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overinvest or be exploited by speculation, since it was provided in the bill that the issuance of securities was to be authorized and guaranteed by the Federal Government. Furthermore, it was pointed out, although most of the northeast and east had since become standardized and developed, the rest of the country was distinguished by vast, underutilized territory. This argued for responsible community initiative, rather than what was regarded as an indiscriminate and inhibiting certification requirement. In the Member's opinion, there existed more trouble from an inadequacy of rail facilities than from any other cause, and the provision would "grind railroad construction to a halt." 33 This same concern had been expressed before the House committee drafting the bill:

[W]ith respect to the extension of railroads or the building of railroads *** I know of no problem which requires correction by this enactment * * * I doubt if there are enough lines of railroad now, if our country continues to grow ***. For example, on the Northwestern line to * * * Wyoming, and on some the lines in South Dakota the service was extremely bad, so bad that it was difficult to handle livestock safely over those lines at all ***. The centralwestern country is served almost altogether by the transcontinental lines, and unless there is some provision made for building railroads into that country it will remain unpopulated and unproductive * * * 34

Finally, many parties regarded paragraphs (18)-(22) as a fundamental part of a bill that was intrusive and unacceptable in any respect. A fairly typical comment was the following:

The Commission has only negative and restrictive power, and we think that when these extensions of administrative power are conferred upon any tribunal, it is only just to the subject of that regulation that some limit upon the exercise of that power would be laid down by Congress. ***You propose not only to regulate the issue of railroad securities *** [you] require extensions of their trunkline railway systems ***. This reaches the limit of constitutional authority ***

The point I make immediately is *** to call to the attention of the committee that when you are giving to the Commission not only the power of life and death through the stoppage of rates and the control of rates, but propose to displace the corporate management in broad fields within which it has formerly exercised its discretion, and will thus change the original undertaking assessed by the stockholders in entering into that enterprise, you are giving such sweeping, drastic, and unlimited powers to the Interstate Commerce Commission as to make it necessary for you in some way to provide by a definition of policy which will retain that such wide power shall be exercised only under conditions that will result

33 Remarks of Representative Smith, 59 Cong., Rec. 746-47 (1919).

34 Testimony of S. H. Cowan, attorney, American Livestock Association, U.S. House, op. cit., n. 14, I, 855.

Much doubt was expressed in legal circles as to the constitutionality of the power given to the commission in paragraph 21. It was felt that unless such an action was accompanied by an absolute guaranty of earnings, it would amount to the taking of property for public use without just compensation. Only once has the ICC issued an order requiring a carrier to extend its lines, although a number of similar cases had been before it which had been refused. In 1929, it directed a subsidiary of the Union-Pacific Railroad Co. to construct a crossState line about 187 miles long, at an estimated cost of $9 million. This order was subsequently set aside by the Supreme Court in Interstate Commerce Comm. v. Oregon-Washington Railroad & Navigation Co.29 The express purpose of the requested extension was to provide facilities for expedious shipment of commodities, and to develop and enhance the area's natural resources. The Court observed:

The phrase "and to extend its line or lines" is part of a single
sentence committing to the Commission the power to require
carriers to provide safe and adequate facilities for car service
as defined in the act. The reasonable conclusion is, therefore,
that the extensions mentioned have to do with car service,
and are not intended to create a wholly independent area of
jurisdiction. In the proviso the furnishing of facilities and
extension of lines are blended as belonging to a single class.
We should expect, if the Congress were intending to grant
to the Commission a new and drastic power to compel the
investment of enormous sums for the development of service
of a region which a carrier had never theretofore entered or
intended to serve, the intention would be expressed in more
than a clause in a sentence dealing with car service.30

The Court discerned "[n]o intimation [in the legislative history of the Transportation Act] *** that carriers should be required to build into territory they had not undertaken to serve" by license or franchise.1 This construction was supported by a brief analysis of the relevant constitutional issues:

The railroads, although dedicated to a public use, remain the private property of their owners, and their assets may not be taken without just compensation. The Transportation Act has not abolished this proprietorship. State courts have uniformly held that to require extension of existing lines beyond the scope of the carrier's commitment to the public service is a taking of property in violation of the Federal constitution. Decisions of this Court will be searched in vain for the announcement of any principle of constitutional interpretation which would support the order of the Commission.82

As to the viability of the certification requirement itself, one Member of Congress argued wholly against paragraphs (18)-(22), saying that a locale desiring a railroad facility is best qualified to determine its own needs. The argument disassociated the present from the experience of the past by stating that the local populace would not likely

29 Op. cit., n. 25.

30 Id., at 35.

31 Id., at 36.

32 Id., at 40-41.

overinvest or be exploited by speculation, since it was provided in the bill that the issuance of securities was to be authorized and guaranteed by the Federal Government. Furthermore, it was pointed out, although most of the northeast and east had since become standardized and developed, the rest of the country was distinguished by vast, underutilized territory. This argued for responsible community initiative, rather than what was regarded as an indiscriminate and inhibiting certification requirement. In the Member's opinion, there existed more trouble from an inadequacy of rail facilities than from any other cause, and the provision would "grind railroad construction to a halt." 33 This same concern had been expressed before the House committee drafting the bill:

[W]ith respect to the extension of railroads or the building of railroads *** I know of no problem which requires correction by this enactment *** I doubt if there are enough lines of railroad now, if our country continues to grow***. For example, on the Northwestern line to ** Wyoming, and on some the lines in South Dakota the service was extremely bad, so bad that it was difficult to handle livestock safely over those lines at all ***. The centralwestern country is served almost altogether by the transcontinental lines, and unless there is some provision made for building railroads into that country it will remain unpopulated and unproductive *** 34

Finally, many parties regarded paragraphs (18)–(22) as a fundamental part of a bill that was intrusive and unacceptable in any respect. A fairly typical comment was the following:

The Commission has only negative and restrictive power, and we think that when these extensions of administrative power are conferred upon any tribunal, it is only just to the subject of that regulation that some limit upon the exercise of that power would be laid down by Congress. ***You propose not only to regulate the issue of railroad securities *** [you] require extensions of their trunkline railway This reaches the limit of constitutional

systems

authority

***

***

The point I make immediately is *** to call to the attention of the committee that when you are giving to the Commission not only the power of life and death through the stoppage of rates and the control of rates, but propose to displace the corporate management in broad fields within which it has formerly exercised its discretion, and will thus change the original undertaking assessed by the stockholders in entering into that enterprise, you are giving such sweeping, drastic, and unlimited powers to the Interstate Commerce Commission as to make it necessary for you in some way to provide by a definition of policy which will retain that such wide power shall be exercised only under conditions that will result

33 Remarks of Representative Smith, 59 Cong., Rec. 746-47 (1919).

34 Testimony of S. H. Cowan, attorney, American Livestock Association, U.S. House, op. cit., n. 14, I, 855.

in a reasonable return, and not in a lawsuit for a return one
point more than confiscation.

To say that a carrier shall be required to expend $50 mil-
lion or $100 million and then remain in the bread line before
the Interstate Commerce Commission in order to receive a
reasonable return upon the investment it has made, Mr.
Chairman, is going too far in the process of regulation.35

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The goals that the Congress sought were not plainly expressed by the words used in the language, requiring subsequent explanation by courts. This repeated statutory construction brought about an extensive case history of the legislative intent in Section I (18)-(22). Most plaintiff's requested that an injunction be applied against the action of construction until a certificate was obtained from the Commission, and in at least one case, the legality of the Commission's authority was the focus of contention. It was invariably held that Congress had invested the Commission with the power to determine the facts of each instance, and to exercise its judgement as to whether a certificate was required.

36

By the early 1930's, the statutory purpose of section 1(18) had received generally two court interpretations. The certification requirement was most often distinguished as the regulation of competition so as to insure a viable service:

"[E]xtension" and "industrial track," as used in paragraphs 18 to 22, is furnished by the context and by the relation of the specific provisions here in question to the railroad policy introduced by the Transportation Act of 1920. By that measure, Congress undertook to develop and maintain, for the people of the United States, an adequate railway system. It recognized that preservation of the financial resources of individual carriers, is a matter of national concern; that the property employed must be permitted to earn a reasonable return; that the building of unnecessary lines involves a waste of resources and that the burden of this competition between carriers may result in harm to the public, as well as in benefit; and that, when a railroad inflicts injury upon its rival, it may be the public which ultimately bears the loss.37

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New construction by an existing carrier might periodically affect the public by financially hampering its function in furnishing an adequate interstate service to the public; by invading the territory already adequately served by another carrier and thus injuring one or both of these by causing an increase in group rates or by other ways.38

The Supreme Court was in one instance obliged to determine whether the Commission was acting lawfully when it authorized con

35 Testimony of Alba B. Johnson, president, Railway Business Association, U.S. House, id., I, 1037, 1039. 36 See, e.g., Colorado v. U.S.. 271 U.S. 153 (1926).

37 Texas & Pacific Ry. v. Gulf, Colorado & Santa Fe Ry., 270 U.S. 266, 277-78 (1926) (references omitted).

38 Missouri-Kansas-Texas R. Co. v. Northern Oklahoma Rys., 25 F. 2d, 689, 691 (1928) (cert. denied, 278 U.S. 610).

struction so as to provide to a coalmining region a choice among carriers for shipment of the product. The Court recognized, citing previous ICC findings, that the Congress of 1920 wished to balance its concern about duplication with a recognition that competition was not in all cases harmful. In so doing the Court implied the second interpretation of section 1(18), that is, rate base regulation. It was necessary to preclude excessive investment in the construction and operation of facilities which were not needed to insure adequate service, and for which a Commission-administered reimbursement (plus "reasonable" profit) was to be expected from its revenues:

Undoubtedly the purpose of these provisions is to enable the Commission, in the interest of the public, to prevent improvident and unnecessary expenditures for the construction and operation of lines not needed to insure adequate service. In the absence of a plain declaration to that effect, it would be unreasonable to hold that the Congress did not intend to empower the Commission to authorize construction to new lines to provide for shippers such competing service as it should find to be convenient or necessary in the public interest. Indeed, section 6(4) of the act, which authorizes the Commission to prepare a plan for the consolidation of railway properties into a limited number of systems, clearly discloses a policy on the part of Congress to preserve competition among carriers. *** And the Commission has recognized the advantages of competitive service to shippers especially in respect of a diversified car supply for the shipment of coal and lumber; it suggests the possibility of failure of operation from various causes, that under some circumstances competition operates to stimulate better service and that reasonable competition may be in the public interest.9

The court reasoned that the imperative of cost-cutting would occur under the liability of market alternatives rather than under an accounting to an administrative presence. Competition would offset to some extent the rate of return rights of private investments dedicated to public utility resources. This is an interesting twist to the originally intended relation of 1(18)-(22) to the rate of return function, that is, a virtually absolute prior governmental veto of management investment decisions as a check on the public obligation to a carrier's

return.

These cases and others like them enabled the lower Federal courts to rely on a great deal of antecedent in reviewing the fundamental purpose of 1(18):

The underlying purpose of the provision contained in paragraph (18) of the act forbidding the construction without first obtaining a certificate of convenience and necessity was to prevent improvident and unnecessary expenditures for the construction and operation of lines not needed to insure adequate service; to protect interstate carriers from weakening themselves by constructing and operating superfluous lines,

30 Chesapeake & O. Ry. v. U.S., 283 U.S. 35. 37-8 (1931). (References omitted.) See also Transit Commission v. U.S., 289 U.S. 121 (1933).

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