# Jurisdictional Statement — Aberdeen & Rockfish R. Co. v. Students Challenging Regulatory Agency Procedures (SCRAP)

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Jurisdictional Statement
- **Published:** January 1, 1975
- **Citation:** 422 U.S. 289

## Text

Opinions below :
Jurisdiction .
Questions presented
Statutes involved
Statement .
The questions are substantial ===. ss ss ss
Conclusion 0
Appendix A
Appendix Bw
Appendix C 0
Appendix Do
Appendix BE
, CITATIONS
Cases:
Alabama Power Co. v. United States, 316
F. Supp. 337 affirmed, 400 U.S. 73__.
Algoma Coke & Coal Co. v. United States,
11 F. Supp. 487.00
American Lines v. L&N R. Co., 392 USS.
I Saeristswitecstennerieocsest osse-deceataaraiascepediscssnca se:
Arrow Transportation Co. v. Southern R.
Co., 372 U.S. 658

Atchison, Topeka & Santa Fe R. Co. v.

Wichita Board of Trade, 412 U.S. 800. 10, 18,

Calvert Cliffs Coordinating Committee v.
United States Atomic Energy Commis-
sion, 449 F.2d 1109.

Cases—Continued

Committee for Nuclear Safety v. Sea-
borg, 463 F.2d 783 ye
Ecology Action v. United States Atomic
Energy Commission, 492 F.2d 998.
Greene County Planning Board v. Fed-
eral Power Commission, 455 F.2d 412,
certiorari denied, 409 U.S. 849
Harlem Valley Transportation Associa-
3 tion and Natural Resources ‘Defense
Council, Inc. v. Stafford, C.A. 2, No.

73-2496, decided June 18, 1974 ___. 19,

Increased Freight Rates and Charges,
1972, 341 I.C.C. 290 ~
Jicarilla Apache Tribe v. . Morton, 411 F.
ge ., Fee es eS
Life of the Land v. Brinegar, 485 F.2d
Pe ae ee A
Natural Resources Defense Council, Ine.
v. Morton, 458 F.2d 827 -
S.C.R.A.P. v. United States, 346 F. “Supp.
SEA KORO OCR «EC
Union of Concerned Scientists v. Atomic
Energy Commission, et al., C.A.D.C.
No. 73-1099, decided June 10, 1974.
Upper Pecos Ass’n v. Stans, 452 F.2d
ee OU ee eT
United States v. Allegheny-Ludlum Steel
Corp., 406 U.S. 742...
United States v. Florida East Coast Rail-
way Company, 410 U.S. 224 -
United States v. S.C.R.AP., 412 US.

669 . os _.6, 7, 8, 14,
United “States \ v. . SC.R.A-P., 414 US.
1035

19
17, 19

6, 10

til

Statutes: Page

Interstate Commerce Act, Section 15(7),

24 Stat. 384, as amended, 49 U.S.C.

15(7) _ - _ 8-4, 6, 7, 14,17
National Environmental Policy Act of

1969, Section 102(a)(C), 83 Stat. 853,

42 U.S.C. 4332(a)(C) 4-6, 7, 12, 19, 20
Regional Rail Reorganization Act of 1973,

87 Stat. 985 - as. ere 13

oe

-_-

»

«

In the Supreme Court of the United States

OCTOBER TERM, 1973

No.
UNITED STATES OF AMERICA AND INTERSTATE
COMMERCE COMMISSION, APPELLANTS
v.

STUDENTS CHALLENGING REGULATORY AGENCY
PROCEDURES (S.C.R.A.P.), ET AL.

ON APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA

JURISDICTIONAL STATEMENT

OPINIONS BELOW

The opinion of the district court (App. A, infra)
is reported at 371 F. Supp. 1291. The Interstate
Commerce Commission’s opinion and order of October
4, 1972, Ex Parte 281, Increased Freight Rates and
Charges, 1972 (App. D, infra), is reported at 341

*In reprinting this order in Appendix D, we have omitted
the lengthy, detailed discussion of commodity groups not

(1)

—

2

LC.C, 290. Its order of May 2, 1973 (App. E, infra)
is not reported.

JURISDICTION

The judgment of the three-judge district court was ;

entered on February 19, 1974. Notices of Appeal to
this Court were filed by the Interstate Commerce Com-
mission and the United States on April 19, 1974
(App. C, infra). On June 13, 1974, Mr. Chief Jus-
tice Burger extended the time for docketing the ap-
peal to and including July 2, 1974. The jurisdiction
of this Court rests on 28 U.S.C. 1253 and 2101(b).
United States v. Allegheny-Ludlum Steel Corp., 406
U.S. 742.

QUESTIONS PRESENTED

1. Whether the court below, in prohibiting the In-
terstate Commerce Commission from approving a gen-
eral railroad rate increase without first conducting a
thorough analysis of the underlying rate structure in
an environmental impact statement, improperly inter-
fered with the Commission’s discretion to determine
the appropriate type of proceeding in which to ad-
dress complex questions relating to rate-making.

2. Whether NEPA requires that a new hearing be
conducted to consider an environmental impact state-

involved in this proceeding, and Appendices containing
financial data and future evidentiary requirements. We are
lodging ten copies of the entire order with the Clerk for dis-
tribution to the Court.

3

ment, where the sole agency decision makers conduct-
ed a hearing and considered environmental issues be-
fore reaching their decision.

STATUTES INVOLVED

Section 15(7) of the Interstate Commerce Act, 24
Stat. 384, as amended, 49 U.S.C. 15(7), provides:

Whenever there shall be filed with the Com-
mission any schedule stating a new individual or
joint rate, fare, or charge, or any new individual
or joint classification, or any new individual or
joint regulation or practice affecting any rate,
fare, or charge, the Commission shall have, and
it is hereby given, authority, either upon com-
plaint or upon its own initiative without com-
plaint, at once, and if it so orders without answer
or other formal pleading by the interested car-
rier or carriers, but upon reasonable notice, to
enter upon a hearing concerning the lawfulness
of such rate, fare, charge, classification, regula-
tion, or practice; and pending such hearing and
the decision thereon the Commission, upon filing
with such schedule and delivering to the carrier
or carriers affected thereby a statement in writ-
ing of its reasons for such suspension, may from
time to time-suspend the operation of such sched-
ule.and defer the use of such rate, fare, charge, -
classification, regulation, or practice, but not for
a longer period than seven months beyond the
time when it would otherwise go into effect; and
after full hearing, whether completed before or
after the rate, fare, charge, classification, regu-
lation, or practice goes into effect, the Commis-

C.-C “ee,

4

sion may make such order with reference there-
to as would be proper in a proceeding initiated
after it had become effective. If the proceeding
has not been concluded and an order made within
the period of suspension, the proposed change of .
rate, fare, charge, classification, regulation, or
practice shall go into effect at the end of such
period; but in case of a proposed increased rate
or charge for or in respect to the transportation
of property, the Commission may by order re-
quire the interested carrier or carriers to keep
accurate account in detail of all amounts received
by reason of such increase, specifying by whom
and in whose behalf such amounts are paid, and
upon completion of the hearing and decision may
by further order require the interested carrier or
carriers to refund, with interest, to the persons
in whose behalf such amounts were paid, such
portion of such increased rates or charges as by
its decision shall be found not justified. At any
hearing involving a change in a rate, fare,
charge, or classification, or in a rule, regula-
tion, or practice, after September 18, 1940, the
burden of proof shall be upon the carrier to
show that the proposed changed rate, fare,
charge, classification, rule, regulation, or prac-
tice is just and reasonable, and the Commission
shall give to the hearing and decision of such
questions preference over all other questions
pending before it and decide the same as speedily
as possible.

Section 102 of the National Environmental Policy
Act of 1969, 83 Stat. 858, 42 U.S.C. 4332, provides
in relevant part:

\k

5

The Congress authorizes and directs that, to
the fullest extent'possible: (1) the policies, regu-
lations, and public laws of the United States
shall be interpreted and administered in accord-
ance with the policies set forth in this chapter, —
and (2) all agencies of the Federal Government
shall— 3

* a ao * : *

(C) include in every recommendation or re-
port 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 pro-
posed action,

(ii) any adverse environmental effects
which cannot be avoided should the proposal
be implemented,

(iii) alternatives to the proposed action,

(iv) the relationship between local short-
term uses of man’s environment and the main-
tenance and enhancement of long-term produc-
tivity, and ;

(v) any irreversible and irretrievable com-'

mitments of resources which would be in-
volved in the proposed, action should it be_
implemented.

Prior to making any detailed statement, the re-
sponsible Federal official shall consult with and
obtain 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

aa

6

agencies, which are authorized to develop and
enforce environmental standards, shall be made -
available to the President, the Council on En-
vironmental Quality and to the public as pro-
vided by section 552 of. Title 5, and shall ac-
company the proposal through the existing agen-
"ey review processes ;

* . * *
STATEMENT

This appeal is a further chapter in a long and com-
plex litigation involving the impact of the National
Environmental Policy Act of 1969, 42 U.S.C. 4332
(NEPA), on a general revenue proceeding of the
Interstate Commerce Commission conducted pursuant
to Section 15(7) of the Interstate Commerce Act, as
amended, 49 U.S.C. 15(7).’

Faced with sharply escalating costs and an increas-
ingly precarious financial condition, the Nation’s rail-
roads in December 1971 collectively petitioned the
Commission for authorization to file a temporary 2.5
percent surcharge on nearly all freight rates. This
‘emergency interim measure was intended to redress
the railroads’ financial condition pending the rail-
roads’, filing of proposed permanent selective rate
increases.

- The Commission, finding the railroads to have a
_ eritical need for additional revenues, concluded that
the surcharge should be permitted to take immediate
effect. The railroads then filed proposed selective

TSee United States v. S.C.R.A.P., 412 U.S. 669; United
States V. S.C.R.A.P., 414 U.S. 1085.

7

permanent increases averaging 4.1 percent. On April
24, 1972, the Commission issued an order pursuant
to Section 15(7) of the Interstate Commerce Act, in-
stituting an investigation into the lawfulness of the
permanent rate increases and suspending the per-
manent increases for seven months, the maximum
period permitted by 49 U.S.C. 15(7).

Thereafter, a group of law students—Students
Challenging Regulatory Agency Procedures . (S.C.R.-
A.P.)—and other environmental groups filed suit al-
leging that a detailed statement on the environmental
impact of the proposed action was required by Sec-
tion 102(2)(C) of the National Environmental Policy
Act, 42 U.S.C. 4332(2)(C). Plaintiffs sought an in-
junction both to prevent the railroads from collecting
the 2.5 percent surcharge, and to compel the Com-
mission to suspend its order authori ig the surcharge
to become effective without suspension.

The district court granted the relief sought.
S.C.R.A.P. v. United States, 346 F. Supp. 189,’ 201
(D. D.C.). On appeal, however, this Court reversed,
holding that under Section 15(7) of the Interstate
Commerce Act the Commission has exclusive power to
suspend rates pending final decision on their lawful-
ness, and that “NEPA was not intended to repeal
by implication any other statute.” United States v.
S.C.R.A.P., 412 U.S. 669, 694.

* Since the suspended permanent tariffs were intended to
supplant the temporary surcharge, the Commission authorized
the railroads to continue to collect the 2.5 percent surcharge
until November 30, 1972—the end of the suspension period on
the selective increases.

8

Before this Court rendered its opinion, the Com-
mission, on September 27, 1972, issued a final report
and order authorizing some of the selective permanent
increases sought by the railroads. Ex parte 281,
Increased Freight Rates and Charges, 1972, 341
L.C.C. 290 (App. D, infra).

In its opinion, the Commission considered the en-
vironmental impact of its authorization of the rate
increases, both in general (App. D, infra, pp. 20d-
35d), and as applied to specific commodities moving
in the recycling process (App. D, infra, at pp. 49d-
85d).° After this “extensive consideration” (United
States v. S.C.R.A.P., supra, 412 U.S. at 683, n. 11),
the Commission made the threshold assessment that
“increases at the levels authorized herein will have
no significant adverse impact on the quality of our
human environment” (App. D, infra, at p. 34d).
Therefore, it found that a formal environmental im-
pact statement was unnecessary. Nevertheless, the
Commission delayed the effectiveness of the increases
authorized for commodities moving in the recycling
process for 25 days, to permit the filing of comments
concerning the environmental impact of the increased
rates on these commodities (App. D, infra, p. 35d).

*

+The authorized rates for several of the recyclable ma-
terials were less than those sought by the railroads. (See App.
D, infra, pp. 85d-86d) .

5 This consideration was based on independent study by the
Commission, as well as the draft impact statement previously
filed by the railroads requesting the increases and comments
of shippers and environmental groups (App. D, infra, pp. 21d-
23d).

9

Several such comments were filed, and, on November
7, 1972, the Commission reopened the proceeding to
reconsider the environmental effects of the rates on
commodities being transported for recycling, and sus-
pended the tariffs on such commodities for another
seven months. See United States v. S.C.R.A.P., supra,
412 U.S. at 683, n. 11.

Although not conceding that an impact statement
was necessary, the Commission issued its draft impact
statement on March 5, 1973, for public comment.
After consideration of comments, the Commission
adopted the final impact statement, again concluding
that the selective tariff increases on commodities
moving in the recycling process would not adversely
affect the environment (346 I.C.C. 88).* It therefore
found it unnecessary to reconsider the general reve-
nue order of October 4, 1972, and terminated the
proceeding (App. E, infra, p. le).

S.C.R.A.P., the other environmental groups, and
certain scrap dealer associations thereupon filed this
suit, seeking to vacate the Commission’s orders per-
mitting increased rates on recyclable materials on

* We are lodging ten copies of this statement with the Clerk
for distribution to the Court. It contains a thorough discus-
sion of general environmental considerations (95-136, 235-
286); a detailed discussion of the possible diversion from rail
to truck caused by increased rates (id. at 136-143); and an
extensive commodity-by-commodity analysis of the effect that

the proposed increases will have on the shipping and use of
recyclable materials (id. at 143-216). The Commission also
discussed the various possible alternatives to rate increases
on recyclable-commodities. (id. at 218-235).

10

the ground that the Commission had failed to comply
with NEPA.’ The three-judge district court con-
cluded, with Judge Flannery dissenting, that “not only
the Commission’s preparation and utilization of its
impact statement but also the contents of that state-
ment fail to comport with the obligations imposed on
the Commission by Section 102(2)(C) [of NEPA”
(App. A, infra, p. 39a). It vacated the Commis-
sion’s orders of October 4, 1972 and May 2, 1973,
insofar as they related to commodities being shipped
for recycling, and remanded for reconsideration of the
rate increases applicable to such commodities.*

The district court’s decision was purportedly based,
not on substantive review of the Commission’s orders,
but on the court’s conclusion that the Commission had
failed to comply with the procedural requirements
of NEPA. There were, in the court’s view, two major
procedural defects. The court held the statement’s

™ They also sought an injunction restraining the railroads
from collecting the increased rates on such materials. The
district court originally granted this injunction; it was stayed
by the Chief.Justice, and then vacated by this Court, which
remanded the case for reconsideration in light of Atchison,
Topeka, & Santa Fe R. Co. V. Wichita Board of Trade, 412
US. 800. United States v. S.C.R.A.P., 414 U.S. 1035.

8 The court refused to enjoin the collection of the higher
rates by the railroads, noting that “The only consequence of
our vacating the Commission’s orders pending reconsideration
of the rate increases ‘is that the railroads may not rely, in some
subsequent proceeding, on a Commission finding that the pro-
posed rates were just and reasonable. * * *’ Atchison, Topeka
& Santa Fe R. Co. v. Wichita Board of Trade, supra” (App.
A, infra, p. 44a, n. 50).

11

fundamental defect to be that it limited its “analysis
to the marginal impact of the most recent rate in-
crease with no discussion of whether the underlying
rate structure itself significantly affects the environ-
ment” (App. A, infra, at p. 34a). In addition, it held
that the Commission was required to hold a hearing
after the development of the impact statement, to
provide a basis for a “thorough reconsideration” by
the Commission “of the proposed recyclable rate in-
crease in light of that hearing and the impact state-
ment” (id. at p. 28a).

The court remanded the case to the Commission,
directing it to prepare a new draft impact statement
containing a thorough-going rate structure study on
the relationship of recyclables to virgin materials
(App. A, infra, pp. 39a-40a). The court also directed
the Commission to conduct an analysis of the effects
of the rate structure on investment in manufacturing
facilities which make intensive use of scrap (id. at
p. 40a). Furthermore, the district court found a
“strong presumption” that “full consideration of the
revised impact statement through ‘existing agency
review processes’ must entail oral hearings before the
Commission” (id. at pp. 42a-43a).

THE QUESTIONS ARE SUBSTANTIAL

This case presents important questions concerning
the effect of NEPA on agencies with rate-making
responsibilities and, more generally, on the discretion
of agencies to determine the manner in which to
make decisions. In determining that the Commis-

12

sion’s environmental consideration was inadequate
because it did not analyze in detail the underlying
rate structure, but focused instead on the rate in-
creases which were involved in the revenue proceeding,
the court intruded into the area traditionally re-
served to agency discretion. NEPA was not intended
to limit a rate-making agency’s ‘authority to deter-
mine the appropriate type of proceeding in which
to make its decisions. Nor was the provision in Sec-
tion 102(2)(C) that the impact statement “shall ac-
company the proposal through the existing agency
review processes” designed to require an agency to
conduct a new hearing in the circumstances of this
case.

1. The Commission’s Consideration of Environ-
mental Factors Was Adequate.

The Commission orders involved here grew out of
a general revenue proceeding, initiated by the rail-
roads’ proposal to increase all their rates and charges
by about 4 percent. In general revenue proceedings,
the Commission determines whether the carriers’
total revenues are sufficient to provide the Nation
with adequate transportation. If the carriers demon-
strate that the general revenue increase is needed
and the Commission determines that it is consistent
with the public interest, the Commission will au-
thorize a permissive revenue increase. In such pro-
ceedings, the Commission does not determine the rea-
sonableness of individual rates, nor does it consider
the relationship of rates for different classes of com-
modities. Instead, the Commission makes broad find-

13

ings balancing the railroads’ need for revenue and the

public interest. On the basis of these findings, it may
allow the carriers to file tariffs embodying percent-
age increases.° .

The Commission’s decision however, does not auto-
matically increase any individual rate. If the rail-
road does decide to amend its tariffs, the Commis-
sion’s determination means, instead, that a shipper
challenging any individual rate increase which is
within the percentage increase authorized in the
general revenue proceeding must establish that the
rate is unreasonable. The effect of the general reve-
nue order is thus simply to shift the burden of proof
concerning the reasonableness of individual rates
that comply with the order from the carrier to the
shipper.

General revenue orders are in the nature of emer-
gency relief to enable the railroads to keep up, to
some extent, with inflationary pressures, and thus to
protect the public interest in adequate rail service.”
Therefore, the Commission may suspend the effec-

® Commission orders in general revenue proceedings have
traditionally not been subject to judicial review. See, e.g.,
Algoma Coal & Coke Co. v. United States, 11 F. Supp. 487
(E.D. Va.); Alabama Power Co. v. United States, 316 F.
Supp. 337 (D. D.C.), affirmed per curiam\by an equally di-
vided court sub nom. Atlantic City Electric Co. v. United
States, 400 U.S. 73. Cf. Atchison, Topeka, & Santa Fe R. Co. v.
Wichita Board of Trade, supra, 412 U.S. at 814, n. 10.

2° The precarious financial state of the nation’s railroads,
particularly in the northeast, is documented in the Commis-
sion’s October order (App. D, infra, pp. 3d-20d). The Regional
Rail Reorganization Act of 1973, 87 Stat. 985, reflects similar

concerns.

14 | :

tiveness of the increases proposed by the railroads
for only seven months. If the Commission study is
not completed within that time, the rates go into
effect without Commission authorization. 49 U.S.C.
15(7); see Arrow Transportation Co. v. Southern
R. Co., 372 U.S. 658." NEPA has not altered this
statutory scheme. United States v. S.C.R.A.P., 412
U.S. 669. -

The decision of the court below would, as a prac-
tical matter, deny the railroads the benefit of timely
general revenue orders. If such an order cannot is-
sue without an environmental impact statement
which analyzes not only the effects of the general
revenue increases under consideration, but also the
basic rate structure upon which they are predicated,
no such order could be issued by the Commission

within the statutory seven months. Indeed, the Com-

mission is well aware of the need for a thorough
study of the basic railroad freight rate structure,
and is in fact now conducting such a study in a

different proceeding, Ex Parte No. 270, Investigation —

of the Rail Freight Structure. That study includes,
as a separate proceeding (Sub. No. 5), a study of
the rate structure on iron and steel scrap, the prin-
cipal commodity at issue here. But such studies can-
not be made within the statutory time frame re-

1 If the Commission has not acted within the suspension
period, the Commission may require the carriers to keep
detai?ed accounts and to repay any increases the Commission
ultimately disallows. 49 U.S.C. 15(7); United States Vv.
S.C.R.A.P., supra, 412 U.S. at 697.

/

15

quired for general revenue orders. Environmental
Impact Statement, p. 227.”

In sum, the district court’s insistence that the
Commission must, in effect, undertake comprehensive
rate structure analyses and adjustments before it
can authorize general revenue relief both miscon-
ceives the nature of general revenue proceedings and
casts grave doubt on the Commission’s ability effec-
tively to respond to the carriers’ revenue needs and
public interest considerations within the statutorily
limited suspension period. As this court noted in
reviewing another district court’s attempt to require
the Commission to resolve complex rate-related ques-
tions in an inappropriate proceeding (American
Lines v. L. & N. R. Co., 392 U.S. 571, 592):

Given the fact that * * * the Commission was
to exercise its informed judgment in ultimately
determining what method of costing was prefer-
able, it is clear that the District Court also erred
in refusing to permit the Commission to exercise
that judgment in a proceeding it reasonably be-
lieved would provide the most adequate record

122The district court’s opinion clearly contemplates that
extensive studies of this nature will be conducted in order
to prepare the impact statement. It suggests that the Com-
mission may wish to “place a moratorium on rate increases on
recyclable commodities until] Ex Parte No. 270 is completed”
(App. A, infra, pp. 37a-38a) —an alternative expressly rejected
by the Commission (Impact Statement, p. 230). Moreover,
the rather substantial discussion of the rate structure now
contained in the impact statement was considered insufficient.
See Impact Statement at pp. 102-133, 146-160, 222-228, and

passim.

a,

16

for the resolution of the problems involved. We
can see no justification for denying the Commis-
sion reasonable latitude to decide where it will
resolve these complex issues, in addition to how
it will resolve them. The action by the District
Court here not only deprives the Commission of
the opportunity to make the initial resolution of
the issues but also prevents it from doing so in ~
a more suitable context.

This Court has just recently held that the Fed-
eral Power Commission had the authority to fix
rates on an area-wide basis rather than on an in-
dividual producer basis and that, in order to
make such a procedure feasible, it had statutory
authority to impose a moratorium upon rate in-
creases by producers for a period of 214 years |
after the setting of the area rate. Permian
Basin Area Rate Cases, 390 U.S. 747 (1968).
The basis for this holding was the principle that
‘the “legislative discretion implied in the rate
making power necessarily extends to the entire
legislative process, embracing the method used
in reaching the legislative determination as well
as that determination itself.” Id., at 776. That
principle is equally applicable to rate regulation
carried out by the ICC, especially where, as here,
the determination made on an interim basis is
in general accord with both the legislative his-
tory of the stattite involved and the results in
‘prior cases decided by the agency.

Cf. Wichita Board of Trade, supra, 412 U.S. at 819-
821.

The fact that this case, unlike American Lines,
involves the application of NEPA does not justify

17

the district court’s action. The purpose of NEPA is
to ensure that the administrative decision maker
gives full consideration to the environmental aspects
of its decision. So long as the decision maker has
taken the “hard look” at environmental consequences
mandated by Congress, courts should not interject
themselves into “the area of discretion of the [agen-
cy] as to the choice of the action to be taken.” Natu-
ral Resources Defense Council, Inc. v. Morton, 458
F. 2d 827, 838 (C.A.D.C.). As this Court held in
United States v. S.C.R.A.P., supra, 412 U.S. at 697,
NEPA does not give reviewing courts license to up-
set the “careful accommodation of the various inter-
ests involved” in Section 15(7) of the Interstate
Commerce Act.”

~ The district court specifically disavowed any in-
tent to review the merits of the Commission’s envi-
ronmental decision, and based its action instead on
a holding that the Commission had failed to comply
with the procedural requirements of NEPA (App.

*In a somewhat similar situation, two courts of appeals
have recently concluded that the Atomic Energy Commission
did not violate NEPA when it issued reactor licenses after
considering environmental impact statements which were
based on interim safety criteria. ‘The courts held that the
agency could develop definitive criteria in a separate rule-
making proceeding without suspending all licensing in the
interim. Ecology Action v. United States Atomic Energy Com-
mission, 492 F.2d 998, 1002 (C.A. 2); Union of Concerned
Scientists v. Atomic Energy Commission, C.A.D.C. No. 73-
1099, decided June 10, 1974, slip op. 24-30.

18

A, infra, p. 22a). It thus did not explicitly reach
the question of the proper scope of judicial review of
the merits of agency determinations under NEPA.
Nevertheless, in concluding that the detailed impact
statement here involved was inadequate, the court
substituted its judgment for that of the agency con-
cerning the matters discussed in the impact state-
ment, and found that the arguments of the environ-
mental interests, principally concerning the underly-
ing rate structure, were not adequately rebutted for
purposes of the issuance of a general revenue order
(App. A, infra, pp. 30a-34a). Regardless of the par-
ticular formulations of the proper scope of judicial
review of the merits of agency NEPA decisions, it
is clear that such substitution of judicial for agency

judgment is improper. See, ¢.9., Jicarilla Apache
' Tribe of Indians v. Morton, 471 F.2d 1275 (C.A. 9);
Committee for Nuclear Responsibility, Inc. v. Sea-
borg, 463 F.2d 788 (C.A.D.C.); Upper Pecos Ass'n
vy. Stans, 452 F.2d 783 (1233 (C.A. 10). And it is
especially unwarranted where, as here, it would force
the agency to use a particular type of proceeding for
purposes for which it is not suited under the agency’s
regulatory scheme. .

2. NEPA Does Not Require the Commission to
Conduct a New Hearing to Consider the Impact
Statement.

The district court concluded that, since Section 102
(2)(C) of NEPA provides that the agency environ-

%* The court thus implicitly rejected the Commission’s ex-
press determination that an impact statement was not
necessary.

19 eee

mental impact statement “shall accompany the ss 7
posal through the existing agency review processes,”
it was improper for the Commission to consider the
formal impact statement without conducting a new
hearing, and that there is “at least * * * a strong
presumption * * * that full consideration of the re-
vised impact statement through ‘existing agency re-
view processes’ must entail oral hearings before the,
Commission” (App. A, infra, at pp. 42a-43a). But
‘ oral hearings before the Commission are not required
in rulemaking proceedings of the kind involved here.
See United States v. Allegheny-Ludlum Steel Corp., ,
406 U.S. 742, 756-758; United States v. Florida East
Coast Railway Co., 410 U.S. 224, 236-238. And
NEPA does not change that aspect of the Commis-
sion’s procedures. United States v. S.C.R.A.P., supra,
412 U.S. at 694. There is, therefore, no legal basis
for the court’s “presumption.”

The court relied for its conclusion upon Calvert
Cliffs’ Coordinating Committee v. United States
Atomic Energy Commission, 449 F.2d 1109 (C.A.
D.C.), and Greene County Planning Board v. Federal
Power Commission, 455 F.2d 412 (C.A. 2), certio-
rari denied, 409 U.S. 849. Those cases dealt with
fundamentally different types of agency proceedings,
_in which initial agency decisions were subject to re-
view within the agency. They hold only that in those
circumstances Section 102(2) (C) requires the impact
statement to be considered at each level of agency
review. 6 In contrast, here the initial agency decision

16 In pa ee Valley Transportation Association and Natural
Resources Defense Council, Inc. V. Stafford, C.A. 2, No. 73-
2496, decided ans 18, 1974, the court held that Greene County,

Se Co ae ne eee

20

on general revenue matters is by the Commission it-
self; no intermediate agency decision makers are in-
volved, nor are there here any agency review proce-
dures. Instead, the Commission simply reconsidered
its order of October 4, 1972, in light of the environ-
mental impact statement, and concluded that the
further study of the environmental effects of the rate
increases showed no reason to revise the conclusions
it there reached. Cf. Life of the Land v. Brinegar,
485 F.2d 460 (C.A. 9). :

In the absence of any “existing agency review
processes”, therefore, there was no violation of Sec-
tion 102(2)(C),, which does not in terms require a
hearing to be conducted. Nor was there any incon-
sistency here with the policy of NEPA, since the

agency decision makers have taken the necessary
“hard look” at environmental factors in reaching
their decision,” both by extensive consideration of

supra, applies to Commission rail abandonment proceedings
conducted pursuant to 49 U.S.C. 1(18). The court apparently
assumed that such proceedings, like those in Greene County

_ and Calvert Cliffs’, must be heard initially by a hearing ex-
aminer and reviewed by the Commission. The government
has not yet decided whether to seek further review of Harlem
Valley. ;

6 In Life of the Land, the draft'impact statement was cir-
culated after the hearirlg required by the agency’s statute had
been held. The final statement was then approved by respon-
sible agency, officials., The court concluded that the publication
and dissemination of the statement complied with Section
102(2) (C). It emphasized that there had been substantial |
consideration of environmental issues at all stages of the pro-

‘11 Natural Resources Defense Council, Inc. v. Morton, 458
F.2d 827, 888 (C.A. D.C.); cf. Upper Pecos Asa’n, Inc. V.

_—

21

environmental matters at the hearing before the Oc- —
tober 4 decision, and in reviewing the environmental
impact statement and the comments thereon before
reaching their May 2 decision.” There was also ade-
quate opportunity for public participation, both in the
October hearing and in the request for comments on
the draft impact statement. Cf. Hanly v. Kleindienst,
471 F.2d 823, 836 (C.A. 2), certiorari denied, 412
U.S. 908.

Stans, 452 F.2d 1233, 1236 (C.A. 10); Committee for Nuclear
Responsibility, Inc. v. Seaborg, 463 F.2d 783 (C.A. D.C.).

148 The Commission’s action here was thus not inconsistent
with what the court in Harlem Valley, supra, slip op. at 4287-
4288, identified as “the policies behind the decision in Greene
County I, the dangers that an agency will rely on self-serving
statements by an applicant and will place the burden of
analyzing environmental issues upon intervenors * * *.” The
environmental questions were addressed independently by the
Commission both before and after the October 4 order. See
n. 5 supra; Impact Statement, pp. 92, 102.

22
CONCLUSION

Probable jurisdiction should. be noted.
Respectfully submitted.

Rosert H. BorK,
Solicitor General.

WALLACE H. JOHNSON,
Assistant Attorney General.

HARRIET S. SHAPIRO,
Assistant to the Solicitor General.

Fritz R. KAHN,
General Counsel,

Betty JO CHRISTIAN,
Associate General Counsel,

CHARLES H. WHITE, JR.,

Attorney,
Interstate Commerce Commission.

JULY 1974.

la
APPENDIX A

UNITED STATES DISTRICT COURT
DISTRICT OF COLUMBIA

Civ. A. No. 971-72.
STUDENTS CHALLENGING REGULATORY AGENCY
PROCEDURES .(S.C.R.A.P.), PLAINTIFF,
and

COUNCIL ON ENVIRONMENTAL QUALITY,
INVOLUNTARY PLAINTIFF,

and

ENVIRONMENTAL DEFENSE FUND, ET AL.,
PLAINTIFF-INTERVENORS, -

and

NATIONAL ASSOCIATION OF SECONDARY MATERIALS
INDUSTRIES, INC., ET AL., PLAINTIFF-INTERVENORS,

and

INSTITUTE OF SCRAP IRON AND STEEL, INC. and
JULIAN C. COHEN SALVAGE CORPORATION,
PLAINTIFF-INTERVENORS

v.

UNITED STATES OF AMERICA and INTERSTATE
COMMERCE COMMISSION, DEFENDANTS,
and ‘
THE ABERDEEN AND ROCKFISH RAILROAD COMPANY,
ET AL., DEFENDANT-INTERVENORS

Feb. 19, 1974

Proceeding in which environmental groups and
others sought a declaration that ICC had failed to

2a

comply with National Environmental Policy Act in
authorizing railroad rate increases on shipment of re-
cyclables and that orders approving increases were
void, an order enjoining the ICC to reconsider gen-
eral rate increases in accordance with strict demands
of the Act, and an injunction forbidding railroads
from collecting rate increases on recyclables until
ICC complied with the act. On plaintiffs’ and de-
fendants’ cross motions for summary judgment, a
three-judge United States District Court for the Dis-
trict of Columbia, J. Skelly Wright, Circuit Judge,
determined that the ICC’s efforts to meet the com-
mands of the Act were substantially deficient, that
order authorizing rate increases should be vacated,
and that proceeding should be remanded to the Com-
mission for fulfillment of the Act’s obligations, but,
because of uncertainty concerning meaning of a Su-
preme Court decision, refrained from issuing an in-
junction restraining railroad’s collecting the increased
rates pending the ICC’s reconsideration.

, Order accordingly. .

Flannery, District Judge, dissented and filed opin-
ion.

1. Commerce § 152

Three-judge federal district court had jurisdiction
to review Interstate Commerce Commission’s compli-
ance, in authorizing railroad rate increases on ship-
ment of recyclable commodities, with commands of
the National Environmental Policy Act. 28 U.S.C.A.
§§ 1336, 2321-2325; Interstate Commerce Act, §§ 18

8a

(1), 15(1, 7), 16(1), 49 U.S.C.A. §§ 13(1), 15(1,
7), 16(1); National Environmental Policy Act of
1969, §§ 101, 102, 102(2)(C), 42 U.S.C.A. §§ 4331,
4332, 4332(2)(C).

2. Health and Environment § 25.10

Purpose of procedural requirements of National
Environmental Policy Act, which prescribes not only
what considerations must be addressed in an envir-
onmental impact statement but also how the state-
ment is to be developed and utilized, is to insure that
federal agencies integrate consideration of potential
environmental impacts of their contemplated actions
with the policy considerations traditionally attending
such actions. National Environmental Policy Act of
1969, § 102(2)(C), 42 U.S.C.A. § 4832(2) (C).

8. Health and Environment § 25.10

In light of facts, inter alia, that ICC’s order ex-
plaining why national transportation policy warranl
ed general rate increase on recyclables was made
without benefit of an impact statement, that ICC
prepared environmental statement only after an ava-
lanche of criticism from environmental groups, that
ICC did not decide to start over again to reconsider
fully question of such rate increases and instead
merely opened case for limited purpose of further
evaluating environmental effects of increased rates on
movement of recyclables; and that ICC = not even
take its after-the-fact environmental considérations
through existing agency review processes, ICC’s prep-

4a

aration and utilization of its impact statement failed
te comport with obligations imposed on it by Na-
tional Environmental Policy Act. National Environ-
mental Policy Act of 1969, § 102(2)(C), 42 U.S.C.A.
§ 4332 (2) (C).

4. Health and Environment § 25.10

A reviewing court must demand more than pro
forma compliance with section of National Environ-
mental Policy Act prescribing what considerations
must be addressed in an environmental impact state-
ment and how statement is to be developed and util-
ized; it must be assured that the agency engaged in
a full and good faith individualized consideration
and balancing of environmental factors. National
Environmental Policy Act of 1969, § 102(2) (C), 42
U.S.C.A. § 4332 (2) (C).

5. Health and Environment § 25.10

ICC statement on environmental impact of railroad
rate increases on shipment of recyclables, which
failed to include, inter alia, an analysis of underlying
rate structure’s impact on movement of recyclables,
failed to comport with obligations imposed on the
ICC by the Environmental National Policy Act. Na-
tional Environmental Policy Act of 1969, § 102(2)
(C), 42.U.S.C.A. § 4882(2) (C).

6. Health and Environment § 25.10

Phrase “existing agency review processes,” in sec-
tion of National Environmental Policy Act which re-

5a

quires that environmental impact statement be trans-
mitted through existing agency review processes, en-
compasses not only procedures required by explicit
agency regulations but also those procedures which
an agency customarily employs in consideration of a
proposal of the type being analyzed for its environ-

mental impact. National Environmental Policy Act —
of 1969, § 102(2)(C), 42 U.S.C.A. § 4332(2) (C).

See publications Words and Phrases for other judicial
constructions and definitions.

John F. Banzhaf, III, and Peter H. Meyers, Wash-
ington, D.C., for plaintiff SCRAP.

John F. Dienelt and Scott H. Lang, Washington,
D.C., for plaintiff-intervenors Environmental Defense
Fund and others.

Edward L. Merrigan, Washington, D.C., for plain-.
tiff-intervenors National Association of Secondary
Materials Industries, Inc. and others.

Thomas H. Boggs, Jr., George Blow, and E: Bruce
Butler, Washington, D.C., for plaintiff-intervenors
Institute of Scrap Iron and Steel, Inc., and others.

Asst. Atty. Gen. Shiro Kashiwa, Harold H. Titus,
Jr., U. S. Atty., and William M. Cohen, Atty., Dept.
of Justice, for defendant United States of America.

Fritz R. Kahn, Gen. Counsel, Betty Jo Christian,
Associate Gen. Counsel, and Theodore C. Knappen,
Hanford O’Hara; Charles H. White, Jr., and James
_ F. Tao, Attys., Interstate Commerce Commission, for
defendant Interstate Commerce Commission.

6

6a

T. A. Miller, San Francisco, Cal., Albert B. Russ,
Jr., Richmond, Va., Edward A. Kaier, Philadelphia,
Pa., and Charles A. Horsky, Michael Boudin, Michael
J. Henke, Walter Hellerstein and James L. Tapley,

_ Washington, D.C., for defendant-intervenors Aber-
‘deen and Rockfish Railroad Company and others.

Before WRIGHT, Circuit Judge, and RICHEY
and FLANNERY, District Judges.

J. SKELLY WRIGHT, Circuit Judge:

Plaintiff and plaintiff-intervenors challenge an or-
der of the Interstate Commerce Commission (ICC)
authorizing railroad rate increases on shipment of
recyclable commodities on the ground that the Com-
mission has failed to comply with the prescriptions
of the National Environmental Policy Act (NEPA),
42 U.S.C. § 4821 et seg. (1970). Both plaintiffs and
defendants have moved for summary judgment. We
find that the Commission’s efforts to meet the com-
mands of NEPA were substantially deficient. We
thus vacate the Commission’s order authorizing the
rate increases on recyclable commodities and remand
the proceeding to the Commission for fulfillment of
its NEPA obligations. However, because of our un-
certainty concerning the meaning of the Supreme
Court’s decision last term in Atchison, Topeka &
Santa Fe R. Co. v. Wichita Board of Trade, 412 U.S.
800, 93 S.Ct. 2367, 37 L.Ed.2d 350 (1978), we re-
frain from issuing an injunction restraining the rail-
roads from collecting the increased rates pending the
Commission’s reconsideration.

Ta

~ I

~ This case has had a long and complicated history.
Inasmuch as it has produced two previous opinions’ |
by this court* and one by the Supreme Court,* how-
ever, we shall attempt to set forth only those facts
relevant to the motions now before us. Having se-
cured Commission approval of a two and a half per
cent temporary emergency surcharge in February
1971 on nearly all freight rates, the nation’s rail-
roads on March 17, 1972 filed tariffs with the Com-
mission for permanent selective increases averaging
four per cent on most commodities. Under the Inter-
state Commerce Act tariff changes filed by carriers
go into effect automatically unless the Commission
deems that an investigation of the lawfulness of these
tariffs is advisable and that the rates should be sus-
pended pending such an investigation. 49 U.S.C.
§ 15(7) (1970). On April 24, 1972 the Commission
announced its intention to investigate the permanent
increases and suspended these increases for the full
seven-month period permitted by Section 15(7).
Students Challenging Regulatory Agency Proce-
dures (SCRAP) then commenced this action, contend-
ing that NEPA compelled the Commission to prepare
and consider an environmental impact statement be-

1353 F.Supp. 317 (1973); 346 F.Supp 189 (1972).

2 This is a three-judge court convened pursuant to 28 U.S.C.
§§ 2325 & 2284 (1970).

* United States v. SCRAP, 412 U.S. 669, 93 S.Ct. 2405, 37
L.Ed.2d 254 (1978).

a ™

fore permitting any rate increases—including the
temporary two and a half’ per cent surcharge.
SCRAP, which was later to be joined by other envi-
ronmental groups and scrap dealer associations,* ar-
gued that the rate increases discouraged the envi-
ronmentally desirable use of recyclable commodities
not only by raising the costs of shipping recyclables,
but also by aggravating “the preexisting disparity in
shipping costs between these materials and the pri-
mary goods with which they compete.” * In response
to this theory, we held that even the temporary sur-
charge was a major action “significantly affecting the
quality of the human environment,” 42 U.S.C. § 4332
(2) (C), and that the Commission therefore had vio-
lated NEPA by not preparing and considering a
NEPA impact statement before issuing its order per-
mitting the temporary surcharge. We held that any
challenge to the permanent increase was not ripe for
review inasmuch as the Commission had not then yet
issued an order approving this increase. We did,
however, retain jurisdiction to ensure that the Com-

‘SCRAP, an unincorporated association of law students,
was formed to enhance environmental quality. The Environ-
mental Defense Fund,, the National Parks & Conservation
Association, and the Izaak Walton League of America entered
the action in its initial stages as plaintiff-intervenors. The
National Association of Secondary Materials Industries and
the Institute of Scrap Iron & Steel have more recently inter-
vened. All of these parties will be referred to hereinafter
as plaintiffs.

5 346 F.Supp. at 191.

—

9a

mission would comply with NEPA.‘ We further is-

sued a preliminary injunction restraining the tempo-

rary surcharge insofar as it applied to recyclable
commodities. The Supreme Court reversed the in-
junction on June 18, 1973. United States v. SCRAP,

412 U.S. 669, 93 S.Ct. 2405, 37 L.Ed.2d 254 (1973).
Relying on Arrow ‘Transportation Co. v. Southern R.

Co., 372 U.S. 658; 83° S.Ct. 984, 10 L.Ed.2d 52
(1963), the Court held that Section 15(7) vested
exclusive jurisdiction in the Commission to suspend
rates pending its final decision on their lawfulness.’
Meanwhile the Commission’s investigation of, the
proposed permanent increases culminated in a hear-
ing consisting of submission of briefs and oral argu-
ment by concerned parties. Though the Commission
had told the Chief Justice, in connection with its
application for a stay of our order against the tem-
porary surcharge, as well as this court, that it was
developing an impact statement, no statement was
prepared for consideration at this hearing or even
for consideration by the Commission before issuing
its decision on the permanent increases. That deci-
sion, which was issued October 4, 1972, approved
most of the selective increases. Ex Parte No. 281,
Increased Freight Rates and Charges, 1972, 341 ICC
288 (1972). The decision included some discussion
of environmental considerations and limited the rate
increases on nonferrous scrap to three per cent, but

* Id. at 198-201.
7412 U.S. at 690-699, 93 S.Ct. 2405.

an

it generally concluded that the new tariffs would not
significantly affect the quality of the human environ-
ment and that there was thus no necessity for a for-
mal impact statement. The Commission’s failure to
prepare a formal statement provoked vehement pro-
testations from the President’s Council on Environ-
mental Quality (CEQ), from the Environmental Pro-
tection Agency (EPA), and from plaintiffs. Plain-
tiff SCRAP filed with this court on November 7,
1972 a motion to enjoin the approved increases. On
the same day as this filing, the Commission suddenly
shifted its position by suspending, until June 1973,
rate increases on all goods being shipped for pur-
poses of recycling and by reopening its investigation
in Ex Parte No. 281.° The Commission stated that |
the proceeding was reopened for “the limited purpose
of further evaluating, in accordance with [NEPA],

.

s«“* * * The Environmental Protection Agency (EPA)
stated its regret that the Commission chose not to submit
a formal impact statement, arguing that ‘the historical
data presented by the Commission does not support the
conclusion that * * * there will be no adverse environ-
mental impact.’ CEQ, in its letter to the Commission,
felt that the conclusion that the October 4 order would
have no significant environmental impact ‘seems un-
responsive to the language of our NEPA guide
lines * * *.’” «

853 F.Supp. at 321.

® Following the Commission’s Oct. 4 order and opinion, the
railroads refiled their increases, including the increases on
recyclables, in accordance with the order and the exceptions
they made to the Commission’s general approval. It was these
refiled tariffs as they related to recyclables which the Commis-
sion suspended. j

10a

—

lla

the environmental effects of increased railroad freight
“rates and charges on the movements of commodi-
ties. being transported for the purpose of recycling
* * #20 Tn light of the Commission’s action, we
denied SCRAP’s request for a preliminary injunc-
tion. We found that no relief was necessary for the
suspended increases on recyclables and that there
was not sufficicnt likelihood that the plaintiffs would
be successful in showing that an impact statement
was required before increasing rates on nonrecycla-
bles. ‘We reserved decision on the merits. ©
The Commission proceeded to prepare its statement
on the environmental impact of the recyclable rate
increases. The Commission’s draft statement was is-
sued March 5, 1973. It was circulated to several con-
cerned Executive agencies, and departments and to
all of the parties in this action. Not only the plain-
tiffs but. also the Executive agencies and depart-
ments, including EPA, CEQ, General Services Admin-
istration, Department of the Interior, and Depart-
ment of Commerce, responded with extensive com-
ments critical of this draft statement and its con-
clusions. These comments, although acknowledged by’
the Commission in its final statement, did not move
the Commission to ¢hange in any substantial way its
conclusions or even its analysis. The Commission de-
nied the request of plaintiffs to schedule a new set
of hearings in the reopened proceedings. The Com-
mission served its final environmental impact state-

———— 1

1 353 F.Supp. at 321.

—

|

ment on May 7, 1973. The statement’s analysis was
limited to the marginal impact of the most recent

rate increases; it stated that a general rate increase —

proceeding did, not provide an appropriate occasion
to examine whether the, underlying rate structure
discriminated against recyclable commodities with
significant adverse environmental consequences.”
Though it contained no rigorous economic analysis of
the responsiveness of the demand for recyclables to
changes in transportation costs, the statement’s con-
clusion echoed the Commission’s original position in
its October 1972 order that the increases would not
have a significant adverse effect on the environment.
The statement further proriounced that even if some
adverse environmental impact could be anticipated *
the increases would be justified by the need to ensure
a viable and efficient railroad system. The Commis-
sion did not use this staff-prepared statement and the
critical comments on the draft statement to develop
a new opinion to supplant or even supplement its Oc-
tober opinion. Instead the Commission merely ap-
pended a one-sentence order to the statement’s back
_ page which adopted the entire statement as part of
its prior opinion on the rate increases and discon-
tinued Ex Parte No, 281.

“ICC, Ex Parte No, 281, Increased Freight Rates and
Charges, 1972 (Environmental Matters) 22 (May 7, 1973)
(hereinafter “Environmental Impact Statement”).

122 The statement actually did concede at one point that the
rate increase would probably cause a decline in utilization of
glass scrap. Id. at 155. ;

yy

—

13a

On May 30, 1973 SCRAP and plaintiff-intervenor
Environmental Defense Fund (EDF) filed a motion
in this court for a preliminary injunction against
the rate increases on recyclable commodities which
the railroads intended to place in effect when the
suspension period ended on June 10. On June 7 this
court, finding a sufficient likelihood that plaintiffs
would be successful in their present challenge to the
rate increases, issued a temporary injunction restrain-
ing the Commission and the railroads from collect-
ing the increases “until further order of this court.”
This injunction was stayed by Chief Justice Burger.
On November 19, 1973 the Supreme Court~vacated
the injunction and’ remanded the case to this court
for further consideration in light of Atchison, Topeka
& Santa Fe R. Co. v. Wichita Board of Trade,
supra.”

Plaintiffs now ask this court for: a declaration
that the ICC has failed to comply with NEPA and
that the orders approving the increases are thus
void; an order enjoining the Commission to recon- —
sider the general rate increases in accordance with
the strict demands of NEPA; and an injunction for-
bidding the railroads from collecting the rate in-
creases on recyclables until the Commission does so
comply with NEPA. Plaintiffs and defendants have
filed cross motions for summary judgment, and on
these motions we now consider whether it is appropri-

% United States v. SCRAP, —— U.S. ——, 94 S.Ct. 533,
38 L.Ed.2d 326 (1978).

14a

ate for this court to grant plaintiffs’ requests for
relief. .
II

[1] We must first address the contention of the
railroads, who have intervened as defendants, that
we lack jurisdiction to review the Commission’s com-
pliance with the commands of NEPA. The railroads’
position is based on cases dating back almost 40 years
which refused to review challenges of shippers to
general revenue orders like those of October 4, 1972
and May 2, 1973.* These decisions were not com- —
pelled by any statutory limitation on the courts’ pow-
er; three-judge District Courts have jurisdiction “to
enforce, suspend, enjoin, annul or set aside in whole
or in part any order of the Interstate Commerce
Commission * * *.” 28 U.S.C. § 2321 (1970); 28
U.S.C. § 1836 (1970). See 28 U.S.C. §§ 2322-2825
(1970). The decisions were instead predicated upon
the judicially developed doctrines of ripeness and ex-
haustion of administrative remedies. The courts
stressed that the Commission’s approbation of a gen-
eral rate increase under Section 15(7) was merely

“4 See, e.g., Algoma Coal & Coke Co. v. United States,
E.D.Va., 11 F.Supp. 487 (1935); Koppers Co. v. United States,
W.D.Pa., 182 F.Supp. 169 (1955); Atlantic City Electric Co.
v. United States, S.D.N.Y., 306 F.Supp. 338 (1969), and
Alabama Power Co. v. United States, D.D.C., 316 F.Supp. 387
(1969), both affirmed by equally divided Court, 400 U.S. 78,
91 S.Ct. 259, 27 L.Ed.2d 212 (1970); Electronic Industries
Assn v. United States, D.D.C., 310 F.Supp. 1286 (1970),
affirmed. per curiam, 401 U.S. 967, 91 S.Ct. 1188, 28 L.Ed.2d .
$18 (1971).

loa

an acceptance of the railroads’ need for more reve-
nue, that the shippers could challenge the reason-
ableness of particular rates affecting them under Sec-
tions 13(1),.15(1) and 16(1) of the Interstate Com-
merce Act, 49 U.S.C. §§18(1), 15(1), 16(1)
(1970), and that only in a decision pursuant to such
a challenge did the Commission render a judgment
on the reasonableness of particular rates as applied
to particular shippers. The courts thus reasoned that
to review carriers’ challenges to a Section 15(7)
order would be to interfere at an intermediate stage
in the rate-making process before the carriers had
exhausted their remedies before the Commission.
However, as we indicated in our first opinion in
this case,* we do not feel restrained by these cases
from reviewing plaintiffs’ challenges to the Commis-
sion’s orders. First, the precedential force of the
cases is now in substantial doubt. Two of the most
recent, Alabama Power Co. v. United States, D.D.C.,
316 F.Supp. 337 (1969), and Atlantic City Electric
Co. v. United States, S.D.N.Y., 306 F. Supp. 338
(1969), were affirmed without opinion by only an
equally divided Court, 400 U.S. 78, 91 S.Ct. 259, 27
L.Ed.2d 212 (1970). Only last term the Court indi-
cated that the jurisdictional question presented by
these cases, while a serious one, was not settled.”

% 346 F.Supp. at 198.

*In Atchison, Topeka & Santa Fe R. Co. v. Wichita Board
of Trade, 412 U.S. 800, 93 S.Ct. 2367, 87 L.Ed.2d 350 (1978);
the Court reviewed a Commission order that particular rates
were just and reasonable. The plurality opinion stated that

16a

In Alabama Power and Atlantic City the shippers’
challenges were directed to the Commission’s deci-
sion that the general increases were warranted by
the railroads’ revenue needs rather than to the rea-
sonableness of any particular rates. We adhere to the
view expressed in the dissent in Alabama Power
that challenges such as these can best be considered in
direct review of the Commission’s Section 15(7) de-
cision rather than “in countless rate-making proceed-
ings involving individual commodities.” * The instant
case does not present challenges to the reasonable-
ness of particular rates on particular railroads be-
tween particular points; it presents challenges to the
Commission’s determination that the railroads’ gen-
eral revenue needs justify the costs to shippers and
to the environment of a general rate increase on re-
cyclables.* The Commission has made what it be-
lieves to be its final decision on this general balanc-
ing; it surely does not intend to reconsider this deci-
sion after a Section 13 challenge to a particular rate.

if the grain charges “were just like a general rate incrase,
serious questions would arise about the jurisdiction of the
District Court to review the Commission’s order.” Id. at 814
n. 10, 93 S.Ct. at 2378.

11 Alabama Power Go. Vv. United States, supra note 14, 316
F.Supp. at 339.

18 We thus find misplaced the railroads’ reliance on Elec-
tronic Industries Assn V. United States, supra note 14, which
was affirmed unanimously by the Supreme Court without
opinion. In that case the shippers attacked as unreasonable
and arbitrary only that portion of a Commission § 15(7)
order permitting increased rates on two particular items.
$10 F.Supp. at 1287.

17a

We do not, however, rest on an application of the
analysis advanced in the dissent in Alabama Power.
For as stated in our first SCRAP opinion ® the cases
cited by the railroads are all distinguishable from a
case challenging the Commission’s compliance with
NEPA in approving a general rate increase. We
first note that however adequate a Section 13 proceed-
ing might be to a shipper who questions the railroads’
need for a general rate increase, it is at least ques-
tionable that environmental groups such as SCRAP
have standing to initiate Section 13 proceedings dur-
ing which they could attempt to contest the Commis-
sion’s compliance with NEPA. Sections 13(1), 15(1)
and 16(1) permit any person or association to com-
plain of carrier action in contravention of the Inter-
state Commerce Act and empower the Commission to
investigate such complaints and remedy any violation
of the Act, including granting reparations for unrea-
sonable or prejudicial charges on particular items
shipped. It is suggested that an environmental group,
while it could not obtain reparations, should be able
to complain that a particular charge on a particular
item is unreasonable because of its environmental ef-
fects. Thus if SCRAP could initiate an investigation
on this theory, it could argue further that before re-
jecting the complaint the Commission would have to
_ prepare and consider an environmental impact state-
ment. But we know of no Commission order or ju-
dicial opinion accepting this theory and it is thus
too speculative and too unrealistic to support a denial

” 346 F.Supp. at 198.

a

of jurisdiction. It is true that two scrap dealers
associations have intervened in this action to help
champion the environmental cause and that these as-

| sociations or their members may bring Section 13
challenges to particular rates which they could argue
the Commission could not reject without compliance
with NEPA. But we cannot rest a holding on the
fortuity that here shippers as well as envi ental
groups challenge the Commission’s sorkiptishrce with
NEPA. Moreover, to refuse to consider the challenges
of environmental groups to agency compliance with
NEPA because economically interested parties might
make similar challenges in later proceedings would
significantly dilute the Supreme Court’s holding, on
review of our first opinion in this case, that SCRAP
has full standing, equal to and not derived from the
standing of economically interested parties, to seek
review of Commission action which allegedly harms
SCRAP’s members in their use of the environment.”
Even if environmental groups could initiate pro-
ceedings pursuant to Section 13(1), an appeal from
a Commission order on the reasonablenes of a par-
ticular rate would riot be an appropriate time for
a court to review the Commission’s challenged com-
pliance with NEPA. Plaintiffs have persuasively ar-
gued that NEPA compels the Commission, before ap-
proving a general rate increase, to consider whether
the rate increases on recyclables collectively have a
significant environmental impact and, if so, whether

18a

2% United States v. SCRAP, supra note 3, 412 U.S. at 683-
690, 98 S.Ct. 2405.

19a

this impact is justified by the railroads’ need for in-
creased revenues. These are far different questions
from whether a particular rate, in light of environ-
mental considerations, is unreasonable or discrimina-
tory. Even if a court in reviewing a Commission
order on the reasonableness of a particular rate were
able on the record before it to review the Commis-
sion’s compliance with NEPA, the court’s decision
would affect only the particular rate challenged. Thus
burdensome relitigation of each particular rate would
be required to challenge all the rates which collec-
tively impact the environment. Finally, we note that
delay is of greater import here than in previous
cases where review of general rate orders was re-
fused. While the Act provides for reparations to ship-
pers who successfully challenge particular rates after
they have become effective, the environmental degra-
dation which continues while challenges to particu-
lar rates are being considered may not be reparable
at all.

Our reliance on NEPA in finding jurisdiction is
not inconsistent with the Supreme Court’s admonition
in its SCRAP opinion that “NEPA was not intended
to repeal by implication any other statute.”“ The
Court did not suggest that NEPA was to be ignored
by the courts in considering threshold jurisdictional
issues.”

2 Id. at 694, 93 S.Ct. at 2419.

22 The Court’s implicit approval of the assertion of jurisdic-
tion in Committee for Nuclear Responsibility, Inc. v. Seaborg,

149 U.S.App.D.C. 880, 463 F.2d 783 (1971), suggests much

20a

The Court in SCRAP held only that NEPA did not
revive judicial power that had been previously\ ex-
plicitly eliminated by Congress. 412 U.S. at 692-695,
93 S.Ct. 2405. This time we do not wield NEPA in
the face of any statutory limitations on our jurisdic-
tion; there is nothing in the Interstate Commerce Act
which precludes our jurisdiction to review Section
15(7) orders, whatever the limits it imposes on our
injunctive power over carriers. We, like the previous
courts which, in a non-NEPA context, declined to re-
view general rate orders, are applying broad juris-
dictional provisions, 28 U.S.C. §§ 1336, 2321, giving
us power to review “any order” of the ICC. These
provisions demand supplementation by other stat-
utes and by judicially developed doctrines which limit
court review of agency action. As stated above,
previous courts found two of these doctrines to pre-
clude court review of general rate orders. We find
that the existence of NEPA requires us to reconsider
the application of these doctrines and in NEPA cases
to accept more of the broad jurisdictional authority
granted us.

Ill

We thus turn to an examination of the Commis-
sion’s fulfillment of the NEPA mandate. We do not
feel it necessary to rehearse at the outset the full

the reverse. 412 U.S. at 695-696, 98 S.Ct. 2405. The Seaborg
court reviewed whether a decision to conduct a nuclear test
was made in compliance with NEPA though, as we noted in
our first SCRAP opinion, 346 F.Supp. at 197, absent NEPA
no court would have authority to review such a decision.

™

. Sls

structure and the particularized requirements of
NEPA. Previous courts have done so adequately.”
We do, however, think it important to emphasize be-
fore commencing our analysis that the courts have
required strict compliance with the procedural com-
mands of NEPA. Section 102(2)(C) of the Act, 42
U.S.C. § 4832(2)(C), prescribes in some detail not
only what considerations must be addressed in an
environmental_impact statement, but also how the
statement is to be developed and utilized. The Act
states that “all agencies of the Federal Government”
are to comply with these prescriptions “to the fullest
extent possible.” 42 U.S.C. § 4332. Far from pro-
viding “‘an escape hatch for footdragging agencies,”
this language “sets a high standard for the agencies,
a standard which must be rigorously enforced by the
reviewing courts.” Calvert Cliffs’ Coordinating Com-
_mittee v. USAEC, 146 U.S.App.D.C. 33, 38, 449 F.2d
1109, 1114 (1971). Because of the extent of plain-
tiffs’ attack on the impact statement, we further note
that the courts’ substantive review of agency action
pursuant to NEPA is much more limited. Once a
court is satisfied that the agency has “fully and in
good faith” met all of NEPA’s procedural require-
ments, it should not reverse an agency decision on
the merits unless it can determine that the decision ©
was “arbitrary or clearly gave insufficient weight to

23 See, e.g., Environmental Defense Fund, Inc. v. Corps of
Engineers, United States Army, 8 Cir., 470 F.2d 289 (1972);
Calvert Cliffs’ Coordinating Committee v. USAEC, 146 U.S.
App.D.C. 33, 449 F.2d 1109 (1971). :

\

=.

22a

environmental values.” Id., 146 U.S.App.D.C. at 39,
449 F.2d at 1115.* Any substantive review would be
predicated on Section 101 of the Act, 42 U.S.C.
§ 4331, which propounds certain substantive envir-
onmental goals which it is the “continuing responsi-
bility of the Federal Government to use all practica-
ble means” to achieve. One of these goals is to “en-

‘hance the quality of renewable resources and ap-
proach the maximum attainable recycling of deplet-
able resources.” However, because we view the Com-
mission’s efforts to comply with NEPA’s procedural
commands to be sorely deficient, we do not reach the
question whether the Commission clearly gave insuf-
ficient weight to this environmental value.

[2, 3] The purpose of .all the requirements im-
posed by Section 102(2)(C) is to ensure that fed-
eral agencies integrate consideration of the potential
environmental impacts of their contemplated actions
with the policy considerations traditionally attending
such actions. It is for this reason that Section 102
(2) (C) specifically commands that an environment-
al impact statement and the comments of other con-
cerned agencies on this statement “shall accompany
the proposal through the existing agency review proc-
esses.” The Commission’s mode of preparation and
utilization of the challenged impact statement here
violated both Seetion 102(2) (C)’s fundamental pur-

* Accord, Conservation Council of North Carolina v.
Froehlke, 4 Cir., 473 F.2d 664, 665 (1973); Environmental
Defense Fund, Inc. v. Froehlke, 8 Cir., 473 F.2d 346, 353
(1972).

. 28a

pose and this specific command. The Commision’s
October 4 order explaining why the national trans-
portation policy warranted the general rate increase
was made without the benefit of an impact state-
ment. It was only after its October order was greet-
ed with an avalanche of criticism from environment-
al groups, EPA, and CEQ that the Commission de-
cided to prepare an environmental statement on the
impact of the rate increases for recyclable commodi-
ties. The Commission did not, however, decide to
start over again to reconsider fully the question of
rate increases on recyclables. It instead merely re-
opened Ex Parte No. 281 “for the limited purpose
of further evaluating * * * the environmental ef-
fects of increased railroad freight rates and charges”
on the movement of recyclable commodities. ICC or-
der of November 7, 1972. The Commission thus indi-
cated that it had already made its decision and all
that remained was to determine if the environmental
effects of that decision could be justified. The Com-
mission’s May 2, 1973 order discontinuing Ex Parte
No. 281 is further evidence that the Commission
neither intended to give nor actually gave full re-
consideration to the question of the recyclable rate
increase. That one-sentence order merely adopts the
entire staff-prepared impact statement. It makes no
attempt to integrate the considerations of national
transportation policy justifying the rate increase with
the environmental considerations analyzed in the im-
pact statement. Nor does it confront or even acknowl-
edge the critical comments of other concerned agen-

cies and environmental groups appended to the state-—
ment. This utilization of an impact statement simp-
ly does not comport with Section 102(2)(C). Only if
the statement is prepared before an agency decision
is made can it serve its purpose of informing the de-.
cision-making process at every stage. “Compliance
to the ‘fullest’ possible extent would seem to demand
that environmental issues be considered at every im-
portant stage in the decision making process * * ss
Calvert Cliffs’ Coordinating Committee v. USAEC, |
supra, 146 U.S.App.D.C. at 42, 449 F.2d at 1118
(emphasis in original).* If fhe agency fails to pre-
cesiahiaamiigponis Se tae

25 See also Environmental Defense Fund, Inc. v. Armstrong,
N.D.Cal., 352 F.Supp. 50, 55 (1972) (an impact statement
“igs not to be merely an exercise in project justification but
rather a working paper of sorts, one essential input into
agency decisions concerning the contours of Federal action’’).

In his dissent to the Court’s reversal of our first SCRAP
opinion, Mr. Justice Douglas quotes Congressman Dingell, a,
main sponsor of NEPA. That quotation unfortunately is
even more appropriate at this stage of the SCRAP litigation.

“* * * Some agencies aré complying poorly. They
decide what they are going to do and then write an en-
vironmental impact statement to support the decision.
That is not what Congress had in mind. I am fearful
that we are breeding a race of impact statement writers
who put all the right words down but don’t really get
environmental concerns involved in the decision-making

process. * * *”
United States v. SCRAP, supra note 8, 412 U.S. at 713 n. 10,
98 S.Ct. at 2429. CEQ must have been aware of this problem
in drafting its advisory guidelines on agency compliance with
NEPA. These guidelines state: ’
«“* * * It is important that draft environmental state-
ments be prepared and circulated for comment and

/

Ad

25a

_ pare an impact statement before making a decision
significantly affecting the environment, it must start
its procedures over again, including the procedure
required by Section 102 of NEPA, so that the de-
cision-making process can be fully informed through-
out.

In this case, not only did the Commission fail to
start over in considering whether to approve the rate
increases, it did not even take its after-the-fact, envi-
ronmental consideration through the entire “existing
agency review processes.” The “processes” for Com-
mission review of proposed general rate increases are
set forth in Section’ 15(7) of the Interstate Com-
merce Act. The Commission is ernpowered by the sec-
tion to make orders concerning these proposed rates |

“after full hearing.” The Commission held a hearing

before its October 4 order before it had even com-

menced preparing an impact statement. It refused,
however, to hold another hearing to reconsider the

‘increase on ‘recyclables it had already: decided “ge

in light of the impact statement it had prepared.

‘should be clear to all agencies by now that ins 7

are key aspects of nr review processes during

furnished to the Council as early as possible in the agency
' review process in order to permit agency decisionmakers
and outside reviewers to give meaningful consideration
to the environmental issues involved.’ In particular,
. agencies should keep in mind that such statements are to
serve as the means of assessing the environmental im-
pact of proposed agency actions, rather than as a justi-
fication for decisions already made. -

. See, e.g., Jicarilla Apache Tribe, of Indians v. Morton, 9
Cir., 471 F.2d 1275, 1285-1286 (1973); National Helium
Corp. v. Morton, 10 Cir., 455 F.2d 650, 656-657 (1971); City
of New York v. United States, supra note 26, 344 F.Supp.
at 939-940.

et

43a

“existing agency review processes” must entail oral
hearings before the Commission.“

After hearings are held, a final revised order
should be issued manifesting a full reconsideration
by the Commission of the rate increase on recyclables. .
This order should not be limited to adoption of the
impact statement; it should include a reassessment of
the national transportation policy supporting the orig-
inal October order as well as a discussion of the
final impact statement prepared by the Commission’s
staff and of the'comments on the draft statement so-
licited from other concerned agencies.

© We further think that a strong argument could be made
that oral public hearings should be held based on the CEQ
advisory guidelines which state:

“(e) Agency p developed pursuant to sec-
tion 8(a) of these guidetines shall include provision for
public hearings on actions with environmental impact
whenever appropriate, and for providing the public with
relevant information, including information on alterna-
tive courses of action. In deciding whether a public hear-
ing is appropriate, an agency should consider: (i) The
magnitude of the proposal in terms of economic costs, the
geographic area involved, and the uniqueness or size
of commitment of the resources involved; (ii) the degree
of interest in the proposal, as evidenced by requests from
the public and from Federal, State and local authorities
that a hearing be held; (iii) the complexity of the issue
and the likelihood that information will be presented: at

~ the hearing which will be of assistance to the agency-in
fulfilling its responsibilities under the Act; (iv) the
extent to which public involvement already has been
achieved through other means, such as earlier public -
hearings, meetings with citizen representatives, and/or ©
written comments on the proposed action. * * *”

88 Fed.Reg. 10858 (1973).

44a
VI

This does not, however, end the case. Plaintiffs do
not merely ask for a declatation that the Commission
violated the prescriptions of NEPA and an order
directing it to reopen Ex Parte N 281 for recon-
sideration of the recyclable rate in in accord-
ance with these prescriptions. They also request that
we enjoin the railroads from collecting the rate in-
crements on recyclable materials until the Commis-
sion completes its full reconsideration. Such an in-
junction would be necessary to hold down the rates
on recyclables; under the scheme established by the
Interstate Commerce Aci new tariffs filed by car-
riers are effective absent a Commission order finding
the tariffs unreasonable. See 49 U.S.C. §§ 6(3), 15
(1) (1970)."

As stated above, on June 7, 1973 we entered a
temporary injunction against the railroads restrain-
ing them from qollecting the rate increases pending
our review of the Commission’s October 4 and May
2 orders. The /Supreme Court vacated this injunc-
tion and remanded the case to this.court for recon-
sideration in light of its decision last term in Atchi-

8° The only consequence of our vacating the Commission’s
orders pending reconsideration of the rate increases “is that
the railroads may not rely, in some subsequent proceeding, on
a Commission finding that the proposed rates were just and
reasonable. In ah action for reparations, for example, the
railroads could not gain any benefit from the purported
_Commission approval of the increases.” Atchison, Topeka &
Santa Fe R. Co. v. Wichita Board of Trade, supra note 16, ©
412 US. at 818, 93 S.Ct. at 2380.

45a

son, Topeka & Santa Fe R. Co. v. Wichita Board of
Trade, supra. Though it is far from clear that that
decision prevents us from granting plaintiffs further
injunctive relief, it raises substantial enough doubts
concerning the propriety of such relief to stay our
hand. |

We first note that our entering an injunction
against the railroads is not precluded by the Court’s
reversal of our first injunction in this case—the in-
junction entered against the 2.5 per cent surcharge
pending Commission consideration of the lawfulness , .
of rate increases. In that reversal the Court held
that Section 15(7) gave exclusive jurisdiction to the
ICC to suspend rates pending its final decision on
their lawfulness. United States v. SCRAP, supra,
412 U.S. at 690-691, 93 S.Ct. 2405. Now, however,
unlike the time at which we issued our injunction
against the surcharge, the Commission has issued
what it at least thought was its final-order-on the
rate increases. And in Wichita Board of Trade, de-
cided the same day as SCRAP, a majority of the
Court: stated that the terms of Section 15(7) do not
govern a case in which the Commission has issued
what it intends to be its final order. 412 U.S. at
820, 826-828, 93 S.Ct. 2367. Moreover, this Wichita
majority affirmed that District Courts reviewing Com-
mission orders must have at least some power ancil-
lary to their general powers of review and protective
of their jurisdiction to enjoin railroads from collect-
ing new charges pending final determination of the
suit; Mr. Justice Marshall, writing for four mem-

‘

46a

bers of the majority, noted that while three-judge
District Courts are only explicitly given power to
enter orders against the Commission by 28 U.S.C.
§ 2324 (1970)," “ ‘judicial review would be an idle
ceremony if the situation were irreparably changed
[by private parties] before the correction could be
made’” 412 U.S. at 819, 93 S.Ct. at 2381, quoting
Scripps-Howard Radio, Inc. v. FCC, 316 U.S. 4, 62
S.Ct. 875,/86 L.Ed. 1229 (1942). Here collection of
the recyclable rate increases during the Commission’s
reconsideration may well cause further irreparable
environmental degradation.”

The relief we grant today against the Commission is
clearly not called into question by the Court’s SCRAP or
Wichita decisions. “Nor does anything in the Court’s opinion
today deny to the district courts power to enjoin the Commis-
sion to comply with NEPA * * * #o long as no injunction
is issued barring implementation of the rates themselves, cf.
Atchison, T. & S. F. R. Co. v. Wichita Bd. of Trade, post, p.
800 [98 S.Ct. 2367].” United States v. SCRAP, supra note 8,
412 U.S. at 724-725 n. 1, 93 S.Ct. at 2486 (opinion of Mr.
Justice Marshall). %

s°'The railroads argue that this is an inappropriate case
to exercise the ancillary. power posited by Justice Marshall
‘because the Commission can correct any violations of NEPA
without the railroads being enjoined from collecting the in-

we must be concerned if our review is to be more than an
“Gdle ceremony.”

a

47a

However, Justice Marshall proceeded to state for
the Wichita plurality that the considerations which
underlay the Court’s interpretation of Section 15(7)
demand that the courts’ ancillary power be limited.
Justice Marshall’s definition of the ancillary power
is critical, for Mr. Justice Douglas, the fifth member
of the Wichita majority, would detract not at all
from the general power of this court to enjoin the

‘railroad," while three other members of the Court

argued that District Courts lack any jurisdiction
whatever to enjoin rates even after a final Commis-
sion order.“ Justice Marshall stressed that the most
important of the considerations underlying the
Court’s interpretation of Section 15(7) in Arrow
Transportation Co. v. Southern R. Co., supra, the
case primarily relied upon by the SCRAP Court, re-
late to the-concept of agency “primary jurisdiction.”
This concept directs that until the agency has pro-
vided its own views a court should demur from ex-
pressing a view on matters which have been at least
in part entrusted by Congress to an agency’s discre-
tion and concerning which the agency has developed
some degree of expertise. Before a court issues an
injunction pending final determination of a suit, it
normally either implicitly or explicitly makes an esti-
mation of the likelihood of ultimate success on the
merits of the party challenging the agency action.

88 412 U.S. at 826-828, 98 S.Ct. 2367.

412 U.S. at 888, 93 S.Ct. 2367 (opinion of Mr. Justice
White, in which Mr. Justice Brennan and Mr. Justice Rehn-
quist join, concurring in part and dissenting in part).

i

48a

See Virginia Petroleum Jobbers Assn v. FPC, 104
U.S.App.D.C. 106, 110, 959 F.2d 921, 925 (1958).
The expression of such an estimation may well pro-
nounce the views of the court on matters such as
national transportation policy which are within the |
agency’s primary jurisdiction. A court contemplat-
ing an injunction pending final determination will
further make some weighing of the magnitude and ir-
reparability of the harms which would be suffered by
the parties depending on whether an injunction is
issued. Ibid. This weighing may also require the
court to evince its beliefs on matters concerning
which the agency being reviewed has primary exper-
tise. The danger that a reviewing court issuing an
injunction would thus intrude on the primary juris-
diction of the ICC moved the Wichita plurality to
state that District Courts should not enjoin rates in
order to protect their jurisdiction to review Commis-
sion orders unless they entertain “substantial doubt
ahout the consistency of the Commission’s action [on
the substantive merits] with its mandate from Con-
gress.” 412 U.S. at 822, 93 S.Ct. at 2382.

Our uncertainty as to the meaning for this case of
Justice Marshall’s opinion has a dual origin. First,
we question whether issuance of an injunction here
would intrude upon the primary jurisdiction of the
Commission. The injunction overturned by the Wich-
ita Court was issued against the railroads’ imposi-
tion of separate charges for inspection of grain in
transit because the Commission’s order approving
such charges did not justify departure ‘from a long-

49a

standing rule proscribing them. In issuing the in-
junction the District Court thus at least implicitly
had to express its view that this departure was not
justified. Matters of national transportation policy
are, of course, within the especial expertise of the
Commission; however, we are concerned here with
matters of environmental policy and there is no rea-
son to consider the Commission especially expert on
the environment. Our issuance of an injunction pend-
ing final determination would need only be a state-
ment of our belief that a full consideration of the
rate increases’ environmental impact will probably
lead to a conclusion that those increases must be
avoided. Further, Justice Marshall stressed that the
injunction in the Wichita case was perforce based on
a weighing of the injunction’s harm to carriers
against its benefit to shippers. Not only does this
weighing of the interests of carriers and shippers
exclusively involve considerations of national trans-
portation policy; it also must be done against the
background of Section 15(7) which, by providing for
repayment of charges ultimately found to be unrea-
sonable, makes reparable any harms which might
accrue to shippers should an injunction not issue.
Our issuance of an injunction here would require
consideration of environmental degradation for which
the Interstate Commerce Act does not and unhappily
probably could not provide reparation. We thus ques-
tion the applicability of Justice Marshall’s Wichita
analysis to this case. Our doubts are augmented ap-

preciably by the fact that Justice Marshall dissented

ee ee

50a

from the reversal of our first SCRAP opinion, ad-
vancing the same distinctions of our case from Wich-
ita as we have set forth above. See 412 US. at 724,
728-732, 98 S.Ct. 2405.

But even if the analysis of the Wichita plurality
is applicable to this case, we do not think it obvious
that an injunction against the railroads would be
inappropriate. Justice Marshall’s Wichita opinion
recognized that a court need not refrain from grant-
ing an injunction and thus stating its views on the
merits if the court believes it would have to reverse
the agency if it does not change its decision after
reconsideration. We indeed do entertain “substan-
tial doubt” about the consistency of the Commission’s
allowance of the rate increases with the congressional
mandate that the Federal Government “use all prac-
ticable means” to “approach the maximum attain-
able recycling of depletable resources.” 42 U.S.C.

-§ 4331(b) (6). We indeed might well question wheth-

er the Commission can allow the recyclable rate in-
creases without clearly giving “insufficient weight to
environmental values.” See Calvert Cliffs’ Coordi-
nating Committee v. USAEC, supra, 146 U.S.App.
D.C. at 39, 449 F.2d at 1115. Nonetheless, out of
an abundance of caution, we decline to consider fur-
ther granting.to plaintiffs additional injunctive re-
lief.

The October 4, 1972 and May 2, 1973 orders are
vacated and Ex Parte No. 281 is to be reopened for
further proceedings consistent herewith.

So ordered.

Le |

5la

FLANNERY, District Judge (dissenting) :

The history of this protracted litigation is clearly
set forth in the Court’s majority opinion: That his-
tory reveals that the Supreme Court has on two occa-
sions overruled findings of this Court on —
tional grounds.

I

Jurisdiction
On June 18, 1973, the Supreme Court held that
this Court was without jurisdiction to issue a pre-
liminary injunction restraining a temporary sur-
charge on shipping rates for recyclable commodities.
The Court reasoned that section 15(7) of the Inter-
state Commerce Act* vested exclusive jurisdiction in’

the Interstate Commerce Commission to suspend
rates, pending a final decision of their lawfulness.”

On November 19, 1973, the Supreme Court vacated
another injunction issued by this Court restraining
the Commission and railroads from collecting certain
rate increases on recyclable commodities, which the
railroads intended to place in effect at the expiration
of the statutory suspension period.’ The case was
remanded to this Court for further consideration in

149 U.S.C. §15(7) (1970).

2 United States v. Students Challenging Reg. Agcy. Pro.
(SCRAP), 412 U.S. 669, 93 S.Ct. 2405, 37 L.Ed.2d 254
(1978).

* United States—v. Students re ae Reg. Agcy. Pro.
(SCRAP), — U.S. ——, 94 S.Ct. , 88 L.Ed.2d 326
(1978).

pews.

B2a

the light of Atchison, Topeka and Santa Fe Railway
Co. v. Wichita Board of Trade.‘ These decisions by
the Supreme Court clearly require this Court to re-
consider its prior holdings and to determine whether
it has jurisdiction in this matter.

In Wichita, the Supreme\Court held that judicial
review of Interstate Comme Commission decisions
in rate cases is limited in that such deci-
sions afe not to be disturbed\u they are unsup-
ported by evidence, are _made\without a hearing, ex-
ceed constitutional limits;.or for some other reason
amount to an abuse of power. \Since the Commission
in the present case has not yet determined that the
rates in question are reasonable, this Court is. clearly
without jurisdiction to suspend them. Arrow Trans-
portation Co. v. Southern Railway Co.’ The Supreme
Court in Wichita also pointed out that Congress, in
establishing the Interstate Commerce Commission,
had created an administrative agency whose func-
tion was to develop an understanding of national
transportation problems and to use that expertise
to determine what our national transportation policy
should permit. Consequently, a court should ordi- -
narily refrain from expressing any view on such poli-
cy before the Interstate Commerce Commission ex-
presses its view. For this Court to issue an injunc-
tion during an ongoing administrative proceeding
would be to undercut the policies served by the doc-

+412 U.S. 800, 98 S.Ct. 2367, 37 L.Ed.2d 350 (1973).
5372 U.S. 658, 83 S.Ct. 984, 10 L.Ed.2d 52 (1963).

_

58a

trine of primary jurisdiction, and would slide the
Court “unconsciously from the narrow confines of
law into the more spacious domain of policy.” °

It is the established rule that general revenue or-
ders of the Interstate Commerce Commission, such
as the suspension orders directed to individual rates
in this case, are not reviewable by the courts.’ The
Supreme Court has ruled in this case that N.E.P.A.
was not intended to repeal. by implication any other
statute. There is no indication that Congress in-
tended N.E.P.A. to overrule the long line of jugi- ‘
cial decisions holding that general -revenue orders,
such as those presented in this case, are not review-
able by the courts.

This Court, therefore, clearly does not have juris-
diction to enjoin the collection of the increased rates
on recyclable materials. It follows that since the
ommission’s orders are non-reviewable at this stage,

* Atchison, Topeka and Santa Fe Railway Co. v. Wichita

rd of Trade, 412 U.S. at 807, 93 S.Ct. at 2375; Phelps

Corp. v. NLRB, 313 U.S. 177, 194, 61 S.Ct. 845, 85
d. 1271 (1941).

Alabama Power Co. v. United States, 316 vies. 337
(D.\D.C.), aff’d by an equally divided court, 400 U.S. 73, 91
S.Ct. 259, 27 L.Ed.2d 212 (1970); Electronic Industries Ass’n
ited States, 310 F.Supp. 1286 (D.D.C. 1970), aff’d per
, 401 U.S. 967, 91. S.Ct. 1188, 28 L.Ed.2d 318 (1971);
ic a Elec. Co. v. United States, 306 oe ae «f

7 | Sha
this Court is without jurisdiction to grant the relief
requested.
Il

N.E.P.A.

Assuming arguendo that the Court has jurisdic-
tion to review the adequacy: of the N.E.P.A. state-
ment submitted by the Interstate Commerce Commis-
sion, I find the statement to be sufficient and in sub-
stantial compliance with the requirements of N.E.
P.A. , '

The mandates of N.E.P.A, pertain to procedure.
- Although N.E.P.A. itself creates no substantive rights
in citizens to safe, healthful, productive, and cultur-
ally pleasing surroundings, the responsible federal
agency is required to take these factors into account:
before commencement of a project. Upper Pecos
Ass’n v. Stans.’ The record in this case reveals that
the Commission gave extensive consideration to the
possible environmental impact of increased rates for
certain recyclable commodities. The function of this
court is not to decide whether it agrees with the
Commission’s substantive fmdings but only to decide
whether the record reveals that the procedure set
forth in N.E.P.A. was followed and whether the Com-
mission has fully and in good faith considered all fac-
tors mandated by N.E.P.A. The Commission in my
view has substantially complied with the require-
‘ments of N.E.P.A. Based on the substantial record

* 452 F.2d 1288 (10th Cir. 1971).

55a

already compiled, to remand for further hearings un-
der N.E.P.A. would require the Commission to con-
duct a largely ritualistic act.

On November 7, 1973, the Commission reopened
its investigation in this case for the purpose of fur-
ther evaluating, in accordance with N.E.P.A., the
environmental effects of increased railroad freight
rates and charges on the movements of commodities
being transported for the purpose of recycling. The
Commission then spent several months preparing a
draft statement which was issued on March 13, 1973.
After soliciting and receiving the comments of inter-
ested persons and agencies the final Impact State-
ment was released on May 7, 1973. The comprehen-
sive statement anticipates a potential adverse environ-
mental effect stemming from the proposed rate in-
creases but concludes that the increases are justified

* by the need to insure a viable and efficient railroad
system. This Court has already recognized the finan-
cial plight of the nation’s railroads.’ The logic of the
Commission’s conclusion therefore seems unassailable.
Moreover, it is buttressed by extensive findings which
cover in detail the five categories set out in § 102
(a)-(c) of N.E.P.A. The Commission has clearly
taken the “hard_look” at possible environmental con-
sequences mandated by Congress. National Resources
Defense Council v. Morton.”

»” Students Challenging Reg. Agcy. Pro. (SCRAP) v. United
ee States, 353 F.Supp. 317, 323-324 (D.D.C. 1973).

4 148 U.S.App.D.C. 5, 16, 458 F.2d 827, 838 (1972).

ae se

56a

Finally, the fact that the Commission’s final im-
pact statement was filed after the rates had been
initially approved does not establish per se that the
statement was biased and not issued in good faith.
All that is required is that the agency make a rea-
sonable good faith effort to comply with the proce-
dural requirements of N.E.P.A. That the statement
may have been prepared after the decision to proceed
had already been made is not a fatal procedural er-
ror requiring the process to begin all over again.
Jicarilla Apache Tribe v. Morton, 471 F.2d 1275,
1280 (9th Cir. 1973); Upper Pecos Ass’n v. Stans,
452 F.2d 1233, 1237 (10th Cir. 1971); City of New
York v. United States, 344 F. Supp. 929 (E.D.N.Y.
1972).

Even assuming technical non-compliance with
N.E.P.A., if the Commission has considered all rele-
vant environmental factors and has reached a fair
and informed decision under N.E.P.A. its finding
should not be set aside. First National Bank of Home-
stead v. Watson, 363 F.Supp. 466 (D.D.C. 1973).

For the foregoing reasons, I respectfully dissent
and would hold that the motions of the plaintiffs and
intervening plaintiffs for summary judgment and for
injunctive relief be denied, the case be dismissed, and
judgment be rendered for the defendants with normal
costs.

lb
APPENDIX B

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA

Civil Action No. 971-72
[Filed Feb. 19, 1974, James F. Davey, Clerk]

STUDENTS.CHALLENGING REGULATORY AGENCY
PROCEDURES (S.C.R.A.P.), PLAINTIFF

and

COUNCIL ON ENVIRONMENTAL QUALITY,
INVOLUNTARY PLAINTIFF

and
ENVIRONMENTAL DEFENSE FUND, NATIONAL PARKS
AND CONSERVATION ASSOCIATION and IZAAK WALTON
LEAGUE OF AMERICA, PLAINTIFF-INTERVENORS

and .

NATIONAL “ASSOCIATION OF SECONDARY MATERIALS
INDUSTRIES, INC., COMMERCIAL METALS Co., I. V.
SUTPHIN Co. and FRANKEL BROTHERS & Co., INC.,
PLAINTIFF-INTERVENORS

and
INSTITUTE OF SCRAP IRON AND STEEL, INC. and

JULIAN C. COHEN SALVAGE CORPORATION,
PLAINTIFF-INTERVENORS

v.
UNITED STATES OF AMERICA and INTERSTATE
COMMERCE COMMISSION, DEFENDANTS
and

THE ABERDEEN AND ROCKFISH RAILROAD COMPANY,
ET AL., DEFENDANT-INTERVENORS

This case came on for hearing on plaintiffs’ and
defendants’ cross-motions for summary judgment.
Briefs were filed herein by the parties. The court
has this day filed its opinion. On consideration there-
of,

It is ORDERED that the Interstate Commerce
Commission’s orders of Octéber 4, 1972 and May 2,
1973 in Ex Parte 281 are vacated and this case is
remanded to the Commission for further proceedings
consistent with the opinion in this case.

2b
é JUDGMENT

/s/ J. Skelly Wright | y
J. SKELLY WRIGHT
- United States Circuit Judge

/s/ Charles R. Richey
CHARLES R. RICHEY
United States District Judge
District Judge Flannery dissents from the forego-
ing judgment.

:

le
APPENDIX C

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA

Civil Action No. 971-72

STUDENTS CHALLENGING REGULATORY AGENCY
PROCEDURES (S.C.R.A.P.), PLAINTIFF

and

COUNCIL ON ENVIRONMENTAL QUALITY,
INVOLUNTARY PLAINTIFF

’ and
ENVIRONMENTAL DEFENSE FUND, NATIONAL PARKS
AND CONSERVATION ASSOCIATION and IZAAK WALTON
LEAGUE OF AMERICA, PLAINTIFF-INTERVENORS

and
NATIONAL ASSOCIATION OF SECONDARY MATERIALS
INDUSTRIFS,..INC., COMMERCIAL METALS Co., I. V.
SUTPHIN Co. and FRANKEL BROTHERS & Co., INC.,
PLAINTIFF-INTERVENORS

and
INSTITUTE OF ScRAP IRON AND STEEL, INC. and

JULIAN C. COHEN SALVAGE CORPORATION,
PLAINTIFF-INTERVENORS

v.

UNITED STATES OF AMERICA and INTERSTATE
COMMERCE COMMISSION, DEFENDANTS
and

THE ABERDEEN AND ROCKFISH RAILROAD COMPANY,
ET AL., DEFENDANT-INTERVENORS

2c
NOTICE OF APPEAL

1. Notice is hereby given that the Interstate Com-
merce Commission, one of the defendants in the
above-entitled action, hereby appeals to the Supreme
Court of the United States from the opinion and
judgment of this Court dated Febrvary 19, 1974.
This appeal is taken pursuant to 28 U.S.C. § 1253.

2. The entire record in this action is hereby desig- |
nated for certification by the Clerk of the District
Court to the Clerk of the Supreme Court. The Clerk

of the District Court is requested to prepare and to
transmit the entire record to the Clerk of the Su-
preme Court. :

This 19th day of April, 1974.

/s/ Charles H. White, Jr.
CHARLES H. WHITE, JR.
Attorney
Interstate Commerce

Commission
Washington, D. C. 20423

FRITZ R. KAHN
General Counsel

3c

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA

Civil Action No. 971-72

STUDENTS CHALLENGING REGULATORY AGENCY
PROCEDURES (S.C.R.A.P.), PLAINTIFF

and

COUNCIL ON ENVIRONMENTAL QUALITY,
INVOLUNTARY PLAINTIFF

Uv.

THE UNITED STATES OF AMERICA and
THE INTERSTATE COMMERCE COMMISSION,
DEFENDANTS

NOTICE OF APPEAL

Notice is hereby given on this 19th day of April
1974, that the United States of America hereby ap-
peals under 28 U.S.C. 1253 and 2101, to the United
States Supreme Court from the judgment and opin-
ion of this Court filed on February 19, 1974, in favor
of plaintiffs against the defendants, vacating Inter-
state Commerce Commission’s orders of October 4,

|

4c

1972, and May 2, 1973, in Ex Parte 281 and re-
manding the matter to the Commission.

/s/ William M. Cohen

WILLIAM M. COHEN

Attorney for the United
States of America

Land and Natural Resources
Division

Department of Justice

Washington, D. C. 20530

739-2730

DirK D. SNEL

Attorney for the United
States of America

Land and Natural Resources
Division

Department of Justice

Washington, D. C. 20530

739-2769

1d

‘APPENDIX D

Ex Parte No. 281

INCREASED FREIGHT RATES AND CHARGES, 1972

Decided September 27, 1972

REPORT OF THE COMMISSION
By THE COMMISSION:

BACKGROUND

By our prior report and order in this proceeding, Increased
Freight Rates and Charges, 1972, 340 I.C.C. 358, entered December
21, 1971, we instituted a nationwide investigation into the adequacy
of railroad freight rates and charges, and all railroads in the United
States were made respondents. The investigation specifically in-
cluded (a) a general increase by surcharge of 2.5 percent on bills for
freight services (more particularly described in the above re-
ferenced report and order and in appendixes A and B thereto)
which, by order served February |, 1972, we permitted to become
effective without suspension on February 5, 1972, subject to certain
conditions including a requirement that the surcharge schedules ex-
pire on June 5, 1972, and (b) a general increase in rates and charges
to be applied on a selective basis and which respondents indicated
would be filed to supplant the surcharge. For the 4-month period

2d

prior to its then effective expiration date of June 5, 1972, the latter
increase was expected to yield additional revenue in the amount of
$82 million allocated as follows: $31 million—eastern district, $14
million—southern district, and $37 million—western district.

On February 28, 1972, respondents sought permission to file and
make effective on April 1, 1972, a tariff containing their selective
increase proposal. By order served March 6, 1972, the requested
permission was granted subject, however, to a requirement that it be
filed to become effective not earlier than May |, 1972, upon not less
than 45 days’ notice to the public. In accordance with that per-
mission, respondents filed, on March 17, 1972, a selective increase
tariff (designated as X-281-A) to supplant the surcharge (X-281).
The level of increases therein varies between different commodities
and services and between and within different territories from 0 to
10 percent; and, if fully applied, respondents anticipate a 4-percent
increase in total freight revenues (or $489 million) over the presur-
charge (X-267-B) level, allocated as follows: $185 million—eastern
district, $72 million—southern district, and $232 million—western
district.

Both the surcharge and the selective increase proposals were
made subject to a provision for refunds in the event the Commission
ultimately finds that no increase or a lesser increase is warranted,
and, pursuant to our order of August 13, 1970 (Procedures
Governing Rail Carrier General Increase Proceedings, 49 CFR
1102), respondents’ initial petitions were accompanied by verified
statements containing “the full and entire evidential case” relied on
in support of each increase proposal.

In accordance with procedural schedules established in our orders
of December 21, 1971, and March 6, 1972, numerous protests and
verified statements in opposition were filed by various interested
parties. Respondents filed reply verified statements, and oral
hearings for cross-examination were held at Washington, D.C.,
beginning on March 23 and extending to April 20, 1972.

Based upon preliminary consideration of the evidence and argu-
ments of the Sila. we entered an order on April 24, 1972, sus-
pending the selective in¢réase proposal (tariff X-281-A and supple-
ments thereto) in its entirety for the full 7-month period allowed by
statute, or to and including November 30, 1972; and the investi-
gation was continued. At the same time, we extended the expiration
date of the surcharge tariff from June 5 to November 30, 1972.

Pursuant to our order of May 23, 1972 (served on May 24, 1972):
all interested parties were invited to participate in oral argument be-

—_

ae

3d

fore the entire Commission and to file briefs either supplemental to
or in lieu of oral argument. In response to that order numerous
briefs were filed on or before June 12, 1972, and oral argument was
held on June 15 and 16, 1972. .

The record before us, including written submissions and trans-
cripts of oral hearings and oral argument. is of massive Proportions
and reflects the views of virtually every interest ‘affected by the in-
volved nationwide general freight rate increase proposals. Careful
and individual attention has been given to each of those views' and.
to the extent feasible. will be reflected in subsequent sections of this
report. Due and timely execution of our functions, however, impera-
tively and unavoidably requires omission of the administrative law
judge’s report and recommended order.

REVENUE NEED

-s General.—The financial condition of the Nation's railroads has
been a matter of continuous and grave concern to this Commission
charged as we are with administering the Interstate Commerce Act
so as to develop, coordinate, and preserve, under private ownership,
a national transportation system adequate to mee} the needs of the
commerce of the United States. Most recently, we exhaustively
reviewed and analyzed the overall revenue situation of the railroad
industry in the context of general increase tariffs X-265 through X-
267-B. See report served on March 23, 1971, in Increased Freight
Rates, 1970 and 1971, 339 L.C.C. 125, hereinafter sometimes
referred to as the prior case. We there concluded:

that the financial condition of the railroad industry as a whole. and the financial status
of many individual carriers by rail. must be found to be at a dangerously low level. The
precipitous decline in working capital and serious loss of liquidity has reduced many
carriers to a truly marginal operation. This has been most clearly demonstrated by the
recent bankruptcy application of the Penn Central. We think it undeniable that a
number of other roads are approaching a similar financial crisis. (Prior report. page
173.)

We further found that revenues which the railroads could reasonably
expect to receive from rates established at the Ex Parte No. 265
level would enable them to do little more than meet added costs of

‘Including late-filed verified statements: (1) of the Western Wood Mouldings and Millwork
Producers. and (2) of Grande Anse Peat Moss Co.. Ltd.. Conrad Fatard. Inc., and Annapolis
Valley Peat Moss Co.. Ltd.

ee

4d

?
operation in 1970 and 1971 at present levels of service; and that
revenues realized from authorized Ex Parte No.‘267 increases were
necessary to enable the carriers‘ to improve severely depressed
earning ratios, and thereby to enhance their ability to attract
investment capital for use in upgrading their equipment and
facilities.

INCREASED COSTS:

Justification for the increases here proposed is based on operating
‘\ cost increases not anticipated in the prior case. In: effect,
‘respondents claim that additional revenues obtained from the
sought selective increases will not improve their capital base but,
rather, will enable them to offset, in part, currently prevailing
annualized cost levels’ for wages and other employee benefits
(including increases effective April 1, 1972), materials, supplies,
State and local taxes, and additional specified items. Evidence
relating to those increased costs is set forth below.

Wages.—Wage cost increases in 1971 resulted from agreements
executed with nearly all rail unions providing for periodic increases
in wage rates during the period January 1, 1970, to June 30, 1973."
The general pattern of these wage increases was established in
November 1970 by Emergency Board No. 178 following its
investigation of wage disputes involving four unions, viz, the
Brotherhood of Railway, Airline and Steamship Clerks, Freight
Handlers, Express and Station Employees (BRAC), the Brotherhood
of Maintenance of Way Employees (BMWE), the Hotel and
Restaurant Employees and Bartenders International Union (H&RE)
and the United Transportation Union (UTU). The ‘board
recommended increases in wage rates as follows:

January |, 1970 --------- Poccenee S percent
November |, 1970 -------------- 32 cents per hour
April 1, 1971 ------------------ s- 4 percent
October |, 1971---------------2-- 5 percent
April 1. 1972-----------------r---- 5 percent
October 1, 1972 -------y- serecee: S percent

Following the methodology accepted mn the prior case. estimates of increased costs (except
where otherwise indicated) are for a full 12-month period for all class I railroads and are based on
an employment level 3.14 percent below the 1970 level and traffic at the same level as.in 1970. So
stated. these increases are not necessarily the same as the increases in calendar year 1971 over
calendar year 1970. as the latter comparison would involve different levels of employment and
would be affected by the timing of the various increases. Also, a Showing of cost increases limited
to only a portion of the calendar year during which they became effective would fail to, indicate
fully their continuing impact.

Wage increases scheduled under these agreements to become effective after April |. 1972. are
not reflected in respondents’ cost computations and they will not be considered herein.

aa

5d \

This pattern was followed in subsequent ‘legislation and
agreements. Public Law 91-541, enacted December 10, 1970, to
terminate a strike, made the recommended 1970 increases effective
for employees represented by the BRAC, BMWE, H&RE, and UTU.
The recommended increases for 1970, 1971, and 1972 were
‘ subsequently incorporated into agreements reached with the follow-
ing unions:

BMWE—February 10, 1971
H&RE—February 10, 1971
BRAC—February 25. 1971 |
UTSE (United Transport Service Employees)—March 24, 1971
ATDA (American Train Dispatchers Ass'n.)}—April 20, 1971
RYA (Railroad Yardmasters of America)—April 23, 1971
BLE (Brotherhood of Locomotive Engineers)—May 13, 1971

\

The same pattern of wage increases in 1970 and 1971. was
embodied in final agreements reached with the UTU on January 27,
1972, and with the International Brotherhood of Firemen and Oilers
(BFO) on February 11, 1972.

Agreements reached with four shopcraft unions and ratified
November 13, 1971, differ only slightly from the established pattern
insofar as 1971 wage increases are concerned. Thesé agreements
(with the International Association of Machinists and Aerospace
Workers; International Brotherhood of Electrical Workers;
International Brotherhood of Boilermakers, Iron Shipbuilders,
Blacksmiths; Forgers and Helpers; and Brotherhood of Railroad
Carmen of the U.S.A. and Canada) provide increases of 10 cents per
hour effective January 1, 1971, 15 cents per hour for mechanics and
higher rated employees and 8 cents per hour for others effective
April 1, 1971, and the S-percent pattern increase October 1, 1971.

Agreement reached November 16, 1971, ratified November 24,
1971, with the Brotherhood of Railroad Signalmen of America
provides for wage increases in 1971 in rastoiis. with the pattern
of the shopcrafts’ agreement.

Respondents’ cost calculations for wages assume application of
the shopcrafts’ settlement to two shopcraft disputes not yet settled
(representing about | percent of all employees) and application of -
the general increases of 4 percent April 1, 1971, 5 percent October
1, 1971, and 5 percent April 1, 1972, to all other employees. |

Thus calculated, based on an employment level 3.14 percent
below that of the year 1970, wage increases effective January | and
April 1, 1971, represent payroll costs of $253 million a year, and the

f

ee.

October 1, 1971, and April 1, 1972, increases involve annual costs
‘of $305 and $320 millions, respectively. Also, actual wage increases
in 1970 are shown to have exceeded estimates relied upon in the
prior case by $271 million. '

Additional cost increases in wage-related items include $63
million annually in payroll taxes resulting from a statutory increase
(from $650 to $750) in the maximum amount of monthly pay subject
to tax for retirement and medicare, and a $99-million increase
annually in health and welfare expense, became effective March I,
1972. The latter represents the increased cost of renewal of the
existing group policy contract, plus $1.22 monthly per covered
employee for added benefits, as agreed to in a Memorandum of
Understanding between representatives of the carriers and their
employees signed on December 10, 1971.

OTHER Cost INCREASES

Based on a relationship of the consumption of fuel, materials, and
supplies in 1970 adjusted to the first half of 1971 freight traffic
- volume at the 1971 price index, respondents estimate that as of July
1,1971, prices for those items increased over average price levels for
1970 at a rate equivalent to $134 million annually. By applying the
January 1972 price index in a similar manner, increases occurring
during the last half of 1971 were estimated to be $47 million, an
amount which, when compared to. the first half, represents a
substantial decrease in the rate of inflation resulting in large

measure from the price freeze in effect after August 14, 1971.
~ Also included in respondents’ computations of increased 1971
expenses are the’ following amounts: $35 million for freight loss and
damage, payments for personal injuries, insurahce, and pensions; $7
million for depreciation and retirement charges, $1 million
representing State and local taxes; $74 million for equipment rents,
and $10 million for fixed and contingent charges. These amounts
were computed on a calendar year.basis with adjustments being
made for the leveling-off effect of the Avgust 14 freeze.

The increased costs ngted about are summarized and subdivided
by major districts in the following table.

i
i P
, ——

7d

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| a1av

8d

Our review and analysis of respondents’ underlying worksheets
indicates the above data to be accurate and reliable with the
exception noted immediately below.

In developing the cost of wage increases, respondents based such
increases on the level of employment for the year 1970 reduced by
3.14 percent to reflect the first half of 1971 employment level. They
should also have recognized that the 3.14-percent change in
employment levels would result in a corresponding reduction in
total labor costs as compared to the actual 1970 expenses. Those
expenses totaled $4,620 million. Therefore, the ore percent
reduction would amount to $145 million.

In addition respondents should have reduced the $320- saiilion
wage increase effective in April of this year to $310 million to
reflect a similar decrease in employment for the current year. The
development of annualized cost increases of $63 million for payroll
taxes and $99 million for health benefits have also been overstated
by $2 million and $3 million, respectively, because of respondents’
failure to recognize a decrease in employment for the current year.
. These adjustments, in sum $160 million, reduce the total amount
of cost increases in the table above to $1,457 million nationwide and
to $594 million in eastern district, $244 million in southern district,
and $619 million in western district; and, so adjusted, we find that
they correctly depict the total annualized increases in costs faced by
the Nation's railroads since closing of the record in the prior case.

REVENUE YIELD

Estimates of additional revenues to be obtained from the
surcharge and the supplanting selective increases were computed in
the same manner as in the prior case. Accordingly, they are based
upon revenue ton-miles experienced by the carriers during the first
6 months of 1971 projected to reflect the entire year and multiplied
by the average revenue received’ during the second and third
quarters of 1971 at the X-267-B level. The resulting total revenue
estimate for 1971 is then multiplied separately by factors of 2.5 and
4 percent representing, respectively, the surcharge increase and the
average increase under the selective increase tariff to show amounts
of revenue yield assuming both proposals were fully applied.* This
“theoretical” return is reduced by the 82-percent effectiveness
factor utilized in the prior report to reflect probable actual yield in

‘The surcharge increase on lumber and lumber articles is subject to a 2 cents per hundredweight
maximum which reduces its revenue yield by an estimated $8 million. or by SI million in eastern.
less than SO.2 million in southern. and 87 million in western district

Te ROME eS

9d

light of experience in application of previously authorized general
increases. Respondents’ calculations, nationwide and by major
districts, are set forth in the following table:

TABLE 2

Railroads development of estimated revenue vield

Item United Eastern Southern Western
f States district district district

vd

7
1. Revenue ton-miles, Jan.-June 1971

(millions) + --- 382,871 124.856 71.611 186.404
2. Percent first half of annual ton-miles (based

on experience in most recent 4 years ----------- $0.0 50.6 $0.6 49.4
3. Estimated annual ton-miles (millions) (line | +

Vine 2) -----------------------0--22eeeeeeeee ee eeee cence eens 765.000 247,000 141,000 = 377,000
4. Average revenue per ton-mile. 2d and 3d

quarters (X-267-B level)---(cents) ------------------ 1.897 1.825 1.466 1.503
5. Annual freight revenues (millions) (line 3

X VIM 4)------------+-- 2-22 --ee nnn e eee e eee eee ee eee $12,241 $4,508 $2,067 SS.666
6. Yield of full surcharge (2.5 percent x line 5,
* less lumber adjustment)-------------------------------- $299 S112 $52 $135
7. Average percent of selective increases------------ 4.0 41 3.5 4.1
8. Yield full selective increases (line 7 x line $) - $489 S185 $72 $232
9. Adjusted yield surcharge (line 6 x 0.82) --------- $246 $92 $43 Sti
10. Adjusted yield of selected ubcreases (line 8 x

0.82)---------- MO! _ SMS2 $59 $190

These forecasts, in our opinion, are adequately supported and
reasonably reliable, having in mind that estimates of the type
involved, at best, are pragmatic and subject to many unforeseen
contingencies.

While the past experience upon which use of the 82-percent
reduction factor was predicated in the prior case may not recur as to
the surcharge because of tis relatively low level and generally
uniform application, we believe use of that factor results in a
reasonable approximation of the revenue actually derived from the
surcharge for another reason. In this respect, we note that the
surcharge will have been in effect much less than a full 12-month
period and was made inapplicable to recyclable materials after July
16, 1972, by virtue of a court order.°

Also, we have accepted the 82-percent adjustment applied to the
selective increase proposal since any presumption that, due to its
“selectiveness,” experience thereunder will differ materially from

‘See discussion under the caption “Environmental considerations.” intra.

ee ee ae a ee ee ee ee 2 weg ee

10d

prior single-level general increases is dissipated by virtue of the fact
that wholesale exceptions and flagouts by individual lines have
already occurred and are continuing, a circumstance which will be
commented on in a subsequent section of this report.
Accordingly, we find that the surcharge will yield appreciably less
than $246 million during the limited period of its applicability and
that the selective increases, assuming complete approval, would
return $401 million as a maximum amount. The latter amount
represents approximately 28 percent of the $1,457 million in
increased cost levels-found to have occurred since the record was

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386414_0458%3A04. Public record. Not legal advice.