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

9a

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY

WASHINGTON, pD.c. 20460

OFFICE OF

AIR AND WASTE MANAGEMENT

Mr. Edward Merrigan

Smathers & Merrigan

888 17th Street, N.W.

Washington, D. C. 20006

Dear Mr. Merrigan:

As a result of our conversation and the concern I have

for the proper resolution of the freight rate and NEPA

issues in U.S. vy. S.C.R.A.P., I initiated an effort to have

EPA submit an amicus curiae brief. This effort culminated

in a draft brief and a request from EPA’s Office of General

- Counsel to the. Solicitor General for permission to file a

brief. This request was refused primarily because EPA’s

views on the matter are well known to the Court (see the

enclosed correspondence). I regret that EPA will not have

the opportunity to give a stronger indication to the Court

of its position on these issues.

\

%

Please notify me when oral argument is scheduled.

Sincerely,

/s/ Arsen J. Darnay

Arsen J. Darnay

Deputy Assistant Administrator for

Solid Waste Management Programs

(AW-562)

ne

10a

OFFICE OF THE SOLICITOR GENERAL

WASHINGTON, D.c. 20530

February 6, 1975

Robert V.. Zener, Esq.

General Counsel

United States Environmental

Protection Agency

Washington, D.C. 20460

Re: United States, et al. v. S.C.R.A.P., Nos. 73-1966

and 73-1971, October Term, 1974

Dear Mr. Zener:

I have your letter of February 4, 1975, requesting that the

Environmental Protection Agency be authorized to file a

separate amicus curiae brief in the above case stating

EPA’s views. P

While I understand your views in this matter, it appears

EPA has no independent regulatory authority in regard to

the actions of the Interstate Commerce Commission in-

volved in this case. Rather, EPA’s role was to comment on

the ICC’s draft environmental impact statements and that

was done here. EPA’s comments are part of the record and .

are reprinted in the Joint Appendix. Moreover, counsel

for the appellees has relied upon EPA’s views in arguing

that the ICC did not adequately respond to the comments

of EPA and other agencies of the federal government.

Therefore, for these and other reasons discussed with you

by telephone, [ must respectfully refuse your request for

authorization to file a separate amicus curiae brief in this

case.

Sincerely,

/s/ Rosert H. Bork

Robert H. Bork

Solicitor General

Pe

;

lla

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY

WASHINGTON, D.c, 20460

February 4, 1975

OFricr or

ENFORCEMENT AND GENERAL ( ‘OUNBEL

Honorable Robert i. Bor

Solicitor General

Department of Justice

9th & Pennsylvania Avenue, N.W.

Washington, D.C. 20530

Dear Mr. Bork:

Re: United States (Interstate Commerce ( Jommission ),

et al. v. S.C.R.A.P., Nos. 73-1966 and 73-1971

I am requesting permission to submit to the Supreme

Court the views of the Environmental Protection Agency

regarding certain aspects of the above-captioned case. The

interest of this Agency in the case stems f rom our role under

the National Environmental Policy Act and the Guidelines

of the Council on Environmental Quality in the environ-

mental impact statement process, Specifically, NEPA re-

quires the federal agency proposing a major federal action

significantly affecting the environment to obtain comments

from the appropriate federal agencies prior to preparing an

environmental impact statement. EPA js frequently in-

volved in this comment process. In our view, this com-

menting process is meaningless unless the federal agency

proposing action is required to make an adequate response

to the other agency comments. The Environmental | -rotec-

tion Agency is of the opinion that the envi ronmental impact

statement of the Interstate Commerce Commission in Ex

Parte No. 281 does not meet the requirements of Section

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

In particular, EPA believes that the Commission has

failed to provide a reasonable evaluation of and an ade-

quate response to a number of serious criticisms which sev-

an

~

12a

eral federal agencies have levied against the Commission

environmental impact statement. This failure of analysis

deprives the final impact statement of thoroughness and ob-

jectivity and strongly suggests that the NEPA procedure

followed by the Commission lacked the requisite ‘‘ good

faith’’, ‘‘hard look’’ at the environmental implications of a

. general increase in rail transportation rates for recyclable

materials. The Commission’s evaluation in response to

‘agency comments is inadequate in the following three areas:

~

(a) The impact of the proposed changes in transpor-

tation costs on the demand for recyclables ;

(b) The impact of the proposed rate increase on capital

investment in the recycling industry ;

(c) Reasonable alternatives to a general rate increase

on recyclables,

Following is a detailed discussion of these points.

EPA, as early as April 24, 1972 in its letter to the Com-

mission, and the Department of Commerce in responding

to the draft environmental impact statement, pointed out

that the Commission should conduct an economic evaluation

on the responsiveness of the demand for secondary ma-

terials to changes in transportation costs. It was suggested

that such a study consider the cumulative impact of several

rate increases as well. as the specific impact of the proposed

general increase. (Appendix, pp. 572-579)

The major response of the Commission has been to cite

limited historical data showing that the demand for re-

cyclables ‘has continued despite past increases in rail rates.

This response is inadequate because it is clear that the de-

mand for.recyclables is affected by several factors besides

transportation costs. It is erroneous to observe the aggre-

_ gate effect-of all pertinent factors (in this case, continued

demand for recyclables commensurate with increasing rail

rates), yet ‘to conclude without economic analysis that one

factor (transportation rates) has no effect. Such evalua-

\

\

rn

\

at ORR mC it

fr rc Ct

tion is fallacious, and might just as well lead to the incorrect

conclusion, because the demand for non-recyclables has been

increasing in the face of rail rate increases, that transpor-

tation costs play no role in determining the demand for

these materials.

The Commission also responded to EPA’s recommenda-

tion by merely identifying factors which would have a great-

er influence on the demand for recyclables: than transpor-

tation costs. The Commission has conducted no detailed

evaluation or quantification of the extent to which trans-

portation costs may affect demand. The Commission has

essentially asserted in conclusory fashion that because

factors other than transportation costs are the most import-

ant determinants of product demand, it need not perform

substantive economic analysis on the effect of a rate in-

crease. For example, the Commission stated that because

the demand for ferrous scrap metal is related to the total

amount of steel produced, the elasticity of demand studies

recommended by EPA are unnecessary. Here, too, the

Commission’s effort to comply with NEPA is superficial,

consisting of the economically unsound proposition that be-

cause a variety of factors influence the demand for recycl-

ables, reliable evaluation and quantification of the effect of

one factor, rail rates, is unnecessary. An objective inquiry

into the impact of the rate increase requires at minimum an

economic analysis sufficiently detailed to establish a supply-

demand curve for each major secondary commodity.

Finally, the inadequacy of the Commission’s response to

agency comments in this regard is indicated by its apparent

lack of conviction in its own limited economic evaluation.

While opining that the rate increase will have no impact on

the demand for secondary materials, the Commission is

simultaneously ‘‘holding down” the rate increase on re-

eyclables other than ferrous metal, in the belief that such

action ‘‘should encourage the movement and recycling of

commodities.’’ (Appendix, p. 574).

e

l4a

Similarly, in Ex Parte 295, as to certain scrap commodi-

ties, the Commission has reached conclusions contrary to

those of its cursory analysis in Ex Parte 281. Thus, in Ex

Parte 295 the Commission has recently concluded as to a

3% rate increase on nonferrous scrap:

‘‘[An estimated [additional] 3,097 tons of metal will be

annually required from virgin ores. An increased yearly

power consumption of 21.8 million kilowatt hours can

be expected, with an increase in pollutant emissions

of about 15 tons per year. (ICC, Final Environmental

Impact Statement, Ex Parte 295, Increased Freight

Tie and Charges, 1973—Recyclable Materials p. 2-

13.).

With respect to iron and steel scrap, the Commission now

says thatea rail freight increase of 3 per cent on scrap

being transported for recycling will result in:

‘an expected annual decrease in recycled scrap of...

67,000 tons ..., resulting in additional mining require-

ments for 156,000 tons of domestic ore, 58,300 tons of

coal and 14,700 tons of limestone and dolomite. The

processing of additional ore is expected to require an

increase of 324 thousand megawatt hours; increased

pollutants emitted are estimated as 4,500 tons (on a

controlled basis).’’ (p. xiv)

Moreover, the Commission now acknowledges that:

‘*In the long term, the effect of the proposed 3 per

cent rate increase will be to perpetuate and increase

any inequities that may exist in the rail freight struc-

ture between primary and secondary commodities.

Such an effect applies particularly to waste paper and

to non-ferrous metals for which the Interstate Com-

merce Commission has computed differentials in favor

of primary materials. [,]’’ (p. xv-xvi) :

and that:

7

é

“‘to the extent that [the proposed 3 percent rate in-

croanat

decreased the movement of scrap and brought

15a

about a corresponding increase in the consumption of

virgin metal, there may be adverse effects on the envi-

ronment ..., relating not only to accumulation of solid

waste but also to the secondary consequences of re-

source consumption, higher level of pollutants dis-

charged during processing, and—most of all—greaily

increased demands for energy: (p. 2-3)

“*In this connection, strong arguments can be made,

generally and qualitatively, that by increasing the total

costs of recycling, raising the rail freight rates will

significantly decrease scrap reclamation.’’ (p. 2-19)

A second area of agency comments concerns the necessity

for determining whether the proposed rate increase, in its

cumulative effect over the long-term, could deter invest-

ment in the recycling industry. On the one hand the lack of

capital investment in the recycling industry adversely

affects the demand for recyclables. Yet because the Com-

mission has failed to determine the importance of trans-

portation rates to the long-term demand for recyclables, it

cannot adequately evaluate the impact of a rate increase on

capital investment. Such an impact, were it to occur, could

in turn reduce the long-term demand for recyclable com-

modities,

The importance of such a determination is illustrated by

one example involving the Commission’s finding that

electric are furnaces are expected to produce a growing

percentage of the nation’s total steel output. These

furnaces are not integrated to the ore mining industry and

can utilize nearly 100% ferrous scrap. Understanding

whether the rate increase would impede the commercial

development of such furnaces is necessary in order to

evaluate thoroughly the environmental implications of the

rate increase.

The Commission also failed to respond adequately to

agency comments suggesting an analysis of alternatives

4

fe: . - ae a

a = At.

l6a

to the proposed rate increase. CEQ and EPA com-

mented that an assessment of the necessity for the proposed

rate increase and an evaluation of alternatives entails

understanding the extent to which the current rates are

cost-based. (Appendix, pp. 705, 708) The feasibility of

any rate ‘‘hold-down”’ as an alternative would in part be

determined by the degree to which the current rates are

cost-based. In particular CEQ and EPA requested a

determination of whether secondary materials make a pro-

portionally greater contribution to railroad costs than do

competing virgin materials.

The General Services Administration also criticized the

draft impact statement for failing to analyze the feasibilty

of a rate ‘‘hold-down”’ as an incentive .to more recycling.

(Appendix, p. 597). The Department of Commerce

similarly pointed out that the Commission had yet to’

evaluate the impact of a rate increase on a rate structure

which provides little or no incentive for transporting en- .

vironmentally charged materials. (Appendix, p. 578).

The Commission’s response to all proposals that the

alternative of a rate ‘‘hold-down’’ be explored consisted

primarily of a dissertation on ICC rate-setting criteria.

(Appendix, pp. 213-236). Such a discussion contributed

nothing toward answering the questions posed. The

Commission has yet to indicate what portion of the trans-

portation rates and the rate increase is attributable to

railroad cest, what portion is allocable to non-cost char-

stron ai whether recyclables are contributing a pro-

portionally greater share to railroad costs.

Without knowing what shipping costs are it is most

difficult to weigh the environmental effects of shipping

greater or lesser amounts of scrap against the cost of pro-

viding the services. Evaluating the feasibility of a major.

alternative, a ‘‘rate holdodown’’, is therefore impossible.

As the Department of Commerce stated in reviewing the

17a

Commission’s draft environmental statement, ‘‘There is'

need for solid indenendent analysis that considers new

economic realties.’’ (Appendix, p. 573).

Such superficial response to agency recommendations is |

illustrated by the Commission’s reply to CEQ’s suggestion

that a ‘‘hold-down’’ on rates for recyclables be imposed

pending adequate. evaluation of the environmental impact

of the ‘rate increase. The Commission stated that such

would be ‘‘wholly at odds with the achieving of a cost-

related pricing structure.’ (Final KIS, at p. 190). Yet

when presented with EPA’s proposal to determine whether

the rate increase for each commodity was cost justified,

the Commission responded that such an evaluation was ‘‘so

far out of line with the fabric of rate regulation in

America that the proposal could not have been considered

a practical alternative.”’ (Final EIS, p. 194).

Furthermore, EPA suggested that several other alterna-

tives to a general rate increase be investigated, including

the establishment of incentive loading rates (similar to

non-ferrous schedules already implemented), improved

loading methods, more efficient car desgns, and more

efficient scheduling. (Appendix, p. 711).. Yet, the Com-

mission, while conceding that the railroad industry: has

tended to cling to all too many inefficient and uneconomical

practices, asserted as its singular evaluation of the pro-

posed alternatives that it does not ‘‘believe’’. such require-

ments can bring about more efficient carrier management.

(Final EIS, p. 199). .

In conclusion, it is EPA’s view that the Commission’s

response to these and other important agency recommenda-

tions reflects a shallow evaluation of the environmental

impacts of and the alternatives to the proposed rate in-

crease on recyclables. As the Department of Interior

noted of the Commission impact statement, ‘‘. . . instead

of an impact appraisal, the main thrust of the discussion

18a

is the justification of increased rail freight rates.’’ (Ap-

pendix, p. 703). Such an impact statement does not, in

EPA’s opinion, comport with the “good faith reasoned

analysis’’ required where comments of ‘‘sister agencies

disclose new or conflicting data or opinions that cause con-

cern that the agency may not have fully evaluated the

project and its alternatives.’ Silva y. Lynn, 482 F.2d

1282, 1285 (1st Cir., 1973).

Sincerely,

/8/ Rosert V. Zener

Robert V. Zener

General Counsel