Court Opinion

ID: 9439151
Source: CourtListenerOpinion
Date Created: 2023-08-03 06:23:31.723708+00
Date Added: 2024-06-11T17:26:11.563856
License: Public Domain

WILLIAMS, Circuit Judge,
with whom Circuit Judge GINSBURG joins, dissenting from the denial of rehearing en banc.
The Department of Transportation (“DoT”) regulates landing fees charged at Los Angeles International Arport (“LAX”). Here the panel decision upholds as reasonable DoT’s insistence that the charge for the airport’s land be calculated on the basis of .historical accounting cost. 165 F.3d 972 (D.C.Cir.1999). Though there may be a good reason for the Department’s conclusion, the two offered by the Department and approved by the panel appear erroneous.
As our earlier opinion made clear, the agency cannot reject opportunity cost — or any other reasoned proposal offered by a party — without some reason. See 103 F.3d 1027, 1031-34 (D.C.Cir.1997) (rejecting DoT’s previous rejection of opportunity cost). The proposed use of opportunity cost is reasoned: it has the effect of giving the customers the correct signal as to the cost imposed on society by their use of the resource. See id. at 1034 (citing City’s contention that opportunity cost pricing would “ensure that the actual costs of the airfield are borne by those receiving the benefit”). In this case, giving that signal would be valuable because it would cause airlines to use correct figures in comparing LAX with alternatives available to them (e.g., Burbank). As the City argued here, pricing at less than opportunity cost can be expected to bring about excessive use of the airport. See Final Decision on Remand at 20.
The current panel opinion first embraces DoT’s argument that the City obliged itself, in exchange for the statutory subsidy, not to divert the property from its use as an airport. Ergo, say DoT and the panel, there is no opportunity cost. This seems to rest on the idea that if some exogenous circumstance blocks application of a resource to other uses, it follows that use of opportunity cost is inappropriate. That is surely a non sequitur; the signalling referred to above is just as valuable as it *940would have been without the block. By-contrast, of course, an inherent deficiency in the land (not alleged here) would properly cut down opportunity cost.
Suppose a person owns property in fee simple determinable, to hold “so long as the land is used as an airport.” There plainly would be neither legal compulsion for him to price the airport’s services at historic cost, nor would charges based on opportunity cost in any way logically contradict the terms of ownership. Thus the conclusion that use of historical cost was “a consequence of an unambiguously imposed condition,” 165 F.3d at 978, appears to me a non sequitur.
The panel also accepts DoT’s alternative idea that the economic benefits generated for the City by the airport “cover[ ]” the opportunity costs of the land. Id. at 976, 978-79. Of course the airport generates spillover benefits for the City.1 But the panel never explains, and I cannot understand, why the existence of those benefits undercuts the reasons for using opportunity cost. They in no way reduce the utility of sending users accurate price signals.
Perhaps the point of this second theory is that re-allocation of LAX to any other use would drive the City into depression, so that the apparent opportunity is a phantom. But that would be so only if we assumed that the airport would not be replaced, an absurd assumption. Further, even if the costs of replacing the airport would be higher than the opportunity cost of LAX, and so high that on net replacement elsewhere would be unwise, that would not logically undermine the proposition that the opportunity cost of this land is what its best alternative use would be. Even the foolish building of an extravagantly priced substitute airport would in fact release this land for alternative uses. Therefore, its value in those uses is its opportunity cost.
In reliance on these two theories, DoT concluded that “LAX incurs no opportunity cost.” Final Decision on Remand at 16. Because of that belief, it refrained from resolving other possible theories supporting its rejection of opportunity cost. See id. (It mentioned the historic practice of airports to base charges on historic cost, see id. at 22-26, and various complications in computing opportunity cost, see id. at 26-29, but the decision does not suggest that these issues were decisive, and they played no role in the panel’s affirmance.) As DoT has evidently rejected opportunity cost with no logically sound basis for doing so, another remand to DoT seems to me in order.
The engaging charm of Judge Silber-man’s rhetoric, ante, somewhat obscures his resolute refusal to engage the City’s claim. That claim is simply that opportunity cost pricing tends to generate a more optimal allocation of business between suppliers of a good or service: here the service of enabling planes to land and take off, to receive and deliver passengers and freight, in the LA metropolitan area. The Department does not contest this proposition. It therefore does not require economists, resident or non-resident, Nobel laureates or fugitives from Econ 101, to assess its general truth. .That is a given. Rather, the Department claims that the precept is inapplicable where (1) the owner of one source of supply has contractually obligated himself to use his assets for the specified purpose, or (2) the owner of the resource benefits in some collateral way from the business involved. As shown above, both those claims are simply non sequiturs.2
*941As for the fantasy of LAX being closed and entirely replaced by Burbank, that is a fantasy entirely of Judge Silberman’s rich imagination — as any glance at the above text will show. It is not implicated by the simple thought that correct pricing of LAX’s services would generate a better allocation of trade as between LAX, Burbank and any other (existing or as yet undeveloped) suppliers of the same service.

. It also generates spillover costs, such as noise pollution. And, as Intervenor Airports Council International — North America points out, many of the spillover benefits run to the airlines, for which the City creates a market; as the Intervenor observes, "Passengers do not choose air travel because they like the cuisine."

. Notwithstanding the Concurring Statement at 938-39, they are not made any the less non sequiturs because a prior panel cited DoT's contention that LA’s promise rendered the concept of opportunity cost inapplicable, a contention that the panel specifically cast doubt upon. See 119 F.3d 38, 44 (D.C.Cir.1997).