[Congressional Record Volume 154, Number 160 (Thursday, October 2, 2008)]
[Senate]
[Pages S10461-S10466]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                        GAO SLOT AUCTION RULING

  Mrs. MURRAY. Mr. President, as chairman of the Appropriations 
Subcommittee on Transportation, Housing and Urban Development, and 
Related

[[Page S10462]]

Agencies, I rise with my ranking member, Senator Bond, as well as the 
bipartisan leadership of the Senate Commerce Committee, to address an 
important issue pertaining to the Federal Aviation Administration, FAA. 
That issue is the agency's plans to engage in the practice of 
auctioning off landing and takeoff slots at slot-controlled airports.
  Controversial aviation issues do not always garner immediate 
agreement on the part of all committee and subcommittee leaders in the 
Senate. They often trigger disagreements fueled by regional interests 
or differing views on the appropriate role of the Department of 
Transportation, DOT, in regulating the market. But in this instance, it 
should be noted that all four Senators with authorizing and 
appropriating responsibilities for the FAA are in agreement that the 
FAA's plans are illegal. We do not come to that conclusion lightly. 
Just yesterday, the committee received an authoritative legal opinion 
from the General Counsel of the Government Accountability Office, GAO, 
that reached that same conclusion.
  GAO's legal opinion should not come as a surprise to the FAA. Indeed, 
the FAA, as recently as 2 years ago, was of the same view as GAO and 
stated in the Federal Register that it did not have the authority to 
proceed with such slot auctions. More recently, however, the General 
Counsel at the DOT concocted what, in my view, is a new far-fetched 
legal argument for the purpose of evading the clear limitations imposed 
by the authorizing statute and appropriations law. The GAO reviewed the 
Department's new interpretations of the law and found that they don't 
hold water. Indeed, the GAO concluded that, if the FAA were to proceed 
with these auctions, the agency would be engaging in a blatant 
violation of the Antideficiency Act. This legal opinion matters not 
simply because it corroborates our collective bipartisan interpretation 
of the authorizing and appropriations laws. It matters because the GAO 
is statutorily charged with making determinations regarding violations 
of Appropriations law including the Antideficiency Act.
  One would think that this opinion would bring an end to this debate. 
Since we now know, in advance, how the GAO would rule on this question, 
one would expect the DOT to abandon its interpretation and cancel its 
planned auctioning of slots. To do otherwise would signal the agency's 
intention to proceed with a process that will almost certainly be found 
to be illegal. Unfortunately, we are getting indications that this is 
precisely what the Department intends to do--proceed with these slot 
auctions whether they are legal or not. I find the Secretary's plans to 
be both startling and disappointing. In my view, agency heads should 
not be launching into actions that are likely to be found to be 
illegal. And equally important, political appointees should not be 
forcing nonpolitical officials in their departments to participate in 
such acts.
  So, Mr. President, I, along with my colleagues, am taking the time of 
the Senate to implore Secretary Peters to review the GAO's findings and 
abandon the Department's plans. To do otherwise will just subject the 
taxpayers to the costs both of litigating this matter while holding a 
losing hand. The taxpayers will also have to foot the bill for 
financing the operation of this slot auction process. This represents 
an expense potentially in the millions of dollars. Those funds would be 
much better spent addressing the long list of critical safety 
improvements that must be made by the FAA.
  Mr. BOND. It is a rare occurrence in the Senate to get this level of 
strong bipartisan cooperation, and I thank the chair and our colleagues 
on the Commerce Committee, Senators Inouye and Hutchison, for their 
support on this issue.
  As you mentioned, I, too, am concerned that the administration will 
ignore the impartial legal opinion articulated by the GAO on slot 
auctions and proceed with their ill-conceived plan.
  The flying public and taxpayers are not well served by carrying 
through on a plan that will only lead to increased delays and costly 
litigation. Our aviation system needs a comprehensive overhaul, 
operationally and technologically, to fix the problems of congestion. 
An untested scheme to further tax airlines and passengers is certainly 
not what is needed. The delayed and weary flying public deserves 
better.
  Should the administration proceed with their illegal auction scheme, 
it will do nothing to reduce congestion and will only postpone needed 
reforms to the system. The problem of chronic congestion and delays in 
our aviation system deserves the full attention of all of the 
stakeholders involved in aviation--from the administration and 
Congress, the airlines, airports, customers, and the air traffic 
controllers and operational personnel that keep our system moving. With 
the GAO's legal ruling, it is my hope that we can move past this failed 
idea and work towards a real solution.
  I look forward to working with you and our Commerce Committee 
colleagues in addressing the fundamental causes of delays and 
congestion throughout our system and thank you all again for your 
continued leadership and support on the issue.
  Mr. INOUYE. Mr. President, as chairman of the Senate Commerce, 
Science, and Transportation Committee, I rise in support of the remarks 
made by my colleagues and would like to express my concern with moving 
forward on this proposal.
  Clearly, such a profound change in aviation policy must be supported 
by Congress and the agency's underlying authorizing legislation. 
Congress, however, has consistently opposed the DOT's attempt to 
auction slots and explicitly prohibited such actions in P.L. 110-161. 
Just this week, the GAO reaffirmed the position of Congress when it 
issued an opinion which concluded DOT's proposed initiative to auction 
slots is illegal.
  It is perplexing that the DOT continues to pursue this course of 
action in the face of such strong Congressional opposition. Further, I 
am astonished that they would continue down this road in the face of 
legislation that clearly prohibits them from taking such action. I, 
along with my colleagues, implore the DOT to abandon its efforts to 
auction slots. The administration should focus its energy on more 
important issues, such as modernizing the Air Traffic Control System 
and ensuring the safety of its passengers.
  Mrs. HUTCHISON. Mr. President, I thank my friends from the 
Appropriations Committee along with Commerce Committee Chairman Inouye 
for their leadership and agreement on this issue. In the absence of 
explicit authority and in response to the GAO determination, I join my 
colleagues in urging DOT to cease action on any current auction 
proposal.
  I believe market based solutions should play a role in the future of 
our congested airports, but the path the Department has taken is 
shortsighted, untimely and according to the GAO, apparently illegal. 
Instead, the Department should further focus on mitigating delays 
through capacity enhancements at congested airports.
  Mrs. MURRAY. Mr. President, I very much want to thank my colleagues 
for engaging in this discussion today. I ask unanimous consent to have 
the legal opinion sent to us by the GAO General Counsel printed in the 
Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:
     Subject: Federal Aviation Administration--Authority to 
         Auction Airport Arrival and Departure Slots and to Retain 
         and Use Auction Proceeds

                              Government Accountability Office

                               Washington, DC, September 30, 2008.
     Hon. James L. Oberstar,
     Chairman, Committee on Transportation and Infrastructure, 
         House of Representatives.
     Hon. Patty Murray,
     Chairman, Subcommittee on Transportation, Housing, and Urban 
         Development, and Related Agencies, Committee on 
         Appropriations, U.S. Senate.
     Hon. Christopher S. Bond,
     Ranking Minority Member, Subcommittee on Transportation, 
         Housing, and Urban Development, and Related Agencies, 
         Committee on Appropriations, U.S. Senate.
     Hon. Frank R. Lautenberg,
     Hon. Robert Menendez,
     Hon. Charles E. Schumer,
     Hon. Hillary Rodham Clinton,
     U.S. Senate.

       This responds to your request for our legal opinion 
     regarding the authority of the Federal Aviation 
     Administration (FAA) to auction airport arrival and departure 
     slots. As part of its efforts to reduce congestion in the 
     national airspace, in April and May 2008, FAA issued proposed 
     regulations to conduct such auctions at three New York-area 
     airports--LaGuardia Airport (LaGuardia), John

[[Page S10463]]

     F. Kennedy International Airport (JFK), and Newark Liberty 
     International Airport (Newark) at some time in the future. In 
     August 2008, FAA announced that it was proceeding to auction 
     two specific slots at Newark on September 3, an action that 
     has since been administratively stayed. On September 16, 
     2008, FAA announced that ``[i]n accordance with rulemaking 
     activity that is not yet complete'' and ``if the rule is 
     adopted,'' it may auction slots at Newark, LaGuardia, and JFK 
     starting on January 12, 2009. As agreed with your staff, this 
     opinion addresses whether FAA has authority to auction slots 
     and if it does, whether it may retain and use funds obtained 
     through such auctions.
       We conclude that FAA currently lacks authority to auction 
     arrival and departure slots, and thus also lacks authority to 
     retain and use auction proceeds. For the first time since it 
     began regulating U.S. navigable airspace nearly 40 years ago, 
     FAA now asserts that it may assign the use of that airspace 
     using its general property management authority. According to 
     FAA, slots are intangible ``property'' that it 
     ``constructs,'' owns, and may ``lease'' for ``adequate 
     compensation'' under 49 U.S.C. Sec. Sec. 106 (l)(6) and (n) 
     and 40110(a)(2). An examination of those statutes read as a 
     whole, however, makes clear that Congress was using the term 
     ``property'' to refer to traditional forms of property. It 
     was not referring to FAA's regulatory authority to assign 
     airspace slots, no matter how valuable those slots may be in 
     the hands of the regulated community. Related case law 
     confirms our conclusion. The only other source of authority 
     for FAA to raise funds in connection with its slot 
     assignments is the Independent Offices Appropriations Act 
     (IOAA), 31 U.S.C. Sec. 9701, commonly referred to as the 
     ``user fee statute,'' but that authority is currently 
     unavailable. Since 1998, Congress has, through annual 
     appropriations restrictions, specifically prohibited FAA from 
     imposing ``new aviation user fees,'' and we conclude that 
     proceeds from FAA's proposed auctions would constitute such a 
     fee. Accordingly, in our opinion, FAA lacks a legal basis to 
     go forward with the Newark auction or any other auction, and 
     if FAA were to go forward with auctioning slots without 
     obtaining the necessary authority and retained and used the 
     proceeds, GAO would raise exceptions under its account 
     settlement authority for violations of the ``purpose 
     statute,'' 31 U.S.C. Sec. 1301(a), and the Antideficiency 
     Act, 31 U.S.C. Sec. 1341(a)(1)(A).


                               background

       FAA's control of congestion in the national airspace by use 
     of a ``reservation'' or ``slot'' system is not new. What is 
     new is FAA's proposal to assign the slots by auction. FAA 
     first instituted a slot control system nearly 40 years ago, 
     in 1968, in the so-called High Density Rule. See 33 Fed. Reg. 
     17896, 17898 (Dec. 3, 1968); 14 C.F.R. Sec. Sec. 93.121-
     93.129 (1969). Supplementing the traditional first-come, 
     first-served traffic control system, the High Density Rule 
     capped the number of hourly arrivals and departures permitted 
     at five designated ``high density traffic airports''--
     LaGuardia, JFK, Newark, Washington National Airport 
     (Washington National), and Chicago O'Hare International 
     Airport--and required air carriers to obtain a 
     ``reservation'' for these operations from Air Traffic Control 
     (ATC). The number of reservations available for assignment 
     varied by airport, time of day, and class of user.
       In promulgating the High Density Rule, FAA acknowledged 
     that it was acting pursuant to its regulatory authority to 
     ensure the efficient use of the national airspace under 
     sections 307(a) and (c) of the Federal Aviation Act of 1958. 
     33 Fed. Reg. at 17897, 17898. That act created FAA (as the 
     Federal Aviation Agency) and directed the FAA Administrator 
     to: ``assign by rule, regulation, or order the use of the 
     navigable airspace under such terms, conditions, and 
     limitations as he may deem necessary in order to insure the 
     safety of aircraft and the efficient utilization of such 
     airspace. He may modify or revoke such assignment when 
     required by the public interest. . . . [The Administrator 
     also] is authorized to prescribe air traffic rules and 
     regulations governing the flight of aircraft, for the 
     navigation, protection, and identification of aircraft, for 
     the protection of persons and property on the ground, and for 
     the efficient utilization of the navigable airspace. . . .''
       Federal Aviation Act of 1958, Pub. L. No. 85-726, 
     Sec. 307(a), (c), 72 Stat. 731, 749-50, 49 U.S.C. Sec. 1348 
     (a), (c) (1968) (emphasis added). See generally Northwest 
     Airlines, Inc. v. Goldschmidt, 645 F.2d 1309 (8th Cir. 1981) 
     (upholding 1980 amendment to High Density Rule as exercise of 
     FAA's section 307(a) and (c) authority to regulate efficient 
     use of airspace).
       Reservations under the High Density Rule initially were 
     allocated by agreements between the airlines (acting through 
     airport scheduling committees) and ATC and by rule, the vast 
     majority of reservations were set aside for assignment to 
     scheduled air carriers. See 14 C.F.R. Sec. 93.123(a) (1969). 
     Because only a few carriers held certificates of public 
     convenience and necessity for these airports, as required 
     prior to deregulation of the airline industry in the early 
     1980's, there was only limited competition for the 
     reservations. With deregulation, however, any licensed 
     carrier could service any high density airport, with the 
     result that airport scheduling committees could no longer 
     reach agreements acceptable to prospective new entrants and 
     incumbent airlines wishing to expand their operations.
       To accommodate the resulting demand for reservations while 
     ensuring continuity of operations for carriers providing 
     regularly scheduled service, FAA amended the High Density 
     Rule effective in 1986. See 50 Fed. Reg. 52180 (Dec. 20, 
     1985). It again acknowledged that it was acting pursuant to 
     its regulatory authority under sections 307(a) and (c) of the 
     Federal Aviation Act to ensure the efficient use of the 
     national airspace. Id. at 52181. Under a 
     ``grandfather'' policy, FAA initially assigned most 
     reservations--now called ``slots''--to the carriers who 
     already held them under scheduling committee agreements. 
     For the first time, FAA also authorized carriers to sell, 
     lease, or otherwise transfer the slots among themselves, 
     subject to confirmation by FAA and to a determination by 
     the Secretary of Transportation that transfer ``will not 
     be injurious to the essential air service program.'' Slots 
     could be withdrawn at any time for FAA operational needs, 
     and under a ``use-or-lose'' provision, slots not used 65 
     percent of the time would be recalled. FAA made clear that 
     ``[s]lots do not represent a property right but represent 
     an operating privilege subject to absolute FAA control.''
       In issuing the 1986 amendments, FAA noted that it had 
     decided not to pursue a proposal it had made in 1980, to 
     assign slots by means of an auction. It explained this was 
     because ``legislation would be required for the collection 
     and disposition of the proceeds.'' Id. at 52183. FAA noted 
     that ``several unresolved legal questions'' had been raised 
     by the Department of Justice which DOJ believed would make an 
     auction ``impractical,'' citing the Independent Offices 
     Appropriations Act (IOAA), 31 U.S.C. Sec. 9701, commonly 
     referred to as the ``user fee statute.'' IOAA could be 
     problematic, FAA noted, ``if these proceeds were to be 
     applied for airport improvements . . . .'' Id. As FAA had 
     explained in its earlier proposal, this is because ``in 
     accordance with [IOAA], the money received as a result of any 
     auction system will not be retained by DOT but will be paid 
     into the Treasury of the United States. Other disposition of 
     the revenues . . . [is] not now authorized by statute.'' 45 
     Fed. Reg. 71236, 71240, 71241 (Oct. 27, 1980).
       Over time, Congress became concerned that the High Density 
     Rule, particularly the 1986 amendments, hurt competition, 
     unfairly favored incumbent airlines, and was not the best 
     means to reduce congestion. After enacting several measures 
     in the 1980s and 1990s requiring greater access for certain 
     service providers, in 2000, Congress directed FAA to phase 
     out the High Density Rule altogether, at LaGuardia, JFK, and 
     O'Hare, no later than January 1, 2007. At about this same 
     time, Congress also began to enact annual appropriations 
     restrictions prohibiting FAA from promulgating any ``new 
     aviation user fees'' unless specifically authorized by 
     statute. The first of these restrictions was enacted in 1997 
     for fiscal year 1998, and the most recent was enacted in 2007 
     for fiscal year 2008.
       As the 2007 High Density Rule phase-out deadline 
     approached, FAA remained concerned about congestion. In 
     August 2006, it therefore proposed to continue caps on hourly 
     arrivals and departures at LaGuardia and to assign the 
     majority of slots (now called ``operating authorizations'') 
     to incumbent carriers. 71 Fed. Reg. 51360 (Aug. 29, 2006). 
     FAA also now proposed to set expiration dates for most slots, 
     with 10 percent of the slots each year to be redistributed, 
     as they expired, using a market-based mechanism yet to be 
     determined. FAA could not propose a specific market mechanism 
     at that time, it explained, because it lacked authority to do 
     so and would be seeking such authority from Congress: ``[FAA] 
     will seek authority to utilize market-based mechanisms at 
     LaGuardia in the future [to allocate capacity]. Such 
     legislation would be necessary to employ market-based 
     approaches such as auctions or congestion pricing at 
     LaGuardia because the FAA currently does not have the 
     statutory authority to assess market-clearing charges for a 
     landing or departure authorization. If Congress approves the 
     use of market-based mechanisms as we plan to propose, a new 
     rulemaking would be necessary to implement such measures at 
     LaGuardia.''
       Id. at 51362 (emphasis added); see also id. at 51363. FAA 
     subsequently requested such authority from Congress, but it 
     has not been enacted. When FAA was unable to finalize its 
     2006 proposal before the January 1, 2007 phase-out deadline, 
     it issued a series of temporary ``capping orders'' 
     maintaining caps and slots at LaGuardia, JFK, and Newark.
       Finally, as noted above, in April and May 2008, FAA issued 
     its most recent proposals for a cap and slot system at 
     LaGuardia, JFK, and Newark. FAA proposes to continue to 
     assign the majority of slots to incumbent carriers and, as in 
     its 2006 proposal, to withdraw a portion of the slots for re-
     distribution (along with unassigned slots). However, calling 
     its 2006 legal analysis ``overly simplistic'' and 
     ``incorrect,'' FAA now proposes to do what it previously 
     stated it had no authority to do: assign the withdrawn slots 
     by auctioning slot ``leaseholds'' to the highest bidder. The 
     proceeds from the auctions would either be retained by FAA 
     and used to mitigate congestion in the New York City area or, 
     after deducting FAA's administrative costs, paid to the 
     airline that previously held the auctioned slot. To impose 
     caps on hourly arrival and departure slots, FAA continues to 
     rely on its regulatory authority to ensure efficient use of 
     the airspace, now codified at 49 U.S.C. Sec. 40103(b)(1), 
     (2). See 73 Fed. Reg. at

[[Page S10464]]

     20846, 29626. To assign the slots by auctioning slots 
     leaseholds, FAA for the first time relies on its general 
     authority to lease or otherwise dispose of ``property'' under 
     49 U.S.C. Sec. Sec. 106 and 40110. See id. at 20853, 29631.


                                analysis

       Whether FAA may raise funds in connection with its 
     assignment of slots--by holding a slot auction, imposing a 
     user fee, assessing a tax, or by some other mechanism--
     depends on whether it has the proper statutory authority. 
     Congress has granted FAA explicit statutory authority to 
     collect fees in several different situations, but no explicit 
     authority exists for the imposition of fees related to the 
     assignment of slots. We therefore look to whether FAA has any 
     other authority that would permit it to auction slots.
     I. FAA's authority to auction slots under its property 
         disposition authority
       In evaluating whether FAA may assign slots using its 
     general property disposition authority, it is important to 
     understand what a slot is. FAA has consistently characterized 
     a slot as an ``operating authorization'' or ``operational 
     authority'' to conduct one operation (arrival or departure) 
     in the airspace during a specified time period. At the five 
     high density airports, this authorization is in addition to 
     the authorization or ``clearance'' that must be obtained from 
     ATC to operate within the airspace at those facilities. 14 
     C.F.R. Sec. Sec. 91.131(a)(1), 91.173. While these two 
     authorizations differ in some respects--clearances are 
     normally required of all users of this airspace, while slots, 
     due to capacity demands, are issued only to some users--both 
     constitute regulatory permission without which aircraft may 
     not be operated. So understood, a slot is a regulatory 
     license--a legal permission, revocable by FAA, to conduct an 
     act that otherwise would not be permitted.
       As FAA itself emphasizes, it is also important to 
     understand that caps and slots are two interconnected parts 
     of FAA's regulatory structure to ensure the efficient use of 
     the airspace. 2008 FAA Letter at 1. Limiting aircraft traffic 
     by capping the number of arrivals and departures reduces the 
     amount of traffic that is airborne, but it does not avoid the 
     backup of aircraft seeking access to the air traffic system 
     or provide a mechanism for prioritizing traffic. Assigning 
     slots accomplishes this objective; without slots, traffic 
     will queue on a first-come-first-served basis (as it does at 
     non-slot controlled airports), undermining scheduling. 
     Whether the assignment system is called a reservation system, 
     an operating authorization system, or a slot system, the use 
     of an assignment mechanism is key to accomplishing what FAA 
     believes is necessary to promote orderly and efficient 
     traffic flow and use of airspace.
       According to FAA, however, slots are not a license but 
     ``property'' that it ``acquires'' or ``constructs'' and, as 
     the property ``owner,'' may ``lease'' using its general 
     property disposition and contracting authority in 49 U.S.C. 
     Sec. Sec. 106 (l)(6) and (n) and 40110(a)(2). Section 
     106(n)(1) authorizes FAA: ``(A) to acquire (by purchase, 
     lease, condemnation, or otherwise), construct, improve, 
     repair, operate, and maintain--(i) air traffic control 
     facilities and equipment; (ii) research testing sites and 
     facilities; and (iii) such other real and personal property 
     (including office space and patents), or any interest therein 
     . . . as the Administrator considers necessary; [and] (B) to 
     lease to others such real and personal property . . . .''
       Section 106(l)(6) authorizes FAA: ``[to enter into] such 
     contracts, leases, cooperative agreements, or other 
     transactions as may be necessary to carry out the functions 
     of FAA.''
       Section 40110(a)(2) authorizes FAA: ``[to] dispose of an 
     interest in property for adequate compensation. . . .''

     (All emphasis added.)

       As evidence that these provisions authorize slots to be 
     ``leased'' as ``property,'' FAA points to bankruptcy 
     proceedings where slots subject to lease have been accorded 
     some proprietary status. 2008 FAA Brief at 41-43. FAA asserts 
     that it, too, has a property interest in slots subject to 
     lease because: (1) FAA has sovereignty over U.S. navigable 
     airspace; (2) airspace has been characterized as ``public 
     property;'' (3) FAA regulates the use of navigable airspace; 
     (4) as a ``product'' of its regulation, FAA has 
     ``constructed'' slots as an ``intangible property interest'' 
     in airspace use; and (5) as the slot ``constructor,'' FAA 
     ``owns'' and may ``lease'' its ``intangible'' slots. FAA 
     states further that it may--in fact, must--charge ``adequate 
     compensation,'' and even ``market prices,'' for this 
     ``property'' under 49 U.S.C. Sec. 40110. 2008 FAA Brief at 
     41, 50-53.
       As discussed below, however, slots are not ``property'' 
     subject to FAA's property disposition authority. Nor are they 
     the mere ``product'' of FAA regulation; they are FAA 
     regulation. Moreover, FAA's argument that slots are property 
     proves too much--it suggests that the agency has been 
     improperly giving away potentially millions of dollars of 
     federal property, for no compensation, since it created the 
     slot system in 1968.


                                   A.

       Parsing its property acquisition and disposition 
     authorities under 49 U.S.C. Sec. Sec. 106(n) and 40110(a)(2) 
     and applying general dictionary definitions, FAA maintains 
     that when it uses its regulatory authority to delineate a 
     time period for authorized takeoff or landing--a slot--it 
     ``constructs'' or ``acquires'' an intangible ``property'' 
     interest in airspace use that it may ``lease'' to others for 
     ``adequate compensation.'' 2008 FAA Letter at 2-3; 2008 FAA 
     Brief at 47-48. ``Understanding Congressional will requires 
     more than the mechanical application of dictionary 
     definitions,'' however, see Faircloth v. Lundy Packing Co., 
     91 F.3d 648, 660 (4th Cir. 1996) (Michael, J., concurring and 
     dissenting), and it is a cardinal rule of statutory 
     construction that statutes must be read as a whole, ``since 
     the meaning of statutory language, plain or not, depends on 
     context.'' King v. St. Vincent's Hospital, 502 U.S. 215, 221 
     (1991) (citations omitted). When taken in context and read as 
     a whole, the term ``property'' as used in FAA's statute 
     clearly refers to traditional property, not to FAA's 
     regulatory licensing authority over the use of navigable 
     airspace. Almost all of the ``property'' examples listed in 
     49 U.S.C. Sec. 106(n)(1) are traditional tangible property--
     real estate, equipment, and infrastructure--and the 
     legislative history repeats the same examples. See H. R. 
     Conf. Rep. 104-848 (1996) at 107, 1996 U.S.C.C.A.N. 3703, 
     3729. The other example referenced in Sec. 106(n)--a patent-- 
     has long been recognized as intangible property. Other 
     terminology used in Sec. 106(n)(1) reinforces that Congress 
     was referring to traditional property. For example, the 
     statute refers to property that is ``leased'' and 
     ``condemned'' (applied to traditional real property) and 
     ``constructed, improved, repaired, operated, and maintained'' 
     (applied to traditional real and personal property). Under 
     the statutory construction rule of ejusdem generis, ``such 
     other . . . property . . . or any interest therein'' as used 
     in Sec. 106(n)(1)(A) must mean property of a nature similar 
     to the traditional real and personal property examples cited 
     in the statute. This would not include FAA's regulatory 
     authorizations for aircraft takeoffs and landings--that is, 
     slots.
       The structure of FAA's statutory authority and its 
     legislative history support this conclusion. Congress has 
     given FAA different authorities to carry out different 
     responsibilities--it has regulatory authority in 49 U.S.C. 
     Sec. 40103 to ensure the safe and efficient use of the 
     navigable airspace, and property acquisition and disposition 
     authority in 49 U.S.C. Sec. Sec. 106 and 40110 to support 
     FAA's mission and general operations. As relevant here, FAA 
     has had these same basic authorities since its creation in 
     1958. The fact that Congress authorized FAA to carry out its 
     regulatory responsibilities (including assignment of slots) 
     under the strictures of Sec. 40103 undercuts FAA's argument 
     that Congress simultaneously authorized FAA to carry out many 
     of these same responsibilities under the very different 
     strictures of Sec. Sec. 106 and 40110. Congress has never 
     suggested as much in the half-century of FAA's existence, 
     nor, until 2008, has FAA. Thus FAA may not rely on its 
     general property disposition authority to carry out its 
     regulatory slot assignment functions. See, e.g., American 
     Petroleum Inst. v. EPA, 52 F.3d 1113, 1119-20 (D.C. Cir. 
     1995) (EPA cannot rely on general rulemaking authority to 
     regulate air pollutant in manner conflicting with authority 
     specific to that pollutant and ``cannot uncouple the first 
     sentence of [Clean Air Act provision] from the rest of the 
     section in order to expand its authority beyond the aims and 
     limits of the section as a whole.'').
       Finally, FAA's reading of its property authority, 
     particularly the purported significance of a 1996 amendment 
     to that authority, is unavailing because it would interfere 
     with Congress' constitutional prerogatives to set 
     programmatic spending levels and oversee agency activities. 
     U.S. Const. Art. I, Sec. 9, cl. 7. As noted above, in the 
     past FAA has considered imposing a user fee under IOAA in 
     connection with its assignment of slots. Congress also has 
     considered FAA's imposition of user fees. In FAA's 1996 
     reauthorization legislation, for example, Congress authorized 
     FAA to charge certain cost-based user fees, but called for 
     further study of the agency's funding needs and funding 
     mechanisms. See Air Traffic Management System Performance 
     Improvement Act of 1996, Pub. L. No. 104-264, Title II, 
     Sec. Sec. 221(12), 273, 274. And in 1997, Congress enacted 
     the first of its now-annual appropriations restrictions 
     expressly prohibiting FAA from imposing any ``new aviation 
     user fees'' without specific statutory authority. FAA 
     nevertheless asserts that when Congress amended its property 
     authority in the 1996 reauthorization act by enacting 
     Sec. 106(n)--which clarified FAA's property acquisition 
     authority to include personal as well as real property, and 
     authority not just to ``acquire'' property but, as discussed 
     above, to ``construct, improve, repair, operate, and 
     maintain'' it, see Pub. L. No. 104-264, Sec. 228, codified at 
     49 U.S.C. 106(n)--this amendment granted FAA authority to 
     ``construct'' and auction slots. 2008 FAA Brief at 47-48. 
     Given Congress' substantial concerns about FAA's imposing 
     user fees in 1996 and its outright ban on new FAA aviation 
     user fees the following year, we find it highly unlikely that 
     Congress at the same time authorized FAA to obtain non-
     appropriations funding through the ``back door'' of its 
     general property disposition authority.


                                   B.

       Case law regarding the legal status of slots and regulatory 
     licenses confirms our conclusion that slots are not 
     ``property'' in the hands of FAA. To demonstrate that slots 
     are property, FAA cites three bankruptcy cases--In re McClain 
     Airlines, Inc., 80 B.R. 175 (Bankr. D. Ariz. 1987); In re 
     American Central Airlines, 52 B.R. 567 (Bankr. N.D. Iowa 
     1985); and In re Gull Air, Inc., 890 F.2d 1255 (1st Cir.

[[Page S10465]]

     1989)--which considered whether an airline in bankruptcy had 
     a sufficient proprietary interest in its slots to include 
     them as ``property of the estate'' (or in McClain, an 
     interest in a right to seek restoration of a withdrawn slot). 
     2008 FAA Brief at 42-43, 61; 2008 FAA Letter at 3. The courts 
     in these cases focused in part on the fact that after FAA's 
     1986 amendments to the High Density Rule, carriers could 
     sell, lease, or otherwise transfer slots among themselves.
       The cases do not support FAA's position. At most, they 
     recognize the undisputed fact that slots have value in the 
     hands of carriers to whom they are assigned, at least when 
     the slots are transferable to other carriers. The decisions 
     do not address the issue we face here: the nature of slots 
     when they are unassigned and ``held'' by FAA. In fact, the 
     cases underscore the limited nature of slots even after they 
     are assigned: they remain subject to FAA withdrawal at any 
     time for operational reasons and to FAA recall for non-use. 
     In Gull Air, for example, the most recent, and the only 
     appellate court, decision cited by FAA, FAA itself argued 
     that slots were not the carrier's property but rather, 
     as specified in FAA's regulations, ``operating privileges 
     subject to absolute FAA control.'' 890 F.2d at 1258. The 
     First Circuit Court of Appeals ruled only that slots' 
     transferability under the High Density Rule created a 
     ``limited proprietary interest in slots'' that is 
     ``encumbered by conditions that FAA imposed in its 
     regulations.'' Id. at 1260. The court declined to decide 
     whether the slots constituted ``property of the estate'' 
     because whatever that interest was, it was lost 
     automatically under FAA's ``use or lose'' requirement when 
     the airline ceased operations. Thus Gull Air stands only 
     for the proposition that slots have one characteristic of 
     property--transferability--which may qualify slots as 
     ``property of the estate'' under the Bankruptcy Code when 
     held by carriers. This is a far cry from finding that 
     slots are FAA's ``property'' subject to its property 
     disposition statute.
       Furthermore, even if slots were not transferable, there is 
     little doubt that they have value to carriers. Yet the U.S. 
     Supreme Court has made clear that the fact that a government 
     license is valuable to the license holder does not render the 
     license ``property'' in the hands of the issuing agency. 
     Rather, the license is ``no more and no less than [the 
     agency's] sovereign power to regulate.'' Cleveland v. United 
     States, 531 U.S. 12, 23 (2000). In Cleveland, the Supreme 
     Court had to decide whether a Louisiana video poker machine 
     license was ``property'' under the federal mail fraud 
     statute, which makes it a felony to use the mail to further 
     ``any scheme . . . to defraud, or for obtaining money or 
     property by means of false or fraudulent pretenses . . . .'' 
     18 U.S.C. 1341 (emphasis added). Upholding the rulings of 
     five circuit courts of appeals, the unanimous Supreme Court 
     ruled that the licenses were not ``property'' when held by 
     the issuing state agency:
       ``Without doubt, Louisiana has a substantial economic stake 
     in the video poker industry. The State collects an upfront 
     `processing fee' for each new license application . . ., a 
     separate `processing fee' for each renewal application . . ., 
     an `annual fee' from each device owner . . ., an additional 
     `device operation' fee . . ., and, most importantly, a fixed 
     percentage of net revenue from each video poker device . . . 
     It is hardly evident, however, why these tolls should make 
     video poker licenses `property' in the hands of the State. 
     The State receives the lion's share of its expected revenue 
     not while the licenses remain in its own hands, but only 
     after they have been issued to licensees. Licenses pre-
     issuance do not generate an ongoing stream of revenue. At 
     most, they entitle the State to collect a processing fee from 
     applicants for new licenses. Were an entitlement of this 
     order sufficient to establish a state property right, one 
     could scarcely avoid the conclusion that States have property 
     rights in any license or permit requiring an up front fee, 
     including drivers' licenses, medical licenses, and fishing 
     and hunting licenses. Such licenses, as the Government itself 
     concedes, are `purely regulatory.'''

     531 U.S. at 22 (second emphasis added).

       FAA compares its proposed slot leases to patents, a type of 
     intangible property it is authorized to dispose of under 49 
     U.S.C. 106(n)(1)(A)(ii). 2008Sec. FAA Brief at 33, 51. But 
     the Cleveland Court rejected this patent analogy, which had 
     been made by the United States:
       ``[T]hese intangible rights of allocation, exclusion, and 
     control amount to no more and no less than Louisiana's 
     sovereign power to regulate. . . [T]he state's right of 
     control does not create a property interest any more than a 
     law licensing liquor sales in a State that levies a sales tax 
     on liquor. Such regulations are paradigmatic exercises of the 
     States' traditional police powers.
       ``The Government compares the State's interest in video 
     poker licenses to a patent holder's interest in a patent that 
     she has not yet licensed. Although it is true that both 
     involve the right to exclude, we think the congruence ends 
     there. Louisiana does not conduct gaming operations itself, 
     it does not hold video poker licenses to reserve that 
     prerogative, and it does not ``sell'' video poker licenses in 
     the ordinary commercial sense. Furthermore, while a patent 
     holder may sell her patent . . ., the State may not sell its 
     licensing authority. Instead of a patent holder's interest in 
     an unlicensed patent, the better analogy is to the Federal 
     Government's interest in an unissued patent. That interest, 
     like the State's interest in licensing video poker 
     operations, surely implicates the Government's role as 
     sovereign, not as property holder.''

     531 U.S. at 23-24 (emphasis added).

       Just as Louisiana did not run the video poker machines in 
     Cleveland, so FAA does not operate commercial air carriers. 
     Just as Louisiana regulated gaming as part of its police 
     power to protect the public welfare, so FAA regulates air 
     traffic as part of its responsibility to ensure efficient use 
     of the national airspace. As in Cleveland, the fact that 
     FAA's slots have value to slot holders does not transform 
     them into alienable ``property'' in FAA's hands. FAA seeks to 
     distinguish Cleveland because the licenses there were not 
     transferable, and because a rule of leniency applicable to 
     criminal statutes drove the Supreme Court's interpretation. 
     As noted above regarding Gull Air, however, slot 
     transferability is irrelevant to FAA's ``property'' rights 
     because slots do not acquire this trait until after FAA 
     assigns them. And while FAA's property disposition provisions 
     are not criminal statutes, studied skepticism in defining 
     their reach is also warranted. In this regard, there is an 
     acute public interest in protecting Congress' exercise of its 
     constitutional responsibility to set spending levels through 
     the appropriations process, and as discussed above, this 
     would be jeopardized if FAA could circumvent the 
     appropriations process by obtaining funding through slot 
     auctions.
     II. FAA's authority to auction slots under its user fee 
         authority
       Because FAA may not auction slots under its property 
     disposition authority and has no explicit authority to charge 
     a fee for the assignment of slots, the only other arguable 
     authority on which FAA could rely is IOAA. That authority is 
     currently unavailable because as of fiscal year 1998, 
     Congress has prohibited FAA's imposition of any new aviation 
     user fees unless it obtains specific statutory authority. 
     Because FAA lacks authority to collect such fees, if it 
     nevertheless goes forward with an auction, it may not retain 
     or use the proceeds.
       To understand the impact of Congress' prohibition, some 
     context and a brief history are helpful. FAA is funded from a 
     combination of sources, which can be roughly divided into 
     three types: excise tax revenue, General Fund appropriations, 
     and reimbursements from services provided and user fees 
     charged. FAA, Fiscal Year 2007 Performance and Accountability 
     Report, at 121. For the last 10 years, Congress has annually 
     prohibited FAA from implementing any ``new aviation user 
     fees'' not authorized by Congress. The prohibition first 
     appeared in the 1998 Department of Transportation and Related 
     Agencies Appropriations Act and stated:
       ``[N]one of the funds in this Act shall be available for 
     the Federal Aviation Administration to plan, finalize, or 
     implement any regulation that would promulgate new aviation 
     user fees not specifically authorized by law after the date 
     of enactment of this Act.''
       Pub. L. No. 105-66, 111 Stat. 1425, 1429 (1997). At the 
     time, the Conference Committee expressed ``very serious 
     concerns,'' ``on both technical and policy-related grounds,'' 
     about new aviation user fees that FAA had proposed. The 
     Committee made clear that the existing excise tax system, 
     supplemented by appropriated funds, would provide sufficient 
     revenue for FAA without new fees. H. R. Rep. No. 105-313 at 
     40-41 (Conf. Rep.) (1997). The Committee specifically 
     acknowledged the authority that IOAA generally provides to 
     agencies and made clear that it intended to restrict this 
     authority in FAA's case:
       ``The conferees are aware of FAA's opinion that the agency 
     has the legal authority to establish new user fees under the 
     generic authority provided in the User Fee Statute, and do 
     not wish to see FAA circumvent the legislative process and 
     avoid the normal cost controls which apply to other federal 
     agencies through the administrative implementation of new 
     user fees. The conferees emphasize, however, that this 
     provision does not prevent the FAA from implementing new 
     user fees. It only provides that such fees must be 
     specifically authorized by the Congress.''
       Id. at 41. A slightly modified version of the restriction 
     has been included in every subsequent yearly appropriation. 
     The 2008 fiscal year prohibition states:
       ``[N]one of the funds in this [Appropriations] Act shall be 
     available for the Federal Aviation Administration to finalize 
     or implement any regulation that would promulgate new 
     aviation user fees not specifically authorized by law after 
     the date of the enactment of this Act.''
       Consolidated Appropriations Act, 2008, Pub. L. No. 110-161, 
     121 Stat. 1844, 2379 (2007).
       In considering the fiscal year 2008 prohibition, the House 
     Committee on Appropriations commented on its ``serious 
     concerns about the impact of user fees,'' and the Senate 
     Committee on Appropriations expressed its desire that ``any 
     degradation in the Committee's ability to annually set 
     programmatic spending levels and oversee the agency's 
     spending habits as part of the reauthorization process should 
     be strenuously resisted.''
       This fiscal year 2008 prohibition precludes FAA's use of 
     IOAA as authority to auction slots because FAA's slot 
     auctions would amount to a ``new aviation user fee'' not 
     specifically authorized by law. FAA has never previously 
     imposed a fee for authorization to use navigable airspace at 
     a specific time; thus FAA's slot auction would constitute 
     exactly the type of ``new aviation user fee''

[[Page S10466]]

     that Congress has prohibited. Indeed, FAA recognized that 
     slot auctions would constitute a user fee when it proposed to 
     institute such a fee in 1980, and again in 1986 when it 
     decided not to do so. FAA also appeared to recognize that 
     slot auctions would constitute a user fee in 2006 and 2007 
     when, in the face of the annual appropriations restrictions, 
     it promised to and did seek legislation authorizing it to 
     conduct the auctions. FAA's April 2008 proposal in fact 
     acknowledges that because of the appropriations restriction, 
     FAA ``continues to believe that it cannot rely on a market-
     based [slot] allocation method under a purely regulatory 
     approach, which is why it explicitly sought legislation on 
     this matter.'' 73 Fed. Reg. at 20846, 20852.
       FAA suggests that because it will conduct the Newark 
     auction by solicitation of bids for slot leases, rather than 
     by issuance of a new regulation, the language of the 2008 
     Consolidated Appropriations Act--which prohibits ``any 
     regulation'' imposing new aviation user fees--does not apply. 
     2008 FAA Brief at 61 n. 36. Contrary to FAA's suggestion, 
     because the auction would, in effect, amount to a user fee 
     under IOAA, and IOAA requires agencies to prescribe 
     regulations to impose new user fees, see 31 U.S.C. 
     Sec. 9701(b), implementation of the auction would require a 
     new regulation. FAA cannot elude the requirements of 
     otherwise applicable law simply by failing to follow the 
     law's requirements. ``It is axiomatic that an agency cannot 
     do indirectly what it is not permitted to do directly.'' 
     Forest Products Laboratory Agreement with University of 
     Wisconsin, 55 Comp. Gen. 1059 (1976).
       FAA points to examples of other agencies auctioning or 
     charging market-based fees for use of public lands or other 
     public ``property.'' 2008 FAA Brief at 48-49. These are 
     inapposite because unlike FAA, those agencies had specific 
     statutory authority for their activities. See, e.g, 16 U.S.C. 
     Sec. 472a (U.S. Department of Agriculture auction of timber 
     rights on National Forest Service land); 43 U.S.C. Sec. 315b 
     (U.S. Department of Interior issuance of grazing permits for 
     public lands for ``reasonable fees''). FAA's most analogous 
     example is the Federal Communications Commission's auction of 
     license rights to the electromagnetic spectrum. Again, 
     however, Congress has specifically authorized the FCC to 
     conduct such auctions, including specifying the conditions 
     necessary for auction, bidder qualifications, and treatment 
     of auction proceeds. See 47 U.S.C. Sec. 309(j). As discussed 
     above, despite FAA's specific requests, Congress has given 
     FAA no comparable auction authority.
       Finally, even if Congress were to remove the annual 
     appropriations restriction that prohibits FAA from 
     promulgating new aviation user fees, without other specific 
     authority, it could impose only a cost-based fee, not the 
     type of market-based fee it seeks to obtain by auctioning 
     slots to the highest bidder. Under IOAA, when an agency is 
     but one actor in the marketplace, it acts in a commercial, 
     non-governmental capacity and may charge a fee based on the 
     market price of the service provided. When instead an agency 
     exercises its sovereign power and regulates activities based 
     on public policy goals--as FAA would be acting, if it were to 
     auction slots--it acts in a regulatory capacity, and user 
     fees are limited to the agency's costs of providing the 
     specific benefit to the individual recipient. If FAA's fee 
     were based on market value and exceeded its cost of providing 
     the slot to the recipient airline, the fee could rise to the 
     level of a tax. A tax would be beyond IOAA's grant of 
     authority and FAA would have to have some other 
     Congressionally-delegated authority to impose it. National 
     Cable Television Ass'n, Inc. v. United States, 415 U.S. 336, 
     341 (1974); National Park Service--Special Park Use Fees, B-
     307319, Aug. 23, 2007.


                               CONCLUSION

       We conclude that FAA may not auction slots under its 
     property disposition authority, user fee authority, or any 
     other authority, and thus also may not retain or use proceeds 
     of any such auctions. Going forward with the planned Newark 
     auction or any other auction would be without legal basis, 
     and if FAA conducted an auction and retained and used the 
     proceeds, GAO would raise significant exceptions, under its 
     account settlement authority, 31 U.S.C. Sec. 3526, for 
     violations of the ``purpose statute,'' 31 U.S.C. 
     Sec. 1301(a), and the Antideficiency Act, 31 U.S.C. 
     Sec. 1341(a)(1)(A).
       If there are questions concerning these matters, please 
     contact Managing Associate General Counsel Susan. D. Sawtelle 
     at (202) 512-6417 or Managing Associate General Counsel Susan 
     A. Poling at (202) 512-2667. Assistant General Counsels David 
     Hooper and Thomas H. Armstrong, Senior Attorney Bert Japikse, 
     and Staff Attorney James Murphy also participated in 
     preparing this opinion.
           Sincerely yours,
                                               Gary L. Kepplinger,
     General Counsel.

                          ____________________