The Oregon Court of Appeals set the stage Thursday for the City of Portland to reinstate its ban on the expansion of bulk fossil fuel terminals.

The Court reversed a decision by the state Land Use Board of Appeals, concluding that the city could ban major expansions of bulk fuel terminals without violating the "dormant" commerce clause of the U.S. Constitution.

The ruling was a win for environmentalists. A spokesman for Mayor Ted Wheeler said he would be meeting with the Bureau of Planning and Sustainability and city attorneys to determine the path forward for re-implementing the policy.

"This is a significant victory for the people of Portland," Wheeler said in a statement. "Much of the hard work remains. I will be working with my Council colleagues, City staff, and the community in the days ahead on next steps."

The 2016 ordinance was the signature legacy of Mayor Charlie Hales, and won major praise from environmental and conservation groups. It was born after the city decided against making zoning changes to accommodate a $500 million terminal proposed by a Canadian energy company, Pembina Pipeline Corp., to export propane to Asia from the Port of Portland's Terminal 6.

The Columbia Pacific Building Trades Council, the Western States Petroleum Association and the Portland Business Alliance challenged the policy. They maintained that the zoning rules discriminated against out-of-state companies looking to build terminals to export fuels versus those serving in-state customers because the rules limited bulk fuel tanks to 2 million gallons, too small for an international distribution terminal. At the same time the rules included exceptions allowing users in Oregon to store over 2 million gallons of fuel for local use, including airport storage, agricultural use, and local retail use.

The Land Use Board of Appeals found the policy unconstitutional and struck down the ban. But the Court of Appeals wasn't convinced. "We conclude that that cannot constitute discrimination under the dormant Commerce Clause because it is not discrimination between substantially similar out-of-state and in-state economic entities," its decision said.

The Western States Petroleum Association said it was disappointed with the decision. "The Fossil Fuel Zoning Ordinance is not only a violation of Oregon and Portland City land use laws, but punishes consumers and businesses in the city and throughout Oregon, who rely on affordable fuel to power their homes, their businesses and the economy," said Oyango Snell, the organization's general counsel.

The business and union groups did not say whether they planned to appeal the decision to The Oregon Supreme Court.

The appeals court upheld the Land Use Board's finding that the city did not have an adequate factual basis for one of its findings supporting the zoning changes. The city maintained that the demand for fossil fuels could plateau and decline due to more efficient vehicles, electric vehicles and other carbon reduction strategies. The court found that conclusion was unsupported in the record.

Conservation groups said they were thrilled with Thursday's decision.

"The Court's decision confirms the City's ability to stand up for the health, safety, and environment of its residents by restricting dangerous developments such as new oil train terminals," said Dan Serres, conservation director for Columbia Riverkeeper.

- Ted Sickinger

503-221-8505; @tedsickinger