The judge may rule next on the merits of Portland Pipe Line’s challenge to the city’s Clear Skies ordinance, which blocks the flow of Canadian crude oil to South Portland.
by Kelley Bouchard, staff writer
Portland Press Herald news story
Judge John Woodcock Jr. opened his written order issued Tuesday with a weary-sounding reference to “another motion to dismiss” from the city of South Portland.
The federal judge then firmly denied the city’s renewed motion to dismiss a nearly 3-year-old lawsuit by the Portland Pipe Line Corp. over a municipal ban on crude oil exports. Woodcock denied the city’s first consolidated motion to dismiss the lawsuit in August.
The city filed the latest motion in October, after TransCanada Corp. announced that it had abandoned plans to build the controversial Energy East pipeline, which would have carried 1.1 million barrels of crude oil daily from western Canada to the Atlantic coast.
Without the Energy East pipeline, the Portland Pipe Line could no longer claim to have a ready source of Canadian crude that would warrant reversing the flow of its 236-mile pipeline from South Portland to Montreal, the city’s lawyers argued in November in U.S. District Court in Portland.
The company is fighting a 2014 city ordinance that banned shipments of crude oil from South Portland’s waterfront and effectively blocked the company from reversing the flow of its pipeline, which currently transports a dwindling amount of imported crude to refineries in Montreal.
Woodcock flatly rejected the city’s latest challenge of the Portland Pipe Line’s right to fight the so-called Clear Skies ordinance based on the lack of demand for the pipeline’s use.
Woodcock cited the company’s claims that the pipeline could have access to other sources of Canadian crude and that it “will continue to be the sole operator of a crude oil pipeline running to the Atlantic coast.”
“The court still finds that if it is legally permitted to do so, Portland Pipe Line Corp. intends to and is sufficiently likely to be able to reverse the flow of oil in its South Portland-to-Montreal pipelines,” Woodcock said in his dismissal order.
That likelihood gives the company – a Canadian-owned subsidiary of ExxonMobil, Shell and Suncor Energy – the right to challenge the Clear Skies ordinance, Woodcock said. The company has two pipelines but currently uses only one intermittently.
The city has spent $1.4 million so far defending the Clear Skies ordinance and has received $168,000 in donations to the Clear Skies Legal Defense Fund.
Woodcock’s anticipated next step would be to rule on the merits of the company’s claim against the Clear Skies ordinance.
Whatever the outcome in U.S. District Court, the case is expected to wind up in the 1st U.S. Circuit Court of Appeals in Boston and take another two to three years to reach a conclusion.
“(The company) will not complete the reversal project for at least another three or four years,” Woodcock said. “Three or four years is a lifetime in the oil business.”
Despite the TransCanada decision, Woodcock said, “it remains true” that the Portland Pipe Line has reversed its flow in the past and it may not proceed with a reversal project now without violating the ordinance.
The court “does not need to resolve” the validity of the company’s prediction that 80,000 to 100,000 barrels of oil are currently available in Canada to transport daily to South Portland – enough to make a reversal financially feasible – or the city’s assessment that there’s only 25,000 barrels available daily on the spot market, Woodcock said.
If the pipeline did transport as much as 100,000 barrels per day, or 36.5 million barrels per year, south from Montreal to South Portland, that’s less than a quarter of the 160 million barrels of foreign crude that flowed north through the pipeline in 2004.
Since the lawsuit was filed in February 2015, the city has argued that the company has no cause to challenge the ordinance because it has no active plan or effort to reverse the pipeline’s flow. The city also contends that a $180 million reversal project wouldn’t be financially feasible under current market conditions because Canadian refineries have little demand for foreign oil.
The company claims the ban is unconstitutional because it interferes with interstate commerce, discriminates against Canadian interests, devalues the pipeline and infringes on areas of regulation best left to the federal government.
The city, meanwhile, is acting “to protect the health and welfare of its residents and visitors and traditional land use authority to promote future development consistent with the comprehensive plan,” it said in court papers.