Burlington Northern, Inc. v. U.S.
| Decision Date | 29 March 1977 |
| Docket Number | No. 76-1899,76-1899 |
| Citation | 555 F.2d 637 |
| Parties | BURLINGTON NORTHERN, INC., et al., Petitioners, v. The UNITED STATES of America and Interstate Commerce Commission, Respondents, San Antonio, Texas, Acting By and Through its City Public Service Board, Intervenor-Respondent. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Howard J. Trienens, Chicago, Ill., for petitioners; Curtis H. Berg and Richard M. Gleason, St. Paul, Minn., Charles W. Burkett, San Francisco, Cal., Albert E. Schoenbeck, St. Louis, Mo., R. Eden Martin and James W. Jandacek, Chicago, Ill., on the brief.
Charles W. White, I. C. C., Washington, D. C., for respondents; Donald I. Baker, Asst. Atty. Gen., and Lloyd J. Osborn, Atty., Dept. of Justice, Washington, D. C., Mark L. Evans, Gen. Counsel, and Walter H. Walker, III, Atty., I. C. C., Washington, D. C., on the brief.
William L. Slover, Washington, D. C., for intervenor-respondent, City of San Antonio; C. Michael Loftus, Washington, D. C., on the brief.
Richard P. Bruening, St. Louis, Mo., Richard M. Freeman, San Francisco, Cal., Mark M. Hennelly, St. Louis, Mo., Howard D. Koontz, Chicago, Ill., J. L. Lenihan, Louisville, Ky., R. K. Merrill, C. George Niebank, Jr., Chicago, Ill., C. Barry Schaefer, Omaha, Neb., James L. Tapley, Washington, D. C., Walter G. Treanor, San Francisco, Cal., Donal L. Turkal, and Richmond C. Coburn, St. Louis, Mo., on brief for amici curiae Railroads.
Before HEANEY, ROSS and STEPHENSON, Circuit Judges.
Burlington Northern, Inc., and its subsidiaries, and Southern Pacific Transportation Company ask us to review a final order of The origins of this dispute lie in the energy crisis. San Antonio, acting through its City Public Service Board, owns and operates an electric utility which from its inception used natural gas as its primary fuel. San Antonio purchased this gas on a long-term contract for approximately $.24 per MCF. In 1972, its supplier was no longer able to make deliveries pursuant to its contract. San Antonio then made arrangements to purchase gas at a cost of $2.00 per MCF 1 and began a search for alternate fuels. In the course of this investigation, San Antonio asked the petitioners to furnish the approximate cost of hauling coal by unit train from Campbell County, Wyoming, to San Antonio. In November of 1972, the petitioners indicated that a figure of five mills per ton mile could be used for planning purposes. San Antonio continued negotiations among coal producers and carriers. In July, 1973, the petitioners quoted a proposed rate of $7.90 per ton, subject to annual adjustments for changes in their costs, which was reasonably consistent with the five mills per ton mile previously quoted. On March 11, 1974, the petitioners provided a copy of a proposed tariff which set forth this rate. Three days later, the petitioners advised San Antonio that unprecedented cost increases made necessary the submission of new rate quotations. A revised quotation of $11.09 was provided on May 2, 1974. On May 22, 1974, San Antonio entered into twenty-year contracts with Sunedco Coal Company and Amax Coal Company for the supply of coal from mines in Campbell County, Wyoming. At about the same time, San Antonio committed itself to build two coal-fired, 400 mg. electricity generating plants.
the Interstate Commerce Commission which prescribes a maximum reasonable rate of $10.93 per ton for the movement of coal from Campbell County, Wyoming, to San Antonio, Texas. We deny the petition.
The petitioners did not file a tariff for the coal movement. Because it was dissatisfied with the applicable class rate, 2 which in this instance was $30 per ton, and the proposed $11.09 rate, San Antonio filed a complaint with the Commission on May 6, 1975, in which it alleged that the rate of $30 per ton was unjust and unreasonable and hence unlawful under § 1(5) of the Interstate Commerce Act. It also alleged that the petitioners' refusal to publish just and reasonable rates and their insistence that San Antonio agree to an adjustment formula violated §§ 1(4), 1(5), 1(6), 2, 3(1) and 6 of the Interstate Commerce Act. It asked the Commission to prescribe a maximum just and reasonable rate.
Because of the necessity for an expedited decision, the Commission followed the modified procedure provided by 49 CFR §§ 1100.45-1100.54. In its report and order of October 13, 1976, the Commission found the $30 rate unjust and unreasonable under § 1(5) of the Act, prescribed a maximum reasonable rate of $10.93 per ton and disallowed the adjustment clause.
Since the Commission's determination respecting the $30 rate was adjudicative in nature, we must decide whether it was supported by substantial evidence. Arizona Grocery Co. v. Atchison, T. & S. F. Ry. Co., 284 U.S. 370, 388-389, 52 S.Ct. 183, 76 L.Ed. 348 (1932).
The evidence before the Commission showed that the $30 rate was at least twice that of other rates applicable to coal movements by unit trains, and was more than two and one-half times the $11.09 rate proposed by the petitioners. On this record, there is certainly substantial evidence to support the Commission's determination.
The petitioners contend that the Commission violated § 202(b) of the Railroad Revitalization and Regulatory Reform Act of 1976 ("4-R Act"),90 Stat. 31, in finding the $30 rate unjust and unreasonable without first making a finding of market dominance. This contention is without merit. Section 202(b) of the 4-R Act, 49 U.S.C. § 1(5)(b-d), requires that, before the Commission may find a rate to be unjust or unreasonable on the ground that it exceeds a just or reasonable maximum for the service rendered, it must first find that the carrier has market dominance over such service. Section 202(b) further requires the Commission, within 240 days of enactment of the 4-R Act, to establish standards for determining market dominance. Finally, § 202(c),49 U.S.C. § 15(9), provides that, following promulgation of such standards, "the Commission shall . . . within 90 days after the commencement of a proceeding to investigate the lawfulness of such rate, determine whether the carrier proposing such rate has market dominance . . .."
It appears from an analysis of these sections that the Commission's duty to make a finding of market dominance before finding a rate to be unjust or unreasonable arises only in proceedings begun after promulgation of the standards required by § 202(b) of the 4-R Act. This proceeding was initiated on May 6, 1975, prior to passage of the 4-R Act, and the standards for determining market dominance were not adopted until September 30, 1976. 49 CFR § 1109.1, 41 Fed.Reg. 44183 (1976). Further, we note that the petitioners at no time sought to invoke these provisions of the 4-R Act before the Commission.
Rate prescription is a product of informal rule-making, 5 U.S.C. §§ 551(4) and 553(c); see Arizona Grocery Co. v. Atchison, T. & S. F. Ry. Co., supra, 284 U.S. at 387-388, 52 S.Ct. 183 and is reviewed under the standards of 5 U.S.C. § 706(2)(A)-(D). Burlington Northern, Inc., et al. v. United States, et al., 549 F.2d 83, at 88 (8th Cir. 1977). Cf. National Ass'n of Food Chains, Inc. v. ICC, 175 U.S.App.D.C. 346, 535 F.2d 1308, 1313 (1976). In the context of this case, the most pertinent of these is the arbitrary and capricious standard.
In reviewing the Commission's determination, we are mindful that
(t)he process of rate making is essentially empiric. The stuff of the process is fluid and changing the resultant of factors that must be valued as well as weighed. Congress has therefore delegated the enforcement of transportation policy to a permanent expert body and has charged it with the duty of being responsive to the dynamic character of transportation problems.
For this reason, the Commission is given "considerable flexibility" in rate making. Baltimore & O. R. R. Co. v. United States, 345 U.S. 146, 150, 73 S.Ct. 592, 97 L.Ed. 912 (1953); see Federal Power Commission v. Hope Natural Gas Co., 320 U.S. 591, 602, 64 S.Ct. 281, 88 L.Ed. 333 (1944).
At the same time, however,
we * * * have a duty to thoroughly explore the record and carefully examine the Commission's conclusions to determine whether the Commission's findings are supported by the evidence and whether proper legal standards have been applied. See Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 415, 91 S.Ct. 814, 28 L.Ed.2d 136 (1971); Warren Transport, Inc. v. United States, 525 F.2d 148, 151 (8th Cir. 1975).
Burlington Northern, Inc., et al. v. United States, et al., supra, 549 F.2d 83, at 88.
The Commission must "articulate (a) * * * rational connection between the facts found and the choice made." Burlington Truck Lines, Inc. v. United States, 371 U.S. 156, 168, 83 S.Ct. 239, 246, 9 L.Ed.2d 207 (1962). Only if the Commission does so are we able to determine whether it has exercised a "reasoned discretion." Greater Boston Television Corp. v. FCC, 143 U.S.App.D.C. 383, 444 F.2d 841, 850, cert. denied, 403 U.S. 923, 91 S.Ct. 2229, 29 L.Ed.2d 701 (1971), quoted with approval in Burlington Northern, Inc., et al. v. United States, et al., supra, 549 F.2d 83, at 88; Atchison, T. & S. F. Ry. Co. v. Wichita Board of Trade, 412 U.S. 800, 807, 93 S.Ct. 2367, 37 L.Ed.2d 350 (1973).
Our scope of review is succinctly summarized by the Court of Appeals for the District of Columbia:
We must determine whether the Commission has supplied a rational basis for its order; that is, whether it demonstrably has given reasoned consideration to the issues, and has reached a result which rationally flows from its conclusions.
National Ass'n of Food Chains, Inc. v. ICC, supra, at 1315.
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