Who Should Pay for the Impact Statement: More on the Independent Offices Appropriation Act of 1952

A Comment in last month's ELR¹ described the decision of the District of Columbia Circuit in New England Power v. Federal Power Commission,² which struck down the FPC's attempt to make itself self-sustaining under the 1952 Act by assessing a proportional share of the agency's costs to every company subject to FPC regulation. Since that time, the Supreme Court has granted certiorari to review that decision, as well as a decision of the Fifth Circuit which recently upheld an analogous fee schedule adopted by the FCC under the same statute.³ This Comment will further examine these two cases in light of ELR's earlier suggestion that under the 1952 Act costs incurred by federal agencies in preparing NEPA impact statements could be billed to non-federal parties.

The authority to charge costs to private parties derives from Title V of the 1952 Act, which states that it was the sense of Congress that

any work, service, publication, report, document, benefit, privilege, authority, use, franchise, permit certificate, registration or similar thing of value or utility performed, furnished, provided, granted, prepared, or issued by any federal agency … to or for any person … shall be self-sustaining to the full extent possible, and the head of each Federal agency is authorized … to prescribe therefor such fee, charge, or price, if any, as shall determine … to be fair and equitable taking into consideration direct and indirect cost to the government, value to the recipient, public policy or interest served, and other pertinent facts….⁴

The broad language of Title V was given a much narrower interpretation by a Bureau of the Budget circular issued in 1959.⁵ BOB's guidelines provided that before user charges could be imposed, the following preconditions had to be met: the service must be a "special benefit," the recipient must be identifiable, the service must be capable of quantitative measurement, and it must be conferred on a recipient individually, rather than as part of a service furnished to the public generally. In reliance on the BOB circular, the Department of Defense and Civil Aeronautics Board have imposed charges for clerical services.

Since 1968, however, committees of both the Senate and House have taken positions rejecting the BOB view of the statute, and urging that a more expansive reading be given.⁶ Under substantial congressional pressure, the FCC adopted in 1970 a system of annal fees, geared to a broadcaster's advertising rates, with the intention of making the agency entirely self-sustaining. At the same time, license fees were increased and a tax imposed on transfers of station licenses. Shortly thereafter, the FPC followed suit with a new rate schedule, setting fees according to each utility's yearly sales.

[3 ELR 10087]

The new fee schedules were promptly challenged in the courts. The broadcasters charged that the FCC lacked authority to impose the new rates, and that even if it possessed such authority, the fees were excessive. The cablecasters added to this the argument that since they were not licensed by the Commission, they received no substantial benefit for which they could be made to pay. The Fifth Circuit rejected all these arguments, holding that the FCC had made a proper balancing of the value, cost and public policy factors involved. The court conceded that the FCC's policies tended to restrict the cable TV industry, but observed that what prosperity the industry did enjoy could be attributed to the Commission's policy of limiting the number of broadcast TV outlets; both broadcasters and cablecasters, the court said, received a benefit from the FCC in the form of the favorable economic climate which it maintained.

A month later, the D.C. Circuit struck down the rate schedules adopted by the FPC, saying that the legislative history of the 1952 Act and the BOB circular clearly indicated that Congress' intent was to obtain compensation for services provided to "special beneficiaries"; the preservation of a favorable economic climate could not be considered a benefit within the meaning of the statute, as the true beneficiary was in fact the public as a whole.

Both these decisions may be open to criticism. In New England Power the D.C. Circuit placed heavy reliance on the 1959 BOB circular, which restricted the scope of the statute far beyond the apparent intent of Congress. In Clay Broadcasting, on the other hand, the Fifth Circuit's approval of a "favorable economic climate" as a service within the sense of the statute does not seem borne out by a close reading of the Act's text. The Supreme Court may well use this opportunity to define clearly just what the requirements are for a benefit and a beneficiary under the Act. Whether or not the Court approves the "economic climate" as a benefit chargeable to private parties, and preparation of a NEPA impact statement is a readily definable service performed for an easily identifiable beneficiary.

A more basic question is whether the cost of the governmental service should be charged to the party benefitting from it or to the public at large, through the general tax revenues. The former approach, a form of cost internalization, is what the FPC and FCC attempted to employ in their recent fee schedules. In the case of the FCC, the argument in favor of placing the cost of broadcast regulation on the broadcasters themselves is strong; broadcasters pay nothing for a license that virtually guarantees them prosperity. With regard to the FPC, the situation is more questionable, as higher operating costs of utility companies are likely to be passed on the consumers.⁷

In the environmental field the arguments in favor of internalizing the costs of environment-threatening activities are compelling indeed. If the cost of the impact statement is placed on the private party, there is a strong incentive created to submit plans that are environmentally sound, to insure that high costs for impact statement preparation will not be incurred. There is also an inducement to supply as much necessary factual material as possible, in order to make the agency's task as little time-consuming,and therefore as inexpensive, as possible. Much more important, however, is that the public generally would not be made to subsidize each entrepreneur whose plans would have a significant effect on the environment. There seems little reason to distinguish between cases in which ultimate permission to complete a proposed action is granted or denied, as far as assessing costs is concerned. The impact statement, which helps determine the feasibility of a planned project, should be seen as an investment cost analogous to hiring a consulting engineer for his opinion on the technical feasibility of the project. Placing costs on the enterprise are likely to result in higher costs for the ultimate consumer of the applicant's product or service, as is appropriate. Any resulting diminution in demand will mean that much less destruction orconsumption of environmental resources. At the same time, knowledge of the necessity of paying for an impact statement would provide incentives to use resources in ways which would not require statements to be prepared. Environmentalists can hope that the Supreme Court's decision on the two Independent Offices Appropriations Act cases before it will provide an impetus to government agencies to help tum this long-ignored statute into a significant tool for protecting the environment.

1. Comment, The Independent Offices Appropriations Act of 1952: Who Should Pay for Preparing the Impact Statement?, 3 ELR 10059 (May 1973).

2. New England Power Co. v. FPC, 467 F.2d 425 (D.C. Cir. 1972), cert. granted, 41 U.S.L.W. 3605 (U.S. May 14, 1973).

3. Clay Broadcasting Corp. v. United States, 464 F.2d 1313 (5th Cir. 1972), cert. granted sub nom. National Cable Television Assn., Inc. v. United States, 41 U.S.L.W. 3605 (U.S. May 14, 1973). See Note, A New Approach to Agency Financing: New England Power and Clay Broadcasting, 1973 Duke L.J. 161.

4. Act of Aug. 31, 1951, Pub. L. No. 137, ch. 376, tit. V, § 501, 65 Stat. 290 (codified at 31 U.S.C. § 483 (a) (1970)).

5. Bureau of the Budget Circular No. A-25 (Sept. 23, 1959).

6. See H.R. Rep. No. 649, 91st Cong., 1st Sess. 6 (1969), reporting on conference committee meeting of House and Senate Committees on Appropriations.

7. This might in fact result in an effectively regressive charge on individual users of power.