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

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APPENDIX A

' SMATHERS AND MERBRIGAN'

_ ATTORNEYS AND COUNSELLORS AT LAW |

888 SEVENTEENTH STREET, N.W.

WASHINGTON, D.C, 20006

; November 7, 1973

Honorable Dale W. Hardin

‘ Commissioner

Interstate Commerce Commission ~

Washington, D.C. 20423

Re: Ex Parte No. 270, Investigation of Railroad :

Freight Rate Structure |

Dear Commissioner Hardin:

Thank you for your very nice letter of October 23, 1973

and for the information furnished therewith.

Considering the serious problems confronting the Com-

mission, the recycling industry throughout the United

States and, of course, the railroads as a result of the con-

tinuing litigation in Ex Parte No. 281—Increased Freight

Rates, 1972 (S.C.R.A.P. v. United States, et al), we find

it exceedingly difficult to understand why your investiga-

tions announced to date do not include non-ferrous metal

scrap and its competing virgin commodities as well as just

iron ores and scrap iron and steel, and why they do not

include wastepaper and competing wood pulp shipments

instead of just lumber and lumber products.

While we understand the Commission’s assertion that

its investigative abilities are limited in terms of money

and manpower, certainly these additional recyclable com-

modities (non-ferrous metal scrap and wastepaper) should

fairly be added to and considered as part of Ex Parte No.

270 (Sub-No. 5), Ex Parte No. 270 (Sub-No. 6), and Ex

Parte No. 270 (Sub-No. 7), especially in light of the long ~

malingering litigation problem hereinabove referred to.

2a ‘

Accordingly, we urge you to take whatever actions are

necessary—

_ (1) To add non-ferrous metal scrap to Ex Parte No.

270 (Sub-No. 6) and the competing virgin :netal

natural resource commodities to Ex Parte No. 270

(Sub-No. 7), along with wood pulp, which is certainly

one of our most important timber products, or in the

alternative ‘

(3) To commence at the earliest possible date addi-

tional Ex Parte No. 270 investigations to cover the

aforementioned recyclable cofmmodities so heavily in-

volved in the basic rate discrimination questions

raised in Ex Parte No. 281 and the related litigation.

Obviously, NASMI’s committee is ready and anxious to

meet with both you and Mr. Goodman. However, certainly

the first step must be taken by the Commission, to wit, the

commencement of active investigations regarding all of the

important recyclable commodities—not just one of them.

In fact, NASMI is principally’ concerned with all recycl-

able commodities other than scrap iron and steel—and

those it represents (non-ferrous metal scrap, wastepaper,

textiles, plastics) are the ones which create the biggest and

most troublesome solid waste disposal problems for our

federal, state and local governments. Accordingly, it is

these which should clearly have some fair preference in

the current freight rate investigation. Indeed, these are

the recyclable commodities the Federal Maritime Commis-

sion selected for first order of investigation (see Docket

72-35, FMC Investigation of Freight Rates Charged for

_ Transportation of Wood Pulp and _Wastepaper).

Looking forward to your advice in this regard, Iam,

Sincerely,

; Epwarp L. Merrican

ELM ‘gk ;

ec: Leonard S. Goodman, Esq.

APPENDIX B

INTERSTATE COMMERCE COMMISSION

WASHINGTON, D. c. 20423

November 13, 1973

Mr. Edward L. Merrigan

Counsel, National Association of

Secondary Material Industries, Inc.

Smathers and Merrigan

888 Seventeenth Street, N.W.

Washington, D. C. 20006

Dear Mr. Merrigan:

In the Coordinator’s report, served October 10, 1973,

Investigation of Railroad Freight Rate Structure, 345

LC.C. 1, 2, after announcing that five subumbered investi-

gations were being instituted, I stated that, ‘While ship-

pers of various commodities may believe that the Coordi-

nator should immediately institute investigations into the

aspects of the railroad freight rate structure of critical

concern to them, they must remember that the resources in

terms of money and manpower of the railroads, the Special

Projects Counsel, and the Commission are not unlimited. ’’

I therefore can understand your concern that investiga-

tions were not instituted with respect to non-ferrous metal

scrap and wastepaper. Further, I appreciate your aware-

ness that the Commission’s ‘‘investigative abilities are

«limited in terms of money and manpower. ”’

Although I am also well aware of the long ‘‘malinger-

ing’’ litigation problem surrounding the Commission’s de-

cision in Ex Parte No. 281, cited in your letter of Novem-

ber 7, 1973, I am unable to agree with your proposal to

expand the ex parte subnumbered investigations, Sub-No. '

5, Sub-No. 6, and Sub-No. 7. With respect to your alter-

nate suggestion that a subnumbered investigation be insti-

tuted with respect to non-ferrous metal scrap, waste-paper,

and the virgin competitive products, obviously I am not in

a position to advise you by letter when and if such an in-

vestigation will be instituted. You and all interested

parties will be advised of developments in Ex Parte No.

270 by order, notice, or other appropriate means.

Rather than await an initiating response from the Com-

mission, I renew my suggestion of October 23, 1973, that

you meet with the Special Projects Counsel. I would sug-

gest that you also meet with the railroad industry in order

to determine whether or not it is possible to agree upon a

relevant data base and limit areas of controversy. I can

assure you that such efforts, if successful, will in the long

run prove to be useful in the Commission’s continuing

study of the railroad rate structure.

For the convenience of all, I am arranging to have a

copy of this letter and our previous correspondence in-

cluded in the correspondence section of the basic Ex Parte

No. 270 docket.

Sincerely,

/s/ Datz W. Harps

Dale W. Hardin

Commissioner

CC: Leonard S. Goodman

‘

TABLE OF CONTENTS

NR en sider oa Ne vee ew hbde ees beeas

I COU i ka cack natn decncarsbewcssevan

QuESTIONS PRESENTED ..............0.0ceceeeeeeeeee

STATEMENT OF THE CASE ............. ccc cc eeecceeees

SUMMARY OF ARGUMENT ..............cccceceeeceees

es ok Wak oa vkd Cee cba eas

~~ T. Tuts Court Lacks JurispicTtion TO CoNsIDER THE

ITI.

ee una cal bane hie’

Tue Lower Court Hap JurispicTion To. REVIEW

THE ICC Orpers or OctTorer 4, 1972 AND May 7,

1973, AND IT Was APPROPRIATE TO REVIEW THESE

‘UPON ISSUANCE OF THE May 7, 1973 Orver TerMi!-

NATING THE GENERAL REVENUE PROCEEDING ......

A. Statutory Jurisdiction to Review ..............

B. Appropriateness of Review ...................

1. The Case was Ripe for Review .............

2. No Administrative Remedy Exists ..........

THE CoMMISSION’s ENVIRONMENTAL IMPACT STATE-

MENT Is To Be Testep By A RULE oF REASON; THE

Lower Court’s FINDING THAT THIS STANDARD Has

Not Been Met Is Nor C.Leariy ERRONEOUS; AND

THE LOWER Court’s DETERMINATION THAT THE ICC

Dip Not CoMPLY WITH THE REQUIREMENTS OF

a ga Ee er oe ne |

A. The Proper Test for Review of an Environmental

Impact Statement is the Rule of Reason .......

_ B. The Lower Court’s Factual Determinations Are

Subject to Review in this Court by a “Clearly

gh, BS ee rae oe kere

C. The Lower Court Properly Applied the Rule of

Reason Test and its Findings of Fact Are Not

ee Be a ee Cy re mig ee

ii Table of Contents Continued

Page

1. Failure to Respond to Comments ........... 26

2. Failure to Provide Adequate Data for Conclu-

a os ak 1 ek te ea seek 29

3. Failure to Examine the Underlying Rate

PN ee sn ea wee nen van cee 32

4. Failure to Discuss All Reasonable Alterna-

a ec ee eh oa ee ee 34

Granted on Ferrous Scrap When a Holddown

Was Granted on All Other Recyclable Com-

AP eer rer a ee 37

6. Failure to Hold a Hearing on the Draft Impact

Statement ......... 5. cece ede eee eee enone 38

D. Reliance by the Lower Court 6n the Conclusions

of Other Federal Agencies with Respect to the

Inadequacies of the ICC Environmental Impact

Statement Was Appropriate .................. 40

E. Unique Nature of Instant Case ............... 44

See cng ren e e mre ee 46

TN cue co oe Fea sa 8 ca ee enn ee ene e's es la

TABLE OF CITATIONS

CasEs:

Abbott Laboratories v, Gardner, 387 U.S. 136 (1967) 10, 11, 14

Alabama v. United States, 279 U.S. 229 (1929)......... 7

Arrow Transportation Co. v. Southern Ry. Co., 372 U.S.

658 (1963) ...... Se Oe on er 45

Atchison, Topeka & Santa Fe Ry. Co. v. Wichita Board

of Trade, 412 US. 800 (1073)... . 0 eee. 7, 15, 45

Bishop v. United States, 223 F.2d 582 (D.C. Cir. 1955).. 22

Calvert Cliffs’ Coord. Comm., Inc. v. AEC, 449 F.2d 1109

CE Ras es ii ees 19, 24, 26, 32, 36, 44

Chemical Leaman Tank Lines, Inc. v. United States, 368

F.Supp. 925 (D.Del. 1973) ...... 2. seyeesnsesess 25

Chicago & Eastern Illinois R.R. Co. v. United States, 375

ib RR | Re pyr ee rer rer 6

Table of Authorities Continued iil

Page

City of New York v. United States, 337 F.Supp. 150

PG a ai hc cc ee 25

Commissioner v. Duberstein, 363 U.S. 278 (1960)....... 22

Conservation Council v. Froehlke, 473 F.2d 664 (4th Cir.

WOE i yo hk oo ie nek ee cS. 19

Custom Paper Prods. Co. v. Atlantic Paper Bor Co., 469

Bae tre fae Ce. A078). oes ks. 2

Ely v. Velde, 451 F.2d 1130 (4th Cir. 1971)............ 20

Engine Specialties, Inc. vy. Bombardier Limited. 454 F.2d

Me NO De i ee Roo 22

Environmental Defense Fund vy. Corps of Engineers (Gill-

ham Dam), 470 F.2d 289 (8th Cir. 1972) ......... ig

Environmental Defense Fund vy. Corps of Engineers

(Tombigbee Waterway), 492 F.2d 1123 (5th Cir.

a es i ea 19

Graver Tank Co. v: Linde Air Prod. Co., 339 U.S. 605

2. SERS SERS SS EE a ne RAO 22, 23

Greene County Planning Board vy. FPC, 455 F.2d 412 (2d

ee hi a 39

« Gunn v. University Comm. to End the War in Viet Nam.

ee are ee te ee, oe 8

Hanly v. Mitchell, 460 F.2d 640 (2d Cir. 1972)......... 33

Harlem Valley Trans. Ass'n vy. Stafford, 500 F.2d 328

Oe ON 25, 40

Horton v. United States Steel Corp., 286 F.2d 710 (3th

Cir. 1961) >: = 5 BEELER TLL ON tere cee ETE Ee 21

Kennedy v. Mendoza-Martinez, 327 US. 144 (1963). 8

Lathan v. Brinegar, 7 ERC 1048 (9th Cir. 1974)... 1S, 10, 44

Louisiana v. FPC, 503 F.2d 844 (Sth Cir. 1974)... 4-.... 19

Luckenbach Steamship Co., Inc. vy. United States, 364

em Oe 7

McNab v. United States, 318 U.S. 332 (1943).......... 44

Mitchell v. Donovan, 398 U.S. 427 (1970)............. 2,9

National Helium Corp. v. Morton, 486 F.2d 995 (10th

a ee Ti SO ee eee 19, 20

Natural Resources Defense Council, Inc. y. Morton. 7

ae eee eee, OD 25

Natural Resources Defense Council, Inc. vy. Morton, 458

mae ee COA Ce BOGS)... . ood 20, 31, 35

iv Table of Authorities Continued

Page

Natural Resources Defense Council, Inc. v. TVA, 502 F.2d

OSS (Oth Cir. TOTR) «on ce iis oo vse evans o es 19

Pendergrass v. New York Life Ins. Co., 181 F.2d 136 (8th

a Ss loe's Nak bo od 5d on aw ek eRe 22

Public Service Commission v. Brashear Freight Lines,

Poa ik Me Eg ie ee ee

Railway Express Agency, Inc. v. United States, 82 S.Ct.

466 (Harlan, Associate Justice, 1962)............. 6

Scientists’ Inst. for Public Information, Inc. vy. AEC, 481

ee Be Te Be Ts i ve cc bee Fe es seueee 19

Sierra Club v. Froehlke, 486 F.2d 946 (7th Cir. 1973).... 19

Silva v. Lynn, 482 F.2d 1282 (1st Cir. 1973)... . 19, 20, 26,44

St. Louis & O’Fallon Ry. Co. v. United States, 279 U.S.

RG |) One re ey re eer ee 7

Students Challenging Regulatory Agency Procedures v.

United States, 371 F.Supp. 1291 (D.D.C. 1974). . passim

United States v. Dixie Highway Express, Inc., 389 US.

OD TT io hei sh ce eres 6

United States v. E. I. Du Pont de Nemours & Co., 351

ee a oko koko os bo oS ee cee ee 22

United States v. Hancock Truck Lines, Inc., 324 U.S. 774

|) See CE secre eee Ie Sa nee ae 7

United States v. Idaho, 298 U.S. 105 (1936)........... 6,7

United States v. National Association of Real Estate

Boule 200 UB. ARG COO) occ cci es ae em 21,23

United States v. Singer Manufacturing Co., 374 U.S. 174

NR a oh rin es ko ee ke es Ook 22

United States v. Students Challenging Regulatory Agency

Procedures (“SCRAP”), 412 U.S. 669 (1973)...... 11

United States v. United States Gypsum Co., 333 US.

NO so cas Fo bck pices op eee 55 21, 22, 23

Zenith Radio Corp. v. Hazeltine Research, Inc., 393 US.

ee cA ia i vec on kenge 21,22

ICC PROCEEDINGS:

155 ICC 517 (1929)

266 ICC 447 (1945)

286 ICC 171 (1952)

ICC Proceedings Continued Vv

Page

i Oe IE sc vs Fan clo Se ve 39

Dee Mare We CUE ns 582s ee ee 60

WO I WN i Gods e's Fas Civ oo ee 39

Bee Mme Oem Oe CPOEE) |. Oyen. lero 39

332 ICC 714 (1969). PetRS as Sede cEES Pork cea 39

sialics tat... * 1 | Shar ene PETE eee 39

kt a eS: | ee 28

STATUTES: : 2

National Environmental Policy Act, 42 U.S.C. §§ 4331

ie en, Ee eee Ee passim

Section 102(2)(A), 42 U.S.C. § 4832(2)(A)....... 35

Section 102(2)(C), 42 U.S.C. § 4332(2)(C)...... 17,18

Section 102(2)(C)(v), 42 U.S.C. § 4332(2)(C)(v).. 27

Section 102 (2)(D), 42 U.S.C. § 4332(2)(D)...... 36

Interstate Commerce Act, 49 U.S.C. §§ 1 et Ne ae 16

MO OG. 08 ol icicla i ee 36

meen. 1 OO USCA 4,15, 36

Section 13(1), 49 U.S.C. § ES Boe ge eee oy one 2,14

Gestion 1017), @ USC. £i57)............. 11, 45

DMR SIMO A soo ink cess eae 17

wn BP it 18

sie omgici he Fs ca gg EEE OE Pt -

MISCELLANEOUS:

Anperson, NEPA In THE Courts (1973)

Department of Transportation, An Estimation of Dis-

tribution of the Rail Revenue Contribution by Com-

modity Groups and Type of Rail Cars—1969

vi Miscellaneous Continued

Page

Batelle Columbus Laboratories, Summary Reporting on

the Impact of Railroad Freight Rates on the Recycl-

ing of Ferrous Scrap (Jan. 14, 1972)...........--- 30

Brief of the United States, the ICC, and the Secretary of

Agriculture in Atlantic City Electric Co. v. United

States and Alabama Power Co. v. United States, Nos.

70-78 Gnd TO-106 «.. wc ccc ccc sence 10, 11, 12, 15, 16

WriGHutT AND MILLER, FepERAL PRACTICE AND PROCEDURE

be. 3g SS Ee eee re 22

Wright, The Doublful Omniscience of Appellate Courts,

Oe ee. Fe, Fe CA) «vc bc ee hanes bees sen 22

40 C.F.R. eS ee eee ee Se orer et. Peer 32

a os hhc risa case cesncckvebenns 38

Me ee a Se iis 28

Rule 52(a), Federal Rules of Civil Procedure ......... 20, 21

IN THE

Supreme Court of the United States

OcToBER TERM, 1974

Nos. 73-1966 and 73-1971

ABERDEEN AND ROCKFISH RAILROAD COMPANY, ET AL.,

Appellants,

STUDENTS CHALLENGING REGULATORY AGENCY

Procepures (8.C.R.A.P.), ET AL.,

Appellees.

UNITED STATES OF AMERICA AND

INTERSTATE COMMERCE COMMISSION,

ae? eae Appellants,

STUDENTS CHALLENGING REGULATORY AGENCY

ProcepuReEs (S.C.R.A.P.), ET AL.,

Appellees.

On Appeal from the United States District Court

for the District of Columbia

BRIEF FOR THE

INSTITUTE OF SCRAP IRON AND STEEL, INC.

JURISDICTION

Appellees dispute the grounds on which Appellants

contend that the jurisdiction of this Court may be

invoked.

Appellants base the jurisdiction of this Court on 28

U.S.C. § 1253.

: Res

Appellees, however, assert that this appeal is not

from the grant or denial, opposed by the appellants, of

an injunction, as required under Section 1253. In actu-

ality, the lower court vacated an order of the ICC and

remanded the matter to that body. This action was

termed a ‘‘declaration’’ by both the lower court and

the government. 371 F.Supp. at 1295 (Jurisdictional

Statement in 73-1971 [hereinafter Gov. J.S.] at 13a);

Brief of Appellants United States and Interstate Com-

merce Commission [hereinafter Gov. Br.] at, 12. The

party which did not prevail on such a declaration is not

entitled to a direct appeal to this Court. See Mitchell v.

Donovan, 398 U.S. 427 at 430-31 (1970).

STATUTES INVOLVED

Appellees herein incorporate by reference the state-

ment of Statutes Involved set forth in the brief of

Appellees Students Challenging Regulatory Agency

Procedures (SCRAP), Environmental Defense Fund,

et al., at pp. 3-4. Additionally, 28 U.S.C. § 2201 and

Section 13(1) of the Interstate Commerce Act, 49

U.S.C. § 13(1), are set out in the Appendix, infra, p

la.

QUESTIONS PRESENTED

Appellees herein incorporate by reference the state-

ment of the Questions Presented set forth in the brief

of Appellees Students Challenging Regulatory Agency |,

Procedures (SCRAP), Environmental Defense Fund,

et al., at pp. 2-3. Additionally, the following question is

presented :

Whether the court below clearly erred in finding on

the evidence before it that an environmental impact

“1 it on a proposed percentage increase in rail

ireight rates was inadequate where such impact state-

ment failed to consider or explain the discriminatory

treatment of ferrous scrap compared with other re-

cyclables and iron ore.

SG IP E®:

STATEMENT OF THE CASE

Appellees herein incorporate by reference the State-

ment of the Case set forth in the brief of Appellees

Students Challenging Regulatory Agency Procedures

(SCRAP), Environmental Defense Fund, et al., at pp.

4-15,

SUMMARY OF ARGUMENT

I. This Court has no jurisdiction over the instant.

appeals because the statute under which review is

sought authorizes appeal only from the grant or denial

of an injunction and Appellants appeal only from the

grant of a declaratory judgment. The lower court's or-

der did not coerce or restrain the action of any party—

the primary characteristic of an injunction. Nor has

the order been treated as an injunction by Appellants

since no stay of the lower court’s order was sought by

Appellants. x

II. The lower court had jurisdiction.to review’ the

Interstate Commerce Commission’s (hereinafter ICC

or Commission) orders of October 4, 1972 and May 7,

1973 for the purpose of considering compliance with

- NEPA. (National Environmental Policy Act, 42'U.S.C.

§§ 4331 et seq.) No statutory prohibition of judicial re-

view existed, given the posture of this case. In addi-

tion, the case was ripe for review under the standards

previously enunciated by this Court. Since no adminis-'

trative remedy existed for any Appellee hereunder, no

question of exhaustion of administrative remedies is

present. Accordingly, it was appropriate for the lower

court to have reviewed the ICC orders.

III. The proper standard for reviewing the ICC's

environmental impact statement is the rule of reason

test adopted ‘by virtually all cireuit courts of appeal.

The lower court’s factual findings w ith respect to the

insufficiency of the environmental impact statement

are to be tested in this Court by the ‘‘clearly errone-

ous’’ standard.

‘The lower court’s opinion, Students Challenging

Regulatory Agency Procedures v. United States, 371

F.Supp. 1291 (D.D.C. 1974) (Gov. J.S. at 1a), prop-

: erly applied the rule of reason standard. The apparent

bulk of the ICC’s impact statement in the proceed-

ing at issue is deceptive because the ICC failed to

respond to the issues raised repeatedly by other federal

agencies throughout the course of this proceeding. The

comments and suggestions of the Council on Environ-

mental Quality, the Environmental Protection Agency,

the Departments of Commerce and Interior and the

General Services Administration ‘were ignored. The

| ICC based its finding of lack of environmental impli-

cations on one unsubstantiated conclusion which was

disputed by other federal agencies. In addition, the

ICC refused to examine the underlying rate structure

for possible discrimination against recyclable commod-

ities, asserting that it had discretion when to make this

examination. This assertion of discretion is in violation

_of the mandate of NEPA of compliance ‘‘to the fullest

extent possible.’’ Because the underlying rate structure

has subsequently been studied by the ICC in Ex Parte

No. 270, the ICC properly should have returned to the

lower court to seek modification of the court’s order if

it believed that impact’ statement to be in compliance

with NEPA rather than impose upon the time of this

Court. Alternatives to the approved rate increases were

suggested by numerous commentators and should have

received reasoned consideration in the impact state-

ment. These include: other allocations of the railroads’

revenue needs; the inadequacy of an action under Sec-

tion 13 of the Interstate Commerce Act for enabling

_ shippers to challenge the discriminatory rate structure

cht ie er eee anmne WEN I

LLEGET Fone er

imposed on recyclable commodities ; and the dispropor-

tionate burden borne by ferrous scrap vis-a-vis other

commodities, including iron ore. In addition, the Com-

mission failed to explain in the impact statement why

it had concluded that a ‘‘holddown”’ (limitation of rate

increase) on all recyclable commodities but ferrous

scrap would benefit the environment but a holdown on

ferrous scrap would not likewise benefit the environ-

ment. Finally, given the circumstances of the Ex Parte

No. 281 proceeding, it would have been appropriate for

the ICC to have held a hearing on its draft environ-

mental impact statement. Given all of these substantial

deficiencies in the Commission’s impact statement, the

court was not ‘‘clearly wrong”’ in its findings of in-

adequacy under the rule of reason test.

Additionally, it was appropriate for the lower court

to have placed reliance on the conclusions of five other

federal agencies that the ICC had not complied with

NEPA.

ARGUMENT

L THIS COURT LACKS JURISDICTION TO CONSIDER

_ THE APPEALS

Appellants contend that this Court’s jurisdiction of

the appeals from the lower court’s decision here at

issue rests on 28 U.S.C. § 1253. This section provides

for direct appeal to this Court:

‘from an order granting or denying, after notice

and hearing, an interlocutory or permanent in-

junction in any civil action, suit or proceeding re-

quired by an Act of Congress to be heard and

determined by a district court of three judges.”’

It is settled that this provision allows a direct appeal

only to a party which did not prevail on such grant or

denial of injunctive relief and that the party which did

prevail has no right to direct appeal on other issues.

Public Service Commission v. Brashear Freight Lines,

Inc., 306 U.S. 204 (1939).

These appeals are from the order of a three-judge

district court which (a) denied an injunction sought

by Appellees to restrain the collection of certain rail-

road freight rate increases, and (b) vacated ICC or-

ders which found said freight rate increases ‘‘just and

reasonable”’ and remanded the matter to the ICC. Ap-

pellants prevailed in the denial of injunctive relief by

the three-judge district court and, therefore, have no

right of direct appeal to this Court under 28 U.S.C.

§ 1253.

Appellants contend that any court action vacating

an order of the ICC is an injunction which affords the

United States, and any party opposing such court ac-

tion, a right of direct appeal to this Court under 28

U.S.C. § 1253. Such contention is without merit. Pre-

vious cases in which direct appeal has been allowed

have been ones in which:

(1) the vacating of the ICC order would have pro-

hibited a regulated carrier from taking some action

not allowed in the absence of an ICC order ;*

(2) the vacating of the ICC order would have al-

lowed a regulated carrier to take some action which the

vacated order would have prohibited ; * or

‘United States v. Dirte Highway Express, Inc., 389 U.S. 409

(1967) (appeal from order of three-judge district court enjoining

isediance by ICC of certificate of convenience and necessity without

which carricr could not operate); Railway Express Agency, Inc. v.

United States. 82 S.Ct. 466 (Harlan, Associate Justice, 1962) (appeal

from order of three-judge district court refusing to enjoin issuance

of certificate of convenience and necessity without which carrier

could not operate); United States v. Idaho, 298 US. 105 (1936)

(appeal from order of three-judge court vacating ICC order au-

thorizing abandonment of a rail line, without which authorization

carrier could not abandon such line).

* Chicago & Eastern Illinois R.R. Co. v. United States, 375 US.

150 (1963) (appeal from order of a three-judge district court refusing

_ (3) the vacating of, or refusal to vacate, the ICC

order did not directly require any action or inaction by

a regulated carrier, but was coupled with additional

court action prohibiting, or refusing to prohibit, a reg-

ulated carrier from taking some action under the order

in question.”

In all of these instances, the vacating of the ICC

order had a necessary, coercive impact on what some

party could or could not do, or was accompanied by the

court’s granting, or refusing to grant, an order which

would have coerced directly some action or inaction of

a party. Such is not the situation in this appeal. Vacat-

ing the ICC findings that the rates in question are just

and reasonable has had no coercive impact on the Ap-

pellants. No coercion of the ICC arose from the lower

court’s decision, as evidenced by the fact that the Com-

mission has taken no further action in Ex Parte No.

281. The railroads may collect the freight rate increases

which are the subject of the vacated orders and, indeed,

have done so. The sole effect of vacating the orders is

to set aside an ICC order disallowing certain rates) ; United States

v. Hancock Truck Lines, Inc., 324 U.S. 774 (1945) (appeal from

order of three-judge district court vacating certain provisions in a

certificate 6f convenience and necessity which restricted the opera-

tion of a carrier) ; St. Louis & O'Fallon Ry. Co. v. United States, 279

U.S. 461 (1929) (appeal from order of a three-judge district court

setting aside in part an order requiring carrier to pay excess profits

to ICC, «.e., preventing carrier from retaining certain profits).

* Atchison, Topeka & Santa Fe Ry. Co. v. Wichita Board of Trade,

412 U.S. 800 (1973) (appeal from order of three-judge district court

enjoining collection of rates and vacating order of ICC finding such

rates just and reasonable) ; Luckenbach Steamship Co., Inc. v United

States, 364 U.S. 280 (1960) (memorandum per curiam) (appeal

from denial of injunction sought to prohibit collection of certain

rates which ICC refused to suspend pending investigation) ; United

States v. Idaho, supra, note 1, (appeal from order of three-judge

district court enjoining abandonment of rail line); Alabama v.

United States, 279 U.S. 229 (1929) (appeal from order of a three-

judge district court refusing to enjoin collection of rates found by

ICC to be just and reasonable).

that the burden of proving the justness and reasonable-

ness of the rates in any action for reparations remains

on the railroads.*

The concept of coercion, either to act or to refrain

from acting, is central to an injunction. ‘‘An injunc-

tive order is an extraordinary writ, enforceable by the

power of contempt.’’ Gunn v. University Comm. to End

the War in Viet Nam, 399 U.S. 383 at 399 (1970). The

order of the three-judge district court which is the

subject of this appeal is not an injunction. This con-

clusion is reinforced by the fact that Appellants have

not sought a stay pending appeal, which the Appellants

could reasonably have been expected to do if they gen-

uinely believed that the district court order was an in-

junction enforceable by contempt proceedings, or, in-

deed, if that order was causing them any practical

harm.

There is adequate reason for allowing an expedited

direct appeal to this Court when the setting aside of

‘an ICC order materially affects the ability of the trans-

portation industry to operate, e.g., when service is not

provided because an order granting a certificate of con-

venience and necessity is set aside. Such judicial action

could ‘‘paralyze totally the operation of an entire reg-

ulatory scheme.’’ Kennedy v. Mendoza-Martinez, 327

U.S. 144 at 154 (1963). Here, however, there is neither

the potential for, nor the.fact of, such disruption.

In essence, the order of the district court is a declara-

tory judgment that the findings of fairness and reason-

ableness by the ICC are ineffective because the ICC’s

efforts to comply with certain requirements of law in

making such findings were ‘‘substantially deficient.’’

371 F.Supp. at 1293 (Gov. J.S. at 6a). The Court, in

the past, has held that declaratory judgments rendered

~J ee

* Discussed in detail at p. 45, n. 48, infra.

by a three-judge district court may not be appealed

directly to this Court under 28 U.S.C. § 1253. These

holdings and the rationale for them are set forth in

4 Mitchell v. Donovan, 398 U.S. 427 at 430-1 (1970)

; (footnotes omitted), as follows:

“That leaves us with the question whether an

order granting or denying only a declaratory judg-

) ment may be appealed to this Court under ¢ 1253.

In a recent case, Rockefeller v. Catholic Medical

Center, 397 US 820, ... , we gave a negative an-

swer to that question, and we adhere to that deci-

sion. Section 1253 by its terms grants this Court

jurisdiction only of appeals from orders granting

F or denying injunctions. While there are similari-

: ties between injunctions and declaratory judg-

ments, there are also important differences. Ken-

nedy v. Mendoza-Martinez, 372 US 144. ... The

provisions concerning three-judge courts. inelud-

ing the provisions for direct appeal to this Court.

antedate the Declaratory Judgment Act of 1934.

but Congress substantially amended the three-

judge ecurt provisions in 1937 and 1948 without

providing for such direct appeals from orders

eranting or denying declaratory judgments.

“We have stressed that the three-judge-court

: legislation is not ‘a measure of broad social poliev

| to be construed with great liberality,’ but is rather

| ‘an enactment technical in the strict sense of the

term and to be applied as such.’ Phillips v. United

States, 312 US 246... . Thus this Court’s juris-

diction under that legislation is to be literally con-

strued. It would hardly be faithful to sueh a con-

struction to read the statutory term ‘injunction’

as meaning ‘declaratory judgment.’ °

“We conclude, therefore. that this Court lacks

jurisdiction of the appeal.”

Since the appeals herein are not from an order grant-

ing or denying an injunction in opposition to the posi-

tion of Appellants, this Court lacks jurisdiction.

Il. THE LOWER COURT HAD JURISDICTION TO REVIEW THE

ICC ORDERS OF OCTOBER 4, 1972 AND MAY 7. 1973, AND

IT WAS APPROPRIATE TO REVIEW THESE UPON ISSU-

ANCE, OF THE MAY 7, 1973 ORDER TERMINATING THE

GENERAL REVENUE PROCEEDING.

The railroads contend that the lower court lacked

jurisdiction to review the Commission’s order served

October 4, 1972, which approved the general rate in-

erease on recyclable commodities, and the Commis-

sion’s order served May 7, 1973, which permitted that

increase to go into effect. Significantly, the Commis-

sion does not press this issue. The Commission is on

record in a previous case in this Court that judicial

jurisdiction of some aspects of its general revenue or-

ders does exist. Brief of the United States. the ICC,

and the Secretary of Agriculture in Atlantic City Elec-

tric Co. v. United States and Alabama Power Co. V.

United States, Nos. 70-78 and 70-106.

The statutory jurisdiction of the lower court in this

ease, however, is clear. If any issue exists, it is the

appropriateness of review of these orders under the

doctrines of ripeness and exhaustion of administrative

remedies.’ Based upon the various factors outlined by

this Court in Abbott Laboratories v. Gardner, 387 U.S.

136 (1967), the instant case is ripe for review. Addi-

tionally, because no administrative remedy exists, no

question of exhaustion is presented.

A. Statutory Jurisdiction to Review.

Jurisdiction of the lower court to consider the issues

raised in the instant litigation is based upon 28 U.S.C.

§§ 1136, 2201, 2321-5. The railroads cite no statutory

authority limiting that broad grant of jurisdiction to

the federal district courts. As this Court noted, ‘‘judi-

cial review of a final agency action by an aggrieved

5 See 371 F.Supp. at 1296 (Gov. J.S. at 14a).

1 ie Dba

NO ARERR ig eA

person wil] not be cut off unless there is a persuasive

reason to believe that such was the purpose of Con-

gress.’” Abbott Laboratories v. Gardner, supra, 387

U.S. at 140. °

The present posture of the case is clearly distinguish-

able from the situation considered by this Court in its

October 1973 term in United States v. Students Chal-

lenging Regulatory Agency Procedures (“SCRAP”’),.

412 U.S. 669 (1973), where this Court concluded that

no jurisdiction existed for a lower court to issue an

injunction with respect to an interim surcharge pend-

ing investigation of the proposed rate increase.’ In

that decision, the Court epncluded that the language

and history of Section 15(7) of the Interstate Com-

merce Act [49 U.S.C. § 15(7)] indicated clearly that:

‘“‘Congress had vested exclusive power in the Com-

mission to suspend rates pending its final decision

on their lawfulness, and had deliberately extin-

guished judicial power to grant such relief."" 412

US. at Gl...

No comparable deliberate Congressional purpose to

eut off judicial review has been shown once the Section

15(7) proceeding has heen completed and the TCC has

issued its final order in the rate investigation proceed-

ing.

In Atlantic City and Alabama Power, supra, the

Government argued that:

“All three of the federal government parties [in-

eluding the TCC] on whose behalf this brief is filed

are in agreement with the appellants in both cases

‘that the courts below applied an erroneous prin-

* As discussed at p. 13, infra, the ICC orders of Qetober 4 1972

and May 7, 1973 are “final” as that term is utilized by this Court

in Abbott Laboratories.

"In its prior decision in this case, this Court specifiently noted

that it was not expressing a view on the jurisdiction of the lower

court to review an ICC general revenue order for complianee with

NEPA, 412 U.S. at 698, n.22.

aS i a

ciple in dismissing the cases before them. Specif-

ically, all three agree that the plaintiffs in Ala- .

bama Power are entitled to immediate judicial re-

view of the issue presented there. ... [W Je believe

that the Commission’s orders were not per se un-—

reviewable... .’’ Brief for the United States, the

Secretary of Agriculture and the Interstate Com-

merce Commission at pp. 16-17.

_ oa * * |

‘*The Commission has made it clear that its rev-

enue decision is administratively final, and would

not be considered further in any potential future |

proceeding challenging particular rates. Accord-

ingly, the presumption in favor of judicial review

of adverse agency action anplies. F.g., Abbott Lab- |

oratories v. Gardner, 387 U.S. 136. ...’’ Id. at 19.

B. Appropriateness of Review.

In order to avoid judicial interference in the ad-

ministrative process and to avoid imposing unnecessary >

burdens on the judicial machinery from premature re-

quests for judicial review of administrative actions,

the judiciary has developed additional requirements

which a party challenging administrative action must

satisfy before a court will be permitted to consider that

challenge—ripeness for judicial determination and ex-

haustion of\all appropriate administrative remedies.

A review of the various factors weighed by the courts

in determining whether a matter is ripe for determina-

tion shows that no basis for judicial deference existed

in the instant case. Additionally, no administrative

remedy existed which would permit any of the parties

to challenge the adequacy of the ICC environmental

impact statement in a subsequent administrative pro-

ceeding. Accordingly, the issue of exhaustion of ad-

ministrative remedies is not present in this case. There-'

fore, it was appropriate for the lower court to review

the Commission’s orders of October 4, 1972 and May

7, 1973.

1. The Case Was Ripe for Review.

‘The administrative consideration of the environmen-

tal impact statement has been completed. The ICC

stated specifically in its May 7, 1973 order that its Ex

Parte No. 281 proceeding was distontinued (Gov. J.S.

at le). The requisite finality of this proceeding, thus,

existed. The Government notes in its brief that the

agency decision with respect to environmental factors

was final (Gov. Br. at 27).

In addition, the questions presented are ‘fit’? for

review at this time. No further administrative actions

are contemplated in this proceeding. Judicial review,

therefore, does not interfere with the administrative

process. In addition, the ICC knows the basie issues

raised by Appellees and others and has had sufficient

opportunity to correct the record. An ample admin-

istrative record exists to afford review of the issues

raised.

_ The approach suggested by the railroads of requir-

ing environmental issues to be raised in potential See-

tion 13(1) proceedings, even if possible, only raises the

probability of a multiplicity of lawsuits. Rather than

conserving judicial energy, this appr oach serves only

to risk dissipating those energies.’

Finally, the public interest in this particular ease

was best served by prompt judicial review of the ICC

action. The rate increases approved by the Commission

in Ex Parte No. 281 already had heen permitted to ¢o

into effect. Thus, no consideratitns. of impairment of

the present economic health of the railroads existed.

Balanced against this lack of injury to either the rail

roads or the ICC is the Congressional policy objee-

* The Government likewise suggests that ‘such an approge h would

dissipate the ICC’s energy as well. (Joint Appendix in ta and

78-1971 [hereinafter A.] at 21.)

tive of requiring federal administrative agencies to

consider the environmental implications of their ac-

tions. This Congressional objective can be enforced ade-

quately only if administrative environmental impact

statements are reviewed expeditiously. Failure to re-

quire compliance with NEPA raises the possibility of

irreparable harm to the environment.

Based upon the standard enunciated by this Court in

Abbott Laboratories, supra, 387 U.S. at 148-53, the in-

stant ease clearly is ripe for judicial review.

9. No Administrative Remedy Exists.

The railroads have suggested that this Court require

the parties to seek consideration of the environmental

issues in rate-by-rate administrative proceedings under

Section 13(1) of the Interstate Commerce Act [49

U.S.C. § 13(1)]. But even if a shipper were to seek, in

a Section 13(1) proceeding, to test ICC compliance with

NEPA in a previous general revenue proceeding, that

issue probably would not be relevant. A Section 13(1)

proceeding would involve a challenge to a particular

rate on a particular route. If that rate were just, rea-

sonable, and nondiseriminatory, the Commission would

have no power to alter it. Clearly, a shipper could not

bring a Section 13 complaint against particular car-

rier based solely on the failure of the ICC to comply

with NEPA. No administrative remedy exists to test

ICC compliance with NEPA in a general revenue pro-

ceeding which has. been terminated, as this one has

been. Thus, it was appropriate for the lower court to

have considered the matters raised by parties challeng-

ing the Commission’s orders of October 4, 1972 and

May 7, 1973 as they relate to compliance with NEPA.

Despite the railroads’ efforts to portray the law as

settled that no aspect of a general revenue proceeding

is appropriate for judicial review except on appeal

Piette yp Or er ene

cee, seen

from a decision in a Section 13 proceeding, this is not

an accurate statement of the law. As both this Court,

and the lower court have noted, this question is not

settled.’ ‘The Government clearly did not subscribe to

the railroads’ position in the Atlantic City and Ala-

bama Electric cases. Quoting again from the Govern-

ment brief in those cases:

“The railroads argue that review is not now avail-

able becausé the shippers have allegedly not ex-

hausted their administrative remedies by attack-

ing the rates of interest to them in case-by-case

proceedings under Sections 13 and 15(1) of the

Interstate Commerce Act. But there is nothing in

the statutory scheme that evidences any Congres-

sional intent that such further administrative pro-

ceedings precede judicial review of a final general

revenue-need determination such as the Commis-

sion has made here, and the general doctrine of ex-

haustion of administrative remedies erects no bar-

rier under the circumstances of this case. That doc-

trine is simply another aspect of the finality re-

quirement, and it does not apply here because the

Commission has fully considered and reconsidered

the revenue questions; there is no premature inter-

ruption of the administrative process and no like-

lihood that the agency would itself give the general

relief that the appellants seek. . . .”’ (emphasis

added). Brief of United States, Secretary of Agri-

efilture, and ICC, supra, at 19-20.

This basic issue of judicial review pursuant to the

Interstate Commerce Act in general revenue proceed-

ings does not require resolution in the instant case.

This Court need only determine that the judiciary does

have jurisdiction to consider compliance by the ICC

with NEPA in such a proceeding. But it should be

recalled that the Commission’s position in Atlantic City

* Atchison, Topeka & Sante Fe Ry. Co. vy. Wichita Board of

Trade, supra, 412 US. at 814; 371 F. Supp. at 1296 (Gov. J.S. at

~ YBa).

Eee

and Alabama Power was that general revenue proceec-

ings are directly reviewable even without regard to

NEPA. A fortiori, the present proceeding was review-

able to determine the NEPA issue. +

Ill. THE COMMISSION’S ENVIRONMENTAL IMPACT STATE-

MENT IS TO BE TESTED BY A RULE OF REASON: THE

LOWER COURT'S FINDING THAT THIS STANDARD HAS

NOT BEEN MET IS NOT CLEARLY ERRONEOUS; AND THE

LOWER COURT’S DETERMINATION THAT THE ICC DID

NOT COMPLY WITH THE REQUIREMENTS OF NEPA IS

CORRECT.

This Court should confirm the rule enunciated by the

majority of circuit courts of appeal that judicial review

of the content of an environmental impact statement is

to be based upon a rule of reason test. When the con-

tent of the ICC’s environmental impact statement in

the instant case is examined pursuant to this test, the

flaws are so substantial that this Court should not find

to be clearly erroneous the lower court’s determinations

that the impact statement was inadequate. These flaws

include: (1) the failure to respond in a reasoned man-

ner to the adverse comments of five separate federal

agencies; (2) the failure to undertake the necessary

study of the underlying rate structure; (3) the failure

to provide sufficient data of the impact of the rate in-

crease on the environment; (4) the failure to explain

the discrepancy in reasoning between allowing a hold-

down on non-ferrous recyclable material. but no hold-

down on ferrous scrap; and (5) the failure to hold a

hearing on the draft impact statement. The lower

court’s decision neither interferes with the adminis-

tration of the Interstate Commerce Act nor imposes

any barrier to railroad rate increases. It should be af-

firmed as a fair and reasonable accommodation of the

' obligations imposed on the Interstate Commerce Com-

mission by the Interstate Commerce Act and those im-

‘posed by NEPA. ac

A. The Proper Test for Review of an Environmental Impact

Statement is the Rule of Reason. —

With the exception of the railroads, all other parties

appear to agree on the proper test for judicial review

of an environmental impact statement required under

Section 102(2)(C) of NEPA [42 U.S.C; §4332(2)

(C)]."° The court must first examine whether the im-

pact statement has been prepared in the proper form

and with the appropriate consultations and publicity

required by Section 102(2)(C)—namely, ( 1) prepara-

tion of a detailed impact statement covering the five

items set forth in the statute; (2) consultations with

other Federal agencies having jurisdiction by law or

‘possessing special expertise with respect to the environ-

*° The test proposed by the railroads—whether the agency gave

detailed consideration to all of the factors mandated by NEPA—

would apparently limit a court to an examination of whether the

five factors outlined in Section 102(2)(C) have been discussed, with- ,

out regard to the adequacy—or even the accuracy—of that discus-

sion. The railroads label all further judicial consideration of the im-

pact statement as substantive and subject to the stringent arbitrary

and capricious test of 5 U.S.C, § 706(2) (A). The railroads attempt

to equate review of the content of an environmental impact state-

ment with review of the underlying action which is the subject of the

impact statement. ,

™ These five items are: ;

“(i) The environmental impact of the proposed 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 maintenance and enhancement of

long-term productivity, and

(v) Any irreversible and irretrievable, commitments of re-

sources which would be involved in the proposed action

should it be implemented.” (42 U.S.C. § 4332 (C) (i)-

(v).]

mental impact involved; (3) submission of the state-

ment to the President, the Council on Environmental

Quality, and the public; and (4) consideration of the

statement in conjunction with the. proposed action

through the existing agericy review processes.” Once

this preliminary examination has been completed, the

court then is to review the content of the impact state-

ment utilizing a rule of reason test.” If the court is sat-

-isfied that this test has been met it may review the un-

'* derlying decision to see whether that decision was arbi-

trary and capricious or an abuse of discretion in view

of the information developed in the impact statement.”

12 Text of 42 U.S.C, § 4332(2) (C) following subparagraph (v).

'* The Government waivers on its support for the rule of reason

test, however, with respect to the question of whether the ICC was

required to include’a discussion of the underlying rate structure in

the Ex Parte No. 281 impact statement, inexplicably suggesting an

arbitrary and capricious standard for this question (Gov. Br. at

44).

‘*The Ninth Circuit recently determined, en banc, that review

of an environmental impact statement, including review of the con-

tent of that statement, is governed by 5 U.S.C. § 706(2) (D), witch

_ provides;

“. . , The reviewing court shall—(2) hold unlawful and set

aside agency actions, findings and conclusions found to be—

(D) without observance of procedure required by law.”

The Court of Appeals concisely explained the policy considerations

involved as follows:

“We stand on § 706(2)(D) because NEPA is essentially a pro-

— statute. Its purpose is to assure that; by following the

procedures that it prescribes, agencies will be fully aware of the

impact of their decisions when they make them. The procedures

required by NEPA, 42 U.S.C. § 4332(2)(C), are designed to

secure the gen 2 pm of the vital purpose of NEPA. That

result can be achieved only if the prescribed procedures are

faithfully followed; grudging, pro forma compliance will not

do. We think that the courts will better perform their neces-

sarily limited role in enforcing NEPA.if they apply § 706(2)

(D) in reviewing environmental impact statements for com-

_ pliance with NEPA than if they confine themselves with the

straight jacket of § 706(2)(A).” Lathan v. Brinegar, 7 ERC

1048 at 1058 (9th Cir. 1974). ‘

The rule of reason test has been adopted by virtually

all circuit courts of appeal.’ This test was described

by the Tenth Circuit in the following terms:

“[{T]he review of FES [Final Environmental

Statement] is limited to the following:

(1) Whether FES discusses all of the five proce-

dural requirements of NEPA.

(2) Whether the environmental impact state-

ment constitutes an objective good faith com-

lianee with the demands of NEPA.

(3) hether the statement contains a reasonable

discussion of the subject matter involved in

the five required areas.”’

National Helium Corp. y. Morton, 486 F.2d 995 at

1102-3 (10th Cir. 1973).

The Tenth Circuit, in National Helium. expressly

followed Judge Wright’s opinions in Calvert Cliffs’

Coord. Comm., Inc. vy. AEC, 449 F.2d 109 (D.C. Cir.

1971) and Scientists’ Inst. for Public Information, Ine.

v. AEC, 481 F.2d 1079 (D.C. Cir. 1973). See 186 F.2d

at 1001-2.

An essential requirement of the “rule of reason" is

that ‘‘a reasonable discussion of the subject matter in-

volved,”’ National Helium, su pra, must include enough

information about the environmental consequences of

_ proposed action, and about alternatives thereto, to al-

”

* Silva v. Lynn, '482 F.2d 1282 at 1284-5 (Ist Cir. 1973): Con-

servation Council v. Frochlke, 473 F.2d 664 at 665 (4th Cir. 1973);

Environmental Defense Fund vy. Corps of Engineers (Towbighee

Waterway), 492 F.2d 1123 at 1131 (Sth Cir, 1974): Louisiana vy.

FPC, 503 F.2d 844 at 877 (Sth Cir. 1974); Natural Resources De-

fense Council, Inc. v. TVA, 502 F.2d 852 at 853-54 (6th Cir. 1974);

Sierra Club v. Froehlke, 486 F.2d 946 at 950 ( 7th Cir. 1973); En-

vironmental Defense Fund y. Corps of Engineers (Gillham Dam).

470 F.2d 289 at 296 (8th Cir. 1972): Lathan v. Brinegar, supra. 7

ERC 1048 at 1058 (9th Cir. 1974) ; National Helium Corp. ¥. Mor-

ton, 486 F.2d 995 at 1001-3 (10tly Cir. 1973); Calvert Cliffs’ Coord,

Comm., Inc. v. AEC, 449 F.2d 1109 at 1115 (D.C.Cir 1971); Seien-

tists’ Inst. for Public Information, Inc. vy. AEC, 481 F 2d 1079 at

1092 (D.C. Cir. 1973).

low informed decision-making. See, e.g., Natural Re-

sources Defense Council, Inc. v. Morton, 458 F.2d 827

at 835 (D.C. Cir. 1972) (also expressly followed in

National Helium) ; and Silva v. Lynn, 482 F.2d 1282

at 1284-5 (Ist Cir. 1973). The agency must ‘‘explicate

fully its course of inquiry, its analysis and its reason-

ing.’’ Ely v. Velde, 451 F.2d 1130 at 1139 (4th Cir.

1971).

Finally, it should be eiibiaiess that the lower court

did not in any way attempt to substitute its judgment

for that of the ICC on the underlying question of

whether freight rates on recyclables should be allowed

to go into force.” The “‘arbitrary and capricious’’ test

for judicial review of a substantive agency action,

which is the subject of an environmental impact state-

ment, is simply not relevant in the instant case.”

As shown in the succeeding sections, the lower court

correctly applied the rule of reason in the instant case.

B. The Lower Court's Factual Determinations Are Subject to

Review in this Court by a “Clearly Erroneous” Standard.

Rule 52(a) of the Federal Rules of Civil Procedure

requires that this Court affirm the three-judge panel’s

' The lower court specifically noted: “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 Com-

mission clearly gave insufficient weight to this environmental value.”

sa F.Supp. at 1299 (Gov. J.S. at 22a).

'™ The Government devotes three pages of its brief to a suggestion

that the lower court had undertaken a de novo review of the evi-

dence and that such review is improper. (Gov. Br., 37-39.) This

would appear to be a misreading of the court’s opinion. All that the

court suggested was that if the ICC relied on Ex Parte No. 270 to

satisfy its obligation to examine the underlying rate structure, it

should adopt the position expressed by one Commissioner of delay-

ing rate increases until that proceeding is completed. The Court did

not require the ICC to take this action, nor did it hold that the

impact statement was inadeqrate for a failure to impose a rate

moratorium on recyclables. How such an observation becomes de

novo review of the impact statement is unclear.

factual findings on the insufficiency of the Commis-

sion’s environmental impact statement unless it finds

them to be ‘clearly erroneous.’’* This Court, in the

leading case on the issue, defined the ‘clearly errone-

ous’’ standard as follows:

“‘A finding is ‘clearly erroneous’ when although

there is evidence to support it, the reviewing court

on the entire evidence is left with the definite and

firm conviction that a mistake has been com-’

mitted.’” (Emphasis added) United States v.

United States Gypsum Co., 333 U.S. 364 at 395

(1948).

The words “‘definite’’ and ‘‘firm’’ simply mean that

a heavy presumption rests in favor of the lower court’s

factual findings. As one court phrased it, these findings

come to the appellate level ‘well armed with the

buckler and shield”’ of the ‘‘clearly erroneous”’ stand-

ard of Rule 52(a). Horton v. United States Steel Corp.,

286 F.2d 710 at 713 (5th Cir. 1961). Accordingly, it is

not the role of an appellate court to second guess fac-

tual findings of a district court even if there may be

real ambiguities in the evidence. As this Court put it:

“It is not enough that we night give the facts an-

other construction, or resolve the ambiguities dif-

_ferently. ... We are not given those choices, be-

- cause our mandate is not to set aside findings of

fact ‘unless clearly erroneous.’ ’’ United States v.

National Association of Real Estate Boards, 339

U.S. 485 at 495-6 (1950).

** The “clearly crroncous” standard has been previously applied

in appellate review of a district court’s findings on the sufficiency of

an environmental impact statement. See Environmental Defense

Fund v. Corps of Engineers, 492 F.2d 1123 at 1137 (5th Cir. 1974). -

** See also, Zenith Radio Corp. v. Hazeltine Research, Inc., 395

U.S. 100 at 123 (1969): “In applying the clearly erroneous standard

to the findings of a district court sitting without a jury, appellate

courts must constantly have in mind that their function is not to

decide factual issues de novo. The authority of an appellate court,

The deference which an appellate court is required

to give the findings of the district court is not lessened

where the district court’s findings are based on docu-

mentary evidence. As the Supreme Court stated in

United States v. United States Gypsum Co., the

‘clearly erroneous’’ test is also applicable to ‘‘infer-

ences drawn from documents or undisputed facts.’’ 333

U.S. at 394. This rule has been repeatedly reaffirmed by

this Court, 1nd followed by federal appegliate courts,

since the Gypsum case.” It is based on ¥mportant pol-

icy considerations. According to Professor Wright,

“Te]ven in instances where an appellate court is in as

good a position to decide as the trial court, it should

not disregard the trial court’s finding, for to do so im-

pairs confidence in the trial courts and multiplies ap-

peals with attendant expense and delay.’’ WRIGHT AND

MILier, FEDERAL PRactIcE AND PROCEDURE § 2587 at

748 (1971 ed.).” :

when revewing the findings of a judge as well as those of a jury, is

cireumseribed by the deference it must give to decisions of the trier

of the fact, who is usually in a superior position to appraise and

weigh the evidence. The question for the appellate court under Rule «

52(a) is not whether it would have made the findings the trial court

did, but whether ‘on the entire evidence [it] is left with the defirite

and-firm conviction that a mistake has been committed.’ United

States v. United States Gypsum Co. 333 US 364, 395.”

*" E.g.. Zenith Radio Corp. v. Hazeltine, supra; United States v.

Singer Manufacturing Co., 374 US. 174 at 195, n.9 (1963); Com-

missioner V. Duberstein,-363.U.S. 278 at 291 (1960); United States

v. E. 1. Du Pont de Nemours & Co., 351 U.S. 377 at 381 (1956) ;

Graver Tank Co. v. Linde Air Prod. Co.,-339 U.S. 605 at 609-10

(1950). See also, Engine Specialties, Inc. v. Bombardier Limited,

454 F.2d 527 at 530 (Ist Cir. 1972); Custom Paper Prods. Co. v.

Atlantic Paper Box Co., 469 F.2d 178 at 179 (1st Cir. 1972) ; Bishop

v. United States, 223 F.2d 582 at 586-7 (D.C.Cir. 1955), rev’d on

other grounds, 350 U.S. 961 (1956).

1 See also, Wright, The Doubtful Omniscience of Appellate

Courts, 41 Minn.L.REv. 751, 764-71, 778-82 (1956) ; Pendergrass v.

New York Life Ins. Co., 181 F.2d 136 at 138 (8th Cir. 1950) : ‘‘The

IG SL PEIWEN ALN QHELEY. oh 2 I

Ppl ned

oat

The “clearly erroneous” standard is especially nec-

essary When the appellate court is asked, as in the in-

stant case, to review a lower court ‘opinion which is

based on an assessment of various technical and expert

opinions and complex and lengthy economic analyses.

See, €.9., Graver Tank Co. vy. Linde Air Prod. Co.,

supra, 339-08. at 611.

Thus, this Court ought not reverse the lower court’s

decision simply because Appellants urge that an alter-

native interpretation of the sufficieney of the environ-

mental imjpact statement is possible. Even if such an

alternative: interpretation were equally reasonable—

which is not the case here—this Court must still affirm

the lower court’s findings under the ‘clearly errone-

ous”’ test. #.9., United States v. National Association of

Real Estate Boards, supra, 339 U.S. at 495-6. The

lower court: found here, as a matter of sound economies,

that it is mot possible to determine the economic (and

thus the emvironmental) impact of the proposed rate

increase om the basis of the evidence provided in the

Commissiomy’s impact statement. There is nothing in

the record here that would support a “definite” and

“‘firm’’ conviction that this finding was wrong, so as

to justify reversal under the ‘“‘clearly erroneous” stand-

ard of Rule. 52(a). United States v. United States Gyp- °

sum Co., SU pra, 333 U.S. at 395.

C. The Lower- Court Properly Applied the Rule of Reason Test

and iits Findings of Fact are Not Clearly Erroneous.

The lower court approached its task of reviewing

the ICC’s impact statement cognizant of the fact that

entire responsi bility for deciding doubtful fact questions in a non-

jury case shoulld be, and we think it is, that of the district court. The

existence of any doubt as to whether the trial court or this Court is

the ultimate trier of fact issues in nonjury eases is, we think, detri-

mental to the orderly administration of justice, impairs the confi-

dence of litigants and the public in the decisions of the district

courts, and multiplies the number of appeals in such cases,”

Congress had mandated compliance with NEPA by

federal administrative agencies ‘‘to the fullest extent

possible’’ * and that this provision has been interpre-

ted uniformly by the courts as vequiring maximum ef-

fort by these agencies, not as ‘‘an escape hatch”’ per-

mitting minimal compliance.” Given (1) the lack of

enthusiasm of the ICC in acknowledging and carrying

out its obligations under NEPA,” (2) the failure of

*? 371 F.Supp. at 1298 (Gov. J.S. at 21a).

23 Judge Wright in Calvert Cliffs’ Coord. Comm., Inc. v. AEC,

supra, 449 F.2d at 1115, quoted from the conference report of the

House and Senate approving NEPA to the effect that “ ‘to the fullest

extent possible’ shall not be used by any Federal agency as a means

of avoiding compliance with the dircetives set out in section 102... .

[N]o agency shall utilize an excessively narrow construction of its

existing statutory authorizations to avoid compliance.” Based on

this language, Judge Wright concluded “the Section 102 duties are

not inherently flexible. They must be complied with to the fullest

extent, unless there is a clear conflict of statutory authority. [foot-

note omitted] Considerations of administrative difficulty, delay or

economic cost will not suffice to strip the section of its fundamental

importance.” Id.

— With respect to the requirement under NEPA that a federal

agency make a “good faith” effort to prepare a detailed environ-

mental impact statement, it is relevant to recall the ICC’s initial

reealcitrance in resisting the strong recommendations by several

federal agencies on the necessity of an environmental impact state-

ment. The ICC’s obvious lack of enthusiasm for such a statement at

the outset could well have affected the manner in which is ultimately

approached the writing of a statement at a later time. The ICC did

not promulgate regulations outlining its procedures for compliance

until March 28, 1972, more than two years after NEPA’s enactment.

(Gov. Br. at 6, 58-62.) The lower court observed with respect to ICC

-efforts in this case:_—_—-+-

“Though the Commiission had told the Chief Justice, in connec-

tion with its application for a stay of our order against the

temporary surcharge, as well as this court, that it-was develop-

ing an impact statement, no statement was prepared for con-

sideration at this hearing or even for consideration by the Com-

mission before issuing its decision on the permanent increases.”

371 F.Supp. at 1294 (Gov. J.S. at 9a).

When this order was suspended with respect to recyclable commodi-

0 25

the Commission to come to grips with the issues posed

by other governmental agencies, and (3) the official

position of these agencies that the ICC was not in com-

pliance with NEPA, the lower court was correct in its

conclusion that the ICC impact statement did not rep-

resent reasonable compliance with the mandate of

NEPA. Fundamental flaws appear on the face of the

final environmental impact statement itself. As dis-

cussed in the succeeding subsections of this brief, these

flaws wete repeatedly brought to the ICC’s attention

by EPA, CEQ and other federal agencies and by Ap-

pellees. The combined efforts of these parties, however,

were insufficient to persuade the Commission to ad-

dress the questions which NEPA requires the Com-

mission to consider.

ties, it was done only as the result of vigorous protests hy EPA

and CEQ, not out of any concern by the ICC for its NEPA obliga-

tions. (A..at 572-5, 566-72, respectively.) At the time of the lower

court’s decision, every environmental impact statement filed by the

Commission had been filed as the result of —— intervention in

that proceeding.

Every other court which has reviewed ICC actions for compliance

with NEPA has been critical of the Commission’s efforts: (i) Har-

lem Valley Trans. Assn. v. Stafford, “The ICC has been slow. in

reacting to the directions of NEPA . . . ,” 500 F.2d 328 at 331 (2d

Cir. 1974) ; (ii) City of New York v. t Inited States, “Such considera-

tions do net justify the Commission’s disregard of the law. . . . To

permit an agency to ignore its duties under NEPA ... would subvert

the very purpose of the Act and encourage further administfative

laxity in this area. ” 337 F.Supp. 150 (E.D.N.Y. 1972); and (iii)

Chemical Leaman Tank Lines, Inc. v. United States, “We think that

the Commission{s approach seriously underestimates the nature of —

the analysis which [§ 102(a)(C) of NEPA], and the Act generally,

contemplate.” 368 F.Supp. 925 at 948 (D.Del. 1973).

Under a rule of reason test, it obviously is relevant if an agency's

“track record” indicates that it will comply with NEPA only to the

minimum degree necessary and then only when specifically forced

to do so by the judiciary. See Natural Resources Defense Council.

Inc. v. Morton, 7 ERC 1298 at 1302 (D.D.C. 1974).

}

1. Falure to Respond to Comments.

The environnental impact statement itself provides

evidence of the refusal of the ICC to give thoughtful

consideration -o the comments received by the Com-

mission on its draft impact statement. The Commis-

sion, in effect, conceded that its response to these com-

ments was proforma when it noted in the final environ-

mental impact statement that ‘‘[t]he draft environ-

mental impact statement was complete when issued

.... (A. at 16.) This view that the draft statement

could be regarded as final and that the comments on the

draft could be dismissed without serious response again

is reflected in the Commission’s reference to ‘post

statement comments.’’ (A. at 22.) The comment stage is

meant to be a neaningful one in the environmental im-

pact process. It is not merely a procedural obligation

to be satisfied after the ICC has made up its mind.

Calvert Cliffs’ Coord. Comm., Inc., supra, at 1112-3,

n.5. The brief recitation of the content of the various

comments (A. at 22-24) and Appendix D to the final

environmental impact statement (A. at 191-98) do not

evidence the careful consideration of the issues raised

by the commentators which is required. Silva v. Lynn,

supra, 482 F.2d at 1285.

The commen‘s of the CEQ and EPA were essentially

ignored by the ICC. One example is the Commission’s

failure to consider the impact which the rate increase

would have on long term investment decisions, even

thought the ICC states in Appendix D that this issue

was raised by both agencies (A. 197-98). Both EPA

and CEQ had previously [in their October 30, 1972

letters to the ICC (A. 571 and 574-75) ] urged that con-

sideration be given to the effect which disparate freight

rates might have on long-term investment in ore-in-

tensive facilities versus investment in scrap-intensive

facilities. The issue was not considered in the draft

environmental impact statement or met, with a response

in the final statement despite renewal of this suggestion

in the comment period.”

A further question to which the ICC should have

addressed itself is that of whether recycling of second-

_ ary commedities would have increased at an even

greater rate but for rate disparities between primary

and secondary commodities. Such a course of investi-

gation was suggested by the Government Services Ad-

ministration in its comments on the draft environmen-

tal impact statement (A. at 599). This suggestion from

yet another governmental agency also was ignored by,

the ICC.

Another example of this failure to take the com-

ments into consideration in the final environmental im-

pact statement relates to the issue of whether seeond-

ary materials are subsidizing the shipment of other

goods, including competing virgin materials. Numer-

ous commentators quoted a 1969 Department of Trans-

portation Burden Study * which showed that second-

ary materials, and particularly. ferrous scrap, carry

more than their proportionate share of the total rail

shipment costs in ~— with other goods, inelud-

ing iron ore.” Although the detrimental environmental

implications of a\showing that secondary materials

** Failure to consider the impact on long-term investment also is

a violation of § 102(2)(C)(v).

*° In September, 1971, the Department of Transportation (DOT)

published a report entitled Carload Waybill Statisties, 1969. State-

ment TD-1. In January, 1973, DOT published a seeond report en-

titled, An Estimation of Distribution of the Rail Revenue Contribu-

tion by Commodity Groups and Type of Rail Cars—1969, known as

the 1969 Burden Study. Exeerpts from this Study were ineluded in

the record below in Plaintiff-Intervenor'’s Motion for Summary

Judgment. Data from the 1969 Carload Waybill Statisties were a

major input to the Burden Study.

** The Commission itself had recognized this fact at the time the

lower court considered the ICC’s Ex Parte No. 281 impact state-

bear more than their fair share of total freight costs are

clear, the ICC made no attempt to analyze in detail

these implications. The only ICC response with respect

to the Burden Study contained in the impact statement

is as follows:

‘*Tt is because of these many and varied character-

istics that; bare reliance by a number of parties

herein upon certain Burden Study statistics

(which represent estimates only) to indicate the

contribution a partic ‘ular commodity may be mak-

ing to the carriers’ costs is not well taken. This

matter will be amplified at a later point in this

statement.’’ (A. at 29.)

This amplification is not forthcoming and the ICC,

thus, asks simply that reliance be placed in this bare

conclusion. This conclusion is open to serious doubt

since the ICC cites this same Burden Study for its own

purposes and without qualification in the impact state-

ment (A. at 46) and since the ICC has described this

study elsewhere as ‘‘based on the most reliable infor-

mation available’’ despite its Spee OnE S. 345 ICC

11 (1973).

The Government mistakes the meaning of the lower

court’s references to alteration of the impact statement

(Gov. Br. at 36). The court, in noting the failure of the

ICC to revise its impact statement to discuss the issues

raised by these commentators, is not directing how the

ICC is to respond to these issues; it is requiring that a

reasonable response be forthcoming.

The failure of the ICC to consider the Saivivsiiuantal

implications of the underlying rate structure is dis-

cussed separately, infra, pp. 32-4.

ment. In its order in Ex Parte No. 270, Commissioner Hardin noted:

“while the 1969 burden study discloses that iron and steel scrap is

one of the top twenty positive revenue contributors for movements

within official territory, iron ores are similar [sie] disclosed for

movements within official territory to be one of the top twenty deficit

contributors to railroad net revenues. . . .” 38 Fed.Reg. 28600 (Em-

phasis added) (A. 717).

—

2. Fatlure to Provide Adequate Data for Conclusions.

In essence, the thesis advanced initially by the rail-:

roads and adopted by the ICC as the sole basis in the

record for concluding lack of environmental effect of

freight rates is that scrap rates fluctuate significantly

over time and that total scrap shipments have increased

despite past freight rate increases.” This conclusion is

the sole basis cited for the ICC’s conclusion that no

significant environmental impact exists.

Numerous parties including EPA and CEQ have de-

voted extensive efforts to disproving this conclusion.

As CEQ noted in its October 30, 1972 cémments:

“We also take exception with the Commission’s

conclusion that freight rates have no significant

effect on the price of scrap and thus on the quan-

tity consumed. The analysis presented purports to

show that since the price of scrap fluctuates widely

in the short run and since these fluctuations seem

to have no direct relationship te-«hanges in freight

rates, rates therefore do not affeét price. Tn actu-

ality serap prices are determined\ by a number of

factors operating simultaneously, »mong them are

the aggregate demand for steel, the price and trans-

portation costs of iron ore, the supply of serap. as

well as the transportation cost of serap and other

factors. It would be surprising indeed, if, in light

of the number of factors constantly at work in the

serays market, a close and simple relationship ex-

isted between serap price movements and freight

rate changes.

‘Nor does data which shows a constantly growing

consumption of scrap despite rate increases prove

** Even to make this point, it is necessary for the Government in

its brief to go outside the record before the lower court (Gov. Br. at

28). Apart from this questionable presumption, the Government is

forced to quote out-of-context statements not in the record ( refer-

ence to Congressional testimony of Dr. Cutler [Gov. Bri at 29]

where the point made was simply that higher costs, ineluding dis-

proportionately high freight costs, affect demand for serap.

5 CURE 30

that freight rate decisions are inconsequential.

Growth might have heen materially higher or

lower had a rate decisions [sic] been different.

What is needed in each instance is a multivariate

analysis to isolate the effect of transportation costs

on serap prices and the quantity consumed. It can-

not be presumed from the evidence presented that

freight rates are insignificant.’’ (A. at 571-2.)

EPA made a similar observation in its letter to the

Commission of the same date.” Appellee Institute of

Scrap Iron and Steel, Ine. introduced a study com-

missioned by it which concluded that:

(1) Present scrap markets are retarded because

of transport rates which engourage the

usage of iron ore.

(2) Future scrap markets ard being affected

heeause new investment that would be log-

ically directed to serap-iptensive steelmak-

ing is diverted hecatse of the existing

freight-rate structure to ore-intensive steel-

making.

(3) Iron ore (a limited domestic natural re-

source) is being exploited when it can and

should he conserved.

(4) Some serap iron that should be recycled is

unable to move. thus the environment is

despoiled bv unnecessary accumulations of

solid metallic waste.’’ *°

2° EPA commented: “fT The historical data presented by the Com-

mission does not support the conclusion that the movement of the

commorlities will not he affected and that there will be no adverse

environmental impact. The fact that. for any commodity consid-

ered, the cost to a user is a prime consideration in his decision to

use the secondary material as a raw material input, and that freight

rates affect the cost to that user, is prima facie evidence that the

rates would affect the use of the materials.” (A. at 574.)

% Battelle Columbus Laboratories, Summary Report on the Im-

pact of Railroad Freight Rates on the Recycling of Ferrous Scrap

2 (Jan. 14, 1972) included as Attachment I to Plaintiff-Intervenor’s |

Motion for Summary Judgment in the court below.

. ,

As the lower court noted, this study was merely dis-

missed by the ICC without any study of its own to

refute these conclusions.”

The ICC suggests that it has based its impact state-

ment on the bibliography included with the statement.

Comparison of this bibliography with the impact state-

ment shows clearly that the bibliography played little

role in preparation of this statement. Only 15 works

out of 527 listed in the bibliography are cited in the

final environmental impact statement. The Department

of Commerce expressed similar reservations about the

adequacy of the utilization of this bibliography as well

(A. at 578-9).

Based upon this record, the lower court did not err—

still less did it ‘‘clearly’’ err—in concluding that the,

unsubstantiated assertions of the ICC did not support

its conclusion that the rate increase would have no

environmental impact. The lower court’s suggestion

that the Commission prepare a study of elasticity of —

demand for recyclable commodities (371 F.Supp. at

1306, Gov. J.S. at 39a-40a) was merely an attempt to

require sufficient data so that the ICC, the President,

the Congress, and the public can make an informed

decision, on the basis of adequate evidence as to that

question.” See Natural Resources Defense Council,

Inc. v. Morton, supra, 458 F.2d at 837.

** 371 F.Supp. at 1303 (Gov. J.S. at 33a-34a). The lower court

quoted from a district court opinion, Brooks v. Volpe tha‘:

‘The requirement that the statement be detailed places a heavy

burden on government agencies to gather for and include in the

impact statement enough information to show that compliance

has been genuine, not perfunctory. * * * NEPA requires cach

agency to undertake the research needed to adequately expose

environmental harms.’ . . . 350 F.Supp. at 276, 279.” 371 F.Supp.

at 1303, n.34; (Gov. J.S. at 3la-32a).

** Moreover, this suggestion by the lower court merely reflected

agreement by the Court with the recommendations given to the ICC

by EPA and the Department of Commerce, 371 F.Supp. at 1302

(Gov. J.S. at 31a) (A. at 712 and 578).

' 32

3. Failure to Examine the Underlying Rate Structure.

The Commission freely acknowledges in its environ- ”

mental impact statement that it did not examine the

underlying rate structure in the Ex Parte No, 281 pro-

ceeding (A. at 24-6). The Commission does not argue

that the underlying rate structure is irrelevant to the

questiors it must exaniine under NEPA in Ex Parte

No. 281 (Gov. Br. at 40-3).

Its failure to examine-the. underlying rate structure

is in clear violation of CEQ Guidelines, which provide:

‘The statutory clause ‘major Federal actions sig-

nificantly affecting the quality of the human en-

vironment’ is to be construed by agencies with a

view to the overall, cumulative impact of the action

proposed... . Proposed actions, the environmental

effect of which is likely to be highly controversial,

should be covered in all cases. In considering what

constitutes major action significantly affecting the

environment, agencies should beat in mind that the

effect of many Federal decisions about a project or

complex of projects can be individually limited but

cumulatively considerable.’’ (Emphasis added)

40 C.F.R. § 1500.6(a). | .

Rather, the Commission argues that it may decide

for itself the extent to which it will comply with NEPA

in Ex Parte No. 281. No attempt is made to reconcile

this purported discretion with the absolute command

of NEPA that every agency shall comply with NEPA’s

requirements ‘‘to the fullest extent possible.’’ *

* As noted previously, this requirement has been,interpreted uni-

formly as imposing a heavy burden on an agency to exert its greatest

efforts to comply with NEPA. Judge Wright in Calvert Cliffs’, supra,

449 F.2d at 1114:

“Of course, all of these Section 102 duties are qualified by the

phrase ‘to the fullest extent possible.’ We must stress as force-

fully as possible that this language does not provide an escape

hatch for footdragging agencies; it does not make NEPA’s pro-

cedural requirements somehow ‘discretionary.’ Congress did not

_ — aaa

_ The ICC argues that it should be accorded time to

complete its Ex Parte No. 270 proceeding before con-

sidering, in its general revenue proceedings, any as-

pect of discrimination in the underlying rate structure.

even where such consideration may clearly be possible.”

Specific investigations have been instituted of the law-

fulness of all rates subject to the Interstate Commerce

Act maintained by railroads on serap iron and steel

(Ex Parte No. 270, Sub. No. 6) and iron ores (Ex

Parte No. 270, Sub. No. 5). An environmental impact

statement has been prepared in Ex Parte No. 270, Sub.

Nos. 5 and 6, and submitted to the Council on Environ-

mental Quality in final form.

Moreover, since the environmental impact statement

in Ex Parte No. 270 (Sub. Nos. 5 and 6) is only a study,

it is uncertain when, if ever, the Commission wil] take

any action based thereon. Historical evidence is not

encouraging on this question. The Commission’s rate

structure investigation in Docket 17,000 hegan in 1925

and was discottinued in 1933 * and its class rate case

intend the Act to be such a paper tiger. Indeed, the requirement

of environmental consideration ‘to the fullest extent possible’

sets a high standard for the agencies, a standard which must be

rigorously enforced by the reviewing courts.”

See also, Hanly v. Mitchell, 460 F.2d 640 at 648 (2d Cir. 1972): and

Anperson, NEPA (x THE Courts 51 (1973) where it is suggested

that the Seeond Cireuit imposes an even more stringent obligation

on Federal agencies—compliance even where the ageney is reluctant

or powerless to alter its Proposed course of action—in order to pre-

serve the integrity of NEPA.

initiating any corrective action shown to he necessary. Environmen-

tal Impact Statement, Ex Parte No 270 (Sub. Nos. 5 and 6) at 1-1,

lodged with the clerk of this Court ns part of the record in this pro-

ceeding. ~

* The Investigation of Iron and Steel Articles, Docket 17,000 Part

6, was filed in 1925, and an order issued which prescribed rates under

this subdocket on June 7, 1929, 155 ICC 517 (1929).

a ee a

in Docket 28,300 began in 1945 and the tariffs based on

this proceeding became effective in 1952. Based on

these factors and in light of NEPA’s express com-

mand that all federal agencies comply ‘‘to the fullest

extent possible,’’ the lower court’s determination that

the ICC was unreasonable in refusing to consider any

part of the underlying rate structure is not erroneous,

much less ‘‘clearly’’ so.

Most significantly, the ICC now claims that it has

in fact cured, via an impact statement in Ex Parte No.

970, this alleged shortcoming in its Ex Parte No. 281

proceeding with respect to ferrous scrap. The impact }

statement in Ex Parte No. 270 was served August 2,

1974. Rather than return to the lower court to seek a

modification of its judgment, in light of this develop-

ment, the ICC unnecessarily has burdened the Court

with this controversy again. The Government suggests

that thespreliminary evidence available to it indicated

that no diserimination existed in the underlying rate

structure and that the lower court acted upon “‘unsup-

ported suspicion’? (Gov. Br. at 44). As noted in the

preceding subsection, the lower court was not clearly

erroneous in its determination that the information

relied upon was not sufficient. .In addition, the lower

court was not relying on unsupported suspicions, but

rather on the record made by other federal agencies

before the Commission. :

4 Failure to Discuss All Reasonable Alternatives.

Although not discussed by the lower court, the ICC’s

environmental impact statement does not meet the test

for discussion of alternatives mandated by NEPA as

enunciated by the District Court for the District of

36 (ass Rate Investigation 1939, commenced 266 ICC 447 (1945)

and terminated 286 ICC 171 (1952).

(PAA Ard 1

i tibia tacts nes as bi Mets tts

4 MOB 656

hy! is Se

Columbia in Natural Resources Defense Councd, Inc. v.

Morton, supra, 458 F.2d at 836-7:

‘*Where the environmental aspects of alternatives

are readily identifiable by the agency, it is reason-

able to state them—for ready reference by those

concerned with the consequences. of the decision

and its alternatives.”

Much of the discussion in the section of the Commis-

sion’s final environmental impact statement entitled

‘* Altérnatives”’ (A. at 140-57), although quite signifi-

cant, does not relate to alternatives. For example, the

first eight pages of this section deal with the ICC's

obligations and jurisdiction under the Interstate Com- -

merce Act and NEPA. A brief reference to whether

freight rates should be structured to subsidize the ship-

ment of recyclable commodities is so entwined With this

jurisdictional discussion that the comment is virtually

lost (A. at 145).

Those commenting on the draft environmental im-

pact statement raised the question of whether there

were other means of allocating the railroad’s revenue

need than the manner selected. Rather than evaluate

the implications of this alternative, the suggestion is

simply rejected by the Commission without the neces-

sary discussion (A. at 145-6).

The ICC notes that investigation and suspension

proceedings provide one.means of testing the appro-

priateness of particular rates (A. at 147-8) but does not

analyze whether this type of proceeding could be util-

ized to investigate effectively the issues which it claims

are inappropriate in geneml rate proceedings. An affi-

’

%t The so-called “Alternatives” section also contains a restatement

of the ICC’s defense of its general rate decision (A. at 153). This

constant movement from topic to topic contributes to the confusing

nature of the environmental impact statement and is evidence of the

ICC’s lack of systematic approach to environmental problems re-

quired by Section 102(2)(A) of NEPA.

nes eee

davit of Dr. Herschel Cutler included in the record

below avers that no adequate remedy is available to

ferrous serap shippers. This is because the investiga-

tion and suspension proceeding, based upon an allega-

tion of discrimination under Sections 3 and 13 of the

Interstate Commerce Act, poses an intolerable burden

on shippers."* The impracticality of such a vehicle

should have been weighed by the ICC in its determi-

nation of alternatives to its proposed course of action.

As the Commiss#6n freely concedes in its general

iscussion of rate characteristics, not all commodities

bear their full burden in supplying needed revenues

(Gov. J.S. at 36d). An analysis of ways of equalizing

this burden should have been included in the environ-

mental impact statement, even if these methods of

equalization might necessitate recommendations to

Congress to limit prior transportation policy direc-

tives. It is incumbent upon-the ICC to clarify its analy-

sis as to the appropriate manner of reallocating any

unfair burden now imposed upon recyclable ¢ommodi-

ties. This is not to suggest that the ICC must adopt

such a reallocation, but that at a minimum, the ICC

must make the attempt to define this alternative. Only

_if this is done ean satisfaction of NEPA’s Section 102

(2)(D) requirement that the ICC have before it and

take into proper account all proper approaches to a

particular project be insured. Calvert Cliffs’ Coord.

Comm., supra, 449 F.2d at 1114.

————

°8 This affidavit was attached to Appellee Institute of Scrap Iron

and Steel's Motion for Summary Judgment. Relevant excerpts from

this affidavit are attached in the Appendix to this brief at 2a. It is

significant to note that the Government characterizes general rev-

enue proceedings as beneficial to ‘the Commission, the railroads,

and the publie’’? (Gov. Br. at 22). This reference, pointedly, does

not include shippers.

5. Failure to Discuss Why No Holddown Was

Granted on Ferrous Scrap When a lolddown

Was Granted on All Other Recyclable Com-

modities.

Despite the Commission’s efforts to minimize its

role in general revenue proceedings, its role clearly is

substantial. The ICC exerts its influence on rate in-

ereases proposed by the railroads by means of hold-

downs—authorization of rate increases of amounts or

percentages less than these proposed. In Ex Parte No.

281, the ICC authorized holddowns in 29 separate ex-

ceptions.” While the general rate increase approved in

this proceeding would approach a ‘‘theoretical’’ 4%

“ (Gov. J.S. at 2d), the Commission itself notes that the

effective rate of increase must reflect an 82% ‘‘effec-

tiveness factor’’ (Gov. J.S. at 8d).

The Commission permitted the requested holddown

| on iron ore (341 ICC 298 at 392) and mandated a hold-

down on all recyclable commodities but ferrous serap

(Gov. J.S. at 86d). The holddown on other reeyelables

was justified in part on the ground that ‘‘This limita-

tion will also have a beneficial effect upon the environ-

ment.’’ (Gov. J.S. at 60d.) Tn addition, the Commission

| observes that ‘‘the holddown here imposed should en-

courage the movement and recycling of these com-

modities.’’ (Id.)

The environmental impact statement fails totally to

explain either the reasons for, or the impact of, dis-

criminatory treatment of ferrous scrap vis-a-vis other

recyclables on one hand and iron ore on the other.

Nor does it explain how it ean conclude that a hold-

down would encourage the reevcling of all secondary

commodities except ferrous scrap or that a similar

holddown would not encourage iron and steel scrap

39 The ICC list of holddowns is set forth in-the Commission’s order

of October 4, 1972. (Gov. J.S. at 85d-86d.)

recycling. This diserepaney was pointed out to the- —

Commission by numerous commentators,” but to no

avail.

6. Failure to Hold a Hearing on the Draft Impact

Statement.

One final factor considered by the lower court in its )

assessment Was the reasonableness of the ICC’s refusal |

to hold a hearing on the draft environmental impact

statement. In proposed guidelines issued prior to the”

ICC's final environmental impact statement, the CEQ

outlined its view as to when hearings are required :

“In deciding whether a public hearing is appro-

priate, an agency should consider: (1) The magni-

tude of the proposal in terms of economic costs,

the geographic area involved, and the uniqueness

or size of commitment of the resources involved:

(2) the degree of interest in the proposal. as evi-

denced by requests from the public and from Fed-

eral, State and local authorities that a hearing be

held: (3) the complexity of the issue and the like-

lihood that information will be presented at the

hearing which will he of assistance to the agency

in fulfilling its responsibilities under the Act: and

(4) the extent to which publie involvement already I

has been achieved through other means, such as

earlier publie hearings, meetings with citizen rep-

recsentatives and ‘or written comments on the pro-

posed action.”” 40 CFR § 1500.7(d).

The lover court considered the lack of a hearing as

one further factor in evaluating the reasonableness of

the ICC's compliance with NEPA. The court con-

eluded that NEPA required that an environmental

“ CEQ letter of October 30. 1972 to the ICC (A. at 569); EPA

letter of October 30, 1972 to the ICC (A. at 574) ; and Comments of

the Institute of Serap Iron and Steel on the draft impact statement

(A. at 609).

impact statement be considered in the existing agency

review process “ and continued:

“In this case, when the general rate increase was

first being considered without an impact state-

ment, oral hearings were held before the Commis-

sion. This fact at least establishes a strong pre-

sumption for us that full consideration of the re-

vised impact statement through ‘existing agency

review processes’ must entail oral hearings before

the Commission.’’ (Emphasis added) 371 F.Supp.

at 1307 (Gov. J.S. at 42a-43a).

The pressing need for such scrutiny at an oral hear-

ing is emphasized by the ICC itself where, in its Octo-

ber 4, 1972 order, it singled out ‘‘testimony adduced

at the oral hearings’’ as the particularly important

element in its review of the entire record.”

The Court of Appeals for the Second Circuit, in

Greene County Planning Board v. FPO, 455 F.2d 412

at 422 (2d Cir. 1972), held:

“‘[S]ince the [environmental impact] statement

may well go to waste unless it is subject to the full

scrutiny of the hearing process. we also believe

that the intervenors must be given the opportunity

to cross-examine ... witnesses in light of the state-

ment.”’

‘That court recently chose to apply the principle enun-

ciated in Greene County to the ICC in another proceed-

ing in which the ICC had failed to hold a hearing on

an environmental impact statement, saying:

*' Although the Commission asserts that hearings may not be re-

quired for all proceedings under Section 15(7) (See Gov. Br. at 50,

n.20), all general revenue proceedings from 1958 through Ex Parte

No. 281, have included oral proceedings allowing cross-examination

and oral argument. See Ex Parte No. 212, 304 ICC 289 (1958); Ex

Parte No. 223, 311 ICC 373 (1960); Ex Parte No. 256. 329 ICC 854

(1967), 332 ICC 280 (1968); and Ex Parte No. 259, 332 ICC 590

(1968), 332 ICE 714 (1969).

* Report of October 4, 1972, 341 ICC 290 at 332 (Gov. J.S. at

39d).

“(T]he ICC ignores that we held in Greene

County I that the literal language in NEPA re-

quires that impact statements be prepared prior

to hearings since the statement must ‘accompany

the proposal through the existing agency review

“- process.’’’ Harlem Valley Transportation Ass’n

v. Stafford, 500 F.2d 328 at 336 (2d Cir. 1974).

Similarly, the court below was correct in holding that

the oral hearings in Ex Parte No. 281 were part of the

existing agency review process at which the environ-

mental impact statement should be subject to scrutiny.

D. Reliance by the Lower Court on the Conclusions of Other

Federal Agencies with Respect to the Inadequacies of the

ICC Environmental Impact Statement Was Appropriate.

The lower court’s conclusion that the ICC environ-

mental impact statement was inadequate rested in sig-

nificant part on the opinions expressed by other fed-

eral agencies throughout the Ex Parte No. 281 proceed-

ing with respect to the Commission’s non-compliance

with NEPA. Both EPA and CEQ are on record

throughout the course of this proceeding recommend-

ing the steps necessary for ICC compliance and, sub-

sequently, observing that the Commission had taken

neither these steps nor any others which satisfied the

requirements of NEPA. Acceptance by the lower court —

of the conclusions of other federal agencies—especially

those with far greater expertise in compliance with

NEPA than the ICC—certainly was reasonable.

On October 30, 1972, CEQ wrote to the ICC object-

ing to the Commission’s October 4, 1972 order as fol-

lows:

‘“‘fT he Council feels that the basic environmental

issues related to the existing freight rate structure

and changes thereto, must be evaluated in a logical,

analytical and timely fashion in compliance with

the requirements of the National Environmental

Policy Act. The Commission’s actions to date ap-

oe to be inconsistent with the objectives of

EPA, and the analyses undertaken to date by

the Commission appear to offer an inadequate

basis from which to draw conclusions concerning

the impact of freight rates on recycling and en-

vironmental quality... .’? (Emphasis added) (A.

at 570.)

EPA also protested to the ICC along similar lines.‘

Both agencies attached detailed critiques of the ICC

position to these letters.“

Commenting on the draft environmental impact

statement circulated March 5, 1973, the U.S. Depart-

ment of Commerce observed:

‘‘We believe the conclusion cited in the summary

sheet and on page 190 of the impact statement that

the action taken in this proceeding will not have a

significant adverse impact upon the quality of the

human environment raises an important question

about the purpose of the statement. The National

Environmental Policy Act (NEPA) as quoted on

page 11 (i.e., Section 102(2)(C)) requires that the

statement set forth as fully and clearly as possible

precisely what the environmental impact will likely

be. Stmply giving the Commission’s judgment on

the issue without in-depth supporting documenta-

tion is insufficient. We suggest, accordingly, that

the final environmental impact statement. give

more attention to this issue and less to justifying

** By letter of October 30, 1972, EPA observed that: “Although

we are aware that the issues involved are extremely complex and

require correspondingly extensive research and analysis, the impact

statement process would seem to be an appropriate vehicle for such

studies. On-going investigations by this Agency indicate that there

is reason to believe that rate increases on secondary materials may

curtail their movement with resultant adverse environmental im-

pacts. We therefore cannot support the Commission’s proposed ac-

tion on rate increases for secondary materials, scrap steel, and re-

turnable containers.” (Emphasis added) (A. at 572-3.)

** CEQ, Attachment A. 570-1; EPA, Critique A. 573-4.

a contemplated rate-making action.”’ (Emphasis

added) (A. at 576.)

The General Services Administration offered exten-

sive comments on the draft statement, concluding:

“GSA believes the conclusions expressed by the

Commission in its Draft Environmental Impact

Statement are, as hereinabove described, inconsist-

ent with its findings respecting the movements of

individual solid waste materials.’’ (Emphasis

added) (A. at 606.)

The Department of Interior conclusions with respect

to the draft impact statement also are critical of the

ICC effort:

“The revised draft is greatly expanded compared

to that submitted last year ; even so, the fundamen-

tal posture of the statement, in our judgment, re-

mains unchanged. The impact statement does not

appear to us to meet the requirements of Section

102(2)(C) of the National Environmental Policy

Act for providing a careful multi-disciplinary ea-

amination of environmental effect.’’ (Emphasis

added) (A. at 702.)

~The two agencies most directly authorized by Con-

gress to develop an expertise in environmental matters

and to insure incorporation of environmental values in

Federal agency actions renewed earlier criticisms.

CEQ observed:

‘We feel, however, that there are several respects

~ in which the present statement could be signifi-

.. eantly improved by greater objectivity in the Com-

-mission’s evaluation of the potential impact of its

action on the environment. ’

‘Among the issues which we feel have not been

adequately addressed, are the following:

1. While we would certainly agree that the mere

existence of rate differénces does not imply rate

discrimination, the Commission does not demon-

strate that these differentials are justified by in-

herent cost differences or other factors.

2. In our letter of October 30, 1972, we pointed

out the deficiencies of the Commission’s approach

to the question of the impact of rate changes on

scrap consumption. The deficiencies have not been

corrected. For example, the Draft Environmental

Impact Statement ignores completely the very im-

portant consideration of how freight rates might

affect long-run decisions on investment in scrap-

intensive production facilities, such as electric are

furnaces.

3. The Commission has devoted little effort to

analyzing alternative actions within its jurisdic-

tion. We also find it difficult to believe, for exam-

ple, that the economie well-being of the nation’s

railroads is really at stake here. Are there no other

rate schemes that could provide the same revenues,

without increasing or even maintaining rate dif-

_ ferentials which might adversely affect environ-

mental quality ?”’ (A. at 705-6.)

Finally, EPA specifically classified the ICQ’s draft

environmental impact statement as inadequate, con-

cluding that:

“The draft EIS does not adequately assess the en-

vironmental impact of the proposed freight rate

increases on the movement of secondary materials,

nor does it consider in reasonable detail the range

of ie to the proposed action.”’ (A. at

707.

Rather than respond to these comments or attempt

to meet the issues raised, the ICC merely noted the

existence of these objections and summarily rejected

them without any reasoned analysis.

Acceptance by the lower court of these conclusions

of every other Federal agency commenting on the

** The changes made in the draft environmental impact statement

before it was released in final are minimal, reflecting the Commis-

sion’s view that the draft statement “was complete when issued.”--

See discussion, supra, at p. 26. '

ICC’s efforts under NEPA clearly was reasonable and

should not be overturned by this Court.

E. Unique Nature of Instant Case.

In reviewing the decision of the lower court, it is

important to note several unique factors involved in

this case. First, the confrontation in NEPA cases has

usually been between environmental groups and occa- _

sionally economic interests on the one hand, and a Fed-

eral agency on the other. However, the normal skepti-

cism which might be exhibited toward criticism of an

agency impact statement because of the potential tend-

ency to seize on every flaw and to emphasize its impor-

tance is not appropriate here. In the present proceed-

ing, the most compelling and persistent criticism of the

ICC’s efforts to comply with NEPA come from five

othe; federal agencies—the Environmental Protection

Agency, the Council on Environmental Quality, the De-

partments of Interior and Commerce, and the General

Services Administration. The lower court’s similarly

critical judgment reinforces the critiques of the federal |

agencies of the statement.“ eta

Second, the remedy fashioned by the lower court has

the relatively unique attribute of maintaining the

status quo so as not to impair the legal rights of the

economic interests involved:in the litigation without in’

any way hindeying the ICC in its administration of the

Interstate Conjmere Act or impairing the financial

“The Ninth Cirenit observed in Lathan, supra, 7 ERC at 1058:

“As Mr. Justice Frankfurter said in a criminal case, in words

that are equally applicable to the actions of administrative

agencies: ‘The history of liberty has largely been the history of

observance of procedural safeguards.’ McNab v. United States,

1943, 318 US. 332, 347. So it may also be with the history of

environment. See also, Calvert Cliffs’ Coordinating Comm., Inc.

v. United States Atemic Energy Comm’n, D.C.Cir., 1971, 449

F.2d 1109, 1114-5; Silva v. Lynn, 1 Cir., 1973, [5 ERC 1654]

482 F.2d 1282.”

health of the railroads.’ The ICC has and can continue

to permit general freight rate increases to be collected

by the railroads.” The Government’s assertion that the

lower court’s ruling would force the ICC “to abandon

general revenue proceedings altogether”? (Gov. Br. at

41) obviously is hyperbole and disproved by ICC ae-

tions subsequent to the court’s decision.”

‘The prosecution by shippers of their rights is one method by

which the interests of the environmental groups can be protected.

To the extent that these shipping interests are better able to protect

their interests, the cause of the environmentalists likewise is en-

hanced. P

“It is not necessary for the ICC to approve the tariffs before

they may go into effect. So !ong as the ICC has not suspended rates

pursuant to Section 15(7) of the Interstate Commerce Act or dis-

approved those rates during, any suspension period, railroads are

permitted to impose these tariffs. As this Court noted in Arrow

Transp. Co. v. Southern Ry. Co., 372 U.S. 658 at 659-60 ( 1963) :

“[t]he statute (footnote omitted) expressly provides that ‘the

proposed change of rate . . . shall go into effect,’ if the Commis-

sion’s proceeding has not been concluded and an order made

within the period of suspension.” __

The ICC itself concedes in its Jurisdictional Statement that the only

effect. of the lower court’s order isto prevent the “shift [of] the

burden of proof concerning the reasonableness of individual rates

that comply: with the order from the carrier to the shipper.” (Gov.

JS. at 13.)

This Court recognized the implications of this burden of proof shift

last term in Atchison, Topeka & Santa Fe Ry. Co. v. Wichita Board

of Trade, supra, 412 U.S. at 812-6, and, thus, approved the suspen-

sion of the ICC’s order in that case by the lower court so “that the

railroads may not rely, in some subsequent proceeding, on a Com-

mission finding that the proposed rates were just and reasonable.”

412 US. at 818.

** Since the lower court’s decision in the instant ease, the ICC has

permitted general rate increase of 3% with exceptions (Ex Parte No.

295) ; 2.8% (Ex Parte No. 299) ; 4% (Ex Parte No. 303) ; and 13.3%

with exceptions (Ex Parte No. 305, embracing, Ex Parte No. 301).

CONCLUSION

These appeals should be dismissed for want of juris-

diction under 28 U.S.C. § 1253. Alternatively, the judg-

ment of the lower court should be affirmed.

Respectfully submitted,

Tuomas H. Bocas, Jr.

GrorGE BLow

E. Bruce BuTLER

Patton, Boccs & Blow

1200 17th Street, N.W.

Washington, D.C. 20036

Attorneys for Appellee,

Institute of Scrap Iron ~

and Steel, Inc.

Howarp GouLp

Davin REICHERT

GouLp, REICHERT & STRAUSS

2613-20 Carew Tower

Cincinnati, Ohio 45202

Of Counsel

‘Dated: February 10, 1975

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.