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.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
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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]
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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.
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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)
.
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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)
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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)
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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).
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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
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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
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