4. Motions to dismiss this proceeding.-Both MDOA and MCC submitted motions to dismiss. MDOA moves to dismiss the proceeding as it applies to grain rates. MDOA notes that the railroads request that intrastate rates be increased "in the same manner and in the same extent" as interstate rates because present intrastate rates are a burden on interstate commerce. However, MDOA argues that the railroads effectively canceled their authorized Ex Partę Nos. 310 and 313 increases on grain rates by reducing interstate grain rates by 10 percent. Therefore, according to MDOA, because interstate grain rates do not reflect the authorized ex parte increases, there can be no increase in intrastate rates "in the same manner and in the same extent" as interstate rates.

The railroads, in reply, dispute the idea that the amount of reduction cancels authorized increases because the amount of those reductions only coincidentally corresponds to the amount of increase. Moreover, the railroads note that such reductions apply only on grain rates to the West, while rates to the North, East, and South remain unaffected.

Once increases are authorized, this Commission has jurisdiction. to allow the carriers flexibility in meeting competition. Oklahoma Corporation Commission v. United States, 388 F. Supp. 4, 12 (N.D. Okla. 1974). As the respondents point out, only some interstate grain rates were reduced. The fact that some grain rates were reduced to meet competition does not preclude a finding that present intrastate freight rates are a burden on interstate commerce. Moreover, where increases in interstate rates have been less than the amount authorized by this Commission, increases in intrastate rates would be similarly restrained, since the railroads request permission to raise only "to the extent" interstate rates have been raised. We, therefore, deny MDOA's motion to dismiss.

MCC moves to dismiss this proceeding on the grounds that the amendments to the act contained in the Railroad Revitalization and Regulatory Reform Act of 1976 (4R Act) have changed this Commission's jurisdiction to investigate intrastate rates. MCC notes that the new section 13(5) grants this Commission exclusive jurisdiction to act on applications for intrastate rate changes where two events have occurred: (1) the carrier has previously filed the change with the appropriate State regulatory body, and (2) that body has not acted finally on the change within 120 days of the date of filing. Since the Montana commission denied respondents' petition within 120 days, MCC argues that if this Commission has any

jurisdiction to investigate in these circumstances, that jurisdiction is not exclusive, because the second section 13(5) requirement has not been met.

MCC asserts that section 13(5) gives the Montana commission primary jurisdiction in this case. Since the Montana commission found that these petitioners failed to make a prima facie case, MCC argues that this Commission should defer to that decision and find no cause of action here. To do otherwise, MCC argues, would usurp the State's primary jurisdiction. Alternatively, MCC contends that, if this Commission does have jurisdiction to investigate in this case, any investigation should be conducted jointly with the Montana commission as authorized by section 13(3) of the act.

MCC has not shown sufficient justification to support either argument here. We note that section 13(5) does not appear to cover the jurisdictional situation presented in this case. However, that presents no basis from which to conclude we have no jurisdiction, particularly in light of the language of sections 13(3) and 13(4).

Section 13(3) gives this Commission discretionary power to grant carrier petitions for investigation and to conduct joint hearings with State regulatory bodies where the State's rate making authority may be affected by Commission action. Section 13(4), as amended by the 4R Act, states that this Commission "shall prescribe" intrastate rates where its investigation has shown existing intrastate rates to be an undue burden on interstate commerce.' It would be contrary to a harmonious reading of the statutory language to interpret section

"Section 13(5) gives this Commission exclusive jurisdiction if the appropriate State agency has not acted "finally" on the railroad's petition within 120 days of filing. This requires an administratively final decision within the meaning of the particular State's law. While no appeal from the Montana commission's dismissal order was taken, the parties agree that an administratively final decision was rendered.

'Section 13(4) reads:

Whenever in any such investigation the Commission, after full hearing, finds that any such rate, fare, charge, classification, regulation, or practice causes any undue or unreasonable advantage, preference, or prejudice as between persons or localities in intrastate commerce on the one hand and interstate or foreign commerce on the other hand, or any undue, unreasonable, or unjust discrimination against, or undue burden on, interstate or foreign commerce (which the Commission may find without a separation of interstate and intrastate property, revenues, and expenses, and without considering in totality the operations or results thereof of any carrier, or group or groups of carriers wholly within any State), which is hereby forbidden and declared to be unlawful, it shall prescribe the rate, fare, or charge, or the maximum or minimum, or maximum and minimum, thereafter to be charged, and the classification, regulation, or practice thereafter to be observed, in such manner as, in its judgment, will remove such advantage, preference, prejudice, discrimination, or burden. *** Such rates, fares, charges, classifications, regulations, and practices shall be observed while in effect by the carriers parties to such proceeding affected thereby, the law of any State or the decision or order of any State authority to the contrary notwithstanding.

13(5) as removing the Commission's jurisdiction in this case, since that interpretation would make the grant of power in section 13(3) and 13(4) meaningless. The provisions in section 13(3) for a joint State-Commission conference and for Commission use of records of State proceedings in appropriate instances can only refer to instances where there is a jurisdictional overlap. In this proceeding, the Montana commission had the exclusive right to exercise its jurisdiction for a period of 120 days or until it issued a final decision, whichever came first. At this point, this Commission may exercise its jurisdiction, to consider the effect of the State's action on interstate commerce, whether that action was a grant or denial of the authorization sought. The Commission may not, however, act until the 120-day period has expired or a final State decision has been issued.

This interpretation is amply supported by a close reading of the legislative history of section 13(5). The December 19, 1975, Conference Reports reveals that the primary concern of Congress was to afford a prompt and convenient State forum for local consumers to express their views and to ensure that the disposition within the State forum be promptly achieved.

Pursuant to section 13(3), the Commission will act, in appropriate cases, to avail itself of the records of the State proceeding where local consumers would not be adequately represented in the proceeding before this Commission. However, in this case all but one of the parties to the State proceeding are parties to this proceeding, and the one party not represented withdrew voluntarily. Finally, MCC has shown no reason why the time and expense engendered by joint hearings under section 13(3) would be justified here. In addition, the administrative delay caused by joint hearings would conflict with the time limits imposed by section 17(9) of the act and serve no apparent useful purpose here. We conclude that the interests in this case are adequately represented under modified procedure, and deny MCC's motion to dismiss for lack of subject matter jurisdiction.

RESPONDENTS' EVIDENCE

The Montana railroads make four basic assertions to support their position. First, they argue that present intrastate rates within Montana are too low and do not contribute enough to the railroads'

"H. R. Rep. No. 768, 94th Cong. 2d Sess. 1975. Section 13(5) as it appeared in this Conference Report, was subsequently enacted without change.

revenue needs. Second, they argue that conditions for intrastate commerce are no more favorable than conditions on interstate commerce. Third, they argue that present rates are unlawful because they cast an undue burden on interstate commerce. Finally, they argue that the requested increase would remove the unlawfulness, substantially increase revenues, and result in just and reasonable

rates.

To support these assertions, the railroads have submitted cost evidence to show their allegedly inadequate financial condition and their need for increased revenues from Montana intrastate traffic. The railroads point out that Ex Parte No. 310 was designed to let carriers meet costs which were not covered by any rate increase authorizations subsequent to Ex Parte No. 303-A, and that Ex Parte No. 313 is a wage passthrough.

Respondents have calculated a $131,221,000 annual increase in systemwide operating expenses which are not covered by other rate increases, and a total increase in the cost of wage, health, and welfare benefits amounting to $206,668,000. If they obtain the increases they seek here, the railroads expect an annual revenue increase of $956,456 for Ex Parte No. 310 and $1,096,509 for Ex Parte No. 313, a total annual revenue increase of $2,052,965.

In addition, the railroads submitted a comparison of combined system revenues, total operating expenses (including taxes and rents), and net railway operating income for the years 1966 through 1975. The comparison shows an increase in operating revenue of 62.2 percent during this period, compared with an increase of 73.3 percent in operating expenses and a decrease of 24.8 percent in net railway operating income. For the same time period, respondents show rapid increases in the costs of wages, materials and supplies, payroll taxes, and fringe benefits: straight time wages increased 106.8 percent, materials and supplies increased 141.8 percent, payroll taxes increased 153.8 percent, and health and welfare costs increased 85.6 percent. The railroads compared combined-system average revenues and expenses per thousand gross ton-miles for 1966-1975 to show a decrease in revenue margin per thousand gross ton-miles from $0.67 in 1966 to $0.13 in 1975.

Respondents also submitted evidence showing that their interstate and intrastate freight is handled in substantially the same manner, and that conditions surrounding intrastate transportation in Montana are no more favorable than conditions on interstate transportation to, from, or through Montana. They state that they operate no purely intrastate trains within Montana, and that

interstate and intrastate traffic is intermingled on the same trains, moves over the same tracks, is handled and switched by the same crews, and billed by the same clerical workers.

Respondents suggest that costs may even be higher on intrastate traffic, since it is moved mainly on local trains by crews paid at a higher wage rate who earn more overtime than crews working on through trains. These local trains move largely on branch lines in Montana. Branch line track is usually constructed on lighter rail with grades and curvatures equal to or greater than main line tracks. Montana traffic is characterized by steep grades and sharp curvatures. Montana local trains normally handle fewer cars and less tonnage than through trains, and must operate at slower speeds. Intrastate traffic in Montana generally has two switches, as opposed to one for interstate traffic, and moves less tonnage for shorter distances. Respondents, therefore, conclude that unit cost in handling Montana intrastate traffic is substantially higher than costs for interstate traffic.

Respondents BN and Milwaukee also submitted statistics to demonstrate their respective cost increases. BN made a 1-month study of interstate and intrastate train crew wages in July 1973 based on loaded car-miles for Montana which shows that interstate crews were paid $96.95 per thousand loaded car-miles, while intrastate crews were paid $218.96 per thousand loaded car-miles. During the same period, the through train crews' percentage of overtime-tostraight-time pay was 0.4 percent while the figure for local train crews was 12.5 percent. Between 1966 and 1975, BN also showed increases of 116 percent in employee average hourly wages, excluding fringe benefits, and of 129 percent including fringe benefits. Annual wages increased 93.8 percent, and fringe benefits increased 260 percent. BN also cites increases in equipment costs and in the average unit price for new rail and track fastenings.

Milwaukee showed that the average annual increase in employee wages between 1961 and 1975 was 139 percent without, and 159 percent with, fringe benefits. Average unit price for new rail increased 152 percent between 1964 and 1976, while the cost of new track fastenings increased 150 percent.

Respondents submitted rate comparisons rate comparisons of particular commodities to show that even after the requested increases are applied, Montana intrastate rates will be no higher than comparable interstate rates or comparable intrastate rates within North Dakota and Minnesota. Respondents conclude from these comparisons that the resulting intrastate rates would not result in unreasonable charges.