West-coast states and municipalities’ construction of a thin green regulatory line against the export of coal have instigated some intriguing legal challenges. We’ve written previously about two companies’ Commerce and Supremacy Clause claims against Washington state officials for blocking approval of a water-port terminal for coal shipment to Asia (Lighthouse Resources v. Inslee). And in June, we applauded a Ninth Circuit decision that found Oakland, CA broke its contract with an export terminal when the city prohibited transportation of coal to the terminal (OBOT v. City of Oakland).
Late last month, Oakland’s San Francisco Bay neighbor, Richmond, failed to terminate a lawsuit aimed at that city council’s blockade of fossil-fuel exports. Though preliminary, the ruling could inspire further doubt about the legality of export hurdles and may embolden other aggrieved businesses to take similar action elsewhere.
In Levin v. City of Richmond, an export terminal owner (Levin), a fuel-sales business (Wolverine), and Phillips 66 filed suit in the Northern District of California to enjoin Richmond’s ban on the storage of coal and petroleum coke (“petcoke”). The city council passed what it termed a public-health ordinance earlier this year, shutting down nearly 80% of Levin-Richmond Terminal’s business. The terminal is the Bay Area’s only bulk handling and shipping facility for coal and petcoke.
The plaintiffs’ complaint alleged multiple constitutional violations and also claimed that federal transportation and hazardous-waste laws preempted the Richmond ordinance. Judge Yvonne Gonzalez Rogers’ decision denied Richmond’s motion to dismiss all but one of the plaintiffs’ claims.
Judge Rogers found each of the plaintiffs’ constitutional claims to be sufficiently plausible. She disagreed that Richmond’s ordinance was a per se violation of the Dormant Commerce Clause, but found merit in the plaintiffs’ assertion that the ban imposed an undue burden on interstate commerce that outweighed any benefits the city claimed. Judge Rogers also allowed the plaintiffs’ Foreign Commerce Clause claim—that Richmond’s ordinance undercuts a uniform federal policy on fossil-fuel exports—to proceed.
On the claimed Contracts Clause violation, the judge found the plaintiffs had adequately plead the ordinance could be a “substantial impairment to contractual relationships.” Richmond argued that the ordinance was the type of “reasonable and necessary” public-health measure that the U.S. Supreme Court has found acceptable under the Contracts Clause. Judge Rogers discussed the plaintiffs’ contrary factual allegations and held that determining reasonableness was a matter for summary judgment.
Under the Fifth Amendment, the plaintiffs claimed a substantive due-process violation and an unlawful taking of their property without just compensation. While noting the “high burden” plaintiffs ultimately face in proving Richmond used its police power arbitrarily, the court held the complaint stated a plausible due-process claim. On the Takings Clause violation, Judge Rogers rejected Richmond’s argument that the three-year amortization period available to plaintiffs constituted just compensation. She held the plaintiffs should have the opportunity to more fully develop the facts supporting their takings argument, and denied dismissal.
Finally, on the Equal Protection claim, Judge Rogers held that the plaintiffs plausibly alleged that because the Levin-Richmond terminal was the only facility affected by the ordinance, Richmond was singling out Levin, Wolverine, and Phillips 66 without a rational basis.
On preemption, the court held that the plaintiffs made out a plausible case that the Richmond ordinance conflicted with two federal laws, the Interstate Commerce Commission Termination Act (ICTA) and the Shipping Act of 1984. Judge Rogers noted that the key question under ICTA’s express preemption clause—”whether the Ordinance in fact regulates transportation by rail carrier or simply has incidental effects on a rail system”—can only be answered after further factual development.
The Shipping Act prohibits marine terminal operators from discriminating against a common carrier. The Act does not expressly preempt state or local shipping regulation. The Levin plaintiffs argue that because the ordinance forces the terminal owner to refuse service only to coal and petcoke shippers, the ordinance conflicts with the Shipping Act, and is thus impliedly preempted. Judge Rogers rejected Richmond’s arguments on the Shipping Act and held the implied preemption claim could proceed.
Finally, because the fossil fuels at issue are not considered “hazardous” under federal law, the city’s designation of coal and petcoke as hazardous did not conflict with a third federal law, the Hazardous Materials Transportation Act.
The survival of all but one of the plaintiffs’ claims is certainly a satisfying outcome for those troubled by state and local intrusion into the regulation of interstate and foreign commerce. The lawsuit’s larger implications are quite evident, given the intervention of thin-green-line enthusiasts Sierra Club and San Francisco Baykeeper (both represented by Earthjustice), as well as the motion-to-dismiss stage amicus participation of California and Utah.
The hurdles plaintiffs must traverse on their constitutional claims will be much higher, and the applicable caselaw much less supportive, in the next stage of litigation. The Dormant and Foreign Commerce Clause claims are perhaps the most promising, especially given the clear indications that fossil-fuel export is a major part of U.S. energy policy and the plaintiffs’ lack of alternative shipping avenues to Asia.
The survival of three of the plaintiffs’ four preemption claims is especially important given the tenuous chances of their constitutional claims. If Levin, Wolverine, and Phillips 66 can prevail on preemption, the court need not reach the constitutional questions.
We will keep an eye on developments as Levin v. Richmond moves forward.
Also published by Forbes.com on WLF’s contributor page.