Tanker deliveries of foreign crude oil to Portland Pipe Line Corp. terminals in South Portland have essentially stopped in the last nine months, the company’s president and CEO testified Monday, kicking off the long-awaited federal trial challenging the city’s “Clear Skies” ordinance.
The company is trying to show that the 2014 municipal ban on shipping crude oil from the city’s waterfront violates the Commerce Clause of the Constitution, which gives Congress sole power to regulate foreign and interstate trade.
The company says the ban effectively prevents reversing the flow of its 236-mile underground pipeline – a change that would allow it to bring controversial tar sands oil from western Canada to South Portland and ship it to refineries along the Eastern Seaboard and elsewhere.
The company’s lawyers opened their case before U.S. District Court Judge John Woodcock Jr. with testimony showing the ban’s impact so far, especially since crude oil production in Alberta, Manitoba and North Dakota has all but eliminated demand for foreign supplies at the pipeline’s refinery in Montreal.
“Our future depends on a reversed pipeline,” said Thomas Hardison, pipeline company chief. “There’s no northbound business I anticipate whatsoever.”
Hardison said the company has received one tanker delivery so far this calendar year, and it had to “incentivize” the delivery largely to demonstrate that the pipeline was operational for licensing purposes.
Before that, the company received its last tanker delivery in August 2017, Hardison said, indicating a significant decline from an average of 41 ships monthly that made deliveries when the South Portland-to-Montreal pipeline was operating at its peak.
In the last three years, the company has eliminated 10 jobs in Maine, leaving 26 employees who now focus mostly on maintenance, safety, security and environmental compliance, Hardison said. The company is a Canadian-owned subsidiary of ExxonMobil, Shell and Suncor Energy.
Prompted by the company’s lawyers from Pierce Atwood of Portland, Hardison testified that the pipeline offered broad economic benefits to the region, including $750,000 in annual property taxes paid to the city of South Portland and work provided to smaller companies that serviced tankers and their crews.
Without jobs assisting pipeline tankers, Portland Tugboat LLC has reduced staffing from 20 to 15 full-time employees, said Brian McAllister, president of New York parent company McAllister Towing. McAllister said the tug company might have to move one of four boats it operates in Portland Harbor to one of its 16 other East Coast locations.
If the pipeline were able to reverse its flow, it would have access to 140,000 to 180,000 barrels daily flowing east in the Enbridge Line 9 pipeline to its refinery in Montreal, Hardison said. That’s a significant drop from the 550,000 barrels daily that the pipeline once carried north from South Portland, but it would be enough to keep the pipeline operating, he said.
Hardison said the company would use a 2008 reversal proposal – which was approved by city and state officials but never started – as a “jumping-off point” for a reversal project if the Clear Skies ordinance were overturned.
“We don’t want to re-invent the wheel,” Hardison said. “We’re the only pipeline that reaches the Eastern Seaboard (and) we’re already in the ground.”
Hardison disputed the city’s assertion in a pretrial brief that the pipeline could still bring oil sands crude to South Portland from Montreal but load it onto trains at Rigby Yard and ship it to refineries by railroad.
Jonathan Ettinger, the city’s lead counsel and a partner at Foley Hoag of Boston, referred to a 2015 reversal proposal wherein the company considered having Pan Am Railways bring crude oil into Rigby Yard, on trains carrying as much as 70,000 barrels each, and shipping it from the company’s waterfront terminals.
The proposal called for building a $50 million pipeline from the rail yard in the western part of the city to the company’s storage tank farm in the center of the city, which would feed the waterfront terminals.
Ettinger unsuccessfully pressed Hardison to admit that the company didn’t pursue the railway option because there was no demand for oil shipments out of South Portland.
Hardison said the rail option wasn’t economically or logistically viable, especially given the city’s recent opposition to a liquid propane facility at Rigby Yard and the fact that tankers carry as much as 1 million barrels each.
Scheduled to run through Friday at the federal courthouse in Portland, the bench trial is expected to generate interest across the energy sector and other markets that depend on interstate commerce and seaport access for foreign trade.
The city disputes the company’s claims that the Clear Skies ordinance discriminates against out-of-state competitors, attempts to regulate business outside South Portland and interferes with federal control of foreign commerce, according to the city’s pretrial brief.
Since the company filed its lawsuit in February 2015, the city has spent $1.6 million through April on legal fees defending the ordinance and received $168,862 in donations to the Clear Skies Legal Defense Fund. The City Council has appropriated an additional $491,224 to cover future legal costs related to the case.
Approved by the City Council in July 2014, the ordinance’s stated goal was to protect public health and the environment and preserve traditional land use authority to promote future development consistent with the comprehensive plan. It followed a broader waterfront protection proposal that city voters narrowly rejected in a 2013 referendum.
Environmental groups and others who supported the Clear Skies ordinance say tar sands oil is more hazardous to load onto ships, transport through pipelines and clean up if spilled. Oil industry representatives dispute those claims, saying the ordinance is unjustified and jeopardizes business development, jobs and future crude oil shipping.
Whatever the outcome of the pipeline case in U.S. District Court, it’s expected to wind up in the 1st U.S. Circuit Court of Appeals in Boston and take another two to three years to reach a conclusion.
Kelley Bouchard can be contacted at 791-6328 or at:
kbouchard@pressherald.com
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