Untitled Texas Attorney General Opinion

-” .JIX MATI-OX December 12, 1990 xl"romNEY DESERAL Honorable Bob Bullock Opinion No. JM-1258 Comptroller of Public Accounts Re: Validity of import fees L.B.J. Office Building on barges pursuant to section Austin, Texas 78774 26.3574 of the Water Code (RQ-2039) Dear Mr. Bullock: Chapter 26 of the Water Code sets forth comprehensive regulatory provisions regarding water quality control in this state. Subchapter I of chapter 26 governs the regis- tration and regulation of operators of underground and aboveground storage tanks that contain certain hazardous, toxic, or otherwise harmful substances. In 1989 the legislature enacted a bill that, inter alia amended subchapter I, creating a petroleum -I storage tank remediation fund and a storage tank fund in the state treasury for the cleanup of releases from certain petroleum storage tanks and tanks containing regulated substances, as defined by the act. Acts 1989, 71st Leg., ch. 228, 55 16, 18, at 1015, 1020. See aenerally Attorney General Opinion JM-963 (1988). The petroleum storage tank remediation fund consists, in part, of fees imposed by section 26.3574 of the Water Code. Water Code § 26.3573(b)(2). You ask whether, in light of our holding in Attorney General Opinion JR-714 (1987), the import fee imposed on barges pursuant to subsection (d) of section 26.3574 of the Water Code is "invalid." In Attorney General Opinion JM-714, we concluded that a proposed amendment to the petroleum severance tax provisions of the Tax Code that would have imposed a tax on imported petroleum would violate the commerce clause of the United States Constitution. Therefore, we understand you to ask whether section 26.3574 , of the Water Code also violates the commerce clause. We conclude that it does. We do not understand you to ask about, and accordingly we do not address, other constitu- tional provisions, specifically the privileges and immuni- ties and equal protection clauses of the federal Constitu- tion. We will first discuss the relevant Water Code provi- sions. Then we will discuss United States Supreme Court P. 6708 ‘t Honorable Bob Bullock - Page 2 (JM-1258) cases regarding state regulation that affects interstate commerce. Section 26.3573 of the Water Code creates in the state treasury the petroleum storage tank remediation fund, which consists, in part, of fees charged under section 26.3574 of the Water Code. Section 26.3574 of the Water Code provides in pertinent part: (a) In this section: (1) 'Bulk facility' means a facility, including pipeline terminals, refinery terminals, rail and barge terminals, and associated underground and aboveground tanks, connected or separate, from which petroleum Droducts are withdrawn from bulk and delivered into a carao tank or a barae used to transDort those Droducts. This term does not include petroleum products consumed at an electric generating facili- ty. (2) 'Cargo tank' means an assembly that is used. for transporting, hauling, or delivering liquids and that consists of a tank having one or more compartments mounted on a wagon, truck, trailer, railcar, or wheels. (3) 'Withdrawal from bulk' means the removal of a petroleum product from a bulk facility storage tank for deliverv direct- lv into a carao tank or a barae to be transported to another location other than another bulk facility for distribution or sale in this state. (b) A fee is imDOSed on the deliverv of a petroleum Droduct on withdrawal from bulk of that DrOdUCt as Drovided bv this subsection. Each operator of a bulk facility on withdrawal from bulk of a petroleum product shall collect from the person who orders the withdrawal a fee in an amount determined as follows: [sets forth graduated schedule of fees based upon tank size for 'each delivery into a carao tank' but omits any reference to a delivery into a barge] P. 6709 Honorable Bob Bullock - Page 3 (JM-1258) . . . . . (d) A Derson ho imDorts a Detroleu Droduct in a carao &k or a barae destyned for deliverv into an underaround or abovearound storaae tank, regardless of whether or not the tank is exempt from regulation under Section 26.344 of this code [which sets forth exemptions from the regulation provisions of the subchapter], other than a storage tank connected to or part of a bulk facility in this state, shall Dav to the comDtroller a fe 0 the number of aallons imDorted cozputid as provided by Subsections (b), and (c) of this section. If a bulk facilitv ODerator imDorts a Detroleum Droduct in a carao tank or a barae. the bulk facilitv oDerator is not reouired to Dav the fee on that imDOrted Detroleum DrOdUCt if the petroleum DrOdUCt is delivered to a bulk facilitv from which the Detroleum Droduct will be withdrawn from bulk. . . . . (f) Subsection (b) of this section does not apply to a delivery of a petroleum product destined for export from this state if the petroleum product is in continuous movement to a destination outside this state. (Em- phasis added.) Thus, under subsection (d) of section 26.3574, a person who imports1 in a cargo tank or a barge a petroleum product destined for delivery into an underground or aboveground storage tank will pay a fee based upon the number of gallons imported when the product is delivered. If an operator of a bulk facility imports a petroleum product in a cargo tank or 1. It is unclear whether the word 'qimport11is intended only to reach petroleum products that enter Texas from another country, or petroleum products that enter Texas from another state as well. See Attorney General Opinion JM-714 (1987). Because it is uzkely that petroleum products from another country would be delivered to Texas in a barge, as opposed to a tanker, we think it reasonable that "import" .refers to interstate delivery of a petroleum product. For purposes of this opinion, we assume that "import" refers to both foreign and interstate delivery. P. 6710 Honorable Bob Bullock - Page 4 (JM-1258) a barge, the bulk facility operator is not required to pay the fee if the bulk facility into which the petroleum product is delivered is one from which the product ultimate- ly will be withdrawn. Under subsection (b), the fee effec- tively is passed through. Under subsection (b) of section 26.3574, any person who orders the withdrawal of a petroleum product from a bulk facility into a cargo tank (but not into a barge) is re- quired to pay a fee to be collected by the operator of the bulk facility based upon the number of gallons withdrawn when the product is delivered.2 The operator of a bulk facility will pay the fee only in an instance in which the petroleum product is not withdrawn. Thus, under subsections (b) and (d), taken together, a person who orders a withdrawal from bulk of a petroleum product into a cargo tank (but not into a barge) is subject to the fee when the product is delivered. Similarly, a person who llimports" a petroleum product in either a cargo tank or a barge is subject to a fee when the product is delivered. In other words, a person who "imports" a petro- leum product by barge from Louisiana will be subject to a fee when the product is delivered to an underground storage 2. Based upon the omission of the word "barges" in the fee schedule set forth in subdivisions (1) through (5) of subsection (b), you construe subsection (b) not to reach operators of intrastate barges. We note that subsection (b) can be construed to impose that fee on operators of intrastate barges or, in the alternative, to impose a fee in an unspecified amount on operators of intrastate barges. Three arguments support that construction. First, that construction would comport with the evident legislative intent of imposing the delivery fee upon those persons who are most likely to be involved,with a petroleum spill or leak. Second, the definitions of "bulk facility" and "withdrawal from bulk" set forth in subsection (a) include delivery of a petroleum product into a barge. Third, that construction will overcome serious constitutional objections to the statute. We are required to construe a statute, if it is possible to.do so, in a manner that is constitutional. A construction of subsecton (b) of section 26.3574 that imposes the delivery fee on operators of intrastate barges, in addition to operators of intrastate cargo tanks, would overcome equal protection and commerce clause challenges to the statute. However, for purposes of this opinion, we accept your construction. p. 6711 Honorable Bob Bullock - Page 5 (JM-1258) tank in Galveston; however, a person who delivers a petrole- um product by barge from Texas City for delivery to an underground storage tank in Galveston will not be subject to the fee.3 We understand you to ask about the imposition of the fee on those persons who "import1 a petroleum product in a barge. We understand you to ask whether the imposition of the fee on only those persons who deliver interstate by barge, as opposed to those who deliver intrastate by barge, violates the commerce clause of the United States Constitu- tion. The United States Constitution expressly reserves to the federal government the authority to regulate commerce with foreign countries, as well as among the states. The commerce clause provides: "The Congress shall have Power . . . To regulate commerce with foreign Nations, and among the several States, and with the Indian Tribes." U. S. Con&. art. I, 5 8, cl. 3. The commerce clause has been interpreted not only as conferring power on the national government to regulate commerce, but also as limiting the states' powers to inter- fere with commerce. This restriction on state power often is referred to as the "negative implication of the commerce clause" or as the "dormant commerce clause" principle. See. e.cr., Wardair Canada. Inc. v. Florida DeD’t of Revenue, 477 U.S. 1 (1986). Under the dormant commerce clause, the United States Supreme Court has held unconstitutional a variety of state regulatory programs4 and taxation measures5 as unduly burdening commerce. 3. We note that a person who delivers a petroleum product by cargo tank, whether intrastate or interstate, is subject to the fee. 4. See, e.a., Great Atlantic & Pacific Tea Co. v. Cottrell, 424 U.S. 366 (1976) (holding unconstitutional a Mississippi regulation providing that out-of-state milk could be sold in Mississippi only if the producing state would accept Mississippi milk on a reciprocal basis); Pike V. Bruce Church. Inc., 397 U.S. 137 (1970) (holding unconstitutional a state regulatory order prohibiting person from shipping cantaloupes outside the state unless they were packed in state-approved containers). 5. See, e.a Bacchus Imnorts. Ltd. v. Dias, 468 U.S. 263 (1984)(holding'that a state tax on alcoholic beverages that exempted certain locally produced beverages was uncon- (Footnote Continued) . P. 6712 Honorable Bob Bullock - Page 6 (JM-1258) In Attorney General Opinion JM-714, we concluded that a court would probably hold that a proposed amendment to the petroleum severance tax provisions of the Tax Code ;",~z would have imposed a state tax on petroleum imported other states would violate the commerce clause of the United States Constitution. Based .upon the test enunciated in Comnlete Auto Transit, Inc. v. Brady, 43: i.S. 274 (1977), and the holding of Marvland v. Louis.1 n 451 U.S. 725 (1981), we predicted that a court would hoid that such an import tax on petroleum would impermissibly burden inter- state commerce. abut we do not construe the fee imposed by section 26.3574 of the Water Code to impose an import tax on petroleum: therefore, Attorney General Opinion JM-714 does not control your question. In Attorney General Opinion JM-963 (1988), we concluded that a proposed delivery fee on petroleum products that was used to create a state cleanup fund in order to comply with federal statutes was not a tax. Rather, we concluded that such an exaction would be imposed in connection with the conferral of regulatory authority on the state and is more closely analogous to a license fee. The United States Supreme Court very early on distin- guished under the commerce clause- the state power to tax from the state power to regulate commerce. Gibbons v. Oaden, 22 U.S. (9 Wheat.) 1, 199-200 (1824).6 The current (Footnote Continued) stitutional): Boston Stock Exchanae v. State Tax Comm'n, 429 U.S. 318 (1977)(holding that New York transfer tax on securities transactions was unconstitutional because transactions involving out-of-state sales were taxed more heavily than most transactions involving a sale within the state). 6. In Gibbons, the Supreme Court struck down state-granted monopoly for the operation of steamboats tha: had the effect of prohibiting the operation of a federally licensed steamboat in New York waters. The court focused on the origin of the power at issue, whether commerce power or police power, and distinguished the commerce power from the subject matter upon which that power operated. The court concluded that while a state could not regulate "commerce" for its own sake, it might, in the pursuit of other legitimate state goals (such as the public health and safety under the police power), take actions that might impinge to some extent upon-commerce upon the states. In Coolev v. Board of Wardens, 53 U.S. (12 How.) 299 (1851), the court set forth a test for commerce clause ad- (Footnote Continued) P. 6713 Honorable Bob Bullock - Page 7 (JM-1258) test employed by the Supreme Court in determining whether a state regulation violates the commerce clause is not the four-prong test for state taxation schemes set forth in '. C mnlete Auto Tran sit, sunra; instead, the court invokes a bglancing test first adopted * Southern Pacific Co. v. Arizona, 325 U.S. 761, 768-71 (:t45).7 Essentially, the court has adopted what amounts to a two-tiered approach to state economic regulation under the commerce clause. When a state statute directly regulates or discriminates against interstate commerce, or when its effect is to favor in-state economic interests over out-of- state interests, the court generally has struck down the statute without further inquiry. See. e.a Brown-Forman Distillers Corn. v. New York State Liouor &h., 476 U.S. 573 (1986); Edaar v. MITE Corn., 457 U.S. 624 (1982); Hushes vi Oklahoma, 441 U.S.- 322 (1979); Citv of Philadelnhia v. New Jersey 437 U.S. 617 (1978). When, however. a statute has onl; indirect effects on interstate commerce and regulates evenhandedly, the court has examined whether the state% burden is legitimate and whether the burden on interstate commerce clearly exceeds the local benefits. Pike v. Bruce Church. Inc., 397 U.S. 137 (1970). The court has also recognized that there is no clear line separating those sorts of state regulation that are virtual- ly per se invalid under the commerce clause and those sorts of regulation subject to the ~ balancing approach. In either situation, the court focuses on the overall effect of the statute on both local and interstate activity. Brown- For-man Distillers Corn., y; Ravmond Motor Transn.. Inc. v. Rice, 434 U.S. 429 (1978). (Footnote Continued) judication that lasted almost 100 years. The court upheld a Pennsylvania law requiring ships entering or leaving the port of Philadelphia to engage a local pilot. The court sustained the act on the basis of a distinction between those subjects of commerce that demand a uniform rule throughout the country and those subjects that permit diversity of treatment in order to satisfy local concerns. 7. The test was first formulated by Professor Noel T. Dowling in a seminal law review article. See Dowling, Interstate Commerce and State Power, 27 Va. L. Rev. 1 (1940). 8. In other words, state regulation affecting inter- state commerce typically will be upheld if (1) the regulation is rationally related to a legitimate state end, (Footnote Continued) P. 6714 Honorable Bob Bullock - Page 8 (JM-1258) In the leading case of Pike v. Bruce Church, Inc., 397 U.S. 137 (1970), the court struck down an Arizona regulatory order prohibiting a person from shipping cantaloupes outside the state unless they were packed in state-approved contain- ers. The court declared: Where the statute regulates evenhandedly to effectuate a legitimate local public inter- est, and its effects on interstate commerce are only incidental, it will be upheld unless the burden imposed on such commerce is clearly excessive in relation to the putative local benefits. . . . If a legitimate local purpose is found, then the question becomes one of degree. And the extent of the burden that will be tolerated will of course depend on the nature of the local interest involved, and on whether it could be promoted as well with a lesser impact on interstate activi- ties. Id. at 142; see also MITE Corn., suora (striking down an Illinois statue that directly regulated and prevented, unless the terns of the statute were satisfied, interstate tender offers): Lewis v. BT Investment Manaaers, Inc., 447 U.S. ,27 (1980) (striking down Florida statutory scheme prohibiting investment advisory services by bank holding companies with principal offices out of state); Hushes v. Oklahoma, suora (striking down Oklahoma statute pro;:;itiz; the export of natural minnows from the state): V Philadelphia v. New Jersev suora (striking down New Jersey statute prohibiting impor&tion of solid and liquid wastes into the state); Hunt v. Washinaton State Anole Advertisinq Comm'n, 432 U.S. 333 (1977) (striking down North Carolina (Footnote Continued) and (2) the regulatory burden imposed on interstate commerce, and any discrimination against it, are outweighed by the state interest in enforcing the regulation. See aenerallv Tribe, American Constitutional Law, ch. 6 (2nd ed. 1988); Rotunda, Nowak, 8 Young, Treatise on Constitutional Law: Substance and Procedure, ch. 11 (1986). See also Redish & Nugent, The Dormant Commerce Clause and the Constitutional Balance of Federalism, 87 Duke L. J. 569 (1987); Eule, Lavina the Dormant Commerce Clause to Rest, 91 Yale L. J. 425 (1982); Maltz, How Much Reaulation is Too Much -- An Examination of Commerce Clause Jurisorudence, 50 Geo. Wash. L. Rev. 47 (1981); Tushnet, Rethinkina the Dormant Commerce Clause, Wis. L. Rev. 125 (1979). P- 6715 Honorable Bob Bullock - Page,9 (JM-1258) statute imposing additional costs on Washington, but not on North Carolina, apple shippers). We think that a court would hold that the failure of the Texas statute to impose those burdens upon intrastate barge operators that are imposed upon interstate (or for- eign) barge operators would not constitute evenhanded regulation and, therefore, would amount to impermissible discrimination under the commerce clause under the United States Constitution. SUMMARY The failure of section 26.3574 of the Water Code to impose the same burdens upon intrastate operators of barges delivering petroleum products that are imposed upon interstate (and foreign) operators of barges delivering petroleum products would not con- stitute evenhanded regulation and, therefore, would amount to impermissible discrimination under the commerce clause of the United States Constitution. Verv Itrulv vo - ‘- JIM MATTOX '~ Attorney General of Texas MARYKELLER First Assistant Attorney General LOU MCCREARY Executive Assistant Attorney General JUDGE ZOLLIE STEAKLEY Special Assistant Attorney General RENEA HICKS Special Assistant Attorney General RICK GILPIN Chairman, Opinion Committee Prepared by Jim Moellinger Assistant Attorney General P. 6716