Burlington Northern R. Co. v. Surface Transp. Bd.

• Decision Date: 23 May 1997
• Docket Number: No. 96-1229,96-1229
• Citation: 114 F.3d 206
• Parties: BURLINGTON NORTHERN RAILROAD COMPANY, Petitioner, v. SURFACE TRANSPORTATION BOARD and United States of America, Respondents. West Texas Utilities Company, Intervenor.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 206

114 F.3d 206

324 U.S.App.D.C. 352

BURLINGTON NORTHERN RAILROAD COMPANY, Petitioner, v. SURFACE TRANSPORTATION BOARD and United States of America,

Respondents.

West Texas Utilities Company, Intervenor.

No. 96-1229.

United States Court of Appeals, District of Columbia Circuit.

Argued March 18, 1997.

Decided May 23, 1997.

On Petition for Review of Orders of the Surface Transportation Board.

Samuel M. Sipe, Jr., Washington, DC, argued the cause for petitioner. With him on the brief were John D. Graubert, Carolyn Doozan Clayton, Washington, DC, Richard E. Weicher, Schaumburg, IL, and Michael E. Roper, Fort Worth, TX.

Thomas J. Stilling, Attorney, Surface Transportation Board, Washington, DC, argued the cause for respondents. With him on the brief were Henri F. Rush, General Counsel, Ellen D. Hanson, Deputy General Counsel, Craig M. Keats, Associate General Counsel, and Joel I. Klein, Acting Assistant Attorney General, U.S. Department of Justice, John J. Powers III and John P. Fonte, Attorneys.

Kelvin J. Dowd, Washington, DC, argued the cause for intervenor. With him on the brief were William L. Slover and Frank J. Pergolizzi. Andrew B. Kolesar III entered an appearance.

Before RANDOLPH and TATEL, Circuit Judges, and BUCKLEY, Senior Circuit Judge.

Opinion for the Court filed by Circuit Judge TATEL.

TATEL, Circuit Judge:

Petitioner, Burlington Northern Railroad Company, challenges a Surface Transportation Board decision finding the railroad's common carrier rate for coal transport from a Wyoming mine to a Texas power plant unreasonable and ordering the rate substantially lowered. Rejecting Burlington Northern's argument that the Board's decision is invalid because a rate filing was ordered prematurely and finding substantial evidence that the railroad dominated the market for the complaining utility's coal shipments, we conclude that the Board properly exercised its statutory authority to review Burlington Northern's rate. We also uphold the Board's determination that the rate was unreasonably high, finding that its application of a standalone cost constraint--designed to limit monopoly pricing--was both methodologically sound and supported by substantial evidence. Finally, we reject Burlington Northern's contention that the Board impermissibly prescribed the rate's terms of service. Accordingly, we deny the petition for review.

I

Beginning in 1986, Burlington Northern transported coal from the Rawhide mine in Wyoming's Powder River Basin to intervenor West Texas Utilities Company's (WTU) Oklaunion generating station in Vernon, Texas. Anticipating expiration of its contract with Burlington Northern, WTU filed a complaint with the Interstate Commerce Commission in January 1994, asking the Commission to order Burlington Northern to publish a tariff for common carrier service on the Rawhide-Oklaunion route. After the Commission issued the requested order in August 1994, Burlington Northern filed a tariff setting the rate for coal transport at $19.36 per ton. Arguing that the Commission lacked authority to require a tariff filing prior to the expiration of WTU's contract, Burlington Northern petitioned this Court for review of the filing order.

Several months later, in November 1994, WTU amended its complaint before the Commission to allege that Burlington Northern's proposed rate was unreasonably high, prompting the Commission to initiate proceedings to review the tariff. After the parties submitted their final briefs to the Commission in September 1995, WTU's contract with Burlington Northern expired and its traffic began moving at the disputed common carrier rate. In February 1996, while a decision in the rate proceeding was pending, this Court granted Burlington Northern's petition for review of the August 1994 filing order, holding that the Commission lacked authority to require Burlington Northern to publish a tariff because, at the time of the order, WTU's traffic was still moving under contract. Burlington Northern R.R. v. Surface Transp. Bd., 75 F.3d 685 (D.C.Cir.1996).

Inheriting the case from the Commission but applying the law in effect prior to the ICC Termination Act of 1995, Pub.L. No. 104-88, 109 Stat. 803 (1995), the Surface Transportation Board ruled on WTU's complaint in April 1996. West Texas Util. Co. v. Burlington Northern R.R., No. 41191, 1996 WL 223724 (S.T.B. April 25, 1996). After concluding that this court's earlier decision did not preclude review of a tariff then in use, the Board asserted jurisdiction to determine the reasonableness of Burlington Northern's rate based on the Board's finding that the railroad had "market dominance" over WTU's traffic. See 49 U.S.C. §§ 10701a(b)(1), 10709 (1994). Applying the stand-alone cost constraint established in the Commission's Coal Rate Guidelines, 1 I.C.C.2d 520, 542 (1985), aff'd sub nom. Consolidated Rail Corp. v. United States, 812 F.2d 1444 (3d Cir.1987), the Board found that the published rate was unreasonably high. Because the parties' competing methodologies for setting WTU's rate based on the Board's stand-alone cost analysis each yielded a rate below 180 percent of Burlington Northern's variable costs, the Board's jurisdictional threshold, see 49 U.S.C. § 10709(d)(2), the Board ordered Burlington Northern to establish a rate at the jurisdictional level--$13.68 per ton--and pay WTU reparations for earlier overcharges.

After the Board denied Burlington Northern's petition to reopen, the railroad filed this petition for review. Burlington Northern argues that the Board's decision is invalid because the Commission initiated the rate proceeding prematurely. It also argues that the Board's market dominance determination and parts of its stand-alone cost analysis are either unsupported by substantial evidence or conceptually flawed, and that the Board improperly dictated Burlington Northern's terms of service under the disputed rate.

We will set aside a Board decision only if it is "arbitrary, capricious, an abuse of discretion, ... otherwise [unlawful], ... or unsupported by substantial evidence." 5 U.S.C. § 706(2)(A), (E) (1994); see Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43-44, 103 S.Ct. 2856, 2866-67, 77 L.Ed.2d 443 (1983). Because Congress has expressly delegated to the Board responsibility for determining whether a railroad has market dominance and, if so, whether its rate is reasonable, the Board " 'is at the zenith of its powers' " when it exercises that authority, Central & S. Motor Freight Tariff Ass'n v. United States, 777 F.2d 722, 729 (D.C.Cir.1985) (quoting American Trucking Ass'ns v. United States, 627 F.2d 1313, 1320 (D.C.Cir.1980)), and therefore entitled to particular deference. So long as Board findings rest on " 'such relevant evidence as a reasonable mind might accept as adequate to support a conclusion,' " Consolo v. FMC, 383 U.S. 607, 620, 86 S.Ct. 1018, 1026, 16 L.Ed.2d 131 (1966) (quoting Consolidated Edison Co. v. NLRB, 305 U.S. 197, 229, 59 S.Ct. 206, 217, 83 L.Ed. 126 (1938)), and the agency has articulated a " 'rational connection between the facts found and the [decision] made,' " Bowman Transp., Inc. v. Arkansas-Best Freight Sys., Inc., 419 U.S. 281, 285, 95 S.Ct. 438, 442, 42 L.Ed.2d 447 (1974) (quoting Burlington Truck Lines, Inc. v. United States, 371 U.S. 156, 168, 83 S.Ct. 239, 246, 9 L.Ed.2d 207 (1962)), we must leave the Board's judgment undisturbed. See Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 416, 91 S.Ct. 814, 824, 28 L.Ed.2d 136 (1971) ("The court is not empowered to substitute its judgment for that of the agency."). Applying these standards, we consider each of Burlington Northern's arguments in turn.

II

Burlington Northern first contends that we must vacate the Board's order in light of our earlier ruling that the Commission had no authority to issue a filing order before WTU's contract expired. Conceding that the Board had jurisdiction over the tariff after WTU's traffic began moving at the common carrier rate, Burlington Northern argues that the Board should nevertheless have dismissed the rate proceeding after our ruling because the Commission purportedly lacked jurisdiction over WTU's amended complaint when filed. The cases on which Burlington relies for this proposition, however, concern our jurisdiction to hear prematurely filed appeals from agency decisions, see, e.g., TeleSTAR, Inc. v. FCC, 888 F.2d 132, 134 (D.C.Cir.1989), not an agency's jurisdiction to rule on prematurely filed complaints. Finding nothing in our Burlington Northern decision to suggest that the Board's jurisdiction over the filed rate was compromised by the Commission's earlier error, we see no reason to upset the Board's determination to go forward with the rate proceeding, particularly since Burlington Northern chose not to question the Board's jurisdiction based on our decision until after the agency ruled against it. Although Burlington Northern argues that the timing of the Board's review prevented it from submitting new evidence in support of its rate, the railroad remains free, now or in the future, to urge the Board to reopen its proceedings to consider such evidence. See 49 U.S.C.A. § 722(c) (1997).

III

Burlington Northern next challenges the Board's determination that the railroad had market dominance over WTU's coal shipments from the Rawhide mine to the Oklaunion generating station. A prerequisite to the Board's jurisdiction, see 49 U.S.C. §§ 10701a(b)(1), 10709, "market dominance" means "an absence of effective competition ... for the transportation to which a rate applies." Id. § 10709(a). Finding substantial evidence in the record to support the Board's market dominance determination, we agree with the Board that it had jurisdiction to consider the reasonableness of Burlington Northern's rate.

Under its long-term supply contract, WTU must purchase more than two million tons of "base load" coal per year from the Rawhide...