-” 

.JIX MATI-OX December 12, 1990 

xl"romNEY DESERAL 

, 

Honorable Bob Bullock 

Comptroller of Public 

Opinion No. JM-1258 

Accounts 

L.B.J. Office Building 

Austin, Texas 78774 

Re: Validity of import fees 

on barges pursuant to section 

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 registration 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 

-I alia amended subchapter I, creating a petroleum 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 constitutional provisions, specifically the privileges and immunities and equal protection clauses of the federal Constitution. We will first discuss the relevant Water Code provisions. Then we will discuss United States Supreme Court 

P. 6708 
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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 facility. 

(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 directlv 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. (Emphasis 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 'qimport11 is 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 ultimately will be withdrawn. Under subsection (b), the fee effectively 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 required 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 petroleum 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 petroleum 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 Constitution. 

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 interfere 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 interstate 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 distinguished 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-ofstate 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. 

Hushes vi Oklahoma, 441 U.S.- 322 

624 (1982); 

(1979); Citv of 

Philadelnhia v. New Jersey 437 U.S. 617 (1978). 

however. a statute has onl; indirect effects on 

When, 

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 virtually 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. BrownFor-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 interstate 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 containers. The court declared: 

Where the statute regulates evenhandedly to 

effectuate a legitimate local public interest, 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 activities. 

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 foreign) 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 constitute evenhanded regulation and, therefore, 

would amount to impermissible discrimination 

under the commerce clause of the United 

States Constitution. 

Verv I trulv 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