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At least 90 percent of the fossil fuels serving the state of Oregon are stored in, or transported through, the northwest industrial area of Portland, which is in a moderate to high-risk earthquake liquefaction zone. Zenith Energy Terminal Holdings LLC operates such a terminal where it stores approximately 64 million gallons of petroleum and renewal fuels for distribution, as well as an asphalt refinery. Zenith operates pursuant to an Air Contaminant Discharge Permit issued in 2022 by the Oregon Department of Environmental Quality (DEQ).

Any state agency action affecting land use must be accomplished 鈥渋n a manner compatible with acknowledged comprehensive plan and land use regulations.鈥� Although a state agency can conduct the necessary compatibility review, it most often defers to local governments by asking applicants to secure a check-the-box template for completion. This is known as a land use compatibility statement or LUCS.

The LUCS submitted in 2022 asked that the city approve a 鈥渞epositioned facility鈥� that would phase out all crude oil and instead handle sustainable fuels. The 2022 LUCS described four limitations on facility operations, which Zenith proposed and were imposed through conditions of approval. The 2022 LUCS was not appealed.

In 2024, Zenith sought to update its DEQ permits to allow certain operational changes, including expansion of the area of use and installation of equipment to produce sustainable jet fuel. The city approved this request, checking the box that 鈥渢he activity or use is allowed outright鈥� and that 鈥渢he activity or use is allowed; findings are attached.鈥� In support, the city attached a lengthy written narrative submitted by Zenith addressing more than a dozen comprehensive plan policies. Further, the city included revised versions of the same four conditions included in the 2022 approval: 1, the phaseout of crude oil; 2, reduction in storage tank capacity; 3, reduction in emissions of volatile compounds; and 4, closure of the asphalt refinery. According to the decision, these conditions are enforceable by the city.

Northwest Environmental Defense Center (NEDC) and others appealed the 2024 LUCS to the Land Use Board of Appeals. Zenith and the city moved to dismiss the appeal for lack of jurisdiction. LUBA can review only those types of decisions delegated to it under state law. When it comes to a LUCS, where a local government checks the box that 鈥渢he use is allowed without review under the acknowledged comprehensive plan and land use regulations,鈥� the decision is not a land use decision eligible for review by LUBA. According to the city, the facility is allowed outright in the zone and as such, deemed compatible with the comprehensive plan falling squarely within the LUCS exception and not subject to LUBA review.

NEDC countered that by adopting findings evaluating compliance with regulations and plan policies that resulted in the imposition of enforceable conditions, the city did in fact conduct a review. This review, resulting in the imposition of four enforceable conditions, converts this otherwise exempt LUCS into a discretionary land use decision subject exclusively to LUBA review. NEDC highlighted that the 2025 LUCS conditions are more expansive and detailed than those imposed in 2022, suggesting that the use was not accomplished 鈥渨ithout review.鈥�

LUBA鈥檚 analysis begins by noting how unusual it is for a LUCS decision concluding that a use is permitted outright to include conditions. If the use is permitted outright without review, conditions would be unnecessary. LUBA noted that the city鈥檚 authorization to impose conditions appears limited to 鈥渄iscretionary reviews鈥� or were imposed for reasons that had nothing to do with zoning compliance. The focus, according to LUBA, is only on whether the facility is allowed outright and once that determination is made, review of the lawfulness of the conditions rests entirely with the circuit court and not with LUBA. NEDC appealed.

The Court of Appeals review started from the premise that the conditions imposed through the 2025 LUCS were 鈥渃onditions of land use approval鈥� under the city code. Also important to the court was that the city decided that it had authority to impose conditions. These types of decisions are not limited exclusively to whether a use is allowed without review but rather require the discretionary application of land use regulations 鈥� the magic language for triggering LUBA review. The court explained that overlooking the four conditions, LUBA improperly expanded the narrow exception from LUBA jurisdiction for certain LUCS decisions to include other types of land use decisions, 鈥渁s long as they are folded into a LUCS.鈥�

Interestingly, the Court of Appeals鈥� decision attributes to the city arguments that the conditions expressly imposing reductions moving toward a more sustainable model were not necessary to approve the LUCS. This is the same city that for over a decade has fought to rid itself of being the fossil fuel storage capital of the state. Zenith argued that the conditions reflected nothing more than the state of its use subject to the 2022 conditions. The court highlighted the language of the condition that the facility 鈥渨ill be limited 鈥� with such limitations being conditions enforceable鈥� by the city through conditions. This text does not suggest that the conditions are hortatory, but rather enforceable.

With that reversal by the Court of Appeals, the matter is now remanded to LUBA to consider the merits of the NEDC appeal. NEDC鈥檚 arguments on appeal have not been presented yet but presumably will include a claim that, in addition to being a 鈥渓and use decision鈥� subject to LUBA review, this decision is also a 鈥減ermit,鈥� which triggers notice and the opportunity for a public hearing type of review. Presumably the scope of the conditions will also be critical. It is unclear whether the parties would agree to voluntarily remand the decision to remove the conditions that the city apparently now believes are unnecessary or continue to defend a decision that questions the authority for those conditions in the first instance. What is certain is that including conditions as part of a LUCS exception for 鈥渃heck the box鈥� approvals 鈥� which is not as uncommon as LUBA thinks 鈥� are likely to be land use decisions and that local governments must think carefully when adopting this approach.

Edward Sullivan is a retired practitioner of land use and municipal law with more than 50 years of experience. Contact him at [email protected].

Carrie Richter is an attorney specializing in land use and municipal law at Bateman Seidel. Contact her at 503-972-9903 or [email protected].

The opinions, beliefs and viewpoints expressed in the preceding commentary are those of the authors and do not necessarily reflect the opinions, beliefs and viewpoints of the Daily Journal of Commerce or its editors. Neither author nor the 91视频 guarantees the accuracy or completeness of any information published herein.