Last month, Oregon’s Land Use Board of Appeals overturned amendments to Portland zoning regulations to prohibit the siting of new fossil fuel terminals as well as the expansion of existing terminals. At least 90 percent of fossil fuels serving the state of Oregon are stored in or transported through the northwest industrial area of Portland, in a moderate to high-risk earthquake liquefaction zone. The ordinance furthers a city policy of “actively oppos(ing) expansion of infrastructure whose primary purpose is transporting or storing fossil fuels in or through Portland or adjacent waterways.”

The effort was intended to serve two objectives: 1, reducing the potential for catastrophic damage resulting from an earthquake; and 2, reducing the city’s contribution to greenhouse gas emissions and encouraging transition to cleaner, renewable energy. Although other cities such as Seattle, Oakland and Berkeley have enacted similar limitations, this ordinance prohibits the siting of any new terminals that accommodate storage of more than 2 million gallons of fossil fuel and declares that all existing terminals are conditional uses.

In the case before LUBA, Columbia Pacific Building Trades Council v. City of Portland, opponents of the ordinance, largely fossil fuel interests, raised numerous challenges. The single LUBA referee who participated in the decision agreed with a number of the arguments. These included that the decision lacked sufficient findings addressing local plan policies intended to protect and expand industrial use as well as other objections concerning how the prohibition will affect the flow of freight throughout the state under Goal 12 and the Oregon Transportation Plan policies. Ultimately, a clause in the federal constitution led to the ordinance’s undoing.

The United States Constitution’s Commerce Clause provides that all power to regulate commerce rests with Congress. The dormant clause refers to the implicit reverse proposition that states may not pass legislation that discriminates against or excessively burdens interstate commerce. In other words, the clause prohibits protectionist state policies that favor state citizens or businesses at the expense of noncitizens conducting business within that state.

For example, the United States Supreme Court struck down a state tax on milk products, in conjunction with a subsidy program for in-state dairy farmers, because it discriminated against out-of-state interests. The test is whether the state or local law either on its face or in effect has the “practical effect” of discriminating against interstate commerce. Where it is the latter, the burden shifts to the local government to show that the law is supported by a legitimate local purpose that cannot be served by nondiscriminatory alternatives. Where a law does not discriminate in its purpose or practical effect, the courts take a balancing approach, weighing the state interest against the burden on interstate commerce. LUBA found that the city’s amendments failed under both tests.

LUBA found that notwithstanding the facial neutrality of the amendments regarding the origin or destination of fossil fuels, the record showed that the intent was to preclude the construction of fuel terminals that serve interstate or international markets. LUBA pointed out that although most of Commerce Clause cases involve laws intended to favor local economic interests by restricting competition from out-of-state interests, the Portland ordinance “attempts to shield local interests from the burden of obstacles it places in the path of interstate commerce.”

Although the amendment did not speak to the sources of the fuel, a stated objective was to limit fossil fuel storage to meet local and regional demands. Because existing terminals could adequately serve the current demand, limiting expansion effectively restricted interstate or international commerce in fossil fuels. Ultimately, the problem was that the ordinance did not burden the state and local interests to the same degree that it burdened out-of-state interests.

Finding that the regulation did have a practical effect on interstate commerce, LUBA moved on to consider the legitimacy of the stated interest and whether it could be served by nondiscriminatory alternatives. Here, the city fared better, but not quite good enough. LUBA found that reducing seismic vulnerability and reducing a contribution to climate change were both legitimate local interests, but the amendments did not further those objectives. LUBA did not see how a prohibition on new terminals, that presumably would meet seismic standards and could be located outside of the liquefaction zone, increased the seismic risk, particularly when it allowed existing, unreinforced terminals to remain.

LUBA also pointed out exceptions that allowed small terminals or those that handle non-fossil fuels, such as bio-diesel and ethanol, to remain in the same high-risk seismic areas. With regard to climate change, the amendments lacked any provisions reducing the local consumption of fossil fuels. The city made no findings addressing alternatives.

In conclusion, LUBA “questioned whether the city’s desire to preclude establishment of fossil fuel export terminals reflects a legitimate local interest.” The city is free to tackle “its own greenhouse gas emissions from local consumption of fossil fuels,” even if the efforts impose effects on interstate commerce, but it cannot slow the flow of fuels from other states to consumers in other states or countries to reduce carbon emissions worldwide.

Edward Sullivan is a retired practitioner of land use and municipal law for more than 45 years. Contact him at esulliva@gmail.com.

Carrie Richter is an attorney specializing in land use and municipal law at Bateman Seidel. Contact her at 503-972-9903 or crichter@batemanseidel.com.

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