# Appendix — Atchison, Topeka & Santa Fe Railway Co. v. National Ass'n of Recycling Industries, Inc. > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385005_2129%3A02 ## Record - **Collection:** Supreme Court brief - **Document type:** Appendix - **Published:** January 1, 1979 - **Citation:** 440 U.S. 929 ## Text Supreme Court, U. “ FILED | 78-872 NOV $0 1978 No. [cyan RODAK, JR., CLERK , IN THE Supreme Court of the United States OcTOBER TERM, 1978 ™ ATCHISON, TUPEKA & SAnTA Fe Rariway Co., et al., Petitioners, ve NATIONAL ASSOCIATION OF RECYCLING INDUSTRIES, INC., et a., Respondents. On Petition for Writ of Certiorari to the United States Court of Appeals for the District of Columbia Circuit APPENDIX Harry N. Bascock MICHAEL BouUDIN 2700 Terminal Tower Timotoy A. Harr P.O. Box 6419 888 Sixteenth Street, N.W. Cleveland, Ohio 44101 Washington, D.C, 20006 RicHarp W. KIreNLE JaMES L. TAPLEY 8 North Jefferson Street James L. Hows, III Roanoke, Va. 24042 P.O. Box 1808 i C, 2001: WituiaM (. LEIrPER Washington. D 13 P.O. Box 536 James E. SYKES 600 Grant Street 222 S. Riverside Plaza Pittsburgh, Pa. 15230 Chicago, Tl. 60606 Joun A. Datiy 1138 Six Penn Center Plaza Philadelphia, Pa. 19104 Attorneys for the Railroads Ps ‘ Press or Byron S. ApAms PrintINnaG, Inc., WASHINGTON, D. C. TABLE OF CONTENTS Aprenpix A—List of Railroad Petitioners ........... Apprenpix B—Opinion of the United States Court of Appeals for the District of Columbia Circuit in Nos. 77-1187, 77-1193, and 77-1292, August 2, 1978, and Orders of August 7, August 25, and Septem- ber 6, 1978, correcting the opinion .............. Appenpix C—Order of the Court of Appeals, October 16, 1978, modifying the August 2, 1978, opinion .. Appenprx D—Decision of the Interstate Commerce Commission in Ex Parte No. 319, Investigation of Freight Rates for the Transportation of Recyclable or Recycled Commodities, 356 L.C.C. 113, Febru- ef IER Re ee re eee eee Appenpix EK—Judgment of the Court of Appeals for the District of Columbia Circuit in Nos. 77-1187, 77-1193, and 77-1292, August 2, 1978 ............ Appenpix F—Statute Involved: Section 204 of the Rail- road Revitalization and Regulatory Reform Act of he Oe Coe oak tU exe cbeOk heh eikeue’s Appenpix G—Interstate Commerce Commission’s E'zec- utive Summary of the Final Environmental Impact Statement in Ex Parte No. 319, January 4, 1977 .. 1b le 1d le 1f lg APPENDIX A la APPENDIX A Wesrern RarLroaps The Atchison, Topeka and Santa Fe Railway Company Burlington Northern Ine. Chicago and North Western Transportation Company Chicago, Milwaukee, St. Paul and Patific Railroad Com- pany Chicago, Rock Island and Pacific Railroad Company (Wil- liam M, Gibbons, Trustee) The Denver and Rio Grande Western Railroad Company Elgin, Joliet and Eastern Railway Company Green Bay and Western Railroad Company Illinois Central Gulf Railroad Company Illinois Terminal Railroad Company The Kansas City Southern Railway Company Missouri-Kansas-Texas Railroad Company Missouri Pacific Railroad Company St. Louis-San Francisco Railway Company St. Louis Southwestern Railway Company Soo Line Railroad Company Southern Pacific Transportation Company Toledo, Peoria & Western Railroad Company Union Pacific Railroad Company The Western Pacific Railroad Company Eastern RarLroaps The Akron, Canton & Youngstown Railroad Company The Baltimore and Ohio Railroad Company Bangor and Aroostook Railroad Company Boston and Maine Corporation Canadian National Railway Company d/b/a Grand Trunk Railway System (Lines in New England) Canadian Pacific Railway Company Central Vermont Railway, Inc. The Chesapeake And Ohio Railway Company Chicago & Eastern Illinois Railroad Company Chicago South Shore and South Bend Railroad Consolidated Rail Corporation Delaware and Hudson Railway Company The Detroit and Toledo Shore Line Railroad Company Detroit, Toledo and Ironton Railroad Company 2a Elgin, Joliet and FRastern Railway Company Grand Trunk Western Railroad Company lilinois Terminal Railroad Company Long Island Railroad Company Maine Central Railroad Company Norfolk and Western Railway Company The Pittsburgh and Lake Erie Railroad Company Richmond, Fredericksburg and Potomac Railroad Company Si. Johnsbury & Lamoille County Railroad Toledo, Peoria & Western Railroad Company Western Maryland Railway Company SouTHERN RatLRoaps Carolina, Clinchfield and Ohio Railway Central of Georgia Railroad Compan The Cincinnati, New Orleans and rene Pacific Railway Company Florida Kast Coast Railway Company The Georgia Railroad Louisiana & Arkansas Railway Company Louisville and Nashville Railroad Company Norfolk Southern Railway Company Seaboard Coast Line Railroad Company Southern Railway Company APPENDIX B APPENDIX B Notice: This opinion is subject to formal revision before publication in the Federal Reporter or U.S. App. D.C. Reports. Users are requested to notify the Clerk of any formal errors in order that corrections may be made before the bound volumes go to press. United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT ' No. 77-1187 NATIONAL ASSOCIATION OF RECYCLING INDUSTRIES, INC., PETITIONER V. INTERSTATE COMMERCE COMMISSION AND UNITED STATES OF AMERICA, RESPONDENTS ATCHISON, TOPEKA & SANTA FE RAILWAY COMPANY, et al, AMERICAN PAPER INSTITUTE, INC., ALUMINUM ASSOCIATION, INC., FoRT HOWARD PAPER COMPANY, EASTERN RAILROADS, AND BERGSTROM PAPER COMPANY, et al., INTERVENORS No. 77-1193 “ ) NATIONAL ASSOCIATION OF RECYCLING INDUSTRIES, INC., | PETITIONER } Vv. / INTERSTATE COMMERCE COMMISSION AND UNITED STATES OF AMERICA, RESPONDENTS ; ATCHISON, TOPEKA & SANTA FE RAILWAY COMPANY, et al., AND EASTERN RAILROADS, INTERVENORS —_ i ahs Bills of costs must be filed within 14 days after entry of judgment. The court looks with disfavor upon motions to file bills of costs out of time. 2b No. 77-1292 INSTITUTE OF SCRAP IRON AND STEEL, INC., PETITIONER v. INTERSTATE COMMERCE COMMISSION AND UNITED STATES OF AMERICA, RESPONDENTS NORTHWESTERN STEEL & WIRE COMPANY, EASTERN RAIL- ROADS, ATCHISON, TOPEKA & SANTA FE RAILWAY CoMPANY, et al., AND ARMCO STEEL CORPORATION, INTERVENORS Petitions for Review of Orders of the Interstate Commerce Commission SYLLABUS The Interstate Commerce Commission instituted an investigation into the lawfulness of the rate structures on recyclable and virgin resource materials pursuant to Section 204 of the Railroad Revitalization and Regulatory Reform Act of 1976. After an investigation, the Com- mission, with three Commissioners dissenting, concluded that the majority of the rates were lawful and declined to order their removal. Petitioners filed petitions to »view the Commission’s order, claiming that the Com- mwsion did not comply with the mandate of Section 204 Nyy, among other things, relieving the railroads of their statutory burden of proof and declining to order removal unlawful rates on competing recyclable ma- | terials. The United States, as statutory respondent, joined in petiNpners’ challenge to the Commission’s order. 3b mission’s investigation on the ground that the Com- mission did not comply with the requirements of the National Environmental Policy Act of 1969. Held: The order of the Commission in its investigation is vacated, and the case remanded for further proceedings consis- tent with this opinion; the consolidated petition to re- view is dismissed as untimely filed. Pp. 4-41. 1. In view of the provisions of Section 204, its legisla- tive history, and the background of congressional concern surrounding its enactment, the Commission’s mandate was to investigate rates for recyclable or recycled materials and competing virgin natural resource materials, and to require removal from rate structures of unreasonable- ness or unjust discrimination; and the Commission was not permitted to assume or defer to asserted revenue needs or to give them greater weight than environmental and energy goals, but was to uphold disparate rate struc- tures only where actually warranted after consideration of all of the transportation characteristics, including the competitive relationships and costs, of the materials in- volved. Pp. 17-25. 2. On this record, the Commission’s order does not represent a reasoned compliance with the mandate of Section 204. Pp, 25-41. (a) The Commission did not address or require proof on the focal question whether the substantial rate disparities between recyclable and virgin prod- ucts are justified by differences in transportation characteristics. Pp. 25-26. (b) Several of the Commission’s underlying find- ings and conclusions with respect to the reasonable- ness and unjust discrimination issues were incon- sistent with its mandate and inadequately supported. Pp. 26-40. In a consolidated petition, petitioner also challenged a 3. The consolidated petition to review, filed in ad- Commission order\terminating two general revenue pro- vance of the jurisdictional time limit, must be dismissed ceedings conducted\during the pendency of the Com- as premature. P. 41. 5b Notice: This opinion is subject to formal revision before publication in the Federal Reporter or U.S. App. D.C. Reports. Users are requested to notify the Clerk of any formal errors in order that corrections may be made before the bound volumes go to press. United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT No. 77-1187 NATIONAL ASSOCIATION OF RECYCLING INDUSTRIES, INC., PETITIONER V. INTERSTATE COMMERCE COMMISSION AND UNITED STATES OF AMERICA, RESPONDENTS ATCHISON, TOPEKA & SANTA FE RAILWAY COMPANY, et al., AMERICAN PAPER INSTITUTE, INC., ALUMINUM ASSOCIATION, INC., FORT HOWARD PAPER COMPANY, EASTERN RAILROADS, AND BERGSTROM PAPER COMPANY, et al., INTERVENORS No. 77-1193 NATIONAL ASSOCIATION OF RECYCLING INDUSTRIES, INC., PETITIONER V. INTERSTATE COMMERCE COMMISSION AND UNITED STATES OF AMERICA, RESPONDENTS ATCHISON, TOPEKA & SANTA FE RAILWAY COMPANY, et al., AND EASTERN RAILROADS, INTERVENORS Bills of costs must be filed within 14 days after entry of judgment. The court looks with disfavor upon motions to file bills of costs out of time. 6b No. 77-1292 INSTITUTE OF SCRAP IRON AND STEEL, INC., PETITIONER Vv. INTERSTATE COMMERCE COMMISSION AND UNITED STATES OF AMERICA, RESPONDENTS NORTHWESTERN STEEL & WIRE COMPANY, EASTERN RAIL- ROADS, ATCHISON, TOPEKA & SANTA FE RAILWAY ComPANY, et al., AND ARMCO STEEL CORPORATION, INTERVENORS Petitions for Review of Orders of the Interstate Commerce Commission Argued March 16, 1978 Decided August 2, 1978 Edward L. Merrigan for petitioner in Nos. 77-1187 and 77-1193 and on the reply brief for intervenor Berg- strom Paper Company et al. in No. 77-1187. David Reichert, with whom Howard Gould and Stephen D. Strauss were on the brief, for petitioner in No. 77- 1292. Kenneth G. Caplan, Attorney, Interstate Commerce Commission, with whom Robert S. Burk, Deputy General Counsel, and Charles H. White, Jr. and Frederick W. Read, III, Associate General Counsel, Interstate Com- merce Commission, were on the brief, for respondent Interstate Commerce Commission. Mark L. Evans, Gen- eral Counsel, and Peter A. Fitzpatrick, Attorney, Inter- 7b state Commerce Commission, also entered appearances for respondent Interstate Commerce Commission. James F, Ponsoldt, Attorney, Department of Justice, with whom Barry Grossman, Attorney, Department of Justice, was on the brief, for respondent United States of America. Lloyd John Osborn and Carl D. Lawson, Attorneys, Department of Justice, also entered appear- ances for respondent United States of America. Michael Boudin, with whom Charles N. Marshall and Stuart C. Stack were on the brief, for intervenor South- ern and Western Railroads. John F. Donelan, with whom John K. Maser, III and Renee D. Rysdahl were on the brief, for intervenors American Paper Institute, Armco Steel Corporation, In- land Steel Corporation, Republic Steel Corporation, and Youngstown Sheet & Tube Company. John A. Daily, with whom Richard W. Kienle was on the brief, for intervenor Eastern Railroads. Dickson R. Loos was on the brief for intervenor Aluminum Association Ine. William L. Strauss was on the brief for intervenor Fort Howard Paper Company. Warren Price, Jr. was on the brief for intervenor Northwestern Steel & Wire Company. Before WRIGHT, Chief Judge, and SwyGcerT* and LEVENTHAL, Circuit Judges. Opinion for the court filed by Chief Judge WriGHT. * Of the Seventh Circuit, sitting by designation pursuant to 28 U.S.C. § 291(a) (1970). Sb WricHut, Chief Judge: In these consolidated cases * we are called upon to review a final report and order of the Interstate Commerce Commission declining to re- move alleged unlawful rates from the freight rate struc- tures for recyclable and virgin resource materials trans- ported by the nation’s railroads. The order under re- ‘ We originally consolidated four separate cases, National Ass'n of Recycling Industries, Inc. v. ICC, No. 77-1187; Insti- tute for Scrap Iron & Steel v. ICC, No. 77-1292; National Ass'n of Recycling Industries, Inc. v. ICC, No. 77-1193; and Durbin Paper Stock Co. v. ICC, No. 77-1828, the first two of which are consolidated petitions challenging the report and order here under review. In No. 77-1193 the petition seeks review of a final order of the Commission terminating two general revenue proceedings, Ez Parte No. 318, Increased Freight Rates and Charges, 1976, and Ex Parte No. 336, In- creased Freight Rates and Charges, 1977, in which the Com- mission approved rate increases applicable to recyclable ma- terials, in one instance without preparing a threshold assess- ment survey, as required by the National Environmental Policy Act of 1969 (NEPA), 42 U.S.C. §§ 4321-4335 (1970), until six months after its approval of the increase, and in the other instance without preparing any environmental statement whatever. Although it raises serious legal questions under NEPA, see Asphalt Roofing Manufacturers Ass’n v. ICC, 567 F.2d 994, 1004-1006 (D.C. Cir. 1977), we have concluded that the petition, filed in advance of the 60-day jurisdictional time limit provided by the Hobbs Act, 28 U.S.C. § 2344 (1970), must be dismissed as premature. See Industrial Union Depart- ment, AFL-CIO v. Bingham, 570 F.2d 965, 968-969 (D.C. Cir. 1977). We add, however, that the Commission will be required to reconsider the lawfulness and cumulative environmental impact of the rate increases challenged by this petition because of our disposition herein, in Nos. 77-1187 and 77-1292, vacat- ing and remanding the Commission’s order. Similarly, the Commission will be required upon remand to reconsider issues presented by the remaining petition in No. 77-1328, which we have decided by separate opinion filed this day. See Durbin Paper Stock Co. v. ICC, —— F.2d —— (D.C. Cir. No. 77- 1328, decided 1978). Oh view,’ dissented from by three commissioners* and chal- lenged here by both representatives of recycling indus- tries‘ and the United States,’ reflects the agency’s ef- forts to comply with Section 204 of the Railroad Reyvital- ization and Regulatory Reform Act of 1976.° This pro- vision directed the Commission to conduct an expedited investigation into the lawfulness of the rate structures and to order removal of all rates not shown by the rail- roads to be just, reasonable, and nondiscriminatory.’ We find that the challenged order does not represent a rea- soned compliance with the mandate expressed by Congress in Section 204. We therefore vacate the order and re- mand for further proceedings. *The order was entered in the Commission’s proceedin entitled Ex Parte No. 319, Investigation of Freight Rates ie the Transportation of Recyclable or Recycled Materials. In- corporated in this order is the published report and order of the Coordinator in Ex Parte No. 270 (Sub No. 6), Investiga- tion of Railroad Freight Rate Structure—Scrap Iron and Steel, 345 ICC 867 (1976). | ‘See pp. 16 & 17 & note 44 infra. ‘ Petitioners here, the National Association of Recvcli Industries (NARI) and the Institute for Scrap Iron sal Beek (ISIS), are national trade association representatives of the recycling industries. NARI challenges that part of the Com- mission’s order related to the rate structures on recyclable nonferrous metal, wastepaper, textiles, and rubber. ISIS chal- langes the Commission’s determinations with respect to the rate structures on scrap iron and steel. As a statutory respondent, 28 U.S.C. §§ 2322, 2342 (1970 the United States, on behalf of the Environmental nabbed Agency and the Federal Energy Administration, challenges the Commission’s order in its entirety. My: Pub. L. No. 94-210, § 204, 90 Star. 40 (1976). The statute is hereinafter referred to as the Regulatory Reform Act. * Section 204 is set forth in Appendix A of this opinion. 10b I The significance and purpose of the investigation re- quired by Section 204 cannot be understood apart from the Commission’s past experience with ratemaking on recyclable materials. That experience occurred largely in the context of general revenue proceedings, in which the Commission’s main task involved determination of the appropriate revenue levels and needs of the railroads, rather than the lawfulness of the rates on these ma- terials. It is to the controversial history * of those pro- ceedings that we turn first in placing the investigation under review, and the Commission’s approach and find- ings therein, in proper perspective. Under the Interstate Commerce Act” the initiative for ratemaking is vested in the railroads, subject to approval by the Commission in an appropriate proceeding. One method by which the railroads may initiate a rate in- crease is by filing a group tariff in which all or sub- stantially all of the nation’s railroads propose an across- the-board percentage increase in rates. In these so-called general revenue proceedings the Commission may either find the proposed increase just and reasonable after tak- ing evidence relating to the general need for increased revenues,” or “approve” the increase by declining to declare it unlawful following an investigation. The * See note 19 infra. °49 U.S.C. § 1 et seq. '" See New England Divisions Case, 261 U.S. 184, 196-199, 201-203 (1923). '' See United States v. Lowisiana, 290 U.S. 70, 73-79 (1933). See also Aberdeen & Rockfish R. Co. v. SCRAP (SCRAP II), 422 U.S. 289, 311-316 (1975). In an investigation the railroads have the burden of proving that an increase is just and reason- able, 49 U.S.C. § 15(7) (1970); 49 U.S.C.A. § 15(8) (f) (1977 Pocket Part). , llb characteristic feature of these proceedings is that the Commission focuses only on the need of the carriers for increased revenues, not on whether any particular ap- plication of the increase is just, reasonable, or nondis- criminatory. Nevertheless, the effect of Commission ap- proval of a general increase is to shift the burden of proof from the carriers favoring the increase to com- plainants later challenging it.* Once the general in- crease has been approved, particular applications of the increase may then be challenged in subsequent proceed- ings under the Act.” + Pursuant to this scheme the Commission approved, over the past decade, a series of annual upward adjust- ments in rates applicable to recyclable materials.* Ap- ** Commenting on this burden-shifting procedure, we have observed that it is “justified by the need for quick action and the assumption that once a general need has been demon- strated most individual increases will be found just and rea- sonable.” Council of Forest Industries of British Columbia v. ICC, 570 F.2d 1056, 1060 (D.C. Cir. 1978). ‘’ Complainants who wish to challenge an application of the rate increase may file a complaint with the Commission under § 13(1), 49 U.S.C. $13(1) (1970), but in any Commission in- vestigation of the complaint under § 15(1), 49 U.S.C. § 15(1) (1970), complainants bear the burden of proving that the rate is unlawful. See Atchison, Topeka & Santa Fe R. Co. v. Wichita Board of Trade, 412 U.S. 800, 812-813 (1973). Pro- cedures following a similar outline govern rate filings by individual carriers, the other method by which railroads may initiate increases in rates. ''The Commission approved rate increases on recyclables by declining to declare them unlawful in the following pro- ceedings: Ex Parte No. 256, Increased Freight Rates and Charges, 1967, 329 ICC 854 (1968); Ex Parte No. 259, In- creased Freight Rates and Charges, 1969, 3837 ICC 4386 (1970); Ex Parte No. 262, Increased Freight Rates and Charges, 1969, unpublished; Ex Parte No. 265, Increased Freight Rates and Charges, 1970, 889 ICC 125 (1971); Ex [continued] 12b pearing in proceedings to oppose the proposed increases, shippers and representatives of recycling industries con- tended that the proposed rates and underlying rate struc- tures on recyclable products were unreasonably high and discriminatory when compared with the lower rates and rate structures traditionally prevailing on virgin re- source materials. They also maintained that application of the proposed increases to recyclables would adversely affect the environment by discouraging industrial use of recycled products, thereby contributing to depletion of the nation’s virgin resources. In the limited context af- forded by general revenue proceedings, and subject to the aforementioned rules governing complainants’ bur- den of proof, the Commission invariably concluded that complainants had neither met their burden of refuting the railroads’ submission of needed revenues, nor other- wise demonstrated that demand for recyclables would be unlawfully reduced as a result of the proposed in- Parte No. 267, Increased Freight Rates and Charges, 1971, 939 ICC 125 (1971); Ex Parte No. 281, Increased F'reight Rates and Charges, 1972, 341 ICC 290 (1973); Ex Parte No. 295 (Sub-No. 1), Increased Freight Rates and Charges, 1978, 344 ICC 589 (1973); Ex Parte No. 308, Increased Freight Rates and Charges, 1974, unpublished; Ex Parte No. 305, RE, Nationwide Increase of Ten Percent in Fy ght Rates and Charaes, 1974, unpublished; Ex Parte N 313; Increased Freight Rates and Charges—Labor Gosts, 1975, unpublished; Ex Parte No. 318, Increased Freight Rates and Charges, 1976, unpublished; Ex Parte No. 336, Increased Freight Rates and Charges, 1977, unpublished. Together these proceedings yielded rate increases applicable to recyclable materials totalling approximately 70%. In addition to any economic and environmental impacts associated with the rate structures, it may be observed that percentage rate increases themselves, although facially neutral, may have independent impacts, since a rate increases a high rate by a larger absolute amount than it does a low rate. ee 2 ee 13b F se : tg Numerous environmental impact statements an . reshold assessment surveys were also prepared,” concluding that increases in freight rates would have "Id. A review of these proceedings reveals findi , » é ‘ n Commission that rate increases on recyclables are td in part because recyclable products are subject to relative ety inelasticities to freight rate increases. In economic ee price and product demand elasticities serve to measure yer response to increased product prices and shipper re- sponse to percentage changes in price. The Commission found in these proceedings that increases in transportation prices = not cause significant shifts in demand for recyclable prod- ucts. For a discussion of the significance of demand elasticity findings, and the elasticity studies relied upon by the Com- mission in this pr i ae his proceeding, see pp. 28, 30-31, & notes 80-83 '" See, e.g., Ex Parte No. 281, Increased Frei Charges, 1972, 346 ICC 88 (1978). The nahn po sponse to its responsibilities under NEPA has aptly been characterized as “slow,” City of New York v. United States 383 F.Supp. 150, 158-160 (E.D. N.Y. 1972),.or “tardy,” SCRAP II, supra note 11, 422 U.S, at 824. Although it is estab- lished that a general revenue proceeding is itself “a ‘major federal action’ * * * requiring its own final environmental impact statement so long as the proceeding has a substantial effect on the environment,” SCRAP II, supra note 11, 422 U.S at 318-319, there are indications that the Commission may be continuing to neglect its NEPA responsibilities, both by de- clining to prepare any environmental statements in support of rate increases applicable to recyclables, see Ex Parte No “> Increased Freight Rates and Charges, 1977, supra note = and by preparing plainly inadequate ones, Asphalt Roofing fanufacturers Ass’n v. ICC, supra note 1. The Commission we note, has on occasion indicated views contrary to those s { forth in its environmental impact statements. In Ex pte No. 310, Increased Freight Rates and Charges, 1975, 349 ICC 99, 578 (1975), for example, the Commission stated: [I]t remains a basic economic f. | act that not granti proposed rate increase for recyclables will pee Ze " yee gree of positive environmental benefit. This course of [continued] 14b either no effect or a negligible one on industrial use of recycled products. Throughout this period the Commission AT refused to conduct a broad investigation into . : a nc ness of the a — = — ane ucts. Apparently of the view that su: ony was unnecessary in light of the findings reac ar al revenue proceedings, the Commission repea y ar requests i. representatives of the age mere try to undertake such an investigation, and, in ' Pond orously opposed legislation under consideration ~ Barat gress that would have required nothing less. action would in the first instance preclude any cr in the movement of recyclables which rg — have been evidenced as a direct response to the 1 art Secondly, as [rates on] virgin — pe ye to increase incrementally, recyclables gy omni deste more favorable economic posture. ; — ee Se Ne LS cecatak suntieaios ek Saae wide-ranging, multiface : ieee oe optimal levels of resource conserva — pd? veo allow concomitant adverse environmenta ae are sero » extent that recyclable rate increases are s pear Fc or eliminated entirely, the action Regent consistent with established national policies sate provide for a measure of environmental improv " 1t See, e.g., Ex Parte No. 281, 346 ICC 88 (1973). See 7 Ex Parte "No. 306, Implementation of Public ge cag 86, Freight Rates for Recyclables, 346 ICC 408, 411 ( , 's Commissioner Stafford, former Chairman — coer sion, testified before congressional ag one 7. — 4 to oppose legislation similar to § 204. Bas on apenage si petitioner NARI sought the Chairman’s oe be gea Pou roceeding. We do not decide whether the C airma eager . recuse himself was erroneous under the ee an ion this case, see Pillsbury Co. v. FTC, 354 F.2d so 5 Bb : 1966), although we note that the views expresse Sing scaling have foreshadowed the Commission’s approach to this gation. 15b by increasing litigation,” however, the Commission, on December 12, 1978, finally instituted an investigation *" into the lawfulness of the rate structures for movements of scrap iron and steel, one of the recyclable materials herein involved. The Commission’s final report, issued on February 4, 1976, confirmed generally its previous find- ings with respect to scrap iron and steel.** Citing the This protracted litigation, challenging the Commission’s approval of a general rate increase in Ex Parte No. 281, pro- duced three opinions by a three-judge District Court, SCRAP v. United States, 371 F.Supp. 1291 (D. D.C. 1974) ; 353 F.Supp. 317 (D. D.C. 1973); 346 F.Supp. 189 (D. D.C. 1972); and two by the Supreme Court, United States v. SCRAP, 412 U.S. 669 (1973); SCRAP IJ, supra note 11. In SCRAP II the Court finally upheld the environmental impact statement prepared by the Commission for that proceeding. In recognition of the nonfinal and limited nature of the issues decided by the Com- mission in a general revenue proceeding, the Court determined that the EIS was adequate despite its failure to consider the environmental impact of the underlying rate structures, 422 U.S. at 329. *” Ex Parte No. 270 (Sub-No. 5), Investigation of Railroad Freight Rate Structure—Iron Ores, 345 ICC 8 (1976); Ex Parte No. 270 (Sub-No. 6), Investigation of Railroad Freight Rate Structure—-Scrap Iron and Steel, 345 ICC 867 (1976). ** The controversy surrounding the Commission’s approval of freight rates on scrap iron and steel dates as far back as 1960. The initial proceeding involved a complaint alleging that the rate structures violated § 3(1) of the Interstate Com- merce Act, 49 U.S.C. §3(1) (1970), quoted at note 79 infra. The Commission dismissed the complaint, ruling that scrap iron and iron ore do not compete. Institute of Seran Iron and Steel, Inc. v. Akron, C. & Y. R. Co., 316 ICC 55 (1962). In subsequent proceedings the Commission adhered to its finding that these materials do not compete, see, e.g., Ex Parte No. 259, Increased Freight Rates, 1969, 337 ICC 436, 474 (1970); Ex Parte Nos. 265 and 267, Increased Freight Rates and Charges, 1970 and 1971, 388 ICC 125, 207 (1971); Ex Parte No. 281, /nereased Freight Rates and Charges, 1972, 341 ICC 290, 413 (1972); Ex Parte No. 295, Increased Freight Rates [continued] 16b relative demand inelasticity of scrap iron and steel to freight rates, and finding that the relationship between scrap iron and iron ore in the steelmaking process is complementary and not competitive,* the report con- eluded that the rate structures were reasonable and non- discriminatory. The environmental impact statement pre- pared for this proceeding also concluded that these rate structures did not have a significant impact on the en- vironment.” On February 5, 1976 Congress enacted the Regulatory Reform Act, including within it Section 204. This sec- tion, in addition to directing the Commission to investi- gate the rail rate structures for “recyclable materials” and for “competing virgin natural resource materials,” as defined therein,** expressly reversed, for the purpose of the investigation, the rules normally governing com- plainants’ burden of proof. It directed the Commission to determine, after a “public hearing during which the burden of proof shall be on” the railroads, whether the “rate structures as affected by rate increases applicable to the transportation of such competing materials is just, reasonable, and nondiscriminatory.” ** Section 204 fur- ther instructed the Commission to order removal of all unreasonableness or unjust discrimination from such rate structures.” The remaining provisions of the statute re- and Charges, 1973, 849 ICC 250, 279 (1974). On one occasion the Commission did find that competition was shown on the record, and it therefore limited increases in scrap iron rates to those imposed on iron ore. Ex Parte No. 256, Increased Freight Rates, 1967, 882 ICC 280, 331 (1968). * 345 ICC 867, 1199-1200 (1976). °3'The environmental impact statement concluded that changes in transportation rates would have negligible short- and long-term impacts on demand for recycled scrap. “4 Section 204(e) of the Act, quoted in Appendix A. *° Section 204 (a) (2) of the Act, quoted in Appendix A. 2 Section 204 (a) (8) of the Act, quoted in Appendix A. ee a el 17b quire the Commission to comply fully wi i y with the require- ments of NEPA,” and directed the Environmental Pro- tection Agency ** and the Department of Transportation *” to participate and assist the Commission i “ipate ssion in carryin the required investigation. ov. Responding to this mandate, the Commission instituted the proceeding under review on February 25, 1976. By order it designated recyclable and virgin resource ma- terials for inclusion within its investigation and in- structed the railroads, in accordance with the burden of proof imposed upon them by Section 204, to submit evi- dence with respect to the costs and revenues derived from their movemeits of the listed materials.’ It also, by order, Incorporated into the record the findings and con- clusions of its previous investigation in Ex Parte No 270." After public hearings and submission of verified ** Section 204(d) of the Act, quoted in Appendix A. ** Section 204(b) of the Act, quoted in Appendix A, ** Section 204(c) of the Act, quoted in Appendix A. “ IT Joint Appendix (JA 841). The Commissi i the parties to submit evidence on seven ee he evidence of costs and movement of recyclable and virgin ma- terials; (2) historical evidence on utilization of recyclable materials; (3) sensitivity of recyclable materials to changes in transportation rates; (4) effect of rate changes on indi- vidual railroads; (5) effect of rate changes on service to shippers of recyclable commodities; (6) alternative rate structures; and (7) other perti . elsowheen. il. pertinent evidence not considered "IT JA 366. Petitioners and the United Sta i Commission’s decision to incorporate the oe te seen in Ex Parte No. 270 as an indication that the Commission relieved the railroads of their burden of proving the lawful- ness of the rate structures. On the circumstances disclosed b the record, we agree, Ex Parte No. 270 was a cticared proceeding which, as the Commission acknowledged, was si 4 nificantly different from the proceeding under review isaars [continued] 18b statements from interested parties, the Commission issued its final report and order, accompanied by draft and final environmental impact statements, on February 1, 1977. The evidence submitted by the railroads was repeatedly criticized by the federal agencies participating in the investigation, and by the Commission itself in its final report." It did indicate, however, that the rates for of the requirement of § 204 that the railroads maintain the burden of proof. Order at 76. Having acknowledged the dif- ferences between these proceedings, however, the Commission proceeded to treat the Coordinator’s conclusions as creating a presumption that the rate structures were lawful. See id. at 75-80. While we believe it was appropriate for the Com- mission to consider the evidence developed in Ex Parte No. 270, it was clearly inappropriate for the Commission to accord presumptive weight to the findings of the Coordinator’s re- port. That report was issued prior to the enactment of § 204. and was therefore superseded by it. Moreover, any approach which treated rate structures as presumptively lawful was in- consistent with the mandate of § 204. “In its reply to the railroads’ submissions EPA criticized the railroads’ evidence and contended that the railroads had not met their burden of proof. III JA 1299-1318. Among the deficiencies noted EPA found that the railroads “submitted only traffic and revenue data, ignoring the requirement that costs be shown for each of the representative moves”; “failed to respond” with any evidence on five of thesseven categories to which the Commission directed their attention; and pre- sented aggregate cost studies which “failfed] to reflect the peculiar transportation characteristics of the study commodi- ties.” III] JA 13038-1306. 8 See, e.g., Order at 31, 33. In particular, the Commission found that there was no evidence on the effect of the rate structures on intermodal competition, id. at 49, 100, and that “all respondents failed to show comparisons of results for recyclable commodities with their competing or potentially competitive virgin commodities,” id. at 31. In some instances, where evidence was submitted, the Commission declined to evaluate it, For example, the Commission declined to make a detailed analysis of the cost evidence presented. Jd. at 36. [continued] aoe ee (en ec a tt Kl ll a 19b movements of the listed recyclable materials were sig- nificantly higher than those for their virgin resource ma- terial counterparts.** In many instances the railroads’ evidence revealed that the rates on recyclables were in excess of the national average,** while corresponding rates on virgin materials were below compensatory levels.*’ Nevertheless, the Commission refused to con- clude that the rate structures were unlawful based solely on the evidence of wide rate disparities. Instead, it de- termined that it would apply traditional ratemaking poms confronted with deficiencies in the railroads’ evi- ence, the Commission repeatedly admonished the shippers for their failure to adduce evide tions. Id. at 18, 19, 131, 188, nt conten- ** The Commission computed ratios of revenues i costs and revenues to fully allocated costs for on carr ments. Comparison of those ratios demonstrated that the rates for recycled products were uniformly higher than the rates on virgin products. See, e.g., Order at 81, 181, 239, 288 335y, 362, 403. For example, the Commission’s comparison of the average rail transportation charge of iron ore with that of ‘Scrap revealed that the average rail rate of scrap was approximately twice that of iron ore, in dollars per ton Id at 136. Similarly, its comparison of the relative rates. for scrap versus commodities for paper, aluminum, copper, zinc and lead indicated that the rates for paper and aluminum scrap were more than one and a half times the rates for com- parable virgin products, and that the rates for lead scrap were three times the rates for virgin lead. Jd. at 45. See also id. at 196 (alumium rates), 295 (zine rates), 296 (lead rates). “ The majority of the revenue-cost ratios 1e 1 computed b encom ORS a pes esa exceeded the saiinel Aca ‘ io oO .8 for products moving b il. at 70, 81, 239, 288, 335y, 362, 403. le a lc “* The record indicated, for example, that eastern ern railroads carry virgin pulpwood and wood cobra substantially below their variable costs, III JA at 995-1000 1007, 1008, 1009-1020, at the same time that recycled waste. paper and textile wastes were transported at rates signifi cantly in excess of such costs. I JA at 326, 337. asia 20b criteria to determine the lawfulness of the rate structures on a product-by-product basis.” Applying such criteria, » it concluded that the rate structures on practically all of the recyclable materials were reasonable and that none ~ of the rate structures were discriminatory. The articu- lated bases for these determinations varied slightly ac- cording to the product involved. Referring to the rela- tive demand inelasticities of recyclable materials to freight rates, as shown by freight commodity statistics submitted by the railroads** and demand elasticity studies *® employed in the environmental impact state- ment, the Commission found that the recent rate increases did not result in a decreased volume in the amount of re- cyclable traffic moved by the railroads. The Commission further found that several of the recyclable materials did not in fact compete with their virgin material counter- parts for transportation purposes, and that shippers of recyclables were not competitively injured by current rate disparities. Based on these findings, supported by the conclusions of the accompanying environmental im- pact statement,"” the Commission issued the final order %* Order at 70. * The freight commodity statistics measured the volume of recyclable traffic carried by the railroads over several years and showed in most instances that the volume of recyclable traffic did not decrease during years of rate increases. *” The Commission relied to a great extent on the so-called Yellman elasticity study, submitted by the railroads, as well as on the results of elasticity studies analyzed in the environ- mental impact statement. Those studies revealed that demand for recyclable products had been inelastic to rate increases in recent years. See text and note at note 75 infra. ‘The environmental impact statement, analyzing the eco- nomic and environmental impacts of freight rates on each recycled product, concluded that freight rates have not had a significant effect on the use of recycled products, and there- fore that the Commission’s action has no significant impact on the quality of the environment. Order at 66-67. 2lb here under review, declining, with few exceptions,“ to order any reductions in the applicable rates. ; Three Commissioners dissented from the majority’s report, arguing that the Commission did not comply with its mandate under Section 204.7 According to the dissenting Commissioners, the majority unlawfully re- lieved the railroads of their burden of proof under Sec- tion 204 by failing to require the railroads to justify the rate structures based on the transportation char- acteristics of the products involved. Advancing similar as well as other related challenges to the Commission’s ce Lapeer thereupon filed these petitions for , In which the i joi j i that the order be set ooo igay ee ee oe II Much of the controversy throughout this proceedi has centered on the appropriate ea ys given to the Commission’s mandate under Section 204 We do not believe the interpretative issue is nearly as difficult as the array of conflicting and exceedingly elabo- rate positions presented by the parties would suggest.** "In a few instances the Commissi on found that for recyclable products were unreasonably high pod pds ingly ordered those rates reduced. Order at 425. “ Order at 425b-d (Commissioners Christi : : ristia ’ dissenting), 425e (Commissioner Clapp, dvesting). sictiy *® Petitioner NARI also a ppears to challenge th 5 the environmental impact statement cea “2 che poond ission. We do not address this issue, since we find that the challenged order i : } pen of § 4. “j er is not reasonably consistent with the man- ** Petitioners construe § 204, among othe i gressional declaration that Seaselahine ek «Aarne ahs echo compete for transportation purposes. The United States di - grees with this interpretation, arguing instead that § 204 . 35b to Section 202 of the Regulatory Reform Act to the effect that practically all commodities are demand in- elastic to freight rate structures indicate that such studies may have no special significance with respect to the rate structures on recyclable products. We need not, and thus do not, question the validity of the Com- mission’s elasticity studies “ in order to observe that its approval of the rate structures, based in several instances solely on the results of these studies, was arbitrary in light of their admitted limitations and the findings of this report. Finally, we stress that the Commission was not per- mitted in this investigation to maintain high rates on recyclables based on general assertions by the railroads concerning the profitability of recyclable traffic and their needs for additional revenues. While we agree with the Section 202(g) of the Regulatory Reform Act, 49 U.S.C. $1(5)(g). The Commission found that, particularly with respect to most manufactured commodities, “the freight rate represents such a small percentage of the total delivered price of the product * * * that major increases in transport prices will not cause significant product demand shifts but may affect modal choice.” INTERSTATE COMMERCE COMMISSION, THE IMPACT OF THE IMPACT OF THE 4-R Act RAILROAD RATEMAK- ING PROVISIONS 102 (1977). ' Petitioner NARI, challenging both the accuracy and the relevance of the Commission’s elasticity studies, appears to contend that under no circumstances may the Commission con- sider such evidence in determining the lawfulness of the rate structures, Petitioner NARI’s supplemental brief at 5-6. We disagree. Where the Commission erred here is that it accorded virtually dispositive weight to evidence, having by its own ad- mission limited significance to a determination of the issues presented, without fully considering other evidence directly relevant to those issues. The Commission is not prohibited from taking such evidence into account, provided it otherwise adheres to its mandate by examining traditional factors re- lated to the transportation of commodities, and it articulates a rational basis for attributing significance to it. 36b Commission that it was not required by Section 204 to establish a maximum reasonableness standard ap- plicable to all recycle! products, we have no doubt that it was prohibited from approving rate structures unless they were shown to be justified by the transportation characteristics of the particular products. To us, this means that the Commission was compelled by Section 204 to scrutinize the railroads’ cost justifications for current rate levels, and that it was insufficient to con- clude that the rates were reasonable merely because these levels were profitable for the railroads or because recyclable traffie would continue to move by rail at the railroads’ current revenue levels. It may be that, hav- ing examined fully the transportation characteristics of the products involved, the Commission might have de- termined to fix a maximum reasonableness standard for recycled products. And in measuring the appropriate standard the Commission might even have allowed for a reasonable margin of profitability under the rate struc- tures. It is not for us to determine at this stage whether this course, if pursued, would have been proper, or pre- cisely how a maximum reasonableness standard should be measured," since, owing to the Commission’s failure ** Petitioner NARI devoted a substantial portion of its argu- ments to the contention that existing rate structures, when measured against guides applied in other rate situations, are unreasonable. In support of its position it relied on: (1) the Commission’s 1972 Burden Study, INTERSTATE COMMERCE COMMISSION, RAIL REVENUE CONTRIBUTION BY COMMODITY AND TERRITORY FOR THE YEAR 1972, Statement No. 153-72; (2) the Commission’s recently promulgated market dominance regulations, 49 C.F.R. § 1109.1, 41 Fed. Reg. 44183 (1976) ; and (8) the Commission’s recent decision in San Antonio, Texas, Acting By and Through Its City Public Service Board », Burlington Northern, Inc., Docket No. 36180. The essence of NARI’s argument appears to be that the existing rate structures are unreasonable per se because they exceed standards announced in these proceedings by a wide [continued] ee ee 37b to require proof on the transportation characteristics of these products, there is no basis in the record for these determinations. We leave these and the other questions alluded to for resolution by the Commission upon re- mand. margin. In its Burden Study, for example, the Commission found that the average cost-revenue ratio on national traffic was 131.8%. A large number of the ratios developed by the Commission in this proceeding exceeded this figure. See note 35 supra. Similarly, many of the ratios were higher than the 160° ratio announced in the Commission’s market dominance regulations as creating a rebuttable presumption that a carrier possesses market dominance over the service rendered under a proposed rate. 49 C.F.R. § 1109.1(g) (2). Finally, although the Commission did not analyze cost evidence in this proceed- ing, it appears that the rate structures on many of the re- cyclable products would be invalid under the Commission’s San Antonio decision, in which it prescribed rates approximat- ing the cost levels of the service therein involved. The Commission contends that none of the standards sug- gested by NARI compel a finding of unreasonableness, or should be used to set a standard of maximum reasonableness, because they were not intended to establish the reasonableness of particular rates. Respondent’s brief at 58-64. Moreover, the Commission asserts that the question of the reasonableness of the rate structures should not be dependent upon a cost standard, at whatever level such standard might be set. Jd. at 58-59. Since costs alone have never been held to determine maximum reasonable rates, see, e.g., General Motors Corp. v. New York Central R. Co., 311 ICC 622, 625, aff’d, 207 F.Supp. 641, 648 (12.D. Mich. 1962), aff'd per curiam, 324 F.2d 604 (6th Cir. 1973); United States v. Great Northern R. Co., 293 ICC 341, 345 (1954); Morrison-Knudson Co. v. Missouri Pa- cific R. Co., 308 ICC 205, 209 (1959), we agree that the Com- mission was neither required to limit its consideration to this criterion solely, nor compelled to establish a maximum stand- ard of reasonableness based exclusively on cost-derived stand- ards. Granting this much, however, does not lead us to con- clude that the Commission was entitled, as it has, to ignore any consideration of costs. Section 204, as we have stated, required it to determine the lawfulness of the rate structures based on a [continued ] 38b B. Discrimination Issues The Commission stated that in determining whether the rate structures were unjustly discriminatory it would be guided by its “traditional standards” under Section 3(1) of the Interstate Commerce Act,"* and would there- fore conduct a four-step analysis. The four steps listed by the Commission were: (1) whether disparities exist between the ratios for recyclable and virgin materials; (2) whether there is “in fact” competition between these materials; (3) whether shippers of recyclables are being complete investigation of the transportation characteristics involved. Nor does our rejection of NARI’s argument inevitably sup- port the view that the Commission was not authorized in this investigation to establish a maximum standard of reasonable- ness. In this regard, we note that the market dominance regu- lations promulgated by the Commission under the Regulatory Reform Act were designed to assist it in focusing on areas where maximum rate regulation is needed in the public inter- est. It may be that during the course of an investigation con- ducted consistent with its mandate under § 204 the Commis- sion would decide that some equivalent standard would serve a similar purpose concerning rates on recyclables. ™ It shall be unlawful for any common carrier subject to the provisions of this chapter to make, give, or cause any undue or unreasonable preference or advantage to any particular person, company, firm, corporation, association, locality, port, port district, gateway, transit point, re- gion, district, territory, or any particular description of traffic, in any respect whatsoever; or to subject any par- ticular person, company, firm, corporation, association, locality, port, port district, gateway, transit point, region, district, territory, or any particular description of traffic to any undue or unreasonable prejudice or disadvantage in any respect whatsoever: Provided, however, That this paragraph shall not be construed to apply to discrimina- tion, prejudice, or disadvantage to the traffic of any other carrier of whatever description. 49 U.S.C. §3(1) (1970). 39b injured by the rate disparities; and (4) whether rate disparities are justified by differences in the transporta- tion characteristics of the materials involved.” Applying these standards, it concluded that most of the recyclable materials did not in fact compete with their virgin ma- terial counterparts, and that shippers of all of the re- cyclable materials were not competitively injured by ex- isting rate structures. As it had in addressing the issue of the reasonableness of the rate structures, the Com- mission again avoided an examination of the transporta- tion charactristics of the various products, in this in- stance by concluding its analysis at the third of these criteria. We agree with the Commission’s initial determination to consider the discrimination issues within the frame- work of the broad prohibitions provided by Section 3 (1).“' Moreover, we concur in the Commission’s view that resolution of the discrimination issues in this pro- “° Order at 72. The Commission thus introduced a novel ele- ment, competition in fact, into its traditional §3(1) inquiry. In typical § 3(1) cases the Commission has required a showing that a party is “competitively injured, actually or potentially.” Id. at 72 n.20. See also Chicago Board of Trade v. Illinois Central R. Co., 344 ICC 818, 831 (1973). ‘' The Commission’s initial position was that it “should not restrict” itself to viewing its investigation under § 2 of the Act, 49 U.S.C. § 2 (1970), which prohibits unjust discrimina- tion between like kinds of traffic under substantially similar circumstances and conditions, but also should consider the prohibitions under § 3(1). Jd. at 71. To the extent that the Commission’s subsequent application of § 3(1) standards may have reflected a view that it was not required to examine the transportation characteristics of these products, see id. n.19a, this determination was inconsistent with its mandate. We note, however, that according to its statement of the criteria applied under § 3(1), the Commission was required to consider whether differences in the transportation characteristics justi- fied disparities in ratios. Jd. at 72. ‘ i V 40b ceeding required it to consider carefully the competitive relationships between the materials involved. We hold, however, that on this record the Commission’s findings of no competition in fact, and no actual competitive injury, were inconsistent with its mandate. Turning first to the Commission’s findings of no com- petition, we note that an obvious concern of Congress in enacting Section 204 was to ensure that the Com- mission take into account the full competitive relation- ships between recyclable and virgin commodities, In its general revenue proceedings the Commission had re- jected challenges to rate increases, concluding consistently that recyclable and virgin products did not compete for transportation purposes because their competitive re- lationships were complementary. As in this proceeding, therefore, the Commission applied a standard of com- petition requiring a showing that recyclable products were substitutable for, rather than functionally equivalent with, virgin products in the manufacture of industrial products. In the view of some members of Congress this standard was unduly narrow and its application by the Commission had resulted in approval of freight rates which retarded rather than promoted industrial use of recycled products. The pertinent passages of the legis- lative history of Section 204 suggest further that these ** Senator Tunney, the sponsor of the amendment to § 204 placing the burden of proof upon the railroads, stated that “the investigation must proceed with an articulation of a presumptive standard of competition. For the purpose of this investigation, the Commission should consider recyclable and virgin materials to be competing if they are functionally equivalent in the manufacturing stage.” 121 Cong. Rec. 38451 (1975). In a similar vein, the Senate Commerce Committee teport stated: “[T]he record * * * indicates that the Commis- sion may not be taking into account the full competitive rela- tionship * * *. A reexamination of that relationship will be necessary if this investigation is to achieve its goal.” S. Rep. No. 94-499, 94th Cong., Ist Sess. 47 (1975). 41b proponents believed application of this standard would frustrate the purpose of the investigation required by the statute. Although the competition standard employed by the Commission was thus an important area of congressional concern, it is evident from both the language of the statute and its remaining legislative history that it was not the main concern leading Congress to require this investigation. As we have previously stated, Congress’ major concern was with removal of rate structures which impeded or discouraged development of industrial re- cycling. In light of this dominant purpose, and especially due to the absence of any statutory reference to the standard of competition to be applied, we are unable to conclude that Section 204 was a legislative directive to the Commission to make positive findings that these products compete for transportation purposes. Nor may we conclude that Congress meant to prescribe any par- ticular standard of competition for application in this investigation. While, as indicated previously, some of the proponents of Section 204 believed that the Com- mission’s investigation should proceed with a presump- tive standard of competition based on the functional equivalency of the products in manufacturing processes, Section 204, by its terms, did not enact such a standard.” ** To hold, as petitioners suggest, that the Commission was required by § 204 to find or assume that recyclable and virgin commodities compete would require us to give controlling weight to the remarks of Senator Tunney. We decline to do so not only because they are not supported by the language of § 204, but also because they were not adopted in the Senate Commerce Committee Report, which indicated instead that the Commission should “reexamine” competitive relationships consistent with the investigation’s purpose of removing unlaw- ful impediments to the movement of recycled materials. See note 82 supra. See also Zuber v. Allen, 396 U.S. 168, 186 (1970); American Airlines, Inc. v. CAB, 365 F.2d 989, 948 (D.C. Cir. 1966). 42b At the same time, giving effect to the specific mandate of Section 204—that the Commission order removal of unlawful rate structures found to discourage industrial recycling after a broad investigation—we believe that the Commission was not entitled to apply a competition standard so narrow in scope as to obviate the statutory purpose of its investigation. The lawfulness of the rate structures was not to be governed by the fact that re- cyclable products had been unable to attain actual com- petitive status with virgin products under existing rates. Instead, we believe that to warrant dispositive findings of no competition the Commission was required to find that the various products were neither actually nor po- tentially competitive for transportation purposes. The Commission was therefore required to consider the po- tential under the rate structures for competitive relation- ships between recyclable and virgin products, and for competitive injury to shippers. This standard, we might add, not only comports with the Commission’s mandate, but is fully consistent with competition standards tra- ditionally applied by the Commission in other discrimina- tion cases,"* When measured against this standard, the Commis- sion’s findings of no competition cannot be sustained. The Commission uniformly required a showing of competition “in fact” to establish discrimination, and concluded in each instance that the recyclable and virgin material counterparts were noncompetitive because they were not “* Baltimore & Ohio R. Co. v. United States, 391 F.Supp. 249, 259 (E.D. Pa. 1975) (“It was the potential for discrimi- natory treatment inherent in the practice which the Commis- sion found to be violative of Sections 2 and 3(1).”) See Chicago Board of Trade v. Illinois Central R. Co., supra note 80. See also Chicago & Eastern Illinois R. Co. v. United States, 384 F.Supp. 298, 300-801 (N.D. Ill. 1974) (three-judge court), aff'd, 421 U.S. 956 (1975). 43b actually substitutable in manufacturing processes.” It made no findings, and was offered no evidence by the railroads, to the effect that the recyclable materials were not potentially competitive in manufacturing processes, in terms of either their substantiality or their functional equivalency. As we have indicated, it was patently insufficient for the Commission to approve rate structures on recyclables without consideration of such evidence, for to do so was to contravene its mandate in this proceeding. It follows from our discussion that the Commission’s alternative findings of no competitive injury also may not be sustained. Based on the same evidence relied upon in determining the reasonableness of the rate struc- tures,** the Commission invariably concluded that shippers of recyclables had not suffered actual injury as a result of disparate rate treatment. That evidence, as we have seen, does not support a finding that the rate structures do not present a potential for competitive harm to ship- pers of recyclables. Instead, it only reflects the respon- siveness of the relatively small amount of recyclables shipped to the recent rate increases approved by the Commission. It does not measure the effects of the rate structures on recyclable traffic. Nor does it account for increases in recyclable traffic that may have occurred absent the effects of the rate structures. Unable to discern from this record any support for the Commission’s findings on the discrimination issues, we set them aside, leaving for the Commisison’s determina- tion such questions as may be involved in the assess- ment of the potential competition and competitive injury * See, e.g., Order at 106, 220-221, 398. ’ See text and notes at notes 71, 74-76 supra. 44b presented by these rate structures.’ Recognizing the breadth of the competition standard the Commission will be required to apply, however, we note that only extra- ordinary circumstances, not disclosed by this record, will warrant another effort by the Commission which omits consideration, under a Section 3(1) analysis, of the issue whether disparities in the rate structures are justified by differences in the transportation characteristics of these products. IV Before concluding, we stress that we are unimpressed with the Commission’s attempt to excuse its failure to comply with its mandate by repeated reference to the expedited nature of this investigation. The Commission has for a long time promised, and was finally compelled by Section 204, to resolve the longstanding controversy related to these rate structures. In light of the Com- mission’s general familiarity with the issues involved, and the fact that a significant portion of the extensive record compiled consists of incorporated matter pre- dating its investigation, the proffered excuse is untenable. This is not a case where an agency’s determinations are or should be accorded an unusual degree of deference by a reviewing court because of the novelty of the issues and the time constraints within which the agency must operate.”” *t There are indications on this record that some, if not all, of the rate structures present potential for competitive harm to shippers. See, e.g., Order at 1382 (“price and availability of raw materials” found to be one factor affecting a manufac- turer’s determination to build a scrap-consuming electric fur- nace). In order to meet their burden of proof on this issue, the railroads should at a minimum be required to survey existing and potential users of recyclables to determine whether reductions in rates would encourage them to purchase more or make additional use of recyclable materials. 88 See Market Dominance, supra note 63, —— F.2d at ——, slip op. at 12-13; Amerigan Public Gas Ass’n v. FERC, —— [continued] 45b On the other hand, although we disagree with the Commission’s actions on this record, we also emphasize that our discussion of the standards employed by the Commission to determine the lawfulness of these rate structures, and of the evidence submitted by the rail- roads, is not intended to set forth our view of the law- fulness of any of the rate structures involved. They may be lawful, or they may not. In either event, it was not for the Commission to decide initially based on an adequately supported consideration of the transporta- tion characteristics of the products consistent with its mandate. We have concluded only that the Commission has not done so in this case. Nor, by our disposition, do we mean to intimate any view on the several contentions advanced relating to the measures the Commission should adopt in proscribing either maximum rates or recyclables or maximum rate disparities between recyclable and virgin products. All of these questions we leave to the informed judgment of the Commission, after full consideration of the railroads’ justifications for disparities in the rate structures and the effect of the rate structures in terms of their actual and potential impact on the use of recycled products. With these closing admonitions, we conclude that the Commission has not reasonably adhered to its mandate in this proceeding. Accordingly, we vacate the order un- der review in Nos. 77-1187 and 77-1292 in its entirety, and remand the case for further proceedings consistent with this opinion. We also dismiss the petition for re- view in No. 77-1193.” So ordered. ae —— (D.C. Cir. 1978) (per curiam) (slip op. at 7-18). 8° See note 1 supra. 46b 47b APPENDIX A such rate structure of such unreasonableness or just discrimination; and Section 204 of the Railroad Revitalization and Regula- unjust discrimination; an tory Reform Act of 1976, P.L. 94-210, 45 U.S.C. § 793, (4) report to the President and the _Con- provides: gress, in the annual report of the Commission INVESTIGATION OF DISCRIMINATORY FREIGHT RATES FOR THE TRANSPORTATION OF RECYCLABLE OR RECYCLED MATERIALS Sec. 204. (a) INVESTIGATION.—The Commission, within 12 months after the date of enactment of this Act, and thereafter as appropriate, shall— (1) conduct an investigation of (A) the rate structure for the transportation, by common carriers by railroad subject to part I of the Interstate Commerce Act, of recyclable or re- cycled materials and competing virgin natural resource materials, and (B) the manner in which such rate structure has been affected by succes- sive general rate increases approved by the Commission for such common carriers by rail- road; (2) determine, after a public hearing during which the burden of proof shall be upon such common carriers by railroad to show that such rate structure, as effected by rate increases ap- plicable to the transportation of such competing materials, is just, reasonable, and nondiscrimi- natory, whether such rate structure is, in whole or in part, unjustly discriminatory or unreason- able; (3) issue, in all cases in which such trans- portation, rate structure is determined to be, in whole or in part, unjustly discriminatory or unreasonable, orders requiring the removal from for each of the 8 years following the date of enactment of this Act, and in such other re- ports as may be appropriate, all actions com- menced or completed under this section to elimi- nate unreasonable and unjustly discriminatory rates for the transportation of recyclable or re- cycled materials. (b) PARTICIPATION.—The Administrator of the Environmental Protection Agency shall take such steps as are necessary to assure that the Commis- sion carries out the requirements set forth in sub- section (a) of this section as expeditiously as pos- sible. Such Administrator is authorized to participate as a party in the investigation to be commenced by the Commission under such subsection (a). (c) RESEARCH, DEVELOPMENT, AND DEMONSTRA- TION.—The Secretary, in cooperation with the Com- mission, shall establish a research, development, and demonstration program to develop and improve trans- port terminal operations, transport service char- acteristics, transport equipment, and collection and processing methods for the purpose of facilitating the competitive and efficient transportation of re- eyclable or recycled materials by common carriers by railroad subject to part I of the Interstate Com- merce Act. 8 (d) Review.—Orders issued by the Commission pursuant to this section shall be subject to judicial review or enforcement in the same manner as other orders issued by the Commission under the Inter- state Commerce Act. In all proceedings under this 48b section, the Commission shall comply fully with the requirements of the National Environmental Policy Act of 1969 (42 U.S.C. § 4821 et seq.). (e) DEFINITIONS —As used in this section, the term— (1) “recyclable material” means any ma- terial which has been collected or recovered from waste for a commercial or industrial use, whether or not such collection or recovery fol- lows end usage as a product; and (2) “virgin natural resource material” and “virgin material” mean any raw material, in- cluding previously unused metal or metal ore, woodpulp or pulpwood, textile fiber or material, or other resource which is, or which will become (through the application of technology), a source of raw material for commercial or in- dustrial use. 49b (Title Omitted in Printing) a Filed August 7, 1978 Before: Wricnt, Chief Judge. ORDER It is Orperep, sua sponte, that the opinion of the Court filed August 2, 1978, is hereby amended as follows: Page 4, note 1, Delete phrase ‘‘and remanding’’ in sixth line from the bottom of the page. Page 4, note 1, Add date ‘‘ August 2”’ in last line, Page 5, note 3. Revise to read: See p. 17 & note 42 infra. Page 9 note 15, Revise page citation to read: see pp. 28, 30-31, & notes 71-72 infra, Page 13, line 1. Change ‘‘require’’ to ‘‘required’’. Page 16, note 39. Delete ‘‘See text and note at note 75 supra.”’ Page 20, line 2, Revise ‘‘As interpreted elsewhere’’ to read ‘‘As has been interpreted elsewhere’’. Page 21, line 4. Change ‘‘structure’’ to ‘‘structures’’. Page 26, line 19. Revise to read: ‘‘—we shall discuss the Commission’s determinations on each of these’’. Page 39, line 5, Substitute ‘‘substitutability’’ for ‘*substantiality’’. Page 40, note 88, Change ‘‘See’’ to ‘‘Cf.’’, Page 41, line 9. Delete ‘‘not’’; sentence should read ‘was for the Commission to decide initially based on’’. Page 41, line 17, Change first ‘‘or’’ to ‘‘on’’; sen- tence should read ‘‘either maximum rates on recycla- bles or maximum rate’’. 50b (Title Omitted in Printing) Filed August 25, 1978 Before: Wricut, Chief Judge. OrverR It is Orperep by the court, sua sponte that the opinion of the court filed August 2, 1978 be, and it is hereby, amended as follows: Page 13, note 30. Change ‘‘(JA 341).’’ to read ‘‘(JA) 341.”? in line 1, Page 14, note 31, Delete period at the end of the 4th line from the end. Page 31, note 76, Delete the 4th, 5th, and 6th words, ‘‘Impact or THE’’, in the next to last line. Page 35, note 81. Change ‘‘/d.’’ in line 6 to ‘‘Order’’. Page 35, text. Change “charactristies” in line 11 to ‘‘characteristics’’, Page 41, note 88, Change “(D.C. Cir. 1978)” to read (D.C, Cir, No, 75-2105, decided May 10, 1978)’’. Page 42, text. Delete first comma in the third line from the bottom. Per Curiam For the Court /s/ Rosert A. BonNER Robert A. Bonner Chief Deputy Clerk 5lb (Title Omitted in Printing) Filed September 6, 1978 Before: Wricut, Chief Judge ORDER It is Orperep by the court, sua sponte, that the opinion of the court filed August 2, 1978 in the above cases be, and it is hereby, amended as follows: Page 27 Delete quotation mark preceding the word “proper” in the last line of text. Footnote 69 is amended to read: Chicago Board of Trade v. Illinois Central R. Co., 329 ICC 529, 533 (1967) (reasonableness of rates may be determined ‘‘in relation to any other satis- factory standard which permits [the Commission] to measure and determine the factual question presented”). Page 28 Delete quotation mark following the word ‘*standards.’’ in the first line of text. Footnote 70 is amended to read: Burlington Northern, Inc. v. United States, 549 F.2d 83, 88 (8th Cir. 1977). Per Curiam For the Court /s/ Georce A. FIsHEer George A. Fisher Clerk APPENDIX C le APPENDIX C UNITED. STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT SEPTEMBER TERM, 1978 No. 77-1187 NaTionaL AssociaTION oF Recyciine Inpustries, Inc., Petitioner Ve INTERSTATE COMMERCE ComMMISsION and UnitTep StaTEs oF America, Respondents Atcuison, Topeka & Santa Fr Rattway Company, ET AL, Intervenors And Consolidated Cases Nos. 77-1193 & 77-1292 Filed October 16, 1978 Before: Wricut, Chief Judge, and Swycert* and Leven- THAL, Circuit Judges. ORDER The court has before it petitioner’s petition for rehear- ing and modification of this court’s order of August 2, 1978, the response thereto of the Interstate Commerce Commis- sion, and the opposition thereto of the intervenors herein. On consideration thereof, and for the reasons stated in the following per curiam, It is OrpErEp by the court that the Interstate Commerce Commission complete its action on remand within six (6) months of the date of this order. For the Court /s/ Greorce A. FIsHEeR George A. Fisher Clerk * Of the Seventh Circuit, sitting by designaticn pursuant to 28 U.S.C. § 291(a) (1976). 2¢e Circuit Judge Levenruat dissents. Per Curiam: As the court indicated in its opinion in this ease filed August 2, 1978, Section 204 of the Regulatory Reform Act of 1976 directed the Interstate Commerce Com- mission to conduct an expedited investigation into the law- fulness of certain rate structures and to order removal of all rates not shown by the railroads to be just, reasonable, and nondiscriminatory. The date of the legislation is Feb- ruary 5, 1976, and Section 204 provides that the investiga- tion be concluded within one year of that date. The investi- gation culminating in the orders under review here met this timetable, but on August 2, 1978 we vacated the orders of the Commission and remanded the case to the Commis- _ sion. Thus two and a half years after passage of this ‘‘ex- pedited’’ legislation the Commission is back at Square One. Petitioner in its motion suggests that at the least the (ommission should be required to complete proceedings on remand within six months, whereas the Commission and the railroads suggest that the Commission should have an indefinite time to comply with the congressional mandate of expedition. It is this court’s view that the congressional mandate of expedition should be respected to the extent possible, given - the current delay. Not only should Commission action on remand be expedited, but judicial review thereof, if any, should be as well. LeventuaL, Circuit Judge, divsenting: I do not believe we should enter an order now specifying a six-month period for completing the investigation required by our opinion. I would agree to an order requiring the ICC to make a re- port within six months if the investigation has not been completed, indicating the state of affairs and explaining why more rapid progress has not been made. The difference is not cataclysmic—for even under the present order, the ICC can return and ask for an extension of time. But the 3¢ difference is not merely one of form. The court’s order pre- supposes a capacity to judge how long this investigation should take, and I have no basis for a reasoned judgment on that score. Se oe rere eee eee = APPENDIX D APPENDIX D 30994 INTERSTATE COMMERCE COMMISSION Ex PARTE No. 319 INVESTIGATION OF FREIGHT RATES FOR THE TRANSPORTATION OF RECYCLABLE OR RECYCLED COMMODITIES 3d INVESTIGATION OF FRT. RATES RECYCLABLE COMMODITIES 1i3 TABLE OF CONTENTS Page Introduction and History of the Proceeding ----------------++-re+eeeeenee ee eneeneee 115 Evidence Requested and Presen (ed --------++-+----+0seeeeeenennennrnnnnnnnennennnennnnn 117 Method of Analysis and Decisionmak ing--------------++---+errs errr renee ee ee rere nenee 156 Table | Commodities Scrap iron and Steel -------------------0--+eeeneerereceesennsnnesecaseceessenscscenscsoncs 160 Blast furnace, open hearth, rolling mill or coke oven products and fly PY) | Coenen ee 218 ALUMINUM ------- 0-2-2 - ene eee ee eee eee e en eeeneneeeeneeenncnnneeccnecaenanrsarcatanerannananes 22) Copper --------eeeenennnencecenenernececnccerecscceccrensenensesnncnsescncncescacsasacssnsones 274 Lead and ZiMe -----------------+-eeennnerereenceennsenensreensenennnececsennnecseananenanns 301 Tit ------nn nn nnnnen nnn en enn ee cn eeceneeenneeeeee nea enneeanseaanncaseeecsneaasensscaaanaaasansees 334 Pulpwood, woodchips, wood pulp and waste paper-----------++++--+-+ee+-+e= 339 Textile waste ------ te eeeeenen eee eeeeeneeaeeeeseaseaeeeneaseneeeaneaseceeascssasasesancaseees 371 Cullet----------+--+-0-0neeenereeeeeeeneeennnenaneneneneasceasaeasacaacencascccsescssesacsnanass 384 RUDDEr --------+- +002 ne neneenn eee neeneennneceenenaennnasnannannaranncaseetarcnssenassanacrcses 396 Table Il Commodities General ------------+++00+--nsennenneencnnensesaneceeacnannasasncsnancacannasccesacananacacens 417 Bakery Waste ----------------+--0-0eeeeeneneececencnnennncnnennnnnseceenecncaccsnnaacaenns 419 Shavings Of SAWdUSt------------------------eeeen owen nen ewnneenenncnnnenensnsnnsesensnsanes 420 Beverage COMmtainers -----------------------0e2e-neee ee neeeennnnnennnnneceneneneneaennnenns 422 Steel CONAINETS -------------- +20 +e nn eneenenenenennnennanaesnscneenenecancnseseacennecees 424 Wo0d SCrap OF WASlE ---------------2e er een een en nee ennnnnnnnnnnnencenncanenencaseneanacen 42 Municipal garbage waste----------------------++++++-sereneenenennennnnnnnnnnnnaennnanee 426 Bags --------+---00e+eeenneneneneeenneencnnennececascnserecasaanasaeanacenaenenscasscacansascaees 427 General Discussion and Conclusions -----------+-++-+++++eeeeenneree nnn nnne renee nee neee 427 Ultimate Find ings--------------------+-------e2e- cere eeeerenecennecsenenen anne arananeencseanes 431 APPENines --------+-----2---eeennnnnnennnenacenenecnnscscenacsnsenennncscsascnsnasascscacansees 434 (Old: (1 Meee eee ee 449 356 LCC 4d 114 INTERSTATE COMMERCE COMMISSION REPORTS Ex Parte No 319! INVESTIGATION OF FREIGHT RATES FOR THE TRANSPORTATION OF RECYCLABLE OR RECYCLED COMMODITIES Decided February |, 1977 1. Upon investigation of the railroad freight rate structures for the transportation of recyclable or recycled materials and competing virgin, natural resource materials, and the manner in which such rate structure has been affected by general increases approved by the Commission. 2. Upon consideration of the record, found that the rate structures of the following commodities in the following territories are not unjustly discriminatory but are unjust and unreasonable (a) aluminum residues in official, southern, and western territories, (b) miscellaneous nonferrous metal residues in official territory, (c) copper matte, speiss or flue dust in western territory, (d) cullet in official, southern and western territories, (e) reclaimed rubber in official and southern territories, (f) ashes in official and western territories, and (g) zine dross in southern territory 3 Upon consideration of the record, found that additional investigation into the reasonableness of the rate structures of the following commodities in the following territories is required: (a) miscellaneous nonferrous metal residues in southern territory; (b) copper matte in southern territory, (c) lead matte in southern territory, (d) wood scrap in western territory, (e) municipal garbage in otticial, southern and western territories, (1) bags, old in southern and western territories, (g) bags, old having value for conversion in official, southern and western territories, and (h) bakery waste in official, southern, and western territories 4 Upon consideration of the record, found that the decisions made herein do not significantly affect the quality of the human environment within the meaning of the National Environmental Policy Act of 1969. 5S Upon consideration of the record, found that the railroads should alter their tariff detinition of recyclable to conform with that found in section 204(eMi) of the Railroad Revitalization and Regulatory Reform Act of 1976. 6 Proceeding discontinued except as otherwise ordered A. C. Armstrong, Harry N. Babcock, Donald W. Boe, John A. Daily, William C. Farris, George M. Gallamore, R. W. Kienle, W. C. Includes Fx Parte No 270 (Sub-No. 8), Investigation of Railroad Freight Rate Structure—dron Ores, and Ex Parte No 270 (Sub-No. 6), Investigation of Railroad Freight Rate Structure —Scrap Tron and Steel 356 1.C.C. 5d INVESTIGATION OF FRT. RATES RECYCLABLE COMMODITIES 115 Leiper, Charles N. Marshall, R. J. Murphy, Sr., S. P. Petraities, C. C. Rettberg, Jr., James E. Sykes, D. M. Tohmie, and Donald L. Turkal for respondent railroads. J. Raymond Clark, John F. Donelan, Maurice A. Frater, and John K. Maser III, tor supporting shippers. Eston H. Alt, William C. Anderson, Ralph H. Bell, C. J. Berretta, William Betcher, Michael M. Briley, Dennis Burg, J. Raymond Clark, Richard D. Cooper, Donald R. D’Argento, Elliot L. Davis, N. L. Gershon, Arthur Goldman, John W. Gosselin, Howard Gould, John §. Grahm, Morris Hershorn, H. J. Hussman, Dickson R. Loos, L. D. Mangan, Edward L. Merrigan, Paul V. Miller, Maynard L. Moore, Jr., Theodore A. Newman, Kenneth R. Pepperney, Ross H. Prater, Warren Price, Jr., Robert B. Reedy, David Reichert, Russell R. Sage, Dan E. Sauve, William L. Slover, David H. Smith, D. A. Sommer, Stephen D. Strauss, Al Super, James H. Thrash, Robert F. Toia, and Paul P. Watkins for opposing shippers. G. William Frick tor the Environmental Protection Agency. Joseph C. Lynch and Hydee C. Thompson for the Special Projects Staff, Bureau of Enforcement. REPORT AND ORDER OF THE COMMISSION By THE COMMISSION INTRODUCTION AND HISTORY OF THE PROCEEDING The institution of this investigation was mandated by Congress in section 204 of the Railroad Revitalization and Regulatory Reform Act of 1976 (the 4R Act) which became law February 5, 1976. Section 204, as is here pertinent,’ directs the Commission to investigate, (a) the rate structure of the railroads for the transportation of recyclable or recycled materials (recyclables) and competing virgin natural resource materials (virgin materials or Virgin commodities)’ and, (b) the manner in which such rate ‘The full text of section 204 is set forth in appendix A ‘Section 204(e) defines “recyclable materials” as “any material which has been collected or recovered trom waste for a commercial of industrial use. whether or not such collection or recovery follows end usage as a product.” “Virgin natural resource material” and “virgin material” mean any raw material, including previously unused metal or metal ore, woodpulp or pulpwood, textile fiber of material, of other resource which is, of which wil! become (through the application of technology), a source of raw material for commercial or industrial use. Prior to the enactment of this provision the Commission has sought to encourage the movement of recyclables, see for example, Transportation of “Waste” Products for Reuse. 124 MCC. $83 (1976) 356 LCC. 6d 116 INTERSTATE COMMERCE COMMISSION REPORTS structure has been affected by successive general freight rate increases. The burden of proot is on respondents. The Commission must determine whether such rate structure is, in whole or in part, just, reasonable and not unjustly discriminatory. If we find the rate structure, in whole or in part, to be unreasonable or unjustly discriminatory, we are to issue orders requiring the removal of such unlawfulness. Section 204 requires the Commission to complete its investigation and make its findings by February 5, 1977. Pursuant to this mandate the Commission, in an order’ served February 25, 1976, instituted this proceeding stating that determinations of discrimination were to be primarily based on comparison of cost-revenue relationships and the competitive relationship of the involved materials. The order included (a) a list of recyclable or recycled materials and their corresponding standard transportation commodity code (STCC) numbers, (b) a format for the presentation of evidence,’ and (c) a bibliography of studies concerned with the relationships between recyclable and virgin materials. Through subsequent orders two tables evolved which contain the specific commodities under investigation. Table I contains a list of recyclable and recycled materials, and opposite it a list of their competing or potentially competing virgin natural resource materials. Table Il contains a list of recyclable and recycled materials only. The Commission has no knowledge of nor have any of the parties in this proceeding made us aware, of a competing virgin natural resource material." The rate structures’ for the recyclables in table I have been investigated to determine whether they are reasonable and nondiscriminatory. The rate structures for the recyclables in table Il have been investigated to determine whether they are reasonable since they apparently do not compete with virgin natural resource materials. Ex Parte No. 270 (Sub-No. 5) Investigation of Railroad Frt. Rate Structure, 345 1.C.C. 548 (1976) and Ex Parte No. 270 (Sub-No. 6), Investigation of Railroad Frt. Rate Structure, 345 1.C.C. 867 (1976), ‘See appendia This tormat will be discussed in detail later in this report “Tables Pand Uh as they have been finally constituted, are set out later in the report as well asin uppendia ¢ Although section 204 uses the term “rate structure” this term refers to a single-entity composed of separately established, interrelated cates, Western Traffic Assn.—Agreement, 276 1C © I84 (1949) This proceeding, on the other hand, examines numerous rate structures for recycled materials and competing virgin natural resource materials and will be used in that sense 356 1.C.C. 7d INVESTIGATION OF FRT. RATES RECYCLABLE COMMODITIES 117 which are pending on exceptions and replies thereto have been incorporated in this proceeding, infra. Special procedures were followed. After submission of 95 verified Statements oral hearings were held at Washington, D.C., from October 5 to October 19, and from November 10 to November 12, 1976, on the 12 rebuttal statements filed by respondents. Briefs were filed on December 13, 1976, by the respondent railroads and participating shippers and shipper organizations. Reply briefs were filed on December 31, 1976. Due and timely execution of our functions under section 204 of the 4R Act imperatively requires the omission of an initial decision by an Administrative Law Judge. All evidence and arguments not mentioned have been considered and given due weight. Discussion of many of the various contentions have been omitted since their inclusion would unduly lengthen this Opinion without advancing its disposition. Repetitions of arguments without elaboration or underlying support are omitted to the extent possible. EVIDENCE REQUESTED AND PRESENTED Format of investigation.—-The Commission required the parties to divide their statements into seven parts. The first part was to be restricted to the historical evidence of costs and movement of recyclable .and virgin materials. The carriers were to submit evidence on the movement of the commodities based on representative or repetitive rates as of October 11, 1975. The evidence was to be based on sample studies with the carrier justifying the relevance and validity of the procedures used, or based on rates under which large volumes of commodities moved in 1975, The carriers were required “to demonstrate the validity of any evidence submitted with respect to the representative or repetitive movements selected.” An outline of the 17 categories of information desired was delineated.” Respondents were required to determine the costs of these movements and whether the current rates reflect the differences in costs based on several factors.” The following topics were requested “The intormation required includes the (1) commodity and STCC number. (2) origin and destination pormts, CV) ormin rate territories, (4) type of rate. (8) rates in cents per ton at the October 11. 1973 level. (6) whether on muluiple-car of trainload shipments rates were reduced rom single-car rates, (7) tacit authority, (4) minimum weight per shipment in tons, (9) average weight in net tons, (10) average number of cars per shipment, (11) average weight per car, (12) car ownership. (14) car type, (14) route of movement, (1S) carrier and miles. (16) average revenue per cur, and (17) estimate of annual tonnage for period 1970-75 ‘These factors. included distance traveled. weight of shipment. special equipment. special handling. equipment utilization, and equipment maintenance 356 1.C.C 8d 118 INTERSTATE COMMERCE COMMISSION REPORTS to be discussed in the remaining parts: (2) evidence relating to the trend in utilization of recyclable and virgin material since 1966 and the effect thereon of general rate increases; (3) effect of increases or decreases in the rates on the substitutability between virgin and recyclable materials, (4) the likely effect of rate changes on individual railroads, revenues and profits; (5) the effect that rate changes have had and will have on service; (6) alternative rate structures were to be suggested; and (7) other pertinent evidence not considered elsewhere. Under this last part we have discussed environmental considerations. The evidence submitted in Ex Parte No. 270 (Sub-Nos. 5 and 6) has been incorporated into this record. The movements presented in these earlier proceedings have been updated to the Ex Parte No. 313 level and additional movements were provided. A further discussion of the evidence presented, the conclusions of the Coordinator, and the exceptions thereto are contained in our discussion of “Scrap Iron and Steel and Iron Ore.” A bibliography of studies concerned with the relationship between recyclables and virgin materials was also attached to that order. Parties were encouraged to submit additions to comments on the bibliography. Additional material was requested to be listed in the bibliography by the National Barrel Association, Inc., and the Aluminum Association, Incorporated. Since no objection to the addition of this material has been made, the additional materials will be incorporated into the bibliography. (See appendix D.) Investigated commodities.—in the February 25, 1976, order a list of 13 recyclable or recycled materials to be investigated by the Commission was presented. Participants in the proceeding were intormed that suggestions for additions to or deletions from this list as well as a list of Competitive or potentially competitive virgin natural resource materials could be made. Suggestions for the inclusion of additional competing and recyclable commodities were made by the parties and appropriate revisions were incorporated by the Commission. In the orders served on May 13 and June 11, 1976, respectively, the final list of recyclable and competing virgin materials was set torth The commodities are listed in two tables. Table | which is shown below, contains a list of recyclable or recycled materials and their corresponding competitive or potentially Competitive virgin natural resource materials. 356 L.C.C. 9d INVESTIGATION OF FRT RATES RECYCLABLE COMMODITIES 119 TABLE I 1 8 & Recyclable or re- STCC Virgin natural re- ___No cycled materials No. source materials 22 941 ------- Textile waste garnetted or proc- 24 114 10- Pulpwood or pulpwood logs essed 26 Nhe Pulp 22 973 1S--. Nols, ramie -----+0-.eeeseeeeeee seeeeee 22 999 26- Cotton linters, bleached or dyed 22 973 25--. Nols (Combing of comber 22 971 ------ Wool or mohair, carbonized or waste), cotton scoured thru 22 992-.----- Jute goods, exc. bags 22 973 68--- Rovings, jute and istle 22 995 .-..- Vegetable fibers, exc. cotton (ixtile) 28 213------ Synthetic fibers, exc. glass 22 994 =... Packing of wiping cloths or rags 22 119 74- Cotton piece goods (processed textile waste) 26 Wide Pulp 32 299 24--. Cullet (broken glass)---------+-++-+- 14 413 10- Glass sand, unground Woy Blast turnace, open hearth, roll 10 1 --------- Iron ores ing mill, of coke oven product, nec 33 312 Copper matte, speiss of flue 10 2--------- Copper ores dust, aao, dross slag, skim- mings, et cetera 33 322 Lead matte, speiss of flue 10 3--------- Lead or zine ores dust, avo, dross, slag. skim- mings, ct cetera 33 332 - Zine dross, residues, ashes, 10) 3 -n--+-+- Lead or zine ores et cetera 33 342-.- Aluminum residues, et cetera---- LO SI] ------ Crude bauxite ores V4 39K... Mise. Nonferrous metal residues 10 513------ Calcinated or activated bauxite ores and 8 Trice: PBTIEE otonsssacencisexecetssncaecssvegscene, Sacavhahesnenes | sibecessdsghohussbesesunsccsnccseoasenshsabans 40 211 Tron Of Steel SCrap -----+ --+---2000 10 | -e-eseeee Iron ores 40 212 - Brass, bronze, copper or alloy 10 3--------- Copper ores scrap, ado, tailings of wastes 40 213 ----- Lead, zine or alloy scrap, wav. 10 3... Lead or zine ores tailings of wastes 40 214 -----. Aluminum or alloy serap, aao. 10 SII ------ Crude bauxite ores tailings of wastes 10 513------ Calcinated of activated bauxite ores 40 219 60--- Tin scrap, value for resmelting 10 929 85~ Tin ore (tin stone or cassiterite). Purposes, consisting of scrap crude or preces of metallic, clip- pings, drippings, shavings, turnings of worn-out block lin pipe. 40 24 -- eee Paper waste oF scrap ---------+--+-- 24414 10- Pulpwood of pulpwood logs’ 40 26----+--- Rubber or plastic scrap or OK 423------ Latex gums (crude natural rub waste ber), aao. allied gums. w4 Reclaimed rubbere---------se5. 2K D2 Synthetic rubbers (vulcanizable elas- tomers), exc. tabricated rubber products. 407 22.-.--.- Textile waste, scrap ofr sweep. 26 111 40- Cotton linters pulp ings 26 III ------ Pulp See footnote on following page 356 L.C.C. 10d 120 INTERSTATE COMMERCE COMMISSION REPORTS ‘Woodchips were not mentioned in any of our orders, however, they been contended to be a Potentially Competitive virgin natural resource material and, therefore, have been included in this investigation Table Il contains a list of recyclable or recycled materials as to which no corresponding list of competing virgin materials is provided. This phase of the investigation is limited to the rate structure on these commodities alone and whether it is in whole or in part, unjust and unreasonable. TABLE II STCC No Recyclable or recycled material 20 SIL IK Bukery refuse of sweepings, feed 24 292 Shavings of sawdust 4912 Steel shipping containers, viz. steel drums 4023 Wood serap of waste 40 291 14 Municipal garbage waste, solid, digested, ground, other than fertil 7ef, EXC. Sewage waste 4) 114 44 Bays, old, burlap. gunny, jute or sisal, nec., inc. istle (ixtle) 41 015 40 Bags, old having no value for further use of reconditioning as bags. but having value for conversion into bale covering. 42 111 42 Beverage containers returned empty Ihe STCC numbers referred to in both tables also embrace all articles assigned additional digits listed thereunder in SECC Tariff 1-D In the following discussion of “Evidence Presented,” we will discuss the contentions and arguments of the parties which are applicable to all the investigated commodities. This general discussion and our conclusions to the points thereby raised, are for the purpose of climinating repetitious arguments and for simplification in the presentation of the report. Specific issues related to individual commodities will be considered in the section for that commodity. ParT | MoviMENTS OF RECYCLABLE AND VIRGIN MATERIALS AND THEIR TRANSPORTATION CHARACTERISTICS Respondents were required to submit evidence as to transportation of, and the rate structure on recyclable and virgin materials. They chose to submit evidence as to shipments which moved in volume; repetitive movements. A movement represents traffic moving between one origin and one destination point. The 356 1.C.C. Sat ee eee lld INVESTIGATION OF FRT. RATES RECYCLABLE COMMODITIES 121 number of carloads between the two points may vary depending on the volume of traffic. (Originating traffic only was submitted to avoid duplication.) Respondents submitted information as to some 3,000 rail movements. A standard form for reporting the requested information was developed by the carrier or carrier organization. An example of these forms is contained in appendix E. The movements were then analyzed and costed by the Traffic Executive Association—Eastern Railroads (TEA), the Southern Freight Association (SFA), or the Western Railroad Association (WRA),. In the East, approximately 800 repetitive movements were submitted. The choice of picking a _ particular “repetitive” movement was left to knowledgeable traffic personnel. Consolidated Rail Corporation (ConRail),'" the Chessie System (Chessie), the Norfolk and Western Railway Company (N&W), and the Bessemer and Lake Erie Railroad Company (B&LE) used the following criteria in selecting examples of repetitive movements for ferrous and nonferrous metals: (a) Only repetitive movements were selected, although, in certain instances, it developed that the movements were few in number, (b) Originated traffic only was considered by reporting carriers for the purpose of reporting simplicity, (c) Switching movements were excluded, the reason being that those movements are not susceptible of immediate identification by computer program, (d) A wide variety of movements was sought, ie.. representative of (1) interterritorial and intraterritorial, (2) interstate and intrastate; (3) long-haul, medium-haul and short-haul; (4) heavy-loading per car and light-loading per car. (S) interplant and commercial, (6) single line and joint tine, (7) multiple car and single car, and (8) high volume and low volume They indicate that no attempt was made to select movements which reflected extremes in the range of rates and revenues. For movements of recyclable and textile commodities and woodpulp and pulpwood, ConRail selected movements based on the following criteria: (1) Trattic originated on Penn Centrai (2) Trattic volume greater than one car per year. implying “repetitiveness.” “ConRail submitted movements only tor the Penn Central line because this was the most available information due to the recent formation of several eastern roads into ConRail 356 LCC. 12d 122 INTERSTATE COMMERCE COMMISSION REPORTS (3) Moves generally picked on the basis of largest volume of cars per year Exceptions: (a) Hf all of the highest volume moves were originating from one origin, then one move would be selected from the set originating from that origin, and che following moves would be selected from other origins, even though their annual tonnage may have been lower, thus providing greater geographic coverage (b) In some instances, the traffic level for a particular STCC group was so small that all traffic moving from PC origins ts covered by the repetitive moves, {thus climinating the clement of choice] The Maine Central Railroad (MCR) and the Boston and Maine Corporation (B&M) generally selected repetitive movements based on 15 carloads. The MCR also showed its total tonnage and gross freight revenue and percentage relationship on which selected commodity movements bore to the total. In the South, the method of selection was also decided by the individual carrier. The Southern Railway chose large volume movements with no rigid basis for selection. A minimum of 30 carloads between a pair of origin and destinations was generally used, except for pulpwood which has higher volume movements. However, where the commodity moved in smaller amounts, this also was submitted. It also showed the tonnage originated for a particular commodity and the tonnage included in the selected repetitive movements. In total, 42 percent of its recyclable traffic and 69 percent of its virgin material traffic was included by the representative movements. The IMlinois Central Gulf Railroad Company (ICG) selected repetititve movements based on 50 carload shipments, with a minimum of 30 carloads if 50 carloads did not move. It also indicated that the tonnage selected represented 22.9 percent of its system recyclable tratfic, 35.9 percent of carloads originating in the South and approximately 34 percent of virgin traffic. It therefore concludes that the sample size was large enough to make the study results representative, The St. Louis-San Francisco Railway Company (Frisco)'' in selecting representative movements originating in the South, considered the repetitive nature of the movement, the total number of cars handled, and the mileage of the movements. It also showed The St. Louis-San Francisco submitted originating movements in the South and West. To avoid contusion ay to what evidence was presented by this carrier for each territory, it will be referred to as the Frisco in the South and the SLSF in the West 356 1.C.C. Orestes sense en kee ee Be er te a 13d INVESTIGATION OF FRT. RATES RECYCLABLE COMMODITIES 123 the percentage of tonnage included in its repetitive movements as compared to the total tonnage originated for that commodity. The Louisville and Nashville Railroad Company (L&N) selected as repetitive those movements which showed at least 20 percent of its traffic for that commodity starting with the heaviest movements until that goal was reached. Overall the shipments selected represent 38 percent of all its recyclable traffic and 58 percent of all virgin traffic originated in 1975. The number of shipments originated by the L&N, the number of different point-to-point movements involved and the number of these included within its unit slips are also given, The Seaboard Coast Line Railroad Company (SCL) selected repetitive originating movements based on movements consisting of SO cars or more between one origin and one destination or, if there were no movements totaling 50 cars, then the movements having the greatest number of cars was used. The 1,338 unit slips presented by the Southern carriers were then analyzed and costed by the SFA. The WRA devised a standard form to be used by reporting Western roads. A subcommittee chairman was named to coordinate the submission of movements (unit slips are referred to as WRR-1I forms) and other information relating to the particular assigned commodities (information on special equipment, backhauls, and maintenance are contained in the WRR-2 form). If a WRR-2 form was not attached, then it was presumed that there were no special transportation characteristics. Individual roads, generally those thought to have the largest volume movements of the commodities were made members of the committee. The number of carriers submitting movements varied from commodity to commodity. The western railroads were asked to submit repetitive movements generally based on the following criteria: (a) The six largest movements of virgin materials, and (b) The two largest movements of recyclable materials in the mileage blocks of 0 to 200 miles, 200 to 400 miles, and over 400 miles The reason given for the breakdown into mileage blocks for recyclable commodities is based on the facts that the origins and destinations for recyclables are more diverse and this breakdown would give a more accurate picture of the rates for varying distances, This criteria was changed for movements on commodities added by the May 12, 1976 order (textile fibers and waste materials, 356 LCC 14d 124 INTERSTATE COMMERCE COMMISSION REPORTS miscellaneous nonferrous metals, and calcinated bauxite) to four representative or repetitive movements. Two repetitive movements for the commodities contained in the September |, 1976 order (bags, steel drums, beverage containers, and reclaimed rubber) were also requested, These unit slips were then consolidated by the subcommittee chairman. If unit slips contained incomplete data, they were supplemented if time permitted; otherwise, they were eliminated. The remaining unit slips were then forwarded to the WRA for costing and analysis. At this stage, duplicate movements were eliminated and faulty unit slips were either rejected or corrected as time permitted. Out of the 963 unit slips presented, 792 were costed by the WRA. Opposing shippers and governmental participants.—The manner in which the railroads selected so-called “representative or repetitive movements” has been attacked by various shippers, shipper organizations, and the Environmental Protection Agency (EPA). It is argued that respondents have failed to demonstrate the validity and relevance of the movements presented, and have therefore failed to meet their burden of proof. NARI contends that, except for the southern territory (which did not analyze woodchips), the other territories have failed to demonstrate the validity of their sampling procedures. It is noted that different standards are used in determining “representative” movements for virgin versus recyclable commodities within the same territory, and that the selection of movements between the territories is also varied, ranging from 400 carloads to | carload. A different) percentage of tonnage moved under the selected movements in comparison to the total tonnage originated for that particular commodity is also criticized. NARI contends that the invalidity of their sampling is best demonstrated by comparing their samples with the norm presented by the Commission's |-percent waybill sample. For the carriers’ sample to be valid, it is argued that the ratio of carloads of virgin materials should correspond to carloads of recyclable materials as found in the |-percent waybill sample. This, it is alleged, is not the case as shown from the figure below. Therefore, NARI concludes that the carriers could have in fact, used movements which reflect the most favorable ratio of revenue to variable costs. * 356 LCC. 15d INVESTIGATION OF FRT. RATES RECYCLABLE COMMODITIES 125 TABLE | NARI's comparison of ratios of carloads of recyclables virgin products in the 1974 I-percent waybill sample to railroads submissions West South East Copper a | percent sample --- Wtteseeeneeesseeeenceesseeasseeseneees 43 Railrowds’ sample -----------+--00--00- eee eeceeceeeeceeeeeeees 152.0 Lead of sine | percent sample -- 26.1 16.7 62.5 Railroads sample . 2161 99 9 7 Aluminum | percent sample -- 10.0 11.5 108% Railrouds sample 120.5 10.0 27) Paper es | percent sample - 31 7.1 tid.2 Railrouds’ sample ------ . . 117.6 VK 22.7 Conclusion.—The respondents were required, by the initial order in this proceeding to “demonstrate the validity of any evidence submitted with respect to the representative or repetitive movements selected.”'‘ This requirement applies to either representative or repetitive movements and therefore it applies to all submissions of movements offered in this proceeding. The railroads used varying techniques for determining whether or not a movement was repetitive.'’ This in and of itself, does not invalidate their selection process. It is common knowledge that certain virgin materials and recyclables move in greater volume than others. A movement of 5 carloads of tin scrap which moves in relatively insignificant amounts, between the same points may be Just as representative as the movement of 500 carloads of scrap iron and steel which moves in great volume between the same two points. However each movement is reflective of the rate structure of that particular commodity. Because of the varying amounts of the different commodities transported, it was necessary to allow flexibility in determining a repetitive movement. It is therefore incorrect to argue that the standards of selection should be totally uniform.'* Where there are different methods of selections used, the Ss ‘This language appears on page two of the initial order. ‘AI railroads were named respondents to this proceeding. There was nv requirement that they hntly subniit evidence and hence there was no requirement that each submit evidence based on an Wentical selection basis See footnote 13. 356 LCC. 16d 126 INTERSTATE COMMERCE COMMISSION REPORTS carriers have justified the variance, based on such transportation cir- cumstances as the volume of the commodity, the experience of a particular carrier or the desire to present the Commission with rates more reflective of the total rate structure. In some cases, as few as two movement slips are presented yet these movements equalled 25 percent of the carrier's tonnage of that commodity. We also disagree with NARI’s position that the percentage relationship of recyclables to virgin materials in the 1l-percent waybill sample should be used to determine the validity of the selected movements. Respondents were not required to make a sample study but had the alternative of presenting information as to repetitive traffic if they could demonstrate its relevance or fairness. Merely because the movements chosen represent differing percentages of traffic than the |-percent waybill sample, it does not by itself prove any unreasonableness in the movements selected or the manner in which it was done. First, this comparison only indicates whether the percentage relationship between virgin and recyclable commodities is proportionate. Secondly, the respondents should not be penalized for submitting greater carload movements than the |-percent waybill sample since the additional tonnage increases the likelihood of repetitiveness and representativeness. Thirdly, NARI's presentation fails to recognize that the movements in the sample have not been selected on the basis of being a repetitive movement. And fourthly, the Il-percent waybill is a sample study and the movements presented herein are based on volume movements so that a comparison between the two is of little value, Although certain opposing parties contend that the respondents have methodically gleaned and selected movements providing the ‘most favorable ratios of revenue to variable cost, there is no probative evidence of record to support this allegation. In fact, as will be shown in later sections on the movements presented for particular commodities, the ratios are varied and often a movement with an extremely high revenue/cost ratio is included despite the fact that it will seriously affect the weighted average of the commodity. This does not indicate that the respondents systematically submitted movements favorable to their position. In conclusion, we find that the movements submitted by the railroads have been shown to be repetitive movements, the standards for their selection having been adequately justified. The requirement that representative or repetitive movements be submitted, however, was for the purpose of enabling us to determine sae BL. 17d INVESTIGATION OF FRT. RATES RECYCLABLE COMMODITIES 127 the rate structure of a commodity and whether it is just, reasonable or discriminatory. The railroads have submitted over 3,000 movements, which after the elimination of duplicate movements, intrastate movements, and paper rate movements, still leaves us with 2,125 movements on which to base a decision. In some cases, there may be over 30 movements for a particular commodity originating in a single territory accounting for 30,000 tons annually, which is more than sufficient to portray the rate structure of that commodity. These repetitive movements are therefore an accurate reflection of the traffic which is moving the bulk of the traffic and of the rate structure under investigation. Where respondents have presented very few movements for a particular commodity, they cannot be heard to complain that the cost ratio evidenced thereby does not reflect the rate siructure. Nor can opposing shippers object to the ratios derived from a few movements presented on some commodities since they offered no evidence of additional movements on which we could base a decision. Paper rates.—In analyzing the unit slips to arrive at the ratio of revenue to variable cost, it was observed that in some instances (1) the estimate of annual tonnage was missing; (2) the minimum weight and actual weight were the same, or (3) there were two or more movements listed between the same points, yet only one movement indicated the estimate of annual tonnage. This shows that no actual movements occurred and the rates in question do not actually move traffic but are so-called “paper” rates. Respondents were asked to submit evidence of representative or repetitive movements. If no traffic moved under these rates, then they are not representative or repetitive and they are of little value in determining the reasonable level of rates on the rate structure. See, Motor Vehicles from Kansas City to Ark., La., & Tex., 318 LC.C. 301, 315 (1962) and Ferro Enamel Corp. v. Pennsylvania R. Co., 280 1.C.C. 439, 441 (1951). Unit slips showing paper rates have been given no_ further consideration in this proceeding. Intrastate rates.—The railroads have in some instances submitted evidence as to intrastate movements. It is contended that the inclusion of these movements will give the Commission a clearer picture of the rate structure of the involved commodities and that the Commission's orders did not exclude information as to intrastate 356 1.C.C 18d 128 INTERSTATE COMMERCE COMMISSION REPORTS traffic. The intrastate rates have been updated to include increases authorized in Ex Parte No. 313, although some States had not approved this increase on intrastate rates as of October 11, 1975. Respondents contend that the intrastate rates should be considered at this level however, because generally the States eventually approve the same increase for intrastate traffic as applied on interstate traffic; and it provides for a comparable analysis. NARI on the other hand argues, (1) that intrastate rates should not be considered in looking at the interstate rate structures over which the Commission has jurisdiction in this proceeding; and (2) that the updating of the rates to the Ex Parte No. 313 level was erroneous for it distorts the analysis of the rate structure. NARI submits that increasing the rates to the Ex Parte No. 313 level will allow the railroads to show a more favorable ratio of revenue to variable costs than actually exists, especially in movements of pulpwood where a number of intrastate rates are submitted. Conclusion.—Out of the 3,000 movements submitted, nearly 1,000 were intrastate movements. Intrastate rates are not directly regulated by the Interstate Commerce Commission although they may be the subject of §13(4) proceedings, and therefore, the movements in and of themselves, are not necessarily reflective of the interstate rate structure. They will, therefore, not be included in determining the revenue to variable cost ratio, and will not be used in our analysis of the interstate rate structure. If the carriers believe that intrastate rates are unduly low, appropriate relief can be sought under §13(4) of the act. A. Respondents’ cost evidence. |. Eastern railroads.—The eastern railroads developed costs for movements submitted by the member carriers in accordance with the following principles: a The cost should reflect, as specifically as possible the data available from the traffic intormation b The most current territorial cost data be used. c. Cost apphcations be as compatible as possible in order to facilitate analysis. The eastern railroads utilized 1973 regional costs indexed to October 1, 1975 level by a factor of 1.263. The 1973 costs are found in Rail Carload Cost Scales 1973, 1.C.C. Statement No. 1C1-73, while the update ratio of 1.263 was deveioped using the procedure set forth in LC.C. Statement No. 2-58, Rail Carload Cost Scales by Territories as of January 1, 1958. 356 LC.C. ae ee ee RETA ee els ree ee RL ee le dee LE SP kee We kt 19d INVESTIGATION OF FRT. RATES RECYCLABLE COMMODITIES 129 Southern region cost data, introduced by the eastern railroads for interterritorial movements between the East and South are based on 1974 Rail Form A costs developed by the Southern Freight Association. These 1974 costs were indexed to October 1, 1975 bya factor of 1.131. Western district cost data, introduced by the eastern railroads for interterritorial movements between the East and West, are based on 1974 costs provided by the WRA. These 1974 costs were indexed to October 1, 1975 by a factor of 1.128. The update factor for each of these regions was developed in accordance with procedures contained in I.C.C. Statement No. 2-58, supra. Sources of information and an explanation of adjustments to the cost follow: 1. Data on type of car, ownership of car, average weight per car, route of movement, and type of rate are from the movement data submitted by the respondent railroads. 2. Tare weights are from table 8 of Statement No. 1C1-73, supra, p. 134. 3. Empty-return ratios for the official territory and southern regions were taken from table 14 of Statement No. 1C1-73, supra. Empty-return ratios for the western district were taken from a special study in 1974 by the Western Railroad Association. 4, Way-train miles reflect the totals shown on page 4 of Statement No. 1C1-73, supra. Where the origin and destination region are different, total way-train miles consist of one-half of the origin region way-train miles and one-half of the destination region way-train miles. 5. Interchange costs have been subtracted from car-mile cost and computed on an actual basis. 6. For multiple-car and trainload shipments, adjustments were made to reflect the appropriate economies. The adjustments employed are the same as suggested by the Coordinator of the February. 4, 1976 decision of Ex Parte 270 (Sub-No. 5), Investigation of Railroad Frt. Rate Structure, 345 1.C.C. 548, pages 700-701 and (Sub- No. 6) page 1027. These adjustments are shown in the Commission's comments detailing computation of costs.'* Eastern railroads stated that these adjustments were made in lieu of special studies due to the time limitation. 7. The distinction as to the type of shipment (single-car, multiple-car, or trainload) is based on the number of cars per shipment, which is included on the movement sheets submitted by the individual railroads. Those movements with 73 cars or greater were treated as trainload shipments, while those movements averaging from 5 to 72 cars per shipment were treated as multiple-car shipments. The use of 73 cars as a cutoff point between multiple-car and trainload movements is based on the average length of a through train of open-hopper cars. It is the opinion of the eastern railroads that any movement of less than five cars should not be considered a muitiple-car movement for cost purposes. 8. Because of the nature of iron ore shipments, multiple-car adjustments were made regardless of the type of rate indicated, while for all other commodities, the adjustment was made only if a multiple-car or trainload rate was indicated and the "See page 135. 356 1.C.C. 20d 130 INTERSTATE COMMERCE COMMISSION REPORTS average aumber of cars ‘cll within the ranges indicated above. The lack of adjustment tor commodities other than iron ore is due to the fact that cars per shipment represent average cars per day moving between two cities, without any assurance of multiple switch handling at a single location within that city, The verifigd statement of witnesses Curran, Adell, Becker, Weber and Nappi contains the results, i.e., revenue-to-variable-cost comparisons, for the selected repetitive movements submitted by the various eastern carriers. The results for each movement are shown and the weighted average ratio for each commodity (STCC) is Shown. However, a comparison of the results for recyclables with its Competing or potentially competitive virgin commodity has not been pertormed. Southern Freight Association (SFA).—The cost evidence for the SFA, consists of costs and revenue-cost comparisons for individual “unit slips” which were prepared by the major southern railroad systems and one western road which has substantial operations inthe southern region (St. Louis-San Francisco Railway). Such unit slips contain the basic information necessary for costing rail movements, i.e., STCC, origin, destination, average weight per car, car type, and route of movement. For all movements, except those in shipper-owned tank cars, a computer program was used to develop costs, using the information contained on the unit slips plus supplemental information supplied by SFA. This included way-train miles, thru-train miles, origin and destination terminal handlings, and numbe [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385005_2129%3A02. Public record. Not legal advice.