State v. City of Portland

1

STATE OF MONTANA; WESTERN ENERGY ALLIANCE, a Colorado nonprofit corporation; PACIFIC PROPANE GAS ASSOCIATION, a Washington nonprofit corporation; IDAHO PETROLEUM MARKETERS AND CONVENIENCE STORE ASSOCIATION, INC., an Idaho nonprofit corporation; and CHRISTENSEN, INC., a Washington Corporation, Plaintiffs, v. CITY OF PORTLAND, Defendant.

No. 3:23-cv-00219-YY

United States District Court, D. Oregon, Portland Division

February 26, 2024

FINDINGS AND RECOMMENDATIONS

Youlee Yim You, United States Magistrate Judge

FINDINGS

In 2022, defendant City of Portland adopted amendments to the City's land use code that imposed certain limits on the construction of new or expanded bulk fossil fuel terminals. Plaintiffs are a collection of entities representing fossil fuel producers, distributors, and retailers who have brought suit challenging those amendments on a number of grounds including that they violate plaintiffs' rights under the dormant Commerce Clause, the Foreign Commerce Clause, and the Due Process Clause, and that the amendments are otherwise preempted by federal law regulating railroads.

Defendant has moved to dismiss plaintiffs' claims on two overarching grounds. Mot. Dismiss, ECF 17. First, defendant asserts that the suit should be dismissed for lack of subject matter jurisdiction because none of the plaintiffs have established a concrete, actual injury as required to have standing under Article III of the Constitution. Second defendant asserts that even if the court has subject matter jurisdiction, all of plaintiffs' claims should be dismissed for failure to state a claim. While defendant's motion to dismiss was pending, plaintiffs filed a Motion for Partial Summary Judgment. ECF 34. That motion has been stayed pending resolution of defendant's motion. Order (Oct. 12 2023), ECF 49.

As explained below, defendant's motion to dismiss for lack of subject matter jurisdiction should be denied because plaintiff Christensen, Inc. has standing based on its alleged loss of property value caused by the amendments. Defendant's motion to dismiss for failure to state a claim should be granted as to all of plaintiffs' claims because the challenged amendments do not discriminate against interstate commerce, are not displaced or preempted by the Foreign

Commerce Clause or other federal law, and do not violate plaintiffs' substantive due process rights. Plaintiffs' motion for partial summary judgment accordingly, should be denied as moot.

I. Background^[1]

The City of Portland is an important transportation hub in the Pacific Northwest, boasting a large port with deep-water access to the Pacific Ocean and connections to railway lines and interstate highways that cover large portions of the western United States.^[2] This “combination of geography and multimodal freight infrastructure assures Portland's role as a center for goods distribution to and from the Pacific Northwest and throughout the world.”^[3]

In 2015, the City Council adopted Resolution No. 37168, the stated purpose of which was to “[o]ppose expansion of infrastructure whose primary purpose is transporting or storing fossil fuels in or through Portland or adjacent waterways.”^[4] The Resolution detailed the Council's concerns regarding the risks to the environment and climate, public health, and safety posed by fossil fuels, the costs associated with cleaning up accidents involving fossil fuels, along with other local and regional policies, programs, and initiatives that generally supported or encouraged the shift away from reliance on fossil fuels.^[5] The Resolution also directed the City's Bureau of Planning and Sustainability “to develop proposed code changes for Council consideration to advance the policies set forth in this Resolution[.]”^[6]

The Bureau then proposed, and in December of 2016 the City Council approved, zoning code amendments that created a “new land use category” for “Bulk Fossil Fuel Terminals,” which were “characterized by having (1) marine, pipeline or railroad transport access and (2) either trans-loading facilities for transferring a shipment between transport modes (such as from rail to ship) or bulk storage facilities exceeding 2 million gallons of fossil fuels.”^[7] Several industry groups appealed the 2016 amendments to the Oregon Land Use Board of Appeals. The case eventually reached the Oregon Court of Appeals, which held, among other things, that the 2016 amendments did not violate the dormant Commerce Clause. See Columbia Pac. Bldg. Trades Council v. City of Portland, 289 Or.App. 739, 754 (2018).^[8] Several more rounds of amendments and appeals ensued.^[9]

Finally, in 2022, the City Council adopted the Fossil Fuel Terminal Amendments (“BFFT Ordinance”) that plaintiffs challenge here.^[10] This most recent version of the BFFT Ordinance provides, in relevant part:

Bulk Fossil Fuel Terminals are establishments primarily engaged in the transport and bulk storage of fossil fuels. Terminal activities may also include fuel blending, regional distribution, and wholesaling. Terminals have access to marine, railroad, or regional pipeline to transport fuels to or from the site, and either have transloading facilities for transferring a shipment between transport modes, or have transloading facilities and storage tank capacity exceeding 2 million gallons.

Portland City Code (“P.C.C.”) 33.920.300(A).^[11] According to defendant, there are currently eleven bulk fossil fuel terminals in Portland, all of which are located “within the state of Oregon's critical energy infrastructure hub (‘CEI Hub') in Northwest Portland” along the banks of the Willamette River.^[12] The report accompanying the BFFT Ordinance described one of the primary issues regarding fossil fuel storage at the CEI Hub:

The CEI Hub - built before our current understanding of the region's earthquake risk - sits on unstable soil subject to liquefaction and lateral spreading in an earthquake. The CEI Hub is built on soils that geologists anticipate will be subject to liquefaction (when the water table rises during an earthquake and loosens soils making those soils act more like a liquid than a solid) and lateral spreading (when the soils will spread toward the Willamette River). Because the CEI Hub is so close to the Willamette River and the dense urban core in the City of Portland, the risk of an accident, spill, or major infrastructure failure is particularly concerning as the region's earthquake's risks are now well-known and well-documented. ...

The existing zoning allows an unlimited increase in storage capacity at FFTs in an area with a high probability of liquefaction in a major seismic event (Figure 4). Large FFTs represent a risk to people, property and the natural environment that is a compelling reason to limit future risk by limiting the size of new facilities and expansion of storage tank capacity at existing facilities.^[13]

In passing the BFFT Ordinance, the City Council stated that

The purpose of this ordinance is to limit the risk of damage from a catastrophic Cascadia Subduction Zone earthquake by limiting the expansion of fossil fuel storage tank capacity in an area with high susceptibility to liquefaction, while at the same time allowing the existing terminals to make safety upgrades; to serve future regional needs; and facilitate a transition to cleaner fuels to reduce carbon emissions.^[14]

This suit followed shortly thereafter. Plaintiffs here include Christensen, Inc., a Washington corporation that “owns and operates an industrial liquid-storage terminal in north Portland.”^[15] Christensen asserts that its property has “intermodal infrastructure that is currently used to transfer propane from train to trucks for regional distribution” and thus is subject to the BFFT Ordinance.^[16] Other plaintiffs include Pacific Propane Gas Association, Idaho Petroleum Marketers and Convenience Store Association, Inc., and Western Energy Alliance, which are trade association groups representing companies that produce, distribute, or sell fossil fuel such as oil and natural gas.^[17] Finally, the State of Montana is also a plaintiff, and it brings claims in “both its proprietary capacity and in its sovereign capacity as parens patriae for all Montana citizens.”^[18]

Generally speaking, plaintiffs assert that the BFFT Ordinance is discriminatory because it is “designed to restrict the storage and transportation of fossil fuels in and through Portland, except as necessary to serve local end users of petroleum products . . . [and they] selectively target and burden interstate and foreign commerce in a manner designed to shield local users from the impacts of the regulations.” Resp. 1, ECF 30. Key to this theory is that the BFFT Ordinance specifically exempts certain local facilities from the definition of “Bulk Fossil Fuel Terminals,” thus “shielding them from the prohibition on new/expanded fuel transportation infrastructure.” Id. at 11. These exceptions include: “Gasoline stations and other retail sales of fuel”; terminals that “receive and deliver fossil fuels exclusively by truck”; “[i]ndustrial, commercial, institutional, and agricultural firms that exclusively store fossil fuel for use as an input”; and “[t]he storage of fossil fuels for exclusive use at an airport, surface passenger terminal, marine, truck or air freight terminal, drydock, ship or barge servicing facility, rail yard, or as part of a fleet vehicle servicing facility[.]” P.C.C. 33.920.300(D).

Plaintiffs assert that the BFFT Ordinance violates the dormant Commerce Clause and the Foreign Commerce Clause because it “block[s] energy companies from siting fuel export facilities at the West Coast's fourth largest port obstruct[s] transport of fuel to users in other states and countries, and restrict[s]...