Atlantic Richfield Co. v. U.S.
| Decision Date | 11 October 1985 |
| Docket Number | 84-5885,Nos. 84-5752,s. 84-5752 |
| Parties | ATLANTIC RICHFIELD COMPANY, Appellant, Maryland Tankers, Inc. v. UNITED STATES of America, et al. ATLANTIC RICHFIELD COMPANY Maryland Tankers, Inc., Appellant, v. UNITED STATES of America, et al. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Appeals from the United States District Court for the District of columbia.
Michael Joseph, Washington, D.C., with whom Mark P. Schlefer, Thomas L. Mills and Donald M. Squires, Washington, D.C., were on brief, for appellant Atlantic Richfield Co. in No. 84-5752.
Jonathan Blank, John W. Angus, III, William E. McDaniels, Kevin T. Baine and Eleni M. Constantine, Washington, D.C., were on brief, for appellant Maryland Tankers, Inc. in No. 84-5885.
John H.E. Bayly, Jr., Asst. U.S. Atty., Washington, D.C., with whom Joseph E. diGenova, U.S. Atty., Royce C. Lamberth and R. Craig Lawrence, Asst. U.S. Attys., Washington, D.C., were on brief, for appellee U.S. in Nos. 84-5752 and 84-5885.
Allan Abbot Tuttle, Washington, D.C., with whom Jeff Turner and Joseph A. Klausner, Washington, D.C., were on brief, for appellees OMI Corp. et al. in Nos. 84-5752 and 84-5885.
Before WALD, EDWARDS and STARR, Circuit Judges.
Opinion for the Court filed by Circuit Judge EDWARDS.
Under section 506 of the Merchant Marine Act of 1936 ("the Act"), 1 United States-flag ships built with the aid of federal construction subsidies generally are prohibited from entering the domestic shipping trade. However, on occasions, this prohibition is lifted if the Maritime Administration ("MarAd")
consent[s] in writing to the temporary transfer of such [subsidized] vessel to [domestic service] ... for periods not exceeding six months in any year, whenever [MarAd] may determine that such transfer is necessary or appropriate to carry out the purposes of this Act. 2
Pursuant to this exception, the appellants, Atlantic Richfield Company ("ARCO") and Maryland Tankers, Inc. ("Maryland Tanker"), each received approval from MarAd to enter the Alaskan-Panama Canal domestic oil trade on the condition that four unsubsidized United States-flag ships remain "fixed for suitable employment." At issue in this case is whether the appellants were entitled to an opportunity to contest the termination of their domestic trade approvals when MarAd determined that two unsubsidized ships were no longer "fixed for suitable employment."
The District Court found that the subsidized shippers had no rights to assert under either the Merchant Marine Act, the Administrative Procedure Act ("APA") or the due process clause of the Fifth Amendment. Although we do not subscribe to all of the reasoning of the District Court, we do agree that the judgment of MarAd must be upheld. We find that MarAd properly concluded that, during the disputed period here in question, the unsubsidized ships were without employment in the trade, and therefore these ships were no longer "fixed for suitable employment." We also hold that MarAd was not required to assess whether the unsubsidized ships were reasonably unemployed before confirming the terminations of the conditional licenses of the subsidized shippers. Accordingly, we affirm.
The Merchant Marine Act of 1936 3 divides the United States fleet into two classes of vessels: unsubsidized United States-flag ships with the exclusive right to transport merchandise between points in the United States 4 and subsidized United States-flag ships limited to foreign shipping. 5 Because the costs of building and operating United States-flag ships traditionally have been considerably higher than comparable costs in foreign countries, Congress enacted several statutes for the purpose of protecting the United States shipping industry. With respect to the domestic trade, the Merchant Marine Act of 1920 requires that vessels transporting merchandise in the domestic trade be built in the United States and owned by United States citizens. 6
To make United States vessels competitive in foreign shipping, the Merchant Marine Act of 1936 authorizes MarAd to pay a construction-differential subsidy ("CDS") of up to fifty percent of the cost of a vessel built in the United States. 7 This subsidy is aimed at equalizing ship construction costs in the United States and foreign countries. However, while offering a possible cure for the problem of foreign competition, the subsidy program also threatened to promote an imbalance among United States shippers in the domestic trade. Consequently, Congress sought to provide the unsubsidized fleet with protection from the competition of CDS-subsidized ships by generally prohibiting CDS-subsidized ships from entering the domestic shipping trade. But, recognizing the possibility that domestic ships may not always be adequate for the demand, the Act also provides MarAd may
consent in writing to the temporary transfer of such [subsidized] vessel to [domestic service] ... for periods not exceeding six months in any year, whenever [MarAd] may determine that such transfer is necessary or appropriate to carry out the purposes of this Act. 8
Under regulations promulgated by MarAd, 9 operators of subsidized ships who wish to enter the Alaskan-Panama Canal domestic oil trade must provide MarAd with all available information to support the applicant's assertion that "suitable vessel[s]" 10 of a "competitor" 11 would not be available to carry the cargo. After reviewing written protests from competitors and responses to the protests from the applicant, MarAd decides whether the applicant's entry into the trade is necessary or appropriate to carry out the purposes of the Act. MarAd generally denies an application if any unsubsidized "suitable vessels" are available to transport the cargo. 12
ARCO, Maryland Tanker and Acturus Shipping, Inc. each operate CDS-built very large crude-oil carriers ("VLCC"). On August 30, 1983, ARCO requested permission to enter the Alaskan-Panama Canal oil trade for six months beginning in late October or early November. Two weeks later, on September 14, 1983, Maryland Tanker and Acturus Shipping made similar requests. The operators of several unsubsidized vessels protested these applications. The unsubsidized shippers advised MarAd that they had not yet made arrangements for employment of their vessels following the expiration of their current charters. On October 7, 1983, MarAd granted the requests of the subsidized shippers to enter the trade for six months. These approvals, however, were subject to the condition that they would terminate if any one of four unsubsidized ships were not "fixed for suitable employment" when their charters expired. 13
The three VLCCs began carrying Alaskan oil in November, 1983, but on January 10, 1984, each VLCC received a telegram from MarAd stating that the domestic trading approvals were "terminated, effective immediately" because two of the four unsubsidized vessels named in the condition to the approval--the PRINCE WILLIAM SOUND and the OGDEN COLUMBIA--"remain[ed] unemployed." ARCO filed a petition to reopen, requesting an opportunity to present facts to MarAd that would show that the PRINCE WILLIAM SOUND and OGDEN COLUMBIA had voluntarily foregone opportunities for suitable employment. According to ARCO, the two vessels were unemployed because the owners had demanded unreasonably high rates for their vessels. MarAd denied ARCO's petition, stating that the January 10th telegram was not an order, but merely gratuitous advice to ARCO that the domestic trading approvals had expired on their own terms.
ARCO then commenced this action in the District Court seeking an injunction staying the effectiveness of the termination and a declaratory judgment that the termination was unlawful. The District Court granted the motion of OMI Corporation and Alaska Bulk Carriers, Inc. ("Intervenors") to intervene as defendants and the motion of Maryland Tanker to intervene as plaintiff. Upon cross-motions for summary judgment, the District Court concluded that the approvals held by ARCO and Maryland Tanker were temporary licenses not protected by section 9(b) of the APA 14 and that neither appellant had a property interest in the approvals. The court further held that MarAd was neither arbitrary nor capricious in imposing the condition on the approvals granted ARCO and Maryland Tanker. For these reasons, the trial court granted summary judgment in favor of the Government. This appeal followed.
We pause briefly at the threshold to address the contention of the Government and intervenors that this case is moot. For three reasons--each of them infirm, in our view--the Government and intervenors argue that this case no longer presents a live controversy. First, it is asserted that, as a result of a new rule permitting subsidized ships to enter the domestic trade on a permanent basis, ARCO no longer operates vessels in the subsidized fleet and, therefore, at least in the foreseeable future, ARCO will have no need to apply for temporary approval to enter the domestic trade. On May 7, 1985, MarAd published a final rule providing that subsidized vessels would be permitted to enter the domestic trade permanently by repaying their unamortized CDS along with compounded interest. 15 On July 26, 1985, ARCO repaid its unamortized CDS (with compounded interest) and MarAd permitted ARCO's vessels to enter the domestic trade on a permanent basis. Maryland Tanker made a similar application to repay its CDS on July 18, 1985, but has not yet made repayment. 16 The Government argues that the effect of ARCO's repayment is to eliminate the possibility that ARCO will ever again hold a conditional approval. Additionally, the Government argues that the new rule will increase the size of the domestic fleet, making future issuance of temporary approvals to enter the domestic...
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