Porter, Martin D.

English

University of New Mexico

Volume 19 
Issue 1 Symposium on Land Use 
Winter 1979 
Freight Rates May Discriminate against Recycled Materials 
Martin D. Porter 
Recommended Citation 
Martin D. Porter, Freight Rates May Discriminate against Recycled Materials, 19 Nat. Resources J. 229 
(1979). 
Available at: https://digitalrepository.unm.edu/nrj/vol19/iss1/20 
This Note is brought to you for free and open access by the Law Journals at UNM Digital Repository. It has been 
accepted for inclusion in Natural Resources Journal by an authorized editor of UNM Digital Repository. For more 
information, please contact amywinter@unm.edu, lsloane@salud.unm.edu, sarahrk@unm.edu. 
NOTE
FREIGHT RATES MAY DISCRIMINATE
AGAINST RECYCLED MATERIALS
The United States Court of Appeals for the District of Columbia
ordered the Interstate Commerce Commission to reconsider its order
maintaining present railroad freight charges which the recycling
industries claim discriminate against recycled materials. National
Association of Recycling Industries, Inc. v. Interstate Commerce
Commission, 8 ELR 20653 (1978).
For years the railroads have charged higher rates for the transpor-
tation of recycled materials than for the transportation of virgin
materials.' These rate structures have been challenged repeatedly by
those industries which buy and sell recyclable materials, such as scrap
iron and used paper products.2 These industries have always claimed
that the practice of charging higher freight rates for recyclable
materials both discriminates against them and their recycled products
and adversely affects the environment by discouraging industrial use
of recycled products, thereby contributing to the depletion of the
nation's virgin resources.3 But the recycling industries have never
been able to prove these allegations because of the procedure used in
the past to determine railroad freight rates.
Under the Interstate Commerce Act,4 the initiative for ratemaking
is vested in the railroads. In other words, it is the railroads who
decide when and by how much they want to increase their fares. The
proposed higher rates are then presented to the Interstate Commerce
Commission (ICC) s for approval.Formerly, during such a ratemaking
proceeding the ICC focused on the carrier's need for increased
revenues and not on whether the increase was just, reasonable, or
1. See Ex Parte No. 256, 1967, 329 ICC 854 (1968); Ex Parte No. 259,1969, 337 ICC
436 (1970); Ex Parte No. 262, 1969, unpublished; Ex Parte No. 265, 1970, 339 ICC 125
(1971); Ex Parte No. 267, 1971,339 ICC 125 (1971);ExParte No. 295 (Sub-No. 1), 1973,
344 ICC 589 (1973); Ex Parte No. 303, 1974, unpublished; Ex Parte No. 305, 1974,
unpublished; Ex Parte No. 313, 1975, unpublished; Ex Parte No. 318, 1976, unpublished;
Ex Parte No. 336, 1977, unpublished.
2. National Association of Recycling Industries, Inc. v. Interstate Commerce Commis-
sion, 8 ENVIR. L. REP. (BNA) 20,653, 20,653 (1978).
3. Id. at 20,654.
4. Interstate Commerce Act, 49 U.S.C. § 1 (1970).
5. The ICC and its responsibilities are established in the Interstate Commerce Act.
NATURAL RESOURCES JOURNAL
nondiscriminatory. Once the ICC had approved the proposed rates,
anyone challenging the rates had the burden of proving that the rates
were unlawful.6 The presumption by the ICC that the rates were
lawful make it nearly impossible for shippers and representatives of
the recycling industries to meet their burden of proof.
The recycling industries' claims during the 60's were similar to the
environmental concerns of Congress, as expressed in various legisla-
tion passed since that time. The first piece of legislation which dealt
explicitly with the recycling of the nation's resources was the
National Environmental Policy Act (NEPA). 1 NEPA, among other
things, directs federal agencies to promote the "maximum attainable
recycling of depletable resources."8 Similar legislation followed.9
Finally, concerned over the limited amount of recycling throughout
the nation and what it regarded as a transportation barrier to the
promotion of industrial recycling, Congress enacted Section 603 of
the Regional Rail Reorganization Act (RRRA)." ° This section
directed the ICC to "adopt appropriate rules" to "eliminate dis-
crimination against the shipment of recyclable materials in rate
structures and in other Commission practices where such discrimina-
tion exists." 1 ' But, apparently, the ICC ignored the congressional
intent expressed in Section 603 of the RRRA; soon after it was
passed the ICC approved yet another series of rate increases.' 2 These
increases continued to permit railroads to charge higher rates for the
transportation of recycled materials than for virgin material.
Due to the ICC's refusal to investigate the freight rate structures
and its approval, once again, of allegedly discriminatory rate in-
creases, the recycling industries lobbied for further legislation. In
answer to their plight, Congress enacted the Railroad Revitalization
and Recyclatory Reform Act (RRA)' a on February 5, 1976. Section
6. See Atchison, Topeka & Santa Fe R. Co. v. Wichita Board of Trade, 412 U.S. 800,
812-813 (1973).
7. National Environmental Policy Act of 1969, 42 U.S.C. §4321 (1970).
8. Id. §4331(b)(6).
9. In 1970, Congress enacted the National Materials Policy Act of 1970, 42 U.S.C.
§3251 (1970); followed by the Energy Supply and Environmental Coordination Act of
1974, 42 U.S.C. § 1857 (1974); and then the Resource Conservation and Recovery Act of
1976, 42 U.S.C. §6901 (1976).
10. Regional Rail Reorganization Act of 1973, 87 Stat. 9850, §603 (1973).
11. Id.
12. The ICC approved seven successive rate increases applicable to recyclable materials
totalling approximately 38%. Ex Parte No. 295, 344 ICC 589 (1974); and subsequent
proceedings supra note 1.
13. Railroad Revitalization and Regulatory Reform Act of 1976, 45 U.S.C. §793
(1976).
[Vol. 19
FREIGHT RATES MAY DISCRIMINATE
204 of the RRA requires the ICC to investigate the rate structures
for recycled materials and competing virgin resources.' I It also pro-
vides for a public hearing during which the burden of proof is upon
the railroads to demonstrate that their rate structures, as they apply
to recycled materials, are just, reasonable, and nondiscriminatory.' s
If the railroads fail to meet this burden, the ICC is required to order
the removal of any unreasonable or unjustly discriminatory parts
from such rate structures.' 6
Section 204 of the RRA expressly reverses the burden of proving
whether a railroad freight rate structure is just, reasonable and non-
discriminatory. Before, those challenging the rates had to carry this
burden; now the railroads are supposed to carry it. Congress clearly
intended this reversal to work for the benefit of the recycling indus-
tries. Railroad freight rates for recycled and virgin materials are no
longer accorded a presumption of legality.
Pursuant to Section 204 of the RRA, the ICC commenced its
investigation of the freight rates charged for transporting recycled
and virgin materials. It requested the railroads to submit evidence
pertaining to the costs and revenues derived from their movements of
certain designated recyclable and virgin resource materials. On
February 1, 1977, the ICC issued its final report which incoporated
the findings and conclusions of its investigation.' I From the evi-
dence submitted by the railroads, which was criticized by the ICC as
being inadequate both to support their contentions and to meet their
burden of proof, the ICC concluded that:
1) the freight rates for the designated recyclable materials ranged
from one and a half to even three times the rates for virgin
resource materials;
2) the higher rates did not result in a decrease in the amount of
recyclable materials moved by the railroads; and
3) several of the recyclable products were found not to compete
with their virgin material counterparts.' 8
Thus, other than for a few exceptions, the ICC's final order did not
reduce the applicable rates.
14. Id. §204(a)(1).
15. Icd § 204(a)(2).
16. Id. §204(a)(3).
17. Ex Parte No. 270 (Sub. No. 6) Investigation of Railroad Freight Rate Structure-
Scrap Iron and Steel, 345 ICC 867 (1976).
18. National Association of Recycling Industries, Inc. v. Interstate Commerce Commis-
sion, 8 ENVIR. L. REP. (BNA), 20,653, 20,656.
January 1979]
NATURAL RESOURCES JOURNAL
Petitioners' I filed a petition for review of the ICC's order2 0
declining to reduce the freight rates in the United States District
Court for the District of Columbia Circuit.2 1 In its petition for
review, petitoners claimed that the ICC relieved the railroads of their
burden of proving the lawfulness of the rate structures as required by
Section 204 of the RRA and that the evidence presented by the
railroads fails to prove that the railroad freight rate structures are
lawful.
In its August 2, 1978, opinion, the court severely criticized the
ICC order. The court found the challenged order was not reasonably
consistent with the mandate of Section 204 of the RRA.22 The
court declined, as the petitioners requested, to interpret Section 204
as a congressional declaration that recyclable and virgin natural re-
sources are in competition for railroad transportation.2 3 The court
also rejected the claim made by the United States2 4 that this section
is a mandate to the ICC to weigh environmental goals more heavily
than the traditional transportation policy criteria. After an extensive
review of the legislative history of Section 204 of the RRA, the court
concluded that Congress had attempted by its passage to conserve
virgin natural resources by promoting the recycling industries.2 5
After examining the ICC ruling in terms of the "reasonableness"
of the freight rate structures, the court concluded that the ICC was
incorrect in refusing to consider the rates to be "unreasonable"
unless either the rates had resulted in a diminished volume of traffic
of recycled materials or it appeared that the recycling industries
could not absorb the current rates.2 6 According to the court, the
mere fact that recyclable materials withstood rate increases and con-
19. The National Association of Recycling Industries (NARI) and the Institute for Scrap
Iron and Steel (ISIS) are national trade association representatives of the recycling in-
dustries. NARI challenges the part of the ICC's order related to the rate structures on
recyclable nonferous metal, wastepaper, textiles, and rubber. ISIS challenges the ICC's
determination with respect to the rate structures on scrap iron and steel.
20. The order was entered in the ICC's proceedings entitled Ex Parte No. 319, Investi-
gation of Freight Rates for the Transporation of Recyclable or Recycled Materials, Incor-
porated in this order is the published report and order of the coordinator in Ex Parte No.
270 supra note 17.
21. National Association of Recycling Industries Inc. v. Interstate Commerce Commis-
sion, 8 ENVIR. L. REP. (BNA).
22. Id. at 20,659.
23. Id. at 20,657, F. 44.
24. As a statutory respondent, 28 U.S.C. § §2322, 2342 (1970), the United States on
behalf of the Environmental Protection Agency and the Federal Energy Administration,
challenges the ICC's order in its entirety.
25. 8 ENVIR. L. REP. (BNA) 20,653.
26. Id. at 20,659.
[Vol. 19
FREIGHT RATES MAY DISCRIMINATE
tinued to move by rail did not make the rate structures lawful.2 7
Also, the fact that the volume of recycled materials shipped follow-
ing a rate hike did not decrease failed to show that the rate structure
did not impede the development of increased recycling.' 8
The discriminatory nature of the freight rates, the court stated,
was not governed by the fact that recyclable products had been
unable to attain "actual competitive status" with virgin products.2 9
Although products made from recycled materials may well have
been unable to attain this competitive status precisely because the
higher freight rates were reflected in their higher cost, the non-
discriminatory nature of the rates, the court held, depended upon
whether the railroads could demonstrate that the recyclable materials
were neither competing with nor potentially competing for access to
transportation.3 0 Since the railroads had not demonstrated this, the
court stated that the ICC's finding of no competitive injury could
not be sustained.
The court of appeals concluded that the ICC had not adhered to
its mandate as expressed in Section 204 of the RRA. Therefore, the
ICC order was vacated in its entirety and the case remanded for
further proceedings consistent with its opinion.3 1
This decision should have many ramifications for the recycling
industries if the ICC, finally, begins to comply with its mandate and
the intent of Congress. Many commentators believe that the ICC's
past performance in this area is the result of the conflict of interest
between former railroad executives who now are the regulators and
so-called watchdogs of their previous employers. Whatever the
reasons, it is obvious that the ICC has not complied with the environ-
mental goals of Congress.
As a result of both the environmental goals of Congress and our
nation's dwindling natural resources, recyclables and the recycling
industries can only have an expanding place in the world's markets.
But the transportation barriers will have to be removed before the
recycling industries will ever be able to realistically compete.
by MARTIN D. PORTER
27. Id.
28. Id.
29. Id. at 20,663.
30. Id.
31. Id.
January 19791


Freight Rates May Discriminate against Recycled Materials

https://digitalrepository.unm.edu/cgi/viewcontent.cgi?article=3003&context=nrj

Freight Rates May Discriminate against Recycled Materials

Abstract

Similar works

Full text

Available Versions

University of New Mexico