United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued November 10, 2010 Decided March 15, 2011
No. 09-1002
VILLAGE OF BARRINGTON, ILLINOIS,
PETITIONER
v.
SURFACE TRANSPORTATION BOARD AND UNITED STATES OF
AMERICA,
RESPONDENTS
CANADIAN NATIONAL RAILWAY COMPANY, ET AL.,
INTERVENORS
Consolidated with 09-1028, 09-1048, 09-1049, 09-1073
On Petitions for Review of an Order
of the Surface Transportation Board
Kevin M. Sheys argued the cause for Community
Petitioners. With him on the briefs were Barry M. Hartman,
Edward R. Gower, Joel D. Bertocchi, and Richard H.
Streeter.
Paul A. Cunningham argued the cause for petitioners
Canadian National Railway Company and Grand Trunk
Corporation. With him on the briefs were David A. Hirsh and
Theodore K. Kalick.
2
Evelyn G. Kitay, Associate General Counsel, Surface
Transportation Board, argued the cause for respondents. With
her on the brief were Mary Gabrielle Sprague, Robert B.
Nicholson, and John P. Fonte, Attorneys, U.S. Department of
Justice, Craig M. Keats, Acting General Counsel, Surface
Transportation Board, and Jeffrey D. Komarow, Theodore L.
Hunt, and J. Frederick Miller, Jr., Attorneys, Surface
Transportation Board. John C. Cruden, Assistant Attorney
General, U.S. Department of Justice, entered an appearance.
Kevin M. Sheys, Barry M. Hartman, and Richard H.
Streeter were on the joint brief of Community intervenors.
Paul A. Cunningham, David A. Hirsh and Theodore K.
Kalick were on the brief for intervenors Canadian National
Railway Company and Grand Trunk Corporation in support
of respondents.
Before: HENDERSON, TATEL, and GRIFFITH, Circuit
Judges.
Opinion for the court filed by Circuit Judge TATEL.
TATEL, Circuit Judge: This case presents a difficult
question of statutory interpretation: in enacting the Staggers
Rail Act of 1980, did Congress deprive the Surface
Transportation Board of its authority to impose environmental
conditions when approving so-called minor mergers? For the
reasons set forth in this opinion, we conclude that it did not
and that the Board therefore retains its environmental
conditioning authority. We also conclude that in approving
the merger at issue in this case, the Board complied with the
National Environmental Policy Act and that the
environmental conditions it imposed are neither arbitrary nor
capricious.
3
I.
CHICAGO
Hog Butcher for the World,
Tool Maker, Stacker of Wheat,
Player with Railroads and the Nation’s Freight Handler;
Stormy, husky, brawling,
City of the Big Shoulders.
Today, almost a century after Carl Sandburg’s paean to
America’s Second City, Chicago remains “the Nation’s
Freight Handler.” Chicago is the only city where all seven of
America’s Class I railroads—railroads with annual operating
revenues of $250 million or more—operate. Canadian Nat’l
Ry. Co.—Control—EJ&E W. Co., STB Finance Docket No.
35087, Final Environmental Impact Statement, at 1-3 (Dec. 5,
2008) (“FEIS”). Each day, 600 freight trains carrying
approximately 2.5 million tons of freight pass through
Chicago. Id. at 1-4. Converging in the Chicago Terminal
District—a 2,800 mile rail network containing 70 train yards
and terminals—these freight trains compete for track and yard
space with each other and with over 750 commuter trains and
78 Amtrak trains per day, which together serve over 84
million passengers a year. Id. The resulting congestion slows
freight traffic to a crawl. By one estimate, “[m]oving freight
across the Chicago region by rail . . . typically takes two days
or more, with train speeds averaging between 6.8 and 12
m.p.h.” Business Leaders for Transportation, Critical Cargo:
A Regional Freight Action Agenda 1 (Apr. 2002). Because
“[o]ne-third of all rail freight in the United States currently
moves to, from, or through Chicago,” FEIS at 1-4, the city’s
congestion affects the entire nation.
Petitioner Canadian National, a Class I railroad, operates
over twenty thousand miles of track in North America,
4
connecting the Gulf Coast to its transcontinental rail network
in Canada. Id. at 1-6. Canadian National’s Chicago rail
system consists of five rail lines that converge on the city like
the spokes of a wheel from the north, west, southwest, south,
and southeast. Because Canadian National’s lines meet in the
heart of the Chicago Terminal District, even those trains that
merely pass through the city—about two-thirds of the
company’s Chicago trains—must contend with the city’s
congestion. Canadian National estimates that its freight trains
may take as long as 24 hours to move the thirty miles through
the metropolitan area. Id. at 1-4.
Looping around Chicago, the 120-mile Elgin, Joliet, &
Eastern main line, once known as the “J” line and referred to
throughout these proceedings as the EJ&E line, starts near the
Lake Michigan waterfront, north of Chicago in Waukegan,
Illinois, arcs south and west through the city’s suburbs
including Lake Bluff, Barrington, and Aurora, to Joliet,
Illinois, travels east to Gary, Indiana, and finally turns
northwest and travels along Lake Michigan towards Chicago.
Along the way, the EJ&E cuts across all five Canadian
National rail lines. This rail beltway has encircled Chicago
since the late nineteenth century when J.P. Morgan assembled
it to “avoid the Chicago bottleneck.” David M. Young, The
Iron Horse and the Windy City 115 (2005). Although daily
traffic along the EJ&E line peaked during World War II at as
many as fifty trains, the line has generally averaged between
ten and twenty trains, dropping by the mid-2000s to between
three and eighteen trains per day. Canadian Nat’l Ry. Co.—
Control—EJ&E W. Co., STB Finance Docket No. 35087,
Decision No. 16, at 5 (Dec. 24, 2008) (“Approval”); FEIS
app. A, at 391, 394.
Canadian National, anticipating that owning the EJ&E
line would enable it to avoid Chicago’s congestion, agreed to
5
acquire the EJ&E Railway Company (a non–Class I railroad)
for $300 million on September 25, 2007. Using the EJ&E line
and its three rail yards, Canadian National planned to re-route
freight trains from its five Chicago lines around the
congestion that ensnarls the city’s Terminal District. The
effect on the EJ&E line and on Canadian National’s five
existing lines is expected to be significant. While freight
traffic will likely decline along Canadian National’s existing
tracks within the beltway, daily traffic on the EJ&E line will
rise to between twenty and forty-two trains, some almost as
long as two miles.
Before Canadian National could complete its acquisition
of the EJ&E Railway Company, it was required to obtain the
Surface Transportation Board’s approval, which it sought on
October 30, 2007. See 49 U.S.C. § 11323. Because the
acquisition involved only one Class I railroad, the Board
classified the transaction as a “minor” merger, meaning that it
needed to approve the transaction within 180 days unless it
found that the merger was likely to cause substantial
anticompetitive effects. See 49 U.S.C. §§ 11324(d), 11325(a),
(d). Finding that the substantial increase in freight traffic
along the EJ&E line resulting from this transaction would
“significantly affect[] the quality of the human environment,”
42 U.S.C. § 4332(2)(C), the Board also directed its Section of
Environmental Analysis (SEA) to prepare an environmental
impact statement. The Board explained that it would use the
environmental impact statement to decide whether to impose
“environmental mitigation conditions” if and when it
approved the transaction. Canadian Nat’l Ry. Co.—Control—
EJ&E W. Co., STB Finance Docket No. 35087, Decision No.
2, at 15 (Nov. 26, 2007).
In the course of preparing the final environmental impact
statement, SEA engaged in extensive public outreach, which
6
included publishing notices in the Federal Register and ads in
local newspapers, holding twenty-two public meetings
attended by over 7200 people, consulting with local, state, and
federal agencies and officials, publishing for comment a 3500
page draft environmental impact statement, holding a sixty
day comment period on that draft, and receiving nearly
13,500 comments. Commenters raised concerns about the
effect of Canadian National’s acquisition on traffic
congestion, rail crossing safety, emergency response times,
hazardous material spills, and wildlife, among other issues.
Given that nearly 340,000 people live in close proximity
to the EJ&E line and that 73% of road crossings lack bridges
over the tracks, SEA considered how increased freight traffic
on the EJ&E line would worsen vehicle congestion and
increase the risk of collisions between trains and vehicles.
SEA winnowed the list of 112 railroad crossings along the
EJ&E line down to the 13 most “substantially affected”
crossings. For four of those crossings, SEA recommended
traffic advisory signals. But for the two “substantially
affected” crossings for which traffic delays and the threat of
collision were particularly serious, SEA recommended “grade
separation”—i.e., a bridge over the tracks.
After SEA completed the final environmental impact
statement, the Surface Transportation Board approved
Canadian National’s acquisition of the EJ&E Railway
Company on December 24, 2008—approximately four
hundred days after Canadian National first sought approval.
See Approval. The Board concluded “that the proposed
control transaction is unlikely to cause a substantial lessening
of competition or to create a monopoly or restraint of trade,”
id. at 13, and that “even if there were some modest
anticompetitive effect, it would be outweighed by the public
interest in meeting significant transportation needs,” id. at 15.
7
The Board also responded to comments made during the
preparation of the environmental impact statement. Chief
among them was a memorandum Canadian National
submitted on September 30, 2008, the last day of the
comment period, which challenged the Board’s statutory
authority to impose environmental conditions on “minor”
transactions. According to the memorandum, 49 U.S.C.
§ 11324(d) (“subsection (d)”) (emphasis added), which
provides that “the Board shall approve” a “minor” merger
“unless [the Board] finds that” the merger is likely to cause
substantial anticompetitive effects, prohibits the Board from
imposing any conditions, including environmental conditions,
unrelated to competition. With this comment, Canadian
National totally reversed the position it had taken throughout
the Board’s review. For example, in comments to the Board
filed on November 21, 2007, the railroad acknowledged that
the Board could “impose environmental mitigation conditions
on its approval” notwithstanding the requirement that the
Board approve the merger once the Board found it unlikely to
present anti-competitive concerns. Canadian National Reply
to Barrington Req. for EIS 8 n.10, Nov. 21, 2007 (included at
J.A. 706). Canadian National made similar statements in
filings to the Board in February, March, and August 2008.
Repeating that mantra, Canadian National President and CEO
Hunter Harrison told the House Transportation Committee
that Congress had no need to pass legislation expressly
granting the Board environmental conditioning authority
because “under the existing act, [while] a minor transaction
cannot be turned down on environmental issues[, i]t can be
mitigated. . . . [W]e are perfectly willing to deal with that—to
resolve the environmental issues, mitigate the environmental
issues.” The “Taking Responsible Action for Community
Safety Act”: Hearing on H.R. 6707 Before H. Comm. on
Transp. and Infrastructure, 110th Cong. 51 (Sept. 9, 2008)
8
(statement of E. Hunter Harrison, President & CEO, Canadian
National Railway Co.) But only twenty-one days after
Harrison testified before Congress, on the last 4 pages of its
152-page memorandum, Canadian National switched its
position, arguing for the first time that the Board lacks
authority to impose environmental conditions on “minor”
mergers.
The Board began its response to Canadian National’s
argument by barring the railroad from raising this objection,
explaining that Canadian National had waived the objection
by waiting too long to raise it and that the company was
estopped from maintaining a position clearly inconsistent with
the one its CEO had advanced before Congress. The Board
nonetheless considered Canadian National’s argument “for
the benefit of future applicants,” and found that it had
authority to impose conditions unrelated to competition-
concerns. Approval at 29. The Board located that authority in
49 U.S.C. § 11324(c) (“subsection (c)”), which states “[t]he
Board may impose conditions governing the transaction . . . .”
Having established that it possesses environmental
conditioning authority, the Board then exercised that authority
by imposing conditions to mitigate the effects of the
transaction and by requiring Canadian National to comply
with voluntary mitigation commitments negotiated with
several affected communities. Central to this case, the Board
imposed Condition 14, which required Canadian National to
bear 67% of the costs of building a grade separation at Ogden
Avenue, near Aurora, Illinois, and 78.5% of the costs of
building one at Lincoln Highway in Lynwood, Illinois.
Together these two conditions are expected to cost Canadian
National approximately $68 million.
9
On January 31, 2009, Canadian National consummated
its acquisition of the EJ&E line. It then filed a petition for
review in this court, challenging Condition 14 as both
unlawful and arbitrary and capricious. Approximately a dozen
local governmental entities, including the Village of
Barrington, (“Community Petitioners”) also filed petitions for
review, challenging the Board’s compliance with the National
Environmental Policy Act (“NEPA”). We consolidated the
petitions and consider them all in this opinion.
II.
We must first determine whether Canadian National
preserved its argument that the Surface Transportation Board
lacks environmental conditioning authority. Abandoning its
estoppel rationale, the Board now argues only that Canadian
National has waived this argument because it waited too long
to raise it forcefully during the administrative process.
Community Petitioners also argue that Canadian National
should be barred, but for a different reason—that the railroad
consummated the acquisition of the EJ&E line before
challenging the conditions in this court.
In support of its waiver decision, the Board argues that
Canadian National “had an obvious obligation to raise its
objections to the Board’s conditioning authority clearly and
early in the proceeding so that the issue could be fully aired,”
Resp’t’s Br. 23, especially since the railroad was aware of the
Board’s interpretation, the Board having previously imposed
environmental conditions on “minor” mergers involving
Canadian National. Acknowledging, as it must, that Canadian
National’s comment arrived early enough for it to respond,
the Board nonetheless insists that Canadian National’s
tardiness prejudiced other commenters by depriving them of
the opportunity to develop their own counterarguments.
10
In response, Canadian National emphasizes that it fully
complied with the schedule the Board itself established. As
the railroad points out, it raised its objection during the
comment period on the draft environmental impact
statement—the “one formal opportunity for comments” after
the Board “suggest[ed] imposing something akin to Condition
14.” Canadian National Reply Br. 14 (“CN’s Reply Br.”).
Canadian National argues as well that neither the Board,
which took eighty-five days to respond to its objection, nor
other commenters, who sought no post-comment period
opportunity to rebut Canadian National’s argument and who
would have had little to offer on this question of “pure
statutory interpretation,” were prejudiced by its last minute
filing. Id. at 14–15.
Although Canadian National’s change in position might
well have surprised Congress and the affected communities,
its actions fall short of the standard for waiver the Supreme
Court set forth in Vermont Yankee Nuclear Power Corp. v.
Natural Resources Defense Council, Inc., 435 U.S. 519
(1978), and United States v. L.A. Tucker Truck Lines, Inc.,
344 U.S. 33 (1952). In those two cases, the Supreme Court
established a rule that requires parties to “forcefully
present[],” Vermont Yankee, 435 U.S. at 554 (internal
quotation marks omitted), their arguments “at the time
appropriate under [agency] practice,” L.A. Tucker Truck
Lines, 344 U.S. at 37, or else waive the right to raise those
arguments on appeal. “Simple fairness to those who are
engaged in the tasks of administration, and to litigants,”
demands such a rule. Id. This rule ensures that agencies will
have the opportunity to develop their positions and correct
their errors before an appeal. Id. As for litigants, it “ ‘is
essential . . . that parties . . . have the opportunity to offer all
the evidence they believe relevant to the issues which the
[agency] is alone competent to decide [and] . . . that litigants
11
. . . not be surprised on appeal by final decision there of issues
upon which they have had no opportunity to introduce
evidence.’ ” Sims v. Apfel, 530 U.S. 103, 109 (2000) (quoting
Hormel v. Helvering, 312 U.S. 552, 556 (1941)).
Here, all parties agree that Canadian National “forcefully
presented” its challenge on September 30, 2008, the last day
of the draft environmental impact statement’s comment
period. Vermont Yankee, 435 U.S. at 554. The Board offers no
convincing explanation for why this timing was not
“appropriate under [the Board’s] practice.” L.A. Tucker Truck
Lines, 344 U.S. at 37. After all, Canadian National submitted
its comment within the period the Board itself designated.
And unlike in L.A. Tucker Truck Lines, where the waived
argument was raised for the first time on appeal, and in
Vermont Yankee, where the Intervenor developed on appeal
an argument presented in only a “cryptic and obscure”
manner to the agency, Vermont Yankee 435 U.S. at 554, here
the Board had adequate time and opportunity to respond to a
clearly articulated argument before Canadian National filed
its petition for review.
The Board nonetheless urges us to follow the Eighth
Circuit’s reasoning in Otter Tail Power Co. v. Surface
Transportation Board, 484 F.3d 959 (8th Cir. 2007). There,
the Eighth Circuit barred as “fatally late” an argument raised
for the first time in a party’s simultaneously submitted final
brief because the other party “had no opportunity to
investigate or respond . . . [and because] the Board [lacked]
the opportunity to receive evidence relating to” the waived
argument. Id. at 963. According to the Board, a similar
concern exists here because Canadian National’s last-minute
timing deprived other commenters of any scheduled
opportunity to offer a rebuttal. But we are disinclined to
follow Otter Tail because both there and here the Board could
12
have structured its procedures to provide such rebuttal time.
Moreover, accepting the Board’s waiver theory would present
line-drawing questions that defy principled resolution.
Wouldn’t an argument raised for the first time on the second-
to-last day of the comment period also deprive other
commenters of the opportunity to respond? What about one
raised with a week remaining? In any event, this case is
distinguishable from Otter Tail given that the issue before us
is one of pure statutory interpretation, which does not depend
on evidence that an objecting commenter might provide.
Waiver is thus inappropriate under the circumstances of this
case.
We are similarly unpersuaded by Community Petitioners’
estoppel argument. Relying on Federal Power Commission v.
Colorado Interstate Gas Co., 348 U.S. 492 (1955), and Kaneb
Services, Inc. v. Federal Savings & Loan Insurance Corp.,
650 F.2d 78 (5th Cir. 1981), Community Petitioners argue
that once Canadian National “voluntarily consummated its
transaction based on [the Board’s] conditioned approval,”
estoppel barred the railroad from challenging those
conditions. Community Intervenors’ Br. 6–7. Yet unlike this
case, Colorado Gas and Kaneb dealt with collateral attacks on
conditions that had been imposed in earlier proceedings from
which no appeal had been taken. The finality and opportunism
concerns that motivated the courts in those cases are absent
here because Canadian National has filed a timely petition for
review directly from the proceeding where the conditions
were imposed.
III.
We turn, then, to the merits of Canadian National’s
statutory challenge. The railroad argues that subsection (d),
which mandates that “the Board shall approve” a “minor”
merger “unless it finds that” the merger is likely to cause
13
anticompetitive effects, prohibits the Surface Transportation
Board from imposing conditions other than those related to
competition—such as the environmental conditions at issue
here. 49 U.S.C. § 11324(d) (emphasis added). The Board
rejected Canadian National’s interpretation, reasoning that
subsection (c)’s language—“the Board may impose
conditions governing the transaction”—applies to approvals
of all mergers, including “minor” mergers. Because resolving
this question turns significantly on the text of the Board’s
organic statute and on how Congress has shaped that text over
the years, we don our conductor’s cap for a ride through the
relevant rail regulatory history.
The Interstate Commerce Commission was the original
federal railroad regulator, retaining that role until Congress
abolished the Commission in 1995 and transferred its
remaining railroad regulatory authority to the Surface
Transportation Board. Since 1920, the Commission’s, and
now the Board’s, responsibilities have included reviewing all
railroad mergers and acquisitions. As was true then and is true
now, before a railroad could acquire another railroad or any of
its lines, it first had to obtain the Commission’s, and now the
Board’s, approval. See 49 U.S.C. § 11323. Until 1980, 49
U.S.C. § 11344(b) and (c) (now recodified as 49 U.S.C.
§ 11324(b) and (c)) set the standards under which the
Commission approved and imposed conditions on all mergers.
Subsection (b) included a non-exhaustive list of four factors
that the Commission was required to consider and
subsection (c) provided the more general “public interest”
standard. In relevant part, subsection (c) stated as follows:
The Commission shall approve and authorize a
transaction under this section when it finds the
transaction is consistent with the public
14
interest. The Commission may impose
conditions governing the transaction.
49 U.S.C. § 11344(c) (1978). Under subsection (c)’s “public
interest” standard, the Commission possessed “extraordinarily
broad” discretion to decide not only whether to disapprove a
merger and on what basis, but also what kind of conditions, if
any, to impose on the merged railroad. S. Pac. Transp. Co. v.
ICC, 736 F.2d 708, 721 (D.C. Cir. 1984). Though the Board
points to no pre-1980 examples of the Commission imposing
environmental conditions specifically, the Board argues, and
Canadian National nowhere disagrees, that the Commission
had authority to disapprove or to impose conditions based on
environmental issues.
Seeking to expedite approval of smaller mergers “where
approval is routinely and consistently granted,” Congress
passed the Staggers Rail Act of 1980, H.R. Rep. No. 96-1430,
at 121 (1980) (Conf. Rep.), which added the following
subsection (d):
(d) In a proceeding under this section which
does not involve the merger or control of
at least two Class I railroads . . . the
Commission shall approve such an
application unless it finds that –
(1) as a result of the transaction, there is
likely to be substantial lessening of
competition, creation of a
monopoly, or restraint of trade in
freight surface transportation in any
region of the United States; and
15
(2) the anticompetitive effects of the
transaction outweigh the public
interest in meeting significant
transportation needs.
Staggers Rail Act of 1980, Pub. L. No. 96-448, § 228(b), 94
Stat. 1895, 1931 (codified at 49 U.S.C. § 11324(d)). The Act
also set deadlines for the Commission to approve a “minor”
merger of either 180 or 300 days (depending on factors
irrelevant to this case). Id. § 228(d), 94 Stat. at 1932–33
(codified at 49 U.S.C. § 11325(b), (c)). In addition, the
Staggers Rail Act limited application of subsection (b)
approval factors to proceedings under this section “which
involve[] the merger or control of at least two Class I
railroads”—i.e. “major” mergers. Id. § 228(a), 94 Stat. at
1931 (codified at 49 U.S.C. § 11324(b)). Significantly for the
issue before us, however, Congress made no relevant changes
to subsection (c), which continues to apply to all
“transaction[s] under this section,” (i.e., section 11324). 49
U.S.C. § 11324(c).
Thus, following passage of the Staggers Rail Act, section
11324’s relevant provisions now read as follows:
(b) In a proceeding under this section which
involves the merger or control of at least
two Class I railroads . . . the Board shall
consider at least – [five factors listed in the
statute].
(c) The Board shall approve and authorize a
transaction under this section when it finds
the transaction is consistent with the
public interest. The Board may impose
conditions governing the transaction,
16
including the divestiture of parallel tracks
or requiring the granting of trackage rights
and access to other facilities. . . .
(d) In a proceeding under this section which
does not involve the merger or control of
at least two Class I railroads . . . the Board
shall approve such an application unless it
finds that –
(1) as a result of the transaction, there
is likely to be substantial lessening
of competition, creation of a
monopoly, or restraint of trade in
freight surface transportation in
any region of the United States;
and
(2) the anticompetitive effects of the
transaction outweigh the public
interest in meeting significant
transportation needs.
Explaining the significance of these changes shortly after
Congress passed the Staggers Rail Act, the Seventh Circuit in
Illinois v. ICC, whose holding we embraced in Village of
Palestine v. ICC, held that “if the Commission finds no
substantial anticompetitive effect flowing from the proposed
[“minor”] transaction, its analysis is at an end. At that point,
[it] must approve the transaction . . . .” Illinois v. ICC, 687
F.2d 1047, 1053 (7th Cir. 1982); see also Vill. of Palestine v.
ICC, 936 F.2d 1335 (D.C. Cir. 1991) (relying on Illinois v.
ICC to excuse the ICC from considering issues unrelated to
competition in exempting a “minor” merger from section
11324(d) review because the Staggers Rail Act limited the
ICC’s disapproval authority to such issues). Left unanswered
17
by both Illinois v. ICC and Village of Palestine was whether
the Staggers Rail Act, and specifically subsection (d),
similarly narrowed the Commission’s conditioning authority
to competition-related issues and particularly whether the
Commission retained authority to impose environmental
conditions when approving “minor” mergers. That is the
question presented by this case.
Ordinarily, we review “an agency’s construction of the
statute which it administers” under the familiar principles of
Chevron, U.S.A., Inc. v. Natural Resources Defense Council,
Inc., 467 U.S. 837, 842 (1984). But Canadian National,
although apparently accepting that Congress has generally
delegated authority to the Board to “speak with the force of
law when it addresses ambiguity in the statute” at issue in this
case, insists that the Board has not exercised that authority
and so is owed no Chevron deference here since its views
were formulated through neither notice-and-comment
rulemaking nor formal adjudication. United States v. Mead
Corp., 533 U.S. 218, 229 (2001). In support, the railroad
relies on United States v. Mead Corp., in which the Supreme
Court observed “a very good indicator of delegation meriting
Chevron treatment . . . [is] a relatively formal administrative
procedure tending to foster . . . fairness and deliberation . . .
[such as] notice-and-comment rulemaking or formal
adjudication.” Id. at 229–30. We disagree with Canadian
National.
This Court has consistently granted Chevron deference to
the Board’s statutory interpretations when produced under
procedures comparable to the ones used in this case. See, e.g.,
HolRail, LLC v. Surface Transp. Bd. 515 F.3d 1313 (D.C. Cir.
2008). Granting Chevron deference here would therefore
comport with the Supreme Court’s recent reminder of “the
importance of maintaining a uniform approach to judicial
18
review of administrative action.” Mayo Found. for Med.
Educ. & Research v. United States, No. 09-837, slip op. at 9
(U.S. Jan. 11, 2011) (internal quotation marks omitted).
Moreover, the Board’s procedures are far more formal—and
thus much more likely to “foster . . . fairness and
deliberation”—than those at issue in Mead. 533 U.S. at 230.
In Mead, the Court reviewed an agency interpretation
contained in a single letter ruling whose precedential force
was limited to the letter’s recipient and that was merely one
among the many “being churned out at a rate of 10,000 a year
[by the] agency’s 46 scattered offices . . . .” Id. at 233. By
contrast, under sections 11324 and 11325, when the Board
reviews a merger application it must first publish notice of the
application in the Federal Register and receive written
comments. 49 U.S.C. § 11325(c). In addition, the
requirements of NEPA create further opportunities for public
participation. As a result, the proceedings in this case
included several Federal Register notices and extensive
media, community, agency, and political outreach; twenty-
two public hearings in and around Chicago attended by over
7000 people; a 3500 page draft and 3100 page final
environmental impact statement; multiple comment periods
that produced nearly 13,500 comments; and then a reasoned
opinion from the Board directly engaging the relevant
statutory issue. This case therefore falls comfortably within
the category of agency decision-making procedures that
support Chevron deference. Indeed, in Mead itself the
Supreme Court explained, “as significant as notice-and-
comment is in pointing to Chevron authority, the want of that
procedure here does not decide the [issue] for we have
sometimes found reasons for Chevron deference even when
no such administrative formality was required and none was
afforded.” 533 U.S. at 230–31; see also Menkes v. U.S. Dep’t
of Homeland Sec., No. 09-5372, slip op. at 18–23 (D.C. Cir.
19
Mar. 8, 2011) (granting Chevron deference to an agency
interpretation produced through informal adjudication).
Under Chevron, we must first determine whether “the
intent of Congress is clear,” for if “Congress has directly
spoken to the precise question at issue” then we must give
effect to Congress’s clear intent. Chevron, 467 U.S. at 842. At
this first step of the Chevron analysis we “employ[]
traditional tools of statutory construction,” id. at 843 n.9, to
determine whether Congress has “unambiguously foreclosed
the agency’s statutory interpretation.” Catawba Cnty., N.C. v.
EPA 571 F.3d 20, 35 (D.C. Cir. 2009). Congress may have
done so in one of two ways: either by prescribing a precise
course of conduct other than the one chosen by the agency, or
by granting the agency a range of interpretive discretion that
the agency has clearly exceeded. Because at Chevron step one
we alone are tasked with determining Congress’s
unambiguous intent, we answer both inquiries without
showing the agency any special deference. And if the agency
has either violated Congress’s precise instructions or
exceeded the statute’s clear boundaries then, as Chevron puts
it, “that is the end of the matter”—the agency’s interpretation
is unlawful. Chevron, 467 U.S. at 842.
But if we determine that statutory ambiguity has left the
agency with a range of possibilities and that the agency’s
interpretation falls within that range, then the agency will
have survived Chevron step one. At Chevron step two we
defer to the agency’s permissible interpretation, but only if the
agency has offered a reasoned explanation for why it chose
that interpretation. See Cont’l Air Lines, Inc. v. DOT, 843
F.2d 1444, 1452 (D.C. Cir. 1988). After all, we defer to an
agency’s statutory interpretations not only because Congress
has delegated law-making authority to the agency, but also
because that agency has the expertise to produce a reasoned
20
decision. Chevron, 467 U.S. at 844–45; see also Mayo
Found., slip op. at 10) (explaining that among “[t]he
principles underlying” Chevron deference is the need for an
agency to apply “more than ordinary knowledge”—i.e.,
“agency expertise”—when “fill[ing] . . . gap[s] left, implicitly
or explicitly, by Congress” (internal quotation marks and
citations omitted)). If an agency fails or refuses to deploy that
expertise—for example, by simply picking a permissible
interpretation out of a hat—it deserves no deference. For that
same reason, we give no deference to agency “litigating
positions” raised for the first time on judicial review. See
Bowen v. Georgetown Univ. Hosp., 488 U.S. 204, 212 (1988).
Thus, again using “traditional tools of statutory construction,”
Chevron, 467 U.S. at 843 n.9, and considering only the
rationales the Board actually offered in its decision, we
determine whether its interpretation is “rationally related to
the goals of” the statute, AT&T Corp. v. Iowa Utils. Bd., 525
U.S. 366, 388 (1999).
Mindful of this framework, we begin our Chevron step
one analysis where, as explained above, we may overturn the
Board’s interpretation only if, as Canadian National contends,
the Staggers Rail Act unambiguously prohibits the Board
from imposing environmental conditions. Arguing that it does
just that, Canadian National points to subsection (d)’s
mandatory approval language—“the Board shall approve [a
‘minor’ merger] application unless” it has substantial
concerns relating to competition. 49 U.S.C. § 11324(d)
(emphasis added). This language, according to Canadian
National, eliminates all Board discretion to do anything but
approve a “minor” merger once the Board finds, as it did here,
that the merger will cause no substantial anticompetitive
effects. Subsection (d)’s legislative history reinforces this
interpretation because it reveals Congress’s intent to “narrow
the issues before [the Board] so that non-major transactions
21
could be reviewed expeditiously within the shorter deadlines
(now codified at section 11325(d)) that Congress
simultaneously enacted.” Pet’r Canadian National’s Br. 8
(“Pet’r CN’s Br.”) (summarizing the Staggers Rail Act
Conference Report). In addition, seeking to extend Village of
Palestine and Illinois v. ICC to the Board’s conditioning
authority, Canadian National contends that “[r]equiring
environmental issues to be resolved as a condition of approval
is the same in substance as denying approval because of
unresolved environmental issues,” and thus the Board’s
interpretation rests on a distinction between conditioning and
approval authority that is without meaningful difference. Id. at
9.
Finally, Canadian National argues that reconciling
Village of Palestine and Illinois v. ICC with the Board’s
interpretation of subsection (c) renders section 11324
incoherent. As Canadian National sees it, by ruling that the
Board must approve “minor” mergers using a competition-
only filter, rather than one focused more generally on the
public interest, Village of Palestine and Illinois v. ICC
necessarily held that subsection (c)’s first sentence—“[t]he
Board shall approve and authorize a transaction under this
section when it finds the transaction is consistent with the
public interest”—applies only to “major” mergers, whereas
the Board interprets subsection (c)’s second sentence—“[t]he
Commission may impose conditions governing the
transaction”—as applying to both “major” and “minor”
mergers. But such an interpretation makes no sense since both
sentences refer to the same “transaction” and since, unlike the
first sentence, which limits the Board’s approval authority to
the “public interest,” the second sentence supplies no criteria
governing what kinds of conditions the Board may impose.
Because, according to Canadian National, subsection (d)
replaces subsection (c)’s first sentence with respect to
22
“minor” mergers, it must likewise replace the second
sentence.
Canadian National’s interpretation is eminently
reasonable. But to prevail under Chevron step one, the
railroad must do more than offer a reasonable or, even the
best, interpretation; it must show that the statute
unambiguously forecloses the Board’s interpretation. See
Chevron, 467 U.S. at 843 n.11 (“The court need not conclude
that the agency construction was the only one it permissibly
could have adopted to uphold the construction, or even the
reading the court would have reached if the question initially
had arisen in a judicial proceeding.”). For several reasons,
Canadian National’s arguments fall short of meeting that
heavy burden.
First, subsection (c)’s plain text applies to all mergers,
both “major” and “minor.” Congress obviously knew how to
limit the Board’s authority to either one or the other since it
did so in subsections (b) and (d). Subsection (b) applies to all
mergers “which involve[] the merger or control of at least two
Class I railroads,” while subsection (d) applies to all mergers
“which do[] not involve the merger or control of at least two
Class I railroads.” By contrast, subsection (c) applies to all
“transaction[s] under this section” and “this section,” i.e.,
section 11324, covers all mergers both “major” and “minor.”
Yet Canadian National would have us ignore this textual clue,
notwithstanding one of the most basic tenets of statutory
interpretation, namely, “[w]here Congress includes particular
language in one [sub]section of a [provision] but omits it in
another [subsection], it is generally presumed that Congress
acts intentionally and purposely in the disparate inclusion or
exclusion.” Russello v. United States, 464 U.S. 16, 23 (1983)
(internal quotation marks omitted).
23
Second, because Congress left subsection (c) unchanged
when it added subsection (d), and because subsection (c) was,
prior to the Staggers Rail Act, the source of the ICC’s
extraordinarily broad conditioning authority—which the
Board argues, and Canadian National nowhere disagrees,
included environmental conditioning authority—Canadian
National’s construction would require us to conclude that
subsection (d) impliedly repealed or amended subsection (c).
See Nat’l Ass’n of Home Builders v. Defenders of Wildlife,
551 U.S. 644, 662-64 & n.8 (2007) (“NAHB”) (noting that an
implied amendment that “displaces earlier, inconsistent
commands” is conceptually identical to an implied partial
repeal). Repeals by implication, however, are strongly
disfavored “absent a clearly expressed congressional
intention.” Branch v. Smith, 538 U.S. 254, 273 (2003)
(citations and internal quotation marks omitted); see also
NAHB, 551 U.S. at 664 n.8 (“[I]mplied amendments are no
more favored than implied repeals.”). In other words, for
Canadian National to prevail, we must find in subsection (d) a
clearly expressed congressional intent to do implicitly what
Congress declined to do explicitly—narrow all of
subsection (c) to “major” mergers.
Given that subsection (d) refers only to the Board’s
approval standard, Canadian National’s implied repeal
argument depends on the proposition that conditioning
authority is equivalent to, and can be no broader than,
approval authority. But another provision of the Board’s
organic statute, 49 U.S.C. § 11326, which requires the Board
to impose labor conditions on most mergers, including most
“minor” ones, demonstrates that the Board’s conditioning
authority can be broader than its approval authority.
Moreover, this distinction appears throughout the law,
perhaps most prominently in First Amendment jurisprudence,
which distinguishes between unlawful prohibitions on speech
24
and lawful time, place, and manner restrictions that place
conditions on speech. See, e.g., Ward v. Rock Against Racism,
491 U.S. 781, 790-91 (1989). We are thus unpersuaded that
by narrowing the Board’s approval authority, Congress also
necessarily intended to narrow the Board’s conditioning
authority.
Canadian National’s counterarguments are unconvincing.
Rejecting the relevance of section 11326, the railroad argues
that because that provision “expressly mandates specific
(labor) conditions to be added to a merger approval,” CN’s
Reply Br. 7, “there has to be a reconciliation between the two
mandates”—to approve based on a competition-analysis and
to impose labor conditions, Oral Arg. Tr. 32–33. But
subsection (c)’s second sentence also stands as an express
grant of conditioning authority, albeit a more general one.
Moreover, section 11326’s mandatory nature only reinforces
the point that Congress saw no inconsistency in investing the
Board with conditioning authority broader than its
disapproval authority.
Nor do we think the 300 or 180 day statutory deadlines
emphasized by Canadian National are so short as to reveal an
unambiguous congressional intent to impliedly repeal the
Board’s environmental conditioning authority. In an
analogous line of cases, courts have found clear congressional
intent to impliedly repeal NEPA only where there was “a
clear and unavoidable conflict” between an agency’s organic
statute and NEPA, such as statutory deadlines so short that it
would be “inconceivable” for an agency to prepare an
environmental impact statement within that timeframe and a
requirement that agency review “automatically” ends when
the statutory deadline passes. Flint Ridge Dev. Co. v. Scenic
Rivers Ass’n of Okla., 426 U.S. 776, 787–89 (1976) (thirty
day deadline too short); see also City of New York v. Minetta,
25
262 F.3d 169 (2d Cir. 2001) (sixty day deadline too short). In
this case, we see no such “clear and unavoidable conflict.”
Flint Ridge Dev. Co., 426 U.S. at 788. For one thing, unlike
the statutes at issue in the cited NEPA cases, the Staggers Rail
Act contains no provision requiring that “minor” mergers are
“automatically” approved unless the Board acts before the
expiration of the statutory period. Indeed, the Board explained
that it “ha[s] certain procedural flexibility” to accommodate
environmental review to the relevant timeframes. Approval at
33 n.74. Moreover, as the Board observed, in several prior
“minor” merger cases it did complete its environmental
review and determine what kind of environmental conditions
to impose within the allotted timeframes. Id. (citing
Burlington N.—Control—Wash. Cent., 1 S.T.B. 792, 806-08
(1996)). True, here the Board’s environmental review
exceeded the relevant 180 day deadline. But given that the
statutory timeframes have been adequate in other cases, we
have no basis for thinking that “a clear and unavoidable
conflict” exists. Flint Ridge Dev. Co., 426 U.S. at 788. But
mindful that Congress expected the Staggers Rail Act to
expedite Board review of “minor” mergers, we by no means
suggest that the Board is free to disregard the statute’s
timeframes when interpreting the boundaries of its
conditioning authority over “minor” mergers. Quite to the
contrary, should the Board interpret its authority so broadly as
to make review of “minor” mergers within the statutory
timeframes “inconceivable,” then such an interpretation
would violate Congress’s clear intent. Nor do we mean to
suggest that in imposing environmental conditions, the Board
is free to ignore the Act’s deadlines. Were the Board to
“egregious[ly] . . . [or] unreasonabl[y] delay,” merger
applicants could seek a writ of mandamus. See Telecomms.
Research & Action Ctr. v. FCC, 750 F.2d 70, 79–81 (D.C.
Cir. 1984) (outlining the standard for issuing a writ of
26
mandamus to compel agency action in response to
unreasonable delay).
Canadian National also finds support for its implied
repeal theory in one of our “major” merger cases, Lamoille
Valley Railroad Co. v. ICC, where, in dicta appearing in a
footnote, we “reject[ed] . . . suggestions . . . that the
Commission has broader discretion in imposing conditions on
a merger than in approving or rejecting the merger as a
whole.” 711 F.2d 295, 301 n.3 (D.C. Cir. 1983). The railroad
also cites the ICC’s Illinois Terminal decision, in which the
Commission explained, “[W]e believe we should not attempt
to impose a condition on our approval of a transaction related
to a matter which we could not lawfully consider as a basis
for withholding our approval of that transaction.” Norfolk &
W. Ry. Co.—Purchase—Illinois Terminal R.R. Co., 363 I.C.C.
882, 891 (1981) (“Illinois Terminal”). Neither case supports
Canadian National’s position. Because Lamoille Valley
involved a “major” merger we had no need to grapple with
the textual or historical cues at issue here. We thus see little
relevance to our Chevron step one analysis in that decision’s
offhand remark. As for the ICC’s Illinois Terminal reasoning,
we note that the Commission never said, as Canadian
National contends here, that the statute must be read to limit
the Board’s conditioning authority to the breadth of its
approval authority. Illinois Terminal, 363 I.C.C. at 891.
Instead, the ICC said “we believe” that the statute “should” be
read that way. By using such words, the ICC made clear that
it was exercising discretion delegated by Congress to define
the breadth of its conditioning authority, which the agency is
free to exercise differently in the future so long as it offers a
reasoned explanation for the change. See Nat’l Cable &
Telecomms. Ass’n v. Brand X Internet Servs, 545 U.S. 967,
981 (2005) (“Agency inconsistency is not a basis for
declining to analyze the agency’s interpretation under the
27
Chevron framework.”). Although such reasoning, had the
Board adopted it here, might well have survived a Chevron
step two challenge, it has nothing to do with the Chevron step
one issue we face at this stage of our analysis—whether
subsection (d) unambiguously deprives the Board of its
subsection (c) authority to impose environmental conditions
on “minor” mergers.
Reinforcing our conclusion that section 11324 is
ambiguous with respect to the Board’s environmental
conditioning authority, the relationship between
subsections (c) and (d) creates ambiguity even with respect to
an authority the Board surely has, namely, to impose
competition-related conditions on “minor” mergers. See
Commuter Rail Div., Metra v. Surface Transp. Bd., 608 F.3d
24, 32 (D.C. Cir. 2010) (“Metra”) (noting that the Board
primarily focuses on imposing competition-related conditions
on “minor” mergers). Indeed, even Canadian National, though
agreeing that the Board has such authority, is candidly unsure
as to its statutory source. As the railroad explains, it “may be”
that subsection (c) rather than having no applicability to
“minor” mergers as the railroad otherwise argues, authorizes
competition-related conditioning authority for both “major”
and “minor” mergers. CN’s Reply Br. 6 n.3. “Alternatively, it
may be that . . . [subsection (c)] appl[ies] only to ‘major’
transactions, in which case [subsection (d)] can be read, like
the antitrust laws, to implicitly authorize” imposing
competition-based conditions on “minor” mergers. Id.
(emphasis added). Given that these provisions “may be” read
in any number of reasonable ways, they can hardly be
described as unambiguous. And if the relationship between
subsection (d) and subsection (c)’s second sentence is
ambiguous as to something as fundamental and universally
accepted as the Board’s authority to impose competition-
related conditions, then it would be quite odd to conclude that
28
the very same relationship between these two subsections—
on which the statutory issue in this case turns—is
unambiguous as to the Board’s authority to impose
environmental conditions.
Finally, we disagree with Canadian National that reading
subsection (c)’s second sentence as granting the Board
environmental conditioning authority necessarily renders the
section incoherent. To be sure, if, as the railroad insists,
subsection (d) partially repealed subsection (c)’s first sentence
so that the sentence applies only to “transactions” involving
“major” mergers, then Canadian National would be correct: it
would make no sense for the second sentence, which also uses
the word “transaction,” to cover both “major” and “minor”
mergers. See Comm’r v. Lundy, 516 U.S. 235, 250 (1996)
(“[T]he normal rule of statutory construction [is] that identical
words used in different parts of the same act are intended to
have the same meaning.” (internal quotation marks omitted)).
And it would indeed be troubling if the Board’s “minor”
merger conditioning authority were unconstrained by any
statutory criteria. See Pan. Ref. Co. v. Ryan, 293 U.S. 388
(1935). But since the Staggers Rail Act left both
subsection (c) sentences unchanged, it is also reasonable to
read them as continuing to apply to all mergers. This avoids
the inconsistency central to Canadian National’s argument—
interpreting “transaction” to refer to “major” mergers in the
first sentence but to all mergers in the second sentence. It also
leaves both the Board’s approval and conditioning authority
constrained by subsection (c)’s broad “public interest”
standard. To be sure, as we held in Village of Palestine and as
the Seventh Circuit held in Illinois v. ICC, the Board’s
authority to disapprove a “minor” merger is further
constrained by subsection (d)’s more specific command. But
because subsection (d) says nothing about conditioning
29
authority, the Board’s subsection (c) conditioning authority
need not also be so narrow.
For all these reasons, we conclude that nothing in section
11324 unambiguously forecloses the Board from imposing
environmental conditions on “minor” mergers. This
conclusion, we emphasize, is narrow. In rejecting Canadian
National’s argument, we make no definitive judgment about
the breadth of the Board’s conditioning authority, which
might extend beyond environmental conditions. Likewise, the
Board is free to interpret its conditioning authority as
narrowly as Canadian National insists, so long as it can
reasonably defend that decision. We hold only that given the
statute’s ambiguity, a range of interpretations is permissible,
and that the Board’s current interpretation falls within that
range. Cf. Metra, 608 F.3d at 31–33 (upholding the Board’s
decision not to exercise its “extraordinarily broad” discretion
to impose contract-altering conditions unrelated to
competition on a “minor” merger).
We turn, therefore, to Chevron step two where we ask
whether the Board has reasonably explained how the
permissible interpretation it chose is “rationally related to the
goals of” the statute. AT&T Corp., 525 U.S. at 388. Unlike
our Chevron step one analysis, our review at this stage is
“highly deferential.” Nat’l Rifle Ass’n of Amer. v. Reno, 216
F.3d 122, 137 (D.C. Cir. 2000).
The Board began its analysis by acknowledging that in
Illinois Terminal, one of the ICC’s first post-Staggers Rail
Act “minor” merger cases, the Commission had declined to
exercise its conditioning power to impose traditional public
interest conditions. The Board nonetheless distinguished
between environmental conditions and “traditional public
interest conditions unrelated to competition.” Approval at 31.
30
Environmental conditions are, the Board explained,
“different.” Id.
Most significantly, the Board grounded this distinction in
the National Environmental Policy Act. Noting that in NEPA
Congress directed agencies to “interpret[] and administer[]”
their organic statutes “in accordance” with that statute’s
environmental protection policies “to the fullest extent
possible,” 42 U.S.C. § 4332, and that this court in Natural
Resources Defense Council, Inc. v. EPA, 859 F.2d 156 (D.C.
Cir. 1988) (“NRDC”), understood that command as
“authoriz[ing] the agency to make decisions based on
environmental factors not expressly identified in the agency’s
underlying statute,” id. at 169, the Board determined that it
could “compl[y] with NEPA’s mandate by construing the
Interstate Commerce Act to permit the imposition of
environmental conditions in mergers subject to section
11324(d).” Approval at 32.
Challenging the Board’s reliance on NEPA, Canadian
National argues that “NEPA . . . is a procedural statute” that
“does not modify an organic statute.” Pet’r CN’s Br. 15–16.
This is, of course, true. Because NEPA’s “mandate to . . .
agencies is essentially procedural,” Vermont Yankee, 435 U.S.
at 558, it “does not expand an agency’s substantive powers,”
NRDC, 859 F.2d at 169, and “federal judges . . . enforce the
statute by ensuring that agencies comply with NEPA’s
procedures, . . . not by trying to coax agency decisionmakers
to reach certain results,” Citizens Against Burlington, Inc. v.
Busey, 938 F.2d 190, 194 (D.C. Cir. 1991). As noted above,
however, we have observed that where Congress delegates a
discretionary decision to an agency, NEPA may, within the
boundaries set by Congress, “authorize[] the agency to make
decisions based on environmental factors not expressly
identified in the agency’s underlying statute.” NRDC, 859
31
F.2d at 169. Because under Chevron an agency exercises such
congressionally delegated discretion when it interprets
ambiguities within its organic statute, an agency may
appropriately decide that NEPA counsels in favor of the more
environmentally protective interpretation so long as that
interpretation “fall[s] within the agency’s appropriate
province under its organic statute(s).” Id. (emphasis added).
This is exactly what happened here. Because the interaction
between subsections (c) and (d) creates ambiguity about the
extent of the Board’s conditioning authority over “minor”
mergers, the Board relied on NEPA to support its construction
of the statute as preserving its authority to impose
environmental conditions on “minor” mergers.
The Board believed its reliance on NEPA was
particularly appropriate in light of the Staggers Rail Act’s
legislative history. Early in the legislative process Congress
considered but did not later adopt a version of the Act that
would have exempted mergers from NEPA, see H.R. 7235,
96th Cong. § 309(a) (May 1, 1980), even while it
contemporaneously exempted other railroad regulation, see,
e.g., Milwaukee Railroad Restructuring Act, Pub. L. No. 96-
101, § 19, 93 Stat. 736, 746 (1979) (codified at 45 U.S.C
§ 917). According to the Board, since NEPA, though merely a
procedural statute, is intended to be action-forcing, this
legislative history suggests that Congress believed that the
Board would still have the capacity to act. Canadian National
dismisses the relevance of this legislative history, stating
“inferences of legislative intent from unenacted legislation are
unreliable.” Pet’r CN’s Br. 17 n.8. The railroad’s caution is
well taken, but only to a point. Although we would be
uncomfortable relying on such legislative history at Chevron
step one, we think it may appropriately guide an agency in
interpreting an ambiguous statute—just how the Board used it
here.
32
Besides its NEPA-based rationales, the Board identified
certain other considerations it believed counseled in favor of
its interpretation. Specifically, it pointed to another provision
in its organic statute, section 11321(a), which exempts
merged railroads from “the antitrust laws and from all other
law, including State and municipal law, as necessary to let”
the merged railroad “carry out” the merger. 49 U.S.C.
§ 11321(a). Interpreting that provision as exempting merged
railroads from state and local environmental laws, the Board
worried that if it lacked environmental conditioning authority,
then affected communities would be powerless to address
substantial environmental impacts caused by “minor”
mergers—a result the Board believed Congress could not
have intended. The current transaction illustrates the
significance of this concern. As the Board explained, although
Canadian National’s acquisition “is expected to provide
nationwide economic benefits,” it will also “impose
substantial environmental costs on the local communities
along the EJ&E line[, including] emergency response delays,
increased vehicular traffic congestion and delays, increased
noise and vibration, and increased safety issues at
highway/rail at-grade crossings.” Approval at 33–34. And, in
fact, to avoid just such scenarios, the Board has, at least since
1996, regularly imposed environmental conditions on “minor”
mergers—including in transactions involving Canadian
National. Id. at 29 & n.56, 31 & n.69.
Canadian National criticizes the Board for relying on
“policy argument[s]” best left for Congress instead of “legal
argument[s] about the meaning of section 11324(d).” Pet’r
CN’s Br. 14. But when an agency interprets ambiguities in its
organic statute, it is entirely appropriate for that agency to
consider, as the Board has done here, policy arguments that
are “rationally related to the [statute’s] goals.” AT&T Corp.,
33
525 U.S. at 388. “[A]s long as the agency stays within
[Congress’s] delegation, it is free to make policy choices in
interpreting the statute, and such interpretations are entitled to
deference.” Ariz. Pub. Serv. Co. v. EPA, 211 F.3d 1280, 1287
(D.C. Cir. 2000) (quotation marks omitted).
Canadian National also attacks the Board for having
recognized in its appellate brief only a single, “unworkable”
limit—that its conditions “must not be ‘tantamount to
disapproval.’ ” CN’s Reply Br. 8 (quoting Resp’t’s Br. 34
n.59). But we do not understand the Board to be taking a
position on whether it may impose conditions that would be
“tantamount to disapproval.” Rather, the Board merely
assumes that even if such a limit exists, “the conditions the
Board imposed on [Canadian National] [were] not of that
sort.” Resp’t’s Br. 34 n.59. In any event, we have no need to
resolve whether subsection (d) requires the Board to ensure
that the environmental conditions it imposes on a “minor”
merger under subsection (c) are not tantamount to disapproval
given that Canadian National seems never to have argued
during the administrative process either that the Board should
adopt such a limit or that the limit was breached. See L.A.
Tucker Truck Lines, 344 U.S. at 35 (argument waived if not
first raised to the agency).
To sum up then, the Board offered three basic rationales
in defense of its statutory interpretation: that NEPA counsels
in favor of the more environmentally protective interpretation;
that had Congress intended to terminate the Board’s
subsection (c) authority to impose environmental conditions,
it would have adopted the amendment exempting the Board’s
merger review from NEPA; and that if the Board lacked
authority to address substantial environmental impacts caused
by “minor” mergers, then local communities might be unable
to confront such problems. Given our highly deferential
34
standard of review at Chevron step two, we think the latter
two explanations are “rationally related to the goals of” the
Board’s organic statute. AT&T Corp., 525 U.S. at 388. The
Board’s first explanation likewise supports its statutory
interpretation. Not only does the explanation comport with
NRDC, in which we explained that within the boundaries set
by Congress NEPA may “authorize[] the agency to make
decisions based on environmental factors not expressly
identified in the agency’s underlying statute,” NRDC, 859
F.2d at 169, but it also reflects a reasonable excercise of the
Board’s discretion to interpret its underlying statute to ensure
that its compliance with another statute (NEPA) is more than
a pointless bureaucratic exercise. Because we owe an agency
great deference at Chevron step two, these explanations, taken
together, are sufficient to support the Board’s conclusion that
its subsection (c) conditioning authority still includes the
power to impose environmental conditions on “minor”
mergers.
IV.
In addition to its statutory challenge, Canadian National
argues that Condition 14, which requires it to bear a
substantial portion of the cost of constructing the Ogden
Avenue and Lincoln Highway grade separations, is arbitrary
and capricious. For their part, Community Petitioners identify
a host of alleged defects in the Board’s preparation of the
environmental impact statement. Because these challenges
deal, at least in part, with overlapping issues, we consider
them together.
We start by describing in greater detail how the Board’s
Section of Environmental Analysis prepared the
environmental impact statement. With the assistance of HDR
Engineering, Inc., an environmental contractor that Canadian
National suggested from the Board’s pre-screened contractor
35
list and that SEA approved, SEA began by setting the scope
of its environmental investigation. See 40 C.F.R. § 1501.7
(setting out “scoping” procedures). Soliciting feedback from
other government agencies and the public, SEA published
notices in the Federal Register and in local newspapers; held
fourteen public meetings attended by over 2600 people;
consulted with local, state, and federal agencies and officials;
and received almost 4000 comments. During the scoping
process, SEA adopted Canadian National’s goals as the
“purpose and need” of the Board’s review of the EJ&E
acquisition. See 40 C.F.R. § 1502.13 (“The [environmental
impact statement] shall briefly specify the underlying purpose
and need to which the agency is responding in proposing the
alternatives including the proposed action.”). Those goals
included “improv[ing] [Canadian National’s] operations in
and beyond the Chicago area by providing . . . a continuous
rail route around Chicago, under [Canadian National’s]
ownership, that would connect the five [Canadian National]
lines that presently radiate from Chicago.” Approval at 9.
SEA then published a 3500 page draft environmental
impact statement and solicited comments during a sixty-day
period. To encourage and facilitate that process, SEA
published notices in the Federal Register, placed ads in local
newspapers, issued press releases to local media, and held
eight public meetings attended by over 4500 people, including
3000 in Barrington. SEA received over 9500 comments. It
then published a 3100 page final environmental impact
statement, which reflected changes based on additional
analysis and responses to public comments.
The final environmental impact statement, which
incorporates by reference large portions of the draft, describes
SEA’s consideration of a wide range of environmental
impacts, as well as its examination of particular mitigation
36
strategies. Because 73% of road crossings on the EJ&E line
lack grade separation, SEA studied how increased freight
traffic would worsen traffic congestion, increase the risk of
collisions, slow emergency responders, and increase the
likelihood of hazardous material spills in communities along
the rail line.
To study the transaction’s impact on traffic congestion,
SEA began by articulating three criteria: crossing Level of
Service (LOS), a measure of how freely traffic moves at a
crossing; queue length, a measure of how far traffic backs up
when a train passes; and total vehicle delay, the combined
amount of time that freight trains delay all vehicles during a
twenty-four hour period. Using these criteria, SEA considered
a crossing to be “substantially affected” by the transaction if
(1) crossing LOS would drop below a certain level, (2) the
vehicle queue would block a major thoroughfare, or (3) total
vehicle delay would exceed 2400 minutes (40 hours).
Applying this framework, SEA winnowed the list of 112
railroad crossings along the EJ&E line down to thirteen
“substantially affected” crossings.
As to the increased risk of trains colliding with vechicles,
SEA measured vehicle exposure—calculated by multiplying
the number of trains per day by the number of vehicles per
day—at each crossing. SEA identified three crossings with
exposures exceeding or nearing 1 million.
Next, SEA considered three potential traffic mitigation
strategies for the thirteen “substantially affected” crossings
(which included two of the three crossings with exposures
exceeding or nearing 1 million): traffic advisory signals,
roadway widening, and “grade separation.” Observing that
traffic advisory signals offer a cost-effective strategy for
preventing long vehicle queues from blocking other
37
roadways, whereas grade separation is extremely costly and
can adversely affect a community’s character, SEA favored
traffic advisory signals for the four “substantially affected”
crossings where long traffic queues would occur. By contrast,
SEA recommended grade separation at those crossings that
exceeded or neared SEA’s thresholds for crossing LOS, total
vehicle delay, or vehicle exposure because traffic advisory
signals would be ineffective. SEA relied as well on the
Federal Highway Administration Handbook’s guidance that
“crossings should be considered for grade separation . . .
whenever,” among other things, total vehicle delay exceeds
2400 minutes or vehicle exposure exceeds 1 million. Federal
Highway Administration, Railroad-Highway Grade Crossing
Handbook 151 (2007) (“Handbook”). Based on this analysis,
SEA recommended traffic advisory signals at four
“substantially affected” crossings, grade separation at two
such crossings, and no mitigation at five others. Noting that it
might also have recommended grade separation for two
crossings in Joliet, SEA deferred instead to the voluntary
mitigation agreement Joliet had negotiated with Canadian
National.
SEA also identified emergency responders who would be
“substantially affected” by Canadian National’s acquisition of
the EJ&E line. Rejecting their calls to impose grade
separation, SEA instead recommended installation of closed-
circuit cameras to enable emergency dispatchers to monitor
freight traffic and adjust dispatch plans accordingly.
With respect to the two crossings designated for grade
separation, SEA recommended requiring Canadian National
to contribute 15% of the cost. It selected this figure because
SEA estimated that the acquisition would, on average,
increase traffic delays in the Chicago metropolitan area by
15%.
38
Turning to the risk of hazardous material spills, SEA
projected how frequently Canadian National trains would
release such materials within each segment of the EJ&E line
and examined the six serious incidents that had occurred in
the past five years on the EJ&E line or on Canadian
National’s five existing Chicago area lines. Based on that
information, SEA concluded not only that the risk of a
hazardous material release in any particular location would be
“remote,” but also that any such release would be readily
containable. SEA thus rejected the need to install a hazardous
material containment system along the EJ&E line, finding
instead that existing regulations and Canadian National’s
current business practices would adequately protect the
populace and surrounding environment from hazardous
material spills.
In addition to the foregoing, SEA considered how
Canadian National’s acquisition of the EJ&E line would
affect wildlife near the rail line. Among other actions, SEA
worked with the U.S. Department of the Interior, state
agencies, and Canadian National to limit the railroad’s impact
on endangered and threatened species.
Once SEA had completed the final environmental impact
statement, the Board approved the Canadian National merger.
As noted earlier, in that decision, the Board imposed many of
the conditions proposed by SEA, including grade separations
at Ogden Avenue and Lincoln Highway. See supra 8.
Although SEA had recommended that Canadian National bear
15% of the cost of each separation, the Board, based on its
calculation of the transaction’s impact at each crossing,
increased the railroad’s share significantly—to 67% at Ogden
Avenue and to 78.5% at Lincoln Highway. The Board also set
a deadline of 2015 for Illinois to commit the remaining funds
39
and begin construction on the grade separations, after which
Canadian National would no longer be responsible for its
share. The Board declined to require grade separations at any
other crossings because it agreed with SEA that traffic
advisory signals would more cost-effectively prevent long
traffic queues from blocking other major roads, the principal
problem at those intersections.
In its petition for review, Canadian National challenges
as arbitrary and capricious the criteria the Board used to select
which intersections needed grade separation, as well as the
requirement that it bear a substantial portion of those projects’
costs. Community Petitioners raise a series of NEPA
challenges, including that the Board failed to select and
supervise HDR, its third-party contractor; improperly adopted
Canadian National’s goals as its own; failed to take a “hard
look” at the transaction’s claimed benefits; failed adequately
to consider direct, indirect, and cumulative environmental
impacts; overly relied on voluntary mitigation, reporting, and
consultation mandates, and compliance with existing laws and
regulations to mitigate environmental impacts; and failed
adequately to examine the transaction’s impact on traffic
congestion, emergency responders, the threat of hazardous
material spills, and the danger to wildlife. Community
Petitioners also argue that the Board acted arbitrarily and
capriciously in releasing Canadian National from its financial
commitment after 2015.
In reviewing Canadian National’s challenges, we apply
the APA’s arbitrary and capricious standard. 5 U.S.C.
§ 706(2)(A). Our scope of review under that standard “is
narrow.” Motor Vehicles Mfrs. Ass’n v. State Farm Mut. Auto.
Ins. Co., 463 U.S. 29, 43 (1983). Ordinarily, we will overturn
an agency decision only “if the agency has relied on factors
which Congress has not intended it to consider, entirely failed
40
to consider an important aspect of the problem, offered an
explanation for its decision that runs counter to the evidence
before the agency, or is so implausible that it could not be
ascribed to a difference in view or the product of agency
expertise.” Id. We review Community Petitioners’ challenges
under NEPA’s equally deferential standard. Our job is
principally to “ensure that the agency has adequately
considered and disclosed the environmental impact of its
actions[,] . . . that its decision is not arbitrary and
capricious[, and] . . . that the agency took a ‘hard look’ at the
environmental consequences of its decision.” Comtys. Against
Runway Expansion, Inc. v. FAA, 355 F.3d 678, 685 (D.C. Cir.
2004). Because “NEPA merely prohibits uninformed—rather
than unwise—agency action,” we must be careful not to
displace the agency’s substantive judgment with our own.
Robertson v. Methow Valley Citizens Council, 490 U.S. 332,
351 (1989).
Condition 14
Attacking the Board’s decision to require grade
separations at Ogden Avenue and Lincoln Highway, Canadian
National criticizes the Board for failing to conduct a cost-
benefit analysis and for deviating from the Board’s
established standards for determining where grade separations
are necessary. According to Canadian National, the Board has
previously focused only on crossing LOS and not on total
traffic delay, queue length, or vehicle exposure. Finding
nothing arbitrary and capricious about the Board’s decision to
use these criteria or in how the Board applied them, we reject
Canadian National’s challenge.
With respect to Canadian National’s demand that the
Board use cost-benefit analysis, the railroad points to no
statutory or regulatory requirement that the Board do so. Nor
does Canadian National cite to any authority—and we are
41
aware of none—for the proposition that the APA’s arbitrary
and capricious standard alone requires an agency to engage in
cost-benefit analysis. Moreover, the Board relied, reasonably
in our view, on expert advice contained in the Federal
Highway Administration Handbook, which recommends
imposing grade separation irrespective of cost considerations
whenever thresholds for total vehicle delay or for vehicle
exposure are exceeded, as they were, or nearly were, at both
the Ogden Avenue and Lincoln Highway crossings.
Handbook at 151. In any event, the Board took due account of
cost not only when it winnowed down the list of 112 at-grade
intersections to the 13 most “substantially affected” ones, but
also when it rejected grade separations at crossings in
Barrington in favor of more economical traffic advisory
signals and closed circuit cameras.
As for Canadian National’s argument that the Board’s
criteria deviated from established standards, the Board points
out that it has used some of these same criteria to assess the
need for grade separation in previous cases. See, e.g., San
Jacinto Rail Ltd.—Construction Exemption—Burlington N. &
Santa Fe Ry.—Operation Exemption—Build-Out to the
Bayport Loop, STB Finance Docket No. 34079, Draft
Environmental Impact Statement, at app. F.2 (Dec. 6, 2002)
(relying on the Federal Highway Administration Handbook).
Moreover, the Board offered a reasoned explanation for why
crossing LOS alone was inadequate in this case—namely, its
concern that crossing LOS would fail to capture how
increased railroad operations in a population-dense region
would impact regional mobility and traffic safety—and then
selected additional criteria with well-established pedigrees.
Challenging the Board’s cost-allocations for the Ogden
Avenue and Lincoln Highway grade separations, Canadian
National argues that they far exceed well-established federal
42
and state policies that cap railroad contributions to grade
separation projects at 5%. Those policies, however, apply
only where a governmental entity has proposed a grade
separation paid for with federal funds. See 23 U.S.C. § 130;
23 C.F.R. § 646.210(b). By contrast, the higher proportion of
costs the Board imposed on Canadian National is not unusual
where, as here, the railroad, as opposed to the government,
proposes the action that creates the need for grade separation
and where no federal funds are involved. Cf. Atchison, Topeka
& Santa Fe R.R. v. Pub. Utils. Comm’n, 346 U.S. 346, 352–
53 (1953) (upholding against a Due Process Clause challenge
a state’s requirement that a railroad pay 50% of the cost
allocation of a grade-separation); Iowa, Chi., & E. R.R. v.
Wash. Cnty., 384 F.3d 557, 562 (8th Cir. 2004) (explaining
that a state may require a railroad to pay more than 5% of the
cost of non–federally funded grade separations so long as the
allocation is “fair and reasonable”). The Board’s decision is
also entirely consistent with its policy of “requiring [railroads]
to mitigate transaction-related impacts, but not pre-existing
conditions.” Resp’t’s Br. 52.
We reject as well Community Petitioners’ challenge to
the Board’s decision to release Canadian National from its
financial obligation if work fails to begin on the grade
separations by 2015. As the Board explained, this challenge is
premature because “if reasonable progress has been made, yet
it becomes clear that construction is not likely to be initiated
by 2015 due to circumstances beyond [the Illinois Department
of Transportation’s] control, such as a long appeals process,
the Board will entertain requests to extend the time deadlines”
under 49 U.S.C. § 722(c), which gives the Board authority to
reopen a proceeding “because of material error, new evidence,
or substantially changed circumstances.” Canadian Nat’l Ry.
Co.—Control—EJ&E W. Co., STB Finance Docket No.
35087, Decision No. 21, at 5–6 (Oct. 23, 2009). If the Illinois
43
Department of Transportation or one of the Community
Petitioners asks the Board to exercise that authority in or
around 2015 and the Board refuses, we can consider at that
time whether the Board acted arbitrarily or capriciously.
Barrington Grade Crossings
As noted above, Community Petitioners argue, among
other things, that the environmental impact statement failed to
take the requisite “hard look” at traffic congestion and
emergency responder delays in Barrington, as well as that the
Board failed to adequately examine strategies for mitigating
those impacts. Based on the Board’s criteria, it concluded that
one of Barrington’s four crossings, at Hough Street, would be
“substantially affected” by the merger, primarily because long
traffic queues on Hough Street were projected to block
another major thoroughfare, Northwest Highway, which also
crosses the EJ&E line. The Board then determined that traffic
advisory signals could cost-effectively mitigate this problem
and that grade separations across Hough Street and Northwest
Highway were unnecessary since neither crossing was
projected to exceed Board thresholds for grade separation,
such as 2400 minutes of total vehicle delay. Between
publishing the draft and final environmental impact
statements, the Board also commissioned an additional traffic
study, which concluded not only that much of Barrington’s
traffic congestion stemmed from pre-existing conditions, but
also that Canadian National’s acquisition would increase
congestion during peak morning and evening hours by only
4% to 5%.
Challenging the Board’s reliance on the traffic study,
Community Petitioners point out that the Village of
Barrington commissioned its own study showing that vehicle
delays for Hough Street and Northwest Highway would far
exceed the 2400 minute threshold. But we decline to consider
44
the significance of Barrington’s traffic study because, as
counsel for Community Petitioners conceded at oral
argument, they failed to mention their study until their reply
brief, thus depriving the Board of a fair opportunity to
respond. See Oral Arg. Tr. 74; see also Bd. of Regents of
Univ. of Wash. v. EPA, 86 F.3d 1214, 1221 (D.C. Cir. 1996)
(“[W]e have generally held that issues not raised until the
reply brief are waived.” (citations omitted)). Without their
traffic study, Community Petitioners’ argument that they were
treated differently than similarly situated communities must
fail given that the Board’s study projected that the Barrington
crossings would not exceed the 2400 minute threshold while
those crossings warranting grade separation (Ogden Avenue
and Lincoln Highway) would.
We likewise find no merit to the Community Petitioners’
challenge relating to emergency responders. The
environmental impact statement identified which emergency
responders would be “substantially affected” and proposed
specific measures to mitigate the impact on them. NEPA
requires nothing more.
Remaining NEPA Challenges
We have reviewed Community Petitioners’ other
objections to the environmental impact statement and found
them without merit. The Board did all that NEPA required of
it: it set out the purpose and need for the transaction,
evaluated alternatives that would reasonably and feasibly
accomplish that purpose and need, identified and took a “hard
look” at the transaction’s environmental impacts, examined
strategies for mitigating those impacts, and fielded and
responded to thousands of comments from local, state, and
federal agencies and from the community. Having found no
“error[s] [that] compromise[d] the objectivity and integrity of
the [NEPA] process,” we have no need to consider
45
Community Petitioners’ claim that the Board improperly
selected or supervised its contractor. See Citizens Against
Burlington, 938 F.2d at 202 (internal quotation marks
omitted).
V.
For the foregoing reasons, we deny the petitions for
review.
So ordered.