Olympic Pipeline v. City of Seattle ( 2006 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
OLYMPIC PIPE LINE COMPANY, a 
Delaware corporation,
No. 04-35307
Plaintiff-Appellee,
v.  D.C. No.
CV-03-02343-RSL
CITY OF SEATTLE, a Washington
OPINION
municipal corporation,
Defendant-Appellant.

Appeal from the United States District Court
for the Western District of Washington
Robert S. Lasnik, District Judge, Presiding
Argued and Submitted
June 14, 2005—Seattle, Washington
Filed February 8, 2006
Before: Harry Pregerson, Susan P. Graber, and
Ronald M. Gould, Circuit Judges.
Opinion by Judge Gould
1487
1490 OLYMPIC PIPE LINE v. CITY OF SEATTLE
COUNSEL
William H. Patton, City of Seattle, Seattle, Washington, for
the defendant-appellant.
G. Val Tollefson and Katherine Kennedy, Danielson Harrigan
Leyh & Tollefson LLP, Seattle, Washington, for the plaintiff-
appellee.
Kevin Hawley, Lima, Ohio, for the amicus.
OPINION
GOULD, Circuit Judge:
We must decide whether the City of Seattle (“Seattle” or
“the City”) can enforce specific provisions of two contracts it
has with the Olympic Pipe Line Company (“Olympic”) to
provide safety oversight of a hazardous liquid pipeline within
Seattle’s city boundaries, despite the apparent federal preemp-
tion of hazardous liquid pipeline safety regulation by the
Pipeline Safety Improvement Act of 2002, 49 U.S.C. § 60101et seq. (“PSA”).
After a section of Olympic’s hazardous liquid pipeline
exploded in Bellingham, Washington, killing three people and
causing extensive environmental damage, Seattle declined to
renew Olympic’s franchise for the section of pipeline within
the city limits until Olympic complied with the City’s list of
pipeline safety demands.1 If Olympic failed to comply, the
1
These demands included the completion of a hydrostatic test. A hydro-
static test involves purging all natural gas or petroleum out of the pipeline,
cleaning the inside of the pipeline, filling it with water and then pressuriz-
ing the pipeline to a pressure higher than the normal operating pressure.
See Office of Pipeline Safety, Pipeline Fact Sheet, at http://
primis.phmsa.dot.gov/comm/FactSheets/FSHydrostaticTesting.htm (last
visited Jan. 31, 2006).
OLYMPIC PIPE LINE v. CITY OF SEATTLE 1491
City said it would shut down the operation of Olympic’s pipe-
line within Seattle’s city limits. Declining to comply with
Seattle’s demands, Olympic filed suit for injunctive and
declaratory relief, asserting that, even though the franchise
agreement between Seattle and Olympic arguably included
safety oversight provisions, Seattle’s attempt to impose safety
regulations pursuant to those provisions was preempted by the
PSA. The district court granted Olympic’s motion for a pre-
liminary injunction, halting Seattle’s effort to shut down
Olympic’s pipeline. The district court then granted summary
judgment in favor of Olympic, determining that Seattle’s reg-
ulatory efforts were preempted by the PSA.
We have jurisdiction pursuant to 28 U.S.C. § 1291, and we
affirm.
I
The Olympic Pipe Line Company operates a 400-mile pipe-
line system spanning parts of Washington and Oregon. Olym-
pic’s main pipeline is a 299-mile conduit beginning about
fifteen miles from the Washington-Canada border, at a refin-
ery near Ferndale, Washington, and running southward to its
terminus in Portland, Oregon. Lateral delivery lines carry
petroleum products from the main pipeline to bulk terminals
at Seattle, Seattle-Tacoma International Airport, Tacoma,
Olympia, and Vancouver, Washington, as well as Linnton and
Portland, Oregon. The lateral pipeline at the center of this dis-
pute is Olympic’s Seattle Lateral Line (“Seattle Lateral”),
which branches from Olympic’s main pipeline in Renton,
Washington, travels through the cities of Renton, Federal
Way, and Seattle, and ends at the commercial shipping termi-
nals on Harbor Island.2 Seven miles of the twelve-mile long
2
The Harbor Island terminus is a distribution point for non-pipeline
petroleum transportation, like tanker trucks and barges. About eighty per-
cent of the product shipped in the Seattle Lateral is gasoline, but the pipe-
line also carries jet fuel for use at Boeing Field and high sulfur fuel for
use by the Washington State Ferries. The majority of the petroleum prod-
uct shipped through the Seattle Lateral is petroleum refined in the State of
Washington, but the pipeline also carries petroleum products refined in
other states.
1492 OLYMPIC PIPE LINE v. CITY OF SEATTLE
Seattle Lateral are located in the City of Seattle.3 This section
of the Seattle Lateral runs by elementary schools and a resi-
dential neighborhood, underneath Interstate 5, and next to
electricity transmission lines.
Seattle originally granted Olympic a franchise to operate its
pipeline within Seattle city limits in 1966. The Seattle City
Council adopted the most recent franchise agreement between
the parties, effective January 1, 1991, as Seattle City Ordi-
nance 116331 (“Franchise Agreement”).4 The Franchise
Agreement permitted Olympic to maintain and operate its
pipeline under and along certain Seattle public streets and
rights-of-way for a ten-year term, with the possibility for two
additional ten-year renewals. Seattle conditioned Olympic’s
franchise on the execution of an Indemnity Agreement, ensur-
ing the City that Olympic’s pipeline would “not result in the
City incurring any liability, environmental or otherwise, as a
result of Olympic Pipe Line’s Pipeline or operations pursuant
to the Permit.”
On June 10, 1999, a section of Olympic’s main pipeline
exploded near Whatcom Creek in Bellingham, Washington,
spilling approximately 230,000 gallons of unleaded gasoline,
killing three people, and causing millions of dollars of prop-
erty and ecological damage. The accident caused Olympic to
shut down the northern half of its pipeline until February
2001; to spend millions of dollars to remediate the environ-
mental damage caused by the accident; and to repair, inspect,
and upgrade its pipeline. Relevant to Seattle’s demands, after
the 1999 rupture Olympic entered into several agreements
3
As a consequence of this sensitive geography, the section of the Seattle
Lateral inside Seattle has been designated a “high consequence area”
under the applicable federal regulations. See 49 C.F.R. § 195.452, 49
C.F.R. pt. 195, app. C.
4
Although the effective date of the ordinance was January 1, 1991, the
Seattle City Council passed the ordinance on September 8, 1992, and the
Seattle Mayor approved it on September 11, 1992.
OLYMPIC PIPE LINE v. CITY OF SEATTLE 1493
with the City of Bellingham, which included giving some
safety oversight powers to Bellingham and agreeing to per-
form a hydrostatic test of the pipeline. Olympic also con-
ducted hydrostatic tests on three sections of its pipeline
located in the cities of Bellingham, Woodinville, and Renton.
During each hydrostatic test, a portion of the tested pipeline
failed along a longitudinal seam.
Seattle did not automatically renew Olympic’s franchise for
the Seattle Lateral upon its December 31, 2000, expiration.
Instead, Seattle first sought information from Olympic and the
applicable regulating state and federal agencies regarding
pipeline safety. The City then hired a consultant, SECOR
International, Inc. (“SECOR”), to investigate possible pipe-
line integrity issues. SECOR’s investigation culminated in
Seattle’s requesting that Olympic respond to thirty-three
safety concerns before the City would determine whether it
would agree to a new franchise agreement. Among the listed
items, Seattle requested that Olympic complete a hydrostatic
test of the Seattle Lateral. Olympic refused to perform the
test.
Seattle responded with two letters, one from the Director of
Transportation and one from the Mayor. The Transportation
Director’s letter notified Olympic that Seattle was suspending
all pipeline operations no later than sixty days from the let-
ter’s date until the parties agreed upon a new franchise agree-
ment, and that Olympic’s failure to comply would subject the
company to criminal sanctions. The Mayor’s letter notified
Olympic that, because of Olympic’s bankruptcy5 and the
5
On March 27, 2003, Olympic filed a Chapter 11 bankruptcy proceed-
ing, In re Olympic Pipe Line Co., No. 03-14059, in the United States
Bankruptcy Court for the Western District of Washington. On April 8,
2003, Seattle filed a motion for relief from the automatic bankruptcy stay,
arguing that relief was appropriate under the “for cause” provision of 11
U.S.C. § 362(d)(1). The “cause” alleged was Olympic’s purported failure
to provide the City proof of adequate insurance coverage. The bankruptcy
judge denied Seattle’s motion, holding that Seattle was a governmental
unit for purposes of 11 U.S.C. § 362(b)(4), and its use of police power
with regard to the Seattle Lateral was not automatically stayed by Olym-
pic’s bankruptcy filing.
1494 OLYMPIC PIPE LINE v. CITY OF SEATTLE
refusal of Olympic’s corporate parent6 to provide a corporate
guarantee, Seattle would not grant a new franchise agreement
until a solvent Olympic or its successor company emerged
from bankruptcy. The Mayor’s letter also stated that as of
August 26, 2003, he would suspend Olympic’s operation of
the Seattle Lateral; however, he would rescind that order if
Olympic could prove the pipeline was safe by performing a
hydrostatic test of the pipeline and two inspection digs within
sixty days, or before Seattle schools returned to session.
Mayor Nickels asked for a response indicating Olympic’s
intentions by July 11, 2003.7
Instead of responding, on July 16, 2003, Olympic filed this
action against Seattle8 for injunctive relief restraining the City
from ordering Olympic to shut down the Seattle Lateral and
a declaratory judgment that: (1) the PSA preempts Seattle’s
attempts to control, regulate, or otherwise interfere with mat-
ters relating to the safety, design, construction, testing, or
operation of Olympic’s pipeline; (2) the termination or denial
of Olympic’s franchise would be a violation of the Commerce
Clause; and (3) the franchise fees sought by Seattle were arbi-
trary and unreasonable. See Olympic Pipe Line Co. v. City of
Seattle, 316 F. Supp. 2d 900, 901 (W.D. Wash. 2004). On
August 21, 2003, the district court granted Olympic’s motion
for a preliminary injunction, enjoining Seattle from closing
down the Seattle Lateral.9 Id.6
Olympic is owned by ARCO MidCon and Shell Pipeline Company LP.
7
On July 9, 2003, the Office of Pipeline Safety (“OPS”) of the Depart-
ment of Transportation (“DOT”) notified Seattle that its position was that
a hydrostatic test of the Seattle Lateral was not necessary to ensure the
safe operation of the pipeline and that the pipeline met federal regulatory
standards.
8
The City of Federal Way was also named as a defendant but was later
dismissed without prejudice.
9
The court also granted Olympic’s motion to remove the automatic ref-
erence of the matter to the bankruptcy court.
OLYMPIC PIPE LINE v. CITY OF SEATTLE 1495
The parties then both moved for summary judgment. The
district court granted Olympic’s motion in part, declaring that
the PSA preempted the City’s attempts to regulate the safety
and inspection of the Seattle Lateral. Id. at 902-03. Contrary
to Seattle’s claims, the district court held that Olympic did not
“waive” its ability to claim federal preemption. Id. at 904-05.
The court also concluded that the City’s actions were pre-
empted because, in attempting to enforce the safety provisions
of its contract, Seattle was acting in its regulatory rather than
proprietary capacity. Id. at 905-06. Finally, the court noted
that its determination did not preclude Seattle from taking
other actions possibly affecting Olympic’s continued opera-
tion of the pipeline.10 Id. at 907 & n.8. The court enjoined
Seattle from ordering Olympic to undertake particular inspec-
tions or implement particular safety measures on the Seattle
Lateral. Seattle timely appealed.11
On appeal, Seattle argues that its attempt at safety regula-
tion is not preempted by the PSA because the PSA does not
“fill the field” of pipeline safety regulation. Seattle also
asserts that, even if the PSA does preempt the City’s actions,
Olympic waived its right to raise preemption as a defense
when the company entered into the Franchise Agreement and
10
For example, the court did not consider Seattle’s demand that Olym-
pic provide liability insurance to be a safety demand that was preempted
by federal law. The court also denied Olympic’s request for a declaration
that “any” termination or denial of a franchise violated the Commerce
Clause, and that the franchise fees sought by Seattle were arbitrary and
unreasonable. Those issues were not appealed.
11
We review de novo a district court’s grant of summary judgment.
Hambleton Bros. Lumber Co. v. Balkin Enters., Inc., 397 F.3d 1217, 1226
n.8 (9th Cir. 2005). Viewing the facts in the light most favorable to the
nonmoving party, we must determine whether a genuine issue of material
fact exists, and whether the district court applied the law correctly. See
Fortyune v. Am. Multi-Cinema, Inc., 364 F.3d 1075, 1080 (9th Cir. 2004).
Olympic argues that, because a preliminary injunction was granted in this
case, our review of that ruling is for abuse of discretion. Olympic is incor-
rect. The final judgment appealed is the summary judgment order. There
was no interlocutory appeal of the injunction.
1496 OLYMPIC PIPE LINE v. CITY OF SEATTLE
the Indemnity Agreement. Finally, the City contends that pub-
lic policy requires that the agreements be enforced.
We turn first to the question of federal preemption: whether
the PSA preempts a municipality’s attempt to impose safety
standards on a hazardous liquid pipeline.12
II
[1] The Supremacy Clause of Article VI of the United
States Constitution grants Congress the power to preempt
state or local law. U.S. Const. art. VI, § 2; AGG Enters., 281
F.3d at 1327. Under the doctrine of preemption, a federal law
can displace state law through express preemption, field pre-
emption, or conflict preemption.13 See, e.g., Schneidewind v.
ANR Pipeline Co., 485 U.S. 293, 299-300 (1988); Cal. Fed.
Sav. & Loan Ass’n v. Guerra, 479 U.S. 272, 280-81 (1987).
To determine whether the PSA preempts Seattle’s action, we
begin with the statutory text. See Schneidewind, 485 U.S. at
299.
12
We review de novo a district court’s decision regarding preemption.
AGG Enters. v. Wash. County, 281 F.3d 1324, 1327 (9th Cir. 2002). We
also review de novo a district court’s interpretation of federal statutes,
including the PSA. Shell Oil Co. v. City of Santa Monica, 830 F.2d 1052,
1055-56 (9th Cir. 1987).
13
Express preemption exists where Congress enacts an explicit statutory
demand that state law be displaced. See Morales v. Trans World Airlines,
Inc., 504 U.S. 374, 383 (1992). Field preemption exists “where the scheme
of federal regulation is sufficiently comprehensive to make reasonable the
inference that Congress left no room for supplementary state regulation.”
Moldo v. Matsco, Inc. (In re Cybernetic Servs., Inc.), 252 F.3d 1039,
1045-46 (9th Cir. 2001) (internal quotation marks omitted). Conflict pre-
emption is found “where compliance with both federal and state regula-
tions is a physical impossibility,” Fla. Lime & Avocado Growers, Inc. v.
Paul, 373 U.S. 132, 142-43 (1963), or where state law “stands as an obsta-
cle to the accomplishment and execution of the full purposes and objec-
tives of Congress,” Hines v. Davidowitz, 312 U.S. 52, 67 (1941).
OLYMPIC PIPE LINE v. CITY OF SEATTLE 1497
A
[2] The purpose of the PSA is to “provide adequate protec-
tion against risks to life and property posed by pipeline trans-
portation and pipeline facilities by improving the regulatory
and enforcement authority of the Secretary of Transportation.”14
49 U.S.C. § 60102(a)(1). Federal legislation seeks to provide
“a national hazardous liquid pipeline safety program with
nationally uniform minimal standards and with enforcement
administered through a Federal-State partnership.” 49 C.F.R.
pt. 195, app. A.
[3] The PSA differentiates between the regulation of inter-
state15 and intrastate16 hazardous liquid pipelines.17 For inter-
state pipelines, state and local authorities generally “may not
adopt or continue in force safety standards for interstate pipe-
14
Before the enactment of the PSA in 1992, two separate statutes pro-
vided the framework for the regulation of pipeline safety. The Natural Gas
Pipeline Safety Act of 1968 (“NGPSA”) authorized the DOT to regulate
pipeline transportation of natural gas and other gases as well as the trans-
portation and storage of liquefied natural gas. Pub. L. No. 90-481, 82 Stat.
1003 (1968) (formerly 49 U.S.C. § 1671 et seq.). The Hazardous Liquid
Pipeline Safety Act of 1979 (“HLPSA”), Pub. L. No. 96-129, 93 Stat.
1003 (1979) (formerly 49 U.S.C. §§ 2001-2014), was modeled largely on
the NGPSA, and authorized the DOT to regulate pipeline transportation of
hazardous liquids. The PSA combined and recodified the two existing
pipeline safety statutes at 49 U.S.C. § 60101 et seq.
15
An “interstate hazardous liquid pipeline facility” is “a hazardous liq-
uid pipeline facility used to transport hazardous liquid in interstate or for-
eign commerce.” 49 U.S.C. § 60101(a)(7). “Interstate or foreign
commerce” is defined in relevant part as commerce between “a place in
a State and a place outside that State” or “places in the same State through
a place outside the State.” Id. § 60101(a)(8)(B).
16
An “intrastate hazardous liquid pipeline facility” is “a hazardous liq-
uid pipeline facility that is not an interstate hazardous liquid pipeline facil-
ity.” Id. § 60101(a)(10).
17
A “hazardous liquid pipeline facility” is a “pipeline, a right of way,
a facility, a building, or equipment used or intended to be used in trans-
porting hazardous liquid.” Id. § 60101(a)(5).
1498 OLYMPIC PIPE LINE v. CITY OF SEATTLE
line facilities or interstate pipeline transportation.” 49 U.S.C.
§ 60104(c) (provision entitled “Preemption”). There are two
exceptions to this prohibition. First, a state authority may
enter into a pipeline safety agreement with the DOT, through
which the DOT authorizes the state authority to participate in
the oversight of interstate pipeline facilities. Id. § 60106(a).
Second, the DOT may designate an agent with delegated
authority to conduct inspections of pipeline operators and
facilities to ensure compliance with federal safety standards
on behalf of the DOT. Id. § 60117(c). Thus, a state authority
may not impose safety requirements on an interstate hazard-
ous liquid pipeline unless the DOT has delegated authority to
the state entity under § 60106(a) or § 60117(c). Federal pre-
emption of the regulation of interstate pipeline safety in any
other manner is manifest in the language of the PSA provision
entitled “Preemption.” See id. § 60104(c).18
[4] Regarding intrastate pipelines, the PSA provides:
A State authority that has submitted a current certifi-
cation under section 60105(a) of this title may adopt
additional or more stringent safety standards for
intrastate pipeline facilities and intrastate pipeline
transportation only if those standards are compatible
with the minimum standards prescribed under this
chapter.
Id. § 60104(c). Thus, a state authority may regulate intrastate
pipelines and impose safety requirements in addition to the
federal standards only if: 1) the state authority applies and is
approved by the DOT through an annual certification process
pursuant to § 60105; and 2) the standards are compatible with
the federal standards. Id. § 60104(c). Alternatively, a state
18
The DOT’s regulations also so conclude: “The HLPSA leaves to
exclusive Federal regulation and enforcement the ‘interstate pipeline facil-
ities,’ those used for the pipeline transportation of hazardous liquids in
interstate or foreign commerce.” 49 C.F.R. pt. 195, app. A.
OLYMPIC PIPE LINE v. CITY OF SEATTLE 1499
authority may receive authorization from the DOT to regulate
an intrastate pipeline under a pipeline safety agreement pursu-
ant to § 60106(a) or through the designation of an agent under
§ 60117(c).
The Washington Utilities and Transportation Commission
(“WUTC”) is the regulating state authority for pipelines in the
State of Washington. After the 1999 Bellingham accident, the
Washington state legislature passed its own Pipeline Safety
Act, Wash. Rev. Code §§ 81.88.005-81.88.902, in an effort to
protect the health and safety of Washington’s citizens and the
state’s environment. Wash. Rev. Code § 81.88.005(1). The
Act placed the state’s hazardous liquid pipeline safety author-
ity and responsibility with the WUTC and required the com-
mission to apply for federal delegation for the state’s program
to enforce the federal hazardous liquid pipeline safety require-
ments. Wash. Rev. Code §§ 81.88.060, 81.88.090.
The WUTC entered into an agreement with the DOT, the
“Interstate Pipeline Transportation Agreement” (“WUTC-
DOT Agreement”), which delegated to the WUTC the author-
ity, under 49 U.S.C. § 60117(c), to “participate in the inter-
state pipeline safety program, with the Office of Pipeline
Safety (OPS), to ensure compliance with the Federal safety
standards.” The WUTC-DOT Agreement also provided
WUTC with jurisdiction, pursuant to the certification provi-
sion of 49 U.S.C. § 60105(a), over all intrastate operators sub-
ject to the PSA. Through this statutory delegation and
certification, the agreement granted the WUTC the authority
to address and oversee a wide variety of pipeline issues,
including incident investigation, safety monitoring, inspec-
tions, and reporting, as the DOT’s agent.19
19
The WUTC has promulgated its own regulations, Wash. Admin. Code
480-75 et seq., covering pipeline design, construction, repair, operation,
maintenance, and reporting, that meet or exceed the federal regulations
promulgated by DOT; the WUTC regulations expressly adopt DOT’s reg-
ulations by reference. Wash. Admin. Code 480-75-999 (adopting 49
C.F.R., Parts 195 and 199, including all appendices and amendments).
1500 OLYMPIC PIPE LINE v. CITY OF SEATTLE
[5] Seattle contends that the provisions of the Franchise
Agreement and the Indemnity Agreement that impose safety
standards on Olympic are not preempted by the PSA.20 We
disagree. Assuming arguendo that municipalities can seek
agreements under § 60105(a) and § 60106(a) as they relate to
hazardous liquid pipelines,21 Seattle did not seek any such
agreement. Further, the City has not been delegated authority
by DOT to conduct inspections of pipeline operators and
facilities pursuant to § 60117(c). Rather, the DOT delegated
this authority to the WUTC through the WUTC-DOT Agree-
20
The agreements include two provisions that address safety concerns.
The Franchise Agreement provides:
Section 5. The Permittee shall not construct, reconstruct, relo-
cate, readjust or repair the pipeline system except under the
supervision, and in strict accordance with plans and specifica-
tions, approved by the Director before any work or repair is com-
menced. The Director in his or her judgment may order such
reconstruction, relocation, readjustment or repair of the pipeline
system at the Permittee’s own cost and expense because of the
deterioration or unsafe condition of the pipeline system, grade
separations, or the installation, construction, reconstruction,
maintenance, operation or repair of any and all municipally
owned public utilities, or for any other cause.
The Indemnity Agreement states:
7. Monitoring and Notification of Releases: In addition to
any other monitoring and reporting requirements that are required
by law or prudent under the circumstances, Olympic Pipe Line
shall monitor the Pipeline by making weekly visual inspections
and annual pressure tests. . . .
21
The PSA provides that a municipality may be certified pursuant to
§ 60105(a), or enter into a pipeline safety agreement with the DOT under
§ 60106(a), if the certification or agreement applies to intrastate gas pipe-
line transportation. 49 U.S.C. §§ 60105(a), 60106(a). Hazardous liquids,
however, are distinct from gases under the PSA. Id. §§ 60101(a)(4) (defin-
ing “hazardous liquid” as “petroleum or a petroleum product” or a sub-
stance that the DOT determines “may pose an unreasonable risk to life or
property when transported by a hazardous liquid pipeline facility in a liq-
uid state (except for liquefied natural gas)”), 60101(a)(2) (defining “gas”
as “natural gas, flammable gas, or toxic or corrosive gas”).
OLYMPIC PIPE LINE v. CITY OF SEATTLE 1501
ment.22 We conclude, therefore, that the PSA expressly pre-
empts the City’s attempt to impose safety regulations on the
Seattle Lateral.23
B
Our precedent supports this result. In Shell Oil Co. v. City
of Santa Monica, 830 F.2d 1052 (9th Cir. 1987), we held that
the HLPSA did not preempt Santa Monica from imposing
safety standards in a franchise agreement with Shell Oil’s pre-
decessor to operate an oil pipeline within city limits. Id. at
1063, 1066. We first noted that the HLPSA “expressly pre-
empts states from imposing any additional safety standards on
interstate pipelines.” Id. at 1063. The HLPSA, however,
expressly permitted additional state regulation of intrastate
pipelines by “[a]ny State agency.” Id. at 1064 (relying on the
text of former 49 U.S.C. § 2002(d) (“Any State agency may
adopt additional or more stringent safety standards for intra-
state pipeline facilities and the transportation of hazardous liq-
uids associated with such facilities, if such standards are
compatible with the Federal standards issued under this chap-
ter.”)) (emphasis omitted). For purposes of summary judg-
ment, we assumed that the pipeline at issue was an intrastate
pipeline. Id. at 1064 n.12. We then determined that the
HLPSA did not expressly preempt the City’s imposition of
22
We do not address or decide the extent to which the City of Seattle
may permissibly participate in the WUTC’s regulatory oversight. In any
event, the City surely has some opportunity to gain consideration of its
views through the state agency’s processes.
23
Because we conclude that the City’s actions are preempted if the pipe-
line is either an interstate or an intrastate pipeline, we need not decide
whether the Seattle Lateral segment of the pipeline system should be con-
sidered under the PSA as an interstate or intrastate pipeline. Also, Seattle
argues that the PSA does not “fill the field” of pipeline safety regulation,
and therefore the City’s actions are not preempted. We conclude that the
PSA expressly preempts Seattle’s efforts to impose pipeline safety regula-
tions on Olympic’s operation of the Seattle Lateral, and therefore we do
not reach the question of field preemption.
1502 OLYMPIC PIPE LINE v. CITY OF SEATTLE
safety standards because the term “State agency” could
include a municipality like Santa Monica. Id. at 1065-66 (“If
Congress had intended to limit [the term ‘State agency’] to
state agencies that are certified under § 2004(a), one would
have expected it to have done so expressly.”).
When the HLPSA was recodified as part of the PSA in
1992, Congress changed the term “[a]ny State agency” to “[a]
state authority that has submitted a current certification under
section 60105(a) of this title.” 49 U.S.C. § 60104(c); see also
H.R. Rep. No. 102—247(II) (1992) (“Section 203(d) of the
[HLPSA] is further amended by inserting ‘that has submitted
a current certification under section 205(a)’ after ‘Any State
agency.’ ”). Congress now has declared its intent to limit “any
State agency” to certified agencies. See Shell Oil, 830 F.2d at
1065. Thus, our conclusion that the PSA preempts Seattle’s
attempt to impose safety measures on Olympic’s operation of
the Seattle Lateral is consistent with and supported by our
precedent in Shell Oil.24
C
[6] Although the PSA expressly preempts Seattle’s
attempted safety regulation of the Seattle Lateral, the City
24
Extra-circuit cases analyzing preemption under the HLPSA and the
NGPSA support our conclusion. See, e.g., Kinley Corp. v. Iowa Utils. Bd.,
999 F.2d 354, 358 (8th Cir. 1993) (holding that the HLPSA expressly pre-
empts an Iowa state statute that established a state program to supervise
interstate hazardous liquid pipelines); Natural Gas Pipeline Co. of Am. v.
R.R. Comm’n, 679 F.2d 51, 52 (5th Cir. 1982) (holding that the NGPSA
expressly preempts the application to interstate gas pipelines of a Texas
Railroad Commission rule requiring natural gas companies to provide pro-
cedures and safeguards to protect the public from accidental releases of
gases from their facilities); Williams Pipe Line Co. v. City of Mounds
View, 651 F. Supp. 551, 566 (D. Minn. 1987) (holding that the HLPSA
expressly preempts city and county efforts to regulate hazardous liquid
pipeline safety because the Act “clearly expresses Congressional intent to
preempt state efforts to establish safety standards for hazardous liquid
pipelines”).
OLYMPIC PIPE LINE v. CITY OF SEATTLE 1503
may still contractually require that Olympic perform safety
tests of the pipeline if, in entering into the Franchise Agree-
ment, the City acted as a municipal proprietor rather than as
a regulator. Bldg. & Constr. Trades Council v. Associated
Builders & Contractors, 507 U.S. 218, 227, 229 (1993); Asso-
ciated Gen. Contractors of Am. v. Metro. Water Dist., 159
F.3d 1178, 1182-83 (9th Cir. 1998); see also Shell Oil, 830
F.2d at 1062. To determine whether a government entity is
acting in a proprietary or a regulatory capacity, we consider
whether “the challenged action essentially reflect[s] the enti-
ty’s own interest in its efficient procurement of needed goods
and services, as measured by comparison with the typical
behavior of private parties in similar circumstances” and
whether “the narrow scope of the challenged action defeat[s]
an inference that its primary goal was to encourage a general
policy rather than address a specific proprietary problem.”
Aeroground, Inc. v. City & County of San Francisco, 170 F.
Supp. 2d 950, 957 (N.D. Cal. 2001) (quoting Cardinal Tow-
ing & Auto Repair, Inc. v. City of Bedford, 180 F.3d 686, 693
(5th Cir. 1999)).
[7] The district court correctly concluded that, in requiring
Olympic to comply with certain safety demands, Seattle was
acting as a regulator rather than as a municipal proprietor.
Olympic Pipe Line, 316 F. Supp. 2d at 906-07. The City’s
interest is not that of a private market participant that owns a
pipeline or competes in the pipeline market or a related mar-
ket. Rather, Seattle in its sovereign capacity owns the streets
and land under which the Seattle Lateral runs, for the purpose
of maintaining a transportation system. See Shell Oil, 830
F.2d at 1057-58 (holding that the City of Santa Monica is not
a market participant in the setting of franchise fees for pur-
poses of the dormant Commerce Clause because the City
holds the streets, under which the pipeline runs, in its sover-
eign capacity). Also, Seattle made the safety demands on
Olympic in an effort to prevent a pipeline accident in Seattle
similar to the 1999 Bellingham accident; the City thus acted
pursuant to its general duty to protect the public health and
1504 OLYMPIC PIPE LINE v. CITY OF SEATTLE
safety — a duty grounded in the City’s regulatory, police
power — rather than in an attempt to protect its role in the
real estate market.25 Finally, in its letters to Olympic requiring
compliance with the City’s safety demands, Seattle repeatedly
invoked its police and regulatory powers.26 For example, in a
June 27, 2003 letter to Olympic’s President, Seattle’s Trans-
portation Director stated: “the City hereby exercises its police
and regulatory powers and orders Olympic to cease all opera-
tion of the Seattle Lateral Line under the earliest possible
timeline . . . .” Further, in a June 27, 2003 letter from Seattle’s
Mayor to Olympic’s President, the Mayor noted: “I do not
consider [Olympic’s] response acceptable to the public safety
needs of Seattle residents.” Because Seattle was acting as a
regulator when it imposed safety standards on Olympic, the
City’s actions do not fall within the market proprietor excep-
tion and are preempted by the PSA.
III
Seattle advances two reasons why, even if the PSA pre-
empts the City’s attempt to regulate the safety and inspection
of the Seattle Lateral, we should still require Olympic to com-
ply with the City’s safety regulations. First, the City contends
that Olympic waived the right to argue that the safety regula-
tions are preempted when it entered into the Franchise Agree-
25
In denying Seattle’s motion for relief from the automatic stay, the
bankruptcy court reached the same conclusion, concluding that the City
used its “police and/or regulatory power” with respect to the Seattle Lat-
eral.
26
Seattle implies that it limited its actions and arguments to regulatory
actions instead of contract enforcement actions and arguments because the
City was bound by the bankruptcy court’s automatic stay. The City there-
fore could pursue its contract claims against Olympic without possible
sanction from the bankruptcy court only after the district court granted the
motion to withdraw the automatic reference to the bankruptcy court. The
procedural status of the proceedings in the bankruptcy court does not alter
our conclusion that Seattle acted in its capacity as a regulator rather than
as a market participant.
OLYMPIC PIPE LINE v. CITY OF SEATTLE 1505
ment and the Indemnity Agreement. Second, Seattle asserts
that if we do not require Olympic to comply with the City’s
safety regulations, Olympic and other companies will con-
tinue to enter into contracts they know to be unenforceable.
We address each argument in turn.
A
Seattle argues that at the time Olympic entered into the
Franchise Agreement and the Indemnity Agreement, the com-
pany believed that the Seattle Lateral was an interstate pipe-
line, and therefore knew that the PSA preempted Seattle’s
efforts to impose safety regulations on the pipeline.27 In spite
of this understanding, Olympic chose to enter into the agree-
ments, which include the City’s safety regulations. Seattle
contends that, by entering into these agreements, Olympic
knowingly and voluntarily consented to the City’s regulations
and waived its right to argue that the regulations are pre-
empted by the PSA.
[8] We reject Seattle’s assertion that Olympic “waived” its
right to advance a preemption argument. Federal preemption
is the allocation of power and decision-making authority
between the federal government and the state and local gov-
27
As an initial matter, Olympic argues that the Franchise Agreement
expired on December 31, 2000, more than two years before Seattle
demanded that Olympic complete the list of thirty-three safety concerns.
The Franchise Agreement provides that: “[n]otwithstanding termination or
expiration of the permission granted, or closure or removal of the pipeline
system,” Olympic “shall remain bound by its obligations under this ordi-
nance” until the pipeline is removed. Thus, as long as the pipeline is
within Seattle’s city limits, Olympic remains bound by its obligations
under the Franchise Agreement. The agreement includes, by reference,
Olympic’s obligations pursuant to the Indemnity Agreement. The Indem-
nity Agreement states that “the provisions of the Indemnity Agreement
shall survive the expiration of the Permit and any renewals or extensions
thereof.” Olympic has not removed the Seattle Lateral and therefore
remains bound by both the Franchise Agreement and the Indemnity
Agreement.
1506 OLYMPIC PIPE LINE v. CITY OF SEATTLE
ernments, based on the Supremacy Clause of the Constitution.
See Gibbons v. Ogden, 22 U.S. 1, 211 (1824) (stating that fed-
eral supremacy demands that state laws that “interfere with,
or are contrary to the laws of Congress . . . must yield”). Pre-
emption is a power of the federal government, not an individ-
ual right of a third party that the party can “waive.” Olympic
could not, therefore, waive a right that it did not possess.
The cases on which Seattle relies are not to the contrary.
The City cites cases in which parties to contracts have waived
individual constitutional rights or statutory rights. See, e.g.,
D.H. Overmyer Co. v. Frick Co., 405 U.S. 174, 186 (1972)
(holding that a debtor’s waiver of his individual due process
rights through the execution of a cognovit note was effective);
Hotel Employees, Rest. Employees Union v. Marriott Corp.,
961 F.2d 1464, 1468 (9th Cir. 1992) (holding that an
employer could waive its right to demand a National Labor
Relations Board election); Erie Telecomms., Inc. v. City of
Erie, 853 F.2d 1084, 1096 (3d Cir. 1988) (holding that a
party’s waiver of First Amendment, equal protection, and stat-
utory rights by contract was valid); Legal Aid Soc’y v. City of
New York, 114 F. Supp. 2d 204, 229 (S.D.N.Y. 2000) (hold-
ing that the Legal Aid Society’s contractual waiver of its right
to challenge the City’s action, a right provided for by the
National Labor Relations Act, was valid). No such right is at
issue in this case. Federal preemption is not an individual con-
stitutional right, such as an individual’s right to due process,
and the PSA does not provide Olympic with a statutory right
to challenge Seattle’s safety regulations. We therefore reject
Seattle’s argument that Olympic waived its right to assert pre-
emption.
B
Seattle also argues that, by determining that the City’s pipe-
line safety demands are unenforceable, we will encourage
Olympic and other pipeline companies to agree in future con-
tracts to safety provisions that the companies do not intend to
OLYMPIC PIPE LINE v. CITY OF SEATTLE 1507
honor. To discourage such behavior, the City asserts that we
must require Olympic to comply with Seattle’s safety regula-
tions for the Seattle Lateral.
We disagree. It is not our function to establish public policy
in this area. Rather, Congress has selected the applicable pub-
lic policy. It has chosen, through the express preemption pro-
vision of the PSA, clearly to preclude Seattle from imposing
safety regulations on Olympic.
Moreover, it is not apparent that the City’s public policy
solution is the best one overall. Although a sound public pol-
icy might normally discourage companies from entering into
contracts that they do not intend to honor, that policy concern
is more than balanced by the superordinate federal need to
maintain the PSA’s policy of providing national uniformity in
the establishment and enforcement of hazardous liquid pipe-
line safety regulations. As the court in Williams Pipe Line Co.
v. City of Mounds View stated:
Hazardous liquid pipelines run through 21 states, and
presumably through small and large plots of land
belonging to vast numbers of persons. Were each of
these landowners entitled to demand compliance
with their own safety standards, the clear Congres-
sional goal of a national standard for hazardous liq-
uid pipeline safety would be thwarted.
651 F. Supp. at 569. Accordingly, we do not find the City’s
public policy argument to be persuasive.
AFFIRMED.