By Eric Sell
Federal preemption doctrines could soon become a major roadblock to one west coast state’s fight to dismantle the fossil fuel extraction industry.[1] While an esoteric debate about the Supremacy Clause may not be the stuff of front page headlines, this could be a saving grace for interior states whose budgets and local economies are directly in the crosshairs of the “progress” that some argue is necessary to fight climate change.[2]
Under the guise of promoting public safety, Washington Governor Jay Inslee signed a bill into law in May 2019 that would effectively prohibit transporting crude oil sourced from the Bakken Shale Formation of Western North Dakota and Eastern Montana into the state of Washington.[3] The law targets oil transported by rail into the state, a common form of conveyance for interior state resource extraction industries to export their commodities to the west coast.[4] While the ban is a clear attempt by the state of Washington to leverage its geography in its war on fossil fuels, how the law achieves its goals is a clever attempt to circumvent long-standing constitutional and statutory prohibitions against such efforts.[5]
Senate Bill 5579, “An Act Relating to the volatility of crude oil received in the state by rail,” prohibits the “loading or unloading” of certain crude oil “at any facilities in the state—including those that have invested in facilities specifically designed to receive petroleum crude by rail.”[6] In other words, while the law is ostensibly a prophylactic measure to prevent the disasters that sometimes occur when trains carrying volatile crude oil derail, the law doesn’t actually prohibit transportation of oil into the state.[7] However, by prohibiting the loading and unloading of crude oil from the trains that transport it, this de facto ban on transporting oil into Washington state effectively shuts off access to critical access points to ship this commodity overseas.[8] Additionally, the law only applies to oil above a certain a “vapor pressure limit,” which is specific to oil extracted in the Bakken region. Given the clear economic implications of the ban, it should come as no surprise that the two states impacted most are ready for a fight.
On July 29, the attorneys general from North Dakota and Montana submitted a letter to the federal Pipeline and Hazardous Materials Safety Administration (“PHMSA”), requesting “an administrative determination as to whether federal hazardous material transportation law preempts the State of Washington’s rules relating to the volatility of crude oil received in the state.”[9] North Dakota and Montana argue that the Hazardous Materials Transportation Act (“HMTA”) preempts states from enacting laws like the one adopted by Washington state.[10]
Montana and North Dakota claim Washington’s oil transportation ban is preempted by the HMTA because: (1) it “imposes multiple obstacles to accomplishing the purposes of the [act]”; (2) “aspects of Washington’s law are not substantively the same the Hazardous Materials Regulations” adopted by PHMSA; and (3) “Washington seeks to regulate activities that are squarely within PHMSA’s jurisdiction.[11] Ten states joined Montana and North Dakota in asking PHMSA to find Washington’s law preempted, each making the case for why allowing one state to short-circuit HMTA could be detrimental to interstate commerce and transportation of fossil fuels across state boundaries.[12] The comment period for the states’ application closed on August 23, and PHMSA is expected to issue a determination by late 2019.
Domestic consumption of Bakken crude is a major source of demand for this valuable commodity, but the real issue here is exportation of fossil fuels to Asia.[13] Recent investment in liquefied natural gas facilities on Washington’s coast, are promising investment opportunities for interior state oil and natural gas extraction.[14] With hungry Asian energy markets in need of fossil fuels to power their rapidly growing economies, states like Montana and North Dakota are ready bolster valuable trans-pacific commercial pipelines to feed their own economic growth.[15]
Climate change is undoubtedly a growing problem that needs addressing. Ironically, while Washington’s law is touted as another tool in the fight against climate change, it could actually lead to more atmospheric greenhouse gas emissions, not less.[16] Natural gas is one of the cleanest-burning fossil fuel sources for electricity production.[17] When converted to a liquefied form, it is economically transportable across the Pacific.[18] If Asian countries cannot receive the supply they need to fuel the rapidly expanding electricity production sector, they will turn to other economical fuels, like higher greenhouse gas-emitting sources such as coal.[19]
Natural resource extraction is critical to Montana and North Dakota.[20] Responsible and sustainable development of oil, coal, hard rock minerals, and timber are all integral components to providing the basic government services to the citizens of these states.[21] Without these industries, schools go unfunded, emergency responders are laid off, mental health services for society’s most vulnerable are thinned to a point nearing non-existence. While many in the state of Washington sleep easy at night knowing they’re fighting the good fight, the impact of such punitive policies have a substantial and detrimental effect on neighboring states.[22]
The bottom line is that this is not just a debate about fossil fuels and climate change. Rather, it is a debate about whether one state can use its geography to hold neighboring states hostage. Federal preemption law seeks to prevent exactly this scenario; a patchwork of state laws and regulations that increase market inefficiencies and place one state at the mercy of another.[23] So while politicians in Washington state bask in the glow of self-perceived altruism, families in North Dakota and Montana pray that justice and the rule of law will prevail. After all, their livelihood depends on it.
Twitter: @EricSell
[1] See Joanna Marsh, More States and Groups Voice Opinions About Washington State’s Crude-by-Rail Law, Freight Waves (Sept. 30, 2019), https://www.freightwaves.com/news/more-states-and-groups-voice-opinions-about-washington-states-crude-by-rail-law (discussing the growing fight over Washington’s attempts to ban crude oil-by rail in the state).
[2] See Letter from Montana and North Dakota Attorneys General, Part 107.203 Application for Preemption of Washington State’s Volatility Restrictions on Crude Oil Transported by Rail Applicable to the Transportation of Certain Hazardous Materials to the Pipeline and Hazardous Materials Safety Administration (July 17, 2019), https://attorneygeneral.nd.gov/sites/ag/files/documents/MediaAttachments/2019-07-17-Petition-PHMSA.pdf. [hereinafter “Attorneys General Preemption Application”] (discussing the share of North Dakota’s economy comprised of the oil and gas industries).
[3] 2019 Wash. Sess. Laws ESSB 5579.
[4] See Attorneys General Preemption Application, supra note 2, at 3 (providing statistics demonstrating how common shipping oil from the Bakken region by rail is).
[5] See Attorneys General Preemption Application, supra note 2, at 6-7 (discussing how Washington’s law does not explicitly ban shipping oil into the state by rail, but has such an effect by preventing loading and unloading of crude oil at any facilities in the state).
[6] Id.
[7] Id.
[8] See id. at 10 (providing data backing the assertion that Washington State is a major thoroughfare to access the Pacific Ocean for oil exports).
[9] Attorneys General Preemption Application, supra note 2. See also 84 Fed. Reg. 35,707 (July 24, 2019) (displaying PHMSA’s publication in the federal register for public comment prior to issuing a determination on the whether Washington’s law is preempted).
[10] Id. at 13.
[11] Id. at 13-24.
[12] More States And Groups Voice Opinions About Washington State’s Crude-By-Rail Law, Freight Waves (Sept. 30, 2019), https://www.benzinga.com/government/19/09/14515757/more-states-and-groups-voice-opinions-about-washington-states-crude-by-rail-law.
[13] See Demand from Asia is set to power the growth of the global gas industry over the next five years, International Energy Agency (June 7, 2019, last visited Nov. 3, 2019), https://www.iea.org/newsroom/news/2019/june/demand-from-asia-is-set-to-power-the-growth-of-the-global-gas-industry-over-the-n.html
[hereinafter “IEA Asia Energy Demand Summary”]
(discussing the growing demand in Asia for liquefied natural gas); see also id. at 10 (outlining the importance of Washington State’s geographic location to access Asian natural gas markets).
[14] See, e.g., Puget Sound Energy LNG facility, Port of Tacoma, (last visited Nov. 3, 2019) https://www.portoftacoma.com/puget-sound-energy-lng-facility (discussing Puget Sound Energy’s investment in a liquefied natural gas facility on Puget Sound); Hal Bernton, Inslee pulls support from two Western Washington natural gas projects, Seattle Times (May 8, 2019), https://www.seattletimes.com/seattle-news/politics/inslee-pulls-support-from-two-western-washington-natural-gas-projects.
[15] See IEA Asia Energy Demand Summary, supra note 12 (“After another record year, global demand for natural gas is set to keep growing over the next five years, driven by strong consumption in fast-growing Asian economies and supported by the continued development of the international gas trade.”).
[16] See Jillian Ambrose, Hopes for Climate Progress Falter with Coal Still King Across Asia, The Guardian, (June 15, 2019), https://www.theguardian.com/business/2019/jun/15/climate-crisis-coal-asia-power-generation-fossil-fuels (finding that Asian countries are still heavily reliant on fossil fuel consumption, and will be for the foreseeable future); see also Energy Information Administration, How Much Carbon Dioxide is Produced When Different Fuels are Burned?, (last visited Nov. 3, 2019), https://www.eia.gov/tools/faqs/faq.php?id=73&t=11 (showing that natural gas produces almost 40 percent less CO2 than anthracite coal when burned for electricity).
[17] See Tim Gould, Commentary: The Environmental Case for Natural Gas, International Energy Agency, (Oct. 23, 2017), https://www.iea.org/newsroom/news/2017/october/commentary-the-environmental-case-for-natural-gas.html (“CO2 emissions (per unit of energy produced) from gas are around 40% lower than coal and around 20% lower than oil.”0.
[18] See Mitsubishi Corporation: 50th Year Anniversary of LNG (Liquefied Natural Gas) in Japan, Oil & Gas 360, (Nov. 1, 2019, 4:47 am EDT),
Mitsubishi Corporation: 50th Year Anniversary of LNG (Liquefied Natural Gas) in Japan(stating that LNG was first exported to Japan over 50 years ago, and Asian demand for LNG is expected to increase).
[19] See Jude Clamente, China Soaring Past Japan In Liquefied Natural Gas Imports, Forbes (Nov. 1, 2019), https://www.forbes.com/sites/judeclemente/2019/11/01/china-soaring-past-japan-in-liquefied-natural-gas-imports/(“China has a gasification program to lower an over-dependence on coal and clear dangerously polluted skies with cleaner natural gas.”). See also Timothy J. Skone, P.E., Life Cycle Greenhouse Gas Perspective on Exporting Liquefied Natural Gas from the United States, United States Department of Energy (2014), https://www.energy.gov/sites/prod/files/2014/05/f16/Life%20Cycle%20GHG%20Perspective%20Report.pdf (studying how Asian consumption of US natural gas decreases GHG emissions as the LNG from the United States has a shorter GHG Lifecyle than coal mined in Europe or Asia).
[20] See Attorneys General Preemption Application, supra note 2, at 2-3 (providing statistics of the economic impact the oil and gas industry has on Montana and North Dakota).
[21] See id. (discussing the direct link to government services from the tax revenue derived from the natural resources extraction industries in Montana and North Dakota).
[22] See Amy R. Sisk, North Dakota Asks Federal Agency to Intervene in Oil-by-Rail Dispute with Washington, Bismarck Tribune, (July 18, 2019), https://bismarcktribune.com/news/state-and-regional/north-dakota-asks-federal-agency-to-intervene-in-oil-by/article_47e65401-b29d-5ef5-94d5-c487d46d4b96.html (“A spokeswoman for Washington Gov. Jay Inslee on Wednesday said the state would defend its law in court. Inslee is seeking the Democratic nomination for president and has made addressing climate change central to his campaign.”). But see Attorney General Tim Fox, Washington State Should Stop Blocking Planned Coal Export Terminal, The New York Times (June 21, 2018), https://www.nytimes.com/2018/06/21/opinion/washington-state-should-stop-blocking-planned-coal-export-terminal.html (discussing the impact to Montana from Washington State’s denial of a critical water quality permit for an export terminal).
[23] See generally, Cong. Research. Serv. Federal Preemption: A Legal Primer, (July 23, 2019), https://fas.org/sgp/crs/misc/R45825.pdf (providing an overview of federal preemption doctrines).
