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STUDENTS CHALLENGING REGULATORY AGENCY PROCEDURES

July 10, 1972

STUDENTS CHALLENGING REGULATORY AGENCY PROCEDURES (S. C. R. A. P.), Plaintiff, and Council On Environmental Quality, Involuntary Plaintiff, and Environmental Defense Fund et al., Plaintiffs-Intervenors
v.
The UNITED STATES of America and The Interstate Commerce Commission, Defendants, and The Aberdeen and Rockfish Railroad Company et al., Defendants-Intervenors



The opinion of the court was delivered by: WRIGHT

This case is before us on plaintiff's motion for a preliminary injunction and defendant's cross-motion to dismiss. *fn1" It presents important issues concerning the applicability of the National Environmental Policy Act (NEPA), 42 U.S.C. § 4321 et seq. (1970), to agency rate making procedures. More broadly, it tests once again our commitment "to use all practicable means and measures * * * in a manner calculated to * * * create and maintain conditions under which man and nature can exist in productive harmony, and fulfill the social, economic, and other requirements of present and future generations of Americans." 42 U.S.C. § 4331.

Plaintiff Students Challenging Regulatory Agency Procedures (SCRAP) is an unincorporated association concerned with enhancing the quality of the human environment for its members. SCRAP seeks temporary and permanent relief against Interstate Commerce Commission orders of February 1, 1972 and April 24, 1972 issued in conjunction with Ex Parte 281, Increased Freight Rates and Charges, 1972. These orders permit, with certain exceptions, the nation's railroads to attach a 2.5 per cent surcharge to the normal tariff on all freight shipped until November 30, 1972. The theory of the suit is that this across-the-board increase boosts the cost of shipping recyclable materials and aggravates the preexisting disparity in shipping costs between these materials and the primary goods with which they compete. Plaintiff alleges that this price increase will discourage the environmentally desirable use of recyclable goods and that, hence, the Commission orders are "major Federal actions significantly affecting the quality of the human environment" which, under the terms of NEPA, cannot take effect before a "detailed statement * * * on * * * the environmental impact of the proposed action" is prepared. 42 U.S.C. § 4332(2) (C). *fn2"

 For the reasons given below, we reject each of these contentions. We hold that plaintiff is entitled to a preliminary injunction against implementation of the ICC's April 24 order permitting an extension of the 2.5 per cent surcharge until November 30, 1972. *fn3" We further hold that the Commission should be preliminarily enjoined from permitting the railroads to collect the surcharge until an adequate environmental impact statement has been issued. However, in light of the fact that plaintiff objects to the surcharge only insofar as it increases the shipping costs of recyclable materials, we are restricting our injunction to the movement of these goods. The railroads will be permitted to continue exacting the 2.5 per cent surcharge on the movement of all goods which are not being transported for purposes of recycling.

 I. The Facts

 The Interstate Commerce Act permits carriers to file changes in tariffs with the Commission on their own initiative. If the Commission takes no action on these tariffs, they go into effect as published, although subject to eventual refund if the Commission ultimately finds them unjust or unreasonable. However, the Commission may, if it chooses, suspend the new tariffs for a period of up to seven months while it investigates them. If the Commission finds the rates unreasonable, it may replace them with Commission-made rates. But if the Commission has not completed its investigation in the seven-month period, the suspension is automatically lifted and the carrier-made rates go into effect, although again subject to refund if the Commission finds them unreasonable in its final order. See 49 U.S.C. § 15 (1970).

 In accordance with this order, the railroads refiled the proposed surcharge on January 5, 1972 with a provision that it become effective on February 5. Thereupon, on February 1, the Commission issued the first of the orders attacked by SCRAP. The Commission found that "the increases here proposed are just and reasonable" and that "the involved general increase will have no significant adverse effect on * * * the quality of the human environment within the meaning of the Environmental Policy Act of 1969." The Commission therefore allowed the surcharge to go into effect without suspension, "subject to the conditions that the carrier parties to this proceeding publish upon not less than two days' notice supplements, to become effective on February 5, 1972, (1) providing for an expiration date not later than June 5, 1972, (2) providing that the application of the surcharge or increases in rates and charges on freight in trailer bodies, semi-trailers, vehicles or containers on flat cars, on export and import traffic, proposed by the western and southern carriers be cancelled * * * and (3) providing that the proposed surcharge and increased rates and charges do not apply to shipments originating prior to February 5, 1972 and moving under transit arrangements." At the same time, the Commission held in abeyance the investigation begun by its December 21 order until receipt from the carriers of request to file permanent tariffs with selective increases to replace the surcharge after its expiration.

 This request came on February 28, 1972. The railroads offered to file selective increases averaging 4.1 per cent to go into effect on April 1. On March 6 the Commission issued an order permitting the railroads to republish their proposal, with the selective increases to go into effect no earlier than May 1, 1972. The railroads did so, and on April 24 the Commission issued the second order attacked by SCRAP in which it suspended the 4.1 per cent selective increases for the statutory seven-month period until November 30, 1972, while at the same time permitting an extension of the 2.5 per cent interim surcharge until the end of the suspension period.

 In the meantime, SCRAP and others were engaged in negotiations with the Commission in an effort to secure compliance with NEPA in conjunction with these rate proceedings. Specifically, SCRAP objected to the Commission's failure to issue an impact statement on the effect of the 2.5 per cent surcharge on the shipment and use of recyclable materials. Partly in response to pressure from SCRAP, *fn5" the Commission on March 6 issued a 6-page document entitled "Draft Environmental Impact Statement-Ex Parte 281-Increased Freight Rates and Charges, 1972." The focus of this document is somewhat ambiguous. It could not have been intended to apply to the 2.5 per cent interim surcharge, since this had already gone into effect and, in any event, the Commission strongly contended that no impact statement was necessary in conjunction with the temporary rate increase. But neither does the document on its face appear to deal with the railroads' proposed 4.1 per cent selective increase to take effect on November 30, 1972. Rather, the statement seems to be based on the obviously erroneous hypothesis that the 2.5 percent surcharge would be made permanent after November 30. *fn6" The Commission has never adequately explained why it bothered to prepare a draft impact statement premised on facts it knew to be false, and the reason why the ICC finds itself with the resources necessary to prepare draft statements based on false hypotheses while it is assertedly without resources to prepare impact statements as required by NEPA based on real facts remains one of the enduring mysteries of this case.

 Nonetheless, without stopping to assess its relevance, we merely note that the March 6 statement found that the "imposition of, or failure to impose, a surcharge of 2.5 percent as a permanent part of the railroad rates applicable on freight services might have some impact on the environment; however, based on the varying predictions of the parties in their statements filed to date, it is unclear what the effect would be." The statement proceeds to examine alternatives to an across-the-board increase in extremely cursory fashion, and concludes that "[it] is impossible at this point in the investigation to assess with any certainty the environmental impact of assessment of, or failure to assess, a surcharge on various recyclable materials. The parties are called upon to submit factual data with regard to this issue." SCRAP and the Environmental Defense Fund as well as the President's Council on Environmental Quality (CEQ) and the Environmental Protection Agency all roundly condemned the draft statement as insufficient. Nonetheless, the Commission has as yet filed no additional impact statements, although it has promised to file a final statement some time before the 4.1 per cent selective increase takes effect on November 30.

 With the case in this posture, plaintiff brought this suit to enjoin enforcement of the Commission's February 1 and April 24 orders. *fn7" In addition, plaintiff sought to enjoin the Commission from allowing the permanent rate increase planned for November 30 to become effective before the Commission complied with NEPA. As noted above, we have decided to dismiss that portion of the complaint dealing with the February 1 order as moot and to grant relief with respect to the April 24 order only to the extent that the order permits rate increases on shipment of recyclable goods. Inasmuch as the Commission has as yet taken no final action with respect to the 4.1 per cent selective increase, we also conclude that the lawfulness of this tariff is not ripe for review. In light of the Commission's somewhat disappointing performance to date, however, *fn8" we have decided to retain jurisdiction over this matter so as to insure that any permanent tariffs which are permitted to take effect are preceded by an impact statement in conformance with NEPA and the CEQ Guidelines.

 II. Standing

 As a threshold matter, defendants vigorously contest plaintiff's standing to bring this action. They argue that plaintiff has no more than a general interest in seeing that the law is enforced and that plaintiff's members have failed to distinguish themselves ...


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