Appendix — Aberdeen & Rockfish R. Co. v. Students Challenging Regulatory Agency Procedures (SCRAP)
Supreme Court brief1975
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Order of the Supreme Court noting probable jurisdiction,
: entered October 15, 1974 ............. cece cece cece eens 1
7 Docket entries in court below! ............0-cee eee eeeees 2
‘ Interstate- Commerce Commission
Final environmental impact statement? of Interstate Com-
merce Commission, entitled Ex parte No. 281, Increased
Freight Rates and Charges (Environmental Matters), Final
Report, May 1, 1973, reported at 346 I.C.C. 88-277 ........ 9
Draft environmental impact statement of Interstate Com-
merce Commission, issued March 5, 1973 ............+--- 200
Verified statements (V.S.) and reply verified statements
; (R.V.S.) :
; VS. No. 18, J. W. Hoeland ..............ccceccescees 421
Vie PR Fi 5 ID ini seca te ncecvescececccees 425
VB. Me. 37, A. Paul. Pemoaner ..... ccc ccc ccccces 428
V.S. No. 37, Charles L. Smith .........cccccccccccsecs 430 —
V.S. No. 195, A. Paul Funkhouser .......... a sannene ee 438
2 ee eee 443
V.S. No. 203, R. D. Zuest ........... Eeucsyeasukenaues 454
VB. BRR BR, Bis Tic TIO nna cece cece viseccccns 458
V.8. No. 205, Ralph O. Foster ...........cccsccseccees 461
V.8. No. 206, J. J. Warfield .........cccccccccccees .-- 465
R.V.S. No. 17, G. J. Robinson .,..........cccceccccces 468
R.V.S. No. 24, Robert E. Parrish .............-eeeeeeee 472
R.V.S. No. 31, William J. Bolch, et al. ............000- 474
pee GS BS Re PEC ererrrTerrc Try Te 491
R.V.S. No. 39, G. J. Robingon ......... ccc pescccvnecs 494
pas & YS BAP SO | Sr eeerTe Teer T eee 506
R.V.S. No. 65, Joseph Feldman .............sceeveeeee 511
5 WV .B. Bae, FE, Ge. FT. BROWEMOO wn cee cc cn ccccsccccccns 515
R.V.S. No. 77, Edward L. Pepper ...........scccsccece 530
R.V.S. No. 80, F. Wascoe .......... (peineseeedngenbed 556
TV. Pek CS FOO. vc nasties encsesevecsnes 562
1 The opinion and judgment entered February 19, 1974, in the district court
are printed as Appendices B and C to the Jurisdictional Statement.
2 The Commission’s order of May 3, 1974, discontinuing the proceeding, is
printed as Appendix E to the Jurisdictional Statement.
~
Letter and attachment of Chairman Russell Train, Council
on: Environmental Quality, to Chairman George Stafford,
Interstate Commerce Commission, dated October 30, 1972. .
Letter and attachment of Sheldon Meyers, Environmental
Protection Agency, to Robert Oswald, Interstate Commerce
Commission, dated October 30, 1972 .............--2005s
Letter of Sidney R. Galler, Deputy Assistant Secretary of
Commerce for Environmental Affairs, Department of Com-
merce, to Secretary Robert L. Oswald, Interstate Commerce
Commission, dated April 12, 1973 ............-.eeeeeeee
Railroad respondents’ comments in support of draft environ-
mental impact statement, dated Apri! 12,1973 ..........--
Comments of General Services Administration on draft en-
vironmental impact statement, dated April 12, 1973 .......
Comments of Institute of Scrap Iron & Steel, Inc., in opposi-
tion to draft environmental —_— statement, dated April
DE FD ei ke ead cnn han nek aeeckstasaaausensrre renee
Comments of Environmental Dalene Fund, National Parks
and Conservation Association, and Izaak Walton League
of America on draft environmental impact statement, dated
April 12, 1973, with appendix .............-seeeeeeeeee
Comments of S.C.R.A.P. on draft environmental impact state-
ment, dated BA AGT ig go ec cnc tcsnscceccepervivecs
Comments of Copperweld Steel Company on draft environ-
mental impact statement, dated April 12,1973 ............
Comments of National Association of Secondary Material
Industries, Inc., on draft environmental impact statement. .
Letter of Wm. W. Lyons, Deputy Assistant Secretary of tlre
Interior, to Robert L. Oswald, Secretary of Interstate Com-
merce Commigsion, dated April 13, 1973 ...............+-
Letter of Chairman Russell E. Train, Counsel on Environ-
mental Quality, to Chairman George Stafford, Interstate
Commerce Commission, dated April 17, 1973 .............
Letter and attachment of Sheldon Meyers, Environmental
Protection Agency#to Robert L. Oswald, Interstate Com-
merce Commission, dated April 19, 1973 ...............-
Letter of John Quarles, Acting Deputy Administrator of En-
vironmental Protection Agency, to Robert Oswald, Inter-
state Commerce Commission, dated June 6, 1973 ..........
Ez parte No. 270 (Sub-No. 6), Railroad Freight Rate Struc-
ture, Investigation of Scrap Iron and Steel (38 Fed. Reg.
28600; Oct. 15, 1978) ....ccsscscccccsccesecccecccccecs
/
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576
580
597
705
707
716
In the Supreme Court of the Anited States
Nos. 73-1966 anv 73-1971
ABERDEEN AND RockrisH RarLRoaD CoMPANY, ET AL.,\
APPELLANTS
Srupents CHALLENGING RecuLatory AGENCY
Procepures (S.C.R.A.P.), ET AL.
~ AND
Unirep StaTEs, ET AL.,
Srupents CHALLENGING RecuLatory AGENCY
Procepures (S.C.R.A.P.), ET aL.
Appgats from the United States District Court for the
District of Columbia.
The statements of jurisdiction in these cases having been
submitted and considered by the Court, probable jurisdic-
tion is noted. The cases are consolidated and a total of one
honr is allotted for oral argument.
October 15, 1974
Mr. Justice Powell took no part in the consideration or
decision of this order.
1972
ao nNnwnvp
Docket Entries
Filed complaint.
Issued summons and complaint.
Issued summons and complaint to involuntary plaintiff.
Filed motion for appointment of special process servers; filed
memorandum in support of mgtion.
Filed motion and memorandum in support of motion for prelimi-
nary injunction.
Filed application and memorandum in support to convene a
three-judge court.
Issued affidavit of service on involuntary plaintiff.
. Issued affidavit of service on defendant Attorney General and
U.S. Attorney.
Entered order appointing special process servers.
Filed motion for extension of time to respond to plaintiff’s
motion’; memorandum in support of motion.
Filed joint motion to dismiss complaint, memorandum in support
of motion and in opposition to pfeliminary injunction, notice.
Filed memorandum and notice in opposition to application for
three-judge court.
Filed motion and memorandum in support for temporary re-
straining order.
Filed motion of Environmental Defense Fund, The National
Rarks and Conservation Assoc. and the Izaak Walton League
of America to intervene as plaintiffs, memorandum in support.
Filed motion of Aberdeen and Rockfish Railroad Co. et al. to
intervene as defendants.
Granted motion to intervene of Aberdeen and Rockfish R.R.
Granted motion of Environmental Defense Fund, the National
‘Parks and Conservation Association and the Izaak Walton
League to intervene.
Denied defendants’ motion to dismiss.
Denied plaintiffs’ motion for temporary restraining order.
Granted motion for three-judge court.
Filed order denying motion to dismiss and motion for temporary
restraining order.
Filed motion and memorandum in support of Environmental
Defense Fundy The National Parks and Conservation Assoc.
and the Izaak Walton League of America to intervene as
plaintiffs.
Filed designation of three-judge panel.
Filed motion and memorandum in support for preliminary in-
junction of Environmental Defense Fund.
Filed opposition to motion to dismiss complaint.
Filed order granting Environmental Defense Fund, the National
Parks and Conservation Association, and the Izaak Walton
League of America leave to intervene.
July
Aug.
Nov.
7 Docket Entries
Filed notice to enjoin enforcement of orders of ICC regarding
freight rates to be determined by three-judge court.
Filed motion, affidavit and notice for consolidation with C.A.
806-72. ,
Filed amended complaint and memorandum in support.
Filed supplemental memorandum in support of motion for pre-
liminary injunction.
Filed memorandum in opposition to motion to consolidate.
Filed memorandums of Aberdeen and Rockfish R.R. in opposition
to motion to consolidate and to motion for preliminary in-
junction.
Hearing begun ; concluded ; taken under advisement.
Filed memorandum of points and authorities in opposition to
plaintiffs’ motion to dismiss.
Entered memorandum opinion and order granting plaintiffs’
motion for preliminary injunction and denying defendants’
motion to dismiss.
Filed injunction.
Filed motion, memorandum in support, and notice for stay
pending appeal.
Filed order denying application of intervening railroads and ICC
for a stay of judgment pending appeal.
Filed defendants’ notice of appeal to the U.S. Supreme Court.
Filed certificate of mailing of notice of appeal by USA.
Entered transcript of proceedings.
Entered decision from the Supreme Court of U.S. dated July 19,
1972.
Filed notice of appeal to Supreme Court by ICC.
Filed notice of appeal to Supreme Court by intervenors.
Filed motion of plaintiff for preliminary injunctior and to ex-
pedite oral argument, memorandum in support.
Entered ordes allowing plaintiff 10 days to file memorandum on
the necessity of having expedited oral argument; continuing
hearing set 11/10/72.
Filed defendants’ opposition to motion for preliminary injunc-
tion and for expedited oral argument.
Filed plaintiffs’ memorandum regarding expedited oral argument.
Filed motion and memorandum in support of intervenor plain-
tiffs for leave to file amended and supplemental complaint.
Filed motion of intervening plaintiffs for modification of pre-
liminary injunction and clarification of jurisdiction.
Filed motion of plaintiffs for expedited hearing.
Filed memorandum of intervening railroads regarding request
for expedited hearing.
Entered order directing that ICC and intervening railroads
respond to motion for preliminary injunction and motion for
modification of preliminary injunction and that ICC respond
3
a”
‘Docket Entries
to memorandum concerning expedited oral argument by
12-15-72.
Filed memorandum and affidavits of intervening railroads re-
ae Eee
Filed defendants’ memorandum o/ points and suthorities in
opposition to intervening plaintiff's motions to amend com-—
plaint. :
Filed defendants’ memorandum of points and authorities in
opposition to plaintiff's motions for preliminary injunction
oral argument.
jurisdiction. °
Filed reply memorandum of intervening plaintiffs in re motions
to file amended complaint.
Filed order denying plaintiff’s motion for preliminary injunction.
Filed order directing clerk to prepare and certify the record to
the Supreme Court.
Filed order denying motion of pltf. for preliminary injunction.
Record on appeal delivered to Supreme Court. ,
Motion of National Association of Secondary Material Indus-
tries, Inc., Commercial Metals Co., I. V. Sutphin Co. and
Frankel Brothers & Co., Inc. to intervene as pitfs.
Motion of defts. U.S.A. and Interstate Commerce Commission
for extension of time to respond to motion of Nasmi to inter-
vene ; memo.
Opposition of pltfs. to motion for extension of time to respond
to motion of Nasmi to intervene.
Memorandum of Aberdeen and Rockfish Co. in opp. to Nasmi’s
ion to intervene.
Intervenpr complaint of National Association of Secondary
isl Industries, Inc., Commercial Metals Co., I.V. Sutphin
Co., In¢. and Frankel Brothers & Company, Ine.
Order Granting motion of National Assoc. of Secondary Material
Industries, Ineg Commercial Metals Co., 1.V. Sutphin Co. and
Frankel Brothers & Co., Inc. to intervene as Pitfs.
Motion of Institute of Scrap Iron and Steel, Inc. and Julian C.
Cohen Salvage Corporation to intervene as pitfs.
Motion of pltf. for preliminary injunction.
Motion of pltfs. for Temporary Restraining Order. ‘
’ Motion for Temporary ining Order heard and taken under
advisement.
Memorandum by defts. in opposition to interlocutory relief.
Order. temporarily enjoining defts. and defts-intervenors Aber-
deen & Rockfish Railroad Co. and all other railroad intervenors
and each of them until further order of Court from collecting
\
4
Docket Entries
\
rate increases. This Order shall apply to shipments originating
after June 7, 1973 and moving under transit arrangement.
Certified copy of order from the Supreme Court of the United
States staying order of June 7, 1973 of the District Court
pending further order of the Court.
LETTER from Clerk, of Supreme Court of United States in re
opinion, Judgment or mandate; Opinion attached.
COPY of Letter from Cléerk of Supreme Court of the United
Statés in re denial of application of SCRAP to vacate the
stay.
ORDER nati motion of the Institute of Serap Iron and
Steel, Inc. and Julian S. Cohen Salvage Corp. to intervene as
plaintiffs; directing parties to submit memoranda’ by 7-13-73.
INTERVENOR complaint of Institute of Serap Iron and Steel,
Ine:
NOTICE of appeal by The Alerdeen and Rockfish Railroad
Company to the Supreme Court of the United States.
NOTICE of appeal by deft. Interstate Commerce from order
of 6-7-73 to the U.S. Supreme Court.
NOTICE of appeal by deft. U.S.A. for order of June 7, 1973
to the U.S. Supreme Court.
AMENDMENT to the notice of appeal by defts; copies mailed
‘ to Michael’ Boudin, John F. Dienelt, and John F. Banzdolf,
III.
MEMORANDUM of Institute of Scrap Iron and Steel pursuant
to order of court of June 27, 1973.
MEMORANDUM of National Association of Secondary Ma-
terial Industries, Ine. in response to court order of June 27,
1973.
MEMORANDUM of pltf. in response to the court order of
June 27, 1973. \
JOINT memorandum of USA and Interstate Commerce Com-
mission in response to court order of June 27, 1973.
STATEMENT of Environmental defense Fund respecting mo-
tion for leaye to file amended and supplemental complaint.
MEMORANDUM of Intervening Railroads as to the court of
order of June 27, 1973.,
ANSWER of Intervenor Railroads to the complaint of SCRAP.
ANSWER of Intervenor R.R. to the complaint of Environ-
_ mental defense funds.
ANSWER of Intervenor R.R. to the complaint of National
Association of Secondary Material Industries; Inc.
ANSWER of Intervenor R.R. to the complaint of the Institute
of Scrap Iron and Steel Inc.
CERTIFIED copy of Judgment from the U.S. Supreme Court
that the judgment of the U.S. District Court is hereby re-
versed with costs and remanded to the U.S. District Court for
further proceedings in conformity with the opinion of this
court.
JOINT Answers of defts. to amended complaint.
5 ~
1973
Sep. 4 MOTION of Intervenor-Pitfs. National Association of Secondary
10
14
Docket Entries
Material Industries, Inc. (NASMI), Commercial Metals Co.,
1.V. Sutphin Co., Inc., and Frankel Brothers & Co; Ine. for
summary judgment.
JOINT Motion of defts. for an extension of time in which to
respond to intervenor-pltfs’ motion for summary judgment.
MOTION of Intervenor-pltfs’ to expedite briefing schdule and
hearing on motion for summary judgment.
MEMORANDUM of the intervening railroads respecting briefing
and hearing schedule.
MOTION of pltf. intervenors, Institute of Scrap Iron and Steel,
Inc. and Julian C. Cohen Salvage Corp. for summary judg-
ment.
STATUS Hearing
ORDER denying the motion of Environmental Defense Fund
to file an Amended & Supplemental Complaint; further order
that the Environmental Defense Fund shall have until Sept.
24, 1973 to file a motion for summary judgment.
MOTION of Guy Vander Jagt, Member of Congress, for leave
to file brief Amicus Curiae. ;
MOTION of Environmental. Defense Fund for summary judg-
ment ; statement of material facts.
MOTION of pltf for summary judgment.
JOINT motion of defts for summary judgment.
MEMORANDUM of intervening railroads in opposition to
motions of pltf and intervening pltfs for summary judgment.
LETTER FROM the counsel for defts in re corrected page 12a
of memorandum in support of motion for summary judgment;
attachment.
STATEMENT by pltff. intervenors in opposition to joint mo,
tion of the United States of America and Interstate Commerce
Commission for summary judgment. ° :
ORIGINAL Affidavit of Roger F. Scanlan, Consultant Penn
Central Transportation Company.
‘ORIGINAL Affidavit of Norman M. Lorentzsen.
INTERVENOR-Plaintiff NASMI’S reply to defts’ memoranda
in opposition to pltfs’ motions for summary judgment, and in
opposition 'to gefts’ motion’ for summary judgment.
MOTION of Intervenor-pltfs. Nasmi, et. al. for leave to submit
_ their motion for summary judgment on the papers filed. ~
LETTER from E. Bruce Butler in re certified record of the
proceedings before the Interstate Commerce Commission with
attachments.
CROSS-Motion for summary judgment heard and taken under
advisement.
EXHIBITS D & E.
SUPPLEMENTAL reply of intervenors NASMI’S.
ORDER directing the parties to file certain memoranda by
11-22-73. : : ;
| ; 6 )
1973
Nov. 20
1974
Feb. 19
Apr. 19
19
19
June 14
Docket Entries
WITHDRAWAL of appearance of John F. Dienelt as attorney
for pltf. intervenor Environmental Defense Fund; enter ap-
pearance of Jacqueline M. Warren.
STATEMENT by defts. #1 & 2 to the court; appendix A.
MEMORANDUM of the Institute of Serap Iron and Steel, Ine.
to Court’s order of November 15, 1973; administrative record
summary.
.COMMISSION actions in ex parte No. 281 by deft. #2.
CERTIRJED copy of order from the Supreme Court of the
United States that the Judgment in these causes be, and the
same is hereby vacated with costs; and that these causes be
remanded to the United States District Court for further
consideration in light of Atchison, Topeka and Santa Fe Rail-
way Co. v. Wichita Board of trade, 412 U.S. 800 (1973) and
it is further ordered that Aberdeen and Rockfish Railroad
Company, et al recover from S.C.R.A.P. One Hundred Dollars’
($100) for their costs herein expended.
MEMORANDUM Opinion vacating orders of 10/4/72 and
5/2/73.
JUDGMENT vacating orders of 10/4/72 and 5/2/73 in ex parte
281; remanding case for further proceedings.
NOTICE of appeal by Interstate Commerce Commission to the
Supreme Court from opinion and judgment of 2/19/74.
NOTICE of Cross-appeal to the Supreme Court of the United
States by Institute of Scrap Iron and onl, Ine. Deposit
$5.00 by Boggs.
NOTICE of cross-appeal to the Supreme mee of the United
States by Environmental Defense Fund. Deposit by Hellegers
$5.00.
APPEARANCE of John F. Hellegers entered as counsel for
Environmental Defense Fund.
NOTICE of appeal to the Supreme Court of the United States
from order of 2/19/74 by the National Association of See-
ondary Material Industries, Inc. now known as the National
Association of Recyeling Industries, Inc. Deposit by Merrigan
$5.00.
NOTICE of appeal to the Supreme Court of the United States
from order of 2/19/74 by the Aberdeen and Rockfish Railroad
Company and other carriers listed on attached notice. Deposit
$5.00 by Horsky.
NOTICE of appeal to the Supreme Court of the United States
by United States of America from order of 2/19/74. No fee-
Govt.
MOTION by pitf., Environmental Defense Fund to dismiss its
cross appeal to the Supreme Court of the United States from
the judgment of February 19, 1974.
7
2 ley
>
Docket Entries
1974
June 28 MOTION by Institute of Scrap Iron and Steel, Inc, to dismiss
cross appeal and the appeal of the National Association of
Secondary Material Industries, Inc.
July 3 ORDER granting motion of the Institute of Scrap Iron and
Steele, Inc. and the National Association of Recycling Indus-
tries, Inc. to dismiss their cross-appeal.
ice
30720
INTERSTATE COMMERCE COMMISSION
Ex ParTE No. 281
INCREASED FREIGHT RATES AND CHARGES, 1972
(ENVIRONMENTAL MATTERS )
88 INTERSTATE COMMERCE COMMISSION REPORTS
Ex ParTE No. 281
INCREASED FREIGHT RATES AND CHARGES, 1972
(ENVIRONMENTAL MATTERS)
y
Decided May !, 1973
On further proceedings, the National Environmental Policy Act of 1969 (42 U.S.C.
4321 et seq.) construed and applied, and a final environmental impact statement
issued. Upon consideration of the prior report in this proceeding (341 1.C.C. 288),
of certain selective increases in rail freight rates and charges on the movements of
commodities being transported for the purposes of recycling (which increases
were found in the prior report to be just, reasonable, and otherwise lawful), of the
draft environmental impact statement dated March 5, 1973, and the comments
thereon, and the quantifiable and other effects of such increases upon the quality
of our human environment, found:
a. That such selective rail freight rate increases, when considered in the light of
historic and prevailing rate relationships, transport patterns, and the infinite
variety of.technological and other variables discussed in this report, are not likely
to have a significant impact upon the movement of the involved traffic by rail.
b. That any probable adverse environmental effects which cannot be avoided, when
balanced against other stated public policy purposes, the lack of probability that
the proposed rail rate increases will have a material adverse environmental effect,
and the environmental benefits to be ensured by the maintenance of an efficient
and reliable railroad system, are not significant.
c. That upon a rigorous exploration and objective evaluation of possible alternatives.
~ the proposed action found to have less detrimental effects upon the environment
than other reasonable and practicable alternatives.
d. That future generations will be assured of the availability of an efficient railroad
system and its inherent environmental advantages, and that there is no potentially
significant short-term effect upon the quality of the human environment because
the movements of secondary commodities will not be significantly deterred and
such traffic will not be diverted from the railroads. >
e. That there are likely to be no irreversible and irretrievable commitments of
resources.
Appearances as noted in the prior report, and, in addition:
Russell E. Train for the Council on Environmental Quality.
Sheldon Meyers for the United States Environmental Protection
Agency.
W. W. Lyons for the United States Department of the Interior.
346 LCC.
10
INCREASED FREIGHT RATES AND CHARGES, 1972 89
M.S. Meeker, Leonard A. Salters, and Arthur F. Sampson for the
General Services Administration of the United States.
Irving M. J. Kaplan, Edward L. Merrigan, and Peter H. Meyers for
protestants.
47
FINAL REPORT OF THE COMMISSION ON FURTHER PROCEEDINGS
By THE COMMISSION:
This report represents, in accordance with the National
‘Environmental Policy Act of 1969 (NEPA), 42 U.S.C. 4321 er seq.,
our final statement as to the environmental effects of these
increases in the railroad freight rates and charges on movements of
commodities being transported for the purposes of recycling found
in our prior report and order (341 I.C.C. 288) to be just, reasonable,
and otherwise lawful.
BACKGROUND
This investigation into the adequacy of nationwide railroad freight
rates and charges was instituted, following the filing of petitions by
certain railroads and connecting water and motor carriers, by report
and orders of this Commission entered December 21, 1971 (340
1.C.C. 358). It was noted in that report, which also denied
petitioners’ request for authority to establish an interim surcharge
on certain bills for freight charges on less than statutory notice, ‘that
the carriers had failed to submit a statement with their petitions
regarding the environnrental impact of their Proposal as
contemplated by the NEPA. We directed the petitioners to file and
serve an environmental impact statement within 10 days from the
date of service of those orders, and they responded on January 3,
1972. Our December report and orders were served on all parties to
Ex Parte Nos. 265 and 267, Increased Freight Rates, 1970 and 1971.
339 1.C.C. 125 (1971),' and on all known consumer and
environmental interests. The orders also were published in the
Federal Register. As a consequence, all persons interested in the
This included service on Students Challenging Regulatory Agency Procedures (S.C_R.A P.)
One of that group's principal arguments, before this Commission as well as in the U.S. District
Court for the District of Columbia (Students Challenging Regulatory Aeency Procedures
(S.C.R.A.P.dand Council on Environmental Quality v. United States of America and the Interstate
Commerce Commission, 340 F. Supp. 189 (D.D.C. 1972). reterred to later in this report) had been
that the increases violated the terms of the NEPA and were. theretore. tvalid. S.C RAP. also
argued that this Commission should order a refund of moneys paid under these invalid rates. and
“suspend consideration of any additional or turther requests for freight rate increases by the
Nation's railroads. pending a hearing” on S-C_R-A Pos contention
346 L.C.C.
il
90 INTERSTATE COMMERCE COMMISSION REPORTS
environmental issues have received due notice of our intention to
consider such issues and have been accorded every opportunity to
participate at all stages of this proceeding.
By order entered February 1, 1972, it was found that approval of
the request by the Nation’s railroads.to impose a 2.5 percent
emergency surcharge on all freight shipments beginning February S,
1972,* would appear to have no significant effect either on the’
movement of traffic by rail or on the quality of the human
environment within the meaning of the NEPA. In approving that
temporary increase (then conditioned to expire on June 5, 1972), it
was further concluded, among other things, that the railroads have a
critical need for additional revenue to offset, in part, recently
incurred increases in their operating costs.
By order dated March 1, 1972, and served March 6, 1972, a draft
environmental impact statement (a copy of which is reproduced as
appendix C to the report entered September 27, 1972, Increased
Freight Rates and Charges, 1972, 341 I.C.C. 288, at 551), was
served on all parties to this proceeding and on other governmental
agencies [including the Council on Environmental Quality (CEQ),
Environmental Protection Agency (EPA), and the Office of
Environmental and Urban Systems, Department of Transportation ]
which might have an interest in that matter. Thereafter, the United
States District Court for the District of Columbia enjoined the
collection of the 2.5 percent interim surcharge on goods being
transported for purposes of recycling after July 15, 1972, because it
found that in declining to suspend the temporary surcharge this
Commission had failed to give adequate consideration to the
environmental amenities.* That statement, it bears noting here,
. recognized that additional evidence would be needed for @ more
complete assessment of the potential environmental impact of the
selective freight rate increases under consideration. In the report of
September 27, 1972, Increased Freight Rates and Charges, 1972,
There had carlier been denied, by order entered January 7, 1972. a petition filed December 20.
1971, by S.C.R.A.P.. seeking a 2-week extension of time beyond January 20, 1972. for filing
protests against the proposed surcharge and an additional 2-week extension of the date (February
\ §, 1972) on which such surcharge was to become effective.
‘$.C.R.A.P. y. United States, supra. On July 19, 1972, in Aberdeen R. Co. v. S.C.R.A.P.. 409
U.S. 1207. 93 S.C. 1 (1972). Chief Justice Burger. acting as Circuit Justice for the District of
Columbia Circuit, denied an application for a stay of the District Court's judgment pending
appeal. While expressing grave reservations regarding the decision of the lower court he
concluded that, on balance. the District Court did not abuse its discretion in deciding “that there
was danger to the environment outweighing the loss of income and consequent financial threat to
the railroads.” This matter is now on appeal to the Supreme Court which has heard arguments in
the matter.
346 1.C.C.
C—O OO EEE
INCREASED FREIGHT RATES AND CHARGES, 1972 - 91
,
supra, it was stated that, based on an analysis of the increases
Proposed within particular commodity groups and of recent general
increases in railroad freight rates and charges, our authorizations
would not substantially affect the use, consumption, or shipping of
secondary materials, and that the increases at the levels authorized
would neither actually nor potentially significantly affect the quality
of our human environment. It was concluded that a likely result of
the overall limitation and the specific holddowns otherwise found to
be just and reasonable might be to encourage the movement of
recyclable commodities. "As the environmental issues had been
considered fully, no formal impact statement was thought necessary.
Petitions‘ were filed objecting to the decision not to issue a
formal impact statement and seeking reconsideration of the
discussion of the environmental impact of increased rail rates and
charges on the movements of commodities being transported for the
purposes of recycling. By order of November 7, 1972, this
Proceeding was reopened in order further to evaluate the
environmental effects of increased railroad freight rates and charges
on the’ movements of commodities being transported for the
purpases of recycling as defined in paragraph (m) to the General
Exceptions to the Tariff of Increased Rates and Charges X-281-B.5
‘Petitions were: filed individually by S.C.R.A.P.. CEQ. EPA. the Institute of Scrap Iron and
Stecl. Inc.. National Association of Secondary Materials Industries, Inc. (NASMI). Northwestern
Steel and Wire Company. Copperweld Stec! Company. and the Environmental Defense Fund
(EDF).
That definition reads as follows:
Secondary Materials listed below (being transported for Purposes of recycling)
Recycling for purposes of this tariff shall mean Processing of waste. Le.. any product which
has been or would ordinarily be discarded as worthless. defective or of no use. and the
Processing of such commodity transported in order to Produce a commodity of the same kind
as the commodity transported or to Produce a previous state of the commodity transported
A certification by the Consignor must appear on the Bill of Lading as follows:
“The increases published in Ex Parte 281 do not apply because the involved goods are
being transported for purposes of recycling in a movement from to
22 941 Textile Waste garneted or 33 312) Copper matte. speiss of flue dust.
Processed,
22 973 15 Noils. ramie. 33 322 Lead matte. Speiss or flue dust
22 973 25 Noils (combings or comber — 33-332 Zinc dross. residues. ashes.
waste), cotton.
thru 33 342 Aluminum residues.
22 973 68 Rovings. jute and istle (ixtle). 33 398 Miscellaneous Nonferrous metal
: residues.
32 299 24 Cullet (broken glass). 40 1 Ashes.
33 119 Blast furnance or coke oven 49 2 Waste or Scrap.
products, nec.
(footnote continued on next page)
346 L.C.C. 13
92 INTERSTATE COMMERCE COMMISSION REPORTS
The United States District Court for the District of Columbia by
order filed January 9, 1973, declined to enjoin preliminarily the
increases we approved on commodities other than those being
transported for the purposes of recycling. The court stated that its
decision was influenced, in part, by the substantial and irreparable
harm to the Nation’s railroads that such an injunction might cause.
The draft impact statement dated March 5, 1973, reflected a good
faith effort to satisfy fully the requirements of NEPA. It was
believed that every reasonable and practicable method of
examination that could be accomplished within the time and many
other constraints imposed upon this Commission by statute and
otherwise, had been exhausted so as to assure concerned citizens
that all issues were carefully and thoroughly considered. Yet again,
we have scrutinized the record in this proceeding, including the
environmental representations which are summarized in appendix D
to the prior report herein. The statement of facts in that report,
which was based upon a full and fair hearing, has not been
challenged. It is hereby incorporated by reference in this report,
and we shall repeat only such facts as are necessary for clarity of the
discussion below. In addition, all available literature on this subject
has been carefully studied. Attached as appendix A hereto is a list
of such material. To satisfy ourselves as to the thoroughness of this
research, this bibliography was submitted to the railroads and to
each of the petitioners named in footnote 4, supra, with the
understanding that they would notify us as to any other relevant data
of which they were aware.® In addition, our staff contacted
knowledgeable individuals in this subject area in person, by mail,
and by telephone in order to assure full compliance with the NEPA
require ments.
In the comprehensive draft environmental impact statement,
released March 13, 1973, it was concluded that the selective freight
(footnote 5 continued) :
The STCC Numbers referred to shall also embrace all articles assigned additional digits listed
thereunder.
This exception shall not applygéto goods that are being processed solely by reasons of
contamination or defect in grade or quality, nor to byproducts having a commercial market.
This exception is published solely in compliance with preliminary injunction issued on July 10.
1972, by the United States Distret Court for the District of Columbia in Civil Action No, 971-72,
S.C.R.A.P. versus United Siates.
"Responses were received from the railroad respondents, the Institute of Scrap Iron and Steel.
Inc.. NASMI. S.C.R.A.P., EPA. Copperweld. and EDF. Additional pertinent source materials
_ were presented by each with the exceptions of $.C.R.A.P. and EDF. This additional material has
been considered and identified in the “Supplementary Bibliography” in appendix A. Although the
response of NASMI to our bibliography was fully considered, we inadvertently omitted any
reference to the said response in our draft impact statement.
346 L.C.C.
14
INCREASED FREIGHT RATES AND CHARGES, 1972 93
ie
rate increases approved in this proceeding as to commodities
moving for the purposes of recycling would not have a significant
adverse impact upon the quality of the human environment. It was
found that any environmental costs which may result from that
action would be outweighed by the economic benefits derived by
the railroads, and the resultant quality of rail service that such
benefits would ensure. Interested persons were requested to submit
their views concerning the draft impact statement within 30 days of
the date of service thereof. Comments have been filed individually
by S.C.R.A.P., the Institute of Scrap Iron and Steel, Inc., General
Services Administration of the United States, NASMI, Copperweld,
United States Department of the Interior, United States Department
of Commerce, EPA, and CEQ, and jointly by EDF, National Parks
and Conservation Association, and Izaak Walton League of
America, and the rajlroad respondents. These comments have been
summarized and are attached as appendix D to this statement.
In general, the Institute, S.C.R.A.P., and Commerce contend that
the draft impact statement was written to support our prior
conclusions and not to inform the public. EDF, NASMI, and the
Institute assert that additional environmental hearings are required,
as is the cross-examination of this Commission's staff members that
participated in the drafting of the prior impact statement, and that
the instant report should be a second draft impact statement to
which the parties herein may comment. Certain parties seek our
consideration of alterratives such as the deregulation of the
transportation of recyclables (GSA), the increasing of rates on
primary commodities (EDF et al.), and the deregulation of motor
carriage (EDF et al.). S.C.R.A.P., EDF et al., and CEQ request that
increases on the rates of recyclables be postponed until the
conclusion of our review in Ex Parte No. 270, of the validity of the
existing rate structure. Interior and Commerce seek clarification of
the issue of elasticity of demand, while EPA avers that basic
economics dictate that some decreases in recycling will result
because of the proposed increases in freight rates for secondary
materials.
In their comments on our draft impact statement, certain parties
have referred to specific literature not previously brought to our
attention--S-€.R.A.P. suggests that we consider an EPA Report to
Congress on Resources Recovery dated February 22, 1973. We are
not aware of the existence of such a report and EPA’s Office of
Federal Activities, after inquiries with EPA’s Office of Solid Waste
Management, has disavowed the existence of such a report.
346 L.C.C.
15
Be
os
94 INTERSTATE COMMERCE COMMISSION REPORTS
NASMI takes the position that the draft impact statement in this ~
proceeding differs from the position taken by the Federal Maritime
Commission which, in draft impact statements issued by it, allegedly
has stated that transportation rates may preclude recycling. It
appears, however, that FMC has never found that transportation
rates do inhibit recycling, but merely seeks in its draft statements to
outline all possible issues in a particular proceeding including the
possible effects of increased rates on recycling. FMC’s approach
concerning the relationship between recycling and transportation
rates is, therefore, not contradictory to that reached herein.
NASMI’s further complaint that the draft impact statement
overlooked a report issued by the National League of Cities and the
United States Conference of Mayors on March 22, 1973, entitled
“Cities and the Nation’s Disposal Crises” is not well taken. The
findings of a report issued over 2 weeks after the draft impact
statements were adopted, plainly could not have been incorporated
in that statement. The draft environmental impact statement was
complete when issued and is not deficient either because it did not
embody reports which wete not available or because it is said to be
in conflict with “non-decisions” by our sister agency, FMC. The
report referred to by NASMI was written by urban groups, and the
validity of its undocumented conclusions regarding freight rates and
recyclables is open to substantial doubt as demonstrated in the
instant statement.
EDF et al., refer to a Ph. D. dissertation by James Sawyer entitled
A Regional Analysis of the Automobile Scrap Processing Sector of
the Economy and to a linear programming model, created by
Clifford Russell, of steel producing firms which have some choice of
processing and can choose between inputs of scrap or virgin
material. These theses represent price-sensitivity studies indicating
reasons for fluctuations in scrap prices. We believe that such price
fluctuations. and the elements generating them have been fully
recognized in the instant report and that these studies would shed
no new light upon this subject.
We offer one further“comment before discussing the involved
issues. Much of the criticism that has been leveled at us in this area
may be described as one dimensional. Those critical of our actions
in this proceeding generally advance only environmental issues; to
them, nothing more seems to exist. We are not, however, a one-
dimensional agency, and the NEPA is not a one-dimensional statute.
The NEPA recognizes that existing agencies have other respon-
sibilities and expects such agencies to incorporate environmental
346 1.C.C.
16
Be _—
_—: Ee
INCREASED FREIGHT RATES AND CHARGES, 1972 95
considerations into their present decisionmaking formulas.
Throughout this proceeding we have endeavored to consider all
significant environmental factors, long range as well as short term,
local as well as national, direct as well as indirect, but we have not
lost sight of our other responsibilities. Our views continue to be
best summed up in the following statement issued by this Commis-
sion in December 1970:
We share the rising public concern with our environment and with the deterioration
of our natural surroundings caused by pollution and by the misuse and depletion of
our land and natural resources. We do so first as proud citizens of an involved
community and secondly, as Commissioners charged by the people of the United
States, acting through their President and Congress, with the regulation of this
Nation's surface transportation system in the public interest. Transportation of
“Waste” Products for Reuse, 114 M.C.C. 92, 121.
Our determination to participate fully in the Nation's effort to
stem the pollution of its environment and the depletion of its
resources was further evidenced in Ex Parte No. 55 (Sub-No. 4),
Implementation of Public Law 91-190, National Environmental
Policy Act of 1969 and Related Requirements. The order
announcing the institution of that rulemaking proceeding, entered
April 16, 1971 (339 L-C.C. at 511), made it clear that:
This Commission must and will implement the directives of the NEPA and related ,
pronouncements. We must and will investigate the methods of meeting these statutory
directives to create a more meaningful relationship between this Commission's
regulatory responsibilities and the Nation's battle to save the environment.
Our environmental procedural rules, closely reflecting the
guidelines enunciated by CEQ, as well as the ruling in Calvert
Cliffs’ Coordinating Committee v. U. S. Atomic Energy
Commission, 449. F. .2d 1109 (D.C. Cir. 1971), decided in the
interim, were promulgated by order of January 14, 1972 (340 I.C.C.
431), and became effective shortly thereafter. With this background
in mind, we shall turn now to the specific environmental questions
here at issue.
PRELIMINARY DISCUSSION
Pollution threatens our existence. We believe that any plan to
protect our surroundings must receive the cooperation of
Government, industry, and the public. The environment, however,
does not exist in a vacuum. It affects and is in turn affected by many
346 L.C.C.
17
96 INTERSTATE COMMERCE COMMISSION REPORTS
other facets of our lives! To examine and deal with the environment
without considering these other factors would be like a doctor
examining and treating a patient’s heart without regard to the
reaction of the remainder of his body. The doctor may cure the
heart ailment, but lose the patient. For example, the Department of
Interior claims in its poststatement comments that consideration of
freight rate data is not appropriate in an impact statement. It
believes that we should only assess the effects of the proposed
action on the environment. We fear that such an approach to, this
proceeding would bar an effective evaluation of the full scope of
environmental effects as intended by the NEPA. ,
Some of the parties to this proceeding, in our judgment, have
failed to take a‘practical view of the total problems here involved.
Instead, those parties plainly advance their own individual (and, in
certain instances, economic) interests. They do not seek to balance
interests, but rather to exclude opposing interests. To illustrate, the
submitting railroads contend that they should not be required to
finance industrial ecological programs through the maintenance, of ©
unduly low freight rates; the shipping interests request that their
products not be subjected to the proposed rate increases or that
those products should be subject to certain holddowns,; certain of
the environmentalists maintain that rates;on secondary materials)
(which assertedly should move in greater volumes for recycling
purposes) ought to be preserved and protected (if not lowered) at all
costs; and the governmental interests together with the private
environmental sector seek to demonstrate that this Commission
should investigate environmental matters and effects more
extensively with our own resources. It is such one-dimensional
approaches as these that we are knowingly seeking to avoid. The
NEPA 142 U.S.C. 4331(b)] itself requires us “to use all practicable
means, consistent with other, essential considerations of national
policy, *** to the end that the Nation may *** [as here particularly
pertinent] enhance the quality of renewable resources and approach
the maximum attainable recycling of depletable resources.’
As Chief Justice Burges stated in Aberdeen R. Co. v. S.C.R.A.P.,
supra:
Our society and its governmental instrumentalities having been less than alert to the
needs of our environment for generations, have now taken protective steps. These
developments, however praiseworthy, should not lead courts to exercise equitable
powers loosely or casually, whenever a claim of ‘environmental damage’ is asserted.
The world must go on and new environmental legislation must be carefully meshed
with more traditional patterns of federal regulation. The decisional process *** is one
of balancing and it is often a most difficult task.
346 LC.C.
18
>
‘
INCREASED FREIGHT RATES AND CHARGES, 1972 | 97
\e
It is our responsibility to balance fully, and without tipping the
scales in favor of any single factor, the costs and benefits of our
actions and any reasonable alternatives that may be presented. We
trust that this impact statement accords appropriate weight to
economic and social considerations in addition to that which might
be given environmental matters.
It further should be noted that many persons participating in this
proceeding seem to have ‘adopted the position that, if a problem is
incapable of a definite or mathematically precise solution, then it
can best be solved by a large quantum of detailed evidence and
statistics. This position, characterized by some as the “Dwarfing of
Soft Variables Syndrome,” is a familiar one: if you can’t count it, it
doesn’t exist. But no absolute or mathematically conclusive method
of balancing the environmental, economic, and social values
‘involved in a general rail freight increase proceeding currently
exists. Instead, there are present a wide variety of unquantifiable
factors which this Commission must bring to bear in such decision-
making matters and which under the law, can be brought to. bear
only by this Commission, because of our expertise in surface trans-.
portation recognized by the Congress and the judiciary. We admit,
of course, that readily quantifiable factors are easier to process—and
hence ‘more likely to be recognized and then reflected in the
outcome—than are those that resist quantification. Nevertheless,
the result, despite what turns out to be a spurious appearance of
accuracy and completeness, is likely to be significantly warped and
hence highly suspect. In our attempt, therefore, to analyze the
probable results of any action we take in this proceeding upon the
quality of our human environment, we have carefully examined the
evidence of’record, applied our expertise in surface transportation,
and utilized to the fullest extent possible all available expertise in
the ecological, economic, and social areas.
It is the purpose of the NEPA to have Federal agencies such as
this Commission, in cooperation with State and local, governments
and other public and private organizations, use all practicable means
and measures to create and maintain conditions under which man
and nature can exist in productive harmony. To this end, section 102
of the NEPA spect nay requires om, to the fullest extent possible,
we shall—_
(B) identify and develop methods and procedures, in consultation with the Council
on Environmental Quality ***, ‘which will insure that presently unquantified
Tribe. Trial by Mathematics, 84 Harv. L. Rev. 329 (1972).
346 I.C.C.
19
98 INTERSTATE COMMERCE COMMISSION REPORTS
environmental amenities and values may be given appropriate consideration in
decision making along with economic and technical consideration,
(C) include in every recommendation or report on proposals for legislation and
other major Federal actions significantly affecting the quality of the human
environment, a detailed statement by the responsible official on—
(i). the environmental impact of the proposed action,
(ii) any adverse environmental effects which cannot be avoided should the proposal
be implemented, , (
_ Gi) alternatives to the proposed action,
(iv) the relationship between local shor{-term uses of man’s environment and the
maintenance and enhancement of long-term productivity, and
“~(v) any irreversible and irretrievable commitments of resources which would be
involved in the proposed action should it be implemented.
Prior to making any detailed statement, the responsible Federal official shall
consult with and obsain the comments of any Federal agency which has jurisdiction by
: law or special expertise with respect to any environmental impact involved. Copies of
such statement and the comments and views of the appropriate Federal, State and
local agencies, which are authorized to develop and enforce environmental standards,
shall be made available to the President, the Council on Environmental Quality, and
to the public as pravided by section 552 of Title 5, United States Code, and shall
accdmpany the proposal through the existing agency review processes,***
The NEPA section 102 impact statement is intended as a device
to assure that Federal agencies investigate and give weight to any
significant environment effects caused by action which they take, to
require the development of less damaging alternatives, and to assure
that those effects are made known to the public before the action is
undertaken. The guidelines of the Council on Environmental
Quality, reproduced in appendix A to our report in
Implementation—Natl. Environmental Policy A ct, }969-supra, seek
to coordinate the efforts of Government agencies and to allow
Federal agencies to assess in detail the potential environmental
impact of a considered course of action in order that adverse effects
may be avoided, ‘and the environmental quality restored or
enhanced, to the fullest extent practicable.
In this spirit, we shall proceed next to an analysis of the five
separate criteria eae in section 102(C) of the NEPA as quoted
above. The Council on Environmental Quality in its guidelines and
subsequent memoranda states that Federal agencies must consider
_ the probable impact of the proposed action on the environment,
including the impact on ecological systems such as wildlife, fish, and
marine life. Both primary and secondary significant consequences
for the environment should be included in the analysis. We are also
; . 346 LC.C.
INCREASED FREIGHT RATES AND CHARGES, 1972 99
directed to consider any probable adverse environmental effects
which cannot be avoided, such as water or air pollution, undesirable
land use patterns, damage to life systems, urban congestion, threats to
health, or other consequences adverse to the environmental goals
set forth in section 101(b) of the NEPA. In addition, all alternatives
to major proposed actions must be evaluated even though this may
lead to a consideration of effects and options outside this agency's
actual control. Cf. NRDC v. Morton, 458 F. 2d 827 (C.A.D.C.
1972). That court concluded that a full discussion of such
alternatives is required in order to reach the decision at hand as well
as to inform the public of the issues and to guide the decisions of the
President and Congress, but that a detailed discussion is not required
of alternatives that are deemed only remote and speculative
possibilities. The agency, according to the Morton court, need not
indulge in “crystal ball inquiry” in assessing the effects of
alternatives, but will have taken the “hard look” required by NEPA
if it has discussed the reasonably foreseeable effects with a
_ thoroughness commensurate with their severity and the significance
of the action.
In accordance with the NEPA we must fully consider the
relationship between local short-term uses of man’s environment
and the maintenance and enhancement of long-term productivity.
This in essence requires this Commission to assess the proposed
action for its cumulative and long-term effects from the perspective
that each generation is trustee of the environment for succeeding
generations. We are also directed by the NEPA to consider any
irreversible and irretrievable commitments of resources that would
be involved in the proposed action should it be implemented. This
requires us to identify the extent to which the considered action
curtails the range of beneficial uses of the environment.
It probably would not be possible for us to issue separate
environment impact statements for each specific commodity which
has been classified as recyclable in this proceeding. Therefore, we
have analyzed the overall environmental effects of the proposed
rates increases on all recyclables as a class, separately on cight
commodity groups of recyclables, and on certain selected and
representative commodities individually. We believe that this
approach is administratively efficient and practical, and that this
Commission has met its expansive obligations pursuant to the
NEPA.
346 LC.C.
100 INTERSTATE COMMERCE COMMISSION REPORTS
POSTSTATEMENT COMMENTS RELATING TO PROCEDURAL AND
RELATED MATTERS
It appears that a substantial difference of opinion has developed
among the parties as to the procedures that have been followed in
this proceeding even though most such parties challenge the
completeness, accuracy, and objectivity of the matters set forth in
the draft environmental impact statement. Thus, S.C.R.A.P.
complains that the burden of proof in this proceeding has been
improperly placed upon those parties (other than the railroads)
advocating holddowns or other similar action as to rail freight rates
or commodities being transported for the purposes of recycling.
Other parties, best exemplified by EDF et al., contend that this
Commission must develop more adequate, objective, and systematic
data in order to justify the proposed freight rate increases as to
recyclable materials, and the draft impact statement wrongfully
attempts merely to weigh the arguments and evidence advanced by
the parties to this proceeding, rather than comprising the
independent and searching inquiry and analysis mandated by the
NEPA. On the other hand, the Institute avers that this Commission
apparently has assumed the position of a proponent in this
proceeding in contrast to its proper role as regulator. The Institute
objects to the reliance placed in the drafe’statement upon what it
characterizes as extra-record material which has not been tested by
cross-examination. $.C.R.A.P. and the Department of Commerce
state that they believe the draft impact statement was written to
support the prior conclusions of this Commission and not to inform ©
the public. We strongly reject the validity of all of these assertions.
This Commissicn is required by the NEPA to _ investigate,
evaluate, and report the probable environmental impact of our
major proposed action. In S.C.R.A.P., supra, this Commission was
informed that it may not sit as an arbitrator of the facts, but must
develop a sufficient record on which to base its environmental
determinations. We have done so in this proceeding. Contrary to
S.C.R.A.P.’s contention, *the burden of proof in this proceeding has
never been placed upon the environmentalists. Certainly,
S.C.R.A.P. presented no relevant or probative data upon which an
intelligent decision in this matter could possibly be based. Instead,
we have attempted to research all available literature and have
contacted .governmental and private industry environmental ex-
perts in order to develop the complete record found herein. We
346 L.C.C.
22
INCREASED FREIGHT RATES AND CHARGES, 1972 101
are not content to sit back and simply weigh the evidence of record
because the parties to this proceeding have failed properly to
develop the environmental data) Our present conclusion that the
proposed action is not likely to significantly affect the quality of the
human environment is predicated upon the extensive record
developed in this rulemaking proceeding preceding our prior report
(341 I.C.C. 288), the expenditure of many man-hours of research
and study, and the application of our historical expertise in trans-
portation generally and ratemaking in particular. The parties to this
proceeding, which lack both expertise in transportation and
Supporting research data relating to recycling, aver that the
evidence has not been objectively weighed. As can be seen by the
discussions later in this statement, the data we have developed were
properly considered and logically lead to the conclusions reached
herein.
EDF et al., propose what they consider to be a more systematic
and objective approach to resolving these issues. They do not,
however, explain or even intimate the length of time that such a
four-step procedure would consume, nor whether that procedure
could have been completed during the Statutory time period within
which we must act in suspension proceedings. We have examined
the railroad rate structure and the effect of the increased rates and
charges upon recyclable commodities and that we have done so
differently than some of the parties (such as EDF or the
academicians they have employed) would have, does not render our
effort suspect. In an area as imprecise, ephemeral, and subjective as
the effect of rate increases on the use of secondary materials, there
are bound to be disagreements about how best to make the requisite
environmental assessments. Each method has advantages and
disadvantages, and the selection of one in no way denies the
appropriateness of another. Thus, no matter how we might have
approached our task, a dissatisfied party might have said our
evaluation was inadequate, and that another method would have
permitted a more meaningful determination. EDF et al.,
acknowledge that their four-step procedure is “formidable” and in
any event would not be productive of “absolute accuracy.” That we
elected a different course does not render our analysis any the less
objective or systematic.
EDF et al., NASMI, and the Institute assert that this statement
Should be issued as a second draft impact statement, that additional
hearings should be scheduled on the environmental issues, and that
346 LCC.
23
; a
102 INTERSTATE COMMERCE COMMISSION REPORTS
our staff members who participated in the preparation of this report
should be made available for cross-examination. Oral hearings have
been held in this proceeding, and the parties have had an
opportunity to present environmental data at oral argument, in
petitions for reconsideration, in responses to the bibliography
herein, and in commenting upon our draft statement. We see no
benefit to be derived by allowing further hearings in this proceeding
even if (as we doubt) those hearings could be completed within the
statutory suspension period. The procedure is in keeping with the
requirements of both the Administrative Procedure Act (5 U.S.C.
553) and the Interstate Commerce Act. The present environmental
record has been developed in substantial part by our own
independent efforts and there appears no reasonable basis for now
concluding that the parties can make any further rational
contribution to that record.
This report will be a final report. The suspension period for the
involved rates terminates June 7, 1973, and we have no statutory
authority unilaterally to extend that deadline. For this reason, we
cannot continuously issue draft statements and prolong a final result
in this matter. A proceeding must have a termination. It certainly
was not the purpose or function of the NEPA to extend proceedings
endlessly to the economic benefit of certain of the complaining
parties. The record in this proceeding is complete and further public
procedures herein would be impracticable, unnecessary, and
contrary to the public interest.
In regard to the requests for cross-examination of our staff, the
draft impact statement was a part of a report of this Commission and
is the subject of administrative and judicial appeals in the same
manner as any other report of this Commission.
ASSERTED DISCRIMINATION IN THE RATE STRUCTURE
It is contended that our approval of increased rail rates and charges
on commodities moving for recycling purposes will serve to
aggrevate discrimin already allegedly in the railroad freight
rate structure, to he dete recyclable commodities and the
national recycling effort. Chairman Russell B. Train of CEQ, for
example, has conveyed to us his belief that “several rail haul cost
biases currently exist,” and certain of the parties herein aver that
discriminatory railroad rates and charges impede the movement of
waste materials and favor the transportation of primary materials
with “obvious” adverse consequences to the environment.
346 1.C.C.
24
as
INCREASED FREIGHT RATES AND CHARGES, 1972 103
As recently as the last railroad general rate proceeding, we
pointed out that such a case does not provide an appropriate vehicle
for examining these issues. Increased Freight Rates, 1970 and 1971,
339 L.C.C. 125, 189 (1971). Thus, we do not attempt to determine
whether the particular rates which result from the increases are
maximum reasonable rates, nor does the order constitute a
prescription of rates within the meaning of the decision in Arizona
Grocery Co. v. Atchison, T. & S. F. Ry. Co., 284 U.S. 370. If
individual rates or groups of rates are believed to be unjust and
unreasonable, a shipper or other interested persons has an
administrative remedy available in sections 13 and 15 of the
Interstate Commerce Act, 49 U.S.C. §§13 and IS. General revenue
proceedings are inappropriate forums for litigating such issues.
“Electronic Industries Assn. v. United States, 310 F. Supp. 1286,
1289 (D. D.C. 1970), affirmed mem., 401 U.S. 967 (1971 ); Alabama
Power Co. v. United States, 11 F. Supp. 337, 338 (D. D.C. 1069),
affirmed by a divided court, 400 U.S. 73 (1970); Algoma Coke &
Coal Co. v. United States, 11 F. Supp. 487 (E.D. Va. 1935).
Moreover, we currently have under way a comprehensive
investigation of the railroads’ freight rate structure, Ex Parte No.
270, Investigation of Railroad Freight Rate Structure. That
proceeding was instituted by us in recognition of the growing
concern regarding the pricing of railroad services. More
particularly, we felt the need for exploring whether, as has been
contended, the application by the railroads of increases in rates
and charges as approved by us (especially when measured as
percentages of existing rates) have over the years caused a
misalignment of rate relationships and a distortion of proper rate
levels. A specific area we have assigned for development in that case
is the way in which our prior rate decisions may have an effect on
the Government's program of protecting the environment. The
Institute of Scrap Iron and Steel, Inc., the National Association of
Secondary Material Industries, Inc., and other parties to this
proceeding are parties as well to Ex Parte No. 270. This Commission
has recently named a Special Counsel to further develop the record
in Ex Parte No. 270. We also have proposed new rules governing the
presentation of evidence in Ex Parte No. 290 which, if later
determined appropriate, would provide for data relative to the
revenue contribution of 143 major commodities or groups thereof.
Notwithstanding these on-going efforts to eliminate any distortions
that may inhere in the rate base and to improve our evidentiary
346 L.C.C.
104 INTERSTATE COMMERCE COMMISSION REPORTS
procedures applicable to proceedings such as this one, we think that
the following comments are appropriate at this point in our
deliberations.
We have made an examination of the presently effective railroad
rate structure, and we have done so without ascribing to any of the
parties the burden of establishing that it impedes the transportation
of recyclable commodities. We recognize full well that the
obligation of assessing the ecological implications of our actions,
singly taken or in their cumulative effect, is ours.
The contention that the existing railroad rate structure contains a
bias in favor of primary materials to the prejudice of setondary
materials rests, essentially, upon a surface comparision of their
rates. Thus, for example, the Institute of Scrap Iron and Steel, Inc.,
notes that in 1966 the average rail revenue per 100 pounds was 20.6
cents for iron and steel scrap, whereas, the comparable earnings on
iron ore were but 8.2 cents. The Institute acknowledges that by 1969
this disparity was considerably less—$5.11 per gross ton for scrap
iron compared to $2.67 for iron ore in the United States and $4.70
against $2.58 in official territory. The charge that the rates on iron
and steel scrap are more than twice those of iron ore has been
repeated by others as well, and underlies the frequently repeated
charge that the rail rate structure maintained by the railroads
prefers primary materials to the undue prejudice of secondary
materials.
.The allegation that the disparity in rates between iron and steel
scrap and iron ore demonstrates &n unwarranted bias, reflects an
unfamiliarity with American transportation and a naivety as to
ratemaking in domestic commerce that the Institute’s long and
sophisticated participation in our proceedings belies. If rates were
established on nothing more than a consideration of the weight of
the shipment, the Institute’s position would have some plausibility.
As it well knows, however, that is not and never has been the
method followed in this: country for establishing transportation
charges. é
It is true that domestic transportation rates are generally stated in
terms of cents per hundredweight. In this respect, their method of
publication differs from the practice in the ocean trade, in which
rates normally are stated on the basis of displacement or cents per
cubic foot. Nevertheless, a comparison of the rates, expressed as
cents per hundredweight, does not permit a meaningful
determination as to whether a discriminatory or prejudicial situation
obtains. .
cv
346 LC.C.
26
INCREASED FREIGHT RATES AND CHARGES, 1972 . 105
We have said on numerous occasions that the mere existence of a
difference in rates does not establish undue prejudice or preference.
Black Hills Glass & Mirror Co. v. C., M., & St. P. & P. R. Co., 313
1.C.C. 333, 339 (1961); Malt Liquors, Missouri, Illinois, and
Nebraska to Okla., 310 1.C.C. 93, 101 (1960); United States Lime
Products Corp. v. A., T. & S. F. Ry. Co., 288 1.C.C. 293, 300 (1953);
Cinder Concrete Products, Inc.,v. Colorado & S. Ry. Co., 279 1.C.C.
191, 194 (1950); A. C. Jensen Block & Supply Co. v. C., M., & St. P.
& P. R. Co., 273 1.C.C. 399, 401 (1948); Wayggener Paint Co. v.
Chicago G.W. Ry. Co., 308 I1.C.C. “T48,.150 (1959); Commodity
Credit Corp. v. Texas & P. Ry. Co., 306 1.C.C. 525, 533 (1959): and
State Board of Equalization of Wyo. v. Abilene & S. Ry. Co., 305
1.C.C. 497, 513 (1959).
Our view long has had the approbation of the courts. Nearly 50
years ago the Supreme Court of the United States in United States v.
Illinois Central R.R., 263 U.S. 510 (1923), expressed its agreement
that differences in rates in and of themselves do not establish their
illegality under the antidiscrimination provisions of the Interstate
Commerce Act. The Court said, supra, 263 U.S. at 524:
*** to bring a difference in rates within the prohibition of $3, it must be shown that
the discrimination practiced is unjust when measured by the transportation standard.
In other words, the difference in rates cannot be held illegal, unless it is shown that it
is not justified by the cost of the respective services, by their values, or by other trans-
portation conditions.
Accord: Southern States Cooperative, Inc., v. Baltimore & O. R.
Co., 323 1.C.C. 400, 408 (1964); Southeastern Assn. of R. & Util.
Commrs. v. A., T. & S.F. Ry., 321 L.C.C. 519, 553 (1964): United
States v. Oklahoma City-Ada-Atoka Ry. Co., 319 1.C.C. 182, 186
(1963); and Seattle Traffic Assn. v. Consolidated Freightways, Inc.,
306 I.C.C. 87, 92 (1959).
We begin by“noting that there are literally hundreds of thousands
of commodities that comprise the commerce of this Nation, and that
the railroads through their network of connecting lines hold
themselves out as common carriers of all of such commodities be-
tween each of the tens of thousands of points that they serve. To
enable them to render their task of rate publication manageable, our
Nation's railroads long have classified the freight that they transport.
We think it appropriate to include in this discussion of the alleged
discrimination in the rate structure a brief summary of the principles
of classification and ratemaking. Our review of these fundamentals is
offered at this point not to draw comparisons between any specific
346 L.C.C.
27
106 INTERSTATE COMMERCE COMMISSION REPORTS
commodities, whether they be primary or secondary, but simply to
suggest the complexity and diversity of the factors that go into
classification and ratemaking,
A classification has a twofold meaning in transportation
parlance.* In the one sense, the term denotes the process by which
the myriad commodities tendered a carrier are grouped for the
pricing of its services. As succinctly stated in Van Metre, Industrial
Traffic Management, 27 (1953):
It must be immediately apparent that the publication of rates for a railroad system
as large as that of the United States is a monumental task. Our railroads handle
thousands of commodities each day, between thousands of stations. On each
commodity handled there is a published freight rate applying to its transportation be-
tween each freight station and all other freight stations in the country. If all articles
carried were charged an identical rate per hundred pounds, the tariff for a single
station would have to be as large as a good-sized mail-order catalouge. But instead of
one article, there are probably as many as 30,000 for which freight rates must be
made.®
The process by which the publication of transportation charges of
the thousands of articles in commerce is made manageable is
classification. Classification as so uséd has been defined by the
Supreme Court in Director General v. Viscose Co., 254 U.S. 498,
503 (1921), as follows:
Classification in carrier rate-making practice is grouping,—the associating in a
designated list, commodities, which, because of their inherent quality or value, or of
the risks involved in shipment, or because of the manner or volume in which they are
shipped or loaded, and the like, may justly and conveniently be given similar rates.°°*
The Commission has variously defined the classification of freight
as “a ratemaking scheme devised for the purpose of according the
same rate to all commodities of a like character from a trans-
portation standpoint,” McCrory Stores Corp. v. Director General,
"For comprehensive discussion of this subject. see Colquitt, The Art and Development of
Freight Classification (1956), and Way, Elements of Freight Traffic (1956).
“Drinker in Interstate Commerce Act 193 (1909). observed:
“O lassification.” said the Commission in its first Annual Report, “is the foundation of all
rate making.”
For the railroads to attempt to fix a separate rate for each commodity shipped, would not
only be unduly burdensome to them and entirely impractical, but it would lead to an endless
complication of tariffs, which would undoubtedly be more objectionable to shippers in
general than a simpler system of rates adjusted with less theoretical nicety. On all sides it has
been found advisable to sacrifice, to a certain extent. mathematical accuracy. for the sake of
securing practical simplicity.
346 L.C.C.
INCREASED FREIGHT RATES AND CHARGES, 1972 107
55 1.C.C. 423, 424 (1919); and Hires Condensed Milk Co. v. P. R.
R. Co., 38 1.C.C. 441, 447 (1916); “a matter of comparison of all the
commodities that move as freight and the assignment of ratings such
that each shall bear its fair share of the transportation burden,”
Classification of Canned Goods, 98 1.C.C. 166, 176 (1925); and “a
determination of reasonable relations between commodities, with
groupings of kindred articles.” National Electrical Mfrs. Assn. v.
Atchison, T. & S. F. Ry. Co., 289 1.C.C. 125, 132 (1953).
The factors that influence the freight’s classification, the so-called
transportation characteristics, are many and varied. In Motor
Carrier Rates in New England, 47 M.C.C. 657, 660-61 (1948), these
characteristics were listed in the following terms:
The characteristics of the commodities which must be considered in fixing
classification ratings are generally as ‘follows:
|. Shipping weight per cubic foot.
2. Liability to damage.
3. Liability to damage other commodities with which it is transported.
4. Perishability.
5. Liability to spontaneous combustion or explosion.
6. Susceptibility to theft.
7. Value per pound in comparison with other articies.
8. Ease or difficulty in loading or unloading.
9. Stowability.
10. Excessive weight.
11. Excessive length.
12. Care or attention necessary in loading and transporting.
13. Trade conditions.
14. Value of service.
15. Competition with other commodities transported.
Accord: All States Frgt. v. New York, N. H. & H. R. Co., 379 U.S.
343 (1964); Class Rate Investigation, 1939, 262 1.C.C. 447, 508
(1945); Investigation and Suspension Docket 76, 25 1.C.C. 442, 463,
472-73 (1912); and Proctor & Gamble Co. v. C., H. & D. Ry. Co., 9
1.C.C. 440, 482 (1903). It is because of these many and varied
characteristics that bare reliance by a number of parties herein upon
certain Burden Study statistics (which represent estimates only) to
indicate the contribution a particular commodity may be making to
the carriers’ costs is not well taken. This matter will be amplified at
a later point in this statement.
The first of the listed transportatin characteristics is the shipping
weight per cubic foot, or density. As we have noted, domestic trans-
portation charges in America generally are assessed on the basis of
346 L.C.C.
29
aiaiteeentiant
108 INTERSTATE COMMERCE COMMISSION REPORTS
the weight of the shipment that is, the rates are stated in terms of so
many cents per 100 pounds. Obviously, under such a scheme of
pricing, the shipper tendering a large shipment in terms of weight
will pay more than the shipper tendering a light shipment. In other
words, a shipper of a 1,000-pound box would be expected to pay
more than the shipper of a 100-pound box. However, a carrier is
limited in how much freight it can carry by the capacity of its equip-
ment, and in any one piece of equipment it can carry a heavier load
of freight having a low cubic displacement than it can shipments of
high cubic displacement. Therefore, in determining the rate
relationships of various commodities, that is, in grouping com-
modities for the assessment of transportation charges, it is natural
that the carrier would rate freight of low density higher than freight
of high density, all other things being equal. Feathers should be
rated higher than lead, as, indeed, they are. Van Metre in /ndustrial
Traffic Management 51-52 (1953), says of this transportation
characteristic:
Since rates are almost all quoted in cents or dollars and cents per hundred pounds or
per ton, it is plain that a car loaded to its capacity in pounds earns more than one
which is loaded only to a fraction of that capacity. But there are many articles so light
in proportion to their bulk that under no circumstances could enough of them be
packed into a car to bring its load up to its weight capacity. Therefore it costs the rail-
road much more per hundred pounds to transport such articles than to transport
articles so heavy in proportion to the space they occupy that they can fill a car to the
limit of its weight capacity. The light, bulky articles take up the earning space of the
carrier's equipment, and the only way in which a carrier can secure revenue which
ad. quately reflects the cost of transporting such articles is to make a high charge per
hundred pounds for their transportation.
The significance of density as a transportation characteristic is
illustrated by the shipments of bulk cottonseed from Blytheville,
Ark., to Memphis, Tenn., and of loose cotton in bags from Arbyrd,
Mo. (Paragould, Ark.), to Memphis. Although these shipping points
are approximately comparable, the cottonseed takes a rate of 17
cents per hundred pounds for a minimum shipment of 50,000
pounds (St. L. S. W. Ry. tariff 321-C, ICC No. 4853) while the loose
cotton in bags takes a rate of $1.83 per hundred pounds (tariff SWL
237-L, ICC No. 4907). This elevenfold difference in rates is
-explained upon an examination of sample waybills. The cottonseed
loads heavily, at over 70,000 pounds per car, resulting in freight
revenue of over $120 per car to the carrier. The loose cotton in bags
of course loads lightly and, at about 6,000 pounds per car, earns less
than $120 per car for the carrier. Since the carrier's costs for moving
346 L.C.C.
30
INCREASED FREIGHT RATES AND CHARGES, 1972 109
the two cars are similar in this specific situation, except for such
items as added fuel costs for pulling a heavier car, the difference in
rates enables the carrier to realize comparable revenues on the
movements.
Another roughly comparable movement of primary and refuse
materials is the transportation of cotton linters from Greenville,
Miss., to Memphis, Tenn., and the movement of cotton motes from
Greenwood, Miss., to Memphis. The linters move at a rate of 32
cents per hundred pounds with a minimum shipment of 60,000
pounds (SFTB 2011-M)- while the motes bear a scale of rates:
Minimum we ighi—pounds Rate—cents per
hundred pounds
20,000 60
30,000 42
40,000 39
Excess over 40,000 in same car ---- 32
An examination of sample waybills again revealed that while the
motes load at just over 40,000 pounds per car, thus bearing the 39-
cent rate, the linters load at over 60,000 pounds per car. The
revenue realized by the carrier is higher for the lower rated com-
modity: the 20-percent difference in rates is more than offset by the
50-percent difference in loading characteristics, as far as the carrier
is concerned. 4
The next group of transportation characteristics—liability to
damage, liability to damage to the commodities with which it is
transported, perishability, liability to spontaneous combustion and
explosion, and susceptibility to theft—relate to the obligation of the
railroads as bailees of the goods that they transport.
Whatever may have been the obligation of the railroads under the
common law, under the prowgions of the Interstate Commerce Act,
rail carriers are tantamount to insurers of the safe delivery of
cargoes entrusted to their care for transportation. Loss and Damage
Claims, 340 1.C.C. 515 (1972). Section 20(11) of the Interstate
Commerce Act, 49 U.S.C. §20(11), states “That any common
carrier, railroad, or transportation company *** shall be liable ***
for any loss, damage, or injury *** caused by it | or by its connecting
carriers]” to the property transported by it. That being the case, it
Stands to reason that in establishing the rate relationship between
the many commodities they transport, the railroads should assess a
higher charge on freight more likely to be lost or damaged in transit
than on freight not having such a tendency. Thus, electric light bulbs
346 1.C.C.
31
110 INTERSTATE COMMERCE COMMISSION REPORTS
should be rated higher than electric switches, as, of course, they are.
The Institute in its comments on our draft statement asserts that the
railroads refuse to pay freight claims on scrap. It offers no .sub-
stantiation of this allegation and, subject to the caveats expressed in
the Loss and Damage Claims case, it has available the same legal
remedies as any other shipper to collect for its legitimate claims.
The next transportation characteristic—value is related. If two
packages of equal weight are lost in transit, the carrier incurs a
greater monetary loss in paying the claim of the shipper of the more
valuable freight than it does in paying any that may be submitted on
the less valuable freight. Accordingly, in establishing the relation-
ship of rates it would be appropriate for the carriers to assess the
former a higher rate than the latter. In other words, as a measure of
the risks assumed, value clearly is a transportation characteristic to
be taken into account. Moreover, value is a factor in classification
for the further reason that it generally is indicative of the ability of a
commodity to pay the transportation charges. Rates on Lumber and
Lumber Products, 52 1.C.C. 598, 615 (1919).
In the latter respect, according the value of the commodity
consideration in establishing the relationship of transportation
charges is not dissimilar from oridinary commercial practices. It is
almost universally true that merchants and manufacturers have a
greater markup or assign a greater portion of their overhead and
anticipated profit to their expensive items than to those bearing a
smaller price. The railroads and other domestic transportation .
companies long have done no less. As Professor Locklin has noted
in his Economics in Transportation (6th Edition 1966) p. 418:
It has been customary from the earliest days of railway development to charge
comparatively high rates on valuable articles and lower rates on cheaper articles ***
sometimes the valuable commodities will not stand high rates, but the usual relation-
ship clearly warrants the prominence generally given to value comparisons in rate
cases. There is no need of giving citations to cases in which the Commission has
acknowledged value of the article as a factor to be considered in determining the
reasonableness of rates. Their number is legion In fact, there is scarcely a case
involving rates on particular articles which does not make use of value, comparisons.
In many cases value becomes the controlling consideration.
The next characteristics—case or difficulty in loading or
unloading, stowability, excessive weight, excessive length, and care
or attention necessary in loading and transporting—can be treated as
a group. That they affect the costs incurred in performing the trans-
portation and, accordingly, warrant consideration by the carrier in
346 LCC.
32
INCREASED FREIGHT RATES AND CHARGES, 1972 111 ,
'
establishing the relationship of its transportation charges is so
_ obvious as to require little or no amplification.
As we previously have noted, domestic transportation charges in
America are generally stated in terms of so many cents a hundred- |
weight. That being the case, the carrier needs to receive greater
' compensation for a shipment of freight requiring extraordinary
handling than one of equal weight that can be moved in the usual
fashion. Thus, for example, a 10,000-pound transformer of a type
used at a’ power company substation, requiring skids, winches, or
similar devices for loading or unloading, should take a higher charge
per 100 pounds than a shipment of equal total weight of boxed trans-
formers of the type used in installing door chimes in private
dwellings. Similarly, it stands to reason that, all things being equal,
the carrier should receive more money for handling a 100-pound bar
of steel stretched to a 50-foot length than it can collect for a barrel
of nails of equal weight. In fact, the railroads and other domestic
carriers assess their rates just that way. Referring to these factors,
among others, Flood in Traffic Management (2d Edition 1963) p. 97,
concluded, “Additional services required to transport a specific
commodity add to the transportation costs and therefore become
_ important elements in classifying the commodity.”
As for the next transportation characteristic—trade condi-
tions—we heretofore have noted that a depressed condition existing
in an industry may be a proper factor to be considered in deter-
mining the reqronableness of the rates that apply on its products.
Thus, in ac involving rates on wool, In Re Transportation of
Wool, Hides, and Pelts, 23 1.C.C. 151, 156 (1912), it was said, “If the
condition of one industry is such that it can not flourish, that the
traffic will not move for the reason that the wool itself will not be
produced, that, certainly, is a circumstance which may be con-
sidered in comparing this rate with those upon other commodities.”
Again, in Utah-Idaho Millers and Grain Dealers Asso. v. R. R. Co.,
44 LC.C. 714, 726 (1917), it was concluded, “*** the condition of
an industry has an influence upon the ability of a commodity
produced by that industry to beara rate, which in turn may have a ©
bearing upon the reasonableness of the rate charged.” Accord: Wool
and Mohair Rates, 276 1.C.C. 259, 269 (1949); Livestock—Western
District Rates, 190 1.C.C. 611, 633 (1933); and Rates and Charges
on Grain and Grain Products, 91 1.C.C. 105, 143 (1924).
Professor Locklin in Economics of Transportation (6th Edition
1966), p. 427 said:
346 LC.C.
33
112 INTERSTATE COMMERCE COMMISSION REPORTS
The ability of a particular commodity to stand a rate is sometimes affected by the
conditions of prosperity or depression within the industry which produces the com-
modity. If an industry is in a depressed condition, high rates may result in curtailed
production. Conversely, if the industry is prosperous, rates may be increased without
affecting production. For this reason the Commission has long recognized that the
conditions existing in an industry may be taken into consideration in determining the
reasonableness of rates. This position has the approval of the United States Supreme
Court, for in Ann Arbor Railroad Co. v. United States the Court said: “In rate making
under existing laws it has been recogn that conditions in a particular industry may
and should be considered along with other factors in fixing rates for that industry and
in determining their reasonableness.” The principle received special emphasis in the
Hoch-Smith Resolution, passed by Congress in 1925, which declared that the “true
policy” to be observed by the Interstate Commerce Commission in adjusting rates was
“that the conditions which at any given time prevail in our several industries should
be considered in so far as it is legally possible to do 80, to the end that commodities
may freely move.”
The principle that rates should be adjusted in accordance with the economic condi-
tions existing in an industry may easily be abused. It is valid only in so far as it throws
light on ability to pay transportation, charges. It is not valid when used to help one
class of individuals at the expense of another. The Interstate Commerce Commission
has emphatically declared that it is not justified in reducing rates on a commodity
merely to relieve a distressed industry. This position was taken in a number of cases
which came up after World War I, when the agricultural interests argued for lower
rates on the products of agriculture on the ground that the industry was in a depressed
condition. These ‘pleas were, as a rule, unsuccessful. The soundness of the Commis-
sion’s reasoning on the question of reducing rates to help a distressed industry cannot
be questioned. If the rates are reduced to help out one industry, the burden of the
reduction must be borné by the railroads or shifted to other shippers and consumers
by increasing the rates on other products. The railroad is not an eleemosynary institu-
tion and ought not to be required to forego reasonable compensation for the services
‘ it renders. *** (Footnotes omitted.)
The next transportation characteristic—value of service—is
perhaps the least understood and most frequently maligned of the
factors influencing the establishment of the relationship of trans-
portation charges. Here again, however, what the railroads and other
domestic transportation companies long have done is wholly
analogous 'to the practice that universally obtains in commerce and
industry. Manufacturers and merchants routinely assess the market
demand for their products and price them accordingly. An item that
may be very much in demand one day, commanding a correspond-
ingly high price, the next day may become a glut on the market, not
to be sold at any price as the fashion may have changed. Thus, for
example, today there might be few takers for Daniel Boone coonskin
caps even if they were virtually given away. On the other hand, as
the demand for a product surges, so does its price, as anyone who
was lucky enough hot to have thrown out his grandmother's coffee
346 LCC.
34
INCREASED FREIGHT RATES AND CHARGES, 1972 113
mill, mason jars, or other items now prized as antiques will testify. If
such pricing in accordance with the elasticity of demand constitutes
charging what the traffic will bear, then that is nothing more than an
economic fact of life.
The traditional railroad rate structure of this country was
characterized by value of service pricing. The railroads were known
freely to charge their shippers what the traffic would bear. With the
advent of the motor carriers, pipelines, and other competitors for
freight-and with the competition for traffic having become intense
and pervasive, as we find it to be today, it has been urged that value
of service no longer is an appropriate factor to be considered in the
setting of transportation rates and charges. This misapprehends
completely the role of value of service, for the intensity and
pervasiveness of today’s competition have not diminished in any way
the relevance of elasticity of demand as a matter to be taken into
account in setting railroad rates and charges; the elasticity of
demand for railroad service has increased greatly and shippers of
freight will divert their traffic to alternative modes when confronted
by increased railroad charges more so than they ever have been able
to do before. Shure
Professor Way in Elements of Freight Traffic (1956), pp. 124-25,
explained the role of value of sefvice under contemporary condi-
tions as follows:
Value of service should not be confused with value of the shipment. Although in
traffic matters there is a definite relationship between the two, each is different. The
former refers to the transportation service performed by carriers; the latter, to some
particular commodity itself. A relatively high rating of a high-valued article results in
a freight rate whieh is higher than one obtained from a low rating, but the resultant
high rate is a small proportion of the selling price of the high-valued article, in
contrast to a low rating of a cheap commodity resulting in a rate which is a substantial
part of its price. Therefore, even the resujting low rate on a low-valued commodity has
much greater influence both upon its selling price and the consequent demand of the
public for it, than a high rate on high-valued articles. Consequently, relatively high
ratings do not restrict shipments of high-valued goods nearly as much as they
influence the geographical extent of markets for low-valued goods, which means value
of service is much greater and more sensitive for shippers of low-valued commodities
than for shippers of high-valued commodities. The former are able and willing to pay
less than the latter for transportation service, because the freight rate is a greater
direct part of the former's cost of production and distribution than to latter's.
This situation is recognized by the carriers in rating determination, for they realize
any action on their part which restricts the demand for an article itself, by an
appreciable proportionate increase in its price, will reduce the demand of shippers of
that article for transportation service. It is Tor this reason that there is such wide
divergence among ratings and that “Exceptions,” which will be explained later, have
346 LC.C.
'
114 INTERSTATE COMMERCE COMMISSION REPORTS
been adopted. Of course, no rating can be so low, regardless of the value of service
and ultimate loss of traffic, that the applicable rate will produce revenue at least no
less than the carrier's out-of-pocket costs of providing the service. While value of
service to the shipper constitutes the highest level of rates, costs to the carrier of
furnishing the service represent the lowest level. In practically all instances, the
rating of a particular article falls somewhere between the two extremes, depending
entirely upon the influence of the other classification factors as they are applied to
individual situations. [Footnote omitted.]
Finally, the last of the transportation characteristics which have
been listed as influencing the classification of freight—competition
with other commodities transported—is perhaps the most important
one in evaluating properly the contention advanced herein that the
railroad rate structure discriminates against secondary materials.
Only recently, we received the decision of the United States District
Court for the Western District of New York in Civil Action No.
1971-542, National Gypsum Company, et al. v. United States, et al.,
353 F. Supp. 941 (decided February 5, 1973), which clearly and con-
cisely reiterates the principles which obtain in assessing the
importance of competition as a factor in explaining disparate rates.
Involved in that case were disparate railroad rates from nine
origins in West Virginia, Ohio, Pennsylvania, and Kentucky to the
port of Toledo, Ohio. The plaintiffs were receivers of metallurgical
coal, and alleged that the lower rates that the railroads assessed on
steam coal were discriminatory, in violation of section 2 of the
Interstate Commerce Act. The Court said:
For many years the Supreme Court has recognized that the carrier's necessity of
meeting competitive conditions in order to retain business is an important considera-
tion, which may provide a sufficient dissimilarity of conditions to warrant a reasonable
difference in rates that will not be classified as unjustly discriminatory. In Texas &
Pac. Railway v. Interstate Commerce Commission, 162 U.S. 197 (1896), the Texas &
Pacific published a lower rate for transportation from New Orleans to California of
traffic imported from Europe than for carriage of identical domestic traffic between —
the same points. The lower rate was justified as necessary to avoid the loss of the
European traffic altogether to competition which would transport it to the California
coast by water. Upholding the discrimination as justified, the Court stated:
We think that Congress has here pointed out that, in considering questions of this sort,
the Commission is not only to consider the wishes and interests of the shippers and
merchants of large cities, but to consider also the desire and advantage of the carriers
in securing special forms of traffic, and the interest of the public that the carriers
should secure that traffic, rather than abandon it, or not attempt to secure it. It is self-
evident that many cases may and do arise where, although the object of the carriers is
to secure the traffic for their own purposes and upon their own lines, yet, never-
theless, the very fact that they seek, by the charges they make, to secure it, operates in
the interest of the public. eg Se
INCREASED FREIGHT RATES AND CHARGES, 1972 115
The principal purpose of the second section is to prevent unjust discrimination
between shippers. It implies that, in deciding whether differences in charges, in given
cases, were or were not unjust, there must be a consideration of the several questions
whether the services rendered were “like and contemporaneous,” whether the kinds of
traffic were “like,” whether the transportation was effected under “substantially
similar circumstances and conditions.” To answer such questions, in any case coming
before the Commission, requires an investigation into the facts; and we think that
Congress must have intended that whatever would be regarded by common carriers,
apart from the operation of the statute, as matters which warranted differences in
charges, ought to be considered in forming a judgment whether such differences were
or were not “unjust.” Some charges might be unjust to shippers—others might be
unjust to the carriers. The rights and interests of both must under the terms of the act,
be regarded by the Commission. 162 U.S. 197, 218-19.
We are not persuaded by plaintiffs’ contention that the teaching of Texas & Pac.
Railway is limited to a difference between import and domestic traffic. The basis of
the decision is much broader than that. It is grounded upon the principle that the
necessity of meeting competition in order to retain traffic is a circumstance that will
be given heavy weight in deciding whether a difference in rates is unjust or unreason-
able. Just as the railroads were entitled in Texas & Pac. Railway to publish lower rates
on import traffic in order to induce it to move through the affected ports rather than
use cheaper water transportation, the railroads were here entitled to do likewise in
order to avoid a very substantial loss of business and resulting revenue that might well
have required them to charge even higher rates to plaintiffs than at present in order to
meet the higher operating costs per ton that would result from the decline in volume
of traffic.
The viability of the principle established by Texas & Pac. Railway has repeatedly
been confirmed. Barringer & Co. v. United States, 319 US. 1 (1943) (railroad
permitted to eliminate a loading charge for cotton destined for Gulf ports in order to
meet truck competition but to retain charge on cotton destined for other southeastern
ports); Koppers Company v. United States, 166 F. Supp. 96, 101 (W.D. Pa. 1958); Coal
to New York Harbor, 311 1.C.C. 355 (1960); Consolidated Edison Co. of New York,
Inc, v. Virginian Ry. Co., 292 1.C.C. 23, 35-38 (1954); Reduced Rates on Coal from
the East to the Northwest, 292 1.C.C. 199, 137-38 (1954); Coal from Ky., Va., and
West Va. to Virginia, 308 1.C.C. 99 (1959); Wyandotte Chemicals Corporation v. The
Baltimore and Ohio Railroad Company, et al. (not published) 1.C.C. Dkt. No. 34460
(Sub-No. 1), decided June, 1965. The Commission's settled construction of $2 is
entitled to the “highest respect.” United States v. Missouri Pacific R. Co., 278 US.
269, 280 (1929).
The foregoing presents a summary of the foremost transportation
characteristics which, as we noted at the outset, are considered in
the classification of freight. While any one of the transportation
characteristics, considered alone, might appear to warrant a higher
or lower classification rating of particular freight, all of them are
taken into consiveration, and no one of them is controlling. Vacuum
346 LC.C. “
37
| ian
116 INTERSTATE COMMERCE COMMISSION REPORTS
Cleaner Mfrs. Assn. v. Atchison, T. & S. F. Ry. Co., 276 1.C.C. 783,
792 (1950); Class Rate Investigation, 1939, 262 1.C.C. 447, 508
(1945); Nashville Traffic Bureau v. L. & N.R. R. Co., 68 1.C.C. 623,
626 (1922); and McCory Stores Corp. v. Director General, 55
I.C.C. 423, 424 (1919).
It is well known, however, that relatively little freight transported
by the Nation’s railroads moves solely in accordance with these
principles, or upon class rates. Rather, approximately 90 percent of
the railroads’ traffic moves on so-called commodity rates.
Commodity rates long have been recognized as a concession to a
particular situation that requires departure from the basic rate
structure embodied in the schedules of class rates. “[C Jommodity
rates are special rates which ought to be made with reference to all
the conditions surrounding the transportation of the particular
articles between the particular points.” The Mississippi River Case,
28 I.C.C. 47, 63 (1913); and Railroad Commission of Louisiana v.
A. H. T. Ry. Co., 48 1.C.C. 312, 369 (1918).
An observer, Landon, in Transportation, 315 (1951), noted:
Commodity rates are special rates for products that move in large ene, such as
lumber, wheat, coal, iron ore, cotton, and many others. They are lower than the
applicable class rates and are usually carload rates. Commodity rates as low as 8
percent of the first-class rates applying in particular areas are numerous for articles
unable to bear higher charges.
The nature of the commodites that are apt to be accorded
commodity rates permits the generalization, as made by Van Metre
in Industrial Traffic Management, 28 (1953), that “While the
number of shipments charged class rates is much greater than the
number of shipments that are charged commodity rates for their
transportation, the volume of traffic moving under commodity rates
is far greater than the volume of traffic moving under class rates.”
In establishing commodity rates railroads take into account —
additional factors, among which the most prominent are the volume
of the movement in qugstion, its regularity, duration, direction, and
length. We next shall consider these.
"Wyman in Railroad Rate Regulation 423 ( Ed. 1915) stated:
The principle on which such |commodity] rates are ex tab! ished is doubtless a sound one. The
articles which are granted commodity rates are staples of comparatively low value, like grain,
lumber, and salt, moving in great quantities over roads of which they form a large part of their
traffic. A granger road, carrying great quantities of grain in bulk, is in an entirely different
position as to traffic in grain from a road in another part of the country carrying small
quantities from time to time to the small consumer, and while the traffic of the latter road can
be classified, that of the former requires special treatment.
346 LC.C.
38
INCREASED FREIGHT RATES AND CHARGES, 1972
An obvious determinent of the level of rates to be assessed is the
size of the shipment. Certain costs are incurred by a railroad
regardless of how large or how small a shipment may be, and these
include the costs attending the preparation of the bill of lading, the
rendition of a statement of charges owing, the tracing of the
shipment if astray, or the processing of a claim if damaged or lost in
transit. Such costs are substantially the same whether the carrier
handles a 40-pound shipment or a 40,000-pound shipment; and,
therefore, all things .being equal, the rate per 100 pounds for
handling the former should be substantially higher than that which
applies on the latter. In transportation parlance, it is axiomatic that
LTL rates should be higher than truckload; LCL rates, higher than
carload.
This relationship is no less valid when only volume shipments are
considered, particularly in the case of the railroads. In other words,
certain Costs are incurred by a railroad regardless of how many
carloads of freight comprise a shipment. Apart from the
housekeeping or overhead costs previously enumerated, there are
those related to picking up and spotting the cars that are the same
or substantially so regardless of the number of cars involved.
Dispatching the locomotive, switching it to the siding, pulling the
cars to the assembly or classification yards at origin, and the reverse
procedure at destination are similar whether the shipments consist
of 1 car or 10. Therefore, once again, all things being equal, the rate
per 100 pounds for handling the former should be substantially
higher than that which applies on the latter. In transportation
parlance, it has become commonplace that carload rates shoid be
higher than multiple carload or trainload rates. This, then, is a
function of the volume of the movement in question.
In considering the rate relationships between iron ore and scrap
iron and steel, we have examined waybills in our files attending the
movement of scrap from Curtis Bay, Md. (Baltimore), to Steelton,
Pa. (Harrisburg). Without in any way suggesting that these are
representative, but noting that actual traffic was moving between
those points, the scrap rates for this movement are (B&O Tariff 488-
A, suppl. 123, ICC No. 24822): Ao
Weight of shipment Rate
Per gross ton
44,800 pounds
80,000 pounds
600 gross tons in not more than 12 cars
900 gross tons in not more than 18 cars
1,200 gross tons in not more than 24 cars
346 LCC. 39
118 INTERSTATE COMMERCE COMMISSION REPORTS
This table of rates shows that volume shipments are in fact accorded
lower rates. As can be seen, a 1,200-gross ton shipment, suite is
substantially below a unit-train lot, bears a rate roughly one-half that
of the single-car rates. We have examined several random waybills
covering actual movements under this tariff and found three single-
car shipments of about 115,000 pounds each at a rate of $7.19 per
gross ton, and an 18-car shipment of 68 gross tons (76.2 net tons) per
car at a rate of $3.87 per gross ton.
Another example of the relationship between rates and weight of a
shipment is shown by the following rates on cotton refuse (Tariff
SFA S-2011-M, ICC No. S-1019):
From East Point, Ga (Atlanta), From Stonewall, Miss., to
to Memphis, Tenn. Memphis, Tenn.
Minimum weight— Rate—cents Minimum weight Rate
r 100
pounds
20,000 105 20,000 83
30,000--- 71. + +=30,000 57
40,000--- 63 40,000 52
Excess over 40,000 ------------------- $2 Excess over 40,000---------------- 41
Thus, by heavy loading, shippers can take advantage of rates which
are almost one-half of the maximum rates.
As for its regularity, it requires little elaboration that a railroad
which can anticipate pulling three cars of freight daily from a
particular industry can plan more efficiently and, hence, can operate
more economically than it can to an industry that has no
requirements | week and then tenders a shipment of 18 cars the first
day of the following week. Although the two shippers may be the
source of an equal amount of traffic for the railroad, it would not be
unreasonable for the former to be accorded a more favorable rate
than the latter. Similarly, it requires little or no elaboration to justify
lower rates when the thovements reasonably can be expected to
continue for several years than when their duration is anticipated to
be short lived. , :
Direction is a factor whenever a railroad experiences an
imbalance in the flow of freight. One of the most interesting
examples of the influence of this factor which we encountered in
recent years involved a railroad engaged in the transportation of
346'1.C.C.
a
=
—
INCREASED FREIGHT RATES AND CHARGES, 1972
phosphate in hopper cars from Florida. In order to avoid the empty
return of its equipment, the railroad published drastically reduced
barge-competitive rates on coal, thereby achieving a balanced
movement.
Finally, the length of the movement is a factor to be considered in
establishing the relationship’of rates for many of the same reasons
that volume is. Essentially, terminal costs, the costs incurred in
originating and terminating the movements, remain identical
whether the intervening line-haul transportation is 50 miles or 500
miles. Therefore, all things being equal, the rate per 100 pounds for
handling the former should be substantially higher than that which
applies on the latter.
It is against a background of these many, varied, and yet
significant factors that enter into the establishment of the
relationships that obtain in the railroad rate structure that the
axiom that a mere disparity in rates does not establish
discrimination or undue preference, assumes real meaning. It is
against the background of these that we conclude that no case for
discrimination or undue preference has been made by arguing that
the railroads as a group in 1965, may have received an average of
2.5 times as much per hundredweight for transporting iron and steel
scrap than they did for handling iron ote.
The comparison between the average revenue per 100 pounds on
iron and steel scrap and iron ore reveals very little; it certainly does
not establish that the former was disadvantaged in relation to the
latter. It tells us nothing about the transportation characteristics we
just have discussed. It provides no information as to the lengths of
the movements making up the average, and whether the hauls of
iron and steel scrap may not have been considerably shorter than
those of the iron ore. It tells us nothing of the duration of the
movements and their regulatity, and whether the movements of iron
and steel scrap may not have been far more sporadic and cyclical
than those of the iron ore. It fails to inform us as to the volume of
the movements going into the average, and whether the tonnages
tendered of iron and steel scrap may have been far less than those of
iron ore. Our experience, our prior cases, and, indeed, the record
herein suggest that each one of these transportation characteristics,
relevant to a comparison of the rates, may not be nearly as favorable
for iron and steel scrap as for iron ore. The Institute’s simplistic
argument tells us nothing of the density of the commodities, and
whether iron and steel scrap, particularly before shredding or
346 L.C.C.
6
41
120 INTERSTATE COMMERCE COMMISSION REPORTS
compacting, may not be lighter than iron ore. It provides no data as
to the ease of loading and unloading of the commodities and of their
tendency to damage the carriers’ equipment, and whether iron and
steel scrap may not be dumped into gondolas from magnetic or
clamshell cranes, whereas, iron ore flows into hoppers from
overhead’ bins or conveyors. li tells us nothing of the intensity of
~competition in the trade, and whetier iron and steel scrap is the
bject of the kind of competition that is characteristic of the iron
ore area. Again, our experience, our prior cases, and, indeed, the
record herein suggest that each of these factors may not be nearly as
favorable for iron and steel scrap in comparison to iron ore.
As we have indicated, the cost of transporting a commodity by
+ rail is affected by the volume in which it moves. All things being
equal, if the volume of movement is large, a carrier is in a position
to organize better its operations and methods of handling the
commodity and so reduce the cost of carrying the freight (i.e., the
costs directly 48Signable to the commodity). However, in order for a
large volume of movement to justify a lower rate on one article than
on another, the larger volume should actually lower direct costs. The
most striking example of this principle occurs where the volume of
traffic in a single commodity permits its movement in continuous,
solid trainloads. Iron ore with a number of economical attributes is
an excellent illustration of such a distinctive transport pattern. Iron
ore is a dense, homogenous material, which moves in huge volumes
from the mines or transshipping ports (i.e., iron ore frequently
moves in trainload quantities of 100 or more cars), and requires
little or no special, individual handling. Moreover, high density
permits heavy loading per car, and homogenity eliminates the need
for detailed identification and the concomitant costs thereof.
Additionally, the absence of individualized handling requirements
also lowers the cost per movement. Over a period of time, however, .
specific types of vessels and rolling stock adapted to the iron ore
movement have been Sea ge docks equipped with special bulk
mechanical handling devices for loading and unloading the freight
at both ends of the haul have been brought into use; and railroad
yards have been designed with particular reference to the traffic.
The actual effect of such volume movements can readily be
observed in the operations of the Duluth, Missabe and Iron Range
Ry. Company and the Bessemer and Lake Erie Railroad Company.
For instance, the D.M.&I.R., which originates roughly 35 percent of
the total iron ore tonnage and derives approximately 88 percent of
its total freight revenue from these movements has specialized its
346 LC.C.
42
ES .
INCREASED FREIGHT RATES AND CHARGES, 1972 121
handling to a point where its entire systemwide operating ratio has
been lowered to 65.1 percent. The B&LE, although not handling as
much iron ore traffic as the D.M.&I.R., nevertheless has a
comparable systemwide operating ratio of some 62.5 percent. Iron
ore movements account for almost 54 percent of Bessemer'’s total
freight revenue. In those instances where iron ore traffic is not as
significant to, or the movements are not as continuous for, an
originating railroad, the operating ratios are higher.
In direct contrast to concentration of iron ore movements the
iron and steel scrap flow pattern is diffused and, except for Penn
Central, the tonnage is rather thinly spread out among almost all of
the Nation’s 68 class I railroads.
In essence, iron ore moves largely over a few single-line direct
routes, whereas scrap moves via many railroads mainly in single
carloads over a multiplicity of routes, some of which are extremely
circuitous. Furthermore, the tendency of scrap to originate over
broad areas for concentration, and to some extent fabrication, and
then to disperse over other destination areas necessitates a
transport system replete with feeder and secondary routes
supporting the main intercity arteries. Such a scattered type of flow
pattern can be expected to cause a few cost and service deficiency
problems as noted by the shippers of scrap iron and steel in Ex
Parte Nos. 265 and 267 (i.e., excessive transit time, terminal and
interchange delays, car shortages, bunching of cars, et cetera."
Regularity of movement is also a most important factor entering
into the measurement of relative cost of railroad service. If traffic
moves regularly, it can be transported with greater economy (i.e.,
more economical train schedules can be worked out, and empty
cars can be supplied with a minimum of expense, et cetera. On the
other hand, irregularity of movements has the opposite effect. This
is particularly true when there is a distinctly seasonal movement,
such as certain types of scrap, which taxes the carrier's facilities at
certain times and results in idle equipment and facilities at others.
The economic advantages inherent in the movement of iron ore in
the highly specialized open-top hopper car with its drop frame that
allows for an unloading in one swift motion, as compared to its
movement in the gondola car are significant irrespective of the
territory in which they operate.
With respect to the terminal investment required by the various
carriers, that also differs materially depending upon the
predominant type of traffic in which the carrier is engaged. Thus,
“Ex Parte Nos. 265 and 267, Increased Freight Rates, 1970 and 1971, 339 L.C.C. 125.
346 LC.C.
43
WERE ate tah Mees, TT n genta Gyan eke reer ey RT eT te ee ee
122 INTERSTATE COMMERCE COMMISSION REPORTS
railroads which specialize in iron ore traffic moving directly from the
mines require facilities entirely different from those carriers serving
a highly industrialized territory. In contrast to the simplicity of the
iron ore operation the latter situation requires an intensive system
of switching lines and siding. connection to accommodate a great
number of industries. In a large industrial area, such as that of the
official territory, this results in great dispersion in the origination
and termination of freight, commonly requiring a number of
switching yards serving each section in the industrial district. The
operation is often conducted under extremely congested conditions.
High land values and the built-up nature of adjacent lands makes
expansion or improvements possible only at prohibitive costs. In
consequence, expanded freight business must be handled by existing
facilities under a system of most intensive operation, and unit costs
accordingly are obviously high.
Data drawn from the railroads’ experience in official territory, the
industrial heartland of America, will permit a meaningful
comparison to be made between the two categories of commodities.
Within official territory are the Great Lakes ports of Cleveland and
Toledo, important in the movement of domestic iron ore, and the
Atlantic Ocean ports of Philadelphia and Baltimore, gateways in the
movement of import iron ore. Here are the iron and steel centers of
Gary, Youngstown, Pittsburgh, Fairless, and Sparrows Point, and
finally, within the territory the greatest amounts of iron and steel
scrap, both home and waste, are generated. Indeed Penn Central
Transportation Company, which blankets the area like no other
railroad, alone originates about one-third of all of the iron and steel
gerap transported within the United States.
We find that, within official territory, carloads of iron ore load far
more heavily than carloads of iron and steel scrap; as a matter of —
fact, carloads of iron ore consistently average nearly half again the
weight of carloads of iron and steel scrap. Similarly, we find that
iron ore travels further than iron and steel scrap; the average haul
per car of iron ore has been nearly twice that of iron and steel
scrap." . “
"In Price-Watson v. Elgin, J. & E. Ry. Co., 329.1.C.C. 736, 740 (1967), sustained, Price-Watson
’ Co. v. United States, 287 F. Supp. 872 (N.D. IIL 1968), we noted that the average haul of scrap
iron in official territory was only 84 miles. This compares with our findings in Increased Rates on
Iron Ore, 313 LC.C. $49, 566 (1961), that about the same time the average haul of iron ore was
142 miles on ex-lake traffic and 357 miles on import traffic. The railroads serving the eastern
district transported a total of 55.5 million net tons of iron ore, that traffic comprising 5.18 percent
of their togpage and 2.8 percent of their revenue. Id. 313 LC.C. at 551.
346 L.C.C.
_-
INCREASED FREIGHT RATES AND CHARGES, 1972 123
Iron ore Iron and steel scrap
Average Average Average Average
ton haul ton haul
per car per car per car per car
1964 76.0 184 53.4 9%
1965 77.7 186 53.4 95
1966 78.7 178 54.1 107
1969 776 194 55.5 103
Source: Carload Waybill Statistics.
At the same time, the rate disparity between iron ore and iron and
steel scrap moving in official territory is not as great as it is
generally represented to be. In 1966, the average revenue per
hundredweight earned by the railroads in handling iron ore was 60
percent of that of the average revenue earned on iron and steel
scrap. In 1969, it was 55 percent. However, the more significant
earnings figure, average revenue-per car, was not nearly as disparate.
In 1966, the average revenue per car of iron ore was 85 percent that
of iron and steel scrap, and in 1969, 80 percent.
Iron ore Iron and steel scrap
Average revenue Average révenue
Per Per Per Per
hundredweight car hundredweight car
1966 1.1 174 18.9 205
1969 11.5 179 20.8 231
Source: Carload Waybill Statistics.
Indeed, we find that some of the rates maintained by the railroads
on comparable movements of iron ore and iron and steel scrap are
not dissimilar. For example, the multiple-car rate on iron and steel
scrap from Curtis Bay (Baltimore), Md., to Steelton (Harrisburg),
Pa., is $3.87 per gross ton, whereas, the rate on iron ore is $3.57.
Baltimore & Ohio Railroad, Tariff No. 4988, ICC No. 24822,
Supplement 123, item 630B, and Tariff No. 1014, ICC No. 24789,
Supplement 141, item 3115E.
Even at the slightly lower rates at which the official territory
railroads handle iron ore than they transport iron and steel scrap,
they find they are making more money on the former than they are
on the latter. Using an average shipment of about 72 carloads of over
346 1.C.C.
45
124 INTERSTATE COMMERCE COMMISSION REPORTS
76 tons each as an example, we have calculated that railroads’
variable cost per ton for the above movement of iron ore and iron
and steel scrap. The results were developed through procedures :
from Statement No. ICI-69, Rail Carload Cost Scales by Territories
for the Year 1969, issued as information by our Bureau of Accounts,
but not adopted by us. The calculation establishes that the carriers’
variable cost per gross ton of iron ore is about $1.70 while that for
scrap is about $2.28. This difference in costs ($0.58) it will be noted
is larger than the difference in rates ($0.30). : ;
Within official territory both the terminal and the ‘through-train
line-haul costs in handling iron ore in hopper cars are lower than
they are for handling iron and steel scrap in gondola cars.
/
1969 terminal costs 1969 line;haul costs
per carload per car-mile
. Cents Cents
Iron ore ; 5406.670 25.21934
. Iron and steel scrap 4 9134.915 28.37805
Source: Section of Cost Finding.
Stated differently, the revenue contribution that iron ore makes to
burden is greater on a variable cost basis but less on a fully allocated
cost basis than the revenue contribution of the iron and steel scrap
- movements in official territory. ‘
1969 contribution 1969 contribution to
© to variable costs _— fully allocated costs
Percent Percent
Iron ore 143.1 103.8
Iron and steel scrap 137.8 - 120.1
Source: Department of Transportation.
/
We do not believe the,foregoing comparisons of the movements of
iron ore and iron and steel scrap fairly permit the conclusion that
the rate disparity between these groups of commodities has unduly
preferred the former and discriminated against the latter. Our prior
decisions generally have been to the same effect.
Only a few years ago we were called upgn expressly to respond to
the contention that the rail rates on gfrap iron and steel were
unduly prejudicial in relation to those o iron ore. Institute of Scrap
Iron & Steel, Inc., v. Akron, C. & Y.\R., 316 LC.C. 55 (1962),
346 L.C.C.
46
' \
INCREASED FREIGHT RATES AND CHARGES, 1972 125
sustained sub nom. Frank Adams & Co. v. United States
(unreported, C.A. No. 5093, S\D. Ohio, May 8, 1963), affirmed
mem., 375 U.S. 215 (1963), rehearing denied, 276 U.S. 929 (1964).
In dismissing the complaint of the Institute of Scrap Iron & Steel,
Inc., 316 I.C.C. at 67, we specially noted that, “*** the
transportation characteristics of iron ore, * * * and scrap differ
widely.” We compared the two groups of commodities, 316 1.C.C. at
ent as follows:
\
‘The movement offi iron ore is highly concentrated. Ninety percent of the total traffic
moves from seven Lake ports and three north’ Atlantic ports, and is delivered to the
railroads by vessels in quantities averaging over 12,000 gross tons at the Lake ports
and 23,000 gross tons at the Atlantic ports.\The remainder of the iron ore traffic
originates at eight domestic mine origins and moves in quantities amounting either to
trainloads or substantial fractions of train! The entire traffic, amounting to over
60 million net tons in 1957, is delivered at approximately 90 déstinations where blast \
furnaces are located. By contrast, scrap iron moves from many points, 501 origins in a
typical month. A study made by the Bethelehm Steel Company showed 263 origins,
with individual plants receiving scrap from as many as 115 origins. Although the
* origin and destination points for iron ore are constant from year to year, there are
frequent changes in the origins from which raya mills obtain their scrap.
The average weight per carload differs widely, iron ore loading in excess of 70 net
tons and scrap to 50 net tons. While iron ore moves largely over single-line direct \
routes, scrap moves over a multiplicity of routes, some of which are extremely
circuitous. Because iron ore is frequéntly delivere¥ to the railroads in quantities in
excess of trainloads, it does not require the very expensive terminal services involved
in way train and classification-yard services which are characteristic of the movement
of any commodity such as scrap, where the typical movement is a single carload. Both
iron ore and scrap are transported in open-top equipment, but this is true of about 58
percent of all the carload traffic within official territory. Iron ore rates have never
been related to the rates on scrap, but have been designed to suit the needs of the iron
ore traffic, ex-lake, ex-tidewater, and locally within eaktern territory, and in the light
of competition between lakefront and seaboard mills, on the one hand, and interior
furnances, on the other. \
\ i
In Price-Watson v. Elgin J. & E. Ry. Co., supra, we concluded:
The rates on scrap iron and on other raw materials of the steel industry have always
been made to reflect circumstances and conditions particular to each transportation
service. The complainants’ rate comparisons relate almost exclusively to long hauls.
As pointed out, scrap iron within official territory moves mostly for short hauls, which
is not true of the other traffic with which comparison is thus made. An analysis of the
short-haul movement in the traffic study shows that out ofa total of approximately
4,300 carloads which moved for a short-line distance of 50 miles or less, about 3,200
moved for the account of members of the Institute. The fates at which the traffic
moved reflected an average of approximately 10 percent oh class. Many of the
‘ fates shown by the complainants are between points where there is no movement For
the og part, the prevailing scrap iron rates at the 87- “percent basis are lower than the’
346 L.C.C.
i
47
= | :
i
A
126 INTERSTATE COMMERCE COMMISSION REPORTS
_ pig iron rates, despite the fact that pig iron has an 18-percent higher average loading
than scrap iron. Moreover, some of the pig iron rates used for comparative purposes
have been reduced to meet water competition; for example, the water-competitive
rates from Buffalo, N.Y., to Philadelphia and Baltimore, and the water-truck
competitive rates from Buffalo to Coatesville and Phoenixville, Pa.
Undue’ preference and prejudice must be shown by clear and convincing evidence.
Substantial similarity in transportation conditions, and a real disadvantage by reason
of the assailed rates, must be ahem, Such a showing has not been made on this record.
When the railroads sought our authorization for the general rate
increases of 1969, the Institute of Scrap Iron and Steel, Inc.,
reiterated the contention that the rates on iron and steel scrap were
prejudicial, pointing to, among other things, the iron content of such
scrap and iron ore as a further basis for supporting the claim of
discriminatory pricing. In Increased Freight Rates, 1969, 337 1.C.C.
436, 474 (1970), we held:
We find no merit in the Institute’s contentions. In the context of the issues in this
proceeding we cannot go behind the basic rates in effect November 17, 1969.
Moreover, the basic rate structures for iron ore, pig iron, and scrap iron are entirely
unrelated. Institute of Scrap Iron & Steel, Inc. vy. Akron, C. & Y. R., 316 LC.C. 55. As
‘in Ex Parte No. 259, we conclude that, “while the rates on these various commodities
are not necessarily related, we are of the opinion that, under current conditions, and
where the issues involve the increase in contribution necessary to meet a revenue
need, the burden should be imposed in substantially similar fashion.” (332 L.C.C. at
743.) The uniform 6-percent increase applied to the basic rates on these commodities
si will accomplish this purpose. We find no violation of section 2 or 3 in the manner in
which the 6-percent increase has been applied on iron ore, pig iron, and scrap iron.
In the next general increase proceeding, begun after the
enactment of the National Environmental Policy Act of 1969, the
Institute added the argument that its allegation of discriminatory
pricing was further buttressed by the provisions and purposes of that
legislation..In Increased Freight Rates, 1970 and 1971, 339 L.C.C.
125, 205 (1971), we said:
a tla Sis id tendon
extremely sensitive to changes in freight rates. Between 1961 and 1966, when there
were no general freight rate increases, the price of scrap fluctuated between $24 and
$39 per ton. The price of No. | heavy melting scrap increased from $27.64 per gross
ton in 1967 to $43.50 in 1970, an increase of nearly 60 percent, in spite of the
incronsed freight rates during thet same period. The prices of pig iron and iron ore
advanced only slightly. In addition, protestant’s figures for the ratio of purchased
scrap consumed show erratic behavior during those years. The position of purchased
scrap improved from 19.9 percent in 1966 to 20.3 percent in 1967, and again to 20.9
percent in 1968, followed by a drop to 19.4 percent in 1969. The only conclusion
346 L.C.C.
48
Py
| INCREASED FREIGHT RATES AND CHARGES, 1972 127
warranted on this record is that there is little, if any, correlation between rail freight
rates and the market for iron and steel scrap. We are not persuaded that rail freight
rates on scrap have any material impact on the decisions which result in removal of
wrecked automobiles and other scrap metals pursuant to antipollution measures.
Responding specifically to the suggestion that their iron content
required similar rates on iron and steel scrap and iron ore, it was
concluded, 339 LC.C. at 207:
y, There are differences in the transportation service performed by the railroads in
connection with ferrous scrap’and iron ore, including differences in the average length ~*
of haul, average weight per car, average size of shipment, and regularity of movement
and general distribution Evidence offered by the protestants, including testimony of
expert witnesses, generally to the effect that all metallic sources compete, is not
persuasive of their contention that scrap iron and iron ore specifically and directly
compete to the extent that they require similar rate treatment In the light of the
demonstrated intervening processing required of ore to transform it into a competing
product, we adhere to out conclusions in Institute of Scrap Iron & Steel, Inc. v.
Akron, C. & Y. R., 316 LC.C. 55. In our recent decision in Ex Parte No. 262 we found
that a uniform percentage increase applied to the basic rates on both scrap iron and
iron ore was equitable to both We are not persuaded that the competition between
these two commodities is so direct as to require any different finding in this
proceeding ,
In our earlier report, served October 4, 1972, we noted, 341
LC.C. at 408-409, that the Institute again was advancing its argu-
ment of alleged discrimination between iron ore and iron and steel
scrap based upon their metallic content:
According to protestant, the Battelle formula presents a fair basis for relating the
competition between ore and scrap as metallic sources. Thus, iron and steel scrap and
iron ore are competitors in the sense that they both yield iron units usable at a
profit in the steelmaking process. The main difference between the competitive inputs
is that iron ore requires reduction from oxide to metallic form prior to use; the
reduction of iron ores confers equivalence with the iron found in ferrous scrap.
Battelle reduced the metallurgical formula to an equivalence reflecting the
estimated share of rail movement of the various commodities: thus, 74 percent of the
scrap iron and steel consumed moves by rail, 58 percent of iron ore, and 65 percent of
metallurgical coal. Again, we are not persuaded that this distinction is necessary or
proper. Battelle utilized the 1-percent waybill statistics for 1966 to determine average
revenue per hundredweight for each commodity: 20.6 cents for scrap, 8.2 cents for
iron ore, and 14.2 cents for coal When these revenue data are inserted into the
adjusted equivalence formula, the rate equivalence fails by the amount of $1.49 per
ton. Thus, Battelle concludes the rate structure is, on the average, prejudicial against
the movement of iron and steel scrap, or prefers the movement of iron ore, by $1.49
per ton On the basis of this $1.49 rate disadvantage for scrap at the 1966 level,
Battelle concluded that the excess cost per net ton of raw steel made from purchased
scrap is $4.21. In terms of relative importance, it is generally estimated that the cost
to manufacture a net ton of raw steel is approximately $69 to $74 per ton of ingot
346 LC.C.
49
Boe Spal OG Us Wee ae a Te a Egan ene oe
128 INTERSTATE COMMERCE COMMISSION REPORTS
Thus, on this basis, the impact of the railroad rate differentiation amounts to
approximately 6 percent of total costs.
We recited the railroads’ response, 341 I.C.C. at 409-410, as follows:
In rebuttal, respondents apply the basic Battelle formula to demonstrate that the
proposed percentage increases actually favor scrap iron in relation to hot metal in
terms of total transportation costs. As stated, the Battelle formula equates 2,000
pounds of ferrous scrap with 3,167 pounds of iron ore plus 602 pounds of coal. The
latter are stated as the cOmponents required to produce | ton of hot metal, or molten
pig iron. The application pf the proposed 4-percent increase to 2,000 pounds (1 net
ton) of scrap iron would mean an increase of 20.92 cents. The 4-percent increases
applied to 3,167 pounds of iron ore (average rate $3.29 per gross ton) and 602 pounds
of coal (average rate $3.45 per net ton) totals 22.8 cents.
Effect of Percentage Increase on Scrap
Iron and Components of Hot
Metal
2,000 pounds of scrap iron - Average rate $5.86 gross ton
- Average rate $5.23*het ton
$5.23 net ton x 1 ton = $5.23
3,167 pounds of iron ore - Average rate $3.29 gross ton
(1.5835 net tons) « - Average rate $2.94 net ton
$2.94 net ton x 1.5835 net tons = $4.655
602 pounds of metallurgical coal - Average rate $3.45 net ton
(0.301 net tons)
$3.45 x 0.301 = $1.04
Equivalents
Scrap iron 2,000 pemnds Iron ore, 3,167 pounds
Metallurgical coal 602 pounds
$4.66 iron ore
1,04 met. coal
$5.23 $5.70 ,
0.04 0.04 :
» Eiect. 20.92 cents 22.80 cents
— .
346 1.C.C.
50
INCREASED FREIGHT RATES AND CHARGES, 1972 129
In the interim we have further analyzed the data submitted by the
Institute and the railroads, and our analysis varies somewhat from
those offered by these parties. As will be seen, this analysis is set
forth in a subsequent section of this report after a discussion of the
iron and steel scrap industry and iron and steel scrap technology.
The transportation characteristics and consequent rate treatment
of another recyclable commodity, fly ash, stand in sharp contrast.
Fly ash is a waste byproduct which results from the combustion of
pulverized coal. It has a shipping weight of 70 to 75 pounds per
cubic foot and will load in excess of 70 tons in a standard hopper
car. It is an inert material which ordinarily moves in darload lots. It
has had a constant value of $1.50 per ton for many years. In-sum, fly _
ash is an extremely low-value, heavy-loading commodity which is
not susceptible to theft and poses no threat of loss or damage claims.
Since it is an inert material, it is not perishable.
Fly ash moves in either open or covered equipment depending on
its ultimate use. If it is to be dumped as a waste, open equipment will
suffice. However, it is handled most advantageously in covered
equipment. If it is to be used commercially in a mixture with cement
or as an asphalt additive, it must be shipped dry. If open cars are °
used for dry shipments, they must be covered to prevent the fly ash
from blowing away or getting wet.
Fly ash is lower in value per ton than other commodities with
similar pozzolanic uses, i.e., sand, $1.56; gravel, $1.89; crushed
stone, $1.78; and volcanic ash, $1.85. In addition, fly ash ordinarily
moves longer distances than these competitive commodities. In
view of the low value of fly ash and the existence of readily available
substitutes which can be produced locally, the level of rates is a —
crucial factor in the movement of fly ash.
In summary, fly ash has very favorable physical transportation
characteristics. However, it requires the use of covered hopper
equipment which is more expensive to the railroads. In addition,
its low value and the availability of low-value substitutes presents a
severe limitation on_its_ability to absorb transportation charges.
Fly ash has been included in the Uniform Freight Classification
since 1939, at 17.5 percent of first-class rates, in carloads, minimum
50,000 pounds. However, almost all movements of fly ash have been
on lower commodity rates. i :
The first comprehensive investigation of fly ash rates took place in
1954 under the heading, Fly Ash, Chicago and Trenton, Mich., to
Official Points, 292 1.C.C. 349. This proceeding embraced five
additional investigations of rates, including one initiated by the
346 L.C.C.
51
130 INTERSTATE COMMERCE COMMISSION REPORTS
Commission on its own motion to arrive at' alevel of rates for
application throughout the country.
The Commission examined the level of rates on fly ash then
prevailing in the various rate territories, and found it to be as
follows:
Official Southern Southwestern Western trunk-
: territory territory territory line territory
Distance industrial No. 28300 . exceptions exceptions
sand scale class 17.5 class 12 class 12
Miles Cents Cents Cents Cents
200------------------- 317 520 421 467
400------------------- 414 720 551 653
800------------------- 559 1060 788 996
1,000 ------------------- 619 1200 875 1120
It was found that numerous commodity rates at lower levels
existed in all territories which moved most of the traffic.
The carriers were seeking a dual basis of rates on fly ash
dependent upon the type of equipment utilized and whether or not
the fly ash had value as a pozzolanic material. The basis was
supported by the cement interests, because fly ash displaces a
portion of cement and has similar transportation characteristics.
The shippers were seeking rates based on the industrial sand scale
which ranged from 7 to 9 percent of first-class rates.
The Commission prescribed rates that were 9.5 percent of first
class. The Commission looked to the level of commodity rates that
was moving the traffic and the level of rates on similar low-value,
heavy- loading commodities to determine a just and reasonable rate.
The prescribed rate basis was approximately the same as coal
cinders and industrial sand with some allowance for the cost of using
more expensive covered equipment. The object of this rate basis was
to permit the free movement of fly ash in competition with other
pozzolans and other dow-value commodities. The Commission
refused to adopt the cement scale because fly ash has more.
favorable transportation characteristics and a lower value.
Marketing conditions were assessed as well as the relative lengths of
haul for the two commodities.
This prescription of rates has survived to this day subject to
subsequent general freight rate increases. In Ex Parte No. 212,
Increased Freight Rates, 1958, 302 1.C.C. 665, 696, the Commission
acted to preserve low rates on long hauls of fly ash by ordering a 3-
346 1.C.C.
52
INCREASED FREIGHT RATES AND CHARGES, 1972 131
percent increase with a maximum or holddown of 20 cents per ton.
It was sp¢cifically noted that fly ash often had to move greater
distances than sand, ground limestone, or volcanic ash. Fly ash was
again limited to a 3-percent increase in Ex Parte No. 259, Increased
Freight Rates, 1968, 332 1.C.C. 714, 778, 779. In Ex Parte Nos. 265
and 267, the Commission reiterated the fact that fly ash is one of the
lowest value commodities moving by rail and that its f.0.b. price at
Chicago $1.50 per ton. Fly ash rates were held down below the full
increases guthorized for other commodities. In Ex Parte No. 281,
Increased Freight Rates and Charges, 1972, 341 I.C.C. 288, 427,
428, the 6-percent request of the carriers was pared down to 3
percent because of the low value of fly ash and environmental
considerations.
Fly ash rates have been prescribed and maintained by the
Commissicn at an extremely low level based on traditional
classification principles. Both transportation characteristics and
value of service considerations have played important parts in the
movement of fly ash at low rates. Unfortunately, marketing
conditions for fly ash have not improved substantially and the
railroads Cannot afford to subsidize either the disposal or long haul
of this low-value commodity. The rates on the commodity have been
accorded the utmost scrutiny by the Commission and are in line
with those of other similar commodities.
Considemtion of the transportation characteristics and the
consequent rate treatment of iron and steel scrap, on the one hand,
and, on the other, flay ash, offered as illustrative of the several
categories of recyclable commodities, refutes the contention that
the railroac rate structure discriminates against secondary materials
in favor of primary materials. As we have sought to demonstrate, a
mere dispérity in the rates between them means very little in
determining whether there is undue preference and) prejudice, but
we find little more than such rate differences offered in support of
the charge of bias. We conclude there is no discrimination in the
railroad rat structure applicable on reclyclable commodities.
Before turning to a consideration of the several groups of
commodities suitable for recycling and a determination of whether
the very limited percentage railroad rate increases we have
approved for them will restrict their movement in relation to
primary maerials, we deem it appropriate to pause and consider the
contention of some of the parties that the percentage increases we
have authoiized in railroad general rate increase proceedings the
last nme years have aggravated the disparity in the rates
346 LCC. 7
53
132 INTERSTATE COMMERCE COMMISSION REPORTS
applicable to the recyclable and primary materials. The argument
goes that the alleged bias that discriminates against the former to
the advantage of the latter has been accentuated by the percentage
increases that we have permitted the Nation’s railroads to take. We
find no merit in the argument.
Let us assume further that there are two commodities, commodity
A, the recyclable product, and commodity B, the primary material.
Let us assume from a rate base at which the rate on the former was
50 cents greater than the rate on the latter, the Commission
authorized five successive increases of 10 percent each. 3
The argument goes that at the end of the fifth increase the difference
between-the two commodities is 80 cents rather than 50 cents, to:
the evident disadvantage of commodity A."
Analysis of our cases will show, we are confident, that we have
tempered the percentage increases with maxima and so-called
holddowns found warranted upon a thorough consideration of all
"One conceivable alternative might be the authorization of increases only of equal amounts on
both commodities, so as to maintain the 50 cent differential, perhaps, as follows:
Increase A B
Base 100 50
Ist 110 60
2d 121 121
3d 133 83
Yi 4th 146 ve
Sth 161 iil
Obviously, such an arrangement, sat
wholly unacceptable to the shippers
evident, for, whereas at the outset the rates bore a relationship of 2 to |, they ended up
approximately 3 to 2. Moreover, the latter scheme may give an unwarranted windfall to the
railroads, particularly
recyclable products.
illustrations, and we believe this is where our decisions have rended to be.
346 LC.C.
54
WM ee a
—— INCREASED FREIGHT RATES AND CHARGES, 1972 133
pertinent facts and circumstances. Such, of course, is our action
herein, for we have held the rate increases on recyclables to no
more than 3 percent (except as to iron and steel scrap on which the
increases range from 3 to 5 percent), whereas, we have authorized
other increases, mostly on nonrecyclable commodities, up to 6
percent. :
An indication that such has been the pattern of rate increases is
demSnstrated by a comparison of the average revenue earned by the
Nation’s railroads on iron ore and iron and steel scrap. Both on the
basis of the revenue per hundredweight and on the basis of revenue
per carload the actual increase and the percentage increase in the
earnings of the carriers between 1964 and 1969 was less for the
recyclable materials than for the primary.
Iron Ore Iron and Steel Scrap
Revenue Revenue Revenue Revenue
per cwt. per car per cwr per car
1964 8.6 125 20.7 216
1965 8.9 134 20.6 216
1966- 8.2 125 20.6 218
1969- 11.4 174 22.5 246
Difference 1964-
~~4969 2.8 49 1.8 30
Percentage increase ---- 33 39 7 14
Source: Carload Waypbill Statistics
I. THE ENVIRONMENTAL IIMPACT OF THE PROPOSED ACTIONS
The remaining questions to be explored in this proceeding,‘ are:
(1) whether increased rail freight rates will divert traffic from the
railroads to other modes of transportation in degradation of our
human environment, and (2) whether the proposed increased rail.
_ fates will adversely affect the movement (and hence, it is argued, the
_ fecycling) of secondary materials. These are the essential
~ €nvironmental questions here involved. Pursuant to our duty under
_ the NEPA, we shall consider them fully in order. to develop the full
“_. “The decision of the court in $.C.R.A.P. v. United States, supra, which has been appealed to the
‘Supreme Court, involved the environmental impact of the 2.5-percent surcharge. As noted above,
% 346 I.C.C.
55
; lee OSE ERR ENR RET OE eR, aa eee ee eal
134 INTERSTATE COMMERCE COMMISSION REPORTS
range of impacts of the proposed rate increases unfettered by the
traditional areas of our jurisdiction or expertise.
In this connection, the following from the prior repolt in this
Proceeding (341 I.C.C. 319-320) is apposite: \
Neither of these fundamental questions can be answered, we believe, without some
reasoned consideration of how the responsibility for Protecting the environment
should be apportioned among the larger segments of our society. The rail carriers
contend in this connection that the industry creating the waste in the first instance
should bear the complete responsibility for disposing of such wasté. On the other
hand, industrial concerns and other shippers aver that they are fulfilling their
enyjronmental responsibilities by conducting environmental research, and that the
railroads should bear the burden of transportation costs so that funds are not diverted
from industry environmental research. These interests both contend that they are
deeply concerned with the environment, but each would prefer to leave any sacrifices
for ecological protection to its counterpart. In fact, however, environmental
improvement is a national goal and all segments of our Nation—including industry,
the railroads, governmental organizations, and private citizens—must cooperate to
achieve that end.
We are of the opinion that the creator of waste properly should be called upon to
bear a major responsibility for disposing of that waste in an ecologically sound
manner. Of course, other segments of our economy must not construct unnecessary or
undesirable barriers to the economic disposal of such commodities. The railroads
have transported waste and scrap products at just and reasonable rates for many
years—indeed, before environmental aims became fashionable—and the increases
approved in this proceeding will not, in our judgment, alter that pattern ***
As we shall develop hereinafter, we are convinced from our study
of the record, as well as our analysis of the evidence there presented
in the light of all available source material (identified in appendix A
to this report) and the comments of the parties as to the draft impact
statement, that secondary materials, as well as the other
commodities involved, will continue to. move by rail with the same
or greater frequency as before,'* despite the selective rate increases
we have- approved. We further conclude that, without the revenue
increases approved in this proceeding, the railroads would very
likely be unable to provide the shipping public with the economical,
efficient, and responsive service which it requires and which the
national transportation ‘policy requires us to assure. This Nation
346 LC.C.
INCREASED FREIGHT RATES AND CHARGES, 1972 135
_ would then be confronted with both economic and environmental
crises. The services and operations of railroads unable properly to
finance their activities necessarily will deteriorate, and either the
traffic may then be diverted to other modes of transportation or it
may not be transported at all. The following tables illustrate the
revenue position of the railroads and the effect the overall proposed
increases on all commodities were expected to have on these
revenues:
TABLE |
Railroads’ development of estimated revenue yield
i «7
” 5 : =
- pe ‘ Item United Eastern Southern Western
. States district district district
1. Revenue ton-miles, January-June, 1971
(millions) ma 382,871 124,856 71,611 186,404
2. Percent first half of annual ton-miles
(based on experience in most recent
4 years). 50.0 50.6 506 , 494
3. Estimated annual ton-miles (millions)
(line 1= line 2) 765,000 247,000 141,000 377,000
4. Average revenue per ton-mile 2d and 3d
quarters (X-267-B level) (cents) --------------------- 1,597 1,825 1,466 1,503
5. Annual freight revenues (millions)
3 x line 4) $12,241 $4,508 $2,067 $5,666
6. Yield of full surcharge (2.5 percent
x line 5, less lumber adjustment) ------------------- 299 112 $2 135
7. Average percent of selective increases ------------- 4.0 4.1 3.5 4.1
8. Yield full selective increases
(line 7 x line 5) $489 $185 $72 $232
9. Adjusted yield surcharge (line 6 x 0.82------------ 246 92 43 it
10) Adjusted yield of selected increases :
} Gine 8 x 0.82) 401 152 59 i90
TABLE 2
Annualized United Eastern Southern Western
States district district _—_ district
Millions
Yield of surcharge $246 $92 $43 Silt
Yield of selective increases 401 1$2 59 190
" Total cost escalations ; 1,457 594 244 619
346 L.C.C.
136 INTERSTATE COMMERCE COMMISSION REPORTS
These increases were anticipated to cover only 28 percent of the
railroads’ increased costs. Among such increased costs, the National
Industrial Pollution Control Council reported that in 1969 and
1970, the railroads spent approximately $10 million a year to
control and eliminate pollution; and that from 1968 to 1970, the
tailroads made capital improvements for environmental purposes
costing $55 million. Furthermore, labor costs are expected to rise by
$635 million in 1973, because of general raises accorded workers by
new union contracts which provided for a 5-percent general raise on
October 1, 1972, and a 25 cents-an-hour raise on April 1, 1973.
Battelle concludes, and we strongly agree, that it is doubtful that the
problems of the secondary commodities industry can be
satisfactorily solved before the underlying problems of the railroad
industry are remedied. The rails must move commodities at just and
reasonable rates and should make a reasonable effort, wherever
practicable, to promote the transportation of secondary materials.
As we subsequently shall consider more fully, to direct them to do
more would be to require the rail carriers to bear the environmental
burdens of their customers. Many, if not most, of these carriers are
financially incapable of assuming those burdens, and it is our
statutory responsibility to preclude any course of action which might
jeopardize the railroads’ total ability and duty to serve the public. It
is worthy to note at this point that the railroads estimate that
approximately 70 percent of the $3 million a year additional
revenues to be derived from these rate increases on recyclables
would accrue to the Penn Central, Erie Lackawanna, and Reading,
all of which are now in reorganization. Contrary to the position
expressed in CEQ’s poststatement comments, it appears that the
financial well-being of the railroads is an important issue in this
case.
é
A. DIVERSION FROM RAIL TO TRUCK—GENERAL
It is urged that the approval of all or part of the railroads’ proposal
selectively to increase their freight rates and charges will divert
traffic to truck transportation and thereby further despoil the
environment. This argument, in our judgment, is simplistic and
speculative and we reject it. On this subject the following appears in
the prior report (341 LC.C. 321):
It is true that the trend of traffic has been away from the railroads. During 1971, the
class I line-haul railroads (railroads with annual operating revenues of $5 million or |
more) carried 5.9 percent fewer tons of revenue freight than during 1970, a decline
346 I.C.C.
58
INCREASED FREIGHT RATES AND CHARGES, 1972 137
from 2,613.6 million tons to 2,458.6 million tons, and revenue ton- miles decreased 3.6
percent, from 762,544 million ton-miles to 739,391 ton-miles. Transport Economics,
March-April 1972, page 7. The trend is more Pronounced and of longer duration in
terms of the railroads’ share of the transportation market. In 1970, the railroads
handled less than 40 percent of the total intercity ton- miles of freight transported by
all modes of carriage, public and private, a decline of 7 percent from the 43-percent
share of the market that the railroads enjoyed 10 years earlier, in 1960 (85th Annual
Report, 1971, page 119; 79th Annual Report, 1965, page 141). In contrast, during that
same period the truckers retained their share or about 22 percent of the
transportation market, with an actual increase in ton- miles transported by them from
285 billion to 412 billion, an increase of 45 percent Id. We do not think these marked
shifts in traffic patterns fairly’can be attributed to only the railroads’ pricing policies.
Motor vehicle transportation long has been recognized as offering
numerous inherent advantages over rail transportation. Schaffer
Transportation Co. vy. United States, 355 U.S. 83 (1957). These
include the speed, flexibility, and smaller cargo units peculiar to
that mode, and the developments of the past decades in these areas
have definitely favored truck transportation over rail transportation
as a growing medium of intercity carriage. The truckers’ ability to
effect rapid deliveries has been vastly improved by the completion
of much of the Interstate Highway System and the greater speeds
that the vehicles operating over it are able safely to achieve and
maintain. The unique ability of trucks promptly to perform door-to-
door service has been closely related to the accelerated dispersal of
industrial plants and commercial establishments into suburban and
tural areas, often removed from rail lines. Finally, improvements in
small containers and demountable truck bodies are infinitely more
responsive to the needs of those shippers who do not ship in
quantities sufficient to enable them to tender carloads of freight to
the railroads.
By the same token, railroad service to some extent has been
deficient. Our report in Increased Freight Rates, 1970 and 1971,
supra, at 156, noted a number of areas in which shipper complaints
had been numerous and where appreciable improvements were
required, including particularly terminal delays, interchange delays,
erratic delivery, and deliveries not reasonably timed or spaced.
Similarly, our decision in Investigation of Adequacy of Freight Car
Ownership, 335 1.C.C. 264 (1969), 335 LC.C. 874 (1970), affirmed
United States vy. Allegheny—Ludlum Steel Corp., 406 U.S. 742
(1972), called attention to the increasingly unsatisfactory
performance of the railroads both in terms of car supply and their
utilization. It goes without saying that shippers encountering poor
346 1.C.C. ‘ é
59
138 INTERSTATE COMMERCE COMMISSION REPORTS
service on the rails naturally are inclined to explore the alternatives
and inherent benefits offered by truck transportation.
The shippers’ reliance upon rail service is thus a product of many
factors, all of which combine to make up what the economists term
the “demand” for rail service, and the shippers’ ability or willingness
to divert traffic to truck transportation is expressed in the “elasticity
of demand” for such service." The elasticity of demand for rail
service varies, is considerably greater for some commodities than
for others, and is more pronounced for shorter distances than for
longer. By way of illustration, the long-haul rail transpqrtation of,
livestock has all but disappeared and is now handled by truck, while
that of fresh fruits and vegetables persists. On the other hand, the
long-haul truck transportation of new automobiles has largely
ended, having been recaptured by the rails, while that of cigarettes
remains. No all-inclusive generalization is possible. See
Transportation of “Waste” Products for Reuse, supra, at 106.
As noted in the prior report, grain and other agricultural
commodities) perhaps more than any other category of freight, best
exemplify the elasticity of shipper demand for railroad service. The
“Big John” case of a few years ago, Grain in Multiple-Car
Shipments—River Crossings to So., 321 1.C.C. 582 (1963), noted the
increasing participation of trucks and barges in grain movements to
the South, a trend which has been no less pronounced in other parts
of the country. Grain Transportation in the North Central Region,
U.S. Department of Agriculture (1961). Such product appears to be
particularly susceptible of diversion from the railroads because their
transportation by motor.carriers or, when transported in bulk, by
water carriers is exempt from) economic regulation by this
Commission. Aided by technological advances in the vehicles and
vessels they utilize and continuing improvements of the highways
and waterways upon which they operate, the exempt truckers and
bargelines have proved themselves to be forceful and effective
competitors to the railroads in the transportation of grain and other
agricultural commodities.
“Elasticity of demand” generally indicates by how much demand will respond to # given
of goods or services. While estimates of relevant
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