The Misinterpretation of the Tonnage Clause in Polar Tankers, Inc. v. City of Valdez

• Publication year: 2009

§ 26 Alaska L. Rev. 289. THE MISINTERPRETATION OF THE TONNAGE CLAUSE IN POLAR TANKERS, INC. V. CITY OF VALDEZ

Alaska Law Review
Volume 26, No. 2, December 2009
Cited: 26 Alaska L. Rev. 289

THE MISINTERPRETATION OF THE TONNAGE CLAUSE IN POLAR TANKERS, INC. V. CITY OF VALDEZ

Angelo J. Suozzi ^[*]

Abstract

In its recent decision in Polar Tankers, Inc. v. City of Valdez, the United States Supreme Court held that a property tax implemented by the City of Valdez violated the Tonnage Clause of Article I, Section 10 of the United States Constitution. In this Note, the Author argues that the Supreme Court incorrectly interpreted the Court's prior Tonnage Clause jurisprudence. The Author begins by outlining the factual background of the dispute between Polar Tankers, Inc. and the City of Valdez. Next, the Author provides a historical overview of the Tonnage Clause, discussing both the Framers' intent in drafting the clause and the Supreme Court's evolving Tonnage Clause jurisprudence. He then summarizes the decisions of the lower courts in the Polar Tankers case, as well as the Supreme Court members' plurality, concurring, and dissenting opinions. Finally, the Author argues that the Court misinterpreted prior Tonnage Clause jurisprudence, and that a proper interpretation compels the conclusion that the property tax imposed by the City of Valdez did not violate the Tonnage Clause.

Table of Contents

Introduction................................................................................................290

I. The Dispute........................................................................................292

A. The Pipeline................................................................................292

B. The Tax........................................................................................295

II.The Tonnage Clause.......................................................................297

A. "No State Shall ... Lay Any Duty of Tonnage . . ."...............297

B. Framers' Intent and Historical Importance............................298

C. Building in Exceptions: The Evolution of the Tonnage

Clause in Supreme Court Jurisprudence................................302

1. Expansion of the Clause: "All Duties, Regardless of Their Name or Form" ......................................................................303

2. Exceptions: Fees for Services ..................................................304

3. Vessels Taxed As Property .....................................................306

III. The Opinions......................................................................................307

A. The Alaska Supreme Court Decision......................................307

B. Plurality: Improper Duties of Tonnage...................................308

C. Concurring in the Judgment: A Plain Language View.........309

D. Dissent: A Property Tax............................................................310

IV. A Misinterpretation of Precedent..............................................311

A. The Concurrence's Plain Language View Ignores Supreme Court Jurisprudence .................................................311

B. The Plurality Misapplied the Wheeling Decision ...................312

C. Congressional Approval...........................................................314

Introduction

The Framers of the Constitution, when they convened to write the document that would define the scope of federal power and determine the "fate of an empire," ^[1] were, for the most part, exceptionally wary of the rivalries that existed among the independent states. They believed that such rivalries, if left unchecked, would cripple the fledgling nation. ^[2] Since the end of the Revolution, the Founders had witnessed interstate rivalries foment firsthand as the separate states freely pursued their own interests, unrestrained by a federal government largely devoid of power under the Articles of Confederation. ^[3] Thus, the Framers sought to stem the potential conflict that would arise among those states with a geographic advantage and those without, recognizing that certain states with access to shipping lanes or natural resources would be able to leverage their superior situation to the detriment of their neighbors. ^[4] To that end, the Constitution that arose from the Philadelphia Convention contained provisions to facilitate trade among the states. ^[5] Among these provisions was the Tonnage Clause, which prohibits individual states from placing any duties on vessels when those duties "operate to impose a charge for the privilege of entering, trading in, or lying in a port." ^[6] Through the nation's first century and a half, the Supreme Court addressed the Tonnage Clause with relative frequency; the Clause, however, has taken on decreased importance in recent history. ^[7]

The United States Supreme Court in Polar Tankers held, in a 7-2 opinion (though the simplicity of that figure obscures the fact that the Court split along multiple lines), that a tax imposed by the City of Valdez, Alaska, on ships making use of its harbor was an unconstitutional levy imposed for the privilege of using Valdez's ports, and was consequently a violation of the Tonnage Clause. ^[8] In deciding that the Valdez tax violated the Tonnage Clause, the Supreme Court overturned the decision of the Alaska Supreme Court, which had held that the tax was not a duty on tonnage in violation of the constitutional prohibition but was instead a "fairly apportioned ad valorem tax ^[9] on personal property." ^[10] The courts at both levels examined previous Tonnage Clause cases, which have shown a marked evolution in the meaning and application of the Clause since its inception. ^[11] Additionally, at the Supreme Court level, all of the opinions - plurality, concurrence, and dissent-relied heavily on earlier interpretations of the Tonnage Clause to divine the intent of the Framers in reaching their respective conclusions. ^[12]

Part I of this Note discusses the background of the dispute over the Valdez tax, in an attempt to put the litigation into perspective. Part ii examines the Tonnage Clause generally, focusing on the Framers' intent as well as the evolution of the Tonnage Clause throughout Supreme Court jurisprudence. Part III closely examines the decision at the Alaska Superior Court and Alaska Supreme Court levels and proceeds to evaluate the three distinct approaches elucidated in the fractured united States Supreme Court opinion. Finally, Part IV takes the position that the United States Supreme Court misinterpreted previous Tonnage Clause cases when it decided against the City of Valdez. The Note then uses elements of both the Supreme Court's plurality and dissenting opinions, as well as the opinion of the Alaska Supreme Court, to argue that the Valdez tax was, in fact, a valid property tax that did not violate the Constitution. ^[13]

I. The Dispute

The 2009 Supreme Court decision in Polar Tankers concluded a decade-long dispute between the City of Valdez, which imposed the tax in question, and the various oil shipping companies that were subject to it. Though the Framers could not have foreseen the effects the Tonnage Clause would have on a city 3500 miles removed from Independence Hall, they would no doubt have been unsurprised by the fact that the recent litigation, well over two hundred years removed from the Clause's ratification, was focused on a valuable commodity abundant in one state and desired by the rest.

A. The Pipeline

As petroleum production in the united States began to slow in the late 1960s, a new source of oil was discovered at Prudhoe Bay on the North Slope of Alaska. ^[14] After its discovery in 1968, a system was needed to transport the crude oil from the reserves above the Arctic Circle to refineries in the lower forty-eight states. ^[15] Construction of the Trans Alaska Pipeline System, which carries oil south over 800 miles from Prudhoe Bay to the Marine Terminal at Valdez, ^[16] the northernmost ice-free port in North America and the southern terminus of the Trans Alaska Pipeline System, ^[17] was completed in 1977. ^[18]

On August 1, 1977, the freighter ARCO Juneau departed from the port at the City of Valdez, carrying the first oil transported from the North Slope. ^[19] Since that first departure, over fifteen billion barrels of oil have been transported from Prudhoe to the ports at Valdez. ^[20]

Given its valuable oil stores, Valdez maintains a "substantial and continuous relationship with oil tankers and related vessels." ^[21] A number of petroleum companies collectively own, through subsidiary shipping companies, the Trans Alaska Pipeline System, and these companies transport the oil from Alaska to refineries along the west Coast of the united States and in Hawaii. ^[22]

From the first shipment through April 2008, over 19,600 of these tankers had been loaded and shipped out from the port at Valdez to various refineries. ^[23]

Polar Tankers, Inc., a subsidiary of ConocoPhillips, owns tankers that transport oil from the Valdez Marine Terminal to refineries in the lower forty-eight states and Hawaii. ^[24] Polar Tankers' ships spend an average of forty-five days per year in the City of Valdez port, ^[25] and it is estimated that the presence of ships like Polar Tankers' adds an average of 550 extra people to the City's population each year, representing...