NEPA Meets the Energy Crisis: D.C. Circuit Finds Statutory Violations But Refuses to Enjoin Ongoing Energy Projects

In two recent decisions, the United States Court of Appeals for the District of Columbia Circuit found violations of the National Environmental Policy Act (NEPA) in the conduct of federal agencies concerning the 1976 sale of outer continental shelf oil and gas leases in the Gulf of Alaska¹ and the approval of construction of a joint railroad line for the transportation of coal out of the Powder River Basin in Wyoming.² The court, however, refused to grant injunctive relief pending full compliance with NEPA's requirements. In both cases, the environmental impact statements (EISs) were held inadequate for failure to discuss certain alternatives, yet injunctions vacating the sale and the approval order and prohibiting further exploratory drilling or railroad construction were denied as inappropriate under the circumstances.

Some environmental advocates see in these rulings the spector of a disturbing trend away from past judicial willingness to enjoin projects until full compliance with the statutory requirements has been achieved, a judicial stance that has molded NEPA into an effective tool for the protection of environmental values. The D.C. Circuit however, saw itself as simply applying traditional equitable analysis rather than breaking new legal ground on the question of injunctive relief in NEPA litigation.

The decisions also treat other important issues such as the application of the doctrine of exhaustion of administrative remedies in NEPA cases and the effect that designation of a project as "environmentally unsatisfactory" by the Council on Environmental Quality (CEQ) pursuant to a referral from the Environmental Protection Agency (EPA) under § 309 of the Clean Air Act³ has on a lead agency's discretion to decide to go ahead with the project without waiting to collect and evaluate additional environmental information.

Background of Alaska v. Andrus (OCS Lease Sale)

In 1974, former President Nixon directed the Secretary of the Interior to increase drastically the acreage leased for oil and gas exploration and production on the outer continental shelf (OCS) as part of "Project Independence." The Secretary was to reserve decision on opening Atlantic and Alaska OCS areas to leasing, however, until the Council on Environmental Quality completed a study on the associated environmental risks.⁴

The CEQ study, which was completed in April 1974, concluded that leasing in the Gulf of Alaska posed greater environmental dangers than in any other OCS area.⁵ The Secretary of the Interior nonetheless scheduled portions of the Alaskan OCS for leasing earlier than other areas and prepared a draft environmental impact statement on a proposed sale in the Gulf of Alaska. In its comments on the draft EIS, the Environmental Protection Agency urged that exploration and development in the Gulf of Alaska be delayed because of the lack of reliable baseline information upon which to rest an assessment of the apparently serious environmental hazards posed by leasing in that area.

The Department of the Interior then prepared a final EIS which discussed the alternative of delaying the Gulf of Alaska sale pending the completion of baseline environmental studies. Upon review of the final statement pursuant to § 309 of the Clean Air Act,⁶ the EPA Administrator concluded that the lease sale as proposed was "unsatisfactory from the standpoint of environmental quality," and referred the matter to CEQ under § 309(b).⁷ After examining the proposed sale, the Council agreed that it should be delayed for environmental reasons but acknowledged that the Secretary of the Interior had sole authority to balance the environmental benefits of delay against the cost of postponing potential oil and gas production and make the final decision whether to proceed. However, the Council recommended that if the Secretary were to proceed with the sale, he should restrict the acreage offered to a contiguous 150,000-acre block that was low in vulnerability to environmental damage.

In February 1976, the Secretary decided to proceed with the sale, but he reduced the acreage offered from 1.8 million to 1.1 million. CEQ's final word on the matter expressly agreed with EPA's determination that the sale, even as modified, was still "environmentally unsatisfactory." The Secretary subsequently withdrew an additional 92,000 acres and held the sale on April 13, 1976. Bids were ultimately accepted on tracts totalling 410,000 acres. The State of Alaska and other parties unsuccessfully sought a preliminary injunction against the sale,⁸ and their complaint alleging that the requirements of NEPA had been violated and asking that the sale be voided was [8 ELR 10063] later dismissed by the district court.⁹

The D.C. Circuit Decision

On appeal, plaintiffs argued that the lower court had erred because the EIS for the lease sale was inadequate and the decision to proceed with the sale rather than delay it pending receipt of additional environmental information was an illegal abuse of discretion. The D.C. Circuit, in an opinion written by Chief Judge Bazelon, accepted plaintiffs' first argument, ruling that the impact statement improperly failed to evaluate alternative operating orders specifying safety and environmental standards for OCS drilling activities or to consider the inclusion in the leases of termination clauses for lease cancellation if unforeseen environmental hazards are later discovered.¹⁰ The court sidestepped appellants' second contention, however, holding that it was unnecessary to decide whether the Secretary's decision to proceed in the face of an incomplete environmental record and the EPA and CEQ recommendations was a reasonable exercise of his discretion.

Judge Bazelon's rationale for the refusal to resolve this question was that the period of delay envisioned by the recommendations for delay had already elapsed. The court simply presumed that data from the continuing baseline studies had thus become available for use in determining whether to change the OCS operating orders. The court's opinion nonetheless contains dicta which offer some guidance as to the effect EPA and CEQ judgments that a project is environmentally unacceptable have on the lead agency's ability to proceed with implementation in the absence of full environmental information.

The Effect of CEQ and EPA Recommendations Under § 309

The court stated that when the responsible decision maker has fully and carefully considered the risks involved and has decided to proceed with the project despite the absence of complete information concerning environmental dangers, reviewing courts and agencies with environmental expertise such as EPA and CEQ are not empowered by either NEPA or § 309 of the Clean Air Act to substitute their judgment for the lead agency's. This of course avoids the question of what constitutes "full and careful consideration," although the court did refer pointedly to the lack of any quantitative estimates of the costs and benefits of delay.

The opinion also indicates that while strong negative comments by EPA and CEQ as part of the § 309 referral process do not bar the Department of the Interior from going ahead with the lease sale, they do "give rise to a heightened obligation … to explain clearly and in detail" the reasons for proceeding in the face of objections from these "environmental" agencies.¹¹ The court found that § 309 was not intended merely to reiterate the requirement of § 102(2)(C) of NEPA¹² that impact statements be transmitted to CEQ but to assure more adequate consideration by lead agencies of the views of CEQ and EPA. In the court's view, § 309 requires, at a minimum, that lead agencies articulate their reasons for proceeding with projects that have been labeled "environmentally insatisfactory" by CEQ and EPA pursuant to review under § 309. Here again, however, the court provided little guidance to agencies and future reviewing courts as to how this test is to be applied; it refused to rule on whether the Secretary's § 309 obligations were satisfied by his assertions that the environmental risks presented by the proposed sale were acceptable and that the potential value to the nation of sizable domestic energy supply discoveries was substantial.

The Issue of Injunctive Relief

Having determined that the lease sale EIS was inadequate on two counts (failing to evaluate alternative operating orders or to consider the inclusion of termination clauses in the leases), Judge Bazelon was faced with framing a decree to remedy these NEPA violations. NATURAL RESOURCES DEFENSE COUNCIL V. EXPORT-IMPORT BANK OF THE and failed to obtain a stay pending appeal, but they continued to press for both an order setting aside the lease sale and an injunction prohibiting further exploratory drilling.

The court noted that there is a presumption in favor of granting injunctive relief to enforce strict compliance with NEPA's requirements, but that such relief does not automatically below a finding that NEPA has been violated.¹³ In Judge Bazelon's view, courts which have enjoined ongoing projects under NEPA have done so to preserve the decision maker's full opportunity to choose among alternatives while additional information is gathered and considered. Where the violations do not foreclose the possibility that the agency will "change its plans to benefit the environment," an ongoing project should not be enjoined. This is especially true, according to Judge Bazelon, if the public interest clearly favors the project's continuation.

Using a "particularized" equitable analysis, the court determined that invalidating the sale and prohibiting further drilling was neither necessary nor approprite. Judge Bazelon saw the agency's failure to consider the option of imposing different operating orders on lessees or the possibility of including termination clauses in the leases as relating to the method by which the sale was conducted rather than the more fundamental question of whether it was to be held. These statutory violations thus did not necessitate that the sale be set aside, the court said, because proper consideration of these omitted alternatives, which both contemplate a sale, could at most have led the Secretary to conduct the sale differently [8 ELR 10064] and could not logically have led him to cancel it altogether.

To the extent the Secretary could still implement the environmental protections these alternatives would have offered, the court concluded, the sale need not be invalidated. The operating orders issue presented no problems in this regard since such orders may be amended at any time and applied to existing leases. The court therefore saw no reason to vacate the sale on this ground and simply ordered that the Secretary undertake an expeditious environmental evaluation of alternative orders.

The court gave even shorter shrift to the question of including termination clauses in the leases. It held that the Secretary is currently not required to consider that option because of the serious legal problems an attempt to insert such clauses in existing leases would cause,¹⁴ as well as the extent to which it might dissuade the oil industry from participating in the national "energy resource mobilization." This point was supported by the unrealistic suggestion that vacating the sale is unnecessary because the government retains the option of instituting formal condemnation proceedings to take back leasehold interests where subsequent information indicates exploration or production would cause environmental damage that could not be avoided by modifying the operating orders.

Sierra Club v. Interstate Commerce Commission

The D.C. Circuit again denied injunctive relief after finding NEPA violations in a challenge to an Interstate Commerce Commission (ICC) order granting a certificate of public convenience and necessity for the construction of a 115-mile railroad line for the joint use of two railroads in transporting coal mined in the Powder River Basin area of Wyoming and Montana.¹⁵ The Sierra Club asserted in its petition for review that the EIS for the rail line certificate failed to discuss adequately the "off-site" impacts of constructing the line or the alternative of building a coal slurry pipeline. It also charged that the agency had failed to consider the merits of alternative routes in making its decision to approve the proposed joint route.

Exhaustion of Administrative Remedies

The first obstacle petitioner had to face was the charge that the suit was barred by its failure to exhaust administrative remedies. Although the allegations in the petition had been voiced by petitioner and others in comments on the draft EIS, these points had not been presented in the ICC rail line certification proceeding. The agency contended that this failure foreclosed petitioner's right to seek judicial review of the Commission's action on these grounds.

Judge Bazelon, again writing for the court, saw the agency as arguing that the sufficiency of an EIS can be challenged on appeal only if objections to the adequacy of the statement are expressly reiterated at each stage of the administrative proceedings, a contention he found untenable. Noting that it is unclear to what extent the exhaustion doctrine applies in NEPA cases,¹⁶ Judge Bazelon found the notion that challenges must be repeated at all stages especially misplaced in the NEPA context where an "action-forcing" statute places an affirmative duty upon agencies to develop environmental information and evaluate possible alternatives. Moreover, the danger of deliberately deferred challenges to agency action is lessened in NEPA cases by the knowledge that intervenors who do not draw the agency's attention to a particular alternative greatly increase the burden of showing subsequently that the agency's failure to identify and discuss that alternative was unreasonable. Judge Bazelon pointed out that the objections had in fact previously been brought to the agency's attention and concluded that the marginal deterrence of circumvention of the administrative process provided by requiring exhaustion at every stage of that process was outweighed by the public interest in assuring that the ICC has undertaken a full consideration of environmental alternatives.

Judge Leventhal dissented vigorously from the court's ruling on this point, contending that the petitioner, as a party to the ICC proceeding, bore a responsibility to focus issues in that proceeding so as to promote efficient and meaningful resolution of disputes. Judge Leventhal viewed the petitioner's assertion of these grounds in its petition for judicial review as a "tardy" maneuver¹⁷ that was unlikely to yield anything but "sterile and ritualistic compliance" with the letter of the statute on remand.¹⁸

Injunctive Relief Unwarranted

The court's examination of the EIS and the administrative record led it to conclude that while the impact statement's discussion of the coal slurry pipeline alternative was adequate, the investigation of off-site impacts associated with the rail line was insufficiently detailed. It also ruled that the Commission improperly [8 ELR 10065] failed to consider alternative route alignments or to rank these alternatives in terms of overall environmental desirability.

Having found these NEPA violations by the ICC, the court was again faced with the problem of framing an appropriate remedy. It determined that the record should be remanded to the agency for a fuller consideration of alternative routes, but the court found a number of factors that served to overcome that presumption in favor of injunctive relief and led it to decline to vacate the ICC order or enjoin further construction. Chief among these factors was the ongoing construction on the joint route, which the court ascribed in large part to petitioner's delay in seeking a stay of construction until the eve of oral argument.¹⁹ Judge Bazelon also pointed to the absence in the record of data from which to determine either the costs of halting construction or the level of additional resources that would be irrevocably committed to the project if construction were allowed to continue while the ICC considered alternatives. The court noted as well that construction may have reached the point where the rail line is an environmental fait accompli.²⁰

The court held that the impact statement's failure to examine off-site impacts represented only one error in a long and comprehensive EIS and could also be repaired on remand. He directed the Commission to determine within 60 days whether construction should be halted pending its assessment of alternative routes.

The Availability of Injunctive Relief for NEPA Violations

As the court noted in both Alaska v. Andrus and Sierra Club v. ICC, the remedy presumptively available whenever a NEPA violation is found is an injunction to maintain the status quo until compliance with the statutory requirements is achieved.²¹ But courts have often exercised their traditional equitable discretion to draw such injunctions narrowly or not issue them at all where the EIS contains only relatively minor defects,²² the project is in an advanced stage of completion,²³ or if an injunction would cause sizable costs to be incurred with little compensating benefit,²⁴ factors which were present to greater or lesser extents in both Alaska v. Andrus and Sierra Club v. ICC.

An additional ground for denying an injunction mentioned in Alaska v. Andrus is the presence of a substantial public interest in favor of continuation of the project pending NEPA compliance. Perhaps the clearest example of this principle in action was Concerned About Triedent v. Rumsfeld,²⁵ in which the court refused to enjoin construction of the Trident nuclear submarine support facility in Bangor, Washington pending full NEPA compliance because national defense considerations weighed strongly in favor of speedy completion of the base. Judge Bazelon's opinion in Alaska v. Andrus suggests that courts will accord the same overriding weight to the national policy of increasing domestic energy production and may thus be unwilling to enjoin actions to achieve that goal except for gross violations of NEPA's requirements.²⁶ This observation comports with the generally unsuccessful record of legal challenges to various aspects of the national program to expand OCS oil and gas exploration and production by opening new areas to leasing.²⁷

This same basic policy consideration may also have been at work in the Sierra Club v. ICC decision, but the prime reasons for the denial of injunctive relief against further construction of the railroad line were petitioner's delay in seeking a stay²⁸ and the dearth of information in the record from which to discern the relative costs and possible benefits of an injunction pending full NEPA compliance. The court was simply unwilling to exercise its discretionary injunctive powers in the absence of a clearer indication that the balance of equities and hardships tipped decidedly in favor of stopping construction.

The court's refusal to set aside the lease sale or vacate the ICC order granting the railroad line construction certificate is perhaps easier to understand. Reviewing courts have generally avoided ordering an agency to undo what has already been done in violation of NEPA.²⁹

[8 ELR 10066]

Conclusion

The D.C. Circuit's decision in Alaska v. Andrus and Sierra Club v. ICC merit careful examination by NEPA scholars and practitioners. The court's discussion in Alaska of the weight to be accorded CEQ and EPA recommendations made as part of the § 309 referral process represents one of the first instances of judicial interpretation of this statutory provision.³⁰ The opinion indicates that although there is room for judicial scrutiny of a lead agency's explanation of its decision to proceed with a project rated "environmentally unsatisfactory" by the two "environmental" agencies, the resolution of such interagency disputes is essentially a matter for the Executive Branch.

The three separate opinions on the exhaustion of administrative remedies question in Sierra Club v. ICC provide a thorough ventilation of the considerations surrounding the application of that doctrine in the context of litigation under NEPA. The court's ruling that the failure to reiterate at every stage of the administrative proceedings an environmental objection which is already before the agency does to the reasonableness of the agency's failure to discuss that matter and the availability of injunctive relief seems preferable both logically and equitably to the dissent's position that it should serve to bar judicial review altogether.

Finally, the court's refusal to grant an injunction in either case shows that the traditional presumption in favor of injunctive relief to remedy NEPA violations may break down when an agency has made a good faith effort to prepare a comprehensive impact statement and substantial public interest considerations weigh in favor of continuing the project while minor defects in the EIS are corrected. Of the various types of federal projects which may be undertaken in the foreseeable future, it is large-scale efforts to increase domestic energy supplies, such as accelerated OCS leasing or extraction of oil from shale, that portend the most serious and wide-ranging environmental impacts and for which thorough application of the NEPA process is thus crucial. Ironically, however, Alaska v. Andrus suggests it is in cases concerning precisely these sorts of nationally important energy production programs that injunctive relief, the "engine" of NEPA and the most effective remedy to enforce compliance with the statute, may be unavailable to ensure that particular projects are worth their environmental price.

1. Alaska v. Andrus, __ F.2d __, 8 ELR 20237 (D.C. Cir. Feb. 24, 1978).

2. Sierra Club v. Interstate Commerce Commission, __ F.2d __, 8 ELR 20265 (D.C. Cir. Feb. 21, 1978).

3. 42 U.S.C. § 7609, ELR STAT. & REG. 42259.

4. See Comment, CEQ's Report on Outer Continental Shelf Oil and Gas Development: Recommendations for Institutional and Legal Modifications, 4 ELR 10071 (1974).

5. See id.

6. Section 309(a) requires EPA to "review and comment in writing on" the environmental impacts of proposed federal actions. 42 U.S.C. § 7609(a), ELR STAT. & REG. 42259. If as a result of such review, the EPA Administrator determines that an action is environmentally "unsatisfactory," § 309(b) directs him to publish his determination and refer the matter to the Council on Environmental Quality. 42 U.S.C. § 7609(b), ELR STAT. & REG. 42259.

7. See Comment, Section 309 of the Clean Air Act Revisited: EPA Makes Second Referral of "Environmentally Unsatisfactory" Federal Proposal to CEQ, 6 ELR 10059 (1976).

8. Alaska v. Kleppe, 6 ELR 20479 (D.D.C. 1976).

9. Alaska v. Kleppe, 6 ELR 20669 (D.D.C. 1976).

10. Alaska v. Andrus, __ F.2d __, 8 ELR 20237 (D.C. Cir. Feb. 24, 1978).

11. Section 309(b) is silent as to what is to happen after a referral has been made. Commentators have suggested that the project be suspended while the matter is resolved within the Executive Branch, at the presidential level if necessary. W. RODGERS, ENVIRONMENTAL LAW § 7.2, at 710 (1977); F. ANDERSON, The National Environmental Policy Act, in FEDERAL ENVIRONMENTAL LAW 270 (Dolgin & Guilbert eds. 1974). This model was essentially adopted by CEQ in the first draft of its NEPA compliance regulations. See Comment, Reinvigorating the NEPA Process: CEQ's Draft Compliance Regulations Stir Controversy, 8 ELR 10045, 10046-47 (Mar. 1978).

12. 42 U.S.C. § 4332(2)(C), ELR STAT. & REG. 41009.

13. See generally, W. RODGERS, ENVIRONMENTAL LAW § 7.10, at 798-809 (1977).

14. The court noted the Ninth Circuit's decision in Union Oil Co. v. Morton, 512 F.2d 743, 5 ELR 20218 (9th Cir. 1975), that cancellation of a lease not containing a termination clause is equivalent to an unauthorized taking of private property.

15. Sierra Club v. Interstate Commerce Commission, __ F.2d __, 8 ELR 20265 (D.C. Cir. Feb. 21, 1978).

16. Compare Maryland-Nat'l Capital Park & Planning Comm'n v. United States Postal Serv., 487 F.2d 1029, 1040 n.9, 3 ELR 20702 (D.C. Cir. 1973) and Aeschliman v. NRC, 547 F.2d 622, 625 n. 6, 6 ELR 20599 (D.C. Cir. 1976), cert. granted sub nom. Vermont Yankee Nuclear Power Corp. v. NRC, 97 S. Ct. 1098 (1977), with Washington Util. & Trans. Comm'n v. FCC, 513 F.2d 1142, 1168 (9th Cir.), cert. denied, 423 U.S. 836 (1975).

17. The reason for tardy presentation of these objections, he suggested, was the Supreme Court's intervening decision in Kleppe v. Sierra Club, 427 U.S. 390, 6 ELR 20532 (1976), which rejected the same argument petitioner had relied upon in the certification proceeding.

18. In a concurring opinion, Judge Robinson suggested that the dissent was less concerned with traditional exhaustion doctrine than with the conduct of the petitioner in this particular case. He saw the failure to raise objections to the EIS during the ICC proceeding as a factor which should be weighed against injunctive relief rather than used to bar the Sierra Club's petition for review of the ICC decision altogether. Equitable adjustments in the remedy granted NEPA plaintiffs who fail to raise their objections before the lead agency on propitious occasions would, in his view, suffice to discourage the sort of circumvention of the administrative process to which the dissent objected.

19. In its Reply Brief, petitioner explained that it had not yet sought injunctive relief because, so far as it had been able to determine, no construction had yet begun on the railroad line. Petitioner specifically warned against the impression that its decision not to seek an injunction at that time indicated a lack of concern with potential construction. Reply Brief for Petitioner at 26, ELR Doc. [509-D].

20. Judge Bazelon saw this as a factor which would weigh strongly but not conclusively against vacating the certificate. See Ogunquit Village Corp. v. Davis, 553 F.2d 243, 7 ELR 20381 (1st Cir. 1977) (denial of injunction requiring the dismantling of a project completed in violation of NEPA).

21. See W. RODGERS, ENVIRONMENTAL LAW § 7.10, at 799 (1977); F. ANDERSON, NEPA IN THE COURTS at 49-55 (1973).

22. W. RODGERS, ENVIRONMENTAL LAW § 7.10, at 801 (1977).

23. Jones v. District of Columbia Redevelopment Land Agency, 499 F.2d 502, 4 ELR 20479 (D.C. Cir. 1974).

24. Environmental Defense Fund, Inc. v. Froehlke, 477 F.2d 1033, 3 ELR 20383 (8th Cir. 1973).

25. 555 F.2d 817, 6 ELR 20787 (D.C. Cir. 1976). See also Comment, NEPA and National Defense: Trident Base Allowed to Proceed Despite Inadequate Impact Statement, 6 ELR 10275 (1976).

26. In a footnote, Judge Bazelon, speaking only for himself, lessened this implication to some extent by cautioning that "the mere invocation of the energy shortage" does not constitute "a sufficient explanation for every policy decision that will in any way alleviate that shortage." __ F.2d __, 8 ELR at 20243 n.45.

27. See e.g., County of Suffolk v. Secretary of the Interior, 562 F.2d 1368, 7 ELR 20637 (2d Cir. 1977), rev'g 7 ELR 20231 (E.D.N.Y.); Sierra Club v. Morton, 510 F.2d 813, 5 ELR 20249 (5th Cir. 1975); County of San Diego v. Andrus, 7 ELR 20754 (S.D. Cal. 1977); Southern California Ass'n of Governments v. Kleppe, 6 ELR 20115 (D.D.C. 1975); California v. Morton, 404 F. Supp. 26, 6 ELR 20088 (C.D. Cal. 1975). But see Massachusetts v. Andrus, __ F. Supp. __, 8 ELR 20187 (D. Mass.), motion for stay of injunction pending appeal denied, __ F.2d __, 8 ELR 20192 (1st Cir. Jan. 30, 1978).

28. See supra note 19.

29. W. RODGERS, ENVIRONMENTAL LAW § 7.10, at 803-04 (1977); see also Ogunquit Village Corp. v. Davis, 553 F.2d 243, 7 ELR 20381 (1st Cir. 1977); Upper Pecos Ass'n v. Stans, 500 F.2d 17, 4 ELR 20835 (10th Cir. 1974) (NEPA does not require the voiding ab initio of an Economic Development Administration grant for construction of a road through the Santa Fe National Forest made before an EIS was filed). The Supreme Court reinforced this view by indicating in Aberdeen & Rockfish R.R. Co. v. SCRAP, 422 U.S. 289, 5 ELR 20418 (1975), that an agency need not start its entire decision-making process over again in order to correct a NEPA violation. Id. at 321, 5 ELR at 20425.

30. The provision has been much discussed by scholars of NEPA, however, See, e.g., F. ANDERSON, The National Environmental Policy Act, in FEDERAL ENVIRONMENTAL LAW 267-73 (Dolgin & Guilbert eds. 1974); Healy, The Environmental Protection Agency's Duty to Oversee NEPA's Implementation: Section 309 of the Clean Air Act, 3 ELR 50071 (1973).