Opinion ID: 2518074
Heading Depth: 3
Heading Rank: 7

Heading: Alaska Riverways' Challenge to DNR's Calculation of a Lease Fee Based on Passenger Count.

Text: Alaska Riverways argues in its cross-appeal that, even assuming DNR could require it to enter into a lease, DNR may not base the lease fee on the number of its paying passengers. First, Alaska Riverways contends that such a lease fee violates federal law prohibiting states from levying a tax for the use of navigable waters. Second, Alaska Riverways contends that DNR is not authorized by statute to charge such a lease fee. [96] We hold that DNR's calculation of a lease fee based on passenger count violates federal law and, consequently, need not consider Alaska Riverways' alternative argument that DNR lacks the statutory authority to charge such a fee. We therefore vacate that portion of the DNR leasing decision but leave in place the lease fee in the amount of $1,000 per year. Alaska Riverways argues that requiring it to pay a lease fee based on its passenger count would violate 33 U.S.C. § 5(b), which provides with some exceptions: No taxes, tolls, operating charges, fees, or any other impositions whatever shall be levied upon or collected from any vessel or other water craft, or from its passengers or crew, by any non-Federal interest, if the vessel or water craft is operating on any navigable waters subject to the authority of the United States, or under the right to freedom of navigation on those waters.[ [97] ] DNR argues that 33 U.S.C. § 5(b) does not apply because it is not charging vessels or passengers for use of the Chena River, but rather charging Alaska Riverways rent for its exclusive use and occupancy of state-owned shoreland in its capacity as a landowner. DNR cites Brusco Towboat v. State in support, in which the Oregon Supreme Court held that a lease fee did not violate an Oregon statute similar to 33 U.S.C. § 5(b) because the fee was not a charge for the use of navigable waters, but rather a charge upon those who wish to occupy, to the exclusion of others, portions of the state's lands in pursuit of their own business activities. [98] DNR ignores a crucial difference between this case and Brusco Towboat: In Brusco Towboat, the administrative agency did not attempt to calculate the lease fee based on passenger count but instead based the lease fee on the amount of water surface area occupied. [99] The question here is whether the assessment of a lease fee based on passenger count for exclusive use of state land implicates 33 U.S.C. § 5(b). We hold that it does and reject DNR's argument that the fact that it calculates the rent . . . based on the number of [Alaska Riverways'] customers does not convert the rental amount into a `passenger fee' or user fee. DNR's proposed assessment on Alaska Riverways, however labeled, is a charge exacted specifically for the use of navigable watersin this case, $0.25 for each paying passengerand 33 U.S.C. § 5(b) therefore applies. The Ninth Circuit reached a similar conclusion in Western Oil and Gas Association v. Cory, where it held that California's practice of basing the lease fee for running a pipeline over unimproved state tidelands on the volume of oil passing through the pipeline violated the Commerce Clause of the United States Constitution. [100] In rejecting the argument by the State of California that it was only charging rent for the use of state-owned lands, the court stated: Although the volumetric rates are designated as rent by the State, it is the practical effect of an exaction, not its label that is the focus of analysis under the Commerce Clause. The volumetric charges are exacted specifically in return for the use of the coastal property. The present case therefore falls within the bounds of the Supreme Court cases that have reviewed challenges to `user' fees or `taxes' that were designed and defended as a specific charge imposed by the State for the use of state-owned . . . facilities and services.[ [101] ] Similarly, in reversing a decision by this court rejecting a challenge to a port city's property tax on large vessels brought under the Tonnage Clause, the United States Supreme Court made clear that a state may not impose `taxes and duties regardless of their name or form . . . which operate to impose a charge' on the use of navigable waters. [102] While Alaska Riverways contends that the lease fee based on passenger count violates 33 U.S.C. § 5(b) rather than the Commerce or Tonnage Clauses, 33 U.S.C. § 5(b) codified the common law concerning these constitutional provisions. [103] 33 U.S.C. § 5(b), like the Commerce and Tonnage Clauses, prohibits levying fees on the use of navigable waters unless those fees do not impose a significant burden on interstate commerce and represent a fair approximation of the benefit conferred or cost incurred by the charging authority. [104] DNR does not argue that this exception applies, but rather that 33 U.S.C. § 5(b) (and the Commerce and Tonnage Clauses) are inapplicable because the assessment is not a user fee. For the reasons stated above, we disagree. Having determined 33 U.S.C. § 5(b) to be applicable, the proposed lease fee based on passenger count is clearly impermissible because it does not approximate the benefit conferred or cost incurred by the State of Alaska. [105] The State has not argued that it provides facilities or services to Alaska Riverways or its passengers. Nor has the State shown that it incurs costs in leasing the unimproved shorelands to Alaska Riverways [106] above the administrative costs of processing the lease application and issuing the lease, and the litigation costs associated with this lawsuit. [107] The State does confer a benefit on Alaska Riverways and indirectly on its passengers: the exclusive use of state-owned shorelands. And the State may charge for this benefit. Importantly, however, a per-passenger lease fee is not a fair approximation of this benefit; indeed, it has no relation to this benefit. Whether Alaska Riverways has 100 or 100,000 passengers, the benefit conferred by the State is the same. Although DNR has authority to require commercial tour operations to enter into leases for the exclusive use of unimproved state-owned shorelands, it is prohibited by federal law from basing that charge on the number of passengers using navigable waters.