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AMERICAN MARITIME ASSN. v. BLUMENTHAL

October 14, 1977

AMERICAN MARITIME ASSOCIATION, Plaintiff, and Shipbuilders Council of America, Intervening Plaintiff, and Seafarers International Union of North America, AFL-CIO, Intervening Plaintiff,
v.
Michael BLUMENTHAL, Secretary of The Treasury, Defendant, and Amerada Hess Corporation, Intervening Defendant



The opinion of the court was delivered by: GASCH

MEMORANDUM

This case came before the Court on plaintiffs' motion for a temporary restraining order and preliminary injunctive and declaratory relief. The plaintiffs are the American Maritime Association (AMA) and intervenors Shipbuilders Council, and Seafarers International Union of North America, AFL-CIO (Seafarers Union). Defendants are Michael Blumenthal, Secretary of the Treasury, and intervenor Amerada Hess Corporation (Hess). On September 2, 1977, plaintiff AMA sought a temporary restraining order to enjoin the Secretary of the Treasury from permitting the Hercules, a foreign-flag vessel, or any other foreign-flag vessel from departing Valdez, Alaska, ladened with Alaskan crude oil for the Virgin Islands, where the oil will be processed and thereafter shipped to the United States mainland. Judge John H. Pratt of this Court denied the TRO on September 2, 1977. This Court ordered, with the consent of counsel pursuant to Fed.R.Civ.P. 65(a)(2), that the hearing on the motion for preliminary and final injunctive relief be consolidated. *fn1" This matter having been tried to the Court on the 3rd and 4th of October, 1977, the Court makes the following findings of fact and conclusions of law in accordance with Fed.R.Civ.P. 52(a).

FACTUAL BACKGROUND

 Defendant-intervenor Amerada Hess Corporation, a Delaware Corporation, and its subsidiaries are engaged in the exploration, production, purchase, transportation, and sale of crude oil and natural gas as well as the manufacture, purchase, transportation, and marketing of petroleum products. Of the two refineries that Hess presently owns, only the Virgin Islands refinery, with its deep-water port, is accessible by water. It has a present design capacity of about 700,000 barrels of crude oil per day and represents a capital investment of approximately $ 650,000,000. Hess owns or has under charter approximately thirty-eight foreign-flag and seven United States-flag tankers.

 In 1969, after having acquired .5% Interest in the Prudhoe Bay field on the North Slope of Alaska, Hess expanded its refinery facility to increase its daily refining capacity by 160,000 barrels per day. In September of 1969, following press reports of Hess' intention to charter four foreign tankers to transport Alaskan crude oil to the Virgin Islands, Edwin Hood, President of the Shipbuilders Council of America, requested a ruling from the United States Customs Service as to whether the above-described transport would violate the Jones Act, 46 U.S.C. § 883 (1970), which, in brief, requires that transportation of merchandise by water between points in the United States, "either directly or via a foreign port," be accomplished in American vessels. The Acting Commissioner of Customs responded that a formal ruling could not be issued until a specific case was presented to the agency. However, he offered a preliminary view that such transportation would not violate the Jones Act, 46 U.S.C. § 883 (1970).

 In late August of 1977, Edwin Hood was apprised of a "specific case." He informed the Customs Service that the Hercules, a foreign-flag tanker chartered by Hess, was scheduled to load at Valdez and requested a Customs ruling on this matter. The Customs Service responded on September 7, 1977, after the Hercules had departed from Valdez, that it intended to propose rulemaking on this matter.

 On September 2, 1977, plaintiff American Maritime Association filed an application for a temporary restraining order prohibiting the Secretary of the Treasury, Michael Blumenthal, from approving the departure of the Hercules from Valdez. The Hercules, a ship of Liberian registry, was chartered by a subsidiary of defendant Amerada Hess Corporation, the American Hess Shipping Corporation, to transport approximately 1,466,000 barrels of crude oil having a value of approximately twenty million dollars from Valdez, Alaska, to the Virgin Islands. *fn2" In particular, plaintiff sought to enjoin the Secretary from (1) issuing to the Hercules or any other foreign-flag tanker a permit, pursuant to 46 U.S.C. § 313 (1970), or a clearance, pursuant to 19 C.F.R. § 4.84 (1977), authorizing the transportation of Alaskan crude oil from Alaska to the Virgin Islands; (2) permitting the Hercules or other foreign-flag tanker carrying Alaskan crude oil from entering a port of the Virgin Islands; and (3) permitting any ship carrying Alaskan crude oil, which has been shipped to and processed in the Virgin Islands, from entering any port in the United States mainland. Judge Pratt denied plaintiffs' motion for a temporary restraining order.

 The Hercules completed loading crude oil on the 3rd of September and departed the following day. Subsequent to the departure, Shipbuilders Council and the Seafarers Union intervened as party plaintiffs, and Amerada Hess Corporation intervened as party defendant.

 On September 14, 1977, the Customs Service published a notice of proposed rulemaking in which it advanced the general view that the Jones Act is not violated if:

 
at an intermediate port or place other than a coastwise point (that is, at a foreign port or place, or at a port or place in a territory or possession of the United States not subject to the coastwise laws), it is manufactured or processed into a new and different product, and the new and different product thereafter is transported to a coastwise point.

 42 C.F.R. § 46,068 (1977). Plaintiffs contended that the proposed rule would not adequately resolve the legal issues involved in the present case for two reasons. In order to obtain an adjudication on the specific facts presented, plaintiffs must request an advisory ruling from the Customs Service after the rulemaking process is completed. Second, as evidenced by the precedents considered in the notice of proposed rulemaking, the Customs Service would not consider the effect of the Magnuson Amendment to the Ports and Waterways Safety Act, 46 U.S.C. § 391a(7)(C) (Supp.1977), on the Jones Act.

 LEGAL BACKGROUND

 Section 27 of the Merchant Marine Act of 1920, As amended, 46 U.S.C. § 883 (1970) (Jones Act), provides in relevant part:

 
No merchandise shall be transported by water, or by land and water, on penalty of forfeiture thereof, between points in the United States, including Districts, Territories, and possessions thereof embraced within the coastwise laws, either directly or via a foreign port, or for any part of the transportation, in any other vessel than a vessel built in and documented under the laws of the United States and owned by persons who are citizens of the United States.

 The preamble to the Jones Act, 46 U.S.C. § 861 (1970), indicates its underlying policy:

 
It is declared to be the policy of the United States to do whatever may be necessary to develop and encourage the maintenance of such a merchant marine . . . . (T)he Federal Maritime Commission and the Secretary of Commerce shall . . . in the making of rules and regulations, and in the administration of the shipping laws keep always in view this purpose and object as the primary end to be attained.

 However, Section 21 of the same Act, 46 U.S.C. § 877 (1970), provides that the Virgin Islands is exempt from the application of the Jones Act:

 
(T)hat the coastwise laws of the United States shall not extend to the Virgin Islands of the United States until the President of the United States shall, by proclamation, declare that such coastwise laws shall extend to the Virgin Islands and fix a date for going into effect of same.

 The Virgin Islands have remained exempt from the Act, since no United States President has issued such a proclamation. This exemption applies clearly to voyages that begin or terminate in the Virgin Islands. It does not apply to all shipments between points in the United States by way of the Virgin Islands, as this sequence of shipments may be considered under some circumstances transportation between points in the United States within the meaning of the Jones Act.

 The legal issue presented in this case is whether the shipment of oil from Valdez, Alaska, to the Virgin Islands and the subsequent shipment of refined products from the Virgin Islands to the United States mainland is transportation between points in the United States embraced within the coastwise laws. In order to determine this issue, the Court must resolve two questions. As a threshold matter, the Court must determine whether the Magnuson Amendment to the Ports and Waterways Safety Act, 46 U.S.C.A. § 391a(7) (C) (Supp.1977), implicitly amends the Virgin Islands exemption to the extent that it would not apply if the merchandise involved is Alaska oil. If the Court finds that the Magnuson Amendment does not implicitly limit the application of the Virgin Islands exemption, then the Court must determine whether this shipment of crude oil constitutes two discrete shipments of different merchandise and hence is exempt from the Jones Act, or whether it constitutes one continuous voyage and thus is subject to the Jones Act.

 STANDING

 Defendants claim that all three plaintiffs lack standing in that they have failed to allege sufficient "injury in fact." However, it appears to the Court that each plaintiff has satisfied the requisites of standing. DP The requirements for standing applicable to this action are set forth in the Administrative Procedure Act, 5 U.S.C.A. § 702 (Supp.1977). Section 702 grants standing in administrative law cases to persons "suffering legal wrong because of agency action, or adversely affected or aggrieved by agency action." The Supreme Court in Association of Data Processing Serv. Orgs., Inc. v. Camp, 397 U.S. 150, 90 S. Ct. 827, 25 L. Ed. 2d 184 (1970), articulated a two-point inquiry in cases where standing is based on Section 702 of the APA: first, the challenged action must have caused the claimant "injury, in fact, economic or otherwise." Id. at 152, 90 S. Ct. at 829. Second, the interest sought to be protected must be "arguably within the zone of interests to be protected or regulated by the statute or constitutional guarantee in question." Id. at 153, 90 S. Ct. at 830.

 The Court of Appeals for the District of Columbia Circuit recently has interpreted each of these points. In Public Citizen v. Lockheed Aircraft Corp., 184 U.S.App.D.C. 133, 565 F.2d 708 (1977), the court addressed the meaning of "injury in fact" as it pertains to associational plaintiffs. The injury must be palpable, concrete, and immediate. It required a claimant to "show a substantial probability that the requested relief would benefit him in some perceptible, tangible fashion." At 140, 565 F.2d at 715.

 Each of the plaintiffs meets the "injury in fact" requirements set forth in Public Citizen. Plaintiff American Maritime Association is an unincorporated association of thirty-five independent United States-flag steamship companies that operate vessels in foreign and domestic trade, including those transporting crude oil by tanker from Valdez, Alaska to other ports in the United States. The AMA members presently operate about 1.5 million deadweight tons of tankers. This tonnage represents about one-half of the independent sector of the American-flag tanker fleet *fn3" and approximately one-fifth of the total unsubsidized Jones Act tanker fleet. It is true that no AMA member presently has available for Alaska trade a tanker equal in size to the Hercules, which has a capacity of 216,000 deadweight tons; however, several smaller tankers owned or operated by AMA members are currently "laid up" for lack of cargo and could be available for Alaskan trade.

 Plaintiff-intervenor American Shipbuilders Council of America is an unincorporated association of most of the major shipbuilders, shiprepairers and ship component manufacturers in the United States. Twelve of the thirteen shipbuilders capable of building tankers for Alaskan oil trade belong to the Shipbuilders Council. *fn4" All six of the shipbuilding companies ...


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