Supreme Court Clarifies, Confuses Independent Offices Appropriations Act

A Comment in the June, 1973 ELR discussed the split of authority between two Circuit Courts of Appeals on the extent to which the Independent Offices Appropriations Act of 1952 permits government agencies to recoup their administrative costs from the beneficiaries of agency action.¹ The statute, codified at 31 U.S.C. § 483a, provides:

It is the sense of the Congress that any work, service publication, report, document, benefit, privilege, authority, use, franchise, license, permit, certificate, registration or similar thing of value or utility performed, furnished, provided, granted, prepared, or issued by any Federal agency (including wholly owned Government corporations as defined in the Government Corporation Control Act of 1945) to or for any person (including groups, associations, organizations, partnerships, corporations, or businesses), except those engaged in the transaction of official business of the Government, shall be self-sustaining to the full extent possible, and the head of each Federal agency is authorized by regulation (which, in the case of agencies in the executive branch, shall be as uniform as practicable and subject to such policies as the President may prescribe) to prescribe therefor such fee, charge, or price, if any, as he shall determine, in case none exists, or redetermine, in case of any existing one, 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, and any amount so determined or redetermined shall be collected and paid into the Treasury as miscellaneous receipts: Provided, That nothing contained in this section shall repeal or modify existing statutes prohibiting the collection, fixing the amount, or directing the disposition of any fee, charge or price: Provided further, that nothing contained in this section shall repeal or modify existing statutes prescribing bases for calculation of any fee, charge or price, but this proviso shall not restrict the redetermination or recalculation in accordance with the prescribed bases of the amount of any such fee, charge or price.

The statute is of particular interest to environmentalists because on its face it appears to authorize government agencies to recover the cost of preparing NEPA impact statements from the parties proposing major federal actions from which they might benefit.

In 1972, the D.C. Circuit examined annual fee schedules promulgated by the FPC and found that the agency exceeded its authority when it attempted to place the entire cost of regulation on the utilities under its jurisdiction on the grounds that FPC control created the "favorable economic climate" in which the companies had thrived.² The alleged benefit was, according to the court, insufficiently particular to meet the statutory standard, as clarified by a 1959 Bureau of the Budget circular which spoke of "special benefits" to "identifiable recipients." [4 ELR 10095] The court observed that while regulatory agencies served particular industries, they also protected the public, which under the FPC's scheme would pay nothing. (Indirectly, however, consumers would bear the cost, as utilities "passed through" their increased operating expenses in the form of higher rates). At about the same time, the Fifth Circuit approved the FCC's imposition of a $ .30 per subscriber annual fee on cable television operators.³

The Supreme Court granted certiorari to resolve the apparent conflict, and on March 4, handed down two decisions written by Justice Douglas. In New England Power v. FPC,⁴ a unanimous court agreed with the D.C. Circuit that the FPC's rate schedule could not stand. On the other hand, in National Cable Television Operators v. FCC⁵ a 5-2 majority of the Court upheld in principle the FCC's imposition of annual fees, though it reversed and remanded the case on grounds the Commission used an incorrect standard in setting the level of the charges. Justices Marshall and Brennan dissented from the latter decision, arguing that the majority's decisions in the two cases were inconsistent, and that industry-wide assessments could not be justified under the statute.

Passing first on the FCC's regulations, the Court noted that the Commission'sfees were set by a flat per-subscriber rate, reflecting what it believed to approximate the "value to the recipient." The FCC arrived at this figure by dividing the total direct and indirect cost of regulation among the number of CATV subscribers nationwide. The Court then discussed the distinction between a tax and a fee. Taxation was a legislative function, delegable only when the authorizing statute included an "intelligible principle" for determining the amount of the levy. The Court cited as precedent Schechter v. U.S.,⁶ the "sick chicken" case that struck down the National Recovery Act during the New Deal. A fee, on the other hand, connotes a specific benefit, the measure of which must be its "value to the recipient." To allow an administrative agency to weigh "public policy and other pertinent facts," as a literal reading of the statute seems to dictate, would place the agency in the role of the House Appropriations Committee, deciding the best sources of taxation.

The Court stated that the FCC served both the communications industry and the public; approval of a fee schedule that put the entire cost of regulation on the former would imply that the latter received no benefit whatever. Justice Douglas cited with approval the statement of a congressman who argued that it was appropriate for broadcasters to recompense the government for the costs of hearings (presumably on license grants and renewals) in return for the government's protection of the broadcaster's right to operate without interference at its assigned frequency. The same reasoning, he said, should apply to CATV operators. The case was remanded to the FCC for reconsideration of the appropriate fee schedule in light of the "value to the recipient" standard.

In New England Power v. FPC, the Court agreed with the D.C. Circuit Court of Appeals that the statute could not be used to justify assessments against an entire industry on such general grounds as the "favorable economic climate" which regulation had produced. The purpose of the act was, rather, "specific charges for specific services to specific individuals or companies." While some services, such as the development of a new method of accounting, might be a specific benefit to all companies under FPC jurisdiction, and the cost therefore apportionable among them all, administrative costs must be charged to the public where the beneficiary is uncertain or the services primarily benefit the general public.

Justice Marshall, joined by Justice Brennan, concurred in the result in New England Power but dissented from the Court's ruling in Cable Television. The dissenters noted that the Schechter case had been relied upon only once by Court since it was decided in 1935, and questioned the resurrection of the "moribund" delegation doctrine. Where, the dissenters asked, did the benefits conferred on CATV operators differ from the "favorable economic climate" rejected in the case of the FPC? As of 1970, when the regulations went into effect, the operators needed no license from the FCC, although a system of "certificates of compliance" was instituted two years later; the Court's decision validated fees charged both before and after 1972. Many of the operators, Justice Marshall noted, had no contact with the FCC in 1970, but were nonetheless assessed a share of the Commission's expenses.

The dissenters also challenged the Court's acceptance of "value of the recipient" as the sole measure of the fee to be charged The statute provided a "clear and intelligible standard," including value of the recipient, cost to the Government, and the public policy or interest served; and Court had undertaken to rewrite the law. How, Justice Marshall asked, was the Commission to determine what percentage of the value to the recipient should be charged unless it examined also the other factors mentioned? He urged that the Commission be allowed to use all the statutory standards in setting its fees, and to take into account the statutory goal of making agencies as self-sustaining as possible.

Justice Marshall's dissent seems difficult to refute, particularly with regard to the period in which CATV operators did not receive licenses from the FCC. (Unlike broadcasters, cablecasters do not occupy a particular spot on a limited bandwidth, the consideration which has been the rationale of federal control of the airwaves). His objection to the "value to the recipient" standard is also convincing. The majority implies that the value to the recipient of an FCC license will be less than its proportional [4 ELR 10096] share of all FCC regulatory costs, as provided by the challenged regulations. In reality, however, the real value of an FCC license may be immense, equivalent to a large share of the company's net profits. (Some opponents of federal regulation have in fact proposed auctioning off FCC licenses, so that the public treasury may recapture that actual value).

At the time the decision came down, only the FPC, FCC, SEC, and AEC had adopted plans for allocating agency costs pursuant to the Independent Offices Appropriations Act. Less than a month after the Supreme Court decision came down, as these agencies were reevaluating their fee schedules in light of the rulings, the Corps of Engineers published final regulations governing permits for activities in or affecting navigable waters.⁷ These activities include construction and similar work, the discharge of dredged material into navigable waters, and the transportation of dredged material for ocean dumping. The regulations provide that if an environmental impact statement is required, necessitating the development of data at substantial expense to the Government, the District Engineer may charge those extraordinary expenses to the applicant under the Independent Offices Act. The District Engineer is also authorized to commission a third-party contractor to compile the necessary data at the applicant's expense, provided that before choosing the contractor he consults with concerned federal, state, and local officials and with public interest groups and members of the public, as he considers appropriate.

The Corps' regulations indicate that the applicant for a permit is to be charged the cost to the Government of developing the necessary data, a standard which seems both logical and easy to apply. Under the rule set out by the Supreme Court, however, some standard based upon, but not necessarily equal to, "value to the recipient" must be applied. What is the value to a contractor wishing to dump dredged material of a study indicating the degree of disruption of the ecology of the ocean floor? And if the result of the research is the denial of the applicant's permit, should he be charged nothing, on grounds the study had a negative value to him? The Court may merely be saying that when the Government, as part of its regulatory functions, performs a service for an individual party, it is also serving the public, so that the "value to the recipient" cannot equal 100 percent of the actual cost of the service. The two decisions, while they may provide the impetus to other agencies to adopt fee schedules pursuant to the statute, seem also to have replaced a reasonably clear set of legislative standards with a single, murky standard, the application of which is likely to trouble the agencies and the courts through several more years of litigation.

1. Comment, Who Should Pay for the Impact Statement: More on the Independent Offices Appropriations Act of 1952, 3 ELR 10086.

2. 467 F.2d 425. A total of $5 million in regulatory costs under the Federal Power Act had been assessed against jurisdictional utilities, representing an average assessment of 0.024 percent of gross revenue and 0.14 percent of net income. In addition to unspecified charges for regulatory costs under the Natural Gas Act, jurisdictional gas companies with annual operating revenues of $1 million or more were assessed one cent for each hundred thousand cubic feet of new reserves certified each year.

3. 464 F.2d 1313.

4. __ U.S. __, 42 U.S.L.W. 4308.

5. __ U.S. __, 42 U.S.L.W. 4305.

6. 295 U.S. 495.

7. 39 Fed. Reg. 12115 (Apr. 3, 1974). According to a Corps of Engineers attorney the Corps was unaware of the Supreme Court's ruling at the time the regulations were promulgated.