Court Opinion

ID: 4130211
Source: CourtListenerOpinion
Date Created: 2017-02-18 01:01:36.414835+00
Date Added: 2024-06-11T14:31:54.099044
License: Public Domain

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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

                                                      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