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November 12, 1975

Norbert T. Tiemann, as Administrator, Federal Highway Administration and William T. Coleman, Jr., as Secretary, United States Department of Transportation, Defendants, and City of Philadelphia, Defendant Intervenor

The opinion of the court was delivered by: BROTMAN

This case involves the review of an order setting tolls on bridges owned and operated by the Delaware River Port Authority (hereinafter 'Authority' or 'DRPA') *fn1" by the Federal Highway Administrator (hereinafter 'Administrator).

The Administrator's authority to prescribe tolls derives from Section 503 of the General Bridge Act of 1946, 33 U.S.C. § 526. As originally enacted by Congress the power to set 'reasonable and just' tolls was delegated to the Secretary of the Army. Act of August 2, 1946, ch. 753, 60 Stat. 847-48. This power was transferred to the Secretary of Transportation pursuant to the Department of Transportation Act. 49 U.S.C. § 1655(G)(4)(B). The Secretary of Transportation delegated this power to the Federal Highway Administrator. 49 C.F.R. § 1.48(i)(2).

 The proceedings below were conducted by the Administrator pursuant to Secs. 5-9 of the Administrative Procedure Act, 5 U.S.C. §§ 554-558 (originally enacted as Act of June 11, 1946, ch. 324, 60 Stat. 237, 239-43), and the Bridge Toll Procedural Rules, 49 C.F.R. § 310.1-310.14. *fn3" Jurisdiction of the court is founded upon 28 U.S.C. § 1331 *fn4" and1337. *fn5"

 This court must, within the proper scope of its review, consider the statutory requirement of 'reasonable and just' tolls, 33 U.S.C. § 526, the relationship of this requirement to the bond covenant between the Authority and its bondholders, due process claims asserted by the DRPA and the possible application of the National Environmental Policy Act (NEPA). Ultimately, the court must decide whether the Administrator's Order and Opinion is in accord with the relevant statutory criteria, the product of a reasoned decision-making process, and supported by 'substantial evidence.' Implicated in the court's review are, perforce, issues of profound public importance, including the continued ability of the DRPA to operate its public facilities as well as to meet existing obligations to its bondholders, the conservation of fuel, and the reasonableness and justness of the tolls as they affect the bridge-using public.


 The current proceeding began when the DRPA instituted a toll increase, effective April 1, 1972. *fn6" This increase was effected 'for the stated purpose of attaining additional revenue to complete the financing of a capital construction program and to operate and maintain those facilities.' Administrator's Opinion, at 3.

 Complaints were heard from various parties. On August 10, 1972 the Federal Highway Administrator issued a Notice of Public Hearing. *fn7" The Administrator directed that a formal hearing be held in Philadelphia to permit interested parties to submit evidence on the reasonableness and justness of the Authority's tolls.

 A prehearing conference was held on September 9, 1971, pursuant to 49 C.F.R. § 310.8(b). Hearings were held from September 28 through October 7, 1972. On December 29, 1972, the Administrative Law Judge, Honorable Louis G. LaVecchia, issued a Recommended Decision, pursuant to 49 C.F.R. § 310.12(a), finding that the present toll schedule was not reasonable and just, and recommending that the pre-April 1972 toll schedule be reinstated. The Administrator issued a Tentative Opinion and Order on June 1, 1973 which accepted the Recommended Decision. *fn8" On November 5, 1973 the Administrator issued an Opinion, finding that the Authority's toll schedule was not reasonable and just, and ordering a new schedule effective January 1, 1974, providing for a fifty (50) cent cash toll and a thirty-five (35) cent commuter toll. On November 21, 1973 the DRPA filed a Petition for Reconsideration which was denied by the Administrator on December 3, 1973.

 At this point the focus of the proceedings shifted to the federal courts. The Authority filed a complaint for declaratory judgment and a permanent injunction against the enforcement of the Administrator's Order of November 5, 1973 in the United States District Court for the Eastern District of Pennsylvania on December 5, 1973. A temporary stay pending litigation and final relief was also sought. (This action was dismissed by order 'without prejudice to the rights of either party to bring further action of the nature comprehended under the above caption or of any other nature.' Civil Action No. 73-2749, Order of September 27, 1974.)

 On December 11, 1973 representatives of the Authority met in Washington, D.C. with the Federal Highway Administrator to discuss the effect of the impending energy crisis on the DRPA. In light of the gasoline shortage and the energy crisis, the adoption of a new schedule of tolls for the Authority was considered.

 As a result thereof, the Administrator issued a Decision and Order on December 21, 1973 permitting the DRPA to put its new proposed schedule into effect 'at least on an interim basis.' This interim toll schedule is the one presently in operation. In his decision, the Administrator stated quite explicitly that 'the question whether the revenues produced by the new schedule will be excessive remains open.' The hearings were ordered reopened so that evidence bearing on the reasonableness and justness of the toll schedule, in the light of the then-current situation, could be adduced.

 Hearings were held in Philadelphia on April 23, 24, and 25, 1974 before the Administrative Law Judge, Honorable Edward V. Alfieri. The Authority presented evidence in support of the interim toll schedule. The City of Philadelphia, Automobile Club of Southern New Jersey, Pennsylvania Motor Truck Association, Keystone Automobile Club, Motorists for Lower Tolls (a group of New Jersey commuters). Transport of New Jersey, and the United States Environmental Protection Agency all appeared in opposition to the toll schedule. The Federal Highway Administration's Office of Chief Counsel appeared as public counsel representing the public interest.

 The Administrative Law Judge issued a Recommended Decision on October 16, 1974. He found that the present tolls were not reasonable and just and recommended that the toll schedule set forth in the Administrator's Order of November 5, 1973 be instituted.

 Subsequent thereto, on February 10, 1975, the Administrator ordered the Authority to submit additional documents relating to the Authority's refunding program undertaken in June 1974, after the April 1974 hearing had concluded. (Exhibits 136-139). Following the submission of these documents to all record parties for comment, the Administrator reopened the record to include Exhibits 136-139 in evidence. *fn9"

 On May 19, 1975 the Administrator issued his Opinion and Order which is now before this court on review. The Administrator found that the interim toll schedule set forth in the Order of December 21, 1973 was not reasonable and just, and, as noted, set forth in Appendix A a new schedule, to take effect August 1, 1975.

 The Authority filed a petition for reconsideration on June 4, 1975 and request for a stay, which was denied by the Administrator on July 10, 1975. The Administrator on July 10, 1975 also supplemented his Opinion of May 19, 1975. Administrator's Order, July 10, 1975 (hereinafter,'Administrator's Supplemental Opinion').

 Shortly thereafter, on July 14, 1975 the DRPA filed a complaint seeking declaratory judgment, a temporary stay pending litigation and final relief against Norbert T. Tiemann, Federal Highway Administrator, and William T. Coleman, Jr., Secretary, United States Department of Transportation. Leave to intervene was granted to the City of Philadelphia, which had participated in the proceedings below. After considering the briefs and testimony in support of the stay, this court on July 23, 1975 stayed the effective date of the Administrator's Order.

 The matter is now before the court for final determination. Cross motions for summary judgment have been filed pursuant to Fed.R.Civ.P. 56.


 Section 503 of the General Bridges Act of 1946, which governs the rate of tolls on bridges owned and operated by the DRPA, *fn10" provides as follows:

 If tolls shall be charged for the transit over any interstate bridge of engines, cars, street cars, wagons, carriages, vehicles, animals, foot passengers, or other passengers, such tolls shall be reasonable and just, and the Secretary of Transportation may, at any time, and from time to time, prescribe the reasonable rates of toll for such transit over such bridge, and the rates so prescribed shall be the legal rates and shall be the rates demanded and received for such transit. 33 U.S.C. § 526.

 As noted, the Secretary of Transportation delegated the power to prescribe reasonable and just tolls to the Federal Highway Administrator. 49 C.F.R. § 1.-48(i)(2).

 The 'reasonable and just' standard found in Sec. 503 of the General Bridge Act of 1946 has never been the subject of interpretation by the courts. *fn11" However, the term 'reasonable and just' is not uncommon in the federal regulatory scheme. E.g., Interstate Commerce Act, 49U.S.C. § 1(5) (railroads); 49 U.S.C. § 905 (water carriers); Natural Gas Act, 15 U.S.C. § 717c; Federal Aviation Act, 49 U.S.C. § 1482. In Federal Power Commission v. Hope Natural Gas Co., 320 U.S.591,605,64 S. Ct. 281, 289, 88 L. Ed. 333(1944), a case arising under the Natural Gas Act, the Supreme Court defined reasonable and just rates '(r)ates which enable the company to operate successfully, to maintain its financial integrity, to attract capital, and to compensate its investors for the risks assumed . . ..' More recently the Court reaffirmed the validity of the above criteria, while noting in addition that the regulating agency must 'provide appropriate protection to the relevant public interests, both existing and foreseeable.' Permian Basin Area Rate Cases, 390 U.S. 747, 792, 88 S. Ct. 1344, 1373, 20 L. Ed. 2d 312 (1968). Included within the relevant public interests is the protection of consumer interests, here that of the bridge users. Id. at 798, 88 S. Ct. 1344; Democratic Central Committee v. Metropolitan Area Transit Commission, 158 U.S.App.D.C. 107, 485 F.2d 886, 911-12 (1973), cert, denied, 415 U.S. 935, 94S. Ct. 1451, 39 L. Ed. 2d 493 (1974); see also City of Chicago v. Federal Power Commission, 458 F.2d 731, 751 (D.C.Cir. 1971), cert. denied 405 U.S. 1074, 92 S. Ct. 1495, 31 L. Ed. 2d 808 (1972); MacDonald v. Federal Power Commission, 164 U.S.App.D.C. 248, 505 F.2d 355, 363-64 (1974). *fn12"

 The principles developed in Hope, Natural Gas, supra, and Premian Basin, supra, were fashioned to set reasonable and just rates which private, profit-oriented utilities might charge. *fn13" Such utilities are, as noted, entitled to rates which allow them to attract capital and compensate investors. But the Delaware River Port Authority is not such a utility. Rather, it is a public agency. *fn14" Therefore the DRPA has no right to profit from public use of its facilities.

 Indeed, when Congress gave its consent to the Compact creating the DRPA, it was particularly concerned that the Authority not be allowed to retain excess revenue which would have the effect of watering its capital. Consequently, in exempting the Authority from the thirty-year amortization requirement of Sec. 506, 33 U.S.C. § 529, Congress sought to limit the revenues retained by DRPA. The report of the House Public Works Committee on the Compact legislation, H.R.Rep. No. 2293, 82 Cong., 2d Sess. 3 (1952), states:

 With respect to the other point emphasized by the Bureau of the Budget and the Bureau of Public Roads -- that the bills originally introduced might permit the perpetuation of tolls on bridges under the jurisdiction of the Delaware River Port Authority, contrary to the provisions of the 1946 Bridge Act, as amended, and the policy established by the Congress that interstate toll bridges should become toll-free when the cost had been amortized by toll collections, the committee has inserted a proviso in the bill which, although specifically exempting the said port authority from the operation of the 30-year limitation provided for by section 506 of the General Bridge Act, as amended, requires that the collection of tolls shall cease at the expiration of 50 years from the date of the opening to traffic by the port authority of the bridge latest constructed, or acquired thereby, after the effective date of this legislation. The proviso further requires that the rate of such toll shall be subject to the provisions of section 503 of the General Bridge Act of 1946, as amended. Therefore, since any possible watered capital values would be reflected in toll rates, the Secretary of the Army would have the power to prevent the passing on of such watered capital values to the public by controlling the toll rates to be charged, and assuring that they will be reasonable and just.

 Reasonable and just tolls prescribed pursuant to Section 503 of the General Bridge Act of 1946 should therefore allow the DRPA to generate revenues 'sufficient to achieve a return . . . to support its total activities, including the operation of the bridges, the PATCO rapid transit system, and the World Trade Division, and provide sufficient coverage for financings.' Administrator's Opinion, at 10. The authority's ability to maintain its operations and meet its bond commitments are essential aspects of the concept of reasonable and just tolls. *fn15" Equally important are the relevant public interests, including the public policy favoring the conservation of fuel *fn16" and the aforesaid interest of the toll-paying public in reasonable and just tolls.

 Consistent with the above factors, which give content to the statutory term, is the concept of a 'zone of reasonableness.' Within such a zone, the agency may 'employ price functionally in order to achieve relevant regulatory purposes . . ..' Permian Basin, supra 390 U.S. at 797, 88 S. Ct. at 1376. The mere fact that the value of the regulated property may be reduced does not invalidate the regulation, unless said regulation becomes confiscatory. Hope Natural Gas, supra 320 601, 64 S. Ct. 281; Permian Basin, supra 390 770, 88 S. Ct. 1344; Federal Power Commission v. Texaco, Inc., 417 U.S. 380, 391-92, 94 S. Ct.2315, 41 L. Ed. 2d 141 (1974). If the Administrator's new toll schedule falls within this 'zone of reasonableness,' it must be upheld.

 To summarize, a reasonable and just rate of tolls is a rate which enables the DRPA to maintain its public facilities, allows it to meet its commitments to the bondholders, and remains consistent with the other public interests.

 The Opinion and Order of the Federal Highway Administrator now before this court on review is the culmination of a process which began with public hearings *fn17" conducted pursuant to the Bridge Toll Procedural Rules, 49 C.F.R. 310.1 et seq. *fn18" These proceedings, the ultimate purpose of which was to determine reasonable and just tolls to be charged by the DRPA, were adjudicatory in nature, a process to be distinguished from administrative rule-making wherein an administrative agency promulgates policy-type rules affecting an entire industry. See United States v. Florida East Coast Ry., 410 U.S. 224, 245, 93 S. Ct.. 810, 35 L. Ed. 2d 223 (1973).

 Where, as here, an adjudicatory hearing has been held 'to produce a record that is to be the basis of agency action,' Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402,415, 91 S. Ct.. 814, 823, 28 L. Ed. 2d 136 (1971), the 'substantial evidence' test limits the scope of the court's review. Id. at, 414, 91 S. Ct. 814. *fn19" 'Substantial evidence is more than a mere scintilla. It means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion (Citations omitted).' Consolidated Edison Co. v. National Labor Relations Board, 305 U.S. 197, 229, 59 S. Ct. 206, 217, 83 L. Ed. 126 (1938); accord, Richardson v. Perales, 402 U.S. 389, 401, 91 S. Ct. 1420, 28 L. Ed. 2d 842 (1971). *fn20"

 When Congress enacted the Administrative Procedure Act in 1946, it codified the 'substantial evidence ' test articulated in Consolidated Edison, supra. Universal Camera Corp. v. National Labor Relations Board, 340 U.S. 474, 483 n. 16, 71 S. Ct. 456, 95 L. Ed. 456 (1951). ...

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