Polar Tankers, Inc. v. City of Valdez, Alaska: A New Spin on the Tonnage Clause Leaves Lower Courts and Government Taxing Authorities High and Dry

Abstract

Situated on Prince William Sound at the southern terminus of the Trans-Alaska Pipeline System ("TAPS"), the City of Valdez ("Valdez" or the "City") is a crucial link in the transportation chain, bringing crude oil from Alaskan oil fields to refineries in other States. In 1999, in an attempt to offset "a serious erosion of the City's tax base," Valdez adopted a city ordinance creating an ad valorem [according to value] property tax ("vessel property tax") on vessels of at least 95 feet in length docking at private facilities in the city, unless such a vessel was used primarily for commercial fishing. Valdez's rapidly declining property tax revenues were the result of the erosion of the oil and gas property portion of the city's tax base due to "a depreciation formula" agreed to by Alaska and TAPS. In June of 2009, the Supreme Court decided Polar Tankers, Inc. v. City of Valdez, in which it decreed that a tax imposed by the City of Valdez, Alaska on certain vessels using city ports was unconstitutional. The judgment hinged upon the Tonnage Clause, a seldom-invoked provision of the Constitution that provides, "No State shall, without the Consent of Congress, lay any Duty of Tonnage." Prior to this ruling, the Court's Tonnage Clause jurisprudence had, for all practical purposes, reached a stable plateau, vis-a-vis its application to marine vessels. Unfortunately, rather than breathing necessary new life into a mummified constitutional provision or bringing needed clarity to an opaque area of law, the seven to two plurality opinion in Polar Tankers put an inappropriate spin on a clause whose meaning had been well settled. The ramification of the plurality's misguided action is the creation of a nebulous rule that will likely result in confusion and inconsistent outcomes as the lower courts, the States, and other taxing authorities attempt to navigate the murky waters left in the wake of the decision.

After the Introduction in Part I, Part II provides background into the factual setting and history behind the Tonnage Clause and canonical cases. It continues by discussing the outcome of the dispute before the Alaska Supreme Court. Part III continues with the resolution of the Tonnage Clause issue by the Roberts Court. This portion breaks down the sequencing, characterization and semantics of the case, and then explains how a strained interpretation results in a new adulterated Tonnage Clause. Part IV concludes the article.

Keywords: Polar Tankers, Inc. v. City of Valdez, Tonnage Clause, Alaska, Constitution, tax, nebulous rule, taxing authorities, jurisprudence, TAPS, city ports, erosion of oil, maritime law, vessel property tax, serious erosion, commercial fishing, Alaskan oil fields, refineries, tax base