Chapter 14 - § 14.5 • THE NEPA PROCESS


An agency prepares an EA or an EIS in a public process that is subject to certain procedures and obligations. A flowchart of the NEPA process appears at Exhibit 14A.

§ 14.5.1—Internally Initiated/Externally Initiated Proposals

Although the environmental review process under NEPA is triggered by a proposal for major federal action, federal actions may be proposed by the agency itself, or by state or private entities that are external to the agency.

§ 14.5.2—Preparation Of NEPA Documents By Contractors

Agencies may hire third-party contractors to prepare NEPA documents. And proponents of federal actions may fund the preparation of an EIS by a contractor or consultant chosen by the federal agency.100 For an EIS, the agency — not the proponent — "must select the consulting firm, even though the applicant pays for the cost of preparing the EIS."101 The agency is required to guide the consultant's work, independently evaluate the consultant's work product, and ultimately be responsible for the contents of the EIS.102

The CEQ describes this arrangement as a "third-party contract" because the agency is the "third party" to the contract between the contractor and the proponent.103 Third-party contracts are purely "voluntary,"104 but their benefits to the proponent, agency, and contractor are obvious. The contract is between the project proponent and the contractor, and spells out how the former will fund work by the latter.105 A third-party contract should state, consistent with the applicable CEQ regulations, that the private proponent is funding the contractor's preparation of a NEPA document for the agency, and the agency will independently evaluate the consultant's work.106

For an EIS, the agency — and not the proponent — must select the consultant.107 For an EA, the applicant may hire a consultant to prepare an EA without prior agency approval,108 but the agency must "make its own evaluation of the environmental issues and take responsibility for the scope and content of the environmental assessment."109

§ 14.5.3—Conflicts Of Interest

CEQ regulations require the avoidance of conflicts of interests where contractors prepare NEPA documents.110 For an EIS, the contractor must "execute a disclosure statement . . . specifying that [it has] no financial or other interest in the outcome of the project."111 The intent of the disclosure statement is to avoid situations in which the contractor has an interest in the outcome of the NEPA process.112

CEQ regulations do not affirmatively require a contractor preparing an EA to execute a disclosure statement, perhaps because under certain circumstances, the proponent of the action may prepare an EA for consideration by the agency.113 Nonetheless, where a contractor prepares an EA, it may be advisable for it to execute a statement affirming that it does not have a financial or other interest in the outcome of the project.

The CEQ regulations do not define conflict of interest or identify the circumstances under which a contractor has a "financial or other interest" sufficient to disqualify it from preparing a NEPA document.114 In guidance materials, the CEQ has stated that it interprets conflict of interest "broadly to cover any known benefits other than general enhancement of professional reputation."115 A "promise of future construction or design work on the project" would amount to a conflict of interest, as would certain "indirect benefits."116

A consulting firm is not disqualified from preparing a NEPA document for an agency where the proponent previously retained the contractor to develop initial data or information for the project so long as that prior involvement between the proponent and the contractor is disclosed to the agency.117 And a contractor that prepares a NEPA document may later bid for future work on the project if, at the time it prepares the EIS or EA, it does not have a "promise" that it will receive that future work.118

Numerous judicial opinions address claims that NEPA documents were prepared by consultants with conflicts of interest.119 The Tenth Circuit has ruled in an influential case "that a contractor with 'an agreement, enforceable promise or guarantee of future work' has a conflict of interest."120 A contractor's mere "heightened expectation" that its NEPA work would lead to future work does not create a conflict of interest if "the degree of oversight exercised by [the agency] is sufficient to cure any defect arising from that expectation."121 The ultimate inquiry is "whether the alleged breach compromised the objectivity and integrity of the NEPA process."122

The Tenth Circuit has enjoined an agency's reliance on an EA for a highway construction project where the agency had executed a contract that required the third-party contractor to prepare a FONSI because, the court concluded, the contractor "had an inherent, contractually-created bias in favor of issuance of a FONSI rather than preparation of an EIS."123 The District of Colorado has enjoined an agency from relying on an EIS prepared by a contractor where the private proponent of the federal action and the contractor had an "improper relationship" and engaged "in routine communication regarding the substance, scope and timing of the FEIS" in a manner that was prohibited by the contract between the agency, the contractor, and the proponent.124 In another case, the District of Colorado rejected the contention that an EIS for a rail transportation project was tainted by bias because the contractor that managed the preparation of the EIS was involved in construction of related rail transportation projects. The court concluded that "even if there was a conflict of interest," the federal agency "exercised sufficient control over the process such that the integrity of the NEPA process was not compromised."125

The Tenth Circuit has...

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