of hydrocarbons through its pipelines adversely affects PPLC’s ability to respond to market conditions and to facilitate the cross-border flow of hydrocarbons as supported by international treaty and presidential findings. Id.

By limiting the direction in which bulk oil may flow through PPLC’s pipelines, the Ordinance immediately and currently reduces the current market value of PPLC’s pipelines and hinders its ability to engage in interstate and international commerce. Id. ¶ 25. The Ordinance purposefully and effectively prohibits all use of PPLC pipelines for the transportation of oil from Canada to the United States, to the detriment of PPLC’s ability to offer its transportation services to the national and international export market. Id.

PPLC’s shareholders actively market their crude oil to markets in the United States and other countries. Id. ¶ 26. The Ordinance prohibits them from transporting its product to market through the harbor in South Portland and via PPLC’s pipelines, which could handle hundreds of thousands of barrels of their products a day. Id. By prohibiting the loading of oil onto marine vessels in South Portland, the Ordinance further forecloses the Harbor as a means of export for their product, however that product arrives, whether by pipeline, ship, or rail. Id. The inability to use the Harbor and existing commerce avenues has a depressive impact on the value of these shippers’ crude oil, and the precedential impact of the Ordinance, if copied in other U.S. harbor municipalities, would have a profound impact on shippers’ ability to engage in international commerce. Id.

The current transportation of tankers into the Harbor is threatened by the lack of economics in transporting crude oil from south to north. Id. ¶ 27. Conversely, PPLC’s unused capacity is such that, if oil could be transported from Canada through PPLC’s pipelines and loaded onto ships in the harbor in South Portland at an economically rational cost, the commercial activities of the AWO and its members stand to benefit from increased traffic and shipping opportunities. Id. Allowing the import of oil, but not its export, through the Harbor restricts the ability of AWO’s members from engaging in interstate and international commerce. More broadly, the precedential impact of the Ordinance, if copied in other United States harbor municipalities, would have a profound impact on the ability of marine vessels to engage in international commerce and undermines the uniformity of international and national vessel regulation, to the detriment of AWO members’ interests. Id.

E. MARPOL and its Regulatory Scheme

The United States has adopted the International Convention for the Prevention of Pollution from Ships (MARPOL), including Annex VI and Regulation 15 thereto. Id. ¶ 28. Regulation 15 applies to the emissions of volatile organic compounds (VOCs) in cargo transfer operations between tankers and port facilities- the purported concern of the Ordinance. Id. ¶ 29. The first paragraph of Regulation 15 provides: “If the emissions of VOCs from a tanker are to be regulated in a port or ports or a terminal or terminals under the jurisdiction of a Party, they shall be regulated in accordance with the provisions of this regulation.” Id. ¶ 30. The remainder of Regulation 15 obligates parties to MARPOL to notify the International Maritime Organization (“IMO”), an agency of the United Nations, before the party imposes vapor emission control requirements, and to take into account safety guidance developed by the IMO in doing so. Id.

In forwarding MARPOL to the Senate for approval on May 15, 2003, the President noted that ratification of the Convention and Annex VI “will demonstrate U.S. commitment to an international solution” for air emissions from tankers. Id. ¶ 31. In the Secretary of State’s Letter of Submittal of MARPOL, submitted to the Senate in 2003 during the ratification process, the Secretary of State explained that:

[T]he United States has basic and enduring national interests related to the oceans and U.S. port regions, and has consistently taken the position that the full range of these interests is best protected through a widely accepted international framework governing uses of the sea. A workable international regime for the prevention of air pollution from ships is in the best interests of all States because it will subject international shipping to a uniform standard that is environmentally protective.

Id. Consistent with its treaty adoption of MARPOL, the United States has adopted VOCs emission control regulations for tanker loading operations and requires vapor emission control systems, and pursuant to Regulation 15.6 and consistent with IMO Resolution MEPC 185(59), tankers follow VOC management plans required under Regulation 15. Id. ¶ 32.

Canada and the United States act cooperatively consistent with MARPOL regulation and the United States’ goal of acting on an international level in regulating tanker activity and emissions, VOCs and otherwise. Id. ¶ 33. One illustrative example is these two countries’ joint proposal to the IMO pursuant to MARPOL Annex VI, Appendix III of a North American Emission Control Area surrounding their coastlines, subsequently adopted by the IMO to reduce SOx, NOx, and particulate matter emissions. Id. In proposing this Emission Control Area, the two countries noted that they “have an obvious common interest in addressing emissions from ships operating off their coasts given their geographic proximity and the nature of their markets.” Id.

AWO members comply with MARPOL and the federal regulations adopted consistent with MARPOL. Id. ¶ 34. The Ordinance’s attempt to add another layer of regulation and to ban loading altogether impairs their ability to engage in transportation activities in the harbor in South Portland, and the precedential impact of the Ordinance, if copied in other United States harbor municipalities, would have a profound impact on tankers’ ability to engage in national and international commerce by eliminating the uniformity of international maritime regulation sought by the United States in its federal treaties and statutes. Id.

F. The History and Development of the Ordinance

1. The Waterfront Protection Ordinance

The first incarnation of the Ordinance emerged as a citizen initiative in 2013 referred to as the Waterfront Protection Ordinance (WPO). Id. ¶ 40. Proponents of the WPO articulated that the main objective of the WPO was to prevent the transportation of Canadian oil through PPLC’s pipelines due to perceived dangers from products derived from oil-sands-derived crude oil. Id. ¶ 41. An organization called “Protect South Portland” collected the signatures to place the WPO on the ballot. Id. ¶ 42. Before the 2013 vote on the WPO, Protect South Portland posted fact sheets on its website stating that an ordinance was needed to protect “Casco Bay from spills of toxic tar sands from tankers” and exhorted the electorate to “Vote for the Waterfront Protection Ordinance to stop out-of-state big oil companies from building a tar sands export terminal in South Portland.” Id. Proponents of the WPO attended a July 23, 2013 meeting of the South Portland Planning Board, in which they advocated for ordinance enactment, arguing that: (1) the transport of oil derived from tar sands “isn’t consistent with sustainability”; (2) the WPO will “help us protect the earth” and “help us protect our children and our grandchildren”; (3) asserting that there were “catastrophic risks involved with tar sands oil”; (4) “we cannot afford to have a spill in South Portland”; (5) citizens had been “alerted to unacceptable risks involved in carrying tar sands through our community”; (6) tar sands “create[] lakes of toxic waste”; (7) there is “no place to put the waste in Canada”; (8) tar sands are “destroying the land”; and (9) “our whole way of life and our economy is in jeopardy.” Id. ¶ 43. They stated that they “ask nothing but to prevent tar sands from being pumped from Canada to South Portland.” Id.

At an August 13, 2013 meeting of the South Portland Planning Board, proponents of the Ordinance argued that tar sands will “poison our school, children, and teachers” and will be pumped through “very old pipes that are unmapped, ” and that PPLC wanted to “pump tar sands into our community.” Id. ¶ 44.

At an August 19, 2013 meeting of the South Portland City Council, David Lourie, an attorney for Concerned Citizens of South Portland (the predecessor to Protect South Portland) and the original drafter of the WPO, stated that “South Portland has a unique ability to stop the flow of tar sands into the state of Maine.” Id. ¶ 45. Proponents of the Ordinance argued that it would “protect our community from multiple threats, ” including “fouling our drinking water”; that “with a 64 year old pipeline that is used to supporting crude oil, it is only a matter of time before it leaks”; and that the “[WPO] will prevent our community from becoming the North American tar sands oil shipping point.” Id. One proponent said that “the core intent of the [WPO] is to prevent tar sands from flowing from Canada to our community and being exported around the world, ” noting “South Portland’s unique proximity to Canada, ” and that “Alberta, Canada is the beginning of our connection to tar sands.” Id. Another proponent explained, “[w]e do not want to pollute the working waterfront with out of state interests.” Id. Another stated that “if tar sands is so safe, let Canada export it through its own shores.” Id. Proponents argued that PPLC wanted “to expand operations in Alberta to include tar sands and they need the pipeline in South Portland to transport to places like China, ” and that an ordinance was needed because PPLC wants to “facilitate the flow of tar sands from Canada to South Portland and out to the greater world.” Id.

Shortly before the vote on the WPO, an opinion piece published in the Bangor Daily News entitled “Climate Change is here; now what will Maine do about it?” advocated for passage of the WPO because “tar sands are terrible for the climate, with significantly higher emissions of the pollution that causes global warming than conventional oil. Big Oil’s push for tar sands is a ...


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