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TRANS ALASKA PIPELINE RATE CASES *FN*

decided: June 6, 1978.

TRANS ALASKA PIPELINE RATE CASES*FN*


CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT.

Brennan, J., delivered the opinion of the Court, in which all other Members joined, except Powell, J., who took no part in the consideration or decision of the cases.

Author: Brennan

[ 436 U.S. Page 633]

 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),*fn1 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.

[ 436 U.S. Page 634]

     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,*fn2 construction of the Trans Alaska Pipeline System (TAPS) began in 1974. In May and June 1977, seven of the eight owners of TAPS,*fn3 anticipating completion of TAPS in mid-1977, filed tariffs with the Interstate Commerce Commission*fn4 setting out the rules and rates governing transportation

[ 436 U.S. Page 635]

     of oil over TAPS. These rates were met immediately by formal protests*fn5 from the State of Alaska,*fn6 the Arctic Slope Regional Corporation,*fn7 the United States Department of Justice,*fn8 and the Commission's Bureau of Investigations and Enforcement.*fn9

Acting pursuant to § 15 (7) of the Interstate Commerce Act, the Commission*fn10 found that the protests lodged against the

[ 436 U.S. Page 636]

     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*fn11 and that the cost data provided by the carriers were overstated.*fn12 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, "[accepting] the basic data supplied by the carriers" as true, ibid., the Commission

[ 436 U.S. Page 637]

     applied what it stated to be its traditional rate-of-return calculation*fn13 to compute new rates that approximated what full investigation would likely reveal to be lawful rates*fn14 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.*fn15

Four pipeline owners, petitioners here,*fn16 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

[ 436 U.S. Page 638]

     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, and we issued a supplemental stay order on November 14, 1977. 434 U.S. 949. Thereafter we granted certiorari to consider the three issues decided by the Court of Appeals. 434 U.S. 964. We affirm.*fn17

[ 436 U.S. Page 639]

     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 "[all] charges made for any service rendered or to be rendered in the transportation of passengers or property . . . shall be reasonable and just; and every unjust and unreasonable charge for such service is prohibited and declared to be unlawful," 24 Stat. 379, this Court early held that the Commission had no authority to set charges, but could only determine if charges set by the carriers were unreasonable or unjust in the context of granting reparations to injured shippers. See ICC v. Cincinnati, N. O. & T. P. R. Co., 167 U.S. 479 (1897); 1 I. Sharfman, The Interstate Commerce Commission 25-27 (1931) (hereinafter Sharfman).

[ 436 U.S. Page 640]

     In 1906, Congress passed the Hepburn Act, 34 Stat. 584, which, inter alia, augmented the Commission's authority to condemn existing rates as unjust or unreasonable by adding express authority to set maximum rates to be observed by carriers in the future. See 49 U. S. C. § 15. Under the Hepburn Act, however, the Commission could not issue an order affecting a rate until it had become effective. This feature of the Hepburn Act was immediately recognized by the Commission as a major defect. See Sharfman 51 n. 50. It meant that the only relief against unreasonable rates lay in the reparations remedy and this could not provide a satisfactory solution:

"In many cases the damage suffered through loss of competitive advantage far exceeds the difference between the rate actually charged and that found to be reasonable by the Commission; and in most instances the burden of the unreasonable rate is borne by a prior producer or is shifted to the ultimate consumer, for whom no redress whatever is available as against the carrier." Id., at 51.

See H. R. Rep. No. 923, 61st Cong., 2d Sess., 4 (1910), quoting President Taft's special message to Congress on the Interstate Commerce Act;*fn18 S. Rep. No. 355, 61st Cong., 2d Sess., 8 (1910);*fn19 United States v. Chesapeake & Ohio R. Co., 426 U.S. 500, 513, and n. 10 (1976) (Chessie); Dixon, The Mann-Elkins Act, 24 Q. J. Econ. 593, 602-603 (1910)

[ 436 U.S. Page 641]

     (hereinafter Dixon). The Commission's Annual Reports also tell us that, as early as 1907, private litigants were able to convince some federal courts to enjoin rate advances after their effective dates but before the Commission was able to complete an investigation as required by the Hepburn Act. See Arrow Transportation Co. v. Southern R. Co., 372 U.S. 658, 663-664, and n. 6 (1963); Sharfman 50 n. 49. Thus, not only did the Hepburn Act fail to protect the public against unreasonable carrier charges, but the equity litigation spawned by the Act led to discrimination in rates -- much like that prohibited by § 1 of the Act -- in the situation in which shippers successful in court would be paying one charge while those ...


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