Leading District Court Opinion on NEPA: The Trinity River-Wallisville Dam Case

A recent district court opinion from Texas may constitute something of a watershed for the National Environmental Policy Act in the courts. Just as the lengthy district court opinion over two years ago in the Gillham Dam case¹ led the way in identifying and resolving the first generation of NEPA issues, the even more lengthy decision in Sierra Club v. Froehlke² leads the way in identifying and resolving a second generation of issues which cluster around NEPA's substantive requirements and the basic decision-making tools used to implement the national environmental policy. Because the case raises such a wide variety of issues, this Comment will attempt only to draw attention to the most important aspects of Judge Bue's remarkable opinion.

In Sierra Club v. Froehlke plaintiffs challenged the imminent construction of the Wallisville Dam on the Trinity River near its mouth at Houston, Texas. The project allegedly had substantial local benefits, especially the protection of upstream rice crops threatened by salt water that had begun to penetrate freshwater areas as a result of the construction of navigation projects.

The $29 million Wallisville project, however, was also the first step in a gigantic $1.3 billion river development scheme which would eventually include a network of dams and canals reaching 370 miles up the Trinity River. As one indication of the magnitude of the physical alteration contemplated in the landscape, the court cited Corps of Engineers' documents showing that 184 of the natural bends in the River would be eliminated.

Plaintiffs maintained that although the Wallisville Dam was separately funded by Congress, it was an integral part of the Trinity Project and should be enjoined pending preparation of an adequate impact statement on the overall Trinity Project. Alternately, plaintiffs argued that the existing impact statement on the Wallisville Dam was inadequate. The Corps, on the other hand, asserted that "substantial evidence on the record as a whole" showed that the Corps had complied with NEPA. Judge Bue accepted the environmentalists' arguments. However, he gave the Corps the opportunity of proving that the Wallisville Dam had independent local purposes sufficient to excuse the Corps from preparing an impact statement on the Trinity Project before continuing with the Wallisville segment.

[3 ELR 10045]

Standard of Review in NEPA Cases: "Substantial Inquiry"

Judge Bue indicated that all NEPA provisions were subject to the same standard of review, the "substantial inquiry" test used by the Supreme Court in Citizens to Preserve Overton Park v. Volpe.³ Overton Park held that the Administrative Procedure Act's less favorable but generally accepted "substantial evidence" test is authorized only where agency action is taken pursuant to a rule-making provision of the APA itself, or where the action is based on a public adjudicatory hearing. Judge Bue remarked that while "substantial inquiry" is not tantamount to de novo review, in nonetheless requires a searching and careful inquiry into the facts. After ascertaining the facts, the court must determine whether the actual choice was arbitrary or an abuse of discretion and whether it was based on the relevant factors.

Burden of Proof

The substantial inquiry standard of review was, in the Texas court's view, more compatible with the problems surrounding the burden of proof in NEPA cases. Stating that strict procedural compliance with NEPA requires that a heavy burden of proof be placed upon the agencies, the Trinity River court found in such cases as Calvert Cliffs' and Greene County⁴ an underlying rationale for shifting the burden to the agency once environmental groups establish a prima facie violation of NEPA. The agency must then support its decision by a preponderance of the evidence. The court concluded that if the burden were left wholly upon environmentalists, NEPA would never be implemented.

Role of the Impact Statement in Decision-making

Emphasizing that congressional approval has not been given for the navigational aspects of the overall Trinity Project since 1968, when the Corps last attempted to justify the Wallisville project, the court directed that the revised Wallisville Dam impact statement must fully reflect the precise scope of the project as of 1973, not some prior date, and that the completed impact statement must be submitted to Congress, CEQ and appropriate agencies for review and authorization. To ensure full coordination with reviewing agencies, the Trinity River court further suggested that additional review should be required for all modifications made on the project after the initial review. The Corps and all reviewing agencies must base their opinions on the same factual information.

Deference to Commenting Agencies

When a conflict arises between the Corps and an agency making a review in its particular field of expertise, and when the Corps' underlying data is known by the reviewing agency, then, according to the Trinity River court, NEPA requires the Corps to defer to the expert agency's opinion. The Corps may only adopt a contrary opinion upon clear and convincing evidence that the expert agency was in error. Relying on § 102(2)(A) of NEPA, the court stated that Congress did not require agencies to consult with one another, only to ignore the advice given. On the contrary, Congress intended to establish a system of environmental "checks and balances," with the sponsoring agency acting as an environmental manager.

An example of the conflict between the Corps and commenting agencies is seen in the varying estimates of increases in hunting and fishing that would result from construction of the Wallisville Dam. In 1962 the Corps estimated an increase of 4,900,000 man-days annually, compared to the estimate of the Fish and Wildlife Service of only 937,000 man-days. The Corps also estimated that general recreational use of the project would amount to 9,100,000 man-days annually, more than three times the estimate of the National Park Service.

In view of the disparity between estimates given by commenting agencies compared with those of the Corps, the court indicated that the agency with expertise in a given field has the duty under § 102(2)(B) to quantify environmental amenities within that field. Expert agencies, such as the Fish and Wildlife Service, are more qualified than the Corps to quantify data on hunting and fishing benefits.

Duty of Mitigate, or Merely To Disclose?

Acknowledging that it is often difficult to determine when mere consideration of an alternative is sufficient, as opposed to when actual mitigation is required, the court maintained that NEPA requires actual mitigation under appropriate circumstances. An agency cannot merely disclose possible harm, but must make a substantial effort to prevent or minimize adverse environmental effects. The duty to mitigate is embodied in NEPA's requirements to "use all practical means" to assure safe surroundings, to obtain the widest range of beneficial uses, and to preserve our national heritage "to the fullest extent possible." In the court's opinion, however, the Wallisville impact statement did not consider mitigation with respect to any of the possible adverse impacts. For example, the statement, completed two years after NEPA, does not show any project modification since the dam was first designed in 1965. The court noted that the CEQ guidelines, which require reassessment of courses of action to minimize adverse environmental consequences, were also violated. When as here a project appears to require mitigation, yet [3 ELR 10046] none was considered, in the Texas court's opinion the case should be remanded to the agency for further consideration.

Cost-Benefit Analysis

The cost-benefit ratio is of paramount importance to the congressional appropriations process and to decision-making for federally funded public works projects. In the court's view, NEPA requires the cost-benefit ratio for a project to receive special treatment in the impact statement. Recognizing that Congress relies on the Corps' cost-benefit ratio as the final synthesis of technological, economic and environmental factors, the court stated that the impact statement ust contain sufficient detail regarding the cost-benefit ratio to inform a layman as to the basis for the computation.

Judicial Review of Cost-Benefit

While most courts have refused to review cost-benefit ratios, the Trinity River court feels that NEPA requires review of Corps' procedures under the "substantial inquiry" standard. Nevertheless, the court accepts that the final decision whether to build any project is left to Congress, and that it may ratify and cost-benefit ratio it chooses.

Proposed Cost-Benefit Test

Noting that the Secretary of the Army labeled a project with a cost-benefit ratio of 1.24 only "marginally justified," that in 1961 the overall cost-benefit ratio for the nation's waterways was 3.17, and that only crude methods exist for quantifying environmental values, the court suggested that a cost-benefit ratio greatly in excess of unity possibly should be required by Congress before public works are built.

Manipulation of the Cost-Benefit Ratio

Quoting from the Wallisville Dam impact statement, the court stated that when the project was authorized in 1961, its cost-benefit ratio was 2.5; based on a project life of 50 years and a discount rate of 2.5 percent.Based on 1970 prices, however, with a discount rate of 3.125 percent, the cost-benefit ratio was only 1.11. The court also noted that the Trinity River project used a 100-year project life at one point, as did the Wallisville Dam project, and that the Trinity River project's cost-benefit ratio changed from 1.4 to .74 when the project life was changed back to 50 years at the urging of the Bureau of the Budget.

Project Life. The court stated that an artificially long project life violates NEPA, because it fosters an unrealistic "balancing"among technological, economic and environmental factors. A change in length of the project's life dramatically affects the cost-benefit ratio. The greatest costs occur when the project is first constructed. A longer life allows more time over which they can be amortized. Likewise, a longer project life permits benefits to be computed over a longer period of time. Both of these factors tend to skew the cost-benefit ratio and may be in conflict with NEPA, because environmental costs may be deflated while environmental benefits are inflated.

Discount Rate. The discount rate is applied so that future benefits and costs may be stated at their present value. It is generally agreed, the court said, that the discount rate is most accurate when it reflects the prevailing interest rate in the private sector. The significance of changes in the discount rate is illustrated by the very unfavorable cost-benefit ratio which would result if the prevailing rate of 5 5/8 percent were substituted for the 3.125 percent used in the 1968 study. While Congress can approve any rate, the court suggested that the relationship between the discount rate and environmental factors protected by NEPA may bring it under judicial scrutiny. However, as no final decision has been reached on this issue, the court only alluded to the problem.

Demand. The court also identified deficiencies in the Corps' procedure for computing the demand for project benefits. First, evaluation by local interests of "need" is likely to be biased by self-interest. Second, the Corps' practice of interpolating from records of demand kept at similar existing projects is biased in favor of users of developmental facilities, as opposed to those who will use the land in its natural state, simply because careful statistics have been kept on the use of already-constructed projects, while none are kept for the use of an area in its undisturbed state. Finally, the court quoted the late Senator Ellender as saying that many public works would not have been economically "justified" except that the cost-benefit ratio was inflated by adding a great many more recreational benefits than could be justified on the basis of reasonable demand.

Area for Measuring Benefits. The court criticized the Corps' selection of the area over which economic and environmental benefits were computed. The record suggested that the larger the area for computing economic benefits, and the farther away from the dense marketing areas they are obtained, the lower the benefits become. This is because the greatest economic savings from the navigation accrues to those nearest the canal. The court directed the Corps to determine in its impact statement whether this same "area effect" operates on environmental benefits as well as economic benefits.

Inflating Benefits. Despite significant cost increases over generous original estimates, the cost-benefit ratio for the Wallisville Dam Project remained constant. The Corps accomplished this, stated the Trinity River court, by increasing the benefits at the same rate. These increases, which are often many times greater than the annual cost-of-living increases, are severely criticized by the court.

[3 ELR 10047]

Corps' Guidelines and Quantifying Environmental Amenities: § 102(2)(B)

The Trinity River court's comments on agency duties under § 102(2)(B) to quantify environmental amenities complements its discussion of duties regarding cost-benefit determinations and the duty of sponsoring agencies to defer to commenting agencies in their area of expertise. These procedures are necessarily interrelated.

In order for the Corps and court to have the latest information on the § 102(2)(B) requirement for the quantification of environmental values, the court directed the Corps to seek out information from all appropriate sources on the following:

a. The procedure for comparing and evaluating environmental amenities with economic and technical factors.

b. The methods for quantifying environmental amenities, both benefits and costs. Procedures need to be established for determining which agency will be primarily charged with the duty for evaluating the "values" applied to present natural conditions and the "benefits" attributed to uses such as recreation.

c. The procedures for controlling project cost increases, the relationship of project life to projected benefits, the relationship of discount rates to environmental benefit analyses, and the comparative areas used for economic benefit studies versus environmental benefit studies.

d. Guidelines used for determining the demand for recreation and which agency is to determine the demand.

Master Impact Statements: The "Multiple-Tier" Approach

Where it is reasonable to anticipate significant cumulative impacts from a series of projects, the Trinity River court found that it would be necessary to evaluate, not only the immediate project, but also the comprehensive master plan of which it is a part. The magnitude of the problem addressed by a series of projects dictates the scope of the required "master" impact statement, for only in a comprehensive impact statement can meaningful comparison be made of alternative solutions to the problem.⁵ The "lead agency," which is the agency responsible for the first step in the master plan, must prepare the comprehensive impact statement. In addition to the master impact statement, the court required the Corps to prepare sub-statements on each of the Trinity Project's major components, so that a decision-maker can discern each component's relevance and justification when related to the overall project.

1. Environmental Defense Fund v. Corps of Engineers, 325 F. Supp. 728, 1 ELR 20130, 2 ELR 20260, 20353 (E.D. Ark. 1970-71), aff'd, 470 F.2d 289, 2 ELR 20740 (8th Cir. 1972).

2. Sierra Club v. Froehlke, 3 ELR 20248 (S.D. Tex. 1973).

3. 401 U.S. 402, 1 ELR 20110 (U.S. 1971).

4. Calvert Cliffs' Coordinating Committee v. Atomic Energy Comm'n, 449 F.2d 1109, 1 ELR 20346 (D.C. Cir. 1971); Greene County Planning Board v. Federal Power Comm'n, 455 F.2d 412, 2 ELR 20017 (2d Cir. 1972).

5. Natural Resources Defense Council v. Morton, 337 F. Supp. 165, 2 ELR 20028, 337 F. Supp. 167, 2 ELR 20089 (D.D.C. 1971). See also Comment, NEPA and Federal Policy Making: NRDC v. Morton, Legislative Impact Statements and Better NEPA Procedures, 2 ELR 10038 (April, 1972), which suggested the multiple-statement approach.