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7 ELR 20230 | Environmental Law Reporter | copyright © 1977 | All rights reserved County of Suffolk v. Secretary of the InteriorNos. 75 C 208; 76 C 1229 (E.D.N.Y. February 17, 1977)After a trial on the merits, the court enjoins further activities pursuant to leases sold by the Department of the Interior in August 1976 for exploration and production of oil and gas on the Outer Continental Shelf (OCS) in the Baltimore Canyon area off New Jersey and declares the leases null and void. The court concludes that the final environmental impact statement (EIS) inadequately complied with the National Environmental Policy Act (NEPA) in several respects. The first major defect was the failure to account for state and local authority to restrict the siting of pipeline and onshore facilities. The refusal to account for local opposition to OCS-related facilities or to evaluate the local powers meant that the EIS failed to perceive fully the environmental problems. This difficulty was exacerbated by a failure to specify the location of impacts of the shore development. Thus, because the EIS contained only generalities rather than specific studies of actual projects, including tanker- or pipeline-delivery alternatives and the economic consequences of state and local exercise of authority to restrict onshore facilities, insufficient information was provided to make a fully-informed decision on the whole lease sale project. The second major defect in the EIS was a deficient cost-benefit analysis. Trial testimony established that the investment costs of exploration and pipeline construction were substantially underestimated and that the peak production levels were greatly overestimated. Without an accurate cost-benefit analysis of the lease sale project, there could no proper balancing of economic benefits against environmental costs. For NEPA purposes, the inadequacies were so great as to constitute a failure to make a meaningful inquiry; thus, the decision to sell the leases without following the full procedures was arbitrary, capricious, and in violation of law. Thirdly, the EIS failed to consider adequately alternatives to the leasing project, including the separation of exploration and production leases, and the leasing of alternative tracts, notwithstanding that new legislation might be required. Although there was evidence to indicate that the OCS leasing decision was made well before the EIS was prepared and therefore the EIS was irrelevant to the decision, the court deems it unnecessary to decide the issue of good faith on the part of the Secretary of the Interior. The court discusses several alternative remedies, including ignoring the NEPA violation and mandating creation of a new agency to coordinate further OCS drilling activities to minimize harmful environmental effects, and then enjoins further proceedings as a result of the lease sale. The injunction is stayed, however, pending completion of the appeal process. Counsel for Plaintiffs Sarah Chasis John M. Kaufman, Robert Stover John Picciano Hyman Herman Francis G. Calderia, Town Attorney W. Kenneth Chave, Jr., Town Attorney Francis J. Doran, Town Attorney Joseph Colby, Town Attorney Anthony R. Corso William F. Dudine Counsel for Defendants Peter R. Taft, Ass't Attorney General; John J. Zimmerman Lawrence Hoese, Jack Hughes Counsel for Intervenor-Defendant New York Gas Group Counsel for Intervenors National Ocean Industries Association E. Edward Bruce, Robert J. Pope William M. Meyers, Gene W. Lafitte, J. Berry St. John, Jr. Weinstein, J.: After extensive hearings held in July and August of 1976, this court determined that the National Environmental Policy Act (NEPA), 42 U.S.C. § 4321 et seq., required issuance of a preliminary injunction preventing the Secretary of the Interior from proceeding with Lease Sale Number 40 of outer continental shelf lands in the mid-Atlantic region for exploration and production of oil and gas. The text of the memorandum filed by this court on August 13, 1976, as a result of those preliminary hearings is reaffirmed and deemed incorporated as part of this memorandum and final order following final hearings. For reasons set forth in the two memoranda, the court has concluded that the Secretary of the Interior has violated NEPA and that Sale 40 leases are void. While the preliminary memorandum indicated, on the basis of a preliminary hearing, only one ground for declaring NEPA had been violated, the final hearings revealed that NEPA had been violated in a number of respects, as indicated below. The issue before this court is not the wisdom or desirability of this country's total "energy program," or of any of its specific aspects. It is not this court's function to pass on the substantive merits of the Sale 40 lease project, either in its present or potentially modified form. It is, rather, concerned with whether the Secretary of the Interior, in reaching his decision to lease these lands, complied with the statutory requirements governing his responsibilities as trustee and administrator of the public resources of the outer continental shelf; specifically, the question posed is whether his decision was fully and accurately informed and made after adequate consideration of viable alternative programs and potential adverse environmental impacts. Our preliminary finding, as outlined in this court's opinion of August 13, 1976, was that the Secretary had not met his NEPA [7 ELR 20232] responsibilities. In deciding to proceed with Sale 40 in its present configuration he virtually ignored the power of states and their political subdivisions to regulate the siting, construction, and use of nearshore and onshore facilities through measures such as special land-use laws, air and water pollution laws, pipeline regulations, and zoning and building codes. We noted that if the states or municipalities bordering the Sale 40 area prevented pipelines from drilling sites from crossing their shores — as they have the power to do — then the only alternative for transporting oil would be by tankers or longer pipelines. Evidence indicated that state or municipal decisions banning pipelines or ordering their special routing were probable given the substantial impact that construction of a pipeline, or oil spillage from it, would have on coastal lands. We found that the final environmental statement for Sale No. 40 contained no meaningful discussion and reflected to real awareness of the fact that state and municipal action may severely restrict pipelines and related onshore facilities, and that without an analysis of these state and local provisions and the probable extent of state and municipal cooperation or opposition a realistic appraisal of the impact of Sale 40 on the environment was not possible. We also noted that the Sale 40 Program Decision Option Document assumed that pipelines will be used. It was relied upon by the Secretary in making his decision to lease, and assumes the use of pipelines as both economically and technically feasible in case of a large oil discovery. We concluded that if the assumption by the Secretary that pipelines will transport the oil in case of a large strike might have been different if the state situation had been brought home to him in a meaningful way, then the NEPA decision making process was invalid. Accordingly, a preliminary injunction preventing Lease Sale 40 was granted pending further hearings and decision on applications for a permanent injunction. On August 16, 1976, the Court of Appeals for the Second Circuit stayed the order of this court; on October 14, 1976, it held that plaintiffs had not demonstrated that they would suffer irreparable harm between the date of the preliminary hearing and the trial, and that there was some question whether plaintiffs would succeed on the merits at the trial. The parties were advised that, by proceeding with leasing prior to a final determination, they assumed the risk of an ultimate adverse decision. Justice Marshall, in declining to overturn the court of appeals' stay of the preliminary injunction, focused on the extremely narrow grounds for the stay, making clear that invalidation of any resultant leases was a very real possibility should plaintiffs prevail on the merits: The Court of Appeals concluded that plaintiffs would not be irreparably injured if the Secretary were permitted to open the bids. I cannot say that the court abused its discretion. It is axiomatic that if the Government, without preparing an adequate impact statement, were to make an "irreversible commitment of resources," Natural Resources Defense Council v. NRC, 539 F.2d 824 at 844, 6 ELR 20513 (2d Cir. 1976), a citizen's right to have environmental factors taken into account by the decision-maker would be irreparably impaired. For this reason, the lower courts repeatedly have enjoined the Government from making such resource commitments without first preparing adequate impact statements. Indeed this past Term, in Kleppe v. Sierra Club, . . . we indicated that it would have been appropriate for the Court of Appeals to have enjoined the approval of mining plans had that court concluded that "the impact statement covering the mining plans inadequately analyzed the environmental impacts of, and the alternatives to, their approval." U.S., at n. 16, 96 S.Ct., at 2729. In the instant case, however, the Court of Appeals apparently decided that the opening of bids doesnot constitute an "irreversible commitment of resources." I am unprepared to say that the court was wrong in so holding. In the first instance, it is quite clear that the actual opening of the bids does not involve a commitment of any kind, since the Secretary reserves the right to reject all bids. thus it is not until a bid is accepted — which may not happen for 30 days — that an irreversible commitment is evey arguably made. Moreover, even after the bids are accepted, I cannot say that the Court of Appeals would be without power to declare the leases invalid if the court determined that the Government entered into leases without compliance with the requirements of NEPA. N.Y., Natural Resources Defense Council, Inc. v. Kleppe, U.S. , , 97 S. Ct. 4, 7 (1976) (footnotes omitted; emphasis added). The Secretary of the Interior proceeded to lease a total of 93 tracts in the Sale 40 area. He accepted bids totalling over 1.1 billion dollars. The successful bidders have begun to take preliminary steps required for full exploitation of their leaseholds. After further pre-trial hearings and discovery, a final hearing was held at which all parties introduced extensive additional proof. The resulting 1,200 pages of new testimony and numerous documents serve to confirm and expand the bases of the court's earlier tentative conclusion that NEPA has been violated. In all a total of 4,043 pages of testimony were taken, 32 witnesses were heard, 273 documents were received and the affidavits and proffers of proof for a substantial number of other persons considered. Set forth as appendices "A," "B," and "C" [Appendices omitted. Ed.] to this opinion for the assistance of the appellate courts are lists of witnesses and exhibits considered by the court. We find that the Secretary (1) ignored the practical effects of local governmental licensing, permitting, and review powers in the NEPA documents; (2) failed to consider the environmental impact of specific probable pipeline routes from the outer continental shelf, in spite of the fact that projection of such routes is routinely made by industry and could have been made by the Secretary or his agents; (3) greatly overstated peak oil and gas production for Sale 40 and significantly understated the cost of such production, including pipeline construction; this resulted in a serious lack of consideration of the likelihood and attendant dangers of increased tanker traffic and an overestimate of the net value of the entire project; (4) failed to consider the possible impact of particular tract-selection choices on the feasibility and sites of pipelines; there was no consideration of the alternatives of either excluding industry-preferred tracts, or including less highly desired tracts in the final sale offer because of related onshore impacts and developments; and (5) failed to consider the alternative of separating exploration from production leasing. Adequate consideration of these factors might have led to modifications in the Sale 40 leasing program, resulting in greater environmental protection without impairing reasonable exploitation of offshore hydrocarbon resources. While there was substantial evidence that the Secretary's decision was not based upon a good faith consideration of relevant NEPA documents, but on decisions made privately and in advance of public hearings, we find it unnecessary to make any such finding. It is enough for purposes of this proceeding to detail the abstract and misleading aspects of the operative NEPA documents that prevented any realistic appraisal of either environmental dangers or the practical advantages and disadvantages that would result from the specific Sale 40 leases. Each of the inadequacies, considered below in detail, constitutes a violation of both the letter and spirit of NEPA and requires rescission of the Secretary's leasing decision. A. Failure to Consider Impact of State and Local Exercise of Regulatory Powers As we noted earlier, evidence adduced at the final hearings strongly reinforced the preliminary conclusion of the court that the powers of state and municipal authorities to affect the scope of outer continental shelf operations were virtually ignored in deciding to proceed with Lease Sale 40 in its present form. This failure is particularly striking in light of the fact that there are hundreds of political subdivisions with varying degrees of jurisdiction over various aspects of Sale 40 related development. In the Counties of Nassau and Suffolk alone, the following municipalities, bordering the Atlantic, may be harmed by oil spills: Village of Atlantic Beach, City of Long Beach, Village of Lawrence, Village of Woodbury, Village of Hewlett Neck, Village of Hewlet Harbor, Village of Island Park, Village of Freeport, Town of Hempstead, Town of Oyster Bay, Town of Babylon, Village of Amityville, Village of Lindenhurst, Village of Babylon, Town of Islip, Village of Brightwaters, Village of Saltaire, Village of Coean Beach, Town of Brookhaven, Village of Patchogue, Village of Bellport, Town of Southampton, Village of Westhampton Beach, Village of Quogue, Village of Southampton, Town of Easthampton, and Village of Easthampton. And in Cape May County, New Jersey, which is a prime potential site for pipeline placement from the Sale 40 area, the following municipalities possess zoning ordinances which may be used to restrict the placement of pipelines within their jurisdiction: Avalon, Cape May City, Cape May Point, Dennis Township, Lower Township, Middle Township, North Wildwood, Ocean City, Sea Isle City, Stone Harbor, Upper Township, West Cape May, West Wildwood, Wildwood, Wildwood Crest, and Woodbine. When the six states and many cities and other municipalities bordering the estuaries, bays, sound, and ocean are considered, the number of authorities with power to affect the operation multiplies into the hundreds. But the powers of these and other concerned municipalities were virtually ignored in the relevant NEPA documents. This lack of consideration of the need for coordination of zoning and other actions required for reasonable exploitation of the potential oil and gas production resource cannot be attributed to absence of interest or effort on the part of those responsible for state and local coastal planning activities. They have not been mute. On January 27, 1976, for example, New Jersey's Governor Brendan Byrne personally addressed a Department of Interior panel conducting hearings in Atlantic City on the Draft Environmental Statement for Sale 40. One of the four issues he raised illustrates the central problem. On the question of the State of New Jersey's right to manage its coastal areas, Governor Byrne stated: [T]he environmental statement's assumptions concerning the siting of onshore facilities have not been coordinated with State or local coastal planning activities or concerns. The environmental statement and its accompanying technical paper identify certain locations as possible sites for onshore facilities. In New Jersey, again depending on the uncertain range of potential production, the statement assumes that areas in Atlantic, Cape May, Ocean, and Monmouth Counties may be sites for onshore operations bases or pipeline terminals. Yet these assumed sites have been designated without adequate consultation with State or local officials now engaged in developing a coastal management strategy and program pursuant to State and federal law. The designations ignore local concerns and interests. As I am sure local officials will confirm during these hearings, Cape May County has minimal industrial development, and is highly dependent upon a resort economy. There is a strong argument that the continued vitality of this county is totally incompatible with OCS development; to a somewhat lesser extent these concerns are also shared by Atlantic, Ocean, and Monmouth Counties, which are also heavily dependent upon the tourist industry. It is indeed possible that New Jersey will decide that areas like Long Branch and Cape May should be spared all impacts of OCS development in favor of such already industrialized areas as Camden, Port Newark, Bayonne, and Linden. The important point is that in the drafting of the environmental statement there has been no attempt to either consider New Jersey's current thinking on its coastal planning, or to consider what the environmental and economic impacts would be on the OCS program if New Jersey bars onshore OCS facilities from those locations which are assumed to be likely sites in the environmental statement. Statement of Governor Brendan T. Byrne at the Department of the Interior's Hearings on the Proposed Mid-Atlantic Oil and Gas Lease Sale, Atlantic City, New Jersey, January 27, 1976 (emphasis added). 1. Effect of Coastal Zone Management Plans Defendants have relied the contention that these various states and localities have been, and will be, able to protect their coastal areas and environmental from the effects of an incomplete impact statement by developing coastal zone management plans in accordance with the Federal Coastal Zone Management Act (CZMA), 16 U.S.C. § 1451 et seq., using funds supplied by the federal government. The argument that this activity is a substitute for the government's responsibilities under NEPA is unpersuasive. First, NEPA requires an independent assessment of a variety of facts to determine possible environmental damage. That responsibility cannot be fobbed off to the states under a different program. Second, the extensive work being done on the various state plans will not be completed until 1978 at the earliest. Third, the critical amendments to the CZMA relied upon by defendants were adopted after the Final Environmental Statement on Sale 40 was published and the Secretary of the Interior made his decision to lease; these amendments could have had no impact on his decisions under NEPA. Certainly the federal authorities were not required to wait until these CZMA plans were completed, although it might have been desirable to put off a decision until a more rational, fully informed decision could be made. But the work described at the hearings suggests the importance of the state plans and programs in connection with the exploitation by the federal government of the off-shore resources in a way that will minimize environmental impact. Furthermore, evidence of the complexity of the task of achieving state coordinated programs that will mled various local views suggests the critical importance of considering local zoning and planning powers in determining the environmental issue under NEPA. Evidence, which could have been brought to the Secretary's attention by the NEPA documents, demonstrates that these local governmental powers can and will be utilized to prevent landing of outer continental shelf oil over wide portions of the coast line, whether that landing is by tanker or pipeline. Failure to include an evaluation of such local opposition to pipelines or tanker-related onshore facilities necessarily resulted in a failure to gain a full and meaningful perspective on the intrinsic environmental problems related to offshore oil and gas exploration. 2. Recognition of State and Local Powers in NEPA Documents In attempting to demonstrate that the Secretary gave adequate consideration to state and local powers to affect outer continental shelf activities, defendants, in their extensive post-trial memoranda, marshal numerous references in the final environmental statement to such powers. In order to understand the true significance of the references, the most significant passages are reproduced below. In context, they demonstrate a listing in abstract form, without any attempt to evaluate their practical effect on specific oil and gas production and delivery systems from specific areas offshore to specific affected areas onshore: [T]he types of development permitted in the coastal zone, including any that might be associated with offshore oil and gas operations in the event this proposed sale is held, can ultimately be broadly controlled by the States. Siting of [OCS-related facilities] in a coastal area in Maryland, New Jersey, and Delaware (where all primary facility development is anticipated to occur) would be subject to state approval as well, and the interests of local communities might be taken into consideration by the state. In New York and Virginia, where no coastal area facility siting regulations exist at the state level, siting decisions might be made which would adversely affect an adjoining jurisdiction through secondary impacts or because the facility might be inconsistent with neighboring land use. The general location of many of the facilities which would be required onshore as a result of the proposed sale would be a function of where pipelines are allowed to come ashore. As pipeline locations within the states' three mile limit offshore, as well as onshore, would be a matter of state jurisdiction, the general location of these OCS-related activities could be directed by state actions, in addition to specific siting control which would be exercised by state and/or local controls. New Jersey and Maryland have legislation that would require permitting and appropriate environmental analyses for proposed pipelines in legislatively designated portions of the coastal zone. Although local plans may be formulated that identify desirable utility corridors, rarely do zoning plans restrict pipelines to predetermined locations. Local ordinances may, however, prescribe procedures for obtaining local review and approval of proposed pipelines.Direct federal responsibility for the siting of onshore facilities is limited except for federally administered lands. . . . State and local planning and regulatory authorities provide the primary framework within which potential adverse effects of the onshore facilities can be addressed. Id. at p. 456 (footnotes omitted). [W]here the plans involve onshore facilities, such as pipeline landing sites and onshore support facilities, the ultimate approval . . . would be within the jurisdiction of the State. [S]ince State and local jurisdictions would have to permit both onshore sections of pipelines and pipelines in State waters, pipeline landfalls in areas where they would cause great environmental impact are not likely. The Department of the Interior has no authority by statute regarding the planning and siting of onshore OCS-related facilities. The States, counties, and local municipalities are responsible for enforcing their own statutes, regulations, and zoning and permitting powers. . . .[The filing of OCS development plans with the States] will provide the State with more detail regarding offshore resources and onshore facilities than will be needed in order that the States can better plan and coordinate the industry needs with all their State, county, and local authorities. Factors which could hinder or prohibit the use of pipelines in this Mid-Atlantic area might include the following: (3) receptivity of State and local jurisdictions along Mid-Atlantic coast to the approval of pipeline landfalls that would be needed. These and other references succeed in establishing beyond question that the Secretary should have known of the existence of some vague state and local zoning and permitting powers. But there was never any doubt in the court's mind that the Secretary had such unspecific knowledge; any suggestion to the contrary would have had to assume a total ignorance on his part of our federal system. Nor was there any doubt that the NEPA documents made reference generally to the formal state and local powers and procedural requirements in this area, although it hardly requires an environmental impact statement to disclose the existence of some sort of regulatory powers; it surely elementary knowledge to anyone involved in major federal or industry projects. But passing references to, and abstract listings of, state and local authority is only the beginning and not the end of the NEPA-required inquiry. The next, and by far more crucial step is a projection of the site-specific, pragmatic, empirical effects of the likely exercise of such power. It is the impact of local authority, not its mere existence, that must be studied and evaluated. NEPA certainly contemplated that the federal agency responsible for safely regulating ocean exploration would consider specific, pragmatic land-based obstacles to transporting ocean-bottom energy resources. This has not been done. The NEPA documents, in their critial transportation aspects, are highly abstract. Despite the enormous volume of discussion they contain, the likely oil and gas delivery routes are nowhere described; one might almost suppose that levitation were the anticipated mode of transport. The NEPA documents read like a theoretical college thesis, written without the hard empirical data needed by any practical person making a decision. The impact statement studiously avoids the factors required for rational, practical decisionmaking. Environmental impact statements are neither academic exercises nor abstract dissertations on general environmental problems. They must be specific, pragmatic, serious studies of actual projects with real environmental impact aspects. It is not sufficient to cram an enromous volume full of generalities, or to consider in depth irrelevant, tangential or marginal factors. NEPA is an "environmental full disclosure law" aimed precisely at the sort of large-scale, government-initiated project involved here, and designed to assure that potential environmental impacts are carefully thought through with serious insight. Chelsea Neighborhood Associations v. U.S. Postal Service, 516 F.2d 378, 386-87 [5 ELR 20337] (2d Cir. 1975), citing Monroe County Conservation Council v. Volpe, 472 F.2d 693, 697 [3 ELR 20006] (2d Cir. 1972). NEPA's requirement for a "thorough study" and a "detailed statement" is the central feature of the environmental impact statement, without which "the conclusions and decisions of the agency appear to be detached from and unrelated to environmental concerns." Monroe County Conservation Council v. Volpe, 472 F.2d 693, 697-98 [3 ELR 20006] (2d Cir. 1972). It is therefore essential that adequate information be made available before the critical agency decision is taken. Natural Resources Defense Council v. Callaway, 524 F.2d 79, 92 [5 ELR 20640] (2d Cir. 1975). The Council on Environmental Quality Guidelines on Preparation of Environmental Impact Statements, 40 C.F.R. Part 1500, requires analysis of specific impacts on specific areas. It requires consideration of: The relationship of the proposed action to land use plans, policies, and controls for the affected area. This requires a discussion of how the proposed action may conform or conflict with the objectives and specific terms of approved or proposed Federal, State, and locl land use plans, policies, and controls. . . . . Where a conflict or inconsistency exists, the statement should describe the extent to which the agency has reconciled its proposed action with the plan, policy or control, and the reasons why the agency has decided to proceed notwithstanding the absence of full reconciliation. 40 C.F.R. § 1500.8(a)(2) (emphasis supplied) This information on local land policies and controls was available to the Department of the Interior, but was not considered in the Environmental Impact Statement; nor were the effects of these policies on the specifics of the leasing program analyzed. While "foreseeing the unforeseeable" is not required, an agency must use its best efforts to find out all that it reasonably can: It must be remembered that the basic thrust of an agency's responsibilities under NEPA is to predict the environmental effects of proposed action beforethe action is taken and those effects fully known. Reasonable forecasting and speculation is thus implicit in NEPA, and we must reject any attempt by agencies to shirk their responsibilities under NEPA by labeling any and all discussion of future environmental effects as "crystal ball inquiry." Scientists' Institute for Public Information v. Atomic Energy [7 ELR 20235] Comm'n, 481 F.2d 1079, 1092 [3ELR 20525] (D.C. Cir. 1973). As the opinion in Sierra Club v. Coleman, 421 F. Supp. 63, 65 [6 ELR 20798] (D.D.C. 1976), recently noted: The premise from which any environmental impact statement must begin is the recognition that its Goal is to provide a detailed discussion sufficient to allow the agency decision-maker to fully consider in his or her decisional calculus the possible environmental effects of various alternative paths the agency might choose to pursue with respect to a given project. . . . NEPA requires that the agency make such a decision knowingly and with due regard for its environmental consequences. . . . The FEIS simply did not provide the information which would be needed for such informed balancing and decision-making in this regard. Other recent cases have enjoined projects because of the failure of the decision document to comply with NEPA's requirement of a detailed statement rooted in the real problems presented by the proposed action. Chelsea Neighborhood Associations v. U.S. Postal Service, 516 F.2d 378 (2d Cir. 1975); Natural Resources Defense Council v. Callaway, 524 F.2d 79 (2d Cir. 1975); Alabama ex rel. Baxley v. Corps of Engineers, 411 F. Supp. 1261 [6 ELR 20607] (N.D. Ala. 1976); Atchison, Topeka & Santa Fe v. Callaway, 382 F. Supp. 610 [5 ELR 20086] (D.D.C. 1974). The Sale 40 Final Environmental Statement is a "site specific" impact statement. Such a statement must consider the specific conditions in the Sale 40 area and the actual environmental effects of exploration and development, as well as reasonable alternatives. Natural Resources Defense Council v. Morton, 388 F. Supp. 829, 839-840 [5 ELR 20327] (D.D.C. 1974), aff'd, 527 F.2d 1386 (D.C. Cir. 1976). The purpose of a site-specific statement requires a discussion of the actual effects of a project on a specific area. The Sale 40 NEPA documents did not fulfill that function. 3. Effect of State and Local Powers on Pipeline Routing — Absence of Any Projection of Likely Pipeline Locations Absence of any projections of likely pipeline locations illustrates the abstract nature of the relevant documents. The Department's assumptions were that oil and gas collected by gathering lines from separate platforms would be transported to onshore facilities along one to four corridors, in two 24" to 36" pipelines per corridor. The Secretary's postulates are included below: It is anticipated that all oil and gas produced as a result of this proposed sale will be transported to shore by pipeline (special stipulation, Section IV.E.), though a possibility exists that tankers might be used. Oil and gas would be carried in separate pipelines, having first been separated on platforms offshore. Small gathering lines would collect production from platforms, gathering at central points where larger pipelines (24 to 36 inches diameter) would carry production in corridors. It is assumed that from one to four corridors would be established from offshore points to onshore facilities (2 pipelines per corridor). Offshore pipelines (assuming four pipelines) would traverse from 100 to 570 miles of sea bottom. Sale 40 FES, Vol. 2, pp. 17-18. Although as many as eight separate 36" pipelines were anticipated, there was no attempt to determine specific likely landfall sites or the ocean or overland routes that would be followed. The decision documents merely contain brief, vague and abstract conjecture concerning the extremely broad geographical areas that might be involved: Terminal facilities would be located near the landfall of pipelines, and the oil pipelines would then proceed to refineries for processing of the crude oil. Because it is expected that the oil will be processed in existing refineries in northern New Jersey or the Delaware River Basin, it is most probable that pipeline terminals would be located somewhere along the New Jersey coast, with pipeline routes over land to the refineries. Because of the expense of laying, monitoring and maintaining underwater pipelines, landfalls near or on the Atlantic shoreline of New Jersey are more probable than those deeper into Delaware Bay. However, a pipeline landfall in Delaware, with a corridor through Delaware City and/or Philadelphia area refineries has also been suggested. A pipeline landfall in Delaware could conceivably mark the beginning of a corridor to Baltimore, although the small existing capacity there is not thought to warrant it. Id. at p. 227 (citation omitted). All consideration of likely routes is clearly and explicitly deferred to the period after discovery of commercial quantities of oil: If commercial quantities of oil are discovered, pipeline corridor management studies will be initiated to identify the least environmentally hazardous areas in which to require the placement of lines. Although these studies are primarily concerned with the OCS, they will also include areas suitable for the location of onshore processing and support facilities, and will be coordinated with other Federal, State and local authorities. If commercial finds of hydrocarbons are made, then pipeline corridor management studies will be conducted in two phases. The first phase will identify macrocorridors (including potential landfall areas) using existing environmental and socio-economic data. Representatives of affected states as well as the petroleum industry will be encouraged to participate in this planning effort. Once tentative corridors have been identified the second phase of the study effort will be initiated. It will consist of a BLM-funded contract study to obtain quantitative biological, chemical, geological and physical oceanographic baseline data for the tentatively identified corridors. The collected data, once analyzed, will be utilized to select the final corridors and landfall locations with the least net environmental and socio-economic adverse impacts. This deferral of an attempt to grapple with specifics borders on irresponsibility in view of NEPA's explicit mandate that all potential environmental considerations be weighed prior to the decision to proceed with major federal programs. NEPA required the Secretary to explore the site-specific impacts of pipelines along definite routes, at least to the extent that such routes were ascertainable based on information available at the time. It is as if the federal government decided to proceed with the construction of a major highway connecting New York and Washington — approximately the distance to be covered by Sale 40 pipelines — but refused to reveal the contemplated route, whether bridges or tunnels would be utilized, whether mountains would be skirted or dynamited, or the impact on the area bordering the road. Such a course of action would surely be impermissible. Cf. Monroe County Conservation Council, Inc. v. Volpe, 472 F.2d 693, 697 [3 ELR 20006] (2d Cir. 1972); Citizens Committee for Hudson Valley v. Volpe, 425 F.2d 97 [1 ELR 20006] (2d Cir. 1970). Yet the analogy to the instant case is a strong one. It is perfectly clear from highly credible expert testimony at trial from defendants' own witness that pipeline routes not only could have been predicted with a high degree of specificity and accuracy, but that such predictions were in fact made by the oil companies who put up hard cash — "megabucks," as one industry representative described them — in bids. Oil company experts projected relative costs of transportation problems that might arise from local and state zoning, and also predicted specific environmental factors attendant upon detailed alternative pipeline routes. For example, the witness Franklin Brunjes, Manager of Land Transportation for Shell Oil Co., testified that he had computed economic feasibility vis-a-vis tanker transport of various pipeline routes from OCS lease sites to refining facilities in the Philadelphia area. His study encompassed four pipeline routes [7 ELR 20236] and one tanker route: Route 1 (identified as route 1A in testimony and in the attached appendix "D") [Appendices omitted. Ed.] from the drilling site, ashore in Cape May County and across Atlantic and Gloucester Counties to Philadelphia (200 miles); Route 2, around Cape May into Delaware Bay and overland to Philadelphia via Cumberland, Salem, and Gloucester Counties (230 miles); Route 3, into Delaware Bay and up the Delaware River to Philadelphia (245 miles); Route 4, to Cape Henlopen (State of Delaware) and ashore in Delaware to Philadelphia via Sussex, Kent, New Castle, and Delaware Counties (280 miles); and finally, Route 5, at 260 mile tanker route up the Delaware River. See Appendix "D," infra [Appendices omitted. Ed.]. The economic conclusions were precise and detailed; for a variety of production rates and over each of the four pipeline routes transportation was concluded to be less costly than tanker transport. See Appendix "E," infra [Appendices omitted. Ed.]. These routes were not randomly selected. They were determined on the basis of reasonable assumptions and expert analysis of precisely the sorts of information which could have been available to the Secretary. A comparison of Mr. Brunjes' testimony concerning the reasonable hypotheses and procedures followed by Shell Oil Co. with the lack of procedures followed by the Secretary is instructive. Mr. Brunjes testified that Shell Oil Co. based its conclusions with respect to transportation feasibility and cost on various routes to Philadelphia. This was done because the Philadelphia area has the largestconcentration of refineries in the northeast. Shell's determinations were also based upon such sensible assumptions as those concerning where oil would be found, how leases would be developed, the life of possible fields, the quality of the oil, the cost of pipeline, and the availability of rights-of-way. His testimony on direct examination, in part, was as follows: Q. Mr. Brunjes, did Shell Oil Company acquire a number of leases from the United States as a result of OCS Lease Sale No. 40, held on August 17, 1976, relating to the mid-Atlantic offshore area? A. Yes, I understand Shell was successful on twelve tracts. Q. Mr. Brunjes, prior to Shell's bidding for those leases, did the company study the economics and feasibility of transportation of crude oil produced from the Sale 40 area to existing on-shore refineries. Q. Could you describe the analytical work that was done by the company along those lines? A. To answer your question: prior to the lease sale, during the period of February, March and April of 1976, the exploration and production division of Shell came to me for my group and asked us to develop and analyze the transportation feasibility and cost associated with this offshore lease that you talked about. In doing so we developed a feasibility and cost study that involved pipeline routes to the shore and overland toward the Philadelphia area. We also developed costs that had to do with transportation by marine from this area into the Philadelphia area. This activity involved calling upon the expertise of various segments within the company, our engineering organization who have had extensive experience in offshore pipelining; our marine organization, who is experienced in the marine matter; right-of-way groups, people of that nature. Q. Why was the cost information prepared based on transportation to the Philadelphia refining area, Mr. Brunjes? Q. The Philadelphia area, as far as the Northeast in concerned, contains the largest concentration of refineries. I believe they have a capacity in the order of 900,000 barrels a day to a million barrels a day capacity up there in the Philadelphia area. This is much larger than any other area of the Northeast Coast. Q. Woud you state to the Court the basic criteria or assumptions under which the cost information is developed. A. To do a study . . . [o]ne has to assume oil will be found and also where the oil would be found. We looked at several locations within that area. We looked at a range of production going from, say, 25,000 barrels a day up to 200,000 barrels a day. We also had to assume how it would be developed and what the decline rate would be on the production, generally the life of the field. We got that information from our exploration and production people. That kind of tells us where we have to start. We also had to assume the quality of oil, whether it was pumpable or not, what its characteristics are. We also had to assume there would be . . . a normal type oil that could be processed in existing refineries in the Northeast area and particularly in the Philadelphia area. Q. You mentioned pumpability of oil. Do you mean pump from the ground or pump for purposes of transportation? A. Pumped for purposes of transportation. Also, criteria that we live by, too, was, say, pipeline design or costing of pipeline that meets or exceeds all applicable or federal, national standards for pipeline design. Also, we had to, in taking a look at the overland route, we took a quick look at the right-of-way availability, and we assumed that on the right of way that wherever possible that existing corridors would be used. In other words, railroad right of ways, along roads, utilities, easements, gas lines, electric lines — that nature. Q. Are those the basic assumptions.Can you think of any others? A. No, I think that's the major ones. There were many others, but those were the major ones. Major factors in the determination to consider pipeline routes other than Route 1, the most economical alternative, were local zoning and related powers and opposition to pipelines, and particular environmental threats — precisely the considerations that the Secretary failed to evaluate. Mr. Brunjes testified that these alternate routes were: . . . determined not by detail[ed] field analysis — on the ground analysis, but in pursuing this in the various court-houses and through the various local administrations and whatever. This was developed from detailed maps that show railroads. It was also developed from past experiences in types of land like this. It was also developed through a process of at least screening out — screening out to try to determine whether there were any state or local laws or ordinances or regulations that similarly excluded pipelines from traversing this area. Q. You were able to find out about the local opposition that was developing in New Jersey, weren't you? A. As far as looking into the right of way or the possible routes on shore, I believe, as I have talked about yesterday, we had looked to the extent that we were trying to find out whether there were ordinances, local laws or state laws, that summarily prohibit pipelines from coming ashore — Q. . . . Now, . . . you make this statement: This study is essentially a "desk study" in nature since all concepts, assumptions and estimates are based solely on information gathered from available maps of the area. Prior studies relate to the areas' environment and ecology and other available published matter without benefit of on-site investigative research. Since many conditions [7 ELR 20237] which could seriously effect facets of the study have yet to be defined by the state and Federal authorities, the study concepts are limited to known and published information at the time of the study. What are the many conditions that you refer to which you say could seriously affect facets of the study and which have not yet been defined by state and Federal authorities? A. One facet that occurs to me is possibly that you know, any local entity, a county, any state government, could adopt regulations or laws that would affect the routing of the pipeline. Q. Anything else that you can think of, Mr. Brunjes? You mentioned . . . an example of a local action. But your report specifically refers to state and Federal authorities. A. I believe in this context it states that pretty generally. And it means a state level or within a state, whether township, town, local zoning or whatever. Focusing on potential adverse environmental impacts of specific routes, counsel read the following paragraph from a study paper prepared by Mr. Brunjes in connection with the economic feasibility study: [R]ecently this transportation study and its economics were evaluated utilizing the straight median of New Jersey as the final location to come ashore with the oil transported from production fields. However, recent decisions made by the Environmental Protection Agency for the State of New Jersey revealed the possibility of excluding the entire Atlantic coast of New Jersey from any offshore oil lines, and therefore a shore approach location in the Delaware Bay was selected as possible landing point. However, this may cause considerable local opposition because of the areas' economic reliance on the oyster beds located from the Maurice River to Arnold Point. Had the Secretary been at least as conscientious as Shell Oil in exploring specific pipeline locations from an environmental perspective, he certainly would have considered the route into the Delaware Bay and up the Delaware River to Philadelphia, which was studied by Mr. Brunjes and considered a feasible and likely corridor. Testimony at trial demonstrated that Route 3 might have grave environmental consequences along its entire water route. The construction of such a pipeline would, of necessity, involve extensive digging, dredging, and filling over a prolonged time period. There can be no doubt that such construction would adversely affect important marine life. The Secretary's failure to project specific pipeline routes has thus resulted in a final environmental statement which does not even attempt to consider the potential harm to shellfish spawning grounds and innumerable species of fish and waterfowl. Nor does the vague final environmental statement assess the effect of the pipeline construction on swimming, boating, fishing, and other recreational activities on and around the Delaware Bay and River where pipelines are likely to be sited. The adverse effects of a pipeline do not terminate when construction is completed. An underwater route may require changes in anchorages and other facilities. Moreover, possible pipeline leaks and resultant oil spills may cause great harm. These impacts along specific likely routes could have been, but were not, examined in the decision documents. It is clear from the testimony that these economic, environmental and political considerations were all readily available to the Secretary and could have supported similar projections by him. The Shell Oil expert testified: THE COURT: Based upon this [information], generally available, I take it, apart from the philosophy of your company, you were able to predict fairly closely the landing sites and best routes to Philadelphia? THE WITNESS: I would say so. These would seem to be reasonable. I think experienced people would tend to line out the most suitable tracts or identify them without too much effort. THE COURT: Possibly with expertise, certainly some of those available to the Government would, based on your general professional knowledge, come to roughly the same conclusion, would they not? THE COURT: The economic and other factors are those that you can't avoid, isn't that so? THE WITNESS: That's generally correct, yes. The evidence clearly established that the Secretary did not engage in inquiries adequate to inform federal, state, and local decisionmakers and the public of the alternative modes and routes of transport of Sale 40 oil and gas, and to enable government decisionmakers to understand and plan to cope with the impacts of reasonably defined tanker-pipeline options in their zoning, land use, and coastal zone management planning processes. 4. Economic Consequences of State and Local Regulation The economic aspect of the exercise by state and local governments of their powers to prohibit or restrict onshore facilities was inadequately addressed in the NEPA documents. These controls could clearly lead to longer and more expensive pipelines or to the use of tankers. In order to assess the relative costs and benefits of the proposed action, the potential costs to the program resulting from the exercise of such controls should have been detailed: NEPA mandates a case-by-case balancing judgment on the part of federal agencies. In each individual case, the particular economic and technical benefits of planned action must be assessed and then weighed against the environmental costs. Calvert Cliffs' Coordinating Committee v. A.E.C., 449 F.2d 1109, 1123 [1 ELR 20346] (D.C. Cir. 1971). See also Chelsea Neighborhood Association v. U.S. Postal Service, 516 F.2d 378, 386 (2d Cir. 1975) ("NEPA, in effect, requires a broadly defined cost-benefit analysis of major federal activities."); Alabama ex rel. Baxley v. Corps of Engineers, 411 F. Supp. 1261, 1268 (N.D. Ala. 1976) (NEPA requires that environmental and nonenvironmental factors be quantified where reasonably possible and included in a cost-benefit analysis in the project EIS.). Mr. Brunjes' testimony clearly established the feasibility of "costing-out" different transportation forms and routes, and the high degree of precision with which economic conclusions can be reached in this sphere: Q. Before discussing the other routes, I would like to ask you some questions about your analysis of those two routes, which are . . . 1 A and 2 on the exhibit. A. This study again was for the purposes of assessing leased bids. That's why the E and T Division came to us and so when we looked at trying to identify the capital costs and operating costs and other various cost elements that go into a long term transportation situation like this, we took those costs and we generally reduced them to the common denominator of unit cost of transportation over the life of the field, that we assumed in this study. Q. What was the unit that was used? A. Cent per barrel is what we reduced it to. A. On the routing from this area going down one A to the Philadelphia area, and we assumed various levels of production like I said. To give you an example, I will use two hundred thousand barrels a day production rate and two hundred and twenty five thousand barrels per day production rate. Two hundred thousand barrels we ended up with a unit cost of .47 per barrel. At a production rate — this is an initial rate of one hundred and twenty five thousand barrels a day — we ended up with a cost — an average cost over the life of the field of .59 a barrel. Q. How did it compare with tanker transportation at those production levels? A. The tanker transportation from the area out here into Philadelphia by comparison was a $1.16 for two hundred thousand barrels and $1.40 for one hundred and twenty five thousand barrels a day of production. By comparing the numbers, we see that the tanker transportation at those volume estimates and at those locations and going to that destination, the tanker rates are more than double the pipeline transportation rates in this instance. Q. All right, sir, at my request and in connection with this litigation, did you make some further cost analysis with respect to other [routes of] possible pipeline routes from the Sale 40 area to the Philadelphia area? A. The routes that we looked at were a pipeline route that would come down around Cape May and then be laid up the Delaware Bay area up into the Philadelphia area and come ashore in close proximity to the Philadelphia area. Another route that we looked at at the same time was a pipeline route all the way, but it went ashore down in the Delaware area and then came around and up into the Philadelphia area. Q.Mr. Brunjes, before we get into costs with respect to those additional routes, and before leaving Route #2, which is the route going around Cape May avoiding the Atlantic Coast of New Jersey, would you tell us . . . what your cost analysis or your cost estimates showed with respect to the cost of transportation by Route 2 as opposed to the tanker transportation? A. Route 2 around Cape May into the Delaware Bay area, that was along this line and regressing a little bit. For two hundred thousand barrels per day rate of production, that furned out to be 61 cents a barrel. A. The associate Marine Transportation is $1.16. Q. What about the production level of 125 thousand barrels? A. For approximately 125 thousand barrels a day, this route down here around Cape May and coming ashore in the Cumberland-Cape May area, resulted in 77 cents per barrel as compared to the other routing of 59 cents a barrel, and the tanker cost of $1.40 per barrel. I might add too that these transportation costs, the major consideration in these transportation costs as they were looked at is an industry facility, industry pipelines going from industry producing areas into an industry refining center. They would be common carrier type of facilities — multiple ownership and this is generally done in the industry. The major purpose of this is to get economy of scale. Everybody benefits from the joining, both big and small producers, shippers. Q. With respect to OCS Production, . . . is the common use of pipelines customary and usual? A. The OCS Act requires that as a condition of giving [rights-of-way] for laying pipelines in Federal waters, that these pipelines will be common carrier pipelines. They will provide transportation to all who desire at reasonable rates and without descrimination. Q. Do you mean in your analysis that you used routes that would be usable — feasible if production were obtained in all of the areas of the sale of 40 lease area? It is my understanding that, as I said before, that the maximum production that was indicated in the environmental impact statement [was] 320 thousand barrels a day. A single pipeline would be able to handle this quantity. Q. Now, with reference to route 3, which is shown in the exhibit, can you tell the Court the results of your comparison of the pipeline transportation in comparison with tanker transportation? Again, you have to indicate your levels. A. Route 3, the Marine pipeline transportation route all the way to the Philadelphia area, it's more lengthy and under water pipe laying is more expensive than onshore laying. It's a longer route and more expensive. The cost on that increased to 91 cents a barrel and two hundred thousand barrels a day production rate. That compares again to 47 cents on this 1A route and versus a dollar sixteen a barrel by the tanker routing. Q. So transportation by pipeline at that production level is still more economical than tanker transportation? A. Still more economical than tanker, although increasing because of the distance and expense. At 125 thousand barrels per day production rate, the unit costs goes up further. It goes from 91 cents to $1.15 and that again compares to the 59 cents by this 1A route and $1.49 by the tanker route. Again it is less expensive than the tanker but it is more expensive at the volume — the assumed volume drops off. Q. What about the comparison of cost with reference to route 4, which is the pipeline route that goes through the Delaware Counties into the Philadelphia area? A. That pipeline is a longer route and it would be more expensive to install. So its cost is generally higher. Its cost would be for two hundred thousand barrels a day maximum production rate, 95 cents a barrel, and again comparing to 47 cents by the short pipeline and $1.16 by tanker. At the 125,000 barrels a day production rate, it would be $1.20 per barrel as compared to $1.40 by tanker. So there is still about a twenty cents a barrel difference between tankers and pipelines. In summary on this, what it tells us is that as the distance increased, as far as pipelines are concerned, and as the assumed volume drops off, that pipeline costs do increase and they do compare fairly close to tanker transportation.I think we looked at — in looking at lesser volumes, lower than 125 thousand barrels a day production rate, that tankers and pipelines became much closer. That is comparing the long route — comparing the short route to the tanker, even at low production rates, the pipelines are much less expensive. Tr. pp. 857-863; see Appendix "E," infra [Appendices omitted. Ed.]. The court was impressed by the skill and honesty of Mr. Brunjes. It credits his testimony in full. This evidence establishes that it was quite possible for the Secretary to engage in an economic assessment of the effects of local opposition to pipelines. It was also reasonably necessary in order for the Secretary to know the realistic costs of the proposed action as compared to the benefits, and in order to assess fairly the economic feasibility of pipelines as against tankers. Without this information the Secretary could not make a reasoned decision as to the potential costs to be incurred by the proposed program. Where, as here, information was available to the government and meaningful analysis was reasonably possible on issues of such environmental significance, the Interior Department was under a NEPA-imposed obligation to disclose the information and undertake the analysis. The conclusion is inescapable that if, in their own economic interest oil companies can project, examine and analyze fairly detailed pipeline corridors, the Secretary of the Interior, in the critical public interest of environmental protection, must do so as well. B. Defective Cost-Benefit Analysis of Lease Sale 40 In balancing the projected benefits of Lease Sale 40 against its potential adverse environmental impact and against alternative energy producing programs, and in order to arrive at a reasoned decision on whether to proceed, it was essential for the Secretary to make a realistic estimate of the investment costs necessary to produce a given quantity of energy. Critical components of that factor are the estimated quantities of oil and gas reserves, expected peak production levels, and the cost of pipeline construction. This last item has exceptional significance, in light of the Secretary's firm assumption that pipelines, rather than tankers, would be the actual mode of transport. The accuracy of the Secretary's assessment of each of these components was called into [7 ELR 20239] serious question by highly credible evidence. 1. Underestimate of Finding Costs. Based on data sources readily available prior to the preparation of the final environmental impact statement, an expert witness concluded that the finding cost estimates used in the decision documents were unrealistically low, relative to recent industry experience. The Secretary estimated that, assuming large gas and oil reserves, finding costs were 14.5 cents per million British Thermal Units (BTUs), and, on the hypothesis of low reserves, 12.26 cents per million BTUs. The expert testimony, on the other hand, established that realistically determined finding costs for new oil would in fact be 168 percent greater in the first instance, and 127 percent greater in the second. Substantial portions of the testimony of Mr. George L. Donkin, an economist, are reproduced below to indicate the extremely sound and thorough foundation for his conclusions that in this, and related areas, the Secretary's data were grossly inaccurate. As in the case of Mr. Brunjes, this witness impressed the court as completely reliable and credible. His testimony was unshaken by cross-examination: Q. [D]id you make a study of the investment costs associated with the findings and transporting of oil and gas from sale 40? Q. Did you also make an investigation of the peak production levels and . . . the probability of the reserve estimates presented to the Secretary for his evaluation? Q. What data sources did you consult which were available to the Secretary prior to May of 1976? A. I consulted and used in my study data sources from the Federal Power commission, data sources that had been prepared by petroleum consultants and submitted as part of the official record in Congressional hearings, and data sources prepared by major oil companies which were submitted to the natural gas survey. All of these sources were readily available in the public domain . . . to compare the Interior Department estimated cost against cost finding costs estimates that I was aware of and that many economists, geologists and petroleum engineers familiar with searching for oil and gas are also aware of. Q. What was the Secretary's estimate of the cost of finding hydrocarbons in the low reserve estimated case? A. Converted to millions of BTUs, it's 12.26 cents. . . . the [I]nterior [D]epartment presented two total investment estimates for the sale 40 acreage. I prepared a separate exhibit for each of those total investment estimates. And in the high reserve case of 1.4 million and 9.4 trillion cubic feet. These reserve estimates and investment cost estimates relate to a finding cost of 14.5 cents per million BTUs. I would like to add at this point that these finding cost estimates are unrealistically low relative to recent industry experience. Q. Will you explain, by moving on to your next exhibit the courses of [sic] the basis for your finding that the [S]ecretary's estimates were unrealistically low? A. Yes . . . It presents the estimate costs of finding new crude oil . . . and . . . it shows that . . . new crude oil reserve costs [in 1974] approximately 32.86 cents per million BTUs to find. Q. Now, [with] what estimates by the [S]ecretary are you contrasting that 32.86? A. That could be contrasted with either the low reserve estimate or the high reserve estimate case. In the first event, the finding costs for new oil would be approximately 168 percent greater than the Interior [D]epartment estimate. In the second instance, the finding costs would be approximately 127 percent greater than the Interior [D]epartment estimates. Q. What was the data source that gave you the information from which you reached the conclusion that the Secretary had underestimated the cost to the extent that you indicated? A. The data sources identified at the bottom of this exhibit as the FTC, Bureau of Natural [G]ases staff analysis of the costs of finding and producing new crude oil. Mr. Donkin also testified that estimated finding costs for non-associated natural gas were 77 percent greater than Interior's high case resource estimate and 109 percent greater than its low case estimate. Q. Did you find any further corroboration from the official data sources that the [S]ecretary had substantially underestimated the cost of finding new natural gas, and if you did, would you please call our attention to the specific exhibit that shows that? A. Yes. . . . [O]n September 29th, 1975, the Federal Power [C]ommission staff submitted a presentation in the nationwide rule making concerning new natural gas prices. That presentation also contains finding costs estimates for new non associated natural gas. Those estimates appear at page 2 of my exhibit number two. And stated in terms of cents per million btus. The FTC staff estimate is 25.66 cents per million btus. Q. How does that FTC estimate of 25.66 cents for a million btus compare to the Secretary's estimate in both the high reserve and the low reserve cases" A. Again, it's substantially greater. Approximately 77 percent greater than the Interior [D]epartment's high case resource estimate, and one hundred and nine percent greater than the Interior [D]epartment estimate for the finding cost associated with the low resource estimate. Q. Do you know whether the Federal [P]ower [C]ommission agreed substantially with the estimates that have been made by its staff with respect to the finding costs for new nonassociated natural gas? 2. Underestimate of Pipeline Construction Costs Additional testimony by Mr. Donkin, based on information readily available to the Secretary, indicated that the critical element of pipeline construction costs was greatly underestimated in the NEPA documents. While the Secretary used a figure of $1 million per mile for a large diameter off-shore pipeline, the realistic cost is on the order of $1.75 million per mile. In the low resource case the cost of a pipeline was, as a consequence of this disparity, underestimated by $73 million. In the high resource case the error was $330 million: Q. To what dollar extent does the actual experience, cost experience in the Gulf of Mexico for offshore large diameter pipelines exceed the estimates of the Secretary contained in the PDOD for Sale 40. A. It is approximately 700,000 per mile and — A. In excess of the Interior Department estimate. One can also relate that to a total investment cost differential in the Interior Department low resource estimated case. They assume 100 miles of offshore pipeline. Therefore, that would convert to a one hundred million dollar expenditure. And in this case it would be one hundred and seventy three million dollars. Therefore, it's approximately a seventy three million dollar underestimate for the pipeline cost. A. In the high resource case, I have to make a calculation. The Interior Department assumed 450 miles which would be 450 million dollars as opposed to 780 million dollars that would be required to construct the same [7 ELR 20240] pipeline facilities using this Gulf of Mexico cost per mile figure. Therefore, we are talking about a difference of 330 million dollars. Q. 330 million dollars representing the extent to which the Secretary underestimated the cost of building 450 miles of pipeline? THE COURT: Is this about the same cost of an oil pipeline or is it different? THE WITNESS: Your Honor, I understand that it's approximately the same in the offshore area. I made numerous inquiries, I talked to many pipeline — I shouldn't say many — to three pipeline experts of the Federal Power Commission and they assured me that in the offshore areas pipelines' cost per mile do not vary substantially if at all. 3. Underestimate of Total Investment Required As a result of the underestimates with respect to finding and pipeline costs the realistic investment cost for the Sale 40 area in the low reserve case is in fact between 88.8 percent and 131.9 percent greater than Interior Department estimates. With respect to finding new natural gas, in absolute terms this results in additional costs of $756,790,000. In the high reserve case the realistic costs are between 70.7 percent and 100.9 percent higher than Department of Interior estimates, or in absolute terms between $2,359,773,000 and $3,668,733,000 greater. Mr. Donkin's testimony on this matter, reproduced in part below, describes in detail the degree to which the Department of Interior underestimated the proposed costs: Q. . . . Exhibit 4 is entitled, Estimated Realistic Investments Costs, Mid-Atlantic Sale [40] reserve estimates. Will you please explain what comparisons you are making on this exhibit? A. In this exhibit I am simply adjusting the finding cost for the sale forty acreage and the pipeline cost to reflect what I believe to be the realistic finding cost and pipeline cost for large diameter offshore pipelines to develop a total estimated investment cost for the sale area. I then compared that against the Interior Department estimate, and in the low reserve case the realistic investment cost exceeded Interior Department estimates between eighty-eight point eight percent and one hundred and thirty-one point nine percent. Q. What did you arrive at as your total estimated realistic investment costs for finding gas? A. These will range between 1.6 billion dollars and $1.97 billion. Q. As contrasted with your total figures, what were the Interior Department's estimates and where do we find them? A. At line 7, in both columns, $852,000,000 and $852,000,000 — That estimate also appears at page 6 of the PDOD for Sale No. 40. Q. So the Interior Department's estimates of $852 million are derived from the PDOD for Sale 40? Q. Your estimates are derived from the FPC data you previously identified? Q. To what extent did you find the Interior Department had underestimated the investment costs in the low case reserves? A. By an absolute magnitude of $756,790,000. Q. What does the figure in the third column, $1,123,000 plus represent? A. That represents the amount by which Interior underestimated the investment costs for this acreage. The finding costs are 32.86 cents per million btu. . . . [T]he percentage by which the realistic investment costs exceed the Interior Department's estimate . . . range between 88.8 percent and 131.9 percent. Q. [Y]ou found that the Interior Department had underestimated the investment costs in the amount of — by the amount of $2,359,773,000 in column 2 and [$3,668,733,000] in column 3; is that right? Q. The percentage by which the realistic investment costs exceed the Interior Department's estimate is contained at the foot of both columns; is that correct? Q. And the respective figures are 70.7 percent and [109.9] percent? 4. Overestimate of Peak Levels of Production. Finally, Mr. Donkin concluded that the peak levels of oil and natural gas production assumed by the Interior Department could never be obtained given the Department's own reserve estimates. Based on those estimates, peak oil production in 1988 would in fact be 15,000 barrels per day less than assumed by the Secretary in the low reserve case and 60,000 barrels per day less in the high reserve case. In the low case, reserves necessary to support the level of peak production assumed by the Secretary would have to be 52.5 percent greater than government estimates. In the high gas reserve case, resources would have to be 51 percent greater to support the predicted peaks. On this matter, Mr. Donkin testified: . . . [N]atural gas reserves cannot sustain their peak production level for much more than a year or two; in particular from the offshore areas. The decline is relatively rapid. I prepared this exhibit ["Annual Natural Gas Production as a Percent of Proved Reserves for Future Offshore Gas Reserves Additions"] in conjunction with a later exhibit of mine which was prepared as a result of my observation that the Interior Department's peak natural gas production level really could never be obtained given the reserves estimates that they were assuming. To illustrate, in the 9.4 trillion cubic feet case, the Interior Department assumes that natural gas production will peak in 1989 at a level of 3,080,000 mcf per day. This is approximately 1.124 trillion cubic feet per year, which is nearly 12 percent of the total reserves, natural gas reserves, assumed for the entire range area. The reason that this is virtually impossible to obtain is that in 1981 natural gas production commenced increases rather substantially in 1983, more substantially in 1985, and the reserves that were brought on the stream relative to that production, by the time you reach 1989 have already commenced a substantial production decline. Q. What would the reserves have to be in order to realize the production schedule that was projected by the Secretary? Q. As compared to his estimate of 400 million; is that right? [T]he reserves required would be even more significantly greater to obtain the Interior Department's peak daily natural gas production estimate. Typically 3.965 trillion cubic feet of natural gas would be required — Q. Tell us what the Secretary's reserve estimate was. A. The Secretary's reserve estimate in his low resource case was 2.6 trillion cubic feet. Q. Is it possible with a reserve estimate of that amount to attain a peak natural gas production of 850,000 cubic [7 ELR 20241] feet. . . . A. I do not believe it's possible if production commences in 1981 and increases at the levels forecasted by the Interior Department in the PDOD. Q. How much would the reserve have to be in order to realize the Secretary's estimate in the low gas reserves case? Q. That figure is what percentage greater than the Secretary's estimate of 2.6 trillion cubic feet which is contained in the PDOD? Q. What were your findings as to accuracy of the Secretary's estimates of peak oil production? A. Again, the total reserves, total oil reserves would have to be greater to obtain the peak oil daily production levels assumed by the Interior Department. Q. What did the Secretary estimate as being the peak oil production daily? A. 320,000 barrels per day in 1989. Q. What did he estimate in the high reserve case as being the reserve of oil? Q. Could the field reach a production of 320,000 barrels daily? A. No. In fact, given the deliverability decline which I assumed in preparing these exhibits, peak production would be obtained in 1988 at approximately 260,000 barrels per day. This is 60,000 barrels per day less than the Interior Department's estimate. Q. To what extent did the Secretary overstate the peak daily production, in your opinion? A. By approximately 25 percent in terms of reserves; however, in terms of peak daily production, by approximately 23 percent. . . . Given that [gas] reserve estimate, they assumed that in 1989, 3,080,000 mcf per day would be produced and that this would represent the peak daily production. This exhibit shows that in order for that estimate to obtain, natural gas reserves would have to be 14.248 trillion cubic feet as opposed to the Interior Department's estimate of 9.4 trillion cubic feet. This 14.248 trillion cubic feet figure is approximately 51 percent greater than the Interior Department's estimate. 5.NEPA Consequences of Gross Misestimates of Costs and Benefits The Secretary's cost-benefit analysis is vitally linked to critical NEPA issues. Its relevance to the tanker-pipeline issue has previously been alluded to, and its connection to other environmental impact issues is also clear. If the Secretary has grossly understanted the investment costs and overstated the daily production rates and reserves, then the timing, locations, size, and number of pipelines, drilling wells, and duration of construction may differ from the Secretary's projections, with resultant environmental and socio-economic impacts (offshore and onshore) qualitatively and quantitatively different from those estimated in the NEPA documents. The Secretary's duty under NEPA to compare Sale 40 to its alternatives, and to weigh the latter and their environmental effects, depends upon an accurate cost-benefit analysis of the Sale 40 project, without which the Secretary and other decisionmakers cannot adequately determine priorities and the course of action tending most strongly to further the public interest. While we find it unnecessary to consider plaintiff's submission that NEPA requires substantive review of the administrative decision, and no such review has been undertaken in this case, there is no disagreement that, at a minimum, the Secretary's decision may not be arbitrary and capricious. See Kurwin, Substantive Review Under the National Environmental Policy Act, 3 Ecology L.Q. 173 (1973). Where, as here, the economic costs and benefits of the planned action were seriously and grossly misrepresented or omitted, there could be no adequate balancing of economic benefits against environmental costs. It should be emphasized that the discrepancies are so substantial that they cannot be attributed to mere differences in judgment. They were so inadequate as to constitute, for NEPA purposes, a failure to make a meaningful inquiry. As a result, the Secretary's decision on Sale 40 was in this respect arbitrary and capricious and in violation of NEPA. C. Failure to Evaluate Separation of Exploration and Production Leasing The Department of Interior failed to adequately consider alternatives to the Sale 40 leasing procedure. The leases utilized grant exploration, development, and production rights to a successful bidder in one document. The government never considered exploration to determine the extent of oil and gas reserves and their location before granting exclusive rights of production. In uncontradicted trial testimony, the government's witness, Judith Gresham, flatly stated that no alternative had ever been considered by the New York City office of the Bureau of Land Management in preparing for Sale No. 40. Tr. 768-69. It was this office that coordinated preparation for Sale 40 leasing and that prepared the relevant NEPA documents. Ms. Gresham testified that the existing lease forms for the outer continental shelf had always combined exploration, development and production rights and that no thought had ever been given to proceeding differently in Sale 40. This failure to consider exploration before leasing for production was particularly anomalous in view of the limited government knowledge of the nature, extent, and exact location of probable oil and gas in the area. Private oil companies had been making costly preliminary studies for some ten years but the government had not. Apparently only on-the-spot exploratory drilling can determine what, if any, hydrocarbons will be available. The final commitment to grant exclusive rights to exploit specific tracts of governmental land — without even considering prior exploration — occurred in the face of no less than thirteen public comments on the Draft Environmental Statement for Sale No. 40, including among them remarks by the States of New York, New Jersey, Delaware, and Maryland, urging that the exploration and development phases be separated. FES Sale 40, Vol. 3, p. 67. The thrust of these comments was that separation of exploration and development would allow government at all levels to exercise timely and essential controls over environmental, social, and economic impacts, especially those associated with onshore development. Notwithstanding this impressive body of public comment, the possibility of separating exploration from development was effectively ignored in the Sale 40 final environmental statement. Section VIII of the impact statement, which discusses "Alternatives to the Proposed Action," is wholly silent on this option. In the Sale 40 documents the only reference to this alternative is contained in a few lines of response to comments on the draft environmental impact statement, which summarily dismiss the proposed separation as impossible under the provisions of the OCS Lands Act of 1953. FES Sale 40, Vol. 3, p. 67. The environmental impact statement does briefly mention the alternative of government exploration, Vol. 2, pp. 582-83, but the discussion is, considering the thousands of pages devoted to relatively insignificant matter in the NEPA documents, woefully inadequate. The complete treatment reads as follows: Exploratory drilling conducted by or sponsored by the Federal Government prior to holding a lease sale would be an alternative within the proposed action. This would involve an alternative approach to one aspect of the present Federal leasing system. At the present time there is little exploratory drilling on the OCS prior to leasing. The U.S. Geological Survey receives all engineering and geological data from companies which have drilled on leases issued on the OCS. These data and geophysical data, purchased on the open market, are used by the Geological Survey to develop OCS lease policies and evaluate tracts prior to leasing. By conducting such an exploratory program, the Government would obtain valuable data on stratigraphy and structure of the potential leasing areas. It would also [7 ELR 20242] have more detailed information with which to base resource estimates and evaluate tracts (and their monetary value) before leasing. In addition, coastal states might be able to obtain a better concept of expected development onshore. To properly evaluate the range of potential hydrocarbon traps in the Mid-Atlantic, upwards of 60 or more exploratory wells might be required. [R.H. Bowerman, Southern Connecticut Gas Company, stated that exploration staff of the Associated Gas Distributors estimates 50 to 75 wells might be needed (oral testimony, public hearing, DES for proposed OCS lease sale #40, 1976).] The magnitude of such a program would put a strain on personnel, procedures for contracting and hiring, and the Federal budget (especially at $4-$7 million per well). This procedure could delay leasing for several years just to evaluate the data, further increasing Mid-Atlantic reliance on foreign supplies of oil and gas during that period. One decided benefit would be the Federal Government's increased capability to evaluate tracts. However, under this system the Government takes much of the discovery risk. If the Destin Dome offshore Florida had first been explored by the Federal Government with no discoveries, around $1 billion of bonus bids might never have been generated for the U.S. Treasury as a result of the MAFLA sale. On the other hand, if the Federal Government should be responsible for exploration, due to manpower and budget constraints, it would be possible that some less remote though promising areas would not be explored, in favor of other more obvious prospective areas. The Alaskan North Slope area, for example, was explored for several years before any discoveries were found. It is possible as well that oil and gas resources may yet be found at Destin Dome. There is no attempt to measure the government's potential exploration costs against the value of the information that exploration would reveal, especially if oil and gas are found. The conclusory statements concerning the cost effectiveness of the present system are undocumented and probably inaccurate. Furthermore, there is no discussion of the possibility that the government could assume only part-interest in an exploratory effort, or of the complimentary reform of requiring companies in the bidding process to provide so-called "proprietary" information concerning potential reserves. We need not speculate that the exploration-before-leasing discussion in the environmental impact statement was mere window dressing. Mrs. Gresham's testimony demonstrated that this was the case.Like so much else in the NEPA documents, the material is presented to make it appear as if a candid analysis has taken place, designed to assist the public and decision makers, when in fact the decision on the issue has already been made. These deficiencies in the Sale 40 document were not remedied by the final environmental statement, Proposed Increase In Oil And Gas Leasing On The Outer Continental Shelf, (PEIS), which describes three alternative exploration schemes. The first proposal envisions a two-step process: exploration leases to private industry groups first, followed by production leases upon discovery. The environmental impact statement contains a very brief description of this alternative, but fails to comment on its feasibility. (PEIS Vol. 2, pp. 353-54). The second proposed option, a federal exploration program, is dismissed with scant discussion because of the belief that "[e]ven a limited effort would put a strain on personnel, procedures for contracting and hiring, and general organizational structure." PEIS Vol. 2, p. 354. This rationale expresses a questionable assumption at best, especially where the stakes are so high. The reason would be acceptable were it put forward by a small, poor, developing nation. It seems incredible when it comes from spokesmen of the most powerful government in the world whose budget is measured in the hundreds of billions of dollars. Other grounds for rejection — the fear that a "hostile reaction might be encountered from industry," (probably the real reason, although not a valid one) and that a duplication of efforts would result from continued private exploration — are likewise untenable. No private duplicative drilling could take place on government land without government approval. The third alternative presented, government-conducted off-structure stratigraphic drilling, is rejected because of budgetary and manpower constraints, PEIS Vol. 2, p. 355 — a matter subject to annual review by Congress and the President. The environmental impact statement for the proposed increase in leasing also refers to a "two-stage" outer continental shelf development program pursuant to which exploration and development would be divided for the purpose of cost-benefit analysis of production of known reserves before leases are sold. This brief account neither accepts nor rejects the concept of this two-stage development, but merely describes it. PEIS Vol. 2, pp. 350-52. Each of these alternatives is cursorily dismissed in a few paragraphs that fail to provide the information that a decisionmaker requires for an adequate evaluation of the feasibility of these alternatives or their costs and benefits relative to the proposed action. The offhand rejection of the alternative of separating exploration from development and production cannot be justified on the pretext that the option entails a leasing procedure inconsistent with provisions of the Outer Continental Shelf Lands Act of 1953. Final Environmental Statement Sale No. 40, Vol 3, p. 67. The agency was obliged to disclose which specific statutory provisions it deemed to be at variance with the alternative and the manner in which it was deemed to be inconsistent. More significantly, it is a well established rule that an alternative is not ipso facto unreasonable merely because it requires legislative implementation. Natural Resources Defense Council v. Morton, 458 F.2d 827, 837 (D.C. Cir. 1972). Even assuming that legislation would be required, the proposed alternative of separating the phases of exploration, development and production is not "remote and speculative" and therefore falls well within the "rule of reason" standard of Natural Resources Defense Council v. Morton. So much is implied by the Sale 40 final environmental statement itself, where reference is made to the fact that amendments to the Outer Continental Shelf Lands Act, which authorize the proposed alternative, "have been introduced in Congress." Vol. 3, p. 67. It is noteworthy that this legislation was defeated after the Secretary opposed it. Tr. pp. 71-74. The possibility of amending the Outer Continental Shelf Lands Act were thus necessary to protect the public in the view of the Secretary cannot be summarily dismissed. When an alternative course of action exists, whether or not it is within the Secretary's existing authority, that could satisfy environmental and economic concerns relating to a program, that alternative must be treated in a meaningful, non-conclusory fasion. As the court in Committee for Nuclear Responsibility v. Seaborg, 463 F.2d 783, 787 (D.C. Cir. 1971), noted: [T]he statement has significance in focusing environmental factors for informed appraisal by the President, who has broad concern even when not directly involved in the decisional process, and in any event by Congress and the public. The point was reiterated in Natural Resources Defense Council v. Morton, 458 F.2d 827, 833 (D.C. Cir. 1972), where the question of considering alternatives outside the jurisdictional power of the agency was raised: Congress contemplared that the Impact Statement would constitute the environmental source material for the information of the Congress as well as the Executive, in connection with the making of relevant decisions, and would be available to enhance enlightenment of — and by — the public. In the Morton case, Interior argued that it need not consider alternatives which were beyond its power to affect. The court of appeals rejected this argument and required that such alternatives be considered: While the Department of the Interior does not have the authority to eliminate or reduce oil import quotas, such action is within the purview of both Congress and the President, to whom the impact statement goes. The impact [7 ELR 20243] statement is not only for the exposition of the thinking of the agency, but also for the guidance of these ultimate decisionmakers, and must provide them with the environmental effects of both the proposal and the alternatives, for their consideration along with the various other elements of the public interest. The Sale 40 NEPA materials and the record before this court establish that the Bureau of Land Management and the Secretary gave no consideration to the alternative of separating exploration and development. This cavalier treatment of responsible and reiterated public comments urging consideration of a reasonable alternative to a proposed agency action is clearly inadequate and in violation of NEPA. No NEPA requirement has ever received greater judicial emphasis than that which prescribes "a detailed statement" and adequate discussion and consideration of reasonable "alternatives to the proposed action." 42 U.S.C. § 4332. The significance of this one section of the environmental impact statement with respect to the NEPA process as a whole has been stressed repeatedly. Natural Resources Defense Council v. Callaway, 524 F.2d 79, 92 (2d Cir. 1975); Chelsea Neighborhood Association v. U.S. Postal Service, 516 F.2d 378, 386-88 (2d Cir. 1975); Monroe County Conservation Society v. Volpe, 472 F.2d 693, 697-98 (2d Cir. 1972); Natural Resources Defense Council v. Morton, 388 F. Supp. 829, 834 (D.D.C. 1974), aff'd, 527 F.2d 1386 (D.C. Cir. 1976); Calvert Cliffs' Coordinating Committee v. A.E.C., 449 F.2d 1109, 1114 (D.C. Cir. 1971). See also, Council on Environmental Quality Guidelines, 40 C.F.R. § 1500.8(a)(4). As stated by the Court of Appeals for the Second Circuit in Natural Resources Defense Council v. Callaway, 524 F.2d 79, 92-93 (2d Cir. 1975): It is absolutely essential to the NEPA process that the decisionmaker be provided with a detailed and careful analysis of the relative environmental merits and demerits of the proposed action and possible alternatives, a requirement that we have characterized as "the linchpin of the entire impact statement," Monroe County Conservation Society v. Volpe, 472 F.2d at 697-98. Indeed the development and discussion of a wide range of alternatives to any proposed federal action is so important that it is mandated by NEPA when any proposal "involves unresolved conflicts concerning alternative uses ofavailable resources," 42 U.S.C. § 4332(2)(D). Any discussion of alternatives must contain more than "mere assertions" and must provide sufficient data and reasoning to enable a reader to evaluate the analysis and conclusions and to comment on the impact statement. Chelsea Neighborhood Association v. United States Postal Service, 516 F.2d 378, 386-89 (2d Cir. 1975); Silva v. Lynn, 482 F.2d 1282, 1287 [3 ELR 20698] (1st Cir. 1975). The Council on Environmental Quality Guidelines properly call for "a rigorous exploration" and adequate analysis of reasonable alternatives so that "options which might enhance environmental quality or have less detrimental effects" will not be foreclosed. 40 C.F.R. § 1500.8(a)(4). This failure of the responsible federal official to carry out "to the fullest extent possible" the procedural provisions of NEPA constitutes a violation of the judicially enforceable duty to adequately consider environmental values. The Calvert Cliffs' decision pointedly concludes that if the agency's: decision was reached procedurally without individualized consideration and balancing of environmental factors conducted fully and in good faith — it is the responsibility of the courts to reverse. 449 F.2d 1109, 1115 (D.C. Cir. 1971) (emphasis added). The Second Circuit has indicated that a decision must not be made until after a complete and adequate impact statement has been considered: "Otherwise, the process becomes a useless ritual, defeating the purpose of NEPA, and rather making a mockery of it." Natural Resources Defense Council v. Callaway, 524 F.2d 79, 92 (2d Cir. 1975). The record before this court establishes that the environmental impact statement failed to adequately consider an important alternative to the proposed action — separation of exploration and leasing for production — and that the agency's decision to hold Sale 40 was not based on a good faith consideration of this alternative. D. Failure to Consider Impact of Leasing Alternative Tracts Those responsible for the tract selection process neglected to examine the potential environmental effect of offering, and accepting bids on, tracts other than those actually proposed and leased. As we noted earlier, the Secretary has now leased 93 tracts in the Sale 40 area. These leases represent the culmination of a multistep tract selection process. Initially, based on the United States Geological Survey and industry information concerning the potential of a specific region of offshore energy reserves, an area of approximately 6.5 million acres was designated open to "nomination and comment." Tracts covering approximately half this area were "nominated" by industry, i.e., industry expressed at least some interest in leasing these acres. Of the industry-nominated tracts 154 were selected for further study in the Environmental Impact Statement. All of the tracts selected for study were ultimately put up for sale. One hundred one of these were bid on, and 93 were ultimately leased, with 8 bids rejected. See Appendix "D," infra [Appendices omitted. Ed.]. It is clear from the record that nowhere in the lengthy process of considering which tracts were ultimately to be leased did the Secretary or Bureau of Land Management personnel charged with preparing NEPA documents consider the onshore impact of choosing particular tracts, rather than others. They simply assumed that landing of outer continental shelf oil and gas could be had at any point along the coast. Even if the states do not prohibit pipelines, they may restrict their point of entry, requiring a landfall, for example, at the industrialized northern section of the New Jersey Coast or at the refinery areas in the tri-state New Jersey-Delaware-Pennsylvania region. The existence of such a probability imposed on the Secretary the duty to consider the alternative of leasing tracts other than those proposed in Sale 40. It might, for example, improve the revenue from lease sale, decrease pipeline lengths, and reduce environmental impacts if tracts contiguous to potentially acceptable pipeline landfalls were utilized. Testimony by Judith Gresham, Chief of Operations of the Bureau of Land Management, who played a significant role in the process by which tracts were selected for Sale 40, established that the only environmental considerations that affected the scope of Sale 40 was concern over the impact on commercial fishing grounds. No consideration whatsoever was given to the relationship of the selected tracts to specific pipeline routes, onshore impacts, or local zoning and related powers. The following testimony of Ms. Gresham summarizes the position of the government: THE COURT: Were there in Washington considerations of the pipeline possibility or the tanker possibility in the elimination of some of the tracts? I am particularly referring to the wavy gren lines. [Indicating map, Appendix "D"] [Appendices omitted. Ed.] That was the bulk of the elimination? THE WITNESSES: That was where all of the elimination occurred. THE COURT: That was not due to any pipeline consideration? THE COURT: . . . I take it, neither you nor Washington considered the applicability of local laws in making these selections for tracts for possible leasing. THE WITNESS: Not for specific tracts. Correct. We had presentations on land use on onshore impacts. But [7 ELR 20244] those were more generalized than applying them to specific tracts that might be selected. THE COURT: Those purple tracts with the circle in them, those were tracts on which bids were made? But you rejected them? Why were they rejected? Do you know? THE WITNESS: Insufficiency of bids. THE COURT: No environmental practice? THE COURT: No pipeline practice? THE WITNESS: No. They were each rejected specifically for insufficiency of the cash bonus bid. THE COURT: No local law practice? E. The Issue of Secretary's Lack of Good Faith At trial plaintiffs renewed their contention that the NEPA review process was used as post hoc justification for decisions previously made by the Secretary to accelerate outer continental shelf leasing and to hold Sale 40. A strong argument has been made, supported by considerable circumstantial evidence, that the NEPA documents and public hearings were but a charade; that the decision to lease was a foregone conclusion once Presidents and those in their administrations, including successive Secretaries of the Interior, decided some years ago that production of Atlantic hydrocarbons should proceed speedily. Defendant's own witness, Mr. Robert Bybee, an Exxon executive, admitted that as early as 1965 his company began gathering geological data in the Atlantic area north of Cape Hatteras, based on information, obtained from the Interior Department, that a lease sale was planned in the Atlantic: Q. You started [gathering geological data] in 1965. Did you assume then in 1965 sales were going to be made offshore? Q. Did you have any information that it was going to be made offshore? A. In those days the Interior Department was planning on about a 1970 sale in the Atlantic. A. This was informal discussions with those people. Q. In the Department of Interior? Q. They said they were planning on it then? A. Well, if you recall in those days they did not have these five-year plans they published. The only way we were ever able to find out what their plans were in the Gulf of Mexico, or of any other place, was to go ask, "What are your plans?" This is how we did our planning. This statement, as well as numerous other written internal memoranda and public statements of responsible government officials tend strongly to demonstrate that firm decisions to accelerate outer continental shelf leasing and to hold Sale 40 were made long before the ostensible decision dates, and before fulfillment of NEPA's requirements, and that the Bureau of Land Management simply went through the NEPA motions in order to validate the decisions previously made. Although defendant claimed that these decisions were made as a response to the Arab oil embargo, on April 18, 1973, nearly six months prior to the embargo, the President announced his decision to accelerate outer continental shelf leasing and to hold lease sales. At that time, the President directed the Secretary "to take steps which would triple the annual acreage leased on the Outer Continental Shelf by 1979." Pl. Ex. 86, p. 393. The Secretary had, in fact, recommended to the President that this acceleration of leasing occur. Pl. Ex. 103, p. 2. Three months later, on July 11, 1973, the Bureau of Land Management issued a revised proposed schedule implementing the President's directive. The Department of the Interior had decided at that time that leasing would be accelerated; it left open only the final decision about specific sale sites. P. Ex. 87, p. 7. On September 12, 1973, the Department of the Interior Under Secretary of Energy announced that this accelerated program was required in order to meet future energy needs. Pl Ex. 87, p. 6. The Secretary then recommended a further acceleration in outer continental shelf leasing. Pl. Ex. 103, p. 4. The President concurred and on January 23, 1974, stated: Today I am directing the Secretary of the Interior to increase the acreage leased on the Outer Continental Shelf to 10 million acres beginning in 1975, more than tripling what had originally been planned. Pl. Ex. 88, p. 84 (emphasis added). To effectuate this 10 million acre goal, in September 1974, Deputy Under Secretary Jared G. Carter announced to the Directors of the Bureau of Land Management and Geological Survey that Under Secretary Whitaker expected "a firm leasing schedule laid out that definitely includes . . . 10 million acres leased in 1975 — not just 10 million acres offered." Pl. Ex. 89. On November 13, 1974, the President addressed the Governors of the coastal states and announced his commitment to the outer continental shelf plan: I believe that the outer continental shelf oil and gas deposits can provide the largest single source of increased domestic energy during the years when we need it most. The OCS can supply this energy with less damage to the environment and at a lower cost to the U.S. economy than any other alternative. We must proceed with a program that is designed to develop these resources. Secretary Morton addressed the coastal state governors a day later and reiterated the President's endorsement of an accelerated program: "Expeditious development of the Outer Continental Shelf is the keystone to meeting the Nation's energy needs in the late '70s and '80s." Pl. Ex. 91, p. 1. The President, in his January 15, 1975 State of the Union address, reaffirmed the commitment of his administration to outer continental shelf leasing, stating: A massive program must be initiated to increase energy supply, to cut demand, and provide new standby emergency programs to achieve the independence we want by 1985. The largest part of increased oil production must come from new frontier areas on the Outer Continental Shelf and from the Naval Petroleum Reserve No. 4 in Alaska. It is the intent of this administration to move ahead with exploration, leasing, and production on those frontier areas of the Outer Continental Shelf where the environmental risks are acceptable. Two weeks later, when Secretary Morton met in new Jersey with state officials to discuss the outer continental shelf, he maintained a flexible position on some procedural matters but "did not budge from the Administration line that offshore oil must be developed as quickly as possible in order to reduce America's dependence on imported oil. No delays . . . will be tolerated." Pl. Ex. 93. In February 1975, Sale No. 37 for the South Texas outer continental shelf, designated as part of the national program, took place prior to filing of the programmatic final environmental statement. In May 1975, the same events transpired with respect to Sale No. 38 for the outer continental shelf, another part of the national program. Pl. Ex. 100, p. 7. When the President sent to Congress proposed oil pollution liability legislation on July 9, 1975, he accompanied his proposal with the message that energy needs "require accelerated development of our off-shore oil and gas resources." Pl. Ex. 94. More than two and one half months before the mid-Atlantic final environmental statement was released, Secretary Kleppe had apparently firmly decided to proceed with the lease sale; on March 3, 1976, he announced that "[c]hronic pollution from the shelf does not — in all probability — pose a serious threat to the Atlantic Coast." Pl. Ex. 95, p. 4. On May 5, 1976, again prior to the [7 ELR 20245] release of the final environmental statement, the Director of the United States Geological Survey categorically stated that New York would suffer minimal onshore impact, and in all probability, no oil spill was likely to reach New York. Def. Ex. YY. Secretary Kleppe announced on June 16, 1976 that he was proceeding with the Mid-Atlantic Sale; the Secretary failed to wait the required 30 days after the May 25, 1976 filing of the final environmental statement with the Council on Environmental Quality. Pl. Ex. 85, pp. 3-6. That the Department of the Interior had little interest in properly fulfilling its obligations under NEPA is evidenced by a memorandum from Assistant Secretary Hughes. The Assistant Secretary allowed the United States Geological Survey one week to furnish him with information for the final environmental statement on Proposed Increase in Oil and Gas Leasing on the Outer Continental Shelf relating to estimated outer continental shelf oil and gas reserves, likely drilling sites, and whether tankers or pipelines were to be used. Mr. Hughes acknowledged that the "regrettably short response time will likely not allow highly accurate answers." Pl. Ex. 97. In spite of this strong circumstantial evidence that the decision to proceed with Sale 40 was made without considering the NEPA documents, we decline to base our decision that NEPA has been violated on these contentions. To do so would constitute review of the "mental processes" of the Secretary. Under general principles of review of agency action, such an inquiry should be avoided by courts, if it is at all possible to decide a case on other grounds: [T]he courts should avoid wherever possible making detailed inquiries into the reasons for executive decisions and examining communications among high officials which are the basis of their exercise of judgment. Cf. 8 Wigmore, § 2378(3) (McNaughton rev. 1961); Gellhorn and Byse, Administrative Law Cases and Comments, 617-618 (4th ed. 1960). Not only is this reluctance supported by proper respect for the separation of powers, but by the practical consideration that it is often impossible for a highly placed official to analyze or remember the varied emotional and intellectual reasons for a decision. United States v. Schipani, 289 F. Supp. 43, 64 (E.D.N.Y. 1968), aff'd, 414 F.2d 1262 (2d Cir. 1969). Consistent with this position, the Second Circuit has recently refused to permit inquiry into internal agency deliberations, absent "strong preliminary showings of bad faith." National Nutritional Foods Ass'n v. FDA, 491 F.2d 1141, 1145 (2d Cir. 1974). See also, Andrews v. Knowlton, 509 F.2d 898, 906-907 (2d Cir. 1975); but cf. Norris & Hirshberg v. SEC, 163 F.2d 689 (D.C. Cir. 1947). As already demonstrated, there are ample other grounds for holding that NEPA has been violated by the Sale 40 leases. Accordingly, the court need not decide the good faith issue. Having determined that the Secretary's decision to proceed with Lease Sale 40 involved a substantial number of independent violations of NEPA, the court is compelled to consider the appropriate remedy. There are a number of main alternatives. First, the court might enjoin the parties from further proceeding to exercise any powers purportedly granted by the leases executed by the defendant, declaring the leases null and void. Defendant's successor would be required to prepare an adequate environmental impact statement before leasing could be resumed. Second, the court might allow the parties to proceed according to the lease terms, on the equitable grounds that bids and payments of over $1 billion, and the activities already commenced, make it desirable to ignore the Secretary's violation of law. Third, the court might require the defendant to organize a cooperative agency to coordinate federal and industry activities with state and local planning groups in order to minimize the adverse effects of the Secretary's violation of NEPA. A. Creation of Coordinating Agency The alternative of requiring the defendants to create a coordinating and unifying organization that would integrate federal, state, local, and industry planning so as to minimize adverse impacts is probably the most desirable remedy from a political, economic, and social perspective, given the extensive investments already made and the substantial activities conducted by the parties. The need for such an agency is indisputable. State and local planners seeking either to obtain information concerning activities related to the outer continental shelf, or to convey their own data or concerns to federal decisionmakers, are confronted by an overwhelming conglomerate of government and private agencies involved in various ways in the leasing, exploration, and production process. Despite the urgency which past administrations have attached to expanding offshore lease sales and petroleum production, no consolidation of responsibility for the outer continental shelf program in one agency has occurred. There is thus, apparently, no effective top level coordination of outer continental shelf management, practices and studies. The Department of the Interior shares cabinet-level responsibility for outer continental shelf activities with the Department of Commerce, the Department of Defense, and the Department of State. Within the highest levels of the executive branch, the Council on Environmental Quality and the Office of Management and Budget have substantial, but effectively uncoordinated, powers and duties. The Department of Interior alone has fragmented its responsibility for federal management of the offshore oil and gas program among at least nine offices, agencies and bureaus: Geological Survey; Bureau of Land Management; Fish and Wildlife Service; Office of Minerals Policy Development; Assistant Secretary, Fish, Wildlife and Parks; Assistant Secretary, Energy and Minerals; Assistant Secretary, Land and Water Resources; Assistant Secretary, Program Development and Budget; and Solicitor. Additional involved governmental bodies include the Department of Transportation, United States Coast Guard, Material Transportation Bureau, Federal Aviation Administration, Army Corps of Engineers, Office of Coastal Zone Management, United States Navy, Environmental Protection Agency, Federal Power Commission, Interstate Commerce Commission, National Oceanic and Atmospheric Administration. Individuals and municipalities concerned about, or involved in, environmental planning may be caught up in the ensnarled attempts of these and other departments and agencies to protect and enlarge their own bureaucratic functions. See generally, Coastal Effects of Offshore Energy Systems, pp. 43-50, 124-140. This court may have the theoretical equitable power to require the formation of an organization to remedy this lack of coordination. Although NEPA itself is, surprisingly, entirely devoid of remedial provisions, the absence of legislatively explicit remedies has not presented a problem to the courts. Thus far, the remedy invariably sued for and granted in all but the most exceptional circumstances is an injunction, which prohibits the particular agency from proceeding with the project until an adequate environmental impact statement is filed. There is nothing in NEPA or its legislative history, however, to suggest that the court is limited in fashioning remedies to this all-or-nothing approach, i.e., either a finding that the Act has been substantially complied with, or a ruling that no further activities can be conducted until it is complied with. In a significant number of environmental cases courts have by dicta recognized that the general principles and powers of equity jurisdiction are applicable and available where NEPA has been violated. City of Romulus v. County of Wayne, 392 F. Supp. 578, 594 [5 ELR 20302] (N.D.Tex. 1975) (". . . general principles of equity are applicable in NEPA cases and these principles will control the Court's discretion."); Environmental Defense Fund v. Froehlke, 348 F. Supp. 338, 356 (W.D. Mo. 1972); East 63rd Street Association v. Coleman, 9 ERC 1193 (S.D.N.Y. 1976). These statements have been made in the context of a denial that issuance of an injunction is mandatory for any NEPA violation; however, there is no reason to suppose that the legislature intended to permit this traditional exercise of equitable discretion, [7 ELR 20246] but to cut back equally traditional equity powers to fashion appropriate decrees. The Supreme Court's statement in Hecht Co. v. Bowles, 321 U.S. 321, 64 S. Ct. 587, L. Ed. (1944), a nonenvironmental case, applies to the instant suit: We are dealing here with the requirements of equity practice with a background of several hundred years of history. . . . "An appeal to the equity jurisdiction conferred on federal district courts is an appeal to the sound discretion which guides the determinations of courts of equity." . . . The essence of equity jurisdiction has been the power of the Chancellor to do equity and to mould each decree to the necessities of the particular case. Flexibility rather than rigidity has distinguished it. The qualities of mercy and practicality have made equity the instrument for nice adjustment and reconciliation between the public interest and private needs as well as between competing private claims. We do not believe that such a major departure from that long tradition as is here proposed should be lightly implied. . . . [I]f Congress desired to make such an abrupt departure from traditional equity practice as is suggested, it would have made its desire plain. Hence we resolve the ambiguities . . . of that interpretation which affords a full opportunity for equity courts to treat enforcement proceedings under this . . . legislation in accordance with their traditional practices, as conditioned by the necessities of the public interest which Congress has sought to protect. 321 U.S. at 329-30, 64 S. Ct. 591-92. Cf. City of Hartford v. Town of Glastonbury, Nos. 76-6049, -6050, -6059, Slip Op. at p. 1105 (2d Cir. Dec. 23, 1976) (". . . [A]n injunction, combining a practical means to a desired end with a mechanism to take account of future developments, is consistent with the broad, flexible nature of the federal courts' equitable powers. See Hills v. Gautreaux, supra, 44 U.S.L.W. at 4484, and authorities cited therein."). Whatever the theoretical equitable power of this court to require coordinating efforts, as a practical matter this is not a suitable remedy. Courts simply lack the resources to effectively supervise the integration and coordination of the variety of federal, state and local agencies and industry organizations. Reorganization of the federal bureaucracy is a matter for the President and Congress, not the courts. The court of appeals for this circuit has recently recognized the severe limitations on the power of the federal government to compel local and state governments to cooperate in federal programs. Friends of the Earth v. Beame, 75-7497; Friends of the Earth v. Duffy, 76-3054 (2d Cir. January 17, 1977). This court is even more severely limited in forcing cooperation between all levels of government and industry. The alternative of allowing lease activities to proceed in spite of the violation of the law found by the court flies in the face of a strong congressional policy. Except where there have been extraordinary equities to the contrary, courts within this and every other circuit have enjoined projects proceeding in violation of NEPA until the mandates of the Act have been met. Natural Resources Defense Council v. Callaway, 524 F.2d 79 (2d Cir. 1975); Chelsea Neighborhood Associations v. U.S. Postal Service, 516 F.2d 378 (2d Cir. 1975); Monroe County Conservation Council v. Volpe, 472 F.2d 693 (2d Cir. 1972); Conservation Society of Southern Vermont v. Secretary of Transportation, 508 F.2d 927 [5 ELR 20068] (2d Cir. 1974); Steubing v. Brinegar, 511 F.2d 489 [5 ELR 20183] (2d Cir. 1975); Sierra Club v. Mason, 351 F. Supp. 419 [2 ELR 20694] (D. Conn. 1972); Committee to Stop Route 7 v. Volpe, 346 F. Supp. 731 [2 ELR 20446] (D. Conn. 1972); Citizens for Clean Air, Inc. v. Corps of Engineers, 349 F. Supp. 696 [2 ELR 20650] (S.D.N.Y. 1972). The injunction serves two distinct purposes: it ensures that a project posing serious environmental threats will not proceed absent adequate consideration of viable alternatives, and it furthers public disclosure of all data that should, or might, affect the instant decision and perhaps future decision-making: . . . at a minimum it seems clear that in the absence of extraordinary equities on the government's side, the requirement of an impact statement must be enforced by an injunction whenever the proposed project poses a substantial risk of damage to the environment and there exists a reasonable possibility that adequate consideration of alternatives might disclose some realistic course of action with less risk of damage. Even if the responsible agency ultimately decides not to pursue such alternative course, the public disclosure of all the pertinent circumstances serves an important policy of the Act, and may well affect governmental decision-making in the future. Sierra Club v. Mason, 351 F. Supp. 419, 427 (D. Conn. 1972). See also Monroe County Conservation Council, Inc. v. Volpe, 472 F.2d 693 (2d Cir. 1972) (Medina, J. concurring) ("The only way . . . is to require full and strict compliance."). The Court of Appeals for the Second Circuit has emphasized that an injunction is necessary, even if it will have an adverse impact, direct or indirect, on the project, parties, or related industries or segments of the public. "[C]ompliance with NEPA invariably results in delay and concomitant cost increases, and Congress has implicitly decided that these costs must be discounted." Steubing v. Brinegar, 511 F.2d 489, 497 (2d Cir. 1975). In a footnote, the court pointed out that Congress was also undoubtedly aware that "NEPA-caused delays" would interrupt employment, or postpone initial jobs, and implied that these are to be discounted, as well, in insisting on compliance with the Act. Investments made by private parties in reliance on the assumption that a project would be completed "were made subject to the risk that the [project] might not ever be completed as a result of state or federal decisions." 511 F.2d at 497 n. 16. Even if, in the exercise of equitable discretion, we were to give great weight to the economic and social costs to be incurred as a result of the issuance of an injunction, cf. East 63rd Street Association v. Coleman, 9 ERC 1193, 1203 (S.D.N.Y. 1976), the equities would still require such action. Sale 40 exploration and production may profoundly affect the mid-Atlantic region and its human and natural resources for at least the next quarter century. An irreversible commitment of resources is now being made, and it poses a substantial threat of irreparable injury. If the potential hazards overlooked or unrealistically evaluated by the Secretary should create actual catastrophes, the adverse impact could be permanent and devastating. In light of this serious threat, loss of potential profits or sums already committed to Sale 40 activities are not sufficient to warrant denial of NEPA relief. In this regard it is also significant that the substantial economic and technical commitment being made by the oil companies and others is not the result of any tardiness by plaintiffs in their efforts to assert their rights under NEPA. We are not dealing here with an eleventh hour challenge to an already well-advanced project. Cf. East 63rd Street Association v. Coleman, 9 ERC 1193, 1201, 1203 (S.D.N.Y. 1976). At the argument of their appeal from the preliminary injunction, the court of appeals warned the oil industry of this court's power to rescind any leases obtained at the scheduled August 17, 1976 sale, should it ultimately be determined that the Secretary had violated NEPA. Defendant's own witness, Robert W. Bybee, Operations Manager in the Exploration Department of Exxon Oil Co., admitted that his company was aware of the instant lawsuit and that the company's subsequent expenditures and commitments were considered business risks. In fact, many of these commitments contain provisions for cancellation or "hedging" if Sale 40 is rescinded or enjoined. In addition, those expenses representing outlays for exploratory data will continue to have technical value whether or not Sale 40 ultimately proceeds in its present form following the production of an adequate environmental impact statement. As a result of the opening of all Sale 40 bids each oil company is now aware of the bidding strategy and information of the others. If the sale is rescinded but eventually rescheduled the companies will bid against each other with maximum knowledge of their competitors' interpretation of its proprietary raw data. Plaintiffs contend that this will result in increased competitive [7 ELR 20247] bidding which will insure higher lease payments and a greater return by the public for the resources of the Sale 40 area. The court is not convinced, however, that maximum disclosure will necessarily result in increased competition and furtherance of the public interest. Rather, in balancing the equities in this case, we simply note that there was no evidence adduced at either hearing that re-bidding will result in lower payments than were obtained previously. Rescission of the leases will not, therefore, disserve the public in this respect. There is no showing of illegal acts by the oil companies. The fact that they must suffer because of the Secretary's failures was considered by the court. The public's rights and equities are paramount and must prevail. In considering the proper scope of any injunction we have examined and rejected alternatives such as allowing exploration to continue, but enjoining production pending preparation of an adequate environmental impact statement. Such a course is undesirable for two reasons. First, to allow the project to proceed will involve the commitment of resources which will either be lost if the project is abandoned or reformed in the light of compliance with NEPA as a result of proper environmental impact evaluation, or which will impermissibly tilt the scales in favor of proceeding. Second, NEPA requires an evaluation of environmental impact early in the planning phase of a project, so that the decision-maker has the most options available to reformulate the project to minimize adverse consequences. Once action has been taken, or allowed to proceed, it may be too late to alter the plans, because certain otherwise available alternatives have been foreclosed. Judged against "a rule of reason," N.Y. Natural Res. Defence Council v. Kleppe, U.S. , , 97 S.C. 4, 6 (1976), the Secretary of the Interior violated NEPA. The parties are enjoined from further proceedings with the exercise of any powers purportedly granted by Sale 40 leases executed by the defendant. The leases are declared null and void. This order is stayed pending the completion of appeals, if any. 7 ELR 20230 | Environmental Law Reporter | copyright © 1977 | All rights reserved |