Closing Observations

Owen Olpin

Editors' Summary: Although NEPA requires the preparation of an EIS for every major federal action significantly affecting the environment, federal agencies often decide in particular cases that compliance with NEPA is satisfied by preparation of EAs. The decision not to prepare an EIS is usually based on a finding of no significant impact. When an agency's threshold NEPA decision is challenged in court, what is the appropriate standard of review? The federal courts of appeals answer this question in at least two different ways: some circuits use the "arbitrary and capricious" standard, while others inquire into the "reasonableness" of the agency's decision. Several courts have expressed doubt that there is any genuine distinction between the rival standards, and the Supreme Court has so far declined to settle the issue. The author of this Article surveys the federal case law on this question, exploring the approach of each circuit and taking issue with those who maintain that the difference between the standards is illusory. The vital difference, the author argues, is that courts using the reasonableness standard are more likely to substitute their own judgment for that of the agency, while courts adopting the arbitrary and capricious standard tend not to second-guess an agency's decision. Because he sees an important difference between these two approaches, the author urges the Supreme Court to grant certiorari to resolve the circuit split.

Owen Olpin is a partner with O'Melveny and Myers in Los Angeles, California.

[18 ELR 10385]

I share with you an idea that was most eloquently stated by the late Leon Green of the University of Texas Law School. Professor Green observed that law and lawyers merit no particular reverence except to the extent they enable people to carry on their various activities conveniently and safely. I will consider this idea in light of some issues raised during our Airlie deliberations.

Our first topic was bankruptcy. We examined the bankruptcy regime as it dealt with yet another subtle and complicated problem testing the capabilities of the bankruptcy bar and bench. In the final analysis, there was no transformation of bankruptcy law into something else by virtue of having addressed tough environmental problems. Rather, there were struggles with the particular issues in bankruptcy law's customary manner within its customary framework. This is confirmed by the Supreme Court's 1985 decision in Kovacs,¹ which held that claims for hazardous waste cleanup costs are just like any other claims presented to a bankruptcy court and may be discharged through bankruptcy proceedings. Only a superficial reading of Midlantic,² decided the following year, would yield any different conclusion. Read superficially, one might believe Midlantic holds that no longer can a bankruptcy trustee ever abandon contaminated property. Such a reading, though, is much too simplistic. The key concern of bankruptcy remains the division of the proceeds of the debtor's estate, and Midlantic does not stand for the proposition that claims for cleanup costs have priority over other claims.

Thus, while there have been tough calls to make, bankruptcy courts and bankruptcy lawyers are acting as themselves rather than as newly chartered environmental protection institutions.

We have talked much during the conference of transactional difficulties occasioned by legal uncertainties. Uncertainties and ambiguities are thought generally not to be good things for law and lawyers to bestow upon the population. If it is true that we serve only to the extent that we allow people to conduct their activities conveniently and safely, it seems to me that we fail to the extent that we leave people wondering what the rules of the game are. We struggled with this issue a great deal today, and I suspect we will continue to do so.

A challenge before all of us — legislators, administrative agencies, lawyers — is to try in this complex area to articulate the rules of the game and allow the players to play it less vexed by uncertainties. This principle is one on which business people, environmentalists and others can agree.

Consider, for example, the position of the lender. If a lender is told that the only risk it must take is the credit risk — that is, whether the loan will be repaid, or the collateral will be sufficient, or the borrower's credit will suffice — such a rule allows the lender to decide what kind of loan to make available and on what terms.

On the other hand, if it is determined that a lender should take not only a credit risk but also a hazardous waste liability risk, then if this rule is clearly known, the lender can choose loan terms accordingly. To leave this fuzzy may put the lender in a position where the only rational behavior is always to assume the worst and either stay out of the lending market entirely or overprice the loan.

There is much to be said for striving to inform lenders, owners, buyers, sellers, tenants, and all of the people who are in the game as fully as possible to guide them in the choices they must make.

Of course, an argument can be made that society might conceivably be served by uncertainty in specific circumstances: If everyone is fearful of liability, everyone might try harder to reduce risks. If we choose this approach, then at least we ought to be clear about our choice to obfuscate. That is, if we are going to mumble, we should at least mumble more clearly.

Despite the intellectual argument for uncertainty, I submit that the better approach to the contamination problem is to spell out the rules clearly and let lenders and others know of the risks to which they will be exposed.

Who, then, should spell out those rules? It has been suggested that, in addition to writing environmental rules, the EPA should facilitate commercial transactions, serving advisory functions by giving assurances that transactions will not result in unacceptable exposures and risks. But according to Mr. Lucero, EPA is possessed of a certain single-mindedness; the agency does not intend to devote much energy to facilitating business generally or real estate transactions in particular. In my view, this decision is the correct one. The EPA has precisely defined missions, and, while it should clearly announce the rules within its areas of concern, it is ill-equipped to serve a broad commercial facilitation function.

My final point is made by harking back to the ancient conveyance, "A to B and the heirs of his body." This language was used at common law to create the fee tail estate in land, which had the consequence of keeping land in the same family for generation after generation, as the land always passed successively to the oldest male offspring. In medieval England, this restriction was regarded as undesirable, and efforts to frustrate it were encouraged. A clear policy choice was made that land should be kept in commerce and that conveyancing devices fettering the free alienability of land should be removed. This policy against restraints on alienation has been a part of Anglo-American tradition for centuries, perhaps most familiarly symbolized by the rule against perpetuities.

With regard to the issues we have discussed today, perhaps we should question laws such as New Jersey's ECRA that are designed to stop commerce in land until toxics cleanup is accomplished. It is conceivable, of course, that [18 ELR 10386] the problem of toxic contamination is so severe that we ought to fix it by inhibiting land commerce so completely that the situation becomes intolerable and people must address the problem in order, once again, to achieve the medieval goal of rendering land alienable. If we make that choice, however, we ought to consider carefully the trade-offs involved and the resource allocations implicit in the choice. I am not at all persuaded that ECRA-type legislation has been thought through that carefully to date, and I will be interested to see how other states approach the problem and how this experiment ultimately fares.

1. Ohio v. Kovacs, 105 S. Ct. 705 (1985), 15 ELR 20121.

2. Midlantic National Bank v. New Jersey Dept. of Envtl. Protection, 106 S. Ct. 755 (1986), 16 ELR 20278.