CHAPTER 9 THE PROJECT PROPONENT, THIRD-PARTY CONTRACTORS, AND THE ADMINISTRATIVE RECORD

• Jurisdiction: United States

National Environmental Policy Act
(Oct 2010)
CHAPTER 9
THE PROJECT PROPONENT, THIRD-PARTY CONTRACTORS, AND THE ADMINISTRATIVE RECORD
Craig D. Galli
Holland & Hart LLP
Salt Lake City, Utah

CRAIG D. GALLI is with Holland & Hart LLP in Salt Lake City. He focuses his practice on litigation in a variety of natural resources, environmental, land use and energy-related cases. Mr. Galli has litigated over 50 cases in federal district court and U.S. courts of appeals, and has adjudicated numerous cases before administrative agencies. He also advises a wide range of business and industrial clients in the manufacturing, mining, transportation, construction, real estate development and other sectors regarding environmental and natural resources permitting, compliance, contaminated property, due diligence, environmental insurance, environmental audits and management systems, and international environmental law matters. Mr. Galli served as primary outside legal counsel to the 2002 Olympic Winter Games for all environmental compliance and permitting matters. Prior to private practice, Mr. Galli worked as a Senior Trial Attorney with the Environment and Natural Resources Division, U.S. Department of Justice in Washington, D.C., where he defended federal agencies and brought enforcement actions in dozens of states and two U.S. territories. In 1989, he tried the nine-month "Love Canal" case on behalf of the federal government. Mr. Galli is active in professional and community organizations. He currently serves on the Salt Lake City Land Use Appeals Board and is a member of the Steering Committee of Envision Utah. He is vice chair of a subcommittee of the American Bar Association, Section of Environment, Energy & Resources. He is a frequent speaker on topics relating to environmental litigation and compliance, contaminated properties, wetlands, land use and transportation issues. He has published numerous articles on environmental and conservation issues, and edited the third edition of Utah Environmental Law Handbook. He also teaches environmental law as an adjunct professor. Mr. Galli is listed in The Best Lawyers in America, Mountain States Super Lawyers, and Chambers USA in environmental law and environmental litigation and is a Master of the Bench of the American Inns of Court. He is also listed in the Utah Business magazine "Top 100 Legal Elite" under Energy and Natural Resources Law, and was named a "Litigation Star" by Benchmark Litigation.

Table of Contents

I. Introduction

II. The Project Proponent's Delicate Role

A. Discretion to Prepare the Environmental Assessment

B. Pre-Scoping and Scoping Process

C. Project Purpose and Need

D. Responding to Public Comments

E. Compliance with Parallel Regulatory Requirements

III. Third-Party NEPA Contractor

A. Contractor Selection and Engagement

B. Conflicts of Interest

IV. Use and Abuse of the Administrative Record

A. Administrative Record and Standard of Review

B. Compiling and Certifying the Administrative Record

C. Documents Normally Included in the Administrative Record

D. Documents Normally Excluded in the Administrative Record

E. Deliberative Process Privilege

F. Supplementing and Challenging the Scope of the Administrative Record

V. Judicial Review

A. Intervention by the Project Proponent

B. Coordination with Government Counsel

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I. Introduction

Congress enacted the Administrative Procedure Act ("APA") in 1946 in response to the perceived need to impose a check on the executive branch of government that had experienced tremendous expansion during the New Deal period. Legal scholars generally consider it the most important legislation pertaining to the modern regulatory state. In 1950, Justice Robert H. Jackson remarked: "The Act thus represents a long period of study and strife; it settles long-continued and hard-fought contentions, and enacts a formula upon which opposing social and political forces have come to rest. It contains many compromises and generalities and, no doubt, some ambiguities. Experience may reveal defects."¹ In the environmental law arena, the 1970 passage of the National Environmental Policy Act ("NEPA") has received similar veneration as we celebrate its 40th anniversary: "Acknowledging the decades of environmental neglect that had significantly degraded the Nation's landscape and damaged the human environment, the law was established to foster and promote the general welfare, to create and maintain conditions under which man and nature can exist in productive harmony, and fulfill the social, economic, and other requirements of present and future generations of Americans."²

But in the routine world of the environmental practitioners and their clients, the intersection of the APA and NEPA often present a treacherous path through agency bureaucracy and eventually to the courts where years of good faith efforts to coordinate with a federal agency and the agency's NEPA consultant at a cost of millions of dollars in studies can be nullified by the simple words, "arbitrary and capricious" and "vacated and remanded." This article describes the sometimes precarious role of the project proponent in the NEPA process, the federal agency's typical use of third-party contractors to prepare an environmental impact statement ("EIS"), and the compilation, use, and judicial review of the administrative record.

II. The Project Proponent's Delicate Role

Intuitively, one would think that the party with the most knowledge of the project and the most at stake if the NEPA process is inadequate, often has the least involvement in preparing the EIS or EA. Ironically, after submitting the application for approval which triggers the NEPA process, the project proponent can be virtually shut out of the NEPA process except for submitting comments like any other member of the public. And at least in the Ninth Circuit, the project proponent may not even be allowed to intervene to assist federal defendants defend and

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the court understand the project. Yet knowing how to appropriately engage in the NEPA process can make the difference regarding the ultimate defensibility of the document.

The leading case currently addressing the improper influence of a project proponent and its technical consultant on the NEPA process is Colorado Wild, Inc. v. Forest Service.³ In that case, the court granted a preliminary injunction enjoining construction of a road to facilitate development of the Village at Wolf Creek in part because of an "improper relationship that developed between" the Forest Service's EIS contractor and the project proponent, as evidenced by the following:

• "email correspondence indicating that" the proponent and NEPA contractor "were in routine communication regarding the substance, scope and timing of the FEIS," which communication was prohibited by the third-party memorandum of agreement between the Forest Service and the project proponent.

• The failure of the Forest Service, which knew of the direct communication, "to collect and to investigate these communications and include them in the administrative record so it and the public could assess whether" the relationship between the NEPA contractor and the project proponent "had violated the integrity of the NEPA and decision-making process."

Some agencies have cited this case as authority prohibiting any communication between the project proponent and the NEPA contractor during the NEPA process. Other agencies have allowed communication between the NEPA contractor and the project proponent (or the project proponent's technical consultant) unless agency personnel participate in the communication.

A. Discretion to Prepare the Environmental Assessment

The CEQ regulations provide an agency may permit an applicant (or applicant's contractor) to prepare an environmental assessment ("EA"). Nevertheless, the agency must "make its own evaluation of the environmental issues and take responsibility for the scope and content of the environmental assessment."⁴ In practice, some agencies (such as BLM) routinely allow the project proponent to prepare the EA, while some agencies (such as the Department of Energy) rarely do. The amount of oversight an agency gives to a project proponent prepared EA depends on the nature, scope, complexity, and controversy surrounding the project. Even though a project arguably does not result in significant impacts on the environment, the mere fact of public controversy surrounding the project may be sufficient for the agency to exercise its discretion to require preparation of an EIS.⁵

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B. Pre-Scoping and Scoping Process

Mindful of the length of the bureaucratic process and the need to commence the NEPA process as soon as possible, many companies seeking to obtain a right-of-way, permit, or other approval submit a cursory application or plan pursuant to the regulations governing the particular grant or entitlement. For non-controversial and non-complex projects, this approach may be appropriate. However, for controversial and complex projects, cursory submissions during the "pre-scoping" phase of the project may miss an excellent opportunity. Prior to the formal public scoping, the project proponent has the luxury of working with the agency to carefully define the project's scope, purpose, location and other detailed aspects which, if carefully done, will greatly facilitate the formal scoping process and preparation of the draft. During the pre-scoping period, the project proponent typically has the ability to work more closely with agency personnel than is allowed after commencement of the formal scoping process. Once the project application is deemed complete, formal scoping begins, which is defined by the CEQ regulations as "an early and open process for determining the scope of issues to be addressed and for identifying the significant issues related to a proposed action. This process shall be termed scoping."...