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STUDENTS CHALLENGING REGULATORY AGENCY PROCEDURES

February 19, 1974

Students Challenging Regulatory Agency Procedures (SCRAP) et al.
v.
United States, Interstate Commerce Commission and Aberdeen and Rockfish Railroad Co. et al.



The opinion of the court was delivered by: WRIGHT

WRIGHT, Circuit Judge: Plaintiff and plaintiff-intervenors challenge an order of the Interstate Commerce Commission (ICC) authorizing railroad rate increases on shipment of recyclable commodities on the ground that the Commission has failed to comply with the prescriptions of the National Environmental Policy Act (NEPA), 42 U.S.C. § 4321 et seq. (1970). Both plaintiffs and defendants have moved for summary judgment. We find that the Commission's efforts to meet the commands of NEPA were substantially deficient. We thus vacate the Commission's order authorizing the rate increases on recyclable commodities and remand the proceeding to the Commission for fulfillment of its NEPA obligations. However, because of our uncertainty concerning the meaning of the Supreme Court's decision last term in Atchison, Topeka & Santa Fe R. Co. v. Wichita Board of Trade, 412 U.S. 800, 37 L. Ed. 2d 350, 93 S. Ct. 2367 (1973), we refrain from issuing an injunction restraining the railroads from collecting the increased rates pending the Commission's reconsideration.

I

 This case has had a long and complicated history. Inasmuch as it has produced two previous opinions *fn1" by this court *fn2" and one by the Supreme Court, *fn3" however, we shall attempt to set forth only those facts relevant to the motions now before us. Having secured Commission approval of a two and a half per cent temporary emergency surcharge in February 1971 on nearly all freight rates, the nation's railroads on March 17, 1972 filed tariffs with the Commission for permanent selective increases averaging four percent on most commodities. Under the Interstate Commerce Act tariff changes filed by carriers go into effect automatically unless the Commission deems that an investigation of the lawfulness of these tariffs is advisable and that the rates should be suspended pending such an investigation. 49 U.S.C. § 15(7) (1970). On April 24, 1972 the Commission announced its intention to investigate the permanent increases and suspended these increases for the full seven-month period permitted by Section 15(7).

 Students Challenging Regulatory Agency Procedures (SCRAP) then commenced this action, contending that NEPA compelled the Commission to prepare and consider an environmental impact statement before permitting any rate increases - including the temporary two and a half per cent surcharge. SCRAP, which was later to be joined by other environmental groups and scrap dealer associations, *fn4" argued that the rate increases discouraged the environmentally desirable use of recyclable commodities not only by raising the costs of shipping recyclables, but also by aggravating "the preexisting disparity in shipping costs between these materials and the primary goods with which they compete." *fn5" In response to this theory, we held that even the temporary surcharge was a major action "significantly affecting the quality of the human environment," 42 U.S.C. § 4332(2) (C), and that the Commission therefore had violated NEPA by not preparing and considering a NEPA impact statement before issuing its order permitting the temporary surcharge. We held that any challenge to the permanent increase was not ripe for review inasmuch as the Commission had not then yet issued an order approving this increase. We did, however, retain jurisdiction to ensure that the Commission would comply with NEPA. *fn6" We further issued a preliminary injunction restraining the temporary surcharge insofar as it applied to recyclable commodities. The Supreme Court reversed the injunction on June 18, 1973. United States v. SCRAP, 412 U.S. 669, 93 S. Ct. 2405, 37 L. Ed. 2d 254 (1973). Relying on Arrow Transportation Co. v. Southern R. Co., 372 U.S. 658, 10 L. Ed. 2d 52, 83 S. Ct. 984 (1963), the Court held that Section 15(7) vested exclusive jurisdiction in the Commission to suspend rates pending its final decision on their lawfulness. *fn7"

 Meanwhile the Commission's investigation of the proposed permanent increases culminated in a hearing consisting of submission of briefs and oral argument by concerned parties. Though the Commission had told the Chief Justice, in connection with its application for a stay of our order against the temporary surcharge, as well as this court, that it was developing an impact statement, no statement was prepared for consideration at this hearing or even for consideration by the Commission before issuing its decision on the permanent increases. That decision, which was issued October 4, 1972, approved most of the selective increases. Ex Parte No. 281, Increased Freight Rates and Charges, 1972, 341 ICC 288 (1972). The decision included some discussion of environmental considerations and limited the rate increases on nonferrous scrap to three per cent, but it generally concluded that the new tariffs would not significantly affect the quality of the human environment and that there was thus no necessity for a formal impact statement. The Commission's failure to prepare a formal statement provoked vehement protestations from the President's Council on Environmental Quality (CEQ), from the Environmental Protection Agency (EPA), and from plaintiffs. *fn8" Plaintiff SCRAP filed with this court on November 7, 1972 a motion to enjoin the approved increases. On the same day as this filing, the Commission suddenly shifted its position by suspending, until June 1973, rate increases on all goods being shipped for purposes of recycling and by reopening its investigation in Ex Parte No. 281. *fn9" The Commission stated that the proceeding was reopened for "the limited purpose of further evaluating, in accordance with the environmental effects of increased railroad freight rates and charges on the movements of commodities being transported for the purpose of recycling * * *." *fn10" In light of the Commission's action, we denied SCRAP's request for a preliminary injunction. We found that no relief was necessary for the suspended increases on recyclables and that there was not sufficient likelihood that the plaintiffs would be successful in showing that an impact statement was required before increasing rates on nonrecyclables. We reserved decision on the merits.

 The Commission proceeded to prepare its statement on the environmental impact of the recyclable rate increases. The Commission's draft statement was issued March 5, 1973. It was circulated to several concerned Executive agencies and departments and to all of the parties in this action. Not only the plaintiffs but also the Executive agencies and departments, including EPA, CEQ, General Services Administration, Department of the Interior, and Department of Commerce, responded with extensive comments critical of this draft statement and its conclusions. These comments, although acknowledged by the Commission in its final statement, did not move the Commission to change in any substantial way its conclusions or even its analysis. The Commission denied the request of plaintiffs to schedule a new set of hearings in the reopened proceedings. The Commission served its final environmental impact statement on May 7, 1973. The statement's analysis was limited to the marginal impact of the most recent rate increases; it stated that a general rate increase proceeding did not provide an appropriate occasion to examine whether the underlying rate structure discriminated against recyclable commodities with significant adverse environmental consequences. *fn11" Though it contained no rigorous economic analysis of the responsiveness of the demand for recyclables to changes in transportation costs, the statement's conclusion echoed the Commission's original position in its October 1972 order that the increases would not have a significant adverse effect on the environment. The statement further pronounced that even if some adverse environmental impact could be anticipated *fn12" the increases would be justified by the need to ensure a viable and efficient railroad system. The Commission did not use this staff-prepared statement and the critical comments on the draft statement to develop a new opinion to supplant or even supplement its October opinion. Instead the Commission merely appended a one-sentence order to the statement's back page which adopted the entire statement as part of its prior opinion on the rate increases and discontinued Ex Parte No. 281.

 On May 30, 1973 SCRAP and plaintiff-intervenor Environmental Defense Fund (EDF) filed a motion in this court for a preliminary injunction against the rate increases on recyclable commodities which the railroads intended to place in effect when the suspension period ended on June 10. On June 7 this court, finding a sufficient likelihood that plaintiffs would be successful in their present challenge to the rate increases, issued a temporary injunction restraining the Commission and the railroads from collecting the increases "until further order of this court." This injunction was stayed by Chief Justice Burger. On November 19, 1973 the Supreme Court vacated the injunction and remanded the case to this court for further consideration in light of Atchison, Topeka & Santa Fe R. Co. v. Wichita Board of Trade, supra.13

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

 II

 We must first address the contention of the railroads, who have intervened as defendants, that we lack jurisdiction to review the Commission's compliance with the commands of NEPA. The railroads' position is based on cases dating back almost 40 years which refused to review challenges of shippers to general revenue orders like those of October 4, 1972 and May 2, 1973. *fn14" These decisions were not compelled by any statutory limitation on the courts' power; three-judge District Courts have jurisdiction "to enforce, suspend, enjoin, annul or set aside in whole or in part any order of the Interstate Commerce Commission * * *." 28 U.S.C. § 2321 (9170); 28 U.S.C. § 1336 (1970). See 28 U.S.C. §§ 2322-2325 (1970). The decisions were instead predicated upon the judicially developed doctrines of ripeness and exhaustion of administrative remedies. The courts stressed that the Commission's approbation of a general rate increase under Section 15(7) was merely an acceptance of the railroads' need for more revenue, that the shippers could challenge the reasonableness of particular rates affecting them under Sections 13(1), 15(1) and 16(1) of the Interstate Commerce Act, 49 U.S.C. §§ 13(1), 15(1), 16(1) (1970), and that only in a decision pursuant to such a challenge did the Commission render a judgment on the reasonableness of particular rates as applied to particular shippers. The courts thus reasoned that to review carriers' challenges to a Section 15(7) order would be to interfere at an intermediate stage in the rate-making process before the carriers had exhausted their remedies before the Commission.

 However, as we indicated in our first opinion in this case, *fn15" we do not feel restrained by these cases from reviewing plaintiffs' challenges to the Commission's orders. First, the precedential force of the cases is now in substantial doubt. Two of the most recent, Alabama Power Co. v. United States, D.D.C., 316 F. Supp. 337 (1969), and Atlantic City Electric Co. v. United States, S.D.N.Y., 306 F. Supp. 338 (1969), were affirmed without opinion by only an equally divided Court, 400 U.S. 73, 91 S. Ct. 259, 27 L. Ed. 2d 212 (1970). Only last term the Court indicated that the jurisdictional question presented by these cases, while a serious one, was not settled. *fn16" In Alabama Power and Atlantic City the shippers' challenges were directed to the Commission's decision that the general increases were warranted by the railroads' revenue needs rather than to the reasonableness of any particular rates. We adhere to the view expressed in the dissent in Alabama Power that challenges such as these can best be considered in direct review of the Commission's Section 15(7) decision rather than "in countless ratemaking proceedings involving individual commodities." *fn17" The instant case does not present challenges to the reasonableness of particular rates on particular railroads between particular points; it presents challenges to the Commission's determination that the railroads' general revenue needs justify the costs to shippers and to the environment of a general rate increase on recyclables. *fn18" The Commission has made what it believes to be its final decision on this general balancing; it surely does not intend to reconsider this decision after a Section 13 challenge to a particular rate.

 We do not, however, rest on an application of the analysis advanced in the dissent in Alabama Power. For as stated in our first SCRAP opinion, *fn19" the cases cited by the railroads are all distinguishable from a case challenging the Commission's compliance with NEPA in approving a general rate increase. We first note that however adequate a Section 13 proceeding might be to a shipper who questions the railroads' need for a general rate increase, it is at least questionable that environmental groups such as SCRAP have standing to initiate Section 13 proceedings during which they could attempt to contest the Commission's compliance with NEPA. Sections 13(1), 15(1) and 16(1) permit any person or association to complain of carrier action in contravention of the Interstate Commerce Act and empower the Commission to investigate such complaints and remedy any violation of the Act, including granting reparations for unreasonable or prejudicial charges on particular items shipped. It is suggested that an environmental group, while it could not obtain reparations, should be able to complain that a particular charge on a particular item is unreasonable because of its environmental effects. Thus if SCRAP could initiate an investigation on this theory, it could argue further that before rejecting the complaint the Commission would have to prepare and consider an environmental impact statement. But we know of no Commission order or judicial opinion accepting this theory and it is thus too speculative and too unrealistic to support a denial of jurisdiction. It is true that two scrap dealers associations have intervened in this action to help champion the environmental cause and that these associations or their members may bring Section 13 challenges to particular rates which they could argue the Commission could not reject without compliance with NEPA. But we cannot rest a holding on the fortuity that here shippers as well as environmental groups challenge the Commission's compliance with NEPA. Moreover, to refuse to consider the challenges of environmental groups to agency compliance with NEPA because economically interested parties might make similar challenges in later proceedings would significantly dilute the Supreme Court's holding, on review of our first opinion in this case, that SCRAP has full standing, equal to and not derived from the standing of economically interested parties, to seek review of Commission action which allegedly harms SCRAP'S members in their use of the environment. *fn20"

 Our reliance on NEPA in finding jurisdiction is not inconsistent with the Supreme Court's admonition in its SCRAP opinion that "NEPA was not intended to repeal by implication any other statute." *fn21" The Court did not suggest that NEPA was to be ignored by the courts in considering threshold jurisdictional issues. *fn22"

 The Court in SCRAP held only that NEPA did not revive judicial power that had been previously explicitly eliminated by Congress. 412 U.S. at 692-695. This time we do not wield NEPA in the face of any statutory limitations on our jurisdiction; there is nothing in the Interstate Commerce Act which precludes our jurisdiction to review Section 15(7) orders, whatever the limits it imposes on our injunctive power over carriers. We, like the previous courts which, in a non-NEPA context, declined to review general rate orders, are applying broad jurisdictional provisions, 28 U.S.C. §§ 1336, 2331, giving us power to review "any order" of the ICC. These provisions demand supplementation by other statutes and by judicially developed doctrines which limit court review of agency action. As stated above, previous courts found two of these doctrines to preclude ...


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