Air Trans Assn Amer v. DOT , 129 F.3d 625 ( 1997 )

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued May 15, 1997 Decided August 1, 1997
No. 96-1253
Air Transport Association of America,
Petitioner
v.
Department of Transportation, et al.,
Respondents
City of Los Angeles,
Intervenor
Consolidated with
No. 96-1269
On Petitions for Review of Orders of the
United States Department of Transportation
Walter A. Smith, Jr. argued the cause for petitioner Air
Transport Association of America, with whom Allen R. Sny-
der, Jonathan L. Abram, and Jonathan S. Franklin were on
the briefs.
Steven S. Rosenthal argued the cause for petitioner City of
Los Angeles, with whom Ronald N. Wilson, Stanley A.
Zamel, Ardis M. Conant, Leilani F. Battiste, and Breton K.
Lobner were on the briefs. G. Brian Busey entered an
appearance.
Thomas L. Ray, Attorney, United States Department of
Transportation, argued the cause for respondents, with whom
Nancy E. McFadden, General Counsel, and Paul M. Geier,
Assistant General Counsel, were on the brief. Marion L.
Jetton and Robert B. Nicholson, Attorneys, United States
Department of Justice, entered appearances.
Steven S. Rosenthal, Ronald N. Wilson, Stanley A. Zamel,
Ardis M. Conant, Leilani F. Battiste, and Breton K. Lobner,
Attorneys, City of Los Angeles Department of Airports, filed
the brief for intervenor City of Los Angeles. G. Brian Busey
entered an appearance.
Allen R. Snyder, Walter A. Smith, Jr., Jonathan L.
Abram, and Jonathan S. Franklin filed the brief for interve-
nor Air Transport Association of America.
Scott P. Lewis and Kenneth W. Salinger filed the brief for
amici curiae Airports Council International-North America
and American Association of Airport Executives. Patricia A.
Hahn entered an appearance.
Before: Silberman, Ginsburg, and Henderson, Circuit
Judges.
Opinion for the Court filed by Circuit Judge Silberman.
Silberman, Circuit Judge: Petitioners City of Los Angeles
and the Air Transport Association of America, an airline
trade association, each challenge the Department of Trans-
portation's Final Policy Regarding Airport Rates and
Charges. We grant the petitions for review and remand.
I.
Airports are required by statute to charge aeronautical
users reasonable fees.1 Section 511 of the Airports and
Airways Improvements Act, codified at 49 U.S.C. s 47107
(1994), requires an airport that accepts federal grant money
(or land) to assure that the airport will be available for public
use on reasonable conditions and without unjust discrimina-
tion; this assurance has been interpreted to include a re-
quirement that the airport's fees be reasonable. See New
England Legal Found. v. Massachusetts Port Auth., 883 F.2d
157, 169-70 (1st Cir. 1989). Similarly, the Anti-Head Tax Act
allows a publicly owned airport to collect only reasonable
landing fees and charges from aeronautical users. See 49
U.S.C. s 40116(e)(2) (1994); Northwest Airlines v. County of
Kent, 510 U.S. 355, 366 (1994). Although the Department of
Transportation (DOT) has adjudicated disputes over the rea-
sonableness of airport fees under these statutes, see, e.g., New
England Legal Found., 883 F.2d at 163-66, until recently it
never promulgated regulations defining what it thought to be
reasonable airport fees. Airlines and airports did, however,
take these issues to court. See, e.g., Northwest Airlines, 510
U.S. 355; New England Legal Found., 883 F.2d 157; India-
napolis Airport Auth. v. American Airlines, 733 F.2d 1262 (7th Cir. 1984), disapproved by Northwest Airlines.
In August 1994, Congress enacted s 113 of the Federal
Aviation Administration Authorization Act, codified at 49
U.S.C. s 47129 (1994), which required the Secretary of Trans-
portation to publish "final regulations, policy statements, or
guidelines establishing--... the standards or guidelines that
shall be used by the Secretary in determining under this
section whether an airport fee is reasonable." Id.
s 47129(b)(2). That section also created an expedited admin-
istrative procedure in which an airline may challenge before
the Secretary the reasonableness of an airport fee. See City
of Los Angeles Dep't of Airports v. Department of Transp.,
103 F.3d 1027, 1030 (D.C. Cir. 1997) (LAX I). In such
__________
1 Airports collect the bulk of their revenues from two general
groups of users: aeronautical users, such as commercial (passenger)
airlines, and non-aeronautical concessionaires, including car rental
agencies, parking lots, restaurants, gift shops, and other small
vendors.
proceedings, only the reasonableness of the challenged fee is
open to question; the Secretary "shall not set the level of the
fee." 49 U.S.C. s 47129(a)(3).2
The Secretary adopted an "Interim Policy" in February
1995 which required that aeronautical fees be capped by the
cost to airports of providing aeronautical facilities and ser-
vices. The interim policy also required that airfield assets be
valued at their historic cost in determining the total costs that
could be recovered from fees. Airports complained that the
Interim Policy would force them to change their operating
methods and would damage their ability to finance improve-
ments, since they had commonly based fees for certain aero-
nautical facilities (such as terminals) on something other than
historic cost.
In June 1996, after receiving comments on a "Supplemental
Proposed Policy," the Secretary published a regulation enti-
tled the "Final Policy Regarding Airport Rates and Charges."
The Final Policy, unlike the Interim Policy, distinguishes
between airfield and non-airfield fees. For airfield fees--
aeronautical fees charged for the use of the runways, taxi-
ways, ramps, aprons, and roadway land--the Final Policy
maintains the Interim Policy's requirements that aeronautical
fees be capped at actual cost to the airport, and that airfield
assets be valued according to their historic cost. For non-
airfield fees--aeronautical fees charged for the use of all
other aeronautical facilities and services, including terminals,
hangars, cargo space, and maintenance--the Final Policy
instead permits airports to use "any reasonable methodolo-
gy."
According to the Secretary, requiring that assets be valued
at historic cost in setting airfield fees is consistent with
current practice, permits airports to recover their out-of-
pocket costs, and, since historic cost is easily determined from
__________
2 Section 113 permits airports to choose either a residual fee
methodology, a compensatory fee methodology, or any combination
of the two. Id. s 47129(a)(2).
accounting records, will help avoid controversies and be easi-
er to administer. The Secretary rejected fair market valua-
tion as a methodology for valuing assets in determining
airfield fees because the Secretary thought that airports do
not have "opportunity costs" in airfield assets since they are
committed to continued operations. The Secretary also
thought that the Final Policy's treatment of non-airfield fees
is consistent with past practice (which had not resulted in
disputes), and would permit pricing to reflect the differences
among non-airfield facilities. The Secretary believed it un-
likely that airports can or will exercise market power in
setting non-airfield fees.
The Final Policy also permits airports to include in airfield
fees a charge for imputed interest on those aeronautical funds
reinvested in the airfield, unless the invested funds derive
from airfield fees. A charge for imputed interest, according
to the Secretary, lets airports recover their opportunity costs
in the airfield (if any) and compensates for inflation. But
imputed interest cannot be charged for airfield revenues
reinvested in the airfield because the Secretary believes
airfield users might then be financing airfield investment
twice: once in the form of otherwise reasonable airfield fees
that turned out to generate excess revenue, and once on the
imputed interest charge on the investments made with that
revenue.
Petitioners attack the Final Policy from both sides. The
Air Transport Association of America (ATA), on behalf of its
members, challenges what it sees as the Final Policy's com-
plete deregulation of non-airfield fees. The City of Los
Angeles challenges the Final Policy's requirement of historic
cost for airfield fees.
II.
Anterior analytically to the main dispute between the two
petitioners and the Secretary--whether the regulation's 3 dis-
parate treatment of airfield and non-airfield fees is arbitrary
__________
3 Although he calls it a Final "Policy," the Secretary has clearly
promulgated a rule.
and capricious under the Administrative Procedure Act
(APA)--is the nature of the Secretary's authority and obli-
gation to issue regulations (guidelines) which set forth a
particular methodology for determining the reasonableness of
fees. Los Angeles contends the Secretary has no such power,
whereas ATA claims that not only does he have that authori-
ty, he must use it in a meaningful manner for both airfield
and non-airfield fees.
Los Angeles argues that the statute obliges the Secretary
to take a relatively passive role: he "may only determine
whether [a] fee is reasonable or unreasonable and shall not
set the level of the fee." 49 U.S.C. s 47129(a)(3). Emphasiz-
ing the differences that exist among airports regarding air-
field and non-airfield facilities and financial structures, it
contends that Congress, understanding those differences, in-
tended that the Secretary's role be limited to determining
whether a particular airport's fees meet an overall (bottom
line) reasonableness standard. Cf. Federal Power Comm'n v.
Natural Gas Pipeline Co., 315 U.S. 575, 586 (1942). Each
airport is therefore entitled to use any reasonable methodolo-
gy, and the Secretary lacked authority to require airports to
use historic cost as a basis for airfield fees.
We think Los Angeles' position on this issue is not very
persuasive. Section 113, it will be recalled, obliges the Secre-
tary to publish "final regulations, policy statements, or guide-
lines establishing--... the standards or guidelines that shall
be used by the Secretary in determining under this section
whether an airport fee is reasonable." 49 U.S.C.
s 47129(b)(2). That provision certainly implies that Congress
intended the Secretary to fashion a quasi-legislative uniform
approach to measuring the reasonableness of airport fees.
That the Secretary is not authorized actually to set the fee
itself means that each airport necessarily has some discretion
in the application of the Secretary's guidelines, but it hardly
can be read to mean that the Secretary was not authorized to
require a particular methodology for all airports--so long as
that methodology is itself reasonable.
The more difficult question, posed by ATA, is whether the
Secretary's approach to non-airfield fees meets its obligation
under s 113. The Secretary's "guideline" seems to be miss-
ing a "line." The regulation merely states that any reason-
able methodology will serve as a basis for non-airfield fees.
That concept does not seem to add much--if anything--to the
statutory requirement that airport fees be reasonable.4 It
may well be that the Secretary is not required to insist on a
single methodology. Perhaps he could indicate that several
different methodologies, depending on the circumstances,
would be authorized. We need not decide whether the Secre-
tary's treatment of non-airfield fees actually violates his stat-
utory obligation to set forth guidelines, however, because as
will be seen, we conclude that in any event his approach is
arbitrary and capricious.
III.
Even if the Secretary's regulation as applied to non-airfield
fees satisfied s 113's publication obligation, ATA asserts that
it amounts to de facto deregulation of those fees--permitting
airports to use their market power to charge airlines exces-
sive amounts. Not surprisingly, ATA wants the Secretary's
guidelines for valuing assets in determining airfield fees,
based on historic cost, extended to the non-airfield facilities.
ATA complains that DOT has not imposed any sort of mean-
ingful restraint on non-airfield revenues, leaving fees to be set
by the market. That posture, it is argued, is by definition
inconsistent with the reasonableness requirement in the Anti-
Head Tax Act, and violates the Secretary's duty under s 113.
ATA claims that it is well accepted that an agency responsible
for ensuring reasonable rates in industries with anticompeti-
tive conditions may not rely on the market to accomplish that
goal. See, e.g., Federal Power Comm'n v. Texaco, Inc., 417
U.S. 380, 397-99 (1974); Farmers Union Cent. Exch. v.
FERC, 734 F.2d 1486, 1509-10 (D.C. Cir.), cert. denied, 469
__________
4 Theoretically, we suppose it might preclude a fee from being
thought reasonable, no matter what its amount, if it is reached
through a capricious methodology.
U.S. 1034 (1984); cf. Elizabethtown Gas Co. v. FERC, 10 F.3d
866, 870 (D.C. Cir. 1993). Certainly that is so regarding non-
airfield fees because, according to ATA, airports enjoy virtu-
ally the same market power over non-airfield services--
terminals, hangers, cargo space maintenance, etc.--that they
do over the airfields. At minimum, therefore, the distinction
drawn by the Secretary between the charges for the two
types of assets is arbitrary and capricious.
If ATA is correct that the Secretary's regulation imposes
no real restraint on airport charges for non-airfield assets and
that airports exercise the same, or virtually the same, market
power over those assets, then it seems to us that the Secre-
tary's tight regulation of airfield fees--tying them to assets
valued at historic cost and capping them at actual cost--is
something of an illusion. Most aeronautical users, it would
seem, need both landing fields and non-airfield services. The
entire package usually is sold to aeronautical users in one
overall fee. Under the "one lump" theory of antitrust law--
the proposition that there is only one monopoly rent to be
gained from the sale of an end product, see Western Re-
sources, Inc. v. STB, 109 F.3d 782, 784 (D.C. Cir. 1997) (citing
3 Phillip Areeda & Donald F. Turner, Antitrust Law
s 725b, at 199 (1978))--any market power that an airport
wants to exercise over airfield fees theoretically may be
exercised by increasing the non-airfield portion of the fee.
The Secretary takes no position on the question whether
airports have market power over non-airfield facilities, but it
is his belief that even if an individual airport does have such
power, it will not use it. His explanation, set forth in the
basis for the Final Policy and in the briefs before us, is that
publicly owned airports do not seek to maximize profits
because they do not have the same economic incentives as
private investors. And airport authorities may not divert
revenues from airports to fund general government facilities,
so there is little reason to charge airlines excessive prices.
Moreover, even if an airport authority had a desire to build
the world's fanciest airport, see Indianapolis Airport Auth.,
733 F.2d at 1268, it would be somewhat constrained by
competition among airports, at least to be the location of
passenger and cargo hubs.
The Secretary thought past experience supported this posi-
tion: that negotiations for non-airfield fees had not generated
controversies, and non-airfield fees had typically produced
reasonable results by agreement between airlines and the
airports. But as ATA observes, past litigation had sometimes
involved total airport fees, combining both airfield and non-
airfield fees. See Northwest Airlines v. County of Kent, 738
F. Supp. 1112, 1115 (W.D. Mich. 1990), aff'd, 955 F.2d 1054 (6th Cir. 1992), aff'd, 510 U.S. 355 (1994); cf. Indianapolis
Airport Auth., 733 F.2d at 1265. Be that as it may, experi-
ence prior to the Secretary's regulation is not a particularly
reliable guide since airports may well have thought that the
statutory limitation (reasonableness) on all airport fees prior
to 1994 implied some sort of cost-based methodology. See,
e.g., New England Legal Found., 883 F.2d at 169; Indianap-
olis Airport Auth., 733 F.2d at 1271. For the first time, as
ATA points out, the Secretary's regulation, allowing any
reasonable methodology, gives airports much greater assur-
ance that they are free to charge more for non-airfield fees,
and there is little reason to expect they will not. Indeed, by
linking airfield fees to historic cost and capping airfield fees
at total cost but permitting any reasonable methodology and
imposing no cap for non-airfield fees, the regulation certainly
implies that non-airfield fees need not be cost-based. Nor is
the fact that airlines typically have reached agreement with
airports as to these fees of any special significance. Airlines
have incentives to enter into agreements with airports, even if
they are monopolists. And an individual airline may not have
a large incentive to challenge the reasonableness of a monop-
oly rent, since its competitors at an airport would also be
paying the same monopoly rent (by virtue of the prohibition
against discriminating among aeronautical users), and any
benefit of the litigation would be dispersed among the air-
lines.5
__________
5 Individual airlines may still not have a strong incentive to
challenge monopoly rates under the Final Policy, but the Secretary
has (perhaps not unreasonably) interpreted s 113 to permit only
airlines, and not trade associations such as ATA, to challenge the
reasonableness of aeronautical fees.
To be sure, the Final Policy allows airlines to challenge the
reasonableness of an airport's methodology, so presumably an
airline can challenge a non-airfield fee it believes is excessive.
But the regulation provides that the Secretary will "not [ ]
consider complaints about the reasonableness of fees set by
agreement if filed by parties to the agreement," nor does he
"expect to investigate routinely fees set by agreement." 6
Airlines are presumably free not to enter into agreements
with airports, thereby remaining able to challenge particular
non-airfield fees, but we are told that there are certain
business reasons that induce airlines to have fee agreements
in place. At oral argument, counsel for the Secretary seemed
to indicate that airlines would be permitted to enter into
agreements under protest and then file complaints under
s 113. But that explanation seems inconsistent with the
regulation's language, which states that "[t]he threat of a
complaint could discourage airport proprietors from putting
forward their best offers in negotiations." It is thus not at all
clear whether the Final Policy provides airlines with an
adequate remedy to challenge non-airfield fees.
Aside from these procedural ambiguities, the Final Policy
provides no real guidance as to how the Secretary will
determine reasonableness. As we have noted, s 113 may
actually require the Secretary to set forth a full quasi-
legislative standard rather than developing those standards
through a case-by-case approach. Even if the Secretary
has more flexible authority under the statute, his regulation
surely is inadequate under the APA. The Final Policy indi-
cates that the Secretary will consider "extraordinary situa-
tion[s]" (whatever that may mean) in the expedited pro-
ceedings under s 113; that the Secretary will consider the
reasonableness of non-airfield fees "over the long term and
not on the basis of a single year's results"; and that the
Secretary will investigate only where there is "a case of
__________
6 Section 113 actually provides that it is inapplicable to fees set
by agreement, 49 U.S.C. s 47129(e), but the Secretary "do[es] not
interpret [s 113] to preclude an investigation of fees set by agree-
ment or the application of the policy in such an investigation," 61
Fed. Reg. 31,994, 31,998 (1996), and no one challenges this interpre-
tation.
progressive accumulation of surplus aeronautical revenue."
That the Secretary believes that only a long-term accumula-
tion of surplus aeronautical revenue is evidence of unrea-
sonable non-airfield fees implies that the only legal limit to
airport charges is the ability to spend revenues fast enough
on airport improvements, including those for non-
aeronautical concessions. That approach could lead to com-
petition to build the Taj Mahal of airports. See Indianapo-
lis Airport Auth., 733 F.2d at 1268.
It may well be that, as the Secretary suggests, airports
would face some restraint on the exercise of any market
power that they might have. But we do not think the
Secretary has adequately explained how those generally un-
specified restraints will ensure, in the absence of meaningful
guidelines, that non-airfield fees are reasonable. Even as-
suming, however, that the Secretary on remand can with
greater precision identify these restraints and justify notions
of reasonableness of some or all aeronautical fees using
concepts less restrictive than historic cost, there remains the
most serious logical problem with his regulation--which we
simply cannot accept. His explanation for the distinction
drawn between airfield and non-airfield fees is internally
inconsistent. Cf. Motor Vehicle Mfrs. Ass'n of United States
v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 48 (1983).
The obvious difficulty, for instance, with the Secretary's
reliance on his perception that public airports are not profit
maximizers is that the proposition, if correct, would apply
equally to airfield charges, so it hardly can be relied upon to
support a different approach to non-airfield fees. Even the
specific alleged restraint on the airports' use of market power
to charge excessive non-airfield fees--that airports compete
to be hub locations--would, if significant, also restrain airfield
charges. Surely airlines, when determining where to locate
hub facilities, are not indifferent to airfield charges, since
they channel their flights in and out of those hub facilities.
We are obliged therefore to vacate the rule and remand to
the Secretary.
IV.
Los Angeles makes in part the same point: that the
Secretary's disparate treatment of airfield and non-airfield
charges is arbitrary and capricious, albeit from the perspec-
tive of applauding the Secretary's approach to non-airfield
charges. The record does not reveal why Los Angeles is the
sole airport owner to challenge the regulation. We know only
that it is one of the few (if not the only) municipalities that
stopped taking federal grant money--which, as noted, carries
with it an obligation to continue using airport facilities as an
airport--in the early 1990s.
In any event, Los Angeles' primary attack is directed at the
Secretary's requirement of valuing assets at historic cost in
calculating airfield charges. The Secretary was careful not to
make the same mistake that caused us to reject his prior
determination that Los Angeles was obliged to use historic
cost as the basis for airfield fees. See LAX I, 103 F.2d at
1032. Los Angeles then, as now, argued that it should be
entitled to use the fair market value of the land--which in
downtown Los Angeles is quite dear--as the basis for those
charges because it accurately reflects the opportunity cost of
devoting LAX to airport use. In the prior proceeding, the
Secretary had simply assumed, erroneously we held, that the
Anti-Head Tax Act and s 113 require historic cost valuation.
This time he did not. He did observe that since airports are
obliged to use their property as an airport, the concept of
opportunity cost, and therefore fair market value, does not
quite fit. (That logic, however, may not apply to Los Ange-
les.)
The Secretary explained why he thought historic cost was
generally preferable to other valuation bases such as fair
market value: it is simply easier to administer and less likely
to generate controversies. We observed in LAX I, however,
that valuing land (the principal airfield asset) does not pres-
ent the same difficulties as valuing, for example, utility plants
and equipment, for "there is no need to reconstruct a hypo-
thetical asset in order to account for technological changes,
and there is often (indeed, perhaps usually) a ready market in
parcels sufficiently comparable for a professional appraiser to
extrapolate with some confidence." 103 F.3d at 1033; cf.
Duquesne Light Co. v. Barasch, 488 U.S. 299, 308-09 (1989).
Nor has the Secretary actually given any reason to think
controversies will be less likely to occur using historic cost.
In LAX I, the airlines did not contest the accuracy of the
appraisal obtained by Los Angeles for the land at LAX, 103
F.3d at 1033; in a later proceeding the airlines' appraisal of
the land at LAX was actually higher than the airport's; nor is
there a guarantee that historic cost will cause few or no
disputes. And, so far as we can tell, airports need only
appraise the market value of the land once in order to bring it
into the rate base. See id. Although permitting a methodol-
ogy other than historic cost valuation might, in the Secre-
tary's words, "turn landing fee disputes into debates between
real estate appraisal experts with [the Secretary] in the role
of referee," it is not apparent why this justifies requiring
historic cost: the Secretary can adopt any number of fairly
simple procedures, such as the "final offer" device used in
baseball arbitration, see Southern Pac. Trans. Co. v. ICC, 69
F.3d 583, 585 (D.C. Cir. 1995), for administering such dis-
putes.7
Even if ease of determination were an appropriate ground
for requiring historic cost valuation of assets in determining
airfield fees, however, the Secretary's use of it here under-
mines his treatment of non-airfield fees. By permitting non-
airfield fees to be set according to any reasonable methodolo-
gy, the Final Policy leaves airports free to choose any valua-
tion method, including fair market value; the regulation thus
permits airports, in the context of non-airfield fees, to use
methodologies that the Secretary has determined are too
difficult to use in the context of airfield fees. As Los Angeles
puts it, the Secretary simply has not explained why fair
market valuation may be appropriate for other portions of the
airport, but too difficult to use in valuing airfield assets.
__________
7 By apparently choosing to submit fees to something approach-
ing de novo review, the Secretary seems to have burdened himself
with administrative difficulties.
V.
There remains the Secretary's treatment of "imputed inter-
est" which, if anything, is even more puzzling to us than the
rest of his rule. The Secretary's Final Policy permits an
airport to include in its airfield fees a charge for imputed
interest on funds the airport reinvests in its airfield (unless,
of course, debt service costs are already included as explicit
interest). But airports are only permitted to include such
imputed interest in airfield fees insofar as the reinvested
funds stem from non-airfield fees, not from airfield fees. The
Secretary's rule permits the former, but not the latter, be-
cause he reasoned that to charge this cost of capital to the
airlines for funds derived from airfield fees would be double
charging: the airlines would get stuck with both the excess
revenue and the imputed interest on that excess.
ATA objects to paying any imputed interest as part of
airfield fees no matter the source of the funds, claiming in
effect that, if it is double charging to charge imputed interest
on the funds derived from airfield fees, it is equally double
charging to include imputed interest on funds stemming from
non-airfield fees. We agree, in a sense, because we do not
understand what the Secretary means by double charging.
Airports receive revenues from essentially three sources:
airfield fees, non-airfield fees, and concession leases. Al-
though airports cannot invest outside the airport, they can
reinvest, and indeed may be obliged to reinvest, in all three
airport activities--certainly at least the first two. And they
have discretion as to the object of their investment, which
makes the revenue airports receive from the three sources
fungible. Therefore, as the Secretary suggested, there is an
opportunity cost in reinvesting in one activity rather than the
other two: the forgone revenue that would be received had
the airport invested those funds in the other two. There may
be a case to be made, similar to the Secretary's argument
regarding most airports' lack of opportunity costs generally,
that because airports do not have wide discretion as to where
they put surplus funds (they cannot invest off airport), their
cost of capital (opportunity cost) is less than would be true of
another business, but we frankly do not understand the
distinction the Secretary makes between funds that stem
from airfield fees and those that come from non-airfield fees.
* * * *
The Secretary seems to have come up with a rule that
represents an overall rough compromise between the inter-
ests of most airports and carriers. Unfortunately it is much
too rough to withstand judicial review under the APA. Ac-
cordingly, we vacate the challenged provisions of the Final
Policy, paragraphs 2.4, 2.4.1, 2.4.1(a), 2.5.1, 2.5.1(a), 2.5.1(b),
2.5.1(c), 2.5.1(d), 2.5.1(e), 2.5.3, 2.5.3(a), 2.6, the Secretary's
supporting discussion in the preamble, and any other portions
of the rule necessarily implicated by the holding of our
opinion, and remand this proceeding to the Secretary. Our
action in this case does not reinstate any part of the Secre-
tary's Interim Policy that the Final Policy was intended to
replace.