In re Trans Alaska Pipeline Rate Cases

• Decision Date: 06 June 1978
• Docket Number: 77-457,Nos. 77-452,77-551 and 77-602,s. 77-452
• Citation: 98 S.Ct. 2053,436 U.S. 631,56 L.Ed.2d 591
• Parties: In re TRANS ALASKA PIPELINE RATE CASES
• Court: U.S. Supreme Court

436 U.S. 631

98 S.Ct. 2053

56 L.Ed.2d 591

In re TRANS ALASKA PIPELINE RATE CASES.

Nos. 77-452, 77-457, 77-551 and 77-602.

Argued March 28, 1978.

Decided June 6, 1978.

Syllabus

Anticipating completion of the Trans Alaska Pipeline System (TAPS) in mid-1977, seven of its eight owners filed tariffs for the transportation of oil over TAPS with the Interstate Commerce Commission, which at that time had jurisdiction over oil pipelines. Four protestants, respondents here, immediately asked the ICC to suspend the proposed rates, which were claimed to be prima facie unlawful for a number of reasons. Rejecting the carriers' argument that it had no authority under § 15(7) of the Interstate Commerce Act (Act) (which provides that "[w]henever there shall be filed . . . any schedule stating a new individual or joint rate, . . . the Commission . . . may . . . suspend the operation of such schedule") to suspend TAPS's initial rates, the ICC concluded that the rates should be suspended. It then went on to hold that the TAPS carriers could submit interim tariffs, to be effective on one day's notice, which would be allowed to go into effect during the suspension period if the rates proposed in such tariffs were lower than levels summarily fixed by the ICC and if the TAPS carriers would agree to refund any amounts collected under either the interim or initially proposed tariffs which might subsequently (after full hearing) be held to be unlawful. The TAPS carriers petitioned for review of the ICC's order in the Court of Appeals, which affirmed all aspects of the order. Held:

1. Pursuant to § 15(7), the ICC is authorized to suspend initial tariff schedules of an interstate carrier subject to Part I of the Act, as it did here. As against the contention that the word "new" as used in § 15(7) was intended to refer only to increased or changed rates (i. e., rates which replace other rates previously in effect), such word must be given its literal interpretation as applying to services which have never before been offered to the public, thus embracing the initial rates in question in these cases. Pp. 642-652.

2. The ICC has power ancillary to its suspension authority under § 15(7) to establish, without an adjudicatory hearing, maximum interim rates which it would allow to go into effect during the suspension period. By so establishing such interim rates h re, the ICC did not exceed its suspension power but, to the contrary, performed an intelligent and practical exercise of its suspension power in accord with Congress' goal in § 15(7) to strike a fair balance between the needs of the public and the needs of regulated carriers. Pp. 651-654.

3. The ICC, as part of such ancillary power to establish maximum interim rates, has authority, which it properly exercised here, to condition its decision not to suspend tariffs on a requirement that the carriers refund any amounts collected under either interim or initially proposed rates that might later be determined to exceed lawful rates, notwithstanding the absence of express authority in the statute for such refunds. United States v. Chesapeake & Ohio R. Co., 426 U.S. 500, 96 S.Ct. 2318, 49 L.Ed.2d 14. If the ICC's approximations of what would be lawful rates are to be used to meet the carriers' needs, such refund provisions are a necessary and "directly related," id., at 514, 96 S.Ct., at 2325, means of discharging the ICC's mandate to protect the public pending a more complete determination of the reasonableness of the rates, and thus are a "legitimate, reasonable, and direct adjunct to the Commission's explicit statutory power to suspend rates pending investigation," ibid., in that they allow the ICC, in exercising its suspension power, to pursue "a more measured course" and to "offe[r] an alternative tailored far more precisely to the particular circumstances" of these cases. Ibid. Pp. 654-657.

557 F.2d 775, affirmed.

Andrew J. Kilcarr and Richard J. Flynn, Washington, D. C., for petitioners.

Frank H. Easterbrook, Washington, D. C., and

Avrum M. Gross, Atty. Gen., Juneau, Alaska, for respondents.

Mr. Justice BRENNAN delivered the opinion of the Court.

The primary question presented in these cases is whether the Interstate Commerce Commission is authorized by § 15(7) of the Interstate Commerce Act, as added, 36 Stat. 552, and amended, 49 U.S.C. § 15(7),¹ to suspend initial tariff schedules of an interstate carrier subject to Part I of the Act, 24 Stat. 379, as amended, 49 U.S.C. §§ 1-27 (1970 ed. and Supp. V). In addition, we are asked to decide whether, if the Commission is so authorized, it has additional authority summarily to fix maximum interim tariff rates which will be allowed to go into effect during the suspension period and to require carriers filing tariffs containing such rates, as a further condition of nonsuspension, to refund any amounts collected which are ultimately found to be unlawful. We hold that the Commission has statutory authority to suspend initial tariff schedules and that it has power ancillary to that authority to establish maximum interim rates and associated regulations—including refund provisions—as it has done in these cases.

I

In 1968, massive reservoirs of oil were discovered at Prudhoe Bay in the Alaskan Arctic. Two years later plans crystallized to build a pipeline from Prudhoe Bay to the all-weather port of Valdez on Alaska's Pacific coast. After protracted environmental litigation was ended by special Act of Congress,² construction of the Trans Alaska Pipeline System (TAPS) began in 1974. In May and Jun 1977, seven of the eight owners of TAPS,³ anticipating completion of TAPS in mid-1977, filed tariffs with the Interstate Commerce Commission ⁴ setting out the rules and rates governing transportation of oil over TAPS. These rates were met immediately by formal protests ⁵ from the State of Alaska,⁶ the Arctic Slope Regional Corporation,⁷ the United States Department of Justice,⁸ and the Commission's Bureau of Investigations and Enforcement.⁹

Acting pursuant to § 15(7) of the Interstate Commerce Act, the Commission ¹⁰ found that the protests lodged aga nst the TAPS tariffs gave it "reason to believe the proposed rates are not just and reasonable." Trans Alaska Pipeline System, 355 I.C.C. 80, 81 (1977) (TAPS ). In support of this conclusion, it cited the protestants' arguments that the filed rates allowed excessive returns on capital ¹¹ and that the cost data provided by the carriers were overstated.¹² Dismissing the TAPS carriers' argument that § 15(7) gave the Commission no power to suspend initial rates, the Commission suspended the TAPS rates for the full seven months allowed by law, see 355 I.C.C., at 81-82, citing protestants' showing of "probable unlawfulness," id., at 81, and the Commission's concern that "maintenance of excessively high rates could act as a deterrent or an obstacle to the use of the pipeline by nonaffiliated oil producers, and would also delay the Alaskan interests in obtaining revenues that depend upon the well-head price of the oil." Id., at 82.

On the other hand, the Commission found that it would not be in the public interest if TAPS had to close for a seven-month period. Id., at 83. Accordingly, "accept[ing] the basic data supplied by the carriers" as true, ibid., the Commis- sion applied what it stated to be its traditional rate-of-return calculation ¹³ to compute new rates that approximated what full investigation would likely reveal to be lawful rates ¹⁴ and it stated that it would not suspend interim tariffs which specified rates no higher than those estimated. See id., at 83-86. However, since the estimated rates might still "exceed reasonable levels," the Commission stated that any interim tariffs must provide for refunds of any amounts later determined to be in excess of lawful rates. Id., at 86.¹⁵

Four pipeline owners, petitioners here,¹⁶ filed a petition for review of the Commission's suspension order in the Court of Appeals for the Fifth Circuit. That court determined: (1) that the Commission had the statutory authority to suspend an initial tariff as well as changes in tariffs; (2) that it had authority ancillary to the suspension power to set out, without an adjudicatory hearing, maximum interim rates which it would allow to go into effect during the suspension period; and (3) that it had authority to condition a decision not to suspend tariffs on a requirement that carriers whose tariffs were allowed to go into effect be prepared to make refunds of any amounts collected whether under initially proposed or interim tariffs—which were later determined (after full hearing) to be unlawful. Mobil Alaska Pipeline Co. v. United States, 557 F.2d 775 (1977).

Petitioners sought review in this Court and filed applications for a stay of the Commission's suspension order, all relief having been denied by the Fifth Circuit. On October 20, 1977, we granted the applications for a stay, 434 U.S. 913, 98 S.Ct. 383, 54 L.Ed.2d 271, and we issued a supplemental stay order on November 14, 1977. 434 U.S. 949, 98 S.Ct. 475, 54 L.Ed.2d 309. Thereafter we granted certiorari to consider the three issues decided by the Court of Appeals. 434 U.S. 964, 98 S.Ct. 501, 54 L.Ed.2d 449. We affirm.¹⁷

II

By the Act of Sept. 18, 1940, ch. 722, Tit. I, § 1, 54 Stat. 899, note preceding 49 U.S.C. § 1, Congress declared the National Transportation Policy of the United States to be "to encourage the establishment and maintenance of reasonable charges for transportation services." Part I of the Interstate Commerce Act, 24 Stat. 379, as amended, 49 U.S.C. §§ 1-27 (1970 ed. and Supp. V), which applies to common carriers by rail and pipeline, is one vehicle by which the National Transportation Policy is carried into effect. Under the Act as passed in 1887, however, the role of the Commission in establishing "reasonable charges" was circumscribed. Although § 1 of the Act provided that "[a]ll charges made for any service rendered or to be...