INTERSTATE COMMERCE COMMISSION, Petitioner, v. TEXAS et al. MISSOURI-KANSAS-TEXAS RAILROAD COMPANY, et al., Petitioners, v. TEXAS et al.

The petitions for certiorari include both TOFC and COFC service. Pet. for Cert. in No. 85-1222, p. I; Pet. for Cert. in No. 85-1267, p. i. A container, unlike a trailer, cannot itself be hauled on the highway by a tractor rig; it must first be placed on a suitable truck trailer. For the purposes of this opinion, however, there are no relevant differences between TOFC and COFC service.

"TOFC service is inherently bimodal in that its basic characteristic is the combination of the inherent advantages of rail and motor transportation: the railroad's ability to provide efficient line-haul transportation of huge volumes of freight for great distances at high speed; and the motor carrier's ability to provide door-to-door, and if necessary job- or farm-site, pickup and delivery." Ex parte No. 230, Substituted Service-Charges and Practices of For-Hire Carriers and Freight Forwarders (Piggyback Service), 322 I.C.C. 301, 329 (1964).

See generally id., at 305-309 (describing growth of TOFC service).

See 49 CFR § 1039.13 (1986). See also Improvement of TOFC/COFC Regulation, 364 I.C.C. 731, aff'd, American Trucking Assns., Inc. v. ICC, 656 F.2d 1115 (CA5 1981).

The exemption encompasses "[r]ailroad and truck transportation provided by a rail carrier as part of a continuous intermodal movement." 49 CFR § 1039.13 (1986) (emphasis added). In some plans, the motor portion of an intermodal movement is performed by a trucking company, freight forwarder, or shipper. See American Trucking Assns., Inc. v. Atchison, T. & S.F.R. Co., 387 U.S. 397, 403, 87 S.Ct. 1608, 1612, 18 L.Ed.2d 847 (1967). In such plans, the exemption applies only to the rail portion of the intermodal service.

See 49 U.S.C. § 11501. At the time it issued the decision at issue in this case, the Railroad Commission of Texas had provisional certification to regulate intrastate transportation provided by a rail carrier. The Commission no longer has this statutory authority to regulate intrastate rail rates, classification, rules, and practices of interstate carriers because it was denied certification by the ICC in Ex parte No. 388 (Sub-No. 31), State Intrastate Rail Rate Authority—Texas, 1 I.C.C.2d 26 (1984), aff'd, Railroad Comm'n of Texas v. United States, 246 U.S.App.D.C. 352, 765 F.2d 221 (1985).

See ICC No. 39627, Petition Under 49 U.S.C. 11501(c) by Missouri-Kansas-Texas Railroad Company, et al., for Review of an Order of the Railroad Commission of Texas, decided Jan. 19, 1984 (Service Date Jan. 23, 1984); ICC, No. 39704, Petition of Road-Rail Transportation Company, Inc., Under 49 U.S.C. 11501(c) for Review of an Order of the Railroad Commission of Texas, decided Apr. 11, 1984 (Service Date Apr. 13, 1984).

Section 10505(f) provides:

"The Commission may exercise its authority under this section to exempt transportation that is provided by a rail carrier as a part of a continuous intermodal movement."

Section 10521(b)(1) provides:

"(b) This subtitle does not—

"(1) except as provided in sections 10922(c)(2), 10935, and 11501(e) of this title, affect the power of a State to regulate intrastate transportation provided by a motor carrier."

Sections 10922, 10935, and 11501(e) are not relevant to the issue.

The ICC found that the Railroad Commission of Texas' refusal to apply the entire TOFC/COFC exemption violated federal standards and procedures binding upon the State Commission, and authorized the Railroads "to establish any rate, classification, rule, or practice pertaining to intrastate rail or motor transportation provided by a rail carrier as part of a continuous intermodal movement within the State of Texas, to the same extent and in the same manner that they establish rates, classifications, rules, or practices for similar interstate movements." App. to Pet. for Cert. in No. 85-1222, pp. 21a-22a. The Court of Appeals stated:

"The thrust of the argument of the State of Texas is that the I.C.C. lacks jurisdiction over the trucking segment of the totally intrastate TOFC activities of the intrastate [sic ] rail carriers. Without this jurisdiction, Texas maintains, the I.C.C. could not exempt the intrastate highway transportation from state regulation. We are constrained to agree." Texas v. United States, 770 F.2d 452, 453 (CA5 1985) (emphasis added).

This quotation reveals an incompleteness in the Court of Appeals' reasoning. If the rail carriers were "intrastate rail carriers," the ICC would not have had jurisdiction over either the rail or the motor portion of their intrastate movements. But this conclusion does not necessarily extend to the rail and motor portions of intrastate movements by all other rail carriers, specifically those that operate across state boundaries. In fact, the Railroads in this proceeding are all interstate rail carriers,

and the ICC has consistently exercised jurisdiction over their intrastate, as well as their interstate, movements. See n. 14, infra. Nevertheless, the Court of Appeals did not err in its underlying conclusion that the ICC's authority to grant an exemption from federal regulation coincides with its authority to grant an exemption from state regulation. In its argument in this case, the State of Texas also recognizes that the scope of the ICC's authority over exemptions from state regulation is coextensive with its own jurisdiction either to impose federal regulation or to grant an exemption from federal regulation. Thus, although this case involves the ICC's effort to grant exemptions from regulation, the same legal question would be presented if the ICC were trying to regulate the rates for an interstate rail carrier's intrastate movements, and the carrier asserted that only the state commission had such power.

See 49 U.S.C. §§ 10501 and 11501. The Commission does not assert jurisdiction over wholly intrastate carriers; nor does it assert the authority to exempt such carriers from state regulation.

See n. 7, supra.

Our holding that the ICC's jurisdiction under § 10505(f) includes the intrastate portions of Plan II TOFC/COFC service applies whether or not a State has been certified under 49 U.S.C. § 11501. Because the Railroad Commission of Texas is not now certified to regulate railroads, the statute independently places the truck portion of intra-Texas TOFC/COFC service within the jurisdiction of the ICC:

"Any intrastate transportation provided by a rail carrier in a State which may not exercise jurisdiction over an intrastate rate, classification, rule, or practice of that carrier due to a denial of certification under this subsection shall be deemed to be transportation subject to the jurisdiction of the Commission under [§ 10501 et seq.]." 49 U.S.C. § 11501(b)(4)(B).

And of course the Fifth Circuit so held in American Trucking Assns., Inc. v. ICC, 656 F.2d 1115 (1981). The reason why Texas does not have that power is that the statute plainly authorized the ICC either to regulate, or to exempt from regulation, such continuous interstate movements. We think it clear that the ICC's authority over intrastate rail transportation by an interstate rail carrier encompasses the entire movement, even when it includes a truck segment. This conclusion was at least implicit in the Fifth Circuit's opinion in American Trucking Assns., Inc. v. ICC, supra, at 1120:

"[R]ail-owned truck TOFC/COFC service is 'transportation that is provided by a rail carrier.' Had Congress intended to limit the Commission's exemption authority to rail transportation, it could easily have done so by using that language. Instead, it chose the broad 'transportation-that-is-provided-by-a-rail-carrier' language and presumably did so with knowledge that it previously had defined 'transportation' to include the movement of passengers or property by motor vehicle." (Citations omitted; footnotes omitted).

The Court of Appeals based its conclusion that "transportation provided by a rail carrier" should be defined more narrowly for intrastate traffic than for interstate commerce on the "potential mischief" of exempting intrastate rail travel from regulation. The Court of Appeals focused on the hypothetical example of a small intrastate rail carrier that provides minimal rail service within a city and extensive truck service to convey goods to and from the city, and is exempt from state regulation. See 770 F.2d, at 454-455. This scenario could only occur, however, if the ICC had authority to exempt such transportation from regulation. But because the hypothetical railroad is only an intrastate carrier, the ICC would not have any jurisdiction over it, and the speculative potential for mischief would not exist. In this case, by contrast, the Railroads are interstate carriers whose TOFC/COFC services include some segments entirely within Texas. See Guide to Piggyback Routes, Distribution 190, 196 (July 1982) (route diagrams for TOFC/COFC service). See also n. 9, supra.

"[W]e cannot accept arguments based upon arguable inference from nonspecific statutory language, limiting the Commission's power to adopt rules which, essentially, reflect its judgment in light of current facts as to the proper interrelationship of several modes of transportation with respect to an important new development." American Trucking Assns., Inc. v. Atchison, T. & S.F.R. Co., 387 U.S., at 410, 87 S.Ct., at 1615. The reading of the Act proposed by respondents impermissibly limits the ICC's power to implement national transportation policy in the evolving area of intermodal transportation.

See H.R.Rep. No. 96-1035, pp. 38, 61, 128-130 (1980); H.R.Conf. No. 96-1430, p. 79 (1980), U.S.Code Cong. & Admin.News 1980, pp. 3978, 3983, 4006, 4072-4074, 4110.

Section 10101a "establishes a specific rail transportation policy to guide the Commission in its duties in regulation of the railroad industry." H.R.Conf.Rep. No. 96-1430, supra, at 80, U.S.Code Cong. & Admin.News 1980, p. 4111. Section 10101a provides, in part:

"10101a. Rail transportation policy

"In regulating the railroad industry, it is the policy of the United States Government—

"(1) to allow, to the maximum extent possible, competition and the demand for services to establish reasonable rates for transportation by rail;

* * * * *

"(4) to ensure the development and continuation of a sound rail transportation system with effective competition among rail carriers and with other modes, to meet the needs of the public and the national defense;

"(5) to foster sound economic conditions in transportation and to ensure effective competition and coordination between rail carriers and other modes;

* * * * *

"(7) to reduce regulatory barriers to entry into and exit from the industry."

Section 10101 provides in part:

"(a) Except where policy has an impact on rail carriers, in which case the principles of section 10101a of this title shall govern, to ensure the development, coordination, and preservation of a transportation system that meets the transportation needs of the United States, including the United States Postal Service and national defense, it is the policy of the United States Government to provide for the impartial regulation of the modes of transportation. . . ."