ADMINISTRATIVE BULKHEADS.

• Author: Tsuda, Kenta

1. Introduction 2 II. NEPA as Administrative Battleground. 5 III. NEPA Directives on Uncertain Impacts 7 A. Legal Thresholds in NEPA Common Law. 9 1. Defining the Scope of NEPA Review. 10 2. Evaluating Impact Significance. 18 B. Gaps 25 IV. Proposed Responses 27 A. Embracing Lawful Arbitrariness. 27 B. Technocratic Management 29 V. Administrative Bulkheads in NEPA Review 32 A. NEPA and Administrative Skepticism. 32 B. The Bulkhead Rule 33 C. Legal Basis 36 VI. Conclusion 39 I. INTRODUCTION

   Given their role in contemporary economic life, administrative agencies must make decisions in the absence of certainty. Without such decisions, social and economic life as currently arranged would grind to a halt. The conventional wisdom is that these agencies are staffed by experts who must be afforded ample discretion to make hard decisions. Simultaneously, the rule of law imposes stringent analytical procedures upon agencies and requires the testing of administrative decisions in a crucible of pluralistic competition among interested groups. (1) The combination of expert discretion, procedural rigor, and dynamic pluralism has not, however, assuaged doubts about the bureaucracy's tendency to brood catastrophic errors. Recent years have seen such errors, (2) and with them, debate over the legal rules that govern how bureaucratic actors make policy decisions in the face of uncertainty.

   Joining these debates, this Article urges that developments in administrative law recognize the shortcomings of bureaucratic prediction. This Article focuses on the environmental domain, more specifically the body of administrative law that has developed under the United States' most important environmental law, the National Environmental Policy Act (NEPA). (3) Beginning with the D.C. Circuit's Calvert Cliffs (4) decision and the Supreme Court's response in Vermont Yankee, (5) NEPA law has been the locus of struggle over bureaucratic rationality and federal administrative law. Today too, NEPA law is the setting for a debate over a central problem in the administrative state: whether and how the law can bind administrative agencies to account for their own limited knowledge and likely prediction failures.

   NEPA opens a unique window into administrative rationality. Under this procedural law, administrative agencies must describe and consider the potential environmental impact of "major federal actions." (6) Where an impact is of uncertain probability or magnitude, two relevant legal thresholds determine how an agency will proceed. First, the agency must determine whether it confronts a "reasonably foreseeable" impact. (7) Impacts that are not reasonably foreseeable can be excluded from further consideration. (8) Second, the agency must determine whether an impact is potentially "significant." (9) If so, this potential impact warrants the burdensome preparation of an "environmental impact statement" (EIS)--effectively, a detailed report analyzing the action and its environmental consequences relative to alternative policies. (10) NEPA requirements are exclusively procedural. However, the administrative and political costs associated with its processes--particularly where an agency identifies a large or controversial impact--can determine whether an action proceeds at all. Therefore, the choice of legal rules structuring an action's scope of review and determination of impact significance is critical to the administrative state's decisions.

   As currently understood, NEPA leaves a gap as to how an agency is to evaluate impacts of uncertain or low probability. Here, commentators have proposed solutions: Some argue agencies should have discretion to apply their expertise in these circumstances, eschewing a principled legal rule. (11) Others insist the problem of uncertain impacts can be eliminated by intensifying the search for relevant information. (12)

   This Article proposes an alternative path: the bulkhead rule, under which administrative decisions are bound by deeper (more burdensome) analytical procedures when potential impacts are non-localized. The rule analogizes to the bulkhead structure within a boat, which vertically partitions and compartmentalizes the hull with watertight separations, preventing generalized flooding in the event of a breach. Although this rule is intuitive and prudent, NEPA is not currently understood or applied to include it. The bulkhead rule provides that potential, non-localized impacts to natural systems will be included per se in the scope of NEPA review and will be subject to a rebuttable presumption of significance. Agencies would face higher informational and political costs to undertake actions with potential systemic risks and, at the margin, would pursue fewer such actions. Meanwhile, the rule creates a better environment for adaptive management, with more narrowly localized actions becoming "laboratories of environmental policy," to paraphrase Justice Brandeis. (13) Regulators can learn by risking small, localized mistakes without endangering precious natural systems. Environmental policymaking can improve over time without collateral ecological disaster, adding robustness and possibly, antifragility, to federal environmental protection. (14) Just as a ship's bulkhead caps the downside cost of a breach at any one location on a vessel, the bulkhead rule reduces the risk of agency prediction failures by focusing attention and political pressure on larger scale risks and indirectly nudging agencies toward actions with only localized potential impacts.

   After an initial overview of the NEPA regime, this Article describes the functional benefits of the bulkhead rule before turning to its legal basis. NEPA jurisprudence derives from broadly worded statutory language, elaborated by implementing regulations of the Council on Environmental Quality (CEQ). (15) This legislation and regulation have been interpreted in a body of decisions developed over NEPA's five decades, what Justice Thurgood Marshall described as NEPA "common law." (16) The bulkhead rule is not explicitly articulated in NEPA implementing regulations nor in NEPA common law, but as this Article argues, it is implied in both and should be so recognized.

2. NEPA AS ADMINISTRATIVE BATTLEGROUND

   According to foundational, liberal political theory, a core governmental function is to provide an authoritative resolution to coordination problems that arise from decentralized private activity ("the market"). (17) In this coordinating role, government's task is to identify harms that non-governmental entities generate, in order to develop and enforce rules that reduce those harms. (18) It may do this by setting expectations against which private actors can plan and privately arrange their affairs; for example, by defining (and enforcing) rights or by compelling harm-creators to internalize the harms, perhaps even shifting the costs of bearing harms onto the government itself--that is, to socialize them.

   One area in which governments often play such a role is in coordinating use of the environmental commons. This domain presents difficulties, namely because the "environmental commons" entail complex systems that are poorly understood and illegible, and therefore often poorly managed by policy intervention. According to some commentators, the U.S. Federal Government manages these natural systems under laws from the 1960s and 1970s conceived in the so-called "equilibrium paradigm," in which the natural world is viewed in timeless stasis, disturbed only by anthropogenic, and more specifically, industrial activity. (19) These laws are outdated, the critics claim, because ecologists today have superseded this paradigm: Many natural systems are not stable over long time scales. (20) Critics conclude that, under the dead hand of the equilibrium paradigm, existing laws require regulators to manage unstable natural systems as though they were static, predictable, and amenable to technocratic management. (21)

   Additionally, environmental policymaking is subject to a problem that afflicts social organizations as such: The knowledge problem. Centralized hierarchical organizations like bureaucracies and legislative bodies require aggregation and processing of information by some small subset of decision makers: finite persons, with finite resources and finite mental capacities. Even in the best circumstances, the most prudent, public-spirited, and intelligent officials face structural impediments to the necessary informational aggregation:

   the planning apparatus... staffed by persons possessed of the moral stature and material requirements of a Mohandas Gandhi combined with the mental capacity and creative genius of a Leonardo da Vinci... will not know what the right things to do are, even if they passionately wanted to do them. (22) Needless to say, officialdom is rarely headed by Gandhis and da Vincis. (23) The knowledge problem is pronounced when officials undertake environmental regulation. The vast majority of information about natural phenomena--for example: a watershed, a deep-water oil field, an endangered species--does not immediately exist as legible, accessible knowledge. Zoologists, geologists, and interested individuals devote time and energy to develop the limited amounts of knowledge we have about any of these phenomena. But the most important anthropogenic risks to these natural phenomena may be realized only rarely, meaning there is limited data to draw upon. Where information is available, it is mostly dispersed among individuals who live near or use the natural system in question, or with local officials; such information is difficult to gather. Over decades of administrative practice, the federal bureaucracy--acting under congressional and public oversight--has improved its knowledge-aggregating functions. It engages in research and experimentation and cultivates subject-matter specialists. In some circumstances, government decision-making is...