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Portland Pipe line Corp. v. City of South Portland

United States District Court, D. Maine

August 24, 2017

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

          ORDER ON DEFENDANTS' CONSOLIDATED MOTION TO DISMISS UNDER RULE 12(b)(1)

          JOHN A. WOODCOCK, JR. JUDGE

         The Court finds that if it is legally permitted to do so, Portland Pipe Line Corporation intends to and may be able to reverse the flow of oil in its South Portland to Montreal pipelines from north to south and therefore its claim challenging the legality of the city of South Portland's Clear Skies ordinance is justiciable.

         I. BACKGROUND

         In order for a federal court to hear and decide a case, there must be a real dispute. In this case, Portland Pipe Line Corporation (PPLC) has brought suit to challenge the legality of the city of South Portland's so-called Clear Skies ordinance, which prohibits all bulk loading of crude oil at South Portland harbor and the improvement of existing or the installation of new facilities for the purpose of bulk loading of crude oil into any marine tank vessel in South Portland harbor.

         PPLC owns two pipelines that run from South Portland, Maine to Montreal, Quebec. Currently PPLC pumps oil south to north, beginning in South Portland and ending in Montreal, where it is brought to refineries. The premise of PPLC's lawsuit is that PPLC has concrete plans to reverse the flow of oil in its pipeline, and that the current South Portland Clear Skies ordinance prohibits the loading of oil onto ships in South Portland harbor, thereby effectively barring the pipeline reversal.

         The City moved to dismiss PPLC's lawsuit under Federal Rule of Civil Procedure 12(b)(1). Defs.' Consolidated Mot. to Dismiss Pursuant to Rule 12(b)(1) and Mot. for Summ. J. (ECF No. 88) (Defs.' Mot.). Specifically, the City challenged whether PPLC will actually do what it claims it will do: whether-if given permission-PPLC will, in fact, reverse the flow of the pipeline, because in the City's view to do so would be not just non-economical, but impossible. This is true, the City said through its expert, Sarah Emerson, because the oil from the oil-producing areas in the west of Canada and in the northern mid-west of the United States has to run through the so-called Enbridge Line 9, and the pipeline capacity in Enbridge Line 9 is already spoken for. The City maintains that the available capacity in the pipeline would be insufficient to supply PPLC with enough oil to make shipping out of South Portland harbor economically feasible.

         PPLC disagrees. Pls.' Mem. in Opp'n to Defs.' Mot. to Dismiss and for Summ. J. (ECF No. 127). It points out that the City's ordinance prevents PPLC from seeking potential shippers and while the ordinance stands, PPLC “cannot arrange its future.” Id. at 3. It also disputes the City's contention that the reversal project is economically unsound. Id. at 2-53. In reply, the City reiterates its position that PPLC's claims are nonjusticiable because PPLC had no “concrete plan to violate the Ordinance immediately or nearly so.” Reply to Pls.' Opp'n to Defs.' Consolidated Mot. to Dismiss and Mot. for Summ. J. at 2 (ECF No. 142).

         On May 11, 2017, the Court issued an interim order on the Defendants' consolidated motion to dismiss under Rule 12(b)(1), which sets forth in detail the background to this Order. Interim Order at 1-12 (ECF No. 156). In that Order, the Court mandated further proceedings to resolve whether it had subject matter jurisdiction in this case. Id. at 1, 11-12.

         The Court's interim order was occasioned by the peculiar way the parties had presented the issue. The City proffered evidence in its motion through its expert Sarah Emerson that PPLC would be highly unlikely to actually be able to pursue reversal of the pipeline, even if it obtained permission to do so. In response, PPLC decided not to present countervailing evidence that it was indeed planning to reverse the flow of the pipeline, regardless of what Ms. Emerson said. Instead, PPLC raised evidentiary objections as to whether the Court should consider Ms. Emerson's opinion, since she was relying on the truth of reports prepared by other individuals in forming her own conclusions. This, PPLC maintained, violated the Rules of Evidence. The Court was dissatisfied with the state of the record and was extremely reluctant to issue a decisive order based on the application of a relatively technical niche of the Rules of Evidence. Instead, as the Interim Order stated, the Court preferred to render a decision on the merits, having heard from PPLC and the City's witnesses.

         The testimonial hearing on the justiciability motion was held on August 9, 2017. PPLC presented the testimony of Thomas Hardison, its President and Chief Executive Officer, and the City presented the testimony of Sarah Emerson, its expert. Mr. Hardison's entire career has been with PPLC. He started with PPLC as a casual laborer forty-three years ago and rose through the ranks until 2015, when he was named its president. Mr. Hardison described the history of the pipeline, emphasizing the impact that the infusion of tar sands oil mostly from Alberta, Canada and of shale oil mostly from North Dakota, has had on the PPLC South Portland to Montreal pipeline. He testified, for example, that in 2010, 132 vessels unloaded 275, 000 barrels of oil per day in South Portland for shipping to Montreal and in 2016, only 11 vessels unloaded only 23, 000 barrels per day for shipping northward. Indeed, Mr. Hardison testified that PPLC had infused nitrogen into the 18” pipeline to prevent corrosion and was restricting its minimal shipping to the 24” pipeline. Mr. Hardison presented the reversal as a matter of corporate life or death. He described PPLC as being on life support for northbound oil and he said that PPLC needed the reversal project for its very survival as a business. On cross-examination, he stood by his testimony that PPLC would commence the reversal project once it obtained permission to do so.

         The City's witness, Sarah Emerson, is a true expert, extremely knowledgeable and smart about oil markets. She is the President and Managing Director of Energy Security Analysis, Inc., a business that collects data on oil markets, analyzes that data, and prepares forecasts about the oil market. She has been working in this field for thirty years and has worked all over the world for many of the big, medium, and little players in the oil world. Like Mr. Hardison's testimony, Ms. Emerson's testimony was detailed and occasionally arcane, but she focused on two major points: first, that there would not be enough available oil for PPLC to ship to South Portland, and second, that the price differential, the spread, between the per barrel cost of PPLC oil and cheaper oil available elsewhere would not justify the cost of shipment through the pipeline.

         Regarding Enbridge Line 9 capacity, Ms. Emerson testified that Enbridge Line 9 has the capacity to move 300, 000 barrels per day and she stated that three Montreal refiners, Valero Energy, Suncor Energy, and Imperial Oil Company, have the right to about 275, 000 of those barrels. By order of the National Energy Board of Canada, she explained the remaining 25, 000 is left to operators on the spot market and, even if PPLC could somehow gain access to those barrels and transport 25, 000 barrels per day, the volume would be too low to be economically justifiable. She also opined that customers in the east coast of the United States and northern Europe could get oil cheaper from the North Sea and Nigeria than the cost of oil coming out of the PPLC pipeline in South Portland. It is an understatement to say that neither PPLC nor the City accepted the other's viewpoints.

         II. DISCUSSION

         The issues this motion raises fall under the general rubric of justiciability.[1]Erwin Chemerinsky, Fed. Juris. at 42 (6th ed. 2012) (“The justiciability doctrines determine which matters federal courts can hear and decide and which must be dismissed”). More specifically, the City claims that the PPLC lawsuit must be dismissed for lack of standing and lack of ripeness. Defs.' Mot. at 3. For a party to have standing, it must show that a decision in its favor “will relieve a discrete injury” to it. Weaver's Cove Energy, LLC v. Rhode Island Coastal Res. Mgmt. Council, 589 F.3d 458, 467 (1st Cir. 2009); Penobscot Nation v. Mills, 861 F.3d 324, 336 (1st Cir. 2017). For a claim to be ripe, the court's review of the case must be neither “advisory” nor “irrelevant to the ultimate approvability of the project.” Weaver's Cove, 589 F.3d at 467. (quoting City of Fall River, Mass. v. F.E.R.C., 507 F.3d 1, 8 (1st Cir. 2007)); Peno ...


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