Loading tankers with crude oil on South Portland’s eastern waterfront would flout the city’s comprehensive plan and further stunt economic development in a region that’s otherwise booming, the city’s planning director testified Wednesday in U.S. District Court in Portland.

Portland Pipe Line Corp. is challenging the city’s “Clear Skies” ordinance, which effectively blocked the company from reversing the flow of a 236-mile underground pipeline that has carried foreign crude from harbor terminals in South Portland to refineries in Montreal since World War II.

The South Portland City Council banned bulk loading of crude oil on the city’s waterfront in 2014, just as production of controversial tar sands oil was taking off in western Canada and demand for foreign crude began to dwindle.

In a bench trial before Judge John Woodcock Jr., the company is trying to show that the ordinance violates the Commerce Clause of the Constitution, which gives Congress sole power to regulate foreign and interstate trade. The federal trial is scheduled to run through Friday.

Planning Director Tex Haeuser testified that the city’s 2012 comprehensive plan, which provides broad guidelines for future development, allows for an eastern waterfront without the pipeline, its shipping terminals or its massive light green storage tanks.

The shipyard zoning district in particular, where Liberty Ships were built during World War II, calls for a “vibrant mix” of residential, commercial and marine uses and increased public access, Haeuser said.

Next to the pipeline properties, the shipyard district is dominated by a 40-acre parcel that has been owned for more than 20 years by the Cacoulidis family. It offers stunning views of Portland’s skyline across the harbor, of Casco Bay and its islands, and of sprawling Bug Light Park in South Portland and its lighthouse.

“It’s so rare to find more than 30 acres (on the waterfront with) world-class views,” Haeuser said.

HINDERING WATERFRONT DEVELOPMENT

Yet while development in downtown Portland and elsewhere in South Portland is going strong, several attempts to develop a hotel and other commercial and residential features on the Cacoulidis property have failed to attract investors, Haeuser said.

While nearby petroleum storage and distribution facilities pose a challenge to major investment in the Cacoulidis property, Haeuser said, there are also concerns about potential odors, noises, impaired views and “general psychological impacts” if the pipeline expanded its waterfront facilities and started loading bulk crude oil onto tankers.

The company would be expected to install 70-foot-tall vapor combustion units to handle air pollution generated by the loading process. As a result, Haeuser said, the Cacoulidis site remains largely vacant but for a few light industrial and storage facilities.

“It’s very unfortunate that it’s so underutilized. It has tremendous potential as a waterfront property,” Haeuser said. “It’s worrisome that it may never live up to its potential.”

Haeuser said loading crude oil onto tankers would be a new use under city zoning – one that would significantly intensify industrial activity traditionally associated with unloading foreign crude from tankers into the pipeline.

John Aromando, a lawyer for the company who’s with Pierce Atwood of Portland, disputed Haeuser’s understanding of South Portland’s comprehensive plan.

Aromando pointed to several sections of the plan that he said showed the city’s desire to maintain or grow petroleum-related facilities on the eastern waterfront.

“You have to look at the plan as a whole,” Haeuser said.

Aromando also said the plan doesn’t differentiate between loading and unloading petroleum cargo or indicate a need to prevent bulk crude loading on the waterfront.

Aromando noted that the city’s Planning Board approved a proposal to reverse the pipeline’s flow in 2009, when Haeuser indicated in an email to a company representative that he had “no concerns” with the plan.

The board extended the approval through 2012, but the company never started the project and by 2013 it was assuring the public there was no active plan to reverse the pipeline’s flow.

PROTECTING PUBLIC HEALTH

Approved by the City Council in July 2014, the Clear Skies ordinance includes stated goals to protect public health and the environment, preserve traditional land use authority and 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.

Thomas Hardison, CEO of the pipeline company, testified Monday that tanker deliveries of foreign crude have essentially stopped in the last nine months because of oil sands production in Alberta, Manitoba and North Dakota. The company is a Canadian-owned subsidiary of ExxonMobil, Shell and Suncor Energy.

Sarah Emerson, an expert on the petroleum industry, testified Wednesday for the city that the global petroleum market is extremely volatile and has been flooded by Texas shale oil production, especially since Congress lifted a longtime ban on petroleum exports in December 2015.

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 council has appropriated an additional $491,224 to cover future legal costs related to the case.

The federal case 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.

Whatever the outcome in U.S. District Court, the case is 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:

[email protected]

Twitter: KelleyBouchard

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