Free the "Free Rivers" doctrine.

• Author: Frankel, Paul H.

Looking back over the past year, one a the more upsetting actions of the Supreme Court of the United States was its refusal to review a decision of the West Virginia Supreme Court of Appeals concerning West Virginia's refusal to follow the Free Rivers Doctrine. On February 18, 1997, the U.S. Supreme Court turned its back on more than 200 years of jurisprudence supporting the free use of the nation's inland waterways when it declined to grant a writ of certiorari in Hartley Marine Corp. v. Paige, 117 S. Ct. 942 (1997). At issue in Hartley Marine was the excise tax imposed by the West Virginia Department of Tax and Revenue ("Department") on the use of fuel in waterborne commerce. This case questioned whether West Virginia can impose its fuel use tax on fuel consumed by vessels, some making no stops at all in West Virginia, that use the Ohio River in interstate commerce. The Courts refusal to review the state courts decision may prompt other states bordering major inland waterways to impose impermissible taxes on interstate waterborne commerce.

Indeed, the Court's denial of certiorari may have unwelcome consequences for anyone whose livelihood is dependent on interstate waterborne commerce. Hartley Marine may result in escalated efforts by littoral states to require tribute for the heretofore Constitutional right to travel the country's waterways without state interference in the pursuit of interstate waterborne commerce.

Background

The Corporations Involved

This case involved three corporations, Hartley Marine Corp., The Ohio River Company, and Crounse Corporation, each of which was engaged in the business of transporting products in interstate and intrastate commerce by vessels on the Ohio and Mississippi Rivers.(2)

For 277 miles, the Ohio River lies partly within West Virginia and partly within Ohio. Hartley Marine Corp. was engaged in "one-point," "two-point," and "pass-through" traffic on the Ohio River where it borders West Virginia. One-point traffic occurs where either the origination or the destination of a river transport occurs within West Virginia. Two-point traffic occurs where both the origination and destination of a river transport occur in West Virginia. Pass-through traffic occurs where neither the origination nor the destination of a river transport occurs in West Virginia (i.e., where the vessel merely travels along the Ohio River without making any stops whatsoever in West Virginia).

The West Virginia Fuel Use Tax

West Virginia imposes an excise tax on the "use or consumption in this state of gasoline or special fuel purchased outside this state at the rate of five percent of the average wholesale price of such gasoline or special fuel...."(3) Every motor carrier(4) operating in West Virginia is required to pay the excise tax on all gasoline or special fuel consumed within the State.(5) Significantly, the amounts collected from the fuel use tax are deposited in the West Virginia "road fund" and are "used only for the purpose of construction, reconstruction, maintenance and repair of highways, and payment of principal and interest on state bonds issued for highway purposes."(6)

Hartley Marine Corp. paid this fuel use tax for all fuel consumed in operations on the Ohio River. The company also paid various other West Virginia taxes on its business activities in the State, including business and occupation, carrier income, corporate net income, business franchise, consumer sales and service, and ad valorem property taxes.

Federal Activities Concerning Inland Navigable Waterways

The U.S. Government has paramount responsibility for the regulation, servicing, and maintenance of the inland navigable waterways system of which the Ohio River is a part. It is the U.S. Coast Guard that documents the vessels owned by Hartley Marine Corp., which the company uses in its transportation business. It is the U.S. Army Corps of Engineers that is responsible for the planning, engineering, construction and operation of all of the locks and darn on the Ohio River System. Indeed, the Corps of Engineers even has an Ohio River Division. Furthermore, it is the U.S. Coast Guard that has jurisdiction over the seamen who are working on vessels on the inland system.

The federal government imposes a federal fuel use tax on the fuel consumed by Hartley Marine's vessels. Unlike the West Virginia tax, however, the receipts from the federal tax are used to construct improvements on the Ohio River and other navigable waterways of the inland river system. West Virginia, in levying its tax, did not permit a credit for the federal fuel use tax paid, nor did the State's use of the tax receipts bear any relationship to Hartley Marine's use of the river.

The free Rivers Doctrine

During the 13-year period from 1776 to 1789, the United States of America was governed by the Articles of Confederation and by other enactments, including the Northwest Ordinance of 1787. The Northwest Ordinance established the doctrine (the "Free Rivers Doctrine") that interstate commerce along rivers (the principal means of interstate commerce at that time) shall be "forever free."(7)

On March 4, 1789, our Government commenced operations under the Constitution. Despite the adoption of the Constitution, the Northwest Ordinance was (and still is) in effect with respect to interstate commerce.

Two hundred years of jurisprudence have continued the Free Rivers Doctrine. When the Constitution was adopted, the Free Rivers Doctrine was one of the reasons for the inclusion of the Duty of Tonnage Clause. When the Virginia Compact was enacted on December 18, 1789, the Free Rivers Doctrine was embodied in the provision that the use of the Ohio River would be "free."(8) The Virginia Compact, like the Northwest Ordinance, is still in effect.

In Gibbons v. Ogden, 22 U.S. 1 (1824), the U.S. Supreme Court expanded the Free Rivers Doctrine by striking down a New York statute that excluded federally licensed boats from operating in New York waters. Congress expressly set forth the Free Rivers Doctrine when it enacted the Rivers and Harbors Appropriation Act of 1884 (now 33 U.S.C. [sections] 5), which prohibits the imposition of any "tolls and operating charges whatsoever" on the Ohio River and other waterways. In Helson v. Kentucky, 279 U.S. 245 (1929), the Court applied the Free Rivers Doctrine when it held that the imposition of a fuel use tax on the portion of fuel consumed in Kentucky by an interstate ferry was an unconstitutional burden on interstate commerce. The Free Rivers Doctrine continues to this day.

Apparently, however, this is not true in West Virginia. Relying on one of its own decisions, the Supreme Court of Appeals of West Virginia decided that the Free Rivers Doctrine does not apply in West Virginia.(9) It summarily rejected the continued validity of the Northwest Ordinance and the Virginia Compact, it ignored or misinterpreted more than 200 years of Duty of Tonnage Clause, Supremacy Clause and Commerce Clause jurisprudence, and it declared that interstate river traffic is fair game for the State's tax collector.

The West Virginia Tax Is Invalid Under...