Section 16 of the Bus Regulatory Reform Act of 1982 (the "Bus Act" or "BRRA"), Pub.L. No. 97-261, 96 Stat. 1102, 1117 (codified at 49 U.S.C. Sec. 10935), authorizes the Interstate Commerce Commission ("ICC" or "Commission") to let carriers discontinue unprofitable intrastate passenger service when specific "exit" conditions are met. In this proceeding, the Pennsylvania Public Utilities Commission ("PaPUC") challenges an ICC order authorizing Greyhound Lines, Inc. ("Greyhound") to terminate intrastate operations over twelve routes in Pennsylvania. PaPUC denied the discontinuance application in a prior state proceeding. We now affirm the Commission's decision concerning eleven of the twelve routes in question. With respect to the remaining route, we conclude that the ICC erroneously interpreted the Bus Act and failed to base its ultimate findings on a reasoned consideration of the policies underlying the statute. We therefore remand that portion of the ICC's order for further proceedings consistent with this opinion.

This case concerns the continued availability of intrastate bus service to small communities. Specifically, we must determine whether the ICC correctly interpreted and applied the statutory standard governing the conditions under which large bus carriers may discontinue marginally unprofitable routes that provide the only available bus service to small communities. We survey the relevant sections of the BRRA and its legislative history before turning to the facts of this proceeding.

Under the pre-BRRA Interstate Commerce Act, Pub.L. No. 95-473, 92 Stat. 1337 (1978), a bus carrier that wished to terminate a route serving both interstate and intrastate passengers was required to seek discontinuance authority from both the ICC and the relevant state regulatory body. The state and federal proceedings were completely distinct and were governed by different statutes. See H.R.Rep. No. 334, 97th Cong., 1st Sess. 42 (1981) [hereinafter cited as House Report]. Section 16 of the Bus Act was designed to eliminate this dual system of regulation. Under the BRRA, a carrier must still apply to the appropriate state authority for permission to discontinue intrastate service. See 49 U.S.C. Sec. 10935(a). If the state regulatory authority denies a carrier's discontinuance request, or if the state does not act on the request within 120 days, the carrier can petition the ICC for discontinuance authority. See id. If no one objects to the petition before the ICC, the Commission must grant the discontinuance request. If any person objects to the proposed route termination, however, the Commission must consider the petition under the standard elaborated in section 16. See 49 U.S.C. Sec. 10935(e)(1).1

The substance of this discontinuance standard engendered substantial dispute in Congress. Congress undoubtedly enacted section 16 in order to reduce unnecessary government regulation of intrastate service and to enhance the long-term viability of the intercity bus industry. See, e.g., S.Rep. No. 411, 97th Cong., 2d Sess. 4-5, 7-8 (1982) [hereinafter cited as Senate Report]; House Report at 21-23, U.S.Code Cong. & Admin.News 1982, p. 2308. Yet Congress expressly rejected both the ICC's and the bus industry's entreaties that it completely deregulate intrastate bus carriage and permit carriers to discontinue intrastate service at will. See, e.g., 128 Cong.Rec. H6694 (daily ed. Aug. 19, 1982) (statement of Rep. Clausen); 128 Cong.Rec. S7714 (daily ed. June 30, 1982) (statement of Sen. Abdnor); 127 Cong.Rec. H8588-89 (daily ed. Nov. 19, 1981) (statement of Rep. Anderson); id. at H8589 (statement of Rep. Clausen); cf. Trailways, Inc. v. ICC, 727 F.2d 1284, 1288 (D.C.Cir.1984). Instead, Congress took great pains to ensure that regulatory reform of the bus industry would protect the public interest in continued service to rural America. See H.R.Rep. No. 780, 97th Cong., 2d Sess. 47-50 (1982) [hereinafter cited as Conference Report]; Senate Report at 6-7; House Report at 27.2

These competing concerns spawned an initial, complex House version of section 16, a series of Senate amendments to that version, and a detailed compromise worked out in conference.3 As enacted, section 16 provides, in relevant part, that the Commission "shall grant" a discontinuance request

unless the Commission finds, on the basis of evidence presented by the person objecting to the granting of such permission, that such discontinuance or reduction is not consistent with the public interest or that continuing the transportation, without the proposed discontinuance or reduction, will not constitute an unreasonable burden on interstate commerce.

49 U.S.C. Sec. 10935(e)(1)(A).4 An objector can succeed under this section, and thereby block route termination, if she can demonstrate either that discontinuing the service would be inconsistent with the public interest or that continuing the service would not constitute an unreasonable burden on interstate commerce.5 This disjunctive interpretation of section 16 reflects Congress' unmistakable intent that the ICC evaluate a discontinuance request under two separate criteria and that an affirmative finding under either one require continued service. See Conference Report at 47-50; 128 Cong.Rec. H6694 (daily ed. Aug. 19, 1982) (noting that section 16 creates "an either-or test, with an affirmative finding in either case serving as grounds to deny the ... discontinuance") (statement of Rep. Clausen).6

Two additional provisions of the statute flesh out subsection 16(e)(1)'s alternative discontinuance standards. See 49 U.S.C. Sec. 10935(g). First, under subsection 16(g)(1), id. Sec. 10935(g)(1), the Commission is directed to give "great weight to the extent to which" variable costs exceed intrastate and interstate revenues for the routes in question "in making a finding under subsection (e)(1)." The carrier bears the burden of proving that variable costs exceed revenues for any particular route. See id. Second, section 16(g)(2), id. Sec. 10935(g)(2), provides that the Commission, "in making a finding under subsection (e)(1)," shall consider, to the extent applicable, the national transportation policy of 49 U.S.C. Sec. 10101,7 the carrier's actual or promised receipt of a subsidy, whether the route at issue is the last bus service to any point, and the availability of a reasonable alternative to such service.8B. The Proceedings in This Case

On December 17, 1982, Greyhound filed an application with PaPUC to discontinue motorbus service on twelve routes and route segments in Pennsylvania. Notice of the proposed discontinuance was given to the relevant cities and towns,9 and a PaPUC administrative law judge ("ALJ") held hearings on the application in Harrisburg, on April 15, 1983, and in Scranton, on April 21, 1983. See Petition of Greyhound, Inc., for a Review of a Decision of the Pennsylvania Public Utility Commission Pursuant to 49 U.S.C. 10935, No. MC-1515 (Sub-No. 339), slip op. at 2 (Oct. 25, 1983) [hereinafter cited as ICC Decision]. On May 2, 1983, the ALJ entered an opinion denying Greyhound's application under Pennsylvania law. See id.10 Shortly thereafter, PaPUC accepted the ALJ's opinion and denied Greyhound's discontinuance application. See id. Greyhound thereupon petitioned the ICC under section 16 of the Bus Act for authority to discontinue service over the twelve routes.

After receiving objections from PaPUC and evidence from both parties, the ICC granted Greyhound's termination request in full on July 19, 1983. The Commission found that, with one exception, Greyhound had demonstrated that its variable costs exceeded revenues by a wide margin. See ICC Decision at 8-9. According this factor "great weight" as provided in section 16(g)(1), the Commission concluded that PaPUC could not demonstrate that the discontinuance of Routes 1-A through 5-A was inconsistent with the public interest as defined by the BRRA or that continuance would not constitute an unreasonable burden on interstate commerce. See id. at 10, 12-13. With respect to the remaining route, Route 5-B, the ICC concluded that Greyhound did not meet its statutory burden of demonstrating that variable costs exceeded revenues. The Commission nonetheless "inferred" a burden on interstate commerce from the very fact of Greyhound's petition, see id. at 11, and balanced this burden against the public interest in continued service. See id. at 11-12. The ICC then concluded that this "balance" favored discontinuance chiefly because, in its view, "a smaller carrier which may have lower operating costs may be able to provide service over this route profitably." Id. at 12.

On appeal, PaPUC broadly challenges the Commission's conclusions concerning the public interest in continued service and its evaluation of Greyhound's variable cost and revenue data for all of the routes at issue. Where Congress has delegated to an agency the task of making specific findings, our review is governed by the well-settled standards of the Administrative Procedure Act. The ICC's evidentiary conclusions can only be set aside if they are arbitrary or capricious, see 5 U.S.C. Sec. 706(2)(A), or if they are unsupported by the record, see id. Sec. 706(2)(E). See Bowman Transportation, Inc. v. Arkansas-Best Freight System, Inc., 419 U.S. 281, 284-86, 95 S. Ct. 438, 441-42, 42 L. Ed. 2d 447 (1974). PaPUC also argues, however, that the ICC's interpretation and application of the section 16 standard to Route 5-B is inconsistent with the clear congressional intent behind the Bus Act. In this context, a reviewing court must first determine whether Congress expressed a clear intent, and, if so, must ensure that the agency has followed that intent. See Chevron, U.S.A. v. Natural Resources Defense Council, --- U.S. ----, 104 S. Ct. 2778, 2787, 81 L. Ed. 2d 694 (1983).11

We affirm the Commission's findings and its grant of discontinuance authority for Routes 1-A through 5-A. We conclude, however, that the ICC's application of the section 16 standard to Route 5-B, where the carrier could not demonstrate that variable costs exceed revenues, is inconsistent with the clear congressional intent behind the Bus Act. Furthermore, we conclude that the Commission failed to articulate a rational basis for its evidentiary findings concerning Route 5-B. We therefore remand the Commission's decision permitting Greyhound to discontinue service on Route 5-B for further ICC proceedings consistent with this opinion.

II. THE ICC'S INTERPRETATION AND APPLICATION OF THE BUS ACT

The Commission's decision to grant Greyhound's discontinuance request can be divided into two parts. In reviewing the application to terminate service on Routes 1-A through 5-A, the ICC essentially concluded that discontinuance was justified by the significant disparities between variable costs and revenues and by the existence of alternative service. See ICC Decision at 5-8, 10, 12-13. As the Commission itself noted, however, "Route 5-B presented more difficult issues," id. at 10, including a crucial issue of statutory interpretation.

We believe that the Commission applied the correct statutory standard to these routes by explicitly declining to find either that continued service would not constitute an unreasonable burden on interstate commerce or that discontinuance would be inconsistent with the public interest as defined by the Bus Act. First, the Commission found that Greyhound had adequately demonstrated that its variable costs for these routes exceeded its revenues, in some cases significantly. See ICC Decision at 6-9. Accordingly, the Commission gave "great weight," see 49 U.S.C. Sec. 10935(g)(1), to this factor in its assessment of whether PaPUC could make either of the two showings sufficient under section 16 to require continued service. See ICC Decision at 6. We agree with the Commission that the But Act creates a virtual presumption in favor of discontinuance when a carrier demonstrates that variable costs substantially exceed revenues. See Conference Report at 49-50; 128 Cong.Rec. H6694-95 (daily ed. Aug. 19, 1982) (statement of Rep. Clausen). The ICC can therefore consider this statutory factor in making both of the findings required by section 16. See Auville v. ICC, 747 F.2d 179 at 184-85 (4th Cir.1984).

The ICC also explicitly considered the additional statutory factors--the national transportation policy, the promised or actual receipt of subsidies and the availability of alternative transportation--with respect to each of these routes. See 49 U.S.C. Sec. 10935(g)(2). After noting that Greyhound had not received a firm offer of subsidy, it specifically found that discontinuance would not be inconsistent with the public interest in view of the low ridership, the insubstantial public opposition, or the actual availability of alternative service for the affected communities.12 The Commission thus concluded that PaPUC could not satisfy either of the two section 16 criteria for Routes 1-A through 5-A.

PaPUC raises a series of objections directed at the ICC's consideration and evaluation of Greyhound's financial evidence and PaPUC's public interest evidence concerning these routes. The Commission's findings on these matters ordinarily must be accepted by a reviewing court unless arbitrary or capricious or unless unsupported by substantial evidence. See, e.g., Ralston Purina Co. v. Louisville & Nashville RR, 426 U.S. 476, 477-78, 96 S. Ct. 2160, 2161, 48 L. Ed. 2d 781 (1976); Trailways, Inc. v. ICC, 673 F.2d 514, 517 (D.C.Cir.), cert. denied, 459 U.S. 862, 103 S. Ct. 137, 74 L. Ed. 2d 117 (1982). Given this deferential standard of review, we believe that only two of PaPUC's objections concerning these routes require comment. First, PaPUC suggests that the ICC erred in determining that Greyhound had met its burden of proof on the variable cost/revenue factor because Greyhound's data was systemically inaccurate. In particular, PaPUC challenges (1) Greyhound's methodological assumption that off-route revenues should not be included in calculating on-route revenues, (2) its use of a one week traffic study in February to project yearly revenues and (3) its inclusion of certain items as variable costs. The petitioner further suggests that the Commission's acceptance of Greyhound's revenue projections for Routes 1-A through 5-A was arbitrary in light of its refusal to accept the same type of revenue projection for Route 5-B.

The Commission, however, did not accept the challenged data uncritically or without an appreciation of the carrier's underlying methodology. It noted that Greyhound had exhaustively explained its methodology and that the ICC had considered in detail and approved this methodology in prior discontinuance petitions. See ICC Decision at 6-8. In response to PaPUC's objections, moreover, the ICC determined that variable costs so far exceeded revenues for these routes as to render any systemic or statistical inaccuracy harmless error, see id. at 7-8, and that Greyhound's variable cost analysis was on the whole reasonable and consistent with ICC practice. See id. at 9. Finally, the Commission based its rejection of Greyhound's Route 5-B data on the unusual characteristics of that route and on the relatively small difference between revenues and variable costs according to Greyhound's evidence. See id. at 8. We cannot conclude that the Commission's variable cost and revenue findings were arbitrary or unsupported by the evidence. See Auville, 747 F.2d at 183-84 (concluding that substantial evidence supports the ICC's variable cost and revenue conclusions in the face of similar methodological challenges).

Subsection, PaPUC contends that the ICC arbitrarily failed to evaluate evidence of a possible state subsidy. In support of this claim, PaPUC cites a letter from the Pennsylvania Department of Transportation informing Greyhound of the state's subsidy program and notifying the carrier that it should apply promptly for fiscal year 1983-84 operating assistance. See Letter to Warren May from William Parkin (May 12, 1983), J.A. at 254a.

Section 16(g)(2)(B) of the Bus Act, 49 U.S.C. Sec. 10935(g)(2)(B), requires the ICC to consider whether a bus carrier "has received an offer of or is receiving financial assistance." The Commission's implementing regulation further provides that

Any financially responsible person who intends to offer an operating subsidy or financial assistance to the carrier to enable it to continue providing the service which is proposed to be discontinued or reduced must notify the Commission and the carrier within 50 days after the petition is filed. This notification must indicate the amount of the subsidy or assistance being offered and demonstrate the financial responsibility of the person making the offer.

49 C.F.R. Sec. 1169.25 (1984). PaPUC concedes that the state's invitation to Greyhound to solicit a subsidy does not fall within this regulation. See Brief for Petitioners at 37. Neither the Bus Act nor its legislative history, in turn, explicitly defines "offer of ... financial assistance." In this context, we must accept the agency's interpretation if it "is based on a permissible construction of the statute," Chevron, 104 S. Ct. at 2782. PaPUC has not pointed to any reason why the regulation is impermissible in light of the BRRA's underlying policies. We therefore find that the ICC did not act unreasonably by refusing to credit the state's invitation to solicit a subsidy in considering Greyhound's discontinuance application.13

In sum, we conclude that, with respect to Routes 1-A through 5-A, the Commission applied the correct statutory standard, based its findings on the proper factors and substantial evidence, and reasonably weighed the evidence to conclude that discontinuance was warranted.

The ICC's consideration of Route 5-B, by contrast, raises substantial issues of statutory interpretation and rational decisionmaking. The Commission first concluded that Greyhound did not adequately demonstrate that its variable costs exceed revenues for this route. See ICC Decision at 11. The Commission opined that Greyhound's failure to prove a disparity between variable costs and revenues simply meant that the ICC need not give great weight to this factor. See id. Yet the ICC went on to infer "some burden" on interstate commerce from the very existence of Greyhound's petition, reasoning that the carrier's exit request indicates "that the resources committed to this route could be used more efficiently elsewhere." Id. (emphasis in original). The ICC did not rule that this "inferred" burden was alone sufficient to prevent it from finding that continued service would not constitute the unreasonable burden on interstate commerce at issue in section 16 proceedings.

Turning to the second or "public interest" standard the ICC similarly noted that "there is little evidence of a public interest in maintaining service," id., despite the fact that the discontinuance would leave several communities without public transportation. It did not, however, explicitly find that discontinuance would or would not be consistent with the public interest as defined by section 16. Instead, the Commission proceeded to conflate the two separate inquiries mandated under section 16 by "weigh[ing] this burden [on interstate commerce] against the public interest in maintained service in order to determine whether the burden is undue." ICC Decision at 11. In the Commission's words, "[w]e must exercise our discretion in balancing the apparently limited public interest in maintaining service against the burden on interstate commerce." Id.; see also id. at 9. The ICC eventually determined that the crucial factor in this "balancing test" was the possibility that a hypothetical low-cost carrier could serve the communities faced with a loss of transportation. Id. at 12.

The ICC's consideration of Route 5-B is flawed in two respects. First, the Commission's balancing test is inconsistent with Congress' clear intent that the ICC consider two quite separate issues before granting a carrier's discontinuance request. Second, the Commission's subsidiary findings concerning the burden on interstate commerce and the availability of alternative service do not reflect a reasonable accommodation of the policies underlying the Bus Act.14

1. The ICC's interpretation of section 16 in considering Route 5-B. Each party in this case urges a different interpretation of section 16 in the context of Route 5-B. PaPUC argues that Congress intended the "great weight" directive of subsection 16(g)(1) to be the primary guide only in determining whether continued operations would unreasonably burden interstate commerce. Under this reading, only the factors elaborated in subsection 16(g)(2) would be considered in making the distinct, alternative public interest determination. Both the ICC and intervenor Greyhound suggest that the Commission is free to consider all of the criteria set out in subsections 16(g)(1) and 16(g)(2) in making both the burden on commerce and the public interest determination. The ICC, of course, adds the further argument that the statute permits the Commission to weigh the public interest in continued service against the resulting burden on interstate commerce.15

The statutory language supports part of the ICC's interpretation. Subsections 16(g)(1) and 16(g)(2) both refer to an ICC "finding under subsection (e)(1)" which arguably embraces both the public interest and the burden on commerce findings. Cf. Auville, 747 F.2d at 184-85 (holding that the Commission can give "great weight" to the disparity between variable costs and revenues in making both findings). Representative Clausen's description of the conference bill also lends support to this interpretation:

The conference substitute also provides that, in making its public interest and burden-on-commerce determinations with respect to reduction or continuance of existing service, the Commission shall give great weight to the extent to which the revenues derived from the service in question are less than the variable costs of providing the service.

128 Cong.Rec. H6695 (daily ed. Aug. 19, 1982).

Although we agree that the "great weight" factor can apply to both findings required by section 16, see supra p. 847, this interpretation does not authorize the ICC to weigh the public interest in maintained service against the burden on interstate commerce. In our view, the legislative history of the Bus Act and resulting structure of section 16 unmistakably indicate that Congress intended the ICC to make distinct public interest and financial burden findings before granting a carrier's discontinuance application. Congress enacted this requirement, moreover, precisely because it believed that delegating unstructured deregulatory discretion to the ICC would not sufficiently protect the interests of small communities such as those served by Route 5-B.

The original House version of section 16 did not include any reference to the disparity between variable costs and revenues; instead it directed the Commission to make a public interest and a burden on commerce determination by reference to the factors listed in the current subsection 16(g)(2). See House Report at 10-11, 43; Conference Report at 47-48. By omitting any reference to variable costs, the House bill thus accorded somewhat more protection to small communities than the statute eventually passed. The Senate amended this version to require, in effect, that the ICC authorize discontinuance unless it would be inconsistent with the public interest and the route's revenues were adequate to cover variable costs. See Senate Report at 26-27, 62-63; Conference Report at 49-50.16 As Representative Clausen explained:In the simplest shorthand terms, the Senate test said that if you are a carrier and you are losing money--any money on a route--you are out. The House test said that either the public interest or the absence of an unreasonable burden on interstate commerce--which I translate as excessive losses--could keep you in.

128 Cong.Rec. H6696 (daily ed. Aug. 19, 1982).17

In conference, Congress struck a compromise between these positions by (1) requiring two, disjunctive findings by the ICC (a public interest finding largely directed at the effect of discontinuance on small communities, and a burden-on-commerce finding largely directed at profitability), and (2) directing the Commission to give great weight to the variable cost factor in making these findings. See Conference Report at 50. Congress expressly declined to issue a blank deregulation check to the Commission; instead, it required consideration of two distinct statutory standards in order to make it more difficult for carriers to abandon small communities, especially if a carrier could cover or nearly cover its variable costs. See, e.g., 128 Cong.Rec. H6694-95 (daily ed. Aug. 19, 1982) (statement of Rep. Clausen) (noting that the final version of section 16 retains the House test's protection of small communities); id. (statement of Rep. Shuster); 127 Cong.Rec. H8588-89 (daily ed. Nov. 19, 1981) (statement of Rep. Anderson); id. (statement of Rep. Clausen); cf. Trailways, 727 F.2d at 1288. The resulting provision undeniably constrains the ICC's discretion to balance "all relevant considerations" by enumerating precise statutory factors to be considered in a discontinuance request.

"Balancing" the public interest and financial burden standards against one another disregards this carefully devised regulatory scheme.18 Indeed, the Commission's interpretation of section 16 in the Route 5-B context tends to establish the unstructured deregulatory discretion that Congress rejected as inconsistent with the needs of small communities. As it did in considering Route 5-B, for example, the Commission can acknowledge "some" public interest in continued service and "some" financial burden, but never rule on whether an objector has demonstrated either that discontinuance would be inconsistent with the public interest or that continued service would be an unreasonable burden on interstate commerce. By balancing both, the Commission succeeds in explicitly deciding neither. Congress' repeatedly expressed concern about the effects of ICC decisionmaking in this area demands a more accountable set of findings. As the court commented in Trailways, the Commission's "end-run around the regulatory scheme would permit the carrier to contravene a primary concern of the congressional sponsors of [the Bus Act]--continuance of service to small communities." Trailways, 727 F.2d at 1292 (citing legislative history).

Accordingly, we hold that, in proceedings under section 16 of the Bus Act, the ICC is required to determine explicitly whether an objector has established that the proposed discontinuance is inconsistent with the public interest and whether he has established that continued service would constitute an unreasonable burden on interstate commerce. If a carrier can demonstrate that its variable costs exceed revenues for the route(s) at issue, the Commission is free to accord this factor "great weight" in making either finding. The ICC is not, however, authorized to circumvent the statutory scheme and Congress' intent to protect small communities by balancing the two criteria against one another.

2. The ICC's "findings" with respect to Route 5-B. The pitfalls that Congress sought to avoid by requiring the Commission to undertake two specific inquiries are dramatically illustrated by the ICC's somewhat cavalier assessment of the relevant statutory considerations with respect to Route 5-B. As we noted above, the Commission did not specifically find that requiring Greyhound to continue service along Route 5-B would constitute an unreasonable burden on interstate commerce. See supra pp. 849-50. Instead, it merely inferred "some burden" from the very fact of Greyhound's petition.

[W]e may legitimately infer that requiring continued service would impose at least some burden on interstate commerce from the very fact that Greyhound desires to discontinue. This indicates that Greyhound finds that revenues on this route do not meet full economic costs (including opportunity costs), and that the resources committed to this route would be used more efficiently elsewhere. There is also a cross-subsidy when fixed costs are not covered.

ICC Decision at 11 (emphasis in original). In the course of its BRRA deliberations, Congress was certainly concerned about the effects of cross-subsidies on the long term health of the bus industry. See, e.g., Senate Report at 7-8. Nonetheless, Congress explicitly rejected the position that a carrier should be able to discontinue intrastate service upon request, see supra p. 844, and instead required the ICC to consider whether continuance would not constitute an unreasonable burden on interstate commerce. Whatever inferences the Commission might draw from the bare existence of an exit petition, a simple carrier request cannot suffice to support this required finding where, as here, an objector has submitted evidence that the carrier can cover its variable costs.

Similarly, the Commission did not explicitly reject the contention that discontinuing Route 5-B would be inconsistent with the public interest as defined by the Bus Act. PaPUC submitted largely undisputed evidence that terminating this service would leave all but one of the points served by Route 5-B without bus service. See Objections of PaPUC to Greyhound's Petition for Permission to Discontinue Bus Service in Pennsylvania 13-16, 35 (Aug. 16, 1983), J.A. at 169a-171a, 191a, 257a-271a; see also ICC Decision at 9, 11-12 (noting that some communities will lose the last available bus service). Congress, in turn, unmistakably intended that the loss of the last available bus service weigh substantially against discontinuance. See, e.g., 127 Cong.Rec. H8591 (daily ed. Nov. 19, 1981) (statement of Rep. Rahall). The Commission nonetheless "found" that this statutory factor was overriden by the purely hypothetical availability of an alternative carrier.

Given the evidence that Greyhound has been able to come at least fairly close to covering its opportunity costs, and given the fact that Greyhound is a relatively high cost carrier, we believe it is likely that a smaller carrier which may have lower operating costs may be able to provide service over this route profitably. If this should result, it will permit the various goals of the National Transportation Policy to be met simultaneously. Service would be maintained, the burden on interstate commerce would be ended, a variety of service would be provided which would be appropriate to the demands and requirements of this particular market, and equipment energy resources would be used more productively and efficiently.

ICC Decision at 12.

We note that this finding was not merely part of the basis for the Commission's decision, but was the ultimate ground for rejecting PaPUC's contention that discontinuance of Route 5-B would be inconsistent with the public interest.19 We further note that the Commission did not determine that servicing of the route by another carrier would occur, or even would be likely to occur. The ICC merely deemed it "likely" that a small carrier "may have lower operating costs" and "may be able" to serve this route profitably. Surely the public interest finding required under section 16 cannot be met by the ICC's speculative "belief" that a low cost carrier might someday provide alternative bus service to the affected communities. Section 16 directs the Commission to consider the availability of "a reasonable alternative to [discontinued] service," 49 U.S.C. Sec. 10935(g)(2)(C) (emphasis added), not a hypothetical alternative. See, e.g., 127 Cong.Rec. H8591 (daily ed. Nov. 19, 1981) (statement of Rep. Rahall). Even if the Commission had said that a low-cost carrier will be able to provide service over this route profitably, this, without more, could not constitute the finding that alternate service was available, or was at least likely to become available, which would suffice to conclude the public interest inquiry. And since such a finding has not been made here, we need not consider the adequacy of evidentiary support for it.

We do, however, harbor substantial doubt that the probability of alternative service can be deduced from the single datum that a high-cost carrier approaches profitability without any studies or evidence showing that low-cost carriers in fact provide service over equivalent routes discontinued by high-cost carriers. In this case, for instance, the ICC predicated its alternative carrier scenario on a finding that Greyhound was "almost" able to cover its variable costs on Route 5-B. Perhaps a lower cost carrier, the Commission reasoned, could swing a profit on the route. Under this reasoning, a high cost carrier will always be able to secure a discontinuance. If it can show substantial losses, the Commission will presumably grant the request, giving "great weight" to the variable cost/revenue disparity. If it suffers minimal or no losses on the particular route, the Commission can argue as it did here that a carrier's discontinuance petition itself indicates a burden on interstate commerce and that the public interest will be served by discontinuance because some other carrier might be able to service the route more efficiently. Congress could not have intended that small communities be deprived of public transportation through such a shell game.

Notwithstanding its concern with the economic soundness of the bus industry, Congress went to great length to ensure that the public interest in bus service to small communities would not be sacrificed to a carrier's bare assertion that it could make higher profits elsewhere. Indeed, almost all of the congressional debates over section 16 concerned the extent of protections given to small communities. See supra note 2. As Representative Anderson explained:

[T]he intent of this bill is to insure that the public interest test has an equal emphasis with economic considerations and the ICC interpreting otherwise would be a regulatory charade. The act does not create, and the Public Works and Transportation Committee would not condone, such a charade.

127 Cong.Rec. H8591 (daily ed. Nov. 19, 1981).20 In our view, the ICC's alternative carrier scenario constitutes just such a charade. In order to make the appropriate public interest finding, the ICC may not have to identify presently existing alternative transportation in all cases or establish to a certainty that alternative transportation will appear. The Commission surely cannot, however, satisfy section 16 by merely invoking the possibility that another carrier might arrive on the scene. Cf. Rettig v. PBGC, 744 F.2d 133, 154-55 (D.C.Cir.1984). Accordingly, we hold that the ICC's speculation that a low-cost carrier might be able to service Route 5-B efficiently cannot satisfy the required section 16 finding that discontinuance would not be inconsistent with the public interest.

In sum, we conclude that, in addition to the Commission's failure to apply the correct statutory standard to Route 5-B, its meager findings with respect to that route are arbitrary and do not constitute "a reasonable accommodation of conflicting policies ... committed to the agency's care by statute." Chevron, 104 S. Ct. at 2783 (quoting United States v. Shimer, 367 U.S. 374, 382, 81 S. Ct. 1554, 1560, 6 L. Ed. 2d 908 (1961) ).

For the foregoing reasons, we affirm the Commission's order authorizing Greyhound to discontinue service along Routes 1-A through 5-A. With respect to Route 5-B, however, we conclude that the ICC erroneously interpreted the Bus Act and that its findings were not the product of a reasoned decisionmaking process. We therefore remand that portion of the ICC's order for further consideration consistent with this opinion. On remand, the ICC must consider the two, distinct findings required under section 16 of the Bus Act--whether discontinuing the service will be inconsistent with the public interest and whether continuing the route will not unreasonably burden interstate commerce--before granting Greyhound's exit application. The ICC must adhere to the congressional intent behind the Bus Act and base these two findings on evidence in the record documenting the existence of the relevant statutory factors.

So ordered.