Opinion ID: 393013
Heading Depth: 1
Heading Rank: 5

Heading: Computation of Opportunity Cost

Text: 35 The petitioners assert that the ICC improperly considered N&W's opportunity costs as bearing on the public's interest in maintaining rail service over these branches. Here, opportunity costs measure the economic loss N&W experiences by foregoing more profitable use of its resources. See Abandonment of Rail Lines Use of Opportunity Costs, 360 I.C.C. 571 (1980), upheld on petition for review sub nom. Farmland Industries, Inc. v. United States, 642 F.2d 208 (7th Cir. 1981). 9 The petitioners alternatively argue that even if opportunity cost was an appropriate factor for ICC consideration, the ICC used incorrect figures in making its determination. 36 The ICC properly considered opportunity costs in this case. In Missouri Pacific Railroad Company v. United States, 625 F.2d 178 (8th Cir. 1980), the court held that the ICC must consider a railroad's opportunity cost when balancing the public interest in permitting an abandonment. The ICC had disregarded Missouri Pacific's evidence concerning opportunity costs, and the court remanded the case for reconsideration. The court concluded that previous ICC cases presaged such a requirement, giving due notice to the parties that opportunity costs could be considered. 625 F.2d at 182. And the Eighth Circuit concluded that the absence of a regulation governing use of opportunity costs at the time of decision did not limit the requirement that the ICC consider such costs. Id. 37 Like the petitioners in Missouri Pacific, the petitioners here were put on notice by precedent and by N&W's attempt to place opportunity costs into evidence on administrative appeal. The ICC, perhaps taking its cue from the Missouri Pacific case decided two months prior to the ICC's decision in this case, considered N&W's arguments and noted that, including labor expenses as an avoidable cost, the branches failed by a wide margin to return a reasonable amount on investment. There was no error in that action. 38 The ICC, however, erred in the figures used to make its computations. The ICC applied figures for salvage value which had been submitted by N&W as an exhibit before the administrative law judge. N&W had later reduced those figures by $100,000 in connection with the Rushville branch, and about $200,000 in connection with the Connersville branch. The change in salvage value would also alter the tax figures taken into account by the ICC as part of its calculation, see note 9, supra; Abandonment of Railroad Lines and Discontinuance of Service, Proposed Rulemaking and Order, 41 Fed.Reg. 31883 (July 30, 1976), and would result in a new calculation figure that indicates a reasonable rate of return. The ICC's decision, then, is arbitrary and capricious since it lacks any basis in the record. See Doe v. Hampton, 566 F.2d 265, 272 n.15 (D.C.Cir.1977). 39 The ICC and N&W have made little attempt before this court to rebut the charge of miscalculation, but hypothesize that it would have made no difference in the final outcome of the case. Alternatively, say the ICC and N&W, certain figures that were left out of the initial calculation would substantially replace the excess amounts contained in its computations. 40 We cannot tell from the record before us whether a correction of the miscalculation would have made a difference in the ICC's ultimate disposition of this case, even when hefty rehabilitation and normalized maintenance costs are entered into the calculus. Nor have the ICC or N&W directed our attention to any authority permitting us to calculate and determine on our own the effect such a switch in profitability figures could have on the public interest. We must, therefore, remand to the ICC for recalculation of opportunity costs and a determination of the effect such a recalculation would have on the public interest in this abandonment.