Second Circuit Puts Atlantic OCS Oil Development Back in Business

In a decision reaffirming the Interior Department's Atlantic Outer Continental Shelf (OCS) oil and gas leasing procedures, the Second Circuit Court of Appeals, in County of Suffolk v. Secretary of the Interior,¹ reversed a lower court's nullification² of Interior's first sale of Atlantic OCS exploration leases. The court concluded that the district court erred in finding that the requirements of the National Environmental Policy Act (NEPA) had been violated. Instead, the court of appeals ruled that the environmental impact statement (EIS) for the lease sale contained sufficient information on the environmental consequences of the proposed action to fulfill thestatutory requirements given the fact that the sale alone did not constitute an irrevocable commitment to ultimately allow OCS oil and gas development.

First Sale on Atlantic OCS

The genesis of the litigation was the federal government's decision to develop the Outer Continental Shelf for new sources of oil and gas. The first major sale of OCS exploration and development leases on the Atlantic coast was set for a year ago, but Judge Weinstein of the Federal District Court for the Eastern District of New York preliminarily enjoined the sale as a result of a lawsuit alleging NEPA violations. The injunction was stayed by the Second Circuit, and the sale took place after the Supreme Court refused to vacate this stay. Early this year, Judge Weinstein voided the sale after a lengthy trial on the merits,³ concluding that the EIS for the decision to go ahead with the sale was in fact inadequate, but the effect of the decision was again stayed pending appeal. Plaintiffs plan to appeal the Second Circuit's latest decision to the Supreme Court and seek a clarification of the distinction between the standard that a district court uses in reviewing an agency's EIS and the standard used by an appellate court in reviewing the lower court's findings.

Judge Weinstein used the familiar "rule of reason" in analyzing the Interior Department's EIS on the Atlantic OCS lease sale. This standard does not allow a substitution of the judge's substantive view of the project for that of the agency. Rather, it requires a determination whether all reasonably ascertainable environmentally relevant factors were considered by the agency in arriving at the decision. Judge Weinstein concluded that the EIS for the lease sale failed to explore adequately all relevant factors and thus did not meet the statutory requirements.

Explicitly accusing Judge Weinstein of letting his own opinions interfere with his duty on review, the Second Circuit proceeded to find that most of his doubts about the adequacy of the EIS were insubstantial at this time. In so doing, the Second Circuit applied its own "rule of reason" in essentially taking a fresh look at the EIS on which the lower court's decision was based.

Second Circuit Decision

The Second Circuit justified its disregard for Judge Weinstein's conclusions by carving out an exception to [7 ELR 10193] Federal Rule of Civil Procedure 52(a), which states that "[f]indings of fact shall not be set aside unless clearly erroneous." With a curious illogic, the Second Circuit decided that the lower court's conclusion "is not strictly a finding of fact but rather an exercise in judgment as to what is reasonable under given circumstances which, of course, may vary from case to case."⁴ Furthermore, the court of appeals found that the "clearly erroneous" rule does not apply when the evidence is primarily documentary, rather than testimonial, and that the appellate court is "in as good a position as the district court to determine on the undisputed facts what could reasonably be demanded of the EIS in issue."⁵

Taking the decision as a whole, the Second Circuit appears to have found that Judge Weinstein's holdings were "clearly erroneous" without actually saying so. The court may have been unwilling to be explicit on this point, however, because it had doubts itself that certain environmental aspects were in fact fully considered.⁶ The hook upon which the Second Circuit relied to pull itself out of this dilemma was its underlying belief that, at this relatively early stage of the entire Atlantic OCS oil and gas development program, a full and complete exploration of all possible issues was not required. The NEPA analysis which has taken place thus far relates primarily to the exploration of the resource potential of a very large area, rather than to the development of specific sites, and the general problems of transportation of the oil from as-yet unidentified sites to shore, rather than specific routes and landfalls. The environmental hazards that have been pinpointed, therefore, do not relate to specific development sites or pipeline routes. In the court's view, these more specific hazards can be adequately discussed in the EIS prepared in conjunction with the actual development decisions and minimized when these decisions are made. The court emphasized that the Department of the Interior retains sufficient control over the development program to insure this protection if such a phased EIS preparation schedule is followed.

The Second Circuit's basic assumption about the availability of mid-course corrections may be somewhat illusory considering that massive, federally sponsored programs often achieve a self-fufilling impetus that is difficult if not impossible to untrack. While certain potential hazards, such as the possible impact of local regulations on potential pipeline landfall locations, may be too speculative to be fully discussed at this stage of the OCS leasing program, the Second Circuit may have misconstrued its own reviewing role when it used a "rule of reason" to analyze the EIS itself rather than simply determining whether or not there was clear error in the lower court's findings.

The courts in this case were faced with the difficult task of reconciling the national policy of environmental protection and the need for more domestic energy production through development of new sources. By categorically rejecting the doubts raised by the district court as unimportant at this stage of the entire OCS development program without labeling them clearly erroneous, the Second Circuit seems to have fashioned a new and questionable rule of appellate review in NEPA cases that minimizes the usefulness of a trial at the district court level.

1. __ F.2d __, 7 ELR 20637 (2d Cir. Aug. 25, 1977).

2. County of Suffolk v. Secretary of the Interior, __ F. Supp. __, 7 ELR 20230 (E.D.N.Y. Feb. 17, 1977).

3. Id. See Comment, Interior's Failure to Comply with NEPA Blocks Atlantic OCS Oil Leasing, 7 ELR 10067 (Apr. 1977).

4. 7 ELR at 20638.

5. 7 ELR at 20639.

6. 7 ELR at 20647.