the close of the administrative record, with the introduction of the Staff Evaluation, did the true rationale and its supporting data become apparent: The refinery was to be built because of savings in transportation costs, not because of any materially beneficial contribution to the nation's energy supply.
Because of the sudden shift in rationale from energy need and refinery capacity to savings in transportation costs, and because of the introduction of new data relating to transportation costs, this Court finds that the public was denied its opportunity to comment and its right to a public hearing.
B. Validity of the FEIS and SEIS Under NEPA.
National Wildlife challenges the validity of the FEIS and the SEIS on three grounds. First, National Wildlife claims that the transportation-cost data which were first introduced in the Staff Evaluation should have been included in the FEIS or SEIS. Thus, according to National Wildlife, the introduction of the transportation-cost data in the Staff Evaluation rather than the FEIS or SEIS violated not only the requirements of the APA, CWA and the Army's regulations that there be opportunity to comment and a right to a hearing, but also the requirement of NEPA that there be a detailed environmental impact statement. Second, National Wildlife claims that the Staff Evaluation's discussion of alternative sites differed in such a degree from the discussion in the FEIS and SEIS, that the Staff Evaluation effectively obliterated the analysis of alternatives in the FEIS and SEIS required by section 102(2)(C)(iii) of NEPA. Third, National Wildlife argues that apart from the invalidation of the FEIS and SEIS by the Staff Evaluation's subsequent re-analysis of alternatives, the FEIS and SEIS's discussions of alternatives are, in and of themselves, inadequate. Specifically, National Wildlife claims that the SEIS's analysis of 67 sites was not extensive enough, in that 48 alternatives were dismissed summarily, some with just a few words, and that the examination of the remaining 19 sites neglected a number of crucial factors.
Before confronting these challenges, it is worth noting the rather circumscribed role of the Court in passing on the validity of an agency's actions under NEPA. While "NEPA does set forth significant substantive goals for the nation, . . . its mandate to the agencies is essentially procedural." Vermont Yankee Nuclear Power Corp. v. NRDC, 435 U.S. 519, 558, 55 L. Ed. 2d 460, 98 S. Ct. 1197 (1978).
Thus, this Court's obligation is only "to insure a fully informed and well-considered decision," and the Court may not set aside the agency's decision "simply because the court is unhappy with the result reached." Id. See North Slope Borough v. Andrus, 206 U.S. App. D.C. 184, 642 F.2d 589 (D.C. Cir. 1980).
Among the primary procedural mechanisms embodied in NEPA are the requirements that an agency include a cost-benefit analysis pursuant to section 102(2)(B) of NEPA, Calvert Cliffs' Coordinating Committee v. United States Atomic Energy Commission, 146 U.S. App. D.C. 33, 449 F.2d 1109, 1113 & n.9 (D.C. Cir. 1971); Sierra Club v. Sigler, 695 F.2d 957, 976-78 (5th Cir. 1983); Columbia Basin Protection Association v. Schlesinger, 643 F.2d 585, 594-95 (9th Cir. 1981), and a discussion of alternatives to the proposed action pursuant to section 102(2)(C)(iii). E.g., Grazing Fields Farm v. Goldschmidt, 626 F.2d 1068, 1072 (1st Cir. 1980).
Of great importance to a reviewing court is the distinction to be made between the environmental impact statement and the remainder of the administrative record. The cost-benefit analysis and the analysis of alternatives must be contained within the environmental impact statement standing alone, and not as complemented by the administrative record. Any substantial information pertinent to the cost-benefit analysis or the analysis of alternatives found in the administrative record, but not in the environmental impact statement, would render the impact statement inadequate under NEPA. See Grazing Fields Farm, 626 F.2d at 1072-74; I-291 Why? Association v. Burns, 517 F.2d 1077, 1081 (2d Cir. 1975). The reason for this seemingly strict prerequisite lies in the reality that other parts of an administrative record do not receive the same wide circulation and consequent comment comparable to that accorded an environmental impact statement, see Grazing Fields, 626 F.2d at 1070, and thus Congress mandated in section 102(2)(C) of NEPA that the pertinent information be contained wholly within the impact statement. See id. at 1072.
In light of these requirements of NEPA, the Court, mindful of its circumscribed role, nonetheless finds that the Army did not prepare an environmental impact statement in conformity with NEPA's dictates. The introduction of new information in the Staff Evaluation belied the adequacy of the FEIS and SEIS. The Court accepts National Wildlife's first two claims, and finds that as a matter of law the introduction of the transportation-cost data and the re-evaluation of alternatives in the Staff Evaluation invalidated the FEIS and SEIS. However, the Court does not accept National Wildlife's third claim that the analyses of alternatives in the FEIS and SEIS were themselves inadequate.
National Wildlife's first claim is that the late introduction of the transportation-cost data negated the adequacy of the FEIS and SEIS. The strength of that argument lies in the fact that the transportation-cost data was an integral part of the Army's cost-benefit analysis; in the Army's own words, whether or not the refinery's reduction of transportation costs will outweigh the possible environmental harms, " is the gut issue on which the decision to grant or deny hinges."
Thus, the transportation-cost data, as part of the cost-benefit analysis, had to be included in the environmental impact statement under section 102(2)(B) and (C) of NEPA. The omission of the transportation-cost data from the FEIS and the SEIS was an impermissible evasion of the circulation and comment procedures which govern environmental impact statements; the transportation cost data should have been circulated as an additional supplement to the FEIS or SEIS.
Indeed, this conclusion is compelled not only by NEPA itself, but also by the Army's regulations, which require a supplement to the environmental impact statement "whenever . . . new significant impact information, criteria or circumstances relevant to environmental considerations impact on the proposed action." 33 C.F.R. § 230.11(b). The benefit of reduced transportation costs, utilized by the Army as the benefit in the cost-benefit analysis, constitutes "new significant impact information" requiring a supplement to the FEIS and SEIS. See Environmental Defense Fund v. Marsh, 651 F.2d 983, 991-92 (5th Cir. 1981).
Thus, the omission of the transportation-cost data from the FEIS and SEIS, and the subsequent inclusion of the data in the Staff Evaluation violated section 102(2)(B) and (C) of NEPA and the Army's regulations.
The same conclusion is applicable to National Wildlife's second claim, that NEPA and the Army's regulations were contravened not only by the Staff Evaluation's introduction of new data relating to transportation costs, but also by its new analysis of alternatives. The discussion of alternatives in an environmental impact statement, mandatory under section 102(2)(C)(iii) of NEPA, is the "linchpin of the entire statement." Monroe County Conservation Council, Inc. v. Volpe, 472 F.2d 693, 697-98 (2d Cir. 1972). This Court finds that the analysis of alternatives in the Staff Evaluation effectively replaced the discussion of alternatives in the FEIS and SEIS with an entirely new analysis. The Staff Evaluation spoke of the "inconsistencies" between the narrative data and the tabular data in the SEIS; described the result as "very misleading on the comparability of HREC [Hampton Roads Energy Company] to other alternatives" and declared the SEIS's tabular matrix to be "invalid." The Staff Evaluation went on to provide "a more thorough analysis than the matrix offers."
In the Staff Evaluation's subsequent analysis, Hampton Roads Energy Company's site was rated one of the five best, while in the SEIS -- or at least in the tabular portion of the SEIS -- Hampton Roads Energy Company's site was rated one of the worst. Inescapably, the conclusion is that the actual examination of alternatives took place not in the FEIS or SEIS but in the Staff Evaluation, in violation of the holding of Grazing Fields, 626 F.2d at 1069, that a discussion of alternatives contained in a portion of the administrative record other than the environmental impact statement fails to satisfy section 102(2)(C)(iii) of NEPA.
This does not imply, however, that there is any merit to National Wildlife's third claim, that the FEIS and SEIS's analyses of alternatives are themselves inadequate. Until the introduction of the Staff Evaluation, the SEIS's consideration of the 67 sites stood as an adequate, if not exemplary, exploration of alternatives. National Wildlife's claim that an insufficient number of sites were examined, or that the examination was of insufficient depth, is meritless. See Roosevelt Campobello International Park Commission v. U.S.E.P.A., 684 F.2d 1041, 1046-48 (1st Cir. 1982) (examination of only three alternatives to the proposed refinery site was adequate under the circumstances). Rather, NEPA's strictures were violated by the replacement of the adequate discussion of alternatives in the FEIS with a new, also adequate, but sharply different discussion of alternatives which was not subject to the rigorous circulation procedures of an environmental impact statement.
In sum, by including new data and a new analysis of alternatives in the Staff Evaluation, rather than in a supplemental environmental impact statement, the Army was in violation of NEPA.
II. SUBSTANTIVE REVIEW
In addition to attacking the procedures employed by the Army in passing on the permit application and in compiling the FEIS and SEIS, National Wildlife seeks substantive review of the merits of the decision itself. Essentially, National Wildlife wants this Court to declare that even if all the proper procedures had been adopted, that the decision to issue the permit was still incorrect because even a properly compiled record would not support such a decision. In conducting substantive review of this informal adjudication, the standard to be employed by the Court is the "arbitrary and capricious" standard of section 10(e)(2)(A) of the APA, 5 U.S.C. § 706(2)(A). Buttrey, 690 F.2d at 1183. Under this rather narrow standard, this Court must "consider whether the decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment." Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 416, 28 L. Ed. 2d 136, 91 S. Ct. 814 (1971). See Buttrey, 690 F.2d at 1183-84. When exercising this substantive review over those aspects of the agency's determination mandated by NEPA, this general obligation applicable to review of all informal adjudicatory proceedings, translates into the obligation of insuring "that the agency has considered the environmental consequences." Strycker's Bay Neighborhood Council v. Karlen, 444 U.S. 223, 227, 62 L. Ed. 2d 433, 100 S. Ct. 497 (1980) (per curiam). See Grazing Fields, 626 F.2d at 1072 & n.2.
For there to be a "clear error of judgment," there must be an "error . . . so clear as to deprive the agency's decision of a rational basis." Almay, Inc. v. Califano, 187 U.S. App. D.C. 19, 569 F.2d 674, 680 (D.C. Cir. 1977), quoting Ethyl Corp. v. Environmental Protection Agency, 176 U.S. App. D.C. 373, 541 F.2d 1, 35 (D.C.Cir.), cert. denied, 426 U.S. 941, 96 S. Ct. 2662, 49 L. Ed. 2d 394 (1976). Always, the Court must be aware that "although this inquiry into the facts is to be searching and careful, the ultimate standard of review is a narrow one. The court is not empowered to substitute its judgment for that of the agency." Overton Park, 401 U.S. at 416. See Environmental Defense Fund, Inc. v. Costle, 211 U.S. App. D.C. 313, 657 F.2d 275, 282-83 (D.C. Cir. 1981).
Though narrow in scope, this review is not limited to a particular portion of the record, such as the FEIS and SEIS; rather, the entire administrative record must be parsed. Grazing Fields, 626 F.2d at 1072.
National Wildlife, while recognizing this especially limited standard of review, nonetheless argues that the Secretary's decision was arbitrary and capricious because that decision was not "based on a consideration of relevant factors," and the decision was "a clear error of judgment," lacking a "rational basis." The Court disagrees.
National Wildlife lists four relevant factors or environmental consequences which the Army allegedly failed to consider: the long term impact of oil spills; the chronic impact of oil spills; the cumulative impact of several sources of oil contamination; and certain relevant costs that would offset the claimed reduction in transportation costs.
The first factor which National Wildlife claims was ignored is the long term effects of oil spills. Specifically, National Wildlife contends that as a result of the presence of sediments and certain wind patterns in Chesapeake Bay, any oil spills will have a much longer detrimental effect than that estimated by the Secretary in his final decision of December 10, 1979.
The Court finds that long-term effects, sediments, and winds, were all considered repeatedly in the record, especially in the FEIS.
The second factor supposedly ignored was the chronic impact of oil spills. By the word "chronic," National Wildlife means the sublethal effects on the various forms of wildlife. The Court finds that contrary to the assertion of National Wildlife, these effects were considered.
The third factor, the cumulative impact of several sources of oil contamination, was also considered by the Secretary. National Wildlife claims that in measuring the damage from oil spills, the Secretary did not consider the existing background of pollutants, and instead calculated the effect of oil spills on an ideal, pristine environment. According to National Wildlife, pollutants ignored include oily ballast waters discharged from tankers and barges; oil discharges within the marine terminal; and oil discharged as a result of waste water treatment.
Again, the Court finds that the administrative record -- especially the FEIS -- reflects a consideration by the Secretary of these items.
Fourth, National Wildlife alleges that there was no consideration of numerous relevant costs, such as refinery costs, transportation costs of crude oil (in contradistinction to refined oil, which was, of course, subject to extensive analysis in the Staff Evaluation), raw material costs, capital costs, labor costs, maintenance costs, etc.
Generally, costs are relevant to the Secretary's decision by virtue of the cost-benefit analysis required in the environmental impact statement under section 102(2)(B) of NEPA. However, the costs which National Wildlife claims were neglected by the Secretary are not the sort of costs which need enter the cost-benefit computations. First, these costs are economic, not environmental, costs; second, they are private costs to be borne by Hampton Roads Energy Company, not costs to be suffered by the general public. The cost-benefit analysis of NEPA is concerned primarily with environmental costs affecting the public, not with private economic costs. As the Secretary recognized, private investors can be relied upon to determine "that the establishment of an oil refinery in Portsmouth would be, from their perspective, an economic venture."
This Court's review of purely economic costs burdening only Hampton Roads Energy Company is "at most, a narrowly focused, indirect review." South Louisiana Environmental Council, Inc. v. Sand, 629 F.2d 1005, 1011 (5th Cir. 1980). A court may examine the cost-benefit analysis only as it bears upon the function of insuring that the agency has examined the environmental consequences of a proposed project.
In order for a reviewing court to determine whether an agency has complied with NEPA by giving a "hard look" at the environmental considerations, the court must also consider whether the economic considerations, against which the environmental considerations are weighed, were so distorted as to impair fair consideration of those environmental consequences. Without such a showing there is no review of economic benefits.