Beyond Section 404: Corps Permitting and the National Environmental Policy Act

Timothy J. Hagerty

Tim Hagerty is a Member of Frost Brown Todd L.L.C. Mr. Hagerty counsels the firm's clients on environmental compliance and liability issues arising under federal, state, and local laws, with an emphasis on resource management, planning, permitting, and land use issues. He has extensive experience assisting public and private clients in complying with the National Environmental Policy Act (NEPA), § 4(f) of the Department of Transportation Act, and similar state resource review requirements. Mr. Hagerty also assists clients in obtaining wetlands and wastewater discharge permits and related approvals under the federal Clean Water Act and similar state and local laws. He also provides advice to clients concerning the requirements of the Endangered Species Act, the National Historic Preservation Act, and the Clean Air Act. Mr. Hagerty's experience includes work on large-scale residential and commercial developments as well as major public transportation projects, including the Louisville-Southern Indiana Ohio River Bridges Project currently underway. Mr. Hagerty also assists the firm's clients in conducting environmental due diligence, negotiating environmental provisions in complex corporate and real estate transactions, and addressing property contamination issues. Before joining Frost Brown Todd, Mr. Hagerty practiced environmental law with Beveridge & Diamond, P.C., in Washington, D.C. The author wishes to thank Jessica White for her assistance in preparing this Dialogue.

[32 ELR 10853]

Wetlands permitting under § 404 of the Clean Water Act (CWA)¹ presents many complex and challenging issues, ranging from the extent of the federal government's jurisdiction over potential "waters of the United States," to controversies over the definition of "dredge" and "fill" activities, to appropriate forms and amounts of mitigation for wetlands impacts. Additionally, beyond § 404 itself, numerous other federal, state, and local requirements complicate the § 404 permitting process, making even the most simple permitting action a time-consuming and potentially controversial affair. One of the important federal statutes that is implicated to some extent in every § 404 permitting action is the National Environmental Policy Act (NEPA). This Dialogue examines some of the issues that have arisen over the years in the intersection between § 404 and NEPA.

The first section of this Dialogue presents a brief overview of NEPA and the environmental impact statement (EIS) preparation process. The next section then examines the application of NEPA in the § 404 permitting context, focusing particularly on the continuing controversy surrounding the U.S. Army Corps of Engineers' (Corps') "scope of analysis" under NEPA for § 404 permitting actions. This section particularly examines a handful of recent cases that demonstrate that this area of law is far from settled and will continue to pose difficult challenges for § 404 practitioners. The following section briefly examines a handful of additional issues that arise in the NEPA/§ 404 nexus, including the definition of project purpose, substantive versus procedural requirements, NEPA/§ 404 process integration, and the analysis of environmental effects under both statutes.

NEPA Basics

NEPA² was enacted to create a framework within the federal government for including environmental considerations among factors ordinarily examined in the decisionmaking process. The heart of NEPA is the EIS, which must be prepared for all major federal actions significantly affecting the quality of the human environment. The EIS requirement must be satisfied by the federal agency responsible for the proposed action. An EIS must include a detailed statement of the following:

. the environmental impact of the proposed action;

. any adverse environmental effects which cannot be avoided should the proposal be implemented;

. alternatives to the proposed action;

. the relationship between local short-term uses of the human environment and the maintenance and enhancement of long-term productivity; and

. any irreversible and irretrievable commitments of resources which would be involved in the proposed action should it be implemented.³

An EIS has two primary purposes: to ensure that the federal agency makes a fully informed decision in light of the potential environmental consequences of its actions, and to keep the public informed about those consequences and allow them an opportunity to comment on the proposed action. However, NEPA does not mandate any particular out-come. It is a procedural statute that specifies particular procedures to be followed and information that must be presented before a federal agency may make a project decision. NEPA does not require the agency to select the environmentally preferable alternative.

The Council on Environmental Quality (CEQ) adopted regulations to implement the requirements of NEPA in 1978.⁴ Individual federal agencies also are encouraged to develop their own NEPA implementing regulations, and many agencies have developed either such regulations or guidance documents to better integrate the NEPA process into the agency's specific mission.

Compliance Options Under the CEQ Regulations

The CEQ regulations provide for three major pathways of compliance under NEPA. The simplest and most abbreviated process is for certain categories of actions known as "categorical exclusions." Categorical exclusions are categories [32 ELR 10854] of actions which do not individually or cumulatively have a significant effect on the human environment, and therefore do not require either an environmental assessment (EA) or an EIS.⁵ Individual federal agencies are empowered to identify such categorical exclusions in their specific NEPA implementing regulations.

If a proposed action does not fit within a categorical exclusion, some NEPA documentation is required. In that case, an EA may be prepared. An EA is a concise document that serves to provide sufficient information to determine whether the project will have "significant" effects on the environment and thus requires an EIS. (Alternately, if an EIS is clearly required, an EA need not be prepared, and the agency may proceed directly to preparation of the EIS.) The EA must describe briefly the need for and alternatives to the proposal, the environmental impacts of the proposed action and alternatives, and a listing of agencies and persons consulted.⁶

If the EA demonstrates that the agency's proposed action will not have a significant impact on the human environment, the agency will prepare a finding of no significant impact (FONSI). This document presents the reasons why the action will not have a significant impact on the environment. The agency may proceed with the proposed action based on the FONSI after sufficient notice to the public.⁷

The determination of whether an agency's proposed action will have a significant impact on the human environment is often one of the most contentious issues in a NEPA review. It determines whether a simple EA will suffice, or a much more complex, costly, and time-consuming EIS must be prepared. This issue arises frequently in the CWA § 404 permitting context, which is discussed further below.

Preparation of an EIS

An EIS must be prepared if the proposed action will have significant impacts on the human environment. Major elements of an EIS include: a statement of purpose and need (the underlying purpose and need to which the agency is responding); an alternatives analysis (presenting the proposed action and a "reasonable range" of alternatives, and comparing their environmental impacts); the affected environment (the area and resources to be affected); and the environmental consequences of the proposed action and alternatives (including direct, indirect, and cumulative effects on the environment). An EIS also will include a summary, a list of preparers, and various appendices with material related to the EIS and its analyses.⁸

An EIS is prepared in two stages. A draft environmental impact statement (DEIS) must be prepared first, and then published in order to obtain comments from the public and from governmental agencies. Following a public comment period, a final environmental impact statement (FEIS) is prepared. The FEIS must respond to all comments received on the DEIS. In responding to comments received and in preparing the FEIS, the agency may modify the alternatives, information, or analyses contained in the DEIS.⁹

The EIS process is completed by the agency's publication of a record of decision (ROD). This concise statement of the agency's decision should identify all alternatives considered and specify the alternative(s) deemed to be environmentally preferable—which will not necessarily be the alternative the agency has chosen to implement. The agency should explain the rationale for its decision concerning which alternative to implement. The agency also must state whether all practicable means to avoid or minimize environmental harm have been adopted in the decision, and if not, why they were not.¹⁰

NEPA and the Corps: Scope of Analysis and Other Issues

The issuance of a permit under § 404 of the CWA¹¹ or § 10 of the Rivers and Harbors Act (RHA)¹² constitutes a federal action subject to the requirements of NEPA, including the preparation of an EIS if the environmental effects of the permit issuance are deemed to be significant. The application of NEPA to the § 404/§ 10 permitting program has been the source of considerable controversy and continues to raise important issues.

The Corps has adopted its own NEPA implementing regulations, which are codified at 33 C.F.R. Part 325, Appendix B (Appendix B).¹³ The current Appendix B regulations were proposed by the Corps in 1984, and went into effect in 1988. The most controversial aspect of the Appendix B regulations is the "scope of analysis," which seeks to establish the scope of the action subject to NEPA analysis, and thus the scope of the NEPA document, in instances where the application for a Corps permit covers only a part of a larger project that may have both federal and nonfederal elements. The scope of analysis will determine "what portion of the total project will the Corps cover in its EA describing the work, the range of environmental effects of that work, alternatives to the proposed work, etc."¹⁴

The debate over the Corps' scope of analysis presents one of the most common and controversial examples of what is often called the "small federal handle" problem. The issue is at what point does federal involvement in a project proposed by a nonfederal entity (private party, state, or local government, etc.) "federalize" the entire action and subject it to the requirements of NEPA. In the case of Corps permitting decisions, the particular issue is whether the issuance of a Corps permit causes the nonfederal portion of a project with both federal and nonfederal elements to be included within the scope of the NEPA analysis—and if so, how and to what extent. This issue is not simply academic. It will determine whether the reasonable range of alternatives evaluated in the NEPA document must include alternatives to the specific elements within Corps jurisdiction, or alternatives to the over-all project. It also often may mean the difference between the preparation of a relatively simple EA and the preparation of a much more costly and time-consuming EIS. For these reasons, much energy has been expended identifying the [32 ELR 10855] proper scope of analysis for NEPA review of Corps permitting decisions.

The Historical Perspective

Before 1988, the Corps' NEPA regulations provided that NEPA documentation prepared for permit actions should focus

primarily on whether or not the entire project subject to the permit requirement could have significant effects on the environment . . . . (For example, where a utility company is applying for a permit to construct an outfall pipe from a proposed power plant, the EA must assess the direct and indirect environmental effects and alternatives of the entire plant.)¹⁵

Two federal appeals court decisions in 1980 addressed the "small federal handle" problem in the Corps permitting context. Those decisions indicated that the Corps could adopt a more limited scope in the NEPA review of some permitting decisions than indicated in its 1980 NEPA regulations. In Winnebago Tribe of Nebraska v. Ray,¹⁶ the Corps was asked to permit a 1.25-mile river crossing on a proposed 67-mile, nonfederal power line. The Corps' EA focused solely on the river crossing and concluded that no significant environmental impacts could be expected. Plaintiffs challenged the Corps' EA, arguing that, "but for" the Corps' permit, the power line could not be built, and therefore, the Corps had sufficient control over the proposal to require an environmental analysis of the entire 67-mile power line.

The U.S. Court of Appeals for the Eighth Circuit analyzed the situation under both an "enablement" (or legal control) framework and under a factual control test. In this case, the Corps permit was not found to be "a legal condition precedent" to the entire nonfederal power line project. Like-wise, the court found that the Corps lacked sufficient factual, or "veto," control over the project. The court outlined a three-part test to determine factual control, including "(1) the degree of discretion exercised by the agency over the federal portion of the project; (2) whether the federal government has given any direct financial aid to the project; and (3) whether 'the overall federal involvement with the project [is] sufficient to turn essentially private action into federal action.'"¹⁷ These factors were found lacking in this case.

In Save the Bay v. U.S. Army Corps of Engineers,¹⁸ the Corps was asked to issue a permit for the construction of a 2,200-foot wastewater discharge pipeline associated with a proposed massive nonfederal titanium dioxide manufacturing facility adjacent to Bay St. Louis, Louisiana. In its EA, the Corps only analyzed the effects of building the outfall pipeline, not the associated nonfederal facility. In upholding the Corps' action, the U.S. Court of Appeals for the Fifth Circuit determined that there was an insufficient nexus between the Corps and the construction of the nonfederal plant to make the agency a partner in that construction and thereby "federalize" its construction. Although it explicitly refused to adopt a "but for" test, the court nevertheless noted that the pipeline was not necessary to operate the plant (because another method of discharge, not requiring a Corps permit, was available), and therefore, the Corps lacked factual control over the construction as well.

Controversy Over New Regulations

The Corps adopted new NEPA regulations in 1988 in response to the Winnebago and Save the Bay decisions.¹⁹ Those regulations remain in effect today, and have provided the grist for the debate over the Corps' proper "scope of analysis." However, prior to taking effect, those regulations were the subject of a significant dispute between the Corps and the U.S. Environmental Protection Agency (EPA) over the regulations' adequacy in satisfying the Corps' NEPA responsibilities. The Corps first proposed an amendment to its NEPA regulations in 1984 in response to the Fifth and Eighth Circuits' decisions. The new language proposed for Appendix B closely tracked the rationale behind those two appeals court decisions. However, EPA determined that the proposed regulations were "unsatisfactory" and referred the proposed amendments to the CEQ, pursuant to the Clean Air Act § 309. EPA stated that the proposed changes would adversely affect the Corps' and EPA's NEPA review responsibilities and their ability to prevent unacceptable adverse effects from activities permitted under § 404. After an extensive public review and comment period, the CEQ upheld the Corps' proposed changes, with some modifications, as being "within reasonable, implementing agency discretion."²⁰

The U.S. Court of Appeals for the Ninth Circuit subsequently held that the Corps' Appendix B regulations do not conflict with NEPA or the CEQ regulations, and should be accorded judicial deference. In Sylvester v. U.S. Army Corps of Engineers,²¹ that court found that "the Corps' regulations fixing the scope of its NEPA analysis strike an acceptable balance between the needs of the NEPA and the Corps' jurisdictional limitations."²² The court also stated that the CEQ's approval of the Corps' regulations was meant to "provide guidance to all who may be concerned, including the courts."²³

The Appendix B Regulations and Federal "Control"

The Corps' Appendix B regulations state:

In some situations, a permit applicant may propose to conduct a specific activity requiring a [Corps] permit . . . which is merely one component of a larger project . . . . The district engineer should address the scope of the NEPA document (e.g., the EA or EIS) to address the impacts of the specific activity requiring a [Corps] permit and those portions of the entire project over which the district engineer has sufficient control and responsibility to warrant Federal review. . . . The district engineer is considered to have control and responsibility for portions of the project beyond the limits of Corps jurisdiction where the Federal involvement is sufficient to turn an essentially private action into a Federal action. These are cases where the environmental consequences of the [32 ELR 10856] larger project are essentially products of the Corps permit action.²⁴

Thus, the degree of federal control and responsibility over a nonfederal project is a key component in defining the scope of the Corps' NEPA review. Notably, in addressing the "small federal handle" problem, the federal courts have identified two primary ways in which nonfederal portions of a project may become federalized and therefore subject to NEPA review. These concepts, known generally as "legal control" and "factual control," are consistent with the factors identified in the Appendix B regulations.

A project may become federalized when a federal agency exercises sufficient "legal control" over the entire project. The Winnebago court referred to this as "enablement," which occurs when "federal action is a legal condition precedent to accomplishment of an entire nonfederal project."²⁵ In that case, the court held that the proposed power line had not been federalized because the Corps' permitting authority under § 10 extended only to the portion of the power line located in jurisdictional waters—not the construction of the entire power line.

The Appendix B regulations incorporate this concept in the discussion of the "typical factors to be considered in determining whether sufficient 'control and responsibility' exists."²⁶ Those factors include: "the extent to which the entire project will be within Corps jurisdiction," and "the extent of cumulative Federal control and responsibility."²⁷ The regulations explain:

Federal control and responsibility will include the portions of the project beyond the limits of Corps jurisdiction where the cumulative Federal involvement of the Corps and other Federal agencies is sufficient to grant legal control over such additional portions of the project. These are cases where the environmental consequences of the additional portions of the projects are essentially products of Federal financing, assistance, direction, regulation, or approval . . . .²⁸

The regulations also include several examples, one of which is remarkably similar to the facts of Winnebago.²⁹ In that example, the Corps describes a 50-mile electrical transmission cable crossing a 1 1/4-mile-wide river that is a navigable water of the United States. The crossing requires a Corps permit.

Neither the origin and destination of the cable nor its route to and from the navigable water, except as the route applies to the location and configuration of the crossing, are within the control or responsibility of the Corps of Engineers. Those matters would not be included in the scope of analysis which, in this case, would address the impacts of the specific cable crossing.³⁰

Another, more recent case reaffirmed the principles of the Winnebago decision and underscored the type of "legal control" test applied by some courts under NEPA and the Corps' regulations. In Macht v. Skinner,³¹ the U.S. Court of Appeals for the D.C. Circuit found that the Corps' issuance of a § 404 permit for a state light rail project was insufficient to federalize the entire nonfederal project. In that case, the Corps had jurisdiction over only 3.58 acres of wetlands on a 22.5-mile-long rail project. The court held that although the state light rail project required a § 404 permit to cross wetlands, and therefore the Corps could prevent the proposed route by refusing to issue a permit, the Corps' involvement was insufficient to "federalize" the project, even coupled with additional federal funding for preliminary engineering studies and state EIS.³²

The courts also have indicated that a nonfederal project may become federalized where the federal agency has sufficient factual, or "veto," control over the nonfederal action. Four general factors have been identified by the courts in determining whether an agency has "veto" control over a nonfederal project:

. the degree of discretion exercised by the agency over the federal portion of the project³³;

. whether the federal government has given any direct financial aid to the nonfederal project³⁴;

. whether the overall federal involvement with the project is sufficient to turn an essentially nonfederal action into a federal action³⁵; and

. whether the nonfederal project will go forward even if the federal action does not (known as the "but for" test).³⁶

The Corps also has identified another factor in its regulations that relates to the "factual" relationship between the federal and nonfederal portions of a project: "whether there are aspects of the upland facility in the immediate vicinity of the regulated activity which affect the location and configuration of the regulated activity."³⁷

Significant Judicial Decisions

Almost as soon as the Corps' Appendix B regulations were adopted, judicial interpretations began to shape the contours [32 ELR 10857] of the Corps' NEPA compliance. Unfortunately, while some major decisions have provided some overall direction, relevant case law has been riddled with inconsistency and ambiguity. That trend has continued with some significant recent decisions contributing to the ongoing debate.

Sylvester is one of the most significant federal court decisions on this subject following the Corps' adoption of its 1988 NEPA regulations.³⁸ Sylvester concerned the Corps' NEPA review of a proposed resort that included a golf course located on wetlands and a ski resort located on adjacent uplands. In addition to upholding the Corps' NEPA regulations as an acceptable interpretation of its NEPA obligations, the Sylvester court held that the Corps could limit its NEPA review to the construction of the golf course on the wetlands, even though the golf course was part of a larger development.³⁹ The court found that the golf course and the rest of the resort were not "two links of a single chain," because "each could exist without the other, although each would benefit from the other's presence."⁴⁰ Sylvester is significant because it often serves as the basis for arguing that the Corps' NEPA review should be restricted to those areas over which it has jurisdiction.

Wetlands Action Network v. U.S. Army Corps of Engineers⁴¹ is another Ninth Circuit decision that recently addressed the scope of analysis issue. The case involved a challenge to the Corps' decision to grant a permit to fill 16 acres of wetlands and to mitigate the fill by creating a 51-acre wetlands system for a large-scale mixed use development. The Corps agreed to a division of the overall project into three phases for permitting purposes. The Corps also limited its analysis to the impacts resulting from the filling of the 16.1 acres of wetlands for the first phase of development. The court first stated that it had upheld the Corps' NEPA regulations in Sylvester, particularly with respect to the scope of analysis. The court also cited the federalization analysis contained in the Sylvester decision with approval. With respect to the scope of analysis in the present action, the court stated:

The district court's determination that the project would not be able to proceed as planned without the permit and the filling of the wetlands would not occur without the project is correct. The conclusion that the district court drew from these findings [that the analysis should have included all of the upland development], however, is in error. The linkage that the district court found between the permitted activity and the specific project planned is the type of "interdependence" that is found in any situation where a developer seeks to fill a wetland as part of a large development project. If this type of connection alone were sufficient to require a finding that an entire project falls within the purview of the Corps' jurisdiction, the Corps would have jurisdiction over all such projects including those which the Corps' regulations cite as examples of situations in which the Corps would not have jurisdiction over the whole project.⁴²

The court applied the factors identified in the Corps' NEPA regulations and concluded that the Corps' decision to limit its review to the specific activity requiring the permit was not arbitrary or capricious.⁴³ (The court also found that the Corps had not improperly "segmented" its NEPA analysis of the first phase of the project from the second and third phases, based on the preliminary and uncertain nature of those subsequent phases. "Neither the CEQ regulations nor our precedent support the conclusion that the Corps was required to consider the three phases together as cumulative actions.")⁴⁴

Although the Ninth Circuit has maintained a consistent interpretation of the Corps' proper scope of analysis, some other courts have taken a more skeptical view. For example, in Friends of the Earth, Inc. v. U.S. Army Corps of Engineers,⁴⁵ plaintiffs brought suit to challenge the Corps' determination that an EIS was not required for the permitting of three casinos on the Mississippi coast. Among the claims, the plaintiffs objected to the Corps' refusal to consider the effects of the upland portion of the casino projects. In finding for the plaintiffs, the court distinguished Winnebago and Save the Bay, noting that those cases involved very different situations than the casino permitting:

Here by contrast, the agency's jurisdiction encompasses the heart of the development projects—the permitting of the floating casinos themselves. All upland development results from and is entirely conditional on the permitted activity. Because the "environmental consequences of the larger project" therefore "are essentially products of the Corps permit action," 33 C.F.R. § 325 App. B § 7(b), the Court finds that the development here is akin to the shipping terminal example provided by the Corps' own regulations for which the scope of NEPA analysis was extended to the upland development.⁴⁶

Similarly, in Stewart v. Potts,⁴⁷ an applicant sought a § 404 permit for impacts to approximately 2 acres of wetlands to construct a golf course on a 400-acre tract. The Corps limited its scope of analysis to the impacted wetlands. The district court found that because the wetlands were scattered throughout the proposed golf course site, the filling of the wetlands and the clearing of upland forest necessary to construct the golf course were interrelated, thereby bringing the entire project within the Corps' NEPA analysis. The court expressly distinguished the decisions in Winnebago, Save the Bay, and Sylvester. The court stated that in those cases, the activities "invoking Corps jurisdiction and NEPA, were physically, functionally, and logically separable from the activities held not subject to NEPA analysis."⁴⁸ The court observed that "the two acres of wetlands that will be directly impacted are scattered throughout the 200-acre tract . . . . The Corps' characterization of the project as a filling of the wetlands separate and distinct from the clearing of the forest located on those wetlands is irrational."⁴⁹ The court described the Corps' position as "asinine on its face, and an impermissible abdication of a federal agency's duties under NEPA."⁵⁰

[32 ELR 10858]

Collateral Impacts of "Scope of Analysis"

While the Corps' scope of analysis inquiry is intended to identify the scope of the work, whether federal or nonfederal, over which the Corps' assessment of effects will occur, the considerations of "legal" and "factual" control discussed above often recur in determining the extent of the effects that must be disclosed in the NEPA document once the scope of analysis has been identified. Thus, even where the scope of analysis inquiry may have demonstrated that the Corps lacks sufficient control and responsibility to federalize the nonfederal portion of a project, the extent of the Corps' legal or factual control over the nonfederal portions of the project may become an issue again in trying to determine whether those nonfederal portions of the project should be considered the effects (whether direct, indirect, or cumulative) of the portion of the project included within the scope of analysis. This analysis often will turn on notions of causation, i.e., whether the Corps' action (issuing a permit) is a legal or factual "cause" of the nonfederal portions of the project. This can present a difficult and confusing sense of "deja vu," as issues addressed in defining the scope of analysis, i.e., the extent of the action or work subject to NEPA review, are revisited in determining the scope of effects that must be identified.

This confusion can be seen in two relatively old decisions cited by EPA in its original objections to the Corps' proposed scope of analysis regulations in 1984: Colorado River Indian Tribes v. Marsh⁵¹ and Sierra Club v. Marsh.⁵² In the former case, a developer planning a 156-acre residential and commercial development applied for a Corps permit to stabilize an adjacent river bank, which was necessary for the development to proceed. The court there required the private development to be evaluated in the NEPA document as a likely occurrence resulting from the issuance of a permit.⁵³ The latter involved the proposed construction of a causeway from the mainland to an island, and required the NEPA analysis to include among the effects of permit issuance the industrial development on the island that would be stimulated by construction of the causeway.⁵⁴ However, as noted by the Corps in its response to EPA's objections:

These cases did not hold the Corps permits "federalized" the unregulated private development so as to render the private action Federal actions for NEPA purposes. Rather, among the numerous legal problems found by each court, the cases required the Corps to consider the private development likely to occur as a result of the issuance of the Corps permit. Such analysis is part of an accepted NEPA requirement to consider the environmental effects of Federal action . . . .⁵⁵

As noted above by the Corps, it is important to mark the distinction between what constitutes part of the "action" subject to Corps NEPA review and what may be a direct, indirect, or cumulative effect of that action. For example, the extent of the "action" subject to NEPA review will determine the nature and extent of the alternatives that must be evaluated, and specifically whether those must be alternatives to the overall nonfederal action or just the specific portion subject to the Corps' permitting authority. The two decisions cited by EPA are often mis-cited by litigants in an effort to justify a broadened definition of the action subject to NEPA analysis. However, even if the scope of analysis issue is properly analyzed, the analyses set forth in the Colorado Indian Tribes and Marsh decisions can still be misused to dramatically expand the scope of "effects" that must be evaluated in that NEPA review. Without a return to the important concepts of federal control articulated in Sylvester and its progeny, which in turn are useful in determining "federal causation," that expansion of the NEPA analysis can undermine the important limiting principles established by Appendix B and subsequent case law.

Other Issues in the NEPA/§ 404 Nexus

Difficult issues often can arise in harmonizing the procedural requirements of NEPA with the substantive and procedural requirements of the § 404(b)(1) guidelines, 40 C.F.R. Part 230, which have been issued by EPA and which are the primary substantive environmental criteria that guide Corps permitting decisions.

Purpose and Need Versus Project Purpose

NEPA requires the identification of a proposed action's "purpose and need," which helps to guide the identification of a "reasonable range" of alternatives and the evaluation of how well those alternatives satisfy the project's underlying goals. The § 404(b)(1) guidelines also require the identification of "overall project purpose," which serves as the basis for an analysis of alternatives, known as the "practicable alternatives test." In the latter case, the Corps may not issue a § 404 permit "if there is a practicable alternative to the proposed discharge whichwould have less adverse impact on the aquatic ecosystem, so long as the alternative does not have other significant adverse environmental consequences."⁵⁶ An alternative is "practicable" if it is "available and capable of being done after taking into consideration cost, existing technology, and logistics in light of overall project purposes."⁵⁷ Moreover, where special aquatic sites, including wetlands, will be affected, and the activity is not "water dependent," "practicable alternatives that do not involve special aquatic sites are presumed to be available, unless clearly demonstrated otherwise," and are presumed to have less adverse impact on the aquatic ecosystem, unless clearly demonstrated otherwise.⁵⁸

With respect to actions subject to NEPA, the § 404(b)(1) guidelines specifically state:

Where the Corps of Engineers is the permitting agency, the analysis of alternatives required for NEPA environmental documents . . . will in most cases provide the information for the evaluation of alternatives under these [32 ELR 10859] Guidelines. On occasion, these NEPA documents may address a broader range of alternatives than required to be considered under [the § 404(b)(1) guidelines] or may not have considered the alternatives in sufficient detail to respond to the requirements of these Guidelines. In the latter case, it may be necessary to supplement these NEPA documents with this additional information.⁵⁹

Thus, the range of reasonable alternatives identified for NEPA purposes can have a significant and potentially controlling effect on the analysis of practicable alternatives under § 404.⁶⁰

In Simmons v. U.S. Army Corps of Engineers,⁶¹ the Corps issued a permit for the construction of a dam and water reservoir to supply water to the city of Marion, Illinois, and the Lake Egypt Water District. The Corps only evaluated alternatives for supplying the water for the two users from a single source. The court concluded that the Corps had impermissibly narrowed its range of alternatives by defining the project purpose in terms of a single source. "To conclude that a common problem necessarily demands a common solution defies common sense. We conclude that the [Corps] defined an impermissibly narrow purpose for the contemplated project. The Corps therefore failed to examine the full range of reasonable alternatives and vitiated the EIS."⁶²

Substance Versus Procedure

NEPA is a purely procedural statute. It does not mandate any particular outcome, not even the most environmentally preferable outcome (although that alternative must be identified in the document). NEPA is essentially a "stop, look, and listen" statute designed to ensure informed agency decision-making and public disclosure of environmental information. In contrast, as noted above, the § 404(b)(1) guidelines impose a substantive standard, which requires the selection of the practicable alternative with the least adverse impact on the aquatic ecosystem.⁶³ In addition, where special aquatic sites are involved, the burden is placed on the permit applicant to demonstrate that there are no practicable alternatives that would avoid special aquatic sites, or that if such alternatives do exist, that they have more severe impacts on the aquatic ecosystem. Thus, the identification of project purpose and alternatives is all the more important in the § 404 context, because the identification of an alternative as "practicable" can control the agency's ultimate decision. This has led to significant controversy over the definition of project purpose for § 404 permitting actions, and over whether certain alternatives are "practicable." It also highlights the need for care in identifying project purpose and alternatives in the NEPA context, as those decisions may have significant effects within the § 404 process.

Assessment of Effects

NEPA requires an assessment of the effects—direct, indirect, and cumulative—of an agency's proposed action on the human environment. That assessment includes effects on a wide range of resources, including air, water, cultural resources, animal and plant species, human communities, etc. The sweep of NEPA is very broad. In contrast, the § 404(b)(1) guidelines focus more narrowly on impacts to the "aquatic ecosystem"—although the requirement to pick the practicable alternative with the least adverse impact on the aquatic ecosystem includes the following qualifier: "So long as the alternative does not have other significant adverse environmental consequences."⁶⁴ The generally more narrow focus of the § 404(b)(1) guidelines can create some confusion in the review of the Corps' NEPA analysis for permit decisions—which should contain the broader focus required by NEPA—and its findings and decisions under § 404—which are generally more narrowly focused on the issues relevant under the § 404(b)(1) guidelines concerning the aquatic ecosystem. (The Corps' own "public interest review" does provide a more expansive scope of review concerning the potential effects of the Corps' permitting decisions, and is more similar in scope to the NEPA review.⁶⁵ However, the public interest review criteria are much less specific than the standards and procedures established under § 404(b)(1), and the more stringent § 404(b)(1) guidelines tendto be the greater source of controversy.)

NEPA/§ 404 Integration

A number of federal agencies have recently taken steps to try to better integrate the NEPA and § 404 permitting processes for projects that require a Corps permit in addition to various other types of federal involvement, e.g., highway funding. In the NEPA process, commenting agencies and the public often do not see the sponsoring agency's statement of project purpose or alternatives until a DEIS has been published in its entirety. At that point, considerable resources already have been committed to evaluating the environmental effects of those alternatives and presenting them in the DEIS. However, EPA and other resource agencies often express concern at the time of publication of the DEIS about the adequacy of the identified project purpose and/or alternatives to satisfy the § 404(b)(1) alternatives analysis requirements. Resolving such concerns mid-course often adds significant delays, as the lead federal agency either must justify its previous determinations to EPA and the other resource agencies, or must retrace its steps to modify its statement of project purpose or evaluate alternatives that were not previously identified.

In an effort to avoid the cost and frustration of these delays, the Corps, EPA, and a number of other federal agencies have explored "streamlining" measures to harmonize the NEPA and § 404 review processes. This effort, sometimes called "NEPA/404 merger," has produced some agreements calling for early NEPA review of the sponsor's "purpose and [32 ELR 10860] need" and the range of alternatives to be evaluated in the EIS. The goal of the process is to attempt to resolve disagreements early in the NEPA process, before significant resources have been expended on the analysis of alternatives and their presentation in a DEIS. This NEPA/§ 404 merger process has met with mixed success. While a potentially useful tool to resolve disagreements early, the merger process also can be used to "pry open" the NEPA process in order to attack elements of the process, e.g., purpose and need, alternatives, etc., in isolation and to delay or prevent the successful preparation of a DEIS. Moreover, it is unclear whether the early involvement of the resource agencies actually avoids any significant delays on the back end of the process, or simply gives one more opportunity to question the lead agency's purposes or determinations. Discussions continue on how best to harmonize the requirements of NEPA and § 404, to resolve disagreements early, and to provide the certainty, predictability, and efficiency that are required under both statutes.

Indirect and Cumulative Effects

Another source of controversy in the NEPA review of Corps permitting decisions is the assessment of indirect and cumulative effects or impacts. "Effects" include: "direct effects, which are caused by the action and occur at the same time and place"; and "indirect effects, which are caused by the action and are later in time or farther removed in distance, but are still reasonably foreseeable." Indirect effects may include growth inducing effects and other effects related to induced changes in the pattern of land use, population density or growth rate, and related effects on air and water and other natural systems, including ecosystems.

"Effects and impacts as used in these regulations are synonymous. Effects includes ecological . . . aesthetic, historic, cultural, economic, social, or health, whether direct, indirect, or cumulative."⁶⁶

"Cumulative impact" is

the impact on the environment which results from the incremental impact of the action when added to other past, present, and reasonably foreseeable future actions regardless of what agency (Federal or non-Federal) or person undertakes such other actions. Cumulative impacts can result from individually minor but collectively significant actions taking place over a period of time.⁶⁷

Disputes over the analysis of growth-inducing and cumulative impacts often occur in the context of determining whether a proposed action may have a "significant impact" on the human environment, and thus, whether an EIS must be prepared. The goal of the proponent often is to avoid having to "take ownership" of the effects of other actions that may or may not occur in the area. This issue is often particularly relevant in the § 404 permitting context, where a Corps permit often is required for limited wetlands impacts associated with a much larger nonfederal project, such as a residential or commercial development. The goal of proponents normally will be to limit the extent of the Corps' analysis in order to avoid the EIS requirement, while opponents will seek a more expansive review.

Davis v. Coleman⁶⁸ is the classic case of "growth-inducing impacts," a form of indirect effect. The court held that the U.S. Department of Transportation must analyze the growth effects of constructing a new highway interchange in an otherwise undeveloped area. Although this case did not arise in the Corps permitting context, it has proved to have a strong influence on all subsequent case law concerning growth-inducing impacts.

Cumulative effects analysis for Corps permit issuance must identify

(1) the area in which effects of the proposed project will be felt; (2) the impacts that are expected in that area from the proposed project; (3) other actions—past, proposed, and reasonably foreseeable—that have had or are expected to have impacts in the same area; (4) the impacts or expected impacts from these other actions; and (5) the overall impact that can be expected if the individual impacts are allowed to accumulate.⁶⁹

An EA should "consider (1) past and present actions without regard to whether they themselves triggered NEPA responsibilities and (2) future actions that are 'reasonably foreseeable,' even if they are not yet proposals and may never trigger NEPA-review requirements."⁷⁰

In Friends of the Earth,⁷¹ the court found fault with the Corps' analysis of both indirect (or secondary) and cumulative impacts in its EAs for three casinos on the Mississippi coast. With respect to indirect effects, the court stated:

[32 ELR 10861]

Even more problematic is the Corps' total lack of analysis of growth-inducing effects of the casino projects. . . . The Corps . . . contends that it was not required to analyze such impacts because it determined that they are "highly speculative and indefinite." On this issue, the Corps is simply wrong. . . .

The administrative record in this case firmly establishes that increased growth in the area is the only reasonable prediction of what will occur if the casinos are built. . . .⁷²

In contrast, the court in Hoosier Environmental Council, Inc. v. U.S. Army Corps of Engineers,⁷³ in reviewing a Corps permit for a casino on the Ohio River, concluded:

The riverboat casino project's purpose is to provide an attractive resort destination to which people would travel on existing roads. This does not automatically lead to the conclusion that, once there, they will build homes, retail stores and service stations. . . . No facts were presented to the [Corps] that would makes this assessment unreasonable, nor were there any making the likelihood of secondary development reasonably foreseeable. Thus, the [Corps'] consideration of the indirect effects of the riverboat project was not arbitrary or capricious.⁷⁴

With respect to cumulative impacts, the Friends of the Earth court concluded that

while the Corps dedicated nine or ten pages of each EA to cumulative impacts, the discussion provides no analysis at all. All three EAs merely recite the history of development along the Mississippi coast and then conclude that the cumulative direct impacts "have been minimal." There is no actual analysis, only that conclusory statement.⁷⁵

Conclusion

Obtaining a CWA § 404 permit from the Corps is a difficult and time-consuming process, particularly where an individual permit is required. For the party designing a project, or for the Corps in reviewing a proposal, considerable care must be taken to ensure that the scope of environmental review is properly defined. Otherwise, an already difficult permitting process can become even more difficult and costly, and a project sponsor's goals may be delayed or thwarted.

The intersection between the permitting requirements of § 404 and the procedural review under NEPA raises numerous challenging issues. Over 20 years of litigation and rulemaking have failed to eliminate controversy over the proper "scope of analysis" for the Corps' NEPA review of § 404 permit applications. Ultimately, the chances of successfully navigating these legal shoals without undue cost or delay will depend on the specific facts of a proposal and the ability of the project proponent and/or the Corps to properly "scope" the project. Particular attention must be paid to the difference between the scope of the federal action itself and the range of environmental effects that must be identified in the NEPA document. Other challenging issues are posed by the substance-versus-procedure dichotomy between the § 404 and NEPA reviews. In sum, successful application for and issuance of a § 404 permit requires a careful evaluation of the § 404/NEPA nexus in advance. Ample case law demonstrates that those who do not exercise such care often have their plans questioned, delayed, or even defeated.

1. 33 U.S.C. § 1344, ELR STAT. FWPCA § 404.

2. 42 U.S.C. §§ 4321-4370d, ELR STAT. NEPA §§ 2-209.

3. See id. § 4332(2)(C), ELR STAT. NEPA § 102(2)(C).

4. See 40 C.F.R. pts. 1500-1508.

5. See id. § 1508.4.

6. See id. § 1508.9.

7. See id. § 1501.4(e).

8. See id. § 1502.10-1502.19.

9. See id. pt. 1503.

10. See id. § 1505.2.

11. 33 U.S.C. § 1344, ELR STAT. FWPCA § 404.

12. Id. § 403.

13. 33 C.F.R. pt. 325, app. B.

14. 53 Fed. Reg. 3120-21 (Feb. 3, 1988).

15. 33 C.F.R. pt. 230, app. B, § 8(a) (1981) (emphasis added).

16. 621 F.2d 269, 10 ELR 20243 (8th Cir. 1980).

17. See id. at 272, 10 ELR at 20244 (citation omitted).

18. 610 F.2d 322, 10 ELR 20185 (5th Cir. 1980).

19. See 53 Fed. Reg. at 3120, 3121-22.

20. 52 Fed. Reg. 22517, 22518-19 (June 12, 1987).

21. 884 F.2d 394, 399, 19 ELR 20652, 20654 (9th Cir. 1989).

22. Id. at 399, 19 ELR at 20654-55.

23. Id. at 399, 19 ELR at 20654.

24. 33 C.F.R. pt. 325, app. B, § 7(b) (emphasis added).

25. 621 F.2d at 272, 10 ELR at 20244.

26. 33 C.F.R. pt. 325, app. B, § 7(b)(2).

27. Id.

28. Id. § 7(b)(2)(A).

29. See id. § 7(b)(3).

30. Id. The example goes on to state that the scope of analysis for "those activities that require a [Corps] permit for a major portion of a transportation or utility transmission project" should include those portions of the project outside the boundaries of the Corps' regulatory jurisdiction if the "Corps permit bears upon the origin and destination as well as the route of the project outside the Corps regulatory boundaries." Id.

31. 916 F.2d 13, 21 ELR 20004 (D.C. Cir. 1990).

32. See id. at 18-19, 21 ELR at 20005. One of the most thorough and exhaustive treatments of this federal control issue under NEPA is found in Landmark West! v. U.S. Postal Serv., 840 F. Supp. 994, 24 ELR 21290 (S.D.N.Y. 1993), aff'd, 41 F.3d 1500 (2d Cir. 1994). Although this case did not arise within the Corps permitting context, it provides an excellent introduction to the "small federal handle" problem.

33. See, e.g., Winnebago Tribe of Neb. v. Ray, 621 F.2d 269, 272, 10 ELR 20243, 20244 (8th Cir. 1980) (while the Corps has broad discretion in considering environmental factors in granting permits, discretion does not extend beyond navigable waters over which the Corps has jurisdiction).

34. See, e.g., id. at 273, 10 ELR at 20244 (no federal funding involved in power line).

35. See, e.g., id. at 273, 10 ELR at 20244 (no federal involvement other than § 10 permit).

36. See, e.g., Save the Bay v. Corps of Eng'rs, 610 F.2d 322, 10 ELR 20185 (5th Cir. 1980) (entire plant was not "federalized," because alternative method of effluent discharge was available which did not require a Corps permit).

37. 33 C.F.R. pt. 325, app. B, § 7(b)(2)(ii).

38. 884 F.2d at 394, 19 ELR at 20652.

39. See id. at 401, 19 ELR at 20655.

40. Id.

41. 222 F.3d 1105, 31 ELR 20051 (9th Cir. 2000).

42. Id. at 1116-17, 31 ELR at 20054.

43. See id. at 1117-18, 31 ELR at 20054-55.

44. Id. at 1119, 31 ELR at 20055.

45. 109 F. Supp. 2d 30, 31 ELR 20075 (D.D.C. 2000).

46. Id. at 40, 31 ELR at 20079.

47. 996 F. Supp. 668 (S.D. Tex. 1998).

48. Id. at 682.

49. Id.

50. Id. at 682-83.

51. 605 F. Supp. 1425 (C.D. Cal. 1985).

52. 769 F.2d 868, 15 ELR 20911 (1st Cir. 1985).

53. See 605 F. Supp. at 1428-34.

54. See 769 F.2d at 877-78, 15 ELR at 20912-13.

55. 605 F. Supp. at 1428-34. See also Landmark West! v. U.S. Postal Serv., 840 F. Supp. 994, 1010, 24 ELR 21290 (S.D.N.Y. 1993) (skyscraper not indirect effect of Postal Service participation in project where building would be built regardless of Postal Service decision); Natural Resources Defense Council v. EPA, 822 F.2d 104, 121 n.27, 17 ELR 21043, 21057 n.27 (D.C. Cir. 1987) (impacts of siting of private facility are not "effects" of EPA issuance of national pollutant discharge elimination system permit).

56. 40 C.F.R. § 230.10(a).

57. Id. § 230.10(a)(2).

58. See id. § 230.10(a)(3).

59. Id. § 230.10(1)(4).

60. But see Sylvester v. Corps of Eng'rs, 882 F.2d 407, 410, 19 ELR 21348, 21349 (9th Cir. 1989) (Sylvester II) ("A relationship required to be considered in determining reasonable and practicable alternatives need not be of such significance as would be necessary to 'federalize' the entire project." Id. Thus, it is possible for an alternative not to be practicable for § 404 purposes, but still to be possible so as to avoid the federalization of the entire project under NEPA.).

61. 120 F.3d 664, 27 ELR 21204 (7th Cir. 1997).

62. Id. at 667, 27 ELR at 21204-05.

63. See Carmel-by-the-Sea v. Department of Transp., 123 F.3d 1142, 1152, 27 ELR 21428, 21432 (9th Cir. 1997) ("This scenario serves to highlight the distinction between [NEPA] and the [CWA]: the former is procedural and is simply not as demanding as the [CWA] on the issue of wetlands."). Id.

64. 40 C.F.R. § 230.10(a).

65. See 33 C.F.R. § 320.4(a).

66. 40 C.F.R. § 1508.8 (emphasis added).

67. Id. § 1508.7 (emphasis added).

68. 521 F.2d 661, 674-76 (9th Cir. 1975). Compare Sierra Club v. Marsh, 769 F.2d 868, 878-79, 15 ELR 20911, 20915 (1st Cir. 1985) ("Agencies should have taken account of the 'secondary impacts.' First, . . . building the causeway [to Sears Island] and port [on island] will lead to further development [on island]. . . . Once Maine completes the causeway and port, pressure to develop the rest of the island could well prove irreversible.") id. with Laguna Greenbelt, Inc. v. Department of Transp., 42 F.3d 517, 525-26, 25 ELR 20349, 20352 (9th Cir. 1994):

Discussion and documentation in the EIS, however, support the EIS's conclusion that the tollroad will not affect the amount and pattern of growth in Orange County . . . . The record shows that 98.5% of all land in the project's 'area of benefit' is already accounted for by either existing or committed land uses not contingent on construction of the corridor.

Id.

69. Fritiofson v. Alexander, 772 F.2d 1225, 1245-46, 15 ELR 21070, 21080 (5th Cir. 1985).

70. Id. See also City of Carmel-by-the-Sea v. Department of Transp., 123 F.3d 1142, 27 ELR 21428 (9th Cir. 1997) (adopting Fifth Circuit's Fritiofson analysis of cumulative impact analysis requirements); Landmark West! v. U.S. Postal Serv., 840 F. Supp. 994, 24 ELR 21290 (S.D.N.Y. 1993), aff'd, 41 F.3d 1500 (2d Cir. 1994) (cumulative impact analysis considers other actions as context/background against which incremental effect of proposed action is measured; agency sponsoring proposed action need not "take ownership" of environmental consequences of other actions that provide background for proposed action); Coalition on Sensible Transp. v. Dole, 826 F.2d 60, 70-71, 17 ELR 21191, 21196-97 (D.C. Cir. 1987) (It "makes sense to consider . . . cumulative effects by incorporating the effects of other projects into the background 'data base' of the project at issue, rather than by restating the results of the prior studies." Id. In this case, the EA and FONSI were "sufficient to alert interested members of the public to any arguable cumulative impacts.") id.; Piedmont Heights Civic Club v. Moreland, 637 F.2d 430, 441-42, 11 ELR 20257, 20262 (5th Cir. 1981) ("NEPA does not require an agency to restate all of the environmental effects of projects presently under consideration. Where the underlying data base includes approved project and pending proposals, the 'statutory minimal' of NEPA has been met."). Id.

71. 109 F. Supp. 2d at 30, 31 ELR at 20075.

72. Id. at 41, 31 ELR at 20079 (citations omitted).

73. 105 F. Supp. 2d 953, 30 ELR Digest 20786 (S.D. Ind. 2000).

74. Id. at 975-76, 30 ELR Digest at 20786.

75. 109 F. Supp. 2d at 42, 31 ELR at 20079.