Sierra Club v. Peterson

No. 81-1230 (D.D.C. March 31, 1982)

The court upholds defendants' determination not to prepare an environmental impact statement for oil and gas leases issued in the "Palisades" RARE II further planning area in the Targhee and Bridge-Teton National Forests of Idaho and Wyoming. Initially, the court rules that the action is not barred by the statute of limitations for suits contesting oil and gas leasing decisions by the Secretary of the Interior because the doctrine of relation back is applicable. Plaintiff's supplemental pleading challenging Interior's final approval arose out of the subject matter of the original complaint challenging the Forest Service's actions. Applying a four-part version of the arbitrary and capricious standard of review, the court rules that defendants properly made a finding of no significant impact. Lease stipulations that require a site-specific environmental analysis prior to any surface disturbance ensure that there will be no significant environmental effects before further analysis under the National Environmental Policy Act The court rejects plaintiff's argument that these lease stipulations may not be enforceable. The Secretary has authority to condition leases and under contract law leases legally obligate themselves to such conditions.

Counsel for Plaintiff
Howard I. Fox
Sierra Club Legal Defense Fund, Inc.
1424 K St. NW, Suite 600, Washington DC 20005
(202) 347-1770

Counsel for Defendants
Robert B. Schaefer
Land and Natural Resources Division
Department of Justice, Washington DC 20530
(202) 633-2668

[12 ELR 20455]

Robinson, J.:

Memorandum Opinion

The federal defendants in this action have approved oil and gas exploration and development leases for an area known as the "Palisades" (a 247,000 acre section of the Targhee and Bridge-Teton National Forests of Idaho and Wyoming). The approval followed an environmental assessment, which determined that an environmental impact statement pursuant to the National Environmental Policy Act (NEPA), 42 U.S.C. § 4231 et seq. (1976), was unnecessary. In this action, Plaintiff Sierra Club challenges the absence of an environmental impact statement and seeks to enjoin issuance of the approved leases. For the reasons stated herein, Defendants' Motion for Summary Judgment is granted.

I. Background

The Mineral Leasing Act of 1920, 30 U.S.C. § 226 (1976), allows the Secretary of the Interior to lease certain lands owned by the United States which may contain oil and gas deposits, including National Forest lands administered by the National Forest Service.¹ The Bureau of Land Management (BLM) is the subdivision of the Interior Department delegated by the Secretary to issue leases. 43 C.F.R. § 3100 (1980).

Lease applications for National Forest lands are forwarded by the BLM to the Forest Service for its recommendation on leasing, including the stipulations and conditions to be included in any leases issued. By a Memorandum of Understanding between the BLM and the Forest Service entered into in December, 1980, the Forest Service is responsible for complying with the National Environmental Policy Act with respect to the environmental impacts of oil and gas exploration and development activities on National Forest lands. According to the Memorandum of Understanding, it is the general practice of the BLM to accept Forest Service recommendations on lease issuance.

The National Forest land involved in this litigation is roadless and has been reviewed by the Forest Service to determine whether is meets the definition of wilderness under the Wilderness Act of 1964, 16 U.S.C. § 1131(c), and whether it should be recommended for inclusion within the National Wilderness Preservation System. That review was part of the Roadless Area Review and Evaluation known as RARE II.

The Palisades is a RARE II "further planning area." Under RARE II, further planning areas are part of the three-tiered classifications of roadless areas. At one extreme is wilderness; at the other is non-wilderness. In between the two is the further planning area classification.

Further planning areas contain lands for which no wilderness/non-wilderness recommendation was made, pending the development to land and resource management plans required by the National Forest Management Act, 16 U.S.C. § 1604. Prior to completion of these plans, further planning areas are to be considered for all uses, including wilderness, but are to be managed insofar as possible to preserve their suitability for wilderness designation. Oil and gas exploration is permitted in further planning areas, for the purpose of gathering sufficient information to aid in the development of land and resource management plans. The RARE II Final Environmental Statement directs that oil industry exploration proposals be examined on a case-by-case, site-specific basis, in compliance with NEPA. (RARE II Final Environmental Statement at 97).

The Bureau of Land Management forwarded a number of oil and gas leasing proposals involving the Palisades to the Forest Service for its review and recommendations. On June 5, 1980, the Regional Forester for the Intermountain Region recommended full leasing of the Palisades. All Highly Environmental Sensitive (HES) lands were recommended to be leased with "standard," "further planning area" and "conditional no surface occupancy" stipulations and all lands outside of HES were recommended to be leased with "standard," "further planning area" and "special stipulations." Under the stipulation, any exploration or development would require agency approval, following an environmental analysis. The Regional Forester determined in an Environmental Assessment that such leasing would not result in significant adverse impacts on the environment, and consequently, that no environmental impact statement pursuant to NEPA was required.

Plaintiff Sierra Club appealed the Regional Forester's decision to the Chief of the Forest Service. That appeal was denied and administrative review within the Agriculture Department was exhausted. The lease applications were then sent to the Wyoming and Idaho State Directors of BLM for final processing and issuance.

The Sierra Club filed a protest against the issuance of the Palisades leases with State Directors of BLM, who forwarded the protests to BLM in Washington. On May 28, 1981, the Sierra Club filed its complaint for declaratory and injunctive relief in this Court. On June 30, 1981, BLM dismissed the Sierra Club protest and announced the leases would be issued forthwith; that decision was approved by the appropriate Assistant Secretary of the Interior.

On August 27, 1981, Plaintiff filed a Motion for a Temporary Restraining Order and for a Preliminary Injunction, seeking to have the Forest Service recommendation declared arbitrary, capricious, an abuse of discretion, and not in accordance with NEPA, and seeking to enjoin the issuance of the leases. A hearing was held on September 4, 1981, whereupon the parties agreed to attempt a settlement of this case. The motions were held in abeyance during settlement negotiations. On October 27, the parties reported that settlement was impossible, the motions for preliminary relief were withdrawn in exchange for an agreement that the leases would not issue, and a briefing schedule was established. Finally, on November 23, 1981, Plaintiff moved to file an amended complaint adding a challenge to the June 30, 1981 final decision of the Department of Interior approving issuance of the Palisades leases. The motion for leave to file was granted.

II. Defendants' Motion to Dismiss

In addition to Cross-Motions for Summary Judgment pending before the Court, the Government has moved to dismiss the amended complaint which challenges the Interior Department decision.

The Government relies on the statute of limitations for suits contesting oil and gas leasing decisions by the Secretary of the Interior, which provides in pertinent part:

No action contesting a decision of the Secretary involving any oil and gas lease shall be maintained unless such action is commenced or taken within ninety days after the final decision of the Secretary relating to such matter.

30 U.S.C. § 226-2 (1976). The final decision from the Interior Department came on June 30, 1981 when the Sierra Club's protest to the BLM was dismissed and the BLM announced that the leases would be issued forthwith. The amended complaint challenging [12 ELR 20456] that final decision was filed on December 11, 1981, more than ninety days after the final decision.²

By granting leave tofile the amended complaint, this Court did not address the statute of limitations question raised by the Government as Plaintiff assumes. While there is no bar to the claims against the Interior Department, the statute of limitations question merits some discussion.

The "amendment" to Plaintiff's complaint is actually a "supplemental pleading" pursuant to Federal Rule of Civil Procedure 15(d). A supplemental pleading sets forth "transactions, occurrences or events which have happened since the date of the pleading sought to be supplemented." FED. R. CIV. P. 15(d). The Interior Department final decision occurred after the filing of the complaint in this action.

Amended and supplemental pleadings differ in two respects: "[t]he former relate to matters that occurred prior to the filing of the original pleading and entirely replace the earlier pleading; the latter deal with events subsequent to the pleading to be altered and merely represent additions to or continuations of the earlier pleading." WRIGHT & MILLER, FEDERAL PRACTICE AND PROCEDURE § 1504 (1971). The distinction between amended and supplemental pleadings is not crucial, id., except that there is no relation back provision for supplemental pleadings as there is in Rule 15(c) for amended complaints.

Notwithstanding the absence of a relation back provision, the doctrine of relation back applies to supplemental pleadings. Fujii v. Dulles, 224 F.2d 906 (9th Cir. 1955); Russell v. New Amsterdam Cas. Co., 303 F.2d 674 (8th Cir. 1962); WRIGHT & MILLER § 1508. In this case, if the relation back doctrine is applied strictly, the claim challenging the Interior Department action would relate back to the date of the filing of the complaint, May 28, 1981, while the Interior Department action did not occur until June 30, 1981. The claim would technically be premature. However, "the relation-back theory is a legal fiction and should not be viewed in a vacuum without due consideration to the realities of any particular set of facts." Gerrard v. Campbell, 81 F. Supp. 752, 754 (N.D. Ill. 1949). The relation back doctrine should not be applied to produce results that are inconsistent with its remedial purposes. WRIGHT & MILLER § 1496. Thus, the relation back theory may be employed in this case for the purpose of eliminating the statute of limitations bar without regard to the fact that the additional claim would have been premature if filed as part of the original action.

Using the standard of Rule 15(c), the relation back provision for amended complaints, the relation back doctrine is applicable in this case. The supplemental claim arose out of the series of events set forth in the original pleading — the process approving the oil and gas leases. It belies reality to contend, as the government does, that the Interior Department administrative process was separate and distinct from the Agriculture Department administrative process and that a challenge to the latter does not at all relate to the former. As indicated above, the Agriculture and Interior Departments work hand-in-hand on the evaluation of lease proposals for National Forests. The Government clearly had adequate notice of the claim that forms the basis of the supplemental pleading; in fact, the original complaint included the Secretary of the Interior as a Defendant and sought to enjoin issuance of the leases in an effort to avert final approval of the leases. The standards for application of the relation back doctrine have been met. See WRIGHT & MILLER § 1496 et seq.

Since the relation back doctrine is applicable to the supplemental complaint, the statute of limitations is of no avail to the federal defendants and the motion to dismiss is denied.

III. Compliance with NEPA

A. Standard of Review

NEPA requires an agency to prepare an environmental impact statement (EIS) on every "major federal action significantly affecting the quality of the human environment," 42 U.S.C. § 4332(2)(C). In determining whether an EIS is required, an agency must prepare an initial environmental assessment. 40 C.F.R. §§ 1501.3(a), 1501.4(b). If the agency concludes that an EIS is not required, it prepares a Finding of No Significant Impact. 40 C.F.R. § 1501.4(e).

In reviewing an agency's finding of no significant impact, the court may set aside or hold unlawful that finding if it was arbitrary, capricious or an abuse of discretion. 5 U.S.C. § 706. See Committee for Auto Responsibility v. Solomon, 603 F.2d 992, 1002 [9 ELR 20575] (D.C. Cir. 1979). The United States Court of Appeals for the District of Columbia Circuit has outlined four factors to consider in determining whether a finding of no significant impact was arbitrary, capricious or an abuse of discretion:

(1) Did the agency take a "hard look" at the problem, as opposed to a bald conclusion, unaided by preliminary investigation?

(2) Did the agency identify the relevant areas of environmental concern?

(3) As to problems studied and identified, does the agency make a convincing case that the impact is insignificant?

(4) If there is impact of true significance, has the agency convincingly established that the changes in the project have sufficiently minimized it?

Maryland-Nat'l Capital Park and Planning Comm'n v. U.S. Postal Service, 487 F.2d 1029, 1040 [3 ELR 20702] (D.C. Cir. 1973). As will be discussed infra, the area of chief concern here involves the third factor, the persuasiveness of the agency's case that the impact is insignificant.

The review undertaken by this Court is restricted to the administrative record before the agency at the time of its no significant impact finding. See Camp v. Pitts, 411 U.S. 138, 141-42 (1973).³

B. Propriety of the No Significant Impact Finding

The federal defendants argue that the lease stipulations reduce to insignificance potential impacts on the environment resulting from oil and gas exploration or development activities on the leased areas. Rather than prepare and unfocused EIS, federal defendants will await site-specific exploration or development proposals before engaging in a detailed analysis. According to the government, no significant impact will occur until an exploration proposal is submitted and an appropriate environmental analysis is undertaken.

The Standard Surface Disturbance Stipulation requires a site-specific environmental analysis by the U.S. Geological Survey prior to any surface disturbance. This stipulation advises the lessee that any approved oil and gas operation may be subject to conditions such as the location and manner of drilling; types of roads than may be constructed and vehicles that may be used.

The Further Planning Area Stipulation, also attached to all of the leases, specifies that only exploration activities for the purpose of discovering and disclosing the extent of mineral deposits are allowed until development and production operations are specifically concurred in, based on a land management plan or a specific environmental analysis of an operating plan. Exploration plans other than for geophysical activities must be approved by the federal agencies. Until and unless the lands are allocated to "non-wilderness," other restrictions apply.

Leases for "Highly Environmental Sensitive Areas"⁴ have a conditional no surface occupancy stipulation, which may only be altered upon preparation by the agency of an environmental assessment and EIS, if appropriate.

[12 ELR 20457]

No court has considered whether the issuance of onshore oil and gas leases, with or without stipulations, requires preparation of an EIS. Plaintiff in this case concedes that the stipulations, if enforced, would reduce to insignificance the environmental impacts of lease issuance. Plaintiff's principal challenge to the decision not to compile an EIS is that the lease stipulations may not be enforceable.

There is no basis for arguing that the lease stipulations freely and openly entered into by the lessees will be potentially voided, thus freeing the lessees to significantly affect the environment in the Palisades. The Secretary of the Interior has the authority to issue leases encumbered with stipulations and there is no legal basis for invalidating the stipulations.

The Secretary of the Interior has the authority to condition a lease right. NRDC v. Berklund, 458 F. Supp. 925, 937 [9 ELR 20047] (D.D.C. 1978), aff'd, 609 F.2d 553 [9 ELR 20761] (D.C. Cir. 1979). Under basic contract law, the lessees may legally obligate themselves to lease conditions that may result in the inability to explore or develop;⁵ that is a knowing risk the lessees wish to take. RESTATEMENT (SECOND) OF CONTRACTS § 77, Comment c (1981).

Plaintiff relies on Rocky Mountain Oil and Gas Ass'n v. Andrus, 500 F. Supp. 1338, 1345 [11 ELR 20036] (D. Wyo.), appeal docketed, No. 81-1040 (10th Cir. January 5, 1981), for the proposition that the Secretary of the Interior cannot grant "shell leases." The conclusion in that case that leases with no development rights result in an unconstitutional taking is of questionable validity. Moreover, in this case, it is difficult to conceive how a bargained-for lease with restrictive stipulations (that both sides concede may prevent development) is tantamount to a taking in the constitutional sense.⁶ Furthermore, it is not the federal defendants' intention to grant "shell leases"; the stipulations may prevent development but following the appropriate environmental analysis under NEPA, development may occur.

The decision to delay preparation of appropriate environmental impact statements until site-specific development proposals are submitted is neither arbitrary nor capricious. The majority of federal non-competitive oil and gas leases never reach the drilling state, see Environmental Assessment at 10, and the potential impacts of exploration are wholly dependent upon the scope of operations proposed for a specific site. The stipulations included in the leases discussed herein will effectively insure that the environment will not be significantly affected until further analysis pursuant to NEPA. The Court is convinced that the federal defendants took the requisite "hard look" at the problems presented them and reached a rational conclusion.⁷

IV.Conclusion

For the reasons stated herein, Plaintiff's challenge to the decision of the federal defendants to lease areas of Palisades is dismissed. An appropriate Order follows:

Order

Upon consideration of the Memorandum Opinion filed this date and of the entire record herein, it is by the Court this 31st day of March, 1982,

ORDERED, that the federal defendants' Motion to Dismiss be and hereby is DENIED; and it is

FURTHER ORDERED, that Intervenor-Defendant Wexpro's Motion to Strike be and hereby is DENIED; and it is

FURTHER ORDERED, that Plaintiff's Motion for Summary Judgment be and the same hereby is DENIED; and it is

FURTHER ORDERED, that Defendants' Motions for Summary Judgment be and the same hereby are GRANTED and the above captioned case be and hereby is DISMISSED.

1. If the existence of oil and gas deposits has not been established, as in the present case, the leases are issued on a non-competitive basis to the first person making application. 30 U.S.C. § 226(c).

2. It is not at all clear whether a challenge under NEPA is a "contest" for purposes of 30 U.S.C. § 226-2. The Court assumes, without deciding the issue, that section 226-2 applies to this case.

3. Wexpro intervenors have filed a motion to strike certain affidavits filed by the Sierra Club and cited in support of its motion for summary judgment. The affidavits discuss, inter alia, the reasons for pre-leasing site specific analyses and the deficiencies in the Forest Service choice of a slope value criterion to allow surface occupancy in some areas. The Wexpro intervenors argue that consideration of such material would violate the agency record limitation on judicial review.

To the extent that the supplementary materials are only considered as background and used to examine whether the agencies considered all relevant matters, this Court may properly evaluate them. Izaak Walton League of America v. Marsh, 655 F.2d 346, 369 n.56 (D.C. Cir. 1981); ASARCO, Inc. v. EPA, 616 F.2d 1153, 1160 [10 ELR 20433] (9th Cir. 1980). The motion to strike is denied.

4. HES areas are those designated as necessary for the protection or recovery of threatened or endangered species; areas of over 40% slopes; areas of unique plant or animal species; and areas where significant cultural resources exist.

5. Upon consideration of drilling applications and the appropriate environmental analysis, the federal defendants may preclude any development under the leases.

6. The Interior Board of Land appeals cases relied upon by Plaintiff wherein restrictive stipulations were invalidated are all cases where the lessee did not agree to the stipulations, unlike this case where the stipulations are agreed upon.

7. The Court also concludes that the selection of stipulations was neither arbitrary nor capricious, especially in light of the environmental analysis requirement in all stipulations.