Silva I: The Need for HUD "Status Quo" Regulations

A question which has begun to appear with increasing frequency in recent NEPA litigation concerns the environmental damage which a private or state party may cause in the early, "pre-federal" stages of a project before it becomes a "major federal action" and an impact statement must be prepared. This is another of the second generation NEPA issues which have come to the fore as the battle lines between environmental plaintiffs and non-federal developers have been drawn. Thus far the courts which have dealt with this question have provided minimal guidelines as to when, in order to preserve the environmental status quo, private parties may be enjoined from preparatory work, but these standards remain too vague for either environmentalists or developers to form clear expectations of what is enjoinable conduct.

This state of affairs was noted with distress by Chief Judge Coffin of the First Circuit Court of Appeals in Silva v. Romney.¹ A large part of Judge Coffin's opinion was devoted to urging the Department of Housing and Urban Development to adopt suitable regulations to guide federal agencies and federal aid recipients as to what action may be taken to alter the status quo under such circumstances, prior to the point at which the private party can be said to have entered into a "partnership" with the government. Such regulations would inform the agencies and private parties and guide their conduct so as to insure a minimum of environmental damage prior to partnership and obviate the danger of a project's being stopped after considerable work and expense when it is found to be environmentally harmful in the post-partnership NEPA examination. By providing a framework for decision-making, the regulations would also aid the court in reviewing agency decisions.

Judge Coffin suggested that existing law permits, and may actually require, the promulgation of such regulations.In NEPA, the judge noted Congress directed that to the fullest extent possible the policies, regulations, and public laws of the United States be interpreted and administered in accordance with the policies set forth in NEPA.² The duties imparted to the agency by this provision [3 ELR 10156] are not discretionary, and are to be reflected in the agency's procedural decision-making process. In addition, presidential directives regarding the implementation of NEPA, when viewed in conjunction with HUD's own authority to "make such rules and regulations as may be necessary to carry out [the Secretary's] functions, power and duties," would seem to surmount any foreseeable barrier to a regulatory scheme requiring applicants for federal aid to maintain the status quo pending federal environmental review of the project in accordance with NEPA.

The court recognized that such a requirement would hinder the freedom of a private developer, but noted that the developer has voluntarily submitted to some degree of federal regulation as an aid applicant, and that the type of project involved in the case is generally undertaken only if public funds are available. Some courts have already advanced beyond the position that a non-federal party submits to federal regulation by applying for aid. In Indian Lookout Alliance v. Volpe³, the court held that a state highway department came under the requirements of NEPA when it sought location approval for a highway segment merely in order to remain eligible to apply for federal aid. But in regard to the assumption that most projects rise or fall on the availability of federal funding, Judge Coffin did note that there should be a provision in the HUD regulations that a developer and potential aid recipient can alter the environmental status quo if it meets a heavy burden of proof that the project could continue without federal aid.

Silva concerned the denial by the district court of a preliminary injunction against the cutting of trees by a private developer on the site of a planned housing project while HUD was preparing an environmental impact statement. In order to determine whether the developer could be enjoined, the court of appeals, in addition to affirming the district court's ruling that the project was likely to be found a major federal action, had to determine whether the developer was acting in partnership with HUD. In examining the question of partnership the court concentrated on the question of funding, and found that a 180 day loan commitment to the project by HUD had created a contract, although HUD claimed that this contract was rescindable at its discretion. This agency approval of funds for the project was clearly seen as triggering the partnership, although the court expressly disavowed that the partnership question should turn on any one particular step in the developing relationship between federal agency and private party. Such an approach, the court noted, unrealistically stresses adventitious factors which bear little relationship either to the broad concerns of NEPA or the interests of the developer. In accordance with this view, the court found that injunctive relief was appropriate, basing its ruling on a determination that the overall "nexus" between HUD and the developer was so extensive as to result in partnership. While this standard may be more realistic than a narrow funding test, it is also a good deal more ambiguous.

Murky or not, the test was recently adopted by the Second Circuit Court of Appeals in Proetta v. Dent,⁴ which concerned the denial of a preliminary injunction against demolition activities by New York City authorities on a site where a private company planned to finance a plant expansion with a federal loan.No federal funds were to be received by the city for the demolition work. The court, after noting that recipients of federal funds had been found enjoinable in such cases as Silva, found that failure of the federal agency to file an impact statement on the loan did not justify granting injunctive relief to the plaintiffs, as the nexus between the city and the federal agency was insufficiently proximate. Here again, the basic test for partnership seems to be the funding arrangement, although the court's statement regarding the requisite nexus indicates a subjective determination pursuant to an overall examination of the project, including consideration of factors such as joint planning.

In Proetta, the court reinforced the inference that the purpose of the nexus test may indeed be to include such non-funding factors as the planning arrangement in the partnership determination by specifically leaving open the question of whether a non-recipient of federal funds may, under other circumstances, be in partnership with the federal government. Although this again may make for a more realistic test, it is nearly impossible for environmentalists, private developers, or federal officials to know what restraints apply at the early stages of a potential major federal project on the basis of a self-made determination as to when partnership did or will occur.

This question of the onset of partnership must run the judicial course as have other NEPA issues, and clear standard can be reached only through continuing litigation. But this process directly affects the problem of prepartnership conduct by preventing a clear definition of the scope of the term and encouraging developers to gamble with the environment in order to achieve other policy goals such as housing. These effects would not be so drastic if the area of pre-partnership conduct were not [3 ELR 10157] devoid of rules.

As Judge Coffin noted, the prompt promulgation of status quo regulations by HUD would fill this void with a regularized system of restraints. Such regulations would prevent the needless environmental damage, as well as the financial loss, that would occur if a NEPA suit halted a project only after substantial work had been performed. The decision-making process would be rendered shorter, clearer, and more orderly at the judicial as well as the administrative level. Judge Coffin's question to HUD is whether the courts, which cannot fill this void, and the parties, who must now act in the dark, will be left to "muddle through" at the ultimate expense of the environment, or whether HUD, which has the authority and perhaps the mandate to make the needed rules, will take the responsibility and initiative in this regard.

1. Silva v. Romney, 3 ELR 20082 (1st Cir. Feb. 2, 1973). For the opinion of the district court, see 2 ELR 20385 (D. Mass. April 13, 1972). The case has since returned to the court of appeals sub. nom. Silva v. Lynn, 3 ELR 20698 (1st Cir. July 5, 1973), in which the environmental impact statement prepared by HUD was held inadequate.

2. The Atomic Energy Commission has adopted guidelines which allow utilities to acquire land, but forbid certain site preparation activities, prior to the Commission's decision on their applications for permits to construct nuclear facilities. The AEC adopted these rules in the belief that they were "consistent with the direction… of the National Environmental Policy Act of 1969, that, to the fullest extent possible, the policies, regulations and public laws of the United States shall be interpreted and administered in accordance with the policies set forth in that act." The guidelines were challenged on grounds that land acquisition must also be prevented if NEPA is to be implemented "to the fullest extent possible" in Gage v. AEC, 3 ELR 20479 (D.C. Cir. May 25, 1973). Because the plaintiffs in that action had elected not to participate in the rule-making process, although urged to do so by staff of the AEC, the court ruled that they could not claim judicial review, which is limited to "any party aggrieved by the final order."

3. Indian Lookout Alliance v. Volpe, 3 ELR 20739 (8th Cir. Aug. 22, 1973).

4. Proetta v. Dent, 3 ELR 20781 (2d Cir. Sept. 19, 1973).