Editor's note: After the author submitted this article for publication, a decision was issued in the Portland Pipe Line Corp. v. City of South Portland case upholding this ordinance.

“Denied.” With that simple order in late July, the Oregon Supreme Court declined to review a state appellate court decision upholding the city of Portland's ban on “bulk fossil fuel terminals” against a dormant commerce clause challenge. On the other side of the country, another dormant commerce clause case is pending in federal district court over a city of South Portland, Maine, ordinance prohibiting the bulk loading of crude oil onto tankers. Those two cities are at the vanguard of a growing wave of local governments outside hydrocarbon-producing areas seeking to address climate change and other environmental risks by disrupting the infrastructure needed to transport fossil fuels to market.

Less than five years ago new fossil fuel infrastructure received a warm welcome by political leaders in Portland, Oregon. In 2014 the mayor applauded a proposed propane export terminal in the city that could help displace coal consumption in Asia. However, about nine months later, after hearing concerns from voters, the mayor withdrew his support and blocked a zoning code amendment needed to get propane from the shore to the dock. The following year the city council unanimously adopted a resolution to “actively oppose expansion of infrastructure whose primary purpose is transporting or storing fossil fuels in or through Portland or adjacent waterways” with certain carve-outs, including for services “directly to end users.” To implement that resolution, the city council subsequently adopted zoning code amendments prohibiting the development of new, and the expansion of existing, bulk fossil fuel terminals. Those are facilities “primarily engaged in the transport and bulk storage of fossil fuels” that have marine, railroad, or regional pipeline connections and either transloading facilities for transferring shipments between transport modes or a fossil fuel storage capacity of over two million gallons.

Congress has the authority under the commerce clause of the U.S. Constitution to “regulate commerce with foreign nations, and among the several states, and with the Indian tribes.” Dormant commerce clause jurisprudence protects Congress' latent authority in this area. The Oregon Court of Appeals concluded earlier this year in Columbia Pacific Building Trades Council v. City of Portland that Portland's aforementioned zoning code amendments did not run afoul with that jurisprudence. The court first concluded that the amendments could not discriminate against interstate commerce in effect by “examining how the amendments affect out-of-state versus in-state bulk exporters of fossil fuels.” Because Oregon had no in-state bulk exporters, the court concluded that there could be no discrimination in their favor and against out-of-state exporters. However, this reasoning suggests that the opposite result might have been reached if the same ordinance had been enacted in a state with in-state exporters. In other words, this local Oregon government action may be unconstitutional in other states. Interestingly, the court did not consider whether the amendments discriminated against interstate commerce in purpose by relying on older case law that did not consider that issue.

Having concluded that the amendments were not discriminatory, the court then applied the balancing test the U.S. Supreme Court outlined in Pike v. Bruce Church. Under Pike, nondiscriminatory local laws that only have “incidental” effects on interstate commerce are constitutional unless “the burden imposed on such commerce is clearly excessive in relation to the putative local benefits.” Here, the Oregon court found that the plaintiffs had not carried their burden because sufficient information regarding the amendments' burdens on interstate commerce could not be found in the record before the court. In other words, Portland's amendments survived not on the merits but rather due to an insufficient record.

In the pending case Portland Pipe Line v. City of South Portland, the dormant commerce clause focus is not on interstate commerce but rather on foreign commerce, as the local ordinance at issue prevents crude oil exports from that city. Although the foreign commerce aspect of the commerce clause is a rather undeveloped area of the law, the U.S. Supreme Court stated in Japan Line v. Los Angeles County that “there is evidence that the Founders intended the scope of the foreign commerce power to be … greater” than that of its interstate sibling. With U.S. crude oil exports hitting a new record of three billion barrels per day for a week in June, this aspect of the commerce clause may become increasingly relevant to local government efforts to regulate crude oil transportation. Indeed, increasing U.S. crude oil production and heightening concerns about the environmental risks associated with the production and use of fossil fuels create a ripe opportunity for additional local government action in this area and continuing questions regarding the constitutionality of those actions.

Eric L. Martin is a partner with Stoel Rives in Portland, Oregon. His practice focuses on natural resource development with an emphasis on property issues and transactions in the oil and gas (upstream and midstream) and mining industries.