To sum up, we hold that the new I.C.C. rules, announced in Abandonment of Railroad Lines, Ex Parte No. 274 (Sub-No. 1), do not change the substantive law of railroad abandonment as expressed in 49 U.S.C. § 1(18)-(20). The changes announced by those rules merely establish procedural guidelines for disposition of abandonment applications and dispensation with formal hearings, when necessary. Such changes are within the statutory authority of the Commission to make "rules and regulations" for abandonment hearings. 49 U.S.C. § 1(19). We must next turn to consideration of whether the new rules promulgated by the I.C.C. were consistent with the requirements of the A.P.A.
III. administrative requirements
Plaintiffs argue that promulgation of the new I.C.C. rules should have been done in compliance with § 4 of the Administrative Procedure Act, 5 U.S.C. § 553, and thus the public should have been given an opportunity to participate in the rulemaking. They argue the provisions of § 4 must be fulfilled because the 34 carload rule is "substantive", rather than "procedural", as it was originally labeled by the Commission in its announcement of the rules on January 14, 1972. Alternatively, plaintiffs argue, even if the new rules are not labeled "substantive", they will, nonetheless, have a substantial impact on the interests of many states and communities, and thus the requirements of § 4 are mandated. The I.C.C. contends that promulgation of the new rules was an exercise of procedural and interpretive rulemaking which need not conform to the § 4 requirements.
Administrative Procedure Act § 4, titled "Rule Making", requires general public notice of such proceedings and an opportunity for interested persons to "participate in the rule making through submission of written data, views, or arguments with or without opportunity for oral presentation." These requirements, however, do not apply to "interpretive rules, general statements of policy, or rules of agency, organization, procedure or practice." 5 U.S.C. § 553(b)(3)(A). The threshold question here, therefore, is whether this exception covers the I.C.C. rules in question, i.e., whether the new rules are procedural or interpretive, rather than substantive.
In Part I of this opinion, we explicated our views that the Subparts B and C rules are not substantive changes, but merely changes in procedure and practice. They, therefore, need not be promulgated in compliance with § 4. They do not involve substantive changes as were considered in Pacific Coast European Conference v. Federal Maritime Commission, 126 U.S. App. D.C. 230, 376 F.2d 785 (1967) (promulgation of requirements for inclusion in shipper conference agreements); American Airlines, Inc. v. Civil Aeronautics Board, 123 U.S. App. D.C. 310, 359 F.2d 624 (1966) (rules permitting all-cargo carriers to sell block space at wholesale rates); or Pacific Coast European Conference v. United States, 350 F.2d 197 (9th Cir. 1965) (rules governing shippers' contract rate systems.)
We will, nonetheless, consider whether the new I.C.C. rules will have the type of "substantial impact" on parties, such as plaintiffs in this case, as to require § 4 notice and hearings. The "substantial impact" test was announced by a three-judge statutory court in National Motor Freight Traffic Assn. v. United States, 268 F. Supp. 90 (D.D.C. 1967) aff'd 393 U.S. 18, 89 S. Ct. 49, 21 L. Ed. 2d 19 (1968). There, plaintiffs sought to nullify the I.C.C.'s establishment of an informal procedure for repayment to shippers of past charges which the carrier acknowledged to have been illegal. Plaintiffs claimed the rules establishing these procedures should have been promulgated only after notice and compliance with the § 4 proceedings. The I.C.C. argued the new rules fell within the procedural exception of A.P.A. § 4, 5 U.S.C. § 553(b)(3)(A). The Court did not decide whether establishment of these informal procedures was within the I.C.C.'s statutory authority, but held that even if it were, the proceedings had to be consistent with § 4's requirements because the new procedures specifically and definitely committed the Commission to an adjudication of the propriety of a return by a carrier to a shipper of charges theretofore collected.
Such an adjudication may, as we have seen, have palpable effects upon other carriers and shippers; and it is no answer to say that it creates no substantive rights because it is provided by the Commission only for those who voluntarily choose to use it.
268 F. Supp. at 96.
The substantial impact test was used again in Pharmaceutical Manufacturers Association v. Finch, 307 F. Supp. 858 (D. Del. 1970), to find a need for § 4 proceedings before the Food and Drug Administration established "regulations, which prescribe in specific detail, for the first time, the kinds of clinical investigations which will be deemed necessary to establish the effectiveness of existing and future drug products and which require such evidence be submitted as a condition to avoiding summary removal from the market." 307 F. Supp. at 864.
The "substantial impact" found in National Motor Freight and in Pharmaceutical Manufacturers, however, does not exist in the case sub judice. The informal reparation procedures considered in National Motor Freight permitted the I.C.C. to informally adjudicate the illegality of freight charges for services previously rendered by the carrier, and, thus, approve reparations which might "have palpable effects upon other carriers and shippers." The impact of the rate procedures on shippers would be felt when their rates were passed on in subsequent reparation proceedings. 268 F. Supp. at 96. In the present case, however, the new procedures are mechanistic, not substantive, and all affected parties have notice of the abandonment proceedings, and an opportunity to submit evidence.
In Pharmaceutical Manufacturers, the proposed informal procedures jeopardized the sale and distribution of more than 2,000 products which were marketed with FDA approval and placed all of them in jeopardy, "subject to summary removal by order of FDA." The FDA Commissioner did not deny that the new, informal regulations "will have a substantial and pervasive effect on the drug industry." 307 F. Supp. at 864. In this case, the new regulations do not jeopardize the substantive rights of any parties. The only impact on opponents of railroad abandonments is to accelerate the preparation of their case and proffer of evidence if formal proceedings are desired.
The substantive law which the Commission will apply in determining whether abandonment certificates should be granted has not been changed. Unlike National Motor Freight, the new procedures established will not create substantive effects upon the rights of parties not involved in the proceedings. Unlike Pharmaceutical Manufacturers, no services or products formerly available to the public may be summarily removed from the market.
We therefore find no substantial impact on plaintiffs, or other parties who might oppose railroad abandonments, caused by the new I.C.C. rules, which necessitates compliance with § 4 of the A.P.A. We need not determine whether consideration of petitions for reconsideration of the rules, as undertaken by the I.C.C., cured the original failure to allow public input into the rulemaking process. See Wagner Electric Corporation v. Volpe, 466 F.2d 1013, 1020 (3d Cir. 1972). This issue, as argued by the parties, is moot since we have determined that the requirements of § 4 for public participation in rulemaking do not apply to the rules sub judice.
Having found that the I.C.C. need not have complied with § 4 of the A.P.A. in promulgating the new rules in question, and noting that it did comply with A.P.A. § 3, 5 U.S.C. § 552(a)(1)(C), by publishing these new procedural rules in the Federal Register, the only determination left for us is whether the new procedural rules are arbitrary and capricious. 5 U.S.C. § 706(2)(A); Kessler v. Federal Communications Commission, 117 U.S. App. D.C. 130, 326 F.2d 673, 683-689 (1963); Ranger v. Federal Communications Comission, 111 U.S. App. D.C. 44, 294 F.2d 240, 243-244 (1961); cf. Federal Communications Commission v. Schreiber, 381 U.S. 279, 295, 85 S. Ct. 1459, 14 L. Ed. 2d 383 (1965). The Commission has statutory authority to prescribe rules and regulations governing its procedures. 49 U.S.C. §§ 12(1), 17(3). This authority has been interpreted to give administrative agencies broad discretion in determining the methods which would best permit them to perform statutory functions. Federal Communications Commission v. Schreiber, 381 U.S. 279, 289, 85 S. Ct. 1459, 14 L. Ed. 2d 383 (1965).
We believe the procedures adopted are a rational and salutory response to deal expeditiously with critical developments in the railroad industry. None of the parties are absolutely precluded from producing documentary or oral evidence to support their respective positions; and the burden of persuasion remains unchanged.
Plaintiff's complaint will be dismissed. An appropriate order will be entered.