Independent U.S. Tanker Owners Committee v. Skinner, s. 88-5313

Citation884 F.2d 587
Decision Date22 August 1989
Docket Number88-5317,88-5320 and 88-5324,Nos. 88-5313,88-5318,88-5319,88-5314,s. 88-5313
PartiesINDEPENDENT U.S. TANKER OWNERS COMMITTEE, et al. v. Samuel K. SKINNER, in his capacity as Secretary of the United States Department of Transportation, et al. Appeal of AMERICAN PETROFINA, INCORPORATED.
CourtUnited States Courts of Appeals. United States Court of Appeals (District of Columbia)

Appeals from the United States District Court for the District of Columbia (Civil Action Nos. 87-01685 & 87-02102); Charles R. Richey.

Richard A. Olderman, Atty., U.S. Dept. of Justice, with whom John R. Bolton, Asst. Atty. Gen. at the time the brief was filed, Jay B. Stephens, U.S. Atty., and Leonard Schaitman, Atty., U.S. Dept. of Justice, Washington, D.C., were on the brief, for federal appellants. Michael Kimmel, Atty., U.S. Dept. of Justice, Washington, D.C., also entered an appearance for federal appellants in Nos. 88-5319 and 88-5320.

A. Stephen Hut, Jr., with whom Patrick J. Carome, Raymond B. Ludwiszewski, Michael Joseph, and Thomas L. Mills, Washington, D.C., were on the brief, for appellants/intervenors Atlantic Richfield Co. and SPC Shipping, Inc.

Roy G. Bowman, Richard H. Saltsman, and Daniel Joseph, Washington, D.C., were on the brief for appellant American Petrofina, Inc. R. Bruce McLean, Washington, D.C., also entered an appearance for appellant American Petrofina, Inc.

William E. McDaniels and Joseph A. Klausner, Washington, D.C., with whom Daniel P. Levitt, New York City, Allan A. Tuttle, Michael D. Esch, Robert J. Blackwell, Anne E. Mickey, and Kevin T. Baine, Washington, D.C., were on the joint brief, for appellees.

Robert H. Loeffler, Washington, D.C., entered an appearance for State of Alaska, appellant in No. 88-5324 and appellee in No. 88-5313.

Before BUCKLEY and WILLIAMS, Circuit Judges, and GEORGE H. REVERCOMB, * U.S. District Judge for the District of Columbia.

Opinion for the court filed by Circuit Judge BUCKLEY.

BUCKLEY, Circuit Judge:

Under the Merchant Marine Act, the Department of Transportation may provide construction subsidies to vessels, but the subsidized vessels, with certain exceptions, may not operate domestically. The rule under review reaffirms an earlier one that allowed three tankers to repay their construction subsidies in return for permission to ship domestically. The challenged rule was issued and made immediately effective less than one month before Congress passed an appropriations rider that barred the use of appropriated funds to promulgate or implement such subsidy repayment agreements.

Appellee tanker owners argue that the rider renders the rule null and void both because Congress intended the rider to apply retroactively and because it prevents the Department's Maritime Administration from taking the further actions they claim to be necessary before the rule is fully implemented. Appellees also claim that the regulation is procedurally defective.

The district court accepted these arguments or variations of them and vacated the rule. We hold that Congress' appropriations rider applies prospectively only and does not reach the challenged rule because it is self-implementing. We also conclude that the procedural challenges are without merit. We therefore reverse.

I. BACKGROUND

The Merchant Marine Act of 1936 ("Act"), 46 U.S.C.App. Secs. 1101 et seq. (1982), was enacted, in part, to place American merchant vessels operating in foreign trade on a more equal footing with foreign-built and manned vessels. To this end, the Act authorizes the Secretary of Transportation ("Secretary") to subsidize construction costs for ships built in American shipyards on the condition that vessels receiving such subsidies "shall be operated exclusively in foreign trade, or on a round-the-world voyage." Id. Secs. 1151 & 1156. Congress, however, made certain exceptions to this rule. For example, with the Secretary's approval, a vessel financed through a "construction-differential subsidy" ("CDS") may operate domestically for a maximum of six months per year provided that the vessel repays a pro rata share of the subsidy. Id. Sec. 1156.

The agency with immediate administrative responsibility over the merchant marine is the Maritime Administration ("MarAd"). See 49 C.F.R. Sec. 1.4(j)(1) (1987). MarAd was originally located within the Department of Commerce, but was transferred to the Department of Transportation ("DOT" or "Department") in August 1981. See 46 U.S.C.App. Sec. 1601 (1982). Authority over specific aspects of the CDS program has been assigned to a three-member Maritime Subsidy Board located within MarAd. 49 C.F.R. Sec. 1.4(k).

This case involves the latest in a series of attempts by successive administrations to permit certain very large crude oil carriers ("VLCCs") to repay their subsidies in return for permission to operate domestically full-time. These efforts were prompted, first, by a determination that the vessels could no longer compete in foreign commerce as a result of the world oversupply of tankers that had arisen since 1970, and second, by the need, following the completion of the Alaskan pipeline, for an increase in domestic tanker capacity to carry Alaskan oil to Panama where it is transshipped to Atlantic and Gulf Coast ports. See 52 Fed.Reg. 23,522.

Thus in the late 1970's, the Secretary of Commerce entered into subsidy repayment arrangements on a case-by-case basis. His authority to do so was challenged, and, in Seatrain Shipbuilding Corp. v. Shell Oil Co., 444 U.S. 572, 597, 100 S.Ct. 800, 814, 63 L.Ed.2d 36 (1980), the Supreme Court held "that the Act empowers the Secretary to approve full-repayment/permanent-release transactions."

On October 15, 1980, the Secretary of Commerce published and made immediately effective an interim rule that limited the full CDS repayment option to tankers over a certain weight and provided that the Secretary would only accept repayment in "exceptional circumstances" after a determination that the vessels had little prospect for viable employment in foreign trade over an extended period. 45 Fed.Reg. 68,393, 68,394 (1980). On November 13, 1980, MarAd approved repayment for the VLCC BAY RIDGE. Shortly thereafter, the Independent U.S. Tanker Owners Committee ("ITOC") challenged the interim rule as well as the approval of the subsidy repayment by the BAY RIDGE. In Independent U.S. Tanker Owners Committee v. Lewis, 690 F.2d 908, 918-20 (D.C.Cir.1982) ("ITOC I "), we upheld the challenge after finding that the agency had failed to provide an adequate "general statement of the [rule's] basis and purpose" as required by section 553(c) of the Administrative Procedure Act ("APA"), 5 U.S.C. Sec. 553(c). Nevertheless, we allowed the BAY RIDGE to continue operating in domestic commerce. Id. at 931.

Following ITOC I, the Secretary of Transportation, who had by then acquired jurisdiction over shipping matters, issued a new regulation providing that for a one-year period beginning June 6, 1985, any CDS tanker could enter into a repayment transaction. 50 Fed.Reg. 19,170, 19,178 (1985) ("1985 rule"). During this period, three additional VLCCs--the ARCO INDEPENDENCE, ARCO SPIRIT, and BROOKLYN--took advantage of the rule and repaid in excess of $100 million in subsidies and interest. See 52 Fed.Reg. 23,522, 23,524 (1987).

ITOC challenged the 1985 rule and, in Independent U.S. Tanker Owners Committee v. Dole, 809 F.2d 847, 854 (D.C.Cir.1987) ("ITOC II "), we held that DOT had once again failed to provide an adequate statement of basis and purpose. We vacated the rule but withheld issuance of our mandate until July 16, 1987 "to avoid further disruptions in the domestic market [by permitting the VLCCs to continue in domestic commerce pro tem ] and to allow the Secretary to undertake further proceedings to address the problems of the merchant marine trade." Id. at 855.

After our decision in ITOC II, MarAd initiated an informal rulemaking and, on June 22, 1987, published the final rule ("1987 rule") that is at issue here. The rule (in which the Secretary concurred) provides in pertinent part:

The Maritime Administration reaffirms the allowance of the irreversible total repayment of unamortized construction-differential subsidy (CDS), with interest and rescission permanently of the domestic trading restrictions related to the grant of CDS for tankers of any deadweight tonnage for applications approved between June 6, 1985 and June 5, 1986, in accordance with the terms and conditions of paragraph (b) of this section [specifying methods of computing interest, etc.]. The approved applications were for the ARCO INDEPENDENCE, ARCO SPIRIT and BROOKLYN.

52 Fed.Reg. 23,522, 23,536 (June 22, 1987). The Secretary made the rule effective immediately upon publication, invoking the "good cause" exception to the thirty-day waiting period between issuance and effectiveness required by section 553(d) of the APA, 5 U.S.C. Sec. 553(d) (1982). Id.

Meanwhile, Congress had begun work on a rider to an appropriations bill that was designed to bar CDS repayment arrangements. On July 11, 1987, the President signed the Supplemental Appropriations Act of 1987 ("Appropriations Act") which provides (at section 505) that none of the appropriated funds "shall be used to propose, promulgate, or implement any rule or regulation" with respect to the repayment of subsidies in order to relieve CDS vessels from their commitment to foreign commerce. Supplemental Appropriations Act, Pub.L. No. 100-71, Sec. 505, 101 Stat. 391, 471 (1987) ("section 505").

ITOC and certain tanker owners successfully challenged the 1987 rule in the U.S. District Court for the District of Columbia. The court ordered the rule vacated on a finding that Congress had intended to bar the promulgation of a CDS repayment rule after the date of our ITOC II decision, January 16, 1987. The court also concluded that it was improper for MarAd to issue the regulation when it...

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