The twentieth-century tribulations of the American maritime industry have been well-documented in the history of the legislation which has been enacted for its protection and in the judicial antecedents of this case.
In brief and general summary, the U.S. merchant marine has been so beset by circumstances - including, inter alia, large subsidies given by other trading nations to their own flag fleets, and the higher wages, safety standards, and costs of operation obtaining aboard its own - that it has been rendered largely uncompetitive with foreign merchantmen at sea. To redress its competitive disadvantages and encourage American shipping abroad, therefore, Congress has for a number of years authorized construction and operating differential subsidies ("CDS" and "ODS," respectively) to be paid by the government for ships to be built in U.S. shipyards which are destined for carriage in foreign commerce under the U.S. flag. 46 U.S.C. App. §§ 1151-61. Only U.S.-flag vessels which have received no construction or operating differential subsidies, however, are eligible to participate in an artificial domestic shipping market from which both foreign carriers and government-subsidized U.S.-flag ships are excluded by Section 27 of the Merchant Marine Act of 1920 (the "Jones Act"), 46 U.S.C. App. § 883 (1982 & Supp. I 1983), and Section 506 of the Act of 1936, 46 U.S.C. App. § 1156 (1982 & Supp. I 1983). The U.S.-flag fleet is, thus, divided generally into two distinct segments: the so-called "Jones Act fleet," operating exclusively in the protected U.S. domestic trade, safe from all but intramural competition; and the subsidized overseas fleet, permitted, as a matter of policy, to operate only in foreign commerce.
Even with the substantial help of government subsidies, however, U.S.-flag tankers have fared poorly in the international mercantile competition over the course of the last decade. Primarily as a result of market forces beyond the United States' - or any one nation's - control, world shipping rates have fallen below the break-even costs of the subsidized American industry. At the same time, however, not altogether by coincidence, the domestic market has flourished, especially down the West Coast en route from the Alaskan oil fields to Panama. As a result, since the late 1970s, substantial pressure has been building to relax the strictures of Section 506 of the Act and admit subsidized tankers to the domestic trade to share the bounty.
In 1980, the Supreme Court held the Secretary to have authority to release a single financially-distressed CDS vessel permanently from its foreign trade commitment, provided the unamortized portion of its subsidy were repaid with interest. Seatrain Shipbuilding Corp. v. Shell Oil Co., 444 U.S. 572, 63 L. Ed. 2d 36, 100 S. Ct. 800 (1980). Although the Seatrain case involved but one ship in unique circumstances of duress upon which the Supreme Court dwelt at length in its opinion, shortly after the decision MarAd issued what it called an "interim" rule of general applicability which would have permitted certain other vessels to repay their CDS to gain admission to the domestic trade, upon a showing of exceptional circumstances and after a determination that no favorable employment opportunities existed for them in foreign commerce. Then, pursuant to its "interim" rule, MarAd granted an application for repayment of its CDS by a second large tanker.
The "interim" rule was immediately challenged by plaintiff Independent U.S. Tanker Owners Committee ("ITOC") on both procedural and substantive grounds vaticinal of most of those it asserts here.
In September, 1982, the court of appeals struck down the "interim" rule for MarAd's failure to accompany it with a statement of basis and purpose, and remanded to the district court with instructions to vacate the "interim" rule and order new rulemaking proceedings. Independent U.S. Tanker Owners Committee v. Lewis, 690 F.2d 908, 918-20 (D.C. Cir. 1982) (hereinafter cited as " ITOC ").
On January 31, 1983, therefore, the Department of Transportation published the immediate ancestor of the instant payback rule, which purported to permit the repayment of its CDS by any vessel without first requiring a demonstration of economic necessity. 48 Fed. Reg. 4408 (1983). While the rulemaking was pending, however, Congress acted, on three separate occasions, to preclude implementation of the proposed rule for finite periods, the last prohibition expiring May 15, 1985.
A week earlier, anticipating the removal of the impediment, the Secretary promulgated the instant payback rule, in its present and final form, 50 Fed. Reg. 19,170 (1985)(to be codified at 40 C.F.R. pt 276)(proposed May 7, 1985), to become effective one month later. The payback rule provides, in substance, that any tanker vessel built with CDS may repay its subsidy, with interest, in return for permission to permanently enter the domestic trade, conditioned only by a requirement that the repayment obligation be satisfied by June 8, 1986.
During the two-year hiatus occasioned by Congress' moratoria on implementation of the rule, plaintiffs, or some of them, petitioned the Secretary to reopen the record to receive comments with respect to "changed circumstances" in the interim. But, although it appears from the record that some additional comments were received informally from other interested parties, plaintiffs' petitions to reopen were formally denied, in conjunction with the promulgation of the rule in final form, on the ground that the reopening of the record was both unnecessary (the Secretary having been already sufficiently apprised of plaintiffs' positions) and would serve only to delay the matter further. The Secretary also stated that she was receiving "up-to-date" information from the Department of Energy and other sources, bringing to her attention directly any "changed circumstances."
The Secretary's Authority Under the Act
Notwithstanding the Seatrain case, supra, plaintiffs say, the Secretary lacks authority under the Act to lift domestic trading restrictions on all CDS-built vessels by means of single rule which applies automatically to the entire subsidized tanker fleet without regard to circumstances. The Secretary maintains the issue was determined in her favor by the Supreme Court in Seatrain.
It is certainly arguable that Seatrain was limited to its facts. The case concerned the approval of the application of a single CDS tanker for admission to the domestic trade, not an entire flotilla, and in upholding the Secretary's authority to allow the application conditioned upon a repayment of its CDS, the Supreme Court remarked upon market conditions, took into consideration the straitened circumstances of the vessel's owner, and then concluded that nothing in the Act suggested that "the Secretary is forbidden to approve transactions of this sort under these circumstances." 444 U.S. at 588 (emphasis added).
On the other hand, it is manifest from the balance of the Seatrain opinion that the Supreme Court ruled as it did as a matter of statutory construction, not in review of an exercise of administrative discretion. "The primary question for decision" was, as the Court stated it, "whether the Secretary . . . may terminate the restrictions imposed pursuant to [the Act] when the owners of a vessel constructed with a CDS repay that subsidy in full." Id. at 574. It said nothing about the plight of the applicant or the state of the market. And, in reversing a decision of the court of appeals for this circuit which had found, in the express provision in Section 506 of the Act for temporary admissions of CDS vessels to the domestic trade upon specified conditions, an implied prohibition of permanent admissions upon any conditions, the Court said:
The Court of Appeals was of the view that the specific exceptions in § 506 marked the limit of the Secretary's authority to approve entry of subsidized vessels into the domestic trade. By its logic, detail, and legislative history, the panel majority reasoned, that section prohibits transactions like the one before us. In consequence, that court found the broad sweep of the Secretary's power under the balance of the Act irrelevant, the express language giving the Secretary authority to make and amend contracts unimportant, and the policy arguments advanced by the Secretary unpersuasive.
We disagree. On the face of the statute, the Secretary's broad contracting powers and discretion to administer the Act seem to comprehend the authority urged by petitioners here.
Id. at 587-88 (footnote omitted). "In conclusion," it said, "we hold that the Act empowers the Secretary to approve full-repayment/permanent-release transactions of the type at issue here. . . . We express no view upon the merits of the Secretary's particular exercise of discretion with regard to the [vessel involved] since that issue is not before us." Id. at 597.
This Court concludes that Seatrain did confirm the discretionary authority of the Secretary under the Act to admit CDS-built vessels to the domestic trade, upon repayment of their subsidies, in circumstances otherwise undefined.
It must, therefore, consider whether the authority can be exercised without regard to individual circumstances at all other than generic market conditions for U.S.-flag tankers and consumers of their services.
Conformity of the Payback Rule With the Act
Plaintiffs take issue with the payback rule itself in multiple respects. Assuming her discretion in the matter, they assert, the Secretary has abused it grievously by promulgating a rule with so drastic and precipitous an impact upon an entire industry that it will confound each of the purposes the Act proclaims for itself.
Plaintiffs maintain that the rule would compromise national defense because it would deplete the merchant fleet of the smaller, so-called "handy-tankers" which are most useful for military purposes. They argue that the rule imperils civilian commerce, because it abrogates the two-fleet principle embodied in the Jones Act, invites the en masse abandonment of foreign commerce by U.S.-flag vessels altogether, and threatens the vitality of the domestic trade fleet by suffusing the market with a vast overtonnage. The decline of the domestic fleet would, in turn, diminish the number of jobs available for American merchant seamen. Moreover, the intensified competition would most severely affect the newer tankers in the ANS fleet, according to plaintiffs, because those ships are, as a rule, both debt-ridden and not fully written off, and must, therefore, operate at higher rates in order to cover costs. The result will be, according to plaintiffs, contrary to the Secretary's expectations, antithetical to the Act's objective of a modern and efficient merchant marine with the "safest" and "best" equipment aboard. Finally, plaintiffs submit that the influx of existing large CDS tankers into the ANS trade will significantly reduce demand for new tankers for the domestic trade, historically the largest consumer of new ship construction, thus idling the shipyards where they might have been built.
The Secretary's response to each point invokes the same Darwinian principles, but the points are, each and all, touched upon, directly or indirectly, in her commentary accompanying the rule and the administrative record. Confronted with a surfeit of underemployed U.S.-flag vessels generally, she says, and an artificially dislocated market for their services, she has determined to dispense with at least one of the artifices within her control in the hope that disinhibited competition will, over time, distill the best U.S.-flag merchant tanker fleet of which present circumstances will admit, although admittedly less than everyone would desire.
Plaintiffs' objections are all, in substance, simply that the Secretary has grossly underestimated the rule's sanguinary consequences, and that its ultimate effect will not be the survival of the fittest but the extinction of the entire species. But having been presented with an agency record which speaks to all the concerns to which plaintiffs give expression, this Court cannot, within the limits of the scope of the review it is permitted to make of the payback rule, find that the Secretary has failed to give consideration to the relevant factors or has made a clear error of judgment in her disposition of them. See Center for Auto Safety v. Peck, 243 U.S. App. D.C. 117, 751 F.2d 1336, 1342 (D.C. Cir. 1985) quoting Motor Vehicle Manufacturers Ass'n, Inc. v. State Farm Mutual Automobile Insurance Co., 463 U.S. 29, 43, 103 S. Ct. 2856, 77 L. Ed. 2d 443 (1983).
The Secretary's Consideration of Post-Comment Data
During the two-plus years the payback rule lay dormant at congressional direction, the domestic shipping market obviously did not. Oil was shipped from ANS, and data was generated with respect thereto, which were not in anyone's contemplation when the payback rule was first published in 1983. Both plaintiffs and the Secretary draw upon the data to make projections and predictions for the future. The Secretary continues to foresee a decline in shipping costs with some, albeit acceptable, attrition of the least efficient vessels from the Jones Act fleet. Plaintiffs say the figures are considerably more lugubrious: they forebode a glut of tanker tonnage relative to anticipated ANS oil production which will so depress the market that the domestic merchant tanker fleet would unlikely survive the carnage.
Relying upon supporting affidavits submitted with their motions, plaintiffs argue that the Secretary has been led into fundamental misjudgments of fact and policy that public comment would have brought to light;
specifically, they contend that the estimates of present costs, charter rates and fuel consumption, as well as predictions of future Alaskan crude oil production found in the Regulatory Impact Analysis ("RIA") of May, 1985, accompanying (but not published with) the payback rule (A.R. 2412-2488), were erroneous and led to grossly overstated estimates of savings that could be expected as a result of the rule. Plaintiffs assert that the Secretary's refusal to reopen the comment period in May, 1985, to allow them to expound upon the changed economic conditions, together with her own reliance on data compiled for her alone after the close of the comment period, violates § 553(c) of the APA. See International Harvester Co. v. Ruckelshaus, 155 U.S. App. D.C. 411, 478 F.2d 615, 649 (D.C. Cir. 1973); Portland Cement Association v. Ruckelshaus, 158 U.S. App. D.C. 308, 486 F.2d 375, 393 & n.67 (D.C. Cir. 1973).
As a general proposition, however, a new round of notice and comment is required only where the data relied upon is entirely new and is critical to the agency's determination. See Community Nutrition Institute v. Block, 242 U.S. App. D.C. 28, 749 F.2d 50, 58 (D.C. Cir. 1984) (distinguishing Portland Cement, supra). Where subsequent studies or information gathered after close of the comment period merely expand upon or confirm earlier studies' conclusions, or enhance the reliability of earlier data, failure to provide an opportunity for comments on such information is not fatal to the rule it purports to underlie. Id.
The Secretary maintains that the data she considered was neither "entirely new" nor "critical," and that, as the information went merely to a "predictive judgment" on her part, the Court should defer to her expertise in any event. She also points out that plaintiffs had the right, and ample opportunity, to submit their own up-to-date information under Department of Transportation regulations had they desired to do so, see 49 C.F.R. § 5.27, and that other comments were, in fact, received and considered.
It is, however, immediately apparent that the payback rule published in May, 1985, is identical with the rule published in January of 1983 (save for the repayment terms and the one-year time limit), and the reasons given for it are essentially the same reasons advanced in 1983, as illuminated by the comments received. It is, thus, clear that the post-record data, whether right or wrong, did not shape the rule but, as the Secretary suggests, the absence of a rule may have shaped the data.
The rule-making process must end at some point. As the court of appeals stated in ITOC, supra, when it last remanded to the agency for a resumption of the rulemaking proceedings more than three years ago:
An agency is not obliged to publish a tentative opinion for comment. Otherwise, an absurd and endless process could [ensue]: notice and comment procedures followed by a tentative opinion followed by comment followed by a new tentative opinion (necessary to take account of and respond to the new set of comments) and so on.
690 F.2d at 926. Moreover, in such rulemaking proceedings generally, it is not only entirely permissible for an agency to consult extra-record information to give meaning to that upon which its decisions are based, but
interpretation of, and assignment of weight to, data such as these is a task which particularly calls for expert judgment. In interpreting such data and in making predictions based on them, the [agency] must be expected to make use of the experience it has gained through years of dealing with the problem. . . . Frequently, statistics, scientific reports and studies will be amenable to various interpretations and effective regulation requires that the [agency] bring to bear the full range of its knowledge, garnered from whatever source, in making the interpretation on which it bases important policy decisions.