R & M Oil & Supply, Inc. v. Saunders

• Decision Date: 11 October 2002
• Docket Number: No. 02-2370.,02-2370.
• Citation: 307 F.3d 731
• Parties: R & M OIL & SUPPLY, INC., an Illinois Corporation, Appellee, v. John L. SAUNDERS, Director, Department of Agriculture of the State of Missouri, Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

307 F.3d 731

R & M OIL & SUPPLY, INC., an Illinois Corporation, Appellee, v. John L. SAUNDERS, Director, Department of Agriculture of the State of Missouri, Appellant.

No. 02-2370.

United States Court of Appeals, Eighth Circuit.

Submitted: September 12, 2002.

Filed: October 11, 2002.

COPYRIGHT MATERIAL OMITTED

Gary L. Gardner, argued, Jefferson City, MO (Jeremiah W. (Jay) Nixon, on the brief), for appellant.

Michael E. Lavelle, argued, Franklin Park, IL, for appellee.

Before WOLLMAN and MORRIS SHEPPARD ARNOLD, Circuit Judges, and BOGUE,¹ District Judge.

MORRIS SHEPPARD ARNOLD, Circuit Judge.

This case raises a constitutional challenge to a Missouri statute regulating the storage of propane. R & M Oil & Supply, Inc., filed an action against Missouri's Director of Agriculture requesting that the district court² declare that Mo.Rev.Stat. § 323.060.1 violates the commerce clause of the United States Constitution. The district court agreed with R & M and enjoined the statute's enforcement. The state appeals, arguing that the burden on interstate commerce that the statute creates does not exceed the local benefits derived from it. Because we agree with the district court that the state regulation burdens interstate commerce and provides minimal local benefit, we affirm.

I.

Propane is a fossil fuel by-product generated during the processing of natural gas and the refining of petroleum. Although propane is a versatile fuel with many uses, its primary use is as a home heating fuel in rural areas. Because Missouri produces no propane, propane-producing states deliver propane by pipeline to terminals located in or near the state. At those terminals, the propane is unloaded into the retailers' tanker trucks and delivered to their storage tanks. The retailers then use smaller trucks, called bobtails, to transport propane from storage tanks to the tanks of individual customers.

The demand for propane is, of course, significantly higher during the winter months. During periods of extreme cold, the supply of propane available through the pipelines is often insufficient to meet the increased demand. This may result in the rationing, called "allocation," of the available propane among the existing retailers. Retailers often experience substantial delays at the pipeline terminals — as long as six to eight hours — while waiting for their allocation. If the allocation does not meet their customers' demand, retailers must either travel a greater distance to another pipeline terminal or forego filling their customers' orders altogether. Pipeline breaks and unfavorable road conditions during the winter months also occasionally disrupt the supply of propane.

Missouri asserts that the described shortages and disruptions in the propane supply led it to amend its statutes regulating the propane industry. One of these amendments, § 323.060.1, requires persons engaged in the bulk sale of propane at retail to maintain and operate a minimum storage capacity of 18,000 gallons in the state. The amended statute does not obligate retailers to keep an actual propane reserve and there is no requirement that the retailer actually use the tank. Complying with the statute costs retailers $25,000 for the purchase and installation of the storage tank, the market price for one acre of land (between $10,000 and $35,000, depending on location) upon which to locate the storage tank, and approximately $500 annually for maintenance and upkeep of the propane storage area.

R & M is an Illinois corporation engaged in the retail sale of propane with its principal place of business in Columbia, Illinois, which is near the Missouri border. R & M runs a typical retail propane operation. They obtain most of their oil from the Cahokia, Illinois, pipeline terminal, although they occasionally purchase propane at terminals in Wood River, Illinois, Jefferson City, Missouri, Moberly, Missouri, and Princeton, Indiana. After purchasing propane from the pipeline terminals, they transport it to Columbia where it is stored in one of two 30,000 gallon storage tanks. When a Missouri order is placed, one of two R & M drivers living in Hillsboro, Missouri, will drive a bobtail truck from Hillsboro to Columbia, Illinois, to pick up propane (a distance of 36 miles), then back to Missouri to deliver it. Because of the time that it takes to deliver the propane, R & M is able to serve only customers located within a fifty miles radius of its storage facility in Columbia.

II.

The facts are not in dispute, having been stipulated to by the parties. "Because our decision is predominantly one of determining whether the established facts fall within the relevant legal definition, albeit a constitutional definition, we apply a de novo standard of review" in deciding whether there has been a violation of the commerce clause. Falls v. Nesbitt, 966 F.2d 375, 377 (8th Cir.1992); see also Hampton Feedlot, Inc. v. Nixon, 249 F.3d 814, 818 (8th Cir.2001).

The commerce clause of the United States Constitution grants to Congress the power "[t]o regulate Commerce ... among the several States." Art. I, § 8, cl. 3. Even where Congress fails to legislate on a matter affecting interstate commerce, the courts have recognized that a "dormant implication of the Commerce Clause prohibits state ... regulation ... that discriminates against or unduly burdens interstate commerce and thereby `imped[es] free private trade in the national marketplace.'" General Motors Corp. v. Tracy, 519 U.S. 278, 287, 117 S.Ct. 811, 136 L.Ed.2d 761 (1997) (quoting Reeves, Inc. v. Stake, 447 U.S. 429, 437, 100 S.Ct. 2271, 65 L.Ed.2d 244 (1980)). When a claim is made that a state statute violates the dormant commerce clause, we first determine whether the "law in question overtly discriminates against interstate commerce." Hampton Feedlot, 249 F.3d at 818. If it does, then the law is unconstitutional unless the state can demonstrate, "under rigorous scrutiny, that it has no other means to advance a legitimate local interest." Id. (quoting C & A Carbone, Inc. v. Town of Clarkstown, 511 U.S. 383, 392, 114 S.Ct. 1677, 128 L.Ed.2d 399 (1994)). A statute "overtly discriminates" if it is discriminatory on its face, in its purpose, or through its effects. U & I Sanitation v. City of Columbus, 205 F.3d 1063, 1067 (8th Cir.2000). For purposes of this analysis, "`discrimination' means `differential treatment of in-state and out-of-state economic interests that benefits the former and burdens the latter.'" Id. (quoting Oregon Waste Sys., Inc. v. Dep't of Envtl. Quality, 511 U.S. 93, 99, 114 S.Ct. 1345, 128 L.Ed.2d 13 (1994)).

Section 323.060.1 requires persons engaged in the bulk sale of propane at retail to maintain and operate at least eighteen thousand gallons of storage capacity in the state. We agree with both parties that the challenged statute is facially neutral, as it requires both in-state and out-of-state businesses to maintain and operate a Missouri storage facility. R & M argues, however that the statute has a discriminatory effect on out-of-state distributors. R & M maintains that the evidence shows that propane distributors tend to have their operational tanks where they are headquartered. In their view, out-of-state distributors must realistically maintain two storage facilities under § 323.060.1, while in-state distributors must maintain only one.

The difficulty with this claim, as we see it, is that R & M has not presented sufficient evidence to show such a discriminatory effect. The stipulated facts reveal only that of three propane distributors (R & M being one of the three), all three had storage facilities in their headquartered state, and one also had storage facilities in seven other states. We conclude that R & M has failed to prove that non-Missouri distributors must, as a practical matter, maintain more than one storage facility to operate in Missouri. Even if that showing had been made, we discern no basis for concluding that this places out-of-state distributors at a competitive disadvantage vis-à-vis distributors headquartered in Missouri. We find, therefore, that there is insufficient evidence to support the claim that the Missouri statute overtly discriminates against out-of-state propane distributors, either on its face or through its effects.

III.

Although Missouri's statute does not overtly discriminate against interstate commerce, the law "may still violate the dormant Commerce Clause if the local interests that it serves do not justify the burden that it imposes upon interstate commerce." U & I Sanitation, 205 F.3d at 1069. We look at whether the local interest involved "could be promoted as well with a lesser impact on interstate activities" to help us determine whether the "burden imposed on [interstate] commerce is clearly excessive in relation to the putative local benefits." Pike v. Bruce Church, Inc., 397 U.S. 137, 142, 90 S.Ct. 844, 25 L.Ed.2d 174 (1970).

We turn...