Northern Plains Resource Council, Inc. v. Surface Transportation Board

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

NORTHERN PLAINS RESOURCE ⎫

COUNCIL, INC., a Montana Non-

Profit Corporation,

Petitioner,

NATIVE ACTION INC., a Montana

Non-Profit Corporation, No. 97-70037

Petitioner-Intervenor,

⎬ TRAN No.

v. 30186

THE SURFACE TRANSPORTATION

BOARD; UNITED STATES OF AMERICA,

Respondents,

TONGUE RIVER RAILROAD COMPANY,

Respondent-Intervenor.

⎭

NATIVE ACTION INC., a Montana ⎫

Non-Profit Corporation,

Petitioner,

No. 97-70099

v.

⎬ TRAN No.

THE SURFACE TRANSPORTATION 30186

BOARD; UNITED STATES OF

AMERICA,

Respondents.

⎭

21421

21422 NORTHERN PLAINS RESOURCE v. TONGUE RIVER RR

UNITED TRANSPORTATION UNION– ⎫

GENERAL COMMITTEE OF

ADJUSTMENT (GO–386); UNITED

TRANSPORTATION UNION–MONTANA

STATE LEGISLATIVE BOARD,

Petitioners, No. 97-70217

v. ⎬ TRAN

THE SURFACE TRANSPORTATION No. 30186

BOARD; UNITED STATES OF

AMERICA,

Respondents,

TONGUE RIVER RAILROAD COMPANY,

Respondent-Intervenor.

⎭

NORTHERN PLAINS RESOURCE ⎫

COUNCIL; CITY OF FORSYTH; UNITED

TRANSPORTATION UNION; GENERAL

COMMITTEE FOR ADJUSTMENT (GO–

386); UNITED TRANSPORTATION

UNION–MONTANA STATE

LEGISLATIVE BOARD; MARK FIX,

Petitioners, No. 07-74348

NATIVE ACTION INC.,

Petitioner-Intervenor,

⎬ TRAN No.

30186

v. OPINION

THE SURFACE TRANSPORTATION

BOARD; UNITED STATES OF

AMERICA,

Respondents,

TONGUE RIVER RAILROAD COMPANY,

Respondent-Intervenor.

⎭

NORTHERN PLAINS RESOURCE v. TONGUE RIVER RR 21423

On Petition for Review of Orders of the

Surface Transportation Board,

Department of Transportation

Argued and Submitted

July 11, 2011—Portland, Oregon

Filed December 29, 2011

Before: Alfred T. Goodwin, Harry Pregerson, and

Milan D. Smith, Jr., Circuit Judges.

Opinion by Judge Milan D. Smith, Jr.

NORTHERN PLAINS RESOURCE v. TONGUE RIVER RR 21429

COUNSEL

Jack R. Tuholske (argued), Tuholske Law Office PC, Mis-

soula, Montana; John Meyer, Cottonwood Environmental

Law Center, Bozeman, Montana, for the petitioner.

Virginia Strasser (argued), Raymond Atkins, Evelyn G. Kitay,

and Theodore Hunt, Department of Transportation, Surface

Transportation Board, Washington, D.C.; Joan M. Pepin,

Department of Justice, Environmental & Natural Resources

Division, Washington, D.C.; Robert B. Nicholson and John P.

Fonte, Department of Justice, Antitrust Division, Washington,

D.C., for the respondents.

Gordon P. MacDougall (argued), Washington, D.C.; Gary

Ryder, Hysham, Montana; Joe A. Rodriguez, Lame Deer,

Montana, for the petitioner-intervenor.

David Corburn (argued) and Betty Jo Christian, Steptoe &

Johnson LLP, Washington, D.C.; Thomas Ebzery, Billings,

Montana; John G. Crist, Crist, Krogh & Nord LLC, Billings,

Montana, for the respondent-intervenor.

OPINION

M. SMITH, Circuit Judge:

This case arises out of three applications by the Tongue

River Railroad Company, Inc. (TRRC) to build a 130-mile

railroad line in Southeastern Montana to haul coal. The Sur-

face Transportation Board (Board), or its predecessor, the

Interstate Commerce Commission (ICC), approved each of

the three applications (individually, TRRC I, II, and III).

Northern Plains Resource Council, Inc. (NPRC), Mark Fix,

the City of Forsyth, Native Action, Inc. (Native Action), and

United Transportation Union-General Committee of Adjust-

21430 NORTHERN PLAINS RESOURCE v. TONGUE RIVER RR

ment (UTU-GCA) (collectively, Petitioners) challenge TRRC

II and III. Petitioners challenge the approval of TRRC II and

III on a number of environmental and public convenience and

necessity grounds.

We hold that the Board failed to take the requisite “hard

look” at certain material environmental impacts inherent in

TRRC II and III in the manner required by the National Envi-

ronmental Policy Act (NEPA) prior to approving those appli-

cations. We further hold that the Board did not err in its

public convenience and necessity analyses, except with

respect to its reliance on the viability of TRRC II during the

approval of TRRC III. Accordingly, we reverse and remand

in part, and affirm in part.

BACKGROUND

I. Statutory Framework

A. NEPA Requirements

NEPA requires that federal agencies prepare “a detailed

statement by the responsible official on . . . the environmental

impact” of any federal actions “significantly affecting the

quality of the human environment.” 42 U.S.C. § 4332(c); Ctr.

for Biological Diversity v. Nat’l Highway Traffic Safety

Admin., 538 F.3d 1172, 1185 (9th Cir. 2008). NEPA’s pur-

pose is twofold: (1) to ensure that agencies carefully consider

information about significant environmental impacts and (2)

to guarantee relevant information is available to the public.

Robertson v. Methow Valley Citizens Council, 490 U.S. 332,

349 (1989); Ctr. for Biological Diversity, 538 F.3d at 1185.

Regulations governing how NEPA is implemented have

been promulgated by the Council of Environmental Quality,

at 40 C.F.R. §§ 1505.1-1508.28. Regulations governing how

NEPA applies to the constructions of railroads have also been

promulgated by the Board, at 49 C.F.R. § 1105.1-1105.12. An

NORTHERN PLAINS RESOURCE v. TONGUE RIVER RR 21431

environmental impact statement (EIS) is normally prepared

for new railroad construction projects by the Board’s Section

of Environmental Analysis (SEA). See 49 C.F.R. §§ 1105.2,

1105.6(a). An EIS must analyze the direct, indirect, and

cumulative impacts from a proposed action. 40 C.F.R.

§ 1508.25(c). The SEA first invites public comment on the

scope of the issues to be analyzed in the EIS. 49 C.F.R.

§ 1105.10(a)(2). After finalizing the scope of the issues to be

considered, and completing consultations and site visits, the

SEA issues a draft EIS (DEIS). Id. § 1105.10(a)(3). Public

comments may be submitted to the SEA after the DEIS has

been issued. Id. § 1105.10(a)(4). The SEA’s final EIS (FEIS)

discusses comments received, and any changes made to the

DEIS in response to those comments. Id. The FEIS, and any

comments and responses to the DEIS, are part of the record

considered by the Board in deciding whether to grant an

application. Id. § 1105.10(f).

B. Licensing of New Railroad Lines

Under 49 U.S.C. § 10901, the Board has exclusive licens-

ing authority for the construction and operation of new rail-

road lines. A proceeding to grant authority begins when an

application is filed with the Board. 49 U.S.C. § 10901(b).

Under Section 10901(c), as amended by the Interstate Com-

merce Commission Termination Act (ICCTA) of 1995, the

Board “shall issue a certificate authorizing activities for which

such authority is requested in an application filed under sub-

section (b) unless the Board finds that such activities are

inconsistent with the public convenience and necessity.” 49

U.S.C. § 10901(c).1

1

As further discussed in Section II.A, this post-ICCTA statute governs

the issuance of TRRC III. At the time the TRRC II application was filed,

Section 10901 provided that a rail carrier may construct an additional rail-

road line only if the ICC, the Board’s predecessor, found that the “present

or future public convenience and necessity require or permit the construc-

tion or acquisition (or both) and operation of the railroad line.” 49 U.S.C.

§ 10901 (1980).

21432 NORTHERN PLAINS RESOURCE v. TONGUE RIVER RR

II. Factual Background

The TRRC seeks to construct and operate a railroad line in

the Tongue River Valley in southeastern Montana. See end-

note 1, fig. 1-1. In 1983, the TRRC filed an application with

the ICC2 to construct an 89-mile railroad line between Miles

City and Ashland, Montana. See Tongue River R.R. Co.—Rail

Construction and Operation—in Custer, Powder River and

Rosebud Counties, MT, Finance Docket No. 30186, 1986 ICC

LEXIS 314, at *1 (ICC 1986). The purpose of the line was to

serve new coal mines in the Ashland area. The plan was to

connect the new line to the main line railroad at Miles City,

presently owned by Burlington Northern Santa Fe Railroad

(BNSF). Id. The ICC approved the TRRC I application on

May 1, 1986. Id. The issuance of the TRRC I application is

not before us in this litigation. We note, however, that to date

the TRRC I line has not been constructed.

In 1989, the TRRC filed an application with the ICC to

construct and operate an approximately 41-mile-long railroad

line from Ashland to Decker, Montana. This line, TRRC II,

was intended to connect with TRRC I to create a combined

railroad line of approximately 130 miles. The purpose of

TRRC II was to bring coal from Wyoming’s Powder River

Basin to the BNSF main line in Miles City, and then on to

other destinations in the Midwest.

The ICC was concerned about potential environmental

impacts that would be caused by the construction of TRRC

II’s “preferred route,” as submitted in its application. As a

result, the ICC also evaluated an alternate route called the

“Four Mile Creek Alternative,” which was approximately ten

miles longer than the TRRC’s preferred route requested in its

TRRC II application. In April 1996, the Board issued its FEIS

2

In 1995, Congress, through the ICCTA, amended the railroad statutes

and the ICC was replaced by the Board. See Pub. L. No. 104-88, 109 Stat.

803 (1995).

NORTHERN PLAINS RESOURCE v. TONGUE RIVER RR 21433

for the TRRC II project. In October 1996, the Board issued

its decision approving TRRC II, utilizing the Four Mile Creek

Alternative with numerous mitigation conditions. The Board

also required that the TRRC build the entire line from Ash-

land to Decker and the 89-mile line from Miles City to Ash-

land, approved in TRRC I, within three years of the date of

its TRRC II decision.

Petitioners sought reconsideration of TRRC II, which the

Board denied. Petitioners NPRC, UTU-GCA, and Native

Action all filed appeals to our court.3 Subsequently, the TRRC

(and BNSF through intervention) also petitioned for reconsid-

eration of TRRC II, claiming that new studies showed the

Four Mile Creek Alternative was not viable from an engineer-

ing and operational perspective, and, instead, proposed a new

alternative, the 17.4-mile “Western Alignment.” The Board

denied the TRRC petition for reconsideration in December

1997 on the grounds that its objections could have been raised

earlier, but left open the possibility that the TRRC could file

a new application for the Western Alignment. In 1998, Peti-

tioners’ appeals in this matter were ordered held in abeyance

pending the Board’s decision concerning TRRC III, discussed

infra. In 1999, the Board revoked the condition that the entire

line be built within three years of its TRRC II decision, and

did not impose any future time limit on construction of the

line.

In April 1998, the TRRC filed a new application to build

the Western Alignment rather than the Four Mile Creek Alter-

native. That proceeding is called TRRC III in this appeal.

Subsequently, the NEPA process was delayed for almost three

years due to TRRC’s financial problems. In October 2004, the

Board’s contractor issued a Draft Supplemental Environmen-

tal Impact Statement (DSEIS) for TRRC III. The Final Sup-

plemental Environmental Impact Statement (FSEIS) was

3

These three appeals—case numbers 97-70037, 97-70099, and 97-

70217—are three of the four consolidated cases before us.

21434 NORTHERN PLAINS RESOURCE v. TONGUE RIVER RR

completed in 2006 for TRRC III, and included updates to the

environmental reviews in TRRC I and TRRC II. On October

5, 2007, the Board approved the construction and operation of

the Western Alignment along with numerous mitigation mea-

sures. Petitioners timely appeal.

STANDARD OF REVIEW AND JURISDICTION

I. Review of NEPA Claims

Section 706 of the Administrative Procedure Act (APA)

governs judicial review of agency decisions made pursuant to

NEPA. 5 U.S.C. § 706; City of Sausalito v. O’Neill, 386 F.3d

1186, 1205-06 (9th Cir. 2004). An agency’s action must be

upheld unless it is “arbitrary, capricious, an abuse of discre-

tion, or otherwise not in accordance with law.” 5 U.S.C.

§ 706(2)(A).

“Review under the arbitrary and capricious standard is nar-

row, and we do not substitute our judgment for that of the

agency.” Lands Council v. McNair, 537 F.3d 981, 987 (9th

Cir. 2008) (en banc) (quoting Earth Island Inst. v. U.S. Forest

Serv., 442 F.3d 1147, 1156 (9th Cir. 2006), abrogated on

other grounds by Winter v. Natural Res. Def. Council, Inc.,

555 U.S. 7 (2008)) (internal quotations marks and brackets

omitted.

[W]e will reverse a decision as arbitrary and capri-

cious only if the agency relied on factors Congress

did not intend it to consider, entirely failed to con-

sider an important aspect of the problem, or offered

an explanation that runs counter to the evidence

before the agency or is so implausible that it could

not be ascribed to a difference in view or the product

of agency expertise.

Id. at 987 (citations and internal quotation marks omitted).

We look to the evidence the agency has provided to support

NORTHERN PLAINS RESOURCE v. TONGUE RIVER RR 21435

its conclusions, along with materials in the record, to make

this determination. Id. at 993.

A court generally must be “at its most deferential” when

reviewing scientific judgments and technical analyses within

the agency’s expertise. See Balt. Gas & Elec. Co. v. Natural

Res. Def. Council, Inc., 462 U.S. 87, 103 (1983). The court is

not to “act as a panel of scientists that instructs the [agency]

. . . , chooses among scientific studies . . . , and orders the

agency to explain every possible scientific uncertainty.”

Lands Council, 537 F.3d at 988. And “[w]hen specialists

express conflicting views, an agency must have discretion to

rely on the reasonable opinions of its own qualified experts

even if, as an original matter, a court might find contrary

views more persuasive.” Id. at 1000 (quoting Marsh v. Or.

Natural Res. Council, 490 U.S. 360, 378 (1989)).

While we afford deference to the judgment and expertise of

the agency, the agency must, at a minimum, support its con-

clusions with studies that the agency deems reliable. Lands

Council, 537 F.3d at 994. The agency must “explain the con-

clusions it has drawn from its chosen methodology, and the

reasons it considered the underlying evidence to be reliable.”

Id. The agency will have acted arbitrarily and capriciously

when “the record plainly demonstrates that [the agency] made

a clear error in judgment in concluding that a project meets

the requirements” of NEPA. See id.

NEPA imposes a procedural requirement on federal agen-

cies to “take[ ] a ‘hard look’ at the potential environmental

consequences of the proposed action.” Or. Natural Res.

Council v. Bureau of Land Mgmt., 470 F.3d 818, 820 (9th Cir.

2006) (quoting Klamath-Siskiyou Wildlands Ctr. v. Bureau of

Land Mgmt., 387 F.3d 989, 993 (9th Cir. 2004)). “Judicial

review of agency decision-making under NEPA is limited to

the question of whether the agency took a ‘hard look’ at the

proposed action as required by a strict reading of NEPA’s

procedural requirements.” Bering Strait Citizens for Responsi-

21436 NORTHERN PLAINS RESOURCE v. TONGUE RIVER RR

ble Dev. v. U.S. Army Corps of Eng’rs, 524 F.3d 938, 947

(9th Cir. 2008) (citing Churchill Cnty. v. Norton, 276 F.3d

1060, 1072 (9th Cir. 2001)). Through these procedural

requirements, NEPA seeks to make certain that agencies “will

have available, and will carefully consider, detailed informa-

tion concerning significant environmental impacts, and that

the relevant information will be made available to the larger

[public] audience.” N. Idaho Cmty. Action Network v. U.S.

Dep’t of Transp., 545 F.3d 1147, 1153 (9th Cir. 2008) (cita-

tions and internal quotation marks omitted).

II. Review of the Railroad Application

“Our review of the construction given by an agency to a

statute it administers is limited and deferential.” Wash. State

Dep’t of Game v. I.C.C., 829 F.2d 877, 879 (9th Cir. 1987).

We review the agency’s statutory construction under the ana-

lytical framework set out in Chevron U.S.A., Inc. v. Natural

Resources Defense Council, 467 U.S. 837, 842-45 (1984).

DHX, Inc. v. Surface Transp. Bd., 501 F.3d 1080, 1086 (9th

Cir. 2007). First, we inquire whether Congress has addressed

directly the issue before the court. Chevron, 467 U.S. at 842.

If Congress has clearly spoken on the issue, our inquiry ends

and the agency “must give effect to the unambiguously

expressed intent of Congress.” Id. at 842-43. We are com-

pelled to overrule an agency’s interpretation if it is “contrary

to clear congressional intent.” Id. at 843 n. 9. However, if the

statute does not address the specific issue before us, or does

so ambiguously, “the question for the court is whether the

agency’s answer is based on a permissible construction of the

statute.” Id. at 843. The agency’s construction must therefore

only be “reasonable” and need not be the same as the con-

struction the court itself would have embraced had it reviewed

the statute de novo. Id. at 843-44. “[T]he court does not sim-

ply impose its own construction on the statute . . . .” Id. at

843.

We review decisions by the Board on railroad application

approvals under the APA, 5 U.S.C. § 706(2). DHX, 501 F.3d

NORTHERN PLAINS RESOURCE v. TONGUE RIVER RR 21437

at 1086. An agency’s decision must be upheld unless it is “ar-

bitrary, capricious, an abuse of discretion, or otherwise not in

accordance with law.” 5 U.S.C. § 706(2)(A). The Board’s fac-

tual findings must be upheld if they are supported by substan-

tial evidence. In re Transcon Lines, 89 F.3d 559, 564 (9th Cir.

1996).

III. Jurisdiction.

We have jurisdiction under 28 U.S.C. §§ 2321(a), 2342(5),

and 2344.

DISCUSSION

I. Environmental Claims

A. Cumulative Impacts

“NEPA requires that where several actions have a cumula-

tive . . . environmental effect, this consequence must be con-

sidered in an EIS.” Te-Moak Tribe of W. Shoshone of Nev. v.

U.S. Dep’t of Interior, 608 F.3d 592, 602 (9th Cir. 2010)

(citation and internal quotation marks omitted). The pertinent

regulation defines cumulative impact as follows:

Cumulative impact is the impact on the environment

which results from the incremental impact of the

action when added to other past, present, and reason-

ably foreseeable future actions regardless of what

agency (Federal or non-Federal) or person under-

takes such other actions. Cumulative impacts can

result from individually minor but collectively sig-

nificant actions taking place over a period of time.

40 C.F.R. § 1508.7.

A cumulative impact analysis “must be more than perfunc-

tory; it must provide ‘a useful analysis of the cumulative

21438 NORTHERN PLAINS RESOURCE v. TONGUE RIVER RR

impacts of past, present, and future projects.’ ” Kern v. U.S.

Bureau of Land Mgmt., 284 F.3d 1062, 1075 (9th Cir. 2002)

(quoting Muckleshoot Indian Tribe v. U.S. Forest Serv., 177

F.3d 800, 810 (9th Cir. 1999)). To be useful to decision mak-

ers and the public, the cumulative impact analysis must

include “some quantified or detailed information; . . . general

statements about possible effects and some risk do not consti-

tute a hard look absent a justification regarding why more

definitive information could not be provided.” Ocean Advo-

cates v. U.S. Army Corps of Eng’rs, 402 F.3d 846, 868 (9th

Cir. 2005) (quoting Neighbors of Cuddy Mountain v. U.S.

Forest Serv., 137 F.3d 1372, 1379-80 (9th Cir. 1998)). Fed-

eral agencies may “aggregate [ ] cumulative effects analysis”

for NEPA purposes. League of Wilderness Defenders-Blue

Mountains Biodiversity Project v. U.S. Forest Serv., 549 F.3d

1211, 1217 (9th Cir. 2008) (“[A]gencies are not required to

list or analyze the effects of individual past actions unless

such information is necessary to describe the cumulative

effects of all past actions combined.” (quoting Council on

Environmental Quality Memorandum, “Guidance on Consid-

eration of Past Actions in Cumulative Effects Analysis” (June

24, 2005))).

Petitioners contend that the Board’s cumulative impact

analysis in TRRC III ignores the combined impacts of future

coal bed methane4 (CBM) well development and coal mining

projects that will also come into being in Southeastern Mon-

tana. Petitioners further contend that the Board failed to

account for the combined effects of the referenced projects

and the likely effects on air quality, wildlife, and water quality

of the proposed construction and operation of the TRRC rail-

road. We agree with Petitioners’ contentions concerning the

4

CBM is a natural gas. The gas is trapped in coal seams and held in

place by water pressure in coal seam aquifers. To release the gas, develop-

ers build wells to drill underground into the aquifers and pump out the

water contained in the aquifers. After the aquifer is depleted of all its

water, the methane gas is released and can be piped to the surface.

NORTHERN PLAINS RESOURCE v. TONGUE RIVER RR 21439

cumulative foreseeable effects of CBM wells and the Otter

Creek Coal Mine.

1. Coal Bed Methane

In 2003, the Bureau of Land Management (BLM) and the

State of Montana finished a programmatic EIS (Methane EIS)

that evaluated the future impacts of CBM development in the

Powder River Basin. Bureau of Land Management, Final

Statewide Oil and Gas Envtl. Impact Statement (Jan. 2003)

(Methane EIS), available at http://www.blm.gov/mt/st/en/fo/

miles_city_field_office/og_eis.html. The Methane EIS deter-

mined that a reasonably foreseeable development scenario in

Montana over the next 20 years would involve drilling

between 10,000 and 26,000 new CBM wells and 250 and 975

conventional oil and gas wells. Id. at 4-5. The Tongue River

Valley is an area of concentration for such wells. Id. at Map

4-1. The Board incorporated the Methane EIS in its prepara-

tion of the FSEIS in TRRC III.

The Board also evaluated the cumulative impact of nine

approved sites for CBM development near the TRRC sites.

The BLM and the State of Montana had previously issued

Environmental Assessments (EAs) for each of the projects

and found that “no cumulative impacts are expected to occur”

because adverse impacts were likely to occur only if there was

simultaneous construction of the CBM wells and the TRRC

railroad, and that project construction would not overlap.

Notably, the Board found that “[t]he simultaneous construc-

tion of CBM gas wells could result in cumulative effects on

land use.” Ultimately, however, the Board concluded that

because “impacts of current CBM proposals would not occur

within the same temporal parameters as construction of the

Tongue River Railroad, no cumulative impacts would result.”

As a result, the Board determined that there would be no

cumulative impacts from the nine approved CBM projects.

21440 NORTHERN PLAINS RESOURCE v. TONGUE RIVER RR

a. Five-Year Time Frame

Importantly, in order to reach its no cumulative impacts

conclusion, the Board limited its analysis to projects that

would be constructed within a five year period. Petitioners

challenge this limitation. The Board defends its decision to

use a five-year period to analyze cumulative effects because

that period accounts for the time period necessary to construct

the railroad (estimated to be three years) and to operate the

railroad for two years thereafter. Further, the Board argues

that it often uses a five-year period when examining environ-

mental effects. Moreover, the Board maintains that any analy-

sis focused on a time period after five years is wholly

speculative because of likely changes in economic growth,

industry growth, and shifts in energy transportation policies.

Viewed in light of the facts presented by this case, we dis-

agree with the Board.

Each project is different, and the agency is required to

rationally explain its decision in the context of project-

specific effects. See Council on Envtl. Quality, Considering

Cumulative Effects Under the National Environmental Policy

Act, Office of NEPA Policy and Compliance, 16 (Jan. 1997),

available at http://energy.gov/sites/prod/files/nepapub/nepa_

documents/RedDont/G-CEQ-ConsidCumulEffects.pdf (“The

time frame of the project-specific analysis should also be

evaluated to determine its applicability to the cumulative

effects analysis.”) (emphasis added); see also Selkirk Conser-

vation Alliance v. Forsgren, 336 F.3d 944, 962 (9th Cir.

2003) (recognizing that the scope of the EIS is a “delicate

choice” and should be entrusted to the agency but the agency

must have “considered the relevant factors and articulated a

rational connection between the facts found and the choice

made”) (citation omitted).

[1] The Board partially justifies its use of a five-year limi-

tation period because it has used a similar time framework in

the past. However, in this case, the BLM and State of Mon-

NORTHERN PLAINS RESOURCE v. TONGUE RIVER RR 21441

tana’s study projects a significant growth of CBM wells over

the next 20 years. Methane EIS at 4-5. Thus, they anticipated

that building CBM wells will continue well after the termina-

tion of a five-year time framework. The Board does not

explain why its default five-year time frame should necessar-

ily apply under these circumstances.

The Board also reasoned that five years was appropriate

because it would allow for approximately three years of con-

struction time, followed by two years of operation time. The

Board’s assumption that the railroad would be constructed

and operational within five years of approval in 2007 is

clearly flawed in light of the history of this railroad project,

which has been under way for almost three decades, starting

with TRRC I’s approval in 1986. To date, construction has

not begun on any section of the railroad. Accordingly, there

is little reason to presume that the railroad would be con-

structed in five years, which—importantly for the Board’s

analysis—means that we can place little confidence in the

Board’s assumption that the project will not overlap with rea-

sonably foreseeable CBM projects. Moreover, time restric-

tions for the construction of TRRC I and TRRC II were

withdrawn, and TRRC III contains no construction time

requirements. If we credit the 20-year BLM analysis and

actual railroad construction is pushed out beyond five years,

there may be overlapping CBM well construction. However,

the Board’s environmental analysis—which admits that

cumulative impacts may result from simultaneous

development—does not address this issue or account for this

possibility.

In its decision, the Board worked around the Methane EIS

by concluding that it would be too speculative to determine

the effects from wells that are not already approved. In other

words, because the Board does not know specific construction

time lines or locations, it will await the development of site-

specific EISs before including the known projects into its

analysis. We acknowledge that the Board is not required to

21442 NORTHERN PLAINS RESOURCE v. TONGUE RIVER RR

engage in speculative analysis. As we have explained, “[i]t is

not appropriate to defer consideration of cumulative impacts

to a future date when meaningful consideration can be given

now, nor do we require the government to do the impractical,

if not enough information is available to permit meaningful

consideration.” Envtl. Prot. Info. Ctr. v. U.S. Forest Serv., 451

F.3d 1005, 1014 (9th Cir. 2006) (internal quotation marks and

citation omitted).

However, projects need not be finalized before they are rea-

sonably foreseeable. “NEPA requires that an EIS engage in

reasonable forecasting. Because speculation is . . . implicit in

NEPA, [ ] we must reject any attempt by agencies to shirk

their responsibilities under NEPA by labeling any and all dis-

cussion of future environmental effects as crystal ball inqui-

ry.” Selkirk, 336 F.3d at 962 (internal quotation marks and

citation omitted). As the Environmental Protection Agency

(EPA) also has noted, “reasonably foreseeable future actions

need to be considered even if they are not specific proposals.”

EPA, Consideration of Cumulative Impact Analysis in EPA

Review of NEPA Documents, Office of Federal Activities,

12-13 (May 1999), available at http://www.epa.gov/

compliance/resources/policies/nepa/cumulative.pdf.

The TRRC is not operating in a vacuum. The route for the

railroad is known, including the terrain and counties in which

it would operate. Likewise, the Methane EIS has described in

some detail the likely scope of CBM development in the

future. Although the Methane EIS is a programmatic docu-

ment, it is specific to the number of wells, field compressors,

roads, and pipelines for each of the three counties that the

TRRC railroad would cross. Methane EIS, Minerals Appendix

at 17-22. For example, in Big Horn County (where Decker,

Montana, the end of the railroad in TRRC III, is located), an

estimated 2,500 to 7,000 CBM wells are reasonably foresee-

able, and most of the wells would be located in the southeast-

ern part of the county, where Decker is located. Id. at 17. The

EIS also projected that 100 to 250 field compressors and

NORTHERN PLAINS RESOURCE v. TONGUE RIVER RR 21443

1,450 to 4,200 miles of gathering lines would be built in this

area. Id. at 17. Similarly, in Rosebud County (where Ashland,

Montana, the other end of the railroad in TRRC III is located),

an estimated 1,000 to 2,800 CBM wells will be drilled, along

with 40 to 100 field compressors and 600 to 1,650 miles of

gathering lines. Id. at 19. The greatest concentration of CBM

development is anticipated to occur in the Rosebud, Big Horn,

and neighboring Powder River Counties, which is proximate

to where the TRRC railroad will run. Id. at Map 4-1.

[2] In short, the BLM and the State of Montana have

described a time frame and a reasonably foreseeable develop-

ment plan for CBM development in areas that overlap with

the TRRC railroad plans. Under the circumstances, the Board

has not sufficiently explained why it cannot or should not

incorporate this available data concerning likely future devel-

opment into its environmental impact analysis. We do not ask

the Board to peer into a crystal ball. See Selkirk, 336 F.3d at

962. The Methane EIS report contained actual numbers, bro-

ken down by counties, about development over the next 20

years. We conclude, therefore, that in this case, an adequate

cumulative impact analysis necessarily requires that such

information be included. Accordingly, we hold that the Board

arbitrarily and capriciously relied on the five-year time frame,

which resulted in a faulty analysis of the possible cumulative

impacts from reasonably foreseeable CBM projects that could

overlap construction of the railroad line.

b. Nine Approved CBM Sites

Petitioners also argue that the Board’s EIS did not properly

consider the effects of the nine already-approved CBM wells.

These projects were either under consideration or had already

been approved by the time the TRRC III environmental study

and Plans of Development (PODs) for the projects were sub-

mitted to the Board for consideration. The Board concluded

that any potentially significant cumulative impacts would be

limited to the construction period, and that there would be no

21444 NORTHERN PLAINS RESOURCE v. TONGUE RIVER RR

overlap between the well construction and the railroad con-

struction activities. Petitioners contend that the Board failed

to consider the significant long-term cumulative operational

impact of the railroad and these wells.

[3] We conclude that this finding by the Board was not

arbitrary and capricious. First, Petitioners do not present any

evidence that the construction of the approved projects will

overlap with TRRC construction. The Board concluded that

the construction for the approved CBMs typically occur

within two to sixth months after their approval and in some

cases, construction had already begun at the time of the analy-

sis. Thus, there would be no overlap with railroad construc-

tion, which would not occur until much later. We cannot

overturn this finding without evidence to the contrary. Sec-

ond, the Board did address both construction and operational

impacts in many areas, including land use, biological

resources, soil and geology, hydrology and water quality, cul-

tural and paleontological resources, transportation and safety,

air quality, noise and vibration, socioeconomics and environ-

mental justice, recreation, aesthetics, and energy. Based on

these considerations, the Board reasonably concluded that the

TRRC projects would not result in cumulative effects with

respect to the nine approved CBM sites. Petitioners argue that

this conclusion is far-fetched and belied by the record, but

again fail to present evidence that contradicts the findings of

the Board.

c. Air Quality and Wildlife

[4] Beyond their attack on temporal limitation, see supra,

Petitioners argue that the Board failed to consider the cumula-

tive effect of the CBM wells and the railroad on air quality

and wildlife. We disagree.

The Board analyzed air quality assuming an operational

railroad and concluded that such effects would be minor, par-

ticularly when mitigation measures are applied. The Board

NORTHERN PLAINS RESOURCE v. TONGUE RIVER RR 21445

considered two types of emissions that would affect air

quality—fugitive dust emissions and combustion emissions.

Fugitive dust emissions include wind-blown dust which could

result from exposed soils from devegetation along the railroad

right of way. The SEA estimated that 10% of the right of way

would have exposed soils and estimated the emissions based

on EPA emission factors. Fugitive dust emissions also include

coal dust from traveling coal cars. Combustion emissions

from the operation of the railroad locomotives were also con-

sidered using emission standards released by the EPA. The

Board is afforded deference in choosing its scientific method

for modeling data, and it chose to limit the scope to the Air

Quality Control Region in Eastern Montana. See Lands Coun-

cil, 537 F.3d at 988 (explaining that the court is not to impose

its own scientific judgment on the agency); id. at 1000

(“When specialists express conflicting views, an agency must

have discretion to rely on the reasonable opinions of its own

qualified experts even if, as an original matter, a court might

find contrary views more persuasive.”) (citation and quotation

marks omitted). Thus, Petitioners do not demonstrate how the

Board here failed to take a “hard look,” even if they did not

include the air quality model preferred by Petitioners or air

quality data from Wyoming.

[5] Additionally, the Board analyzed effects of construc-

tion and operation of the railroad and the CBM wells on wild-

life and reasonably concluded that most of the effects were

likely to occur during construction, rather than during opera-

tion of the railroad. For example, the Board found that most

of the effects, including removal of vegetation and habitat,

increased sedimentation, and loss of flood plain, are localized

and temporary in nature. The EIS addresses these impacts and

creates mitigation measures. Additionally, Petitioners do not

cite any specific deficiencies in this analysis, but instead point

to generalized wildlife cumulative impacts addressed in the

Methane EIS for the entire state. Therefore, there is no basis

21446 NORTHERN PLAINS RESOURCE v. TONGUE RIVER RR

for finding this particular Board decision irrational, and it is

entitled to deference.5

2. Other Coal Mines

Petitioners further argue that the Board failed to address

any cumulative impacts of the railroad with existing coal

mines—in particular, the Ashland and Otter Creek Mines.

a. Ashland Coal Mines

[6] Petitioners contend that the Board also erred by relying

on the analysis of the Ashland Mines from TRRC I when

doing its analysis for TRRC II and III. Petitioners are correct

that the TRRC I data was incorporated. Wholesale adoption

of TRRC I’s data into TRRC II and III could conceivably

raise some questions because TRRC I pre-dated the other

projects by many years, and the data could have changed in

the meantime. However, the Board evaluated whether there

would be any increases in coal production in the Ashland area

mines for TRRC II and TRRC III. The Board concluded that

no material changes are predicted, beyond those already ana-

lyzed in TRRC I. Accordingly, because coal production has

remained stable, as noted in the TRRC I study, and was

reevaluated for the two subsequent projects, the Board did not

unreasonably continue to rely on the Ashland mines coal pro-

duction conclusions in TRRC I in doing its analysis for TRRC

II and TRRC III.

5

This conclusion, however, is subject to the caveat that the Board lacks

the requisite updated and baseline data as to wildlife. See infra Section

I.B-C. Therefore, to the extent that the operations analysis overlaps with

the lack of requisite data, the Board’s no operation impact finding is arbi-

trary and capricious. Without the requisite data, the Board cannot come to

the conclusion that the operations will not affect wildlife.

NORTHERN PLAINS RESOURCE v. TONGUE RIVER RR 21447

b. Otter Creek Coal Mines

However, we do not reach the same conclusion as to the

Otter Creek mines. Petitioners argue that the Board failed to

address any impacts from the Otter Creek mines, notwith-

standing the fact that the financial justification for the entire

line included hauling Otter Creek coal. The Board first

responds that Petitioners have waived this argument because

Petitioner Mark Fix agreed in comments sent to the Board that

the Otter Creek development was unforeseeable. Second, the

Board claims that mining development in Otter Creek was not

reasonably foreseeable when the Supplemental EIS in TRRC

III was completed. We disagree with both the Board’s conten-

tions.

Parties must alert an agency to their position and conten-

tions. Vermont Yankee Nuclear Power Corp. v. Natural Res.

Def. Council, Inc., 435 U.S. 519, 553 (1978). A party waives

arguments that are not raised during the administrative pro-

cess. See Dep’t of Transp. v. Public Citizen, 541 U.S. 752,

764-65 (2004). Here, however, Petitioner NPRC specifically

commented that development of the Otter Creek coal mines

must be addressed. Specifically, on December 6, 2004, NPRC

stated that the DSEIS was deficient because:

[i]n its preliminary determination that the TRR is in

the public need, the [Board] relies, at least in part, on

the development of coal tracts along Otter Creek and

the development of coal-fired power plants near

Ashland, Montana. The [Board] contends that the

TRR is needed to provide a means of hauling coal

from yet-to-be leased much less permitted coal

tracts. Yet in the SDEIS, the [Board] concludes that

the proposed coal mines and power plants are too

speculative to be considered reasonably foreseeable

future actions. Consequently, the [Board] failed to

evaluate the potential cumulative impacts of this

development on the human environment. This

21448 NORTHERN PLAINS RESOURCE v. TONGUE RIVER RR

[Board] decision is disingenuous, implausible, and a

textbook example of arbitrary and capricious

decision-making.

Earlier, on November 16, 2004, Petitioner Mark Fix told the

Board that he did not see Otter Creek as foreseeable. How-

ever, in this case, the subsequent comment by Petitioner

NPRC brought the issue to the Board’s attention. The Board

had notice of the concern and was afforded the opportunity to

bring its expertise to bear. Thus, the argument is not waived.

[7] Moreover, the Board’s own explanation that the Otter

Creek mines were not foreseeable is arbitrary and capricious.

The Board knew that in 2002 the federal government trans-

ferred the land to the State of Montana for coal development,

and the DSEIS included a map with the sites of future coal

mines. Even more significantly, the Board relied on the coal

mine development in Otter Creek to justify the financial

soundness of the proposal, since it included the tonnage fore-

casts in its 2007 final decision. We therefore hold that,

because the Otter Creek mine was reasonably foreseeable at

the time of TRRC III, the FSEIS violated NEPA by failing to

address the mine’s impacts.

3. Water Quality

Petitioners’ last cumulative effect argument is that the

FSEIS does not analyze the combined effects of the railroad,

CBM, and coal mines as to water quality. The Board responds

that, because there is really no impact from CBM develop-

ment (because construction will not occur simultaneously)

and there are virtually no impacts from coal mine develop-

ment (as mitigated), there are no effects to add to the virtually

non-existent impact on water quality from the railroad.

We agree with the Board that where a proposed project has

“virtually no effect” on water quality, the agency is not

required to examine cumulative impacts from other projects

NORTHERN PLAINS RESOURCE v. TONGUE RIVER RR 21449

because it would not provide an informed analysis. See Nw.

Envtl. Advocates v. Nat’l Marine Fisheries Serv., 460 F.3d

1125, 1140 (9th Cir. 2006). However, we disagree with the

Board’s analysis in this instance because it is largely based on

the reasoning that the railroad construction will not occur

simultaneously with the construction of the CBM wells. This

argument does not address the concern expressed above, see

supra Section I.A.1.a, that there may well be simultaneous

construction. Construction of the railroad is estimated to

increase sentiment loading in the Tongue River. Thus, were

simultaneous construction to occur, the Board must address

this water quality issue. The Board also fails to address the

cumulative effects of railroad construction combined with the

water quality degradation from operational CBM wells, which

are estimated to be substantial.

The Board’s position is more persuasive as it relates to

operation of the railroad, since the railroad is not expected to

discharge water during operation. Mitigation measures such

as revegetation are estimated to reduce the sediment delivery

during operations to “near zero.”

[8] Accordingly, we hold that the Board’s FSEIS in TRRC

III is deficient as to its water quality analysis related to con-

struction, but sufficient as to operations. Furthermore, because

the Board failed to account for the Otter Creek coal mines, the

Board should perform cumulative water quality analysis, tak-

ing this reasonably foreseeable project into account on

remand.

B. Adequacy of the Baseline Data

[9] Petitioners also contend that the TRRC II and III EIS

documents do not provide adequate baseline data to assess the

impacts of the railroad.6 Petitioners take issue with the

6

While Petitioners’ brief argues that TRRC II’s baseline data is insuffi-

cient, Petitioners specific arguments do not refer to the TRRC II EIS.

21450 NORTHERN PLAINS RESOURCE v. TONGUE RIVER RR

Board’s analysis concerning the pallid sturgeon, sage grouse,

fish and aquatic resources, other wildlife, and sensitive plants.

Because the TRRC III FSEIS does not provide baseline data

for many of the species, and instead plans to conduct surveys

and studies as part of its post-approval mitigation measures,

we hold that the Board did not take a sufficiently “hard look”

to fulfill its NEPA-imposed obligations at the impacts as to

these species prior to issuing its decision.

NEPA requires that the agency provide the data on which

it bases its environmental analysis. See Lands Council, 537

F.3d at 994 (holding that an agency must support its conclu-

sions with studies that the agency deems reliable). Such anal-

yses must occur before the proposed action is approved, not

afterward. See LaFlamme v. F.E.R.C., 852 F.2d 389, 400 (9th

Cir. 1988) (“[T]he very purpose of NEPA’s requirement that

an EIS be prepared for all actions that may significantly affect

the environment is to obviate the need for speculation by

insuring that available data is gathered and analyzed prior to

the implementation of the proposed action.”) (internal citation

and quotation marks omitted). “[O]nce a project begins, the

‘pre-project environment’ becomes a thing of the past” and

evaluation of the project’s effect becomes “simply impossi-

ble.” Id.

Petitioners cite the pallid sturgeon as an example of a wild-

life resource with insufficient baseline data. The pallid stur-

geon was listed in 1990 as being endangered throughout its

range by the U.S. Fish and Wildlife Service (FWS). During

the EIS process for TRRC III, the FWS submitted comments

to the Board indicating that the Board failed to determine

Instead, all specific arguments regarding the various species missing base-

line data refer us to the TRRC III EIS process. Accordingly, our discus-

sion and conclusion is largely limited to the TRRC III EIS process.

However, to the extent that the data presented in TRRC III is a wholesale

adoption of the data from the TRRC II EIS, the discussion and conclusion

applies to that portion of the TRRC II EIS as well.

NORTHERN PLAINS RESOURCE v. TONGUE RIVER RR 21451

whether vibrations and noise from the railroad would be

harmful to the fish at a nearby hatchery. The TRRC had hired

an engineering firm, Womack & Associates, Inc. (Womack)

in 1998 to study the effects of the railroad at the Miles City

Fish Hatchery, with supplemental reports being prepared in

2004 and 2006. The FWS, however, disagreed with the analy-

sis by Womack and expressed interest in doing its own studies

as needed to assure that there would be no impacts from the

construction and operation of the TRRC railroad.

As the TRRC III decision itself recognized:

As set out in the SEIS, the parties also have had a

number of discussions on the potential vibration

issues. [FWP] has asked the applicant to conduct

additional baseline studies to more fully understand

the potential long-term effects that vibration may

have on the fish. TRRC is concerned that long-term

studies of the sort [FWP] has sought could signifi-

cantly delay its construction schedule. However, in

April 2006, the railroad agreed to implement a work

plan (included as Appendix G to the Final SEIS) for

additional vibration monitoring at the hatchery.

The work plan, implemented as a mitigation measure, was

developed by Womack and the noise and vibration program

would include measurements and analysis to “[m]easure base-

line conditions at the [Miles City Fish Hatchery],” to

“[p]redict and assess future sound pressure levels from con-

struction and operation of the TRR near the [Miles City Fish

Hatchery] and compare to baseline conditions,” and to

“[m]easure actual noise and vibration during the construction

and operation of the TRR to compare actual levels to pre-

dicted levels.”

Similarly, as to sage grouse, the only data the Board col-

lected was the number of acres of potential sage grouse habi-

tat within the 200-foot railroad right of way. The BLM

21452 NORTHERN PLAINS RESOURCE v. TONGUE RIVER RR

submitted comments to the Board indicating that there was

insufficient information as to the sage grouse:

With the increasing importance of sage grouse, more

discussion on sage grouse is needed, including dis-

cussion on wintering areas and impacts of West Nile

virus on sage grouse. Need to check statewide data

base for more information on sage grouse strutting

grounds which have been found in the past few

years. . . . Sage grouse inventories need to be con-

ducted at least two miles from any proposed distur-

bance.

In response, the Board agreed to conduct sage grouse surveys

at least two miles from the proposed disturbance as a mitiga-

tion measure and that “pre-construction surveys would be

conducted to determine the extent of sage grouse habitats and

activity in the project area.” Further, the Board acknowledged

that “[l]ocations of leks [communal grounds used by the

grouse for courtship, breeding, and wintering] from Birney to

the terminus of the proposed Western Alignment at the Spring

Creek spur are not well known, so potential impacts on grouse

in this portion of the line are difficult to determine.” However,

in response to the BLM’s comments, the Board did not collect

this data before approval of the railroad application and

instead instituted mitigation measure 26 to conduct surveys on

sage grouse at a later date.

Finally, as to fish and aquatic resources, other wildlife, and

sensitive plants, Petitioners also contend that baseline data is

only being gathered as part of mitigation measures. For fish,

mitigation measure 34 purports to “conduct a three-part study

plan to identify aquatic resources” by conducting a fish and

fish habitat survey to “estimate population and to monitor

potential mortality or emigration due to construction

impacts.” For other wildlife, other mitigation measures call

for data reconnaissance to “locate habitat areas and nesting

sites” for several species of animals for the entire rail line. For

NORTHERN PLAINS RESOURCE v. TONGUE RIVER RR 21453

plants, the SEA was unable to conduct ground-level surveys

to identify which state and federally protected plant species

existed along the railroad’s right of way. Thus, the Board pre-

pared a mitigation measure to conduct a field search to “iden-

tify plant species of concern (Federal and state) and to

implement appropriate mitigation measures during construc-

tion activities if such species are found.”

[10] We recognize the Board’s extensive mitigation

efforts. However, such mitigation measures, while necessary,

are not alone sufficient to meet the Board’s NEPA obligations

to determine the projected extent of the environmental harm

to enumerated resources before a project is approved. Mitiga-

tion measures may help alleviate impact after construction,

but do not help to evaluate and understand the impact before

construction. In a way, reliance on mitigation measures pre-

supposes approval. It assumes that—regardless of what

effects construction may have on resources—there are mitiga-

tion measures that might counteract the effect without first

understanding the extent of the problem.

This is inconsistent with what NEPA requires. NEPA aims

(1) to ensure that agencies carefully consider information

about significant environmental impacts and (2) to guarantee

relevant information is available to the public. Robertson, 490

U.S. at 349; N. Idaho Cmty. Action Network, 545 F.3d at

1153. The use of mitigation measures as a proxy for baseline

data does not further either purpose. First, without this data,

an agency cannot carefully consider information about signifi-

cant environment impacts. Thus, the agency “fail[s] to con-

sider an important aspect of the problem,” resulting in an

arbitrary and capricious decision. See Lands Council, 537

F.3d at 987 (citation omitted). Second, even if the mitigation

measures may guarantee that the data will be collected some

time in the future, the data is not available during the EIS pro-

cess and is not available to the public for comment. Signifi-

cantly, in such a situation, the EIS process cannot serve its

larger informational role, and the public is deprived of their

21454 NORTHERN PLAINS RESOURCE v. TONGUE RIVER RR

opportunity to play a role in the decision-making process. See

Robertson, 490 U.S. at 349. While the Board must prepare a

detailed statement on “any adverse environmental effects

which cannot be avoided should the proposal be implement-

ed,” 42 U.S.C. § 4332(C)(ii), this requirement does not con-

travene the Board’s other obligation to ensure that data exists

before approval so that the Board can understand the adverse

environment effects ab initio.

The Board responds that it was unable to conduct some of

the surveys due to the rough terrain in the area, and that it was

unable to access some portions of the land in order to conduct

the surveys because the access points were on private prop-

erty. We are unpersuaded that these excuses can relieve the

Board of its requirement under NEPA to gather information

before it can make an informed decision. The Board presented

no evidence indicating that it even attempted to contact any

private land owners about gaining access to their land to con-

duct the surveys. As to rugged terrain, the Board does not

explain how waiting until post-approval mitigation to conduct

the survey alleviates this issue.

[11] Had the Board attempted to obtain the baseline data

for these plants and wildlife through some scientific study or

methodology that its experts deemed reliable, we would eval-

uate the situation from a different perspective. After all, we do

not “act as a panel of scientists that instructs the [agency]

. . . , chooses among scientific studies . . . , and orders the

agency to explain every possible scientific uncertainty.”

Lands Council, 537 F.3d at 988. The problem here, however,

is that the Board did not collect this data in the first place, and

was therefore unable to consider it during the EIS process.

We hold that the Board violated NEPA by not taking a suffi-

ciently “hard look” when it deferred gathering baseline data

discussed in this Section I B.

C. Stale Data

Petitioners also contend that the Board relied on stale data

in making its TRRC III environmental impacts analysis.

NORTHERN PLAINS RESOURCE v. TONGUE RIVER RR 21455

Board admits that it was unable to conduct on-the-ground sur-

veys as part of the EIS process. The Board cites the rough ter-

rain, rural location, and limited access due to private property

as the reasons that it was unable to conduct on-the-ground

surveys. The Board instead relied on aerial surveys and pho-

tography, along with data from TRRC I and TRRC II. We

agree with Petitioners that the Board’s reliance on this data

does not constitute a “hard look” under NEPA.

[12] Many of the aerial surveys relied upon were con-

ducted many years ago—in 1985 for TRRC 1, in 1992 for

TRRC II, and in 1997 for TRRC III. At the time of the 2007

decision in TRRC III, even the most recent aerial survey was

ten years old. Reliance on data that is too stale to carry the

weight assigned to it may be arbitrary and capricious. See

Lands Council v. Powell, 395 F.3d 1019, 1031 (9th Cir. 2005)

(finding that six-year-old data, without updated habitat sur-

veys, was too stale). For the reasons infra, we find the

Board’s reliance on stale aerial surveys was arbitrary and

capricious under the circumstances in this case.

The Board contends that it is entitled to rely on this out-

dated data because “the physical environment of the area at

issue here is substantially the same.” However, the Board

does not cite any scientific studies or testimony in the record

that supports this conclusion. See Lands Council, 537 F.3d at

994. Moreover, even assuming this was true, we fail to under-

stand how this necessarily and logically leads to the conclu-

sion that the information regarding habitat and populations of

numerous species remains the same as well.

The Board also did not adequately update the aerial surveys

with more recent data. The Board’s 2004 helicopter surveys

were limited to black-tailed prairie dog colonies and bald

eagle wintering and nesting sites. The Board also contends

that it conducted site visits, including one in 2003. However,

these site visits were conducted from the local public roads.

The Board has acknowledged that much of the TRRC railroad

21456 NORTHERN PLAINS RESOURCE v. TONGUE RIVER RR

line would traverse private property that is not near public

roads. The Board fails to explain how its surveys from the

public roads allowed it to adequately update the resource data

when it admits that much of the prospective railroad land is

not even accessible from public roads.

[13] Given the dearth of other data in this case, the Board

fails to show that its reliance on several-years-old aerial pho-

tographs can support its conclusions. The Board’s decision,

citing Mid States Coalition for Progress v. Surface Transpor-

tation Board, 345 F.3d 520 (8th Cir. 2003), contends that

environmental surveys often use aerial photography and aerial

surveys. In Mid States Coalition, the Board used aerial photo-

graphs to identify noise-sensitive receptors—which was

defined as any residence. 345 F.3d at 538. The objection

raised was that a single building that could be identified via

the aerial photograph could in fact contain multiple resi-

dences. Id. The Eighth Circuit held that the agency is not

required to maximize precision at all costs and the method

used was a reasonable way to approximate the number of

affected receptors. Id. The use of the aerial photographs in

Mid States Coalition stands in stark contrast with its use by

the Board in TRRC III. Here, the Board purported to use

aerial photographs and surveys to identify habitats and popu-

lations of fish, plants, and other wildlife. The Board fails to

cite to any explanation in the record of what reliable method-

ology allowed it to determine the population of fish in rivers

or identify sensitive plant species from these aerial surveys.

We do not conclude that an agency cannot rely on aerial sur-

veys in certain situations for studying habitats and popula-

tions. However, in this case, we find it inherently illogical to

credit the evidence the Board has submitted to support its con-

clusion that the aerial surveys conducted were sufficient to

establish the habitat and population for the numerous plants

and wildlife potentially at risk.

[14] In summary, the Board relied on stale data during the

environment impact analysis process of TRRC III and failed

NORTHERN PLAINS RESOURCE v. TONGUE RIVER RR 21457

to properly update the data with additional studies and sur-

veys. We hold that such faulty reliance does not constitute the

“hard look” required under NEPA.

D. Geographic Scope

Petitioners also argue that the Board improperly limited the

geographic scope of the Board’s direct impacts analysis and

focused only on the railroad’s right of way (ROW). “The task

of selecting the geographic boundaries of an EIS requires a

complicated analysis of several factors, such as the scope of

the project considered, the features of the land, and the types

of species in the area.” Selkirk, 336 F.3d at 958. The determi-

nation of the geographic boundary where environmental

impacts may occur is often “a task assigned to the special

competency of the appropriate agencies.” Kleppe v. Sierra

Club, 427 U.S. 390, 414 (1976).

[15] The Board did not arbitrarily limit the geographic

scope to the railroad’s ROW. The impact analysis was limited

to the area surrounding the ROW for the study of land use,

noise and vibration, and cultural resources because these dis-

turbances are limited and not expected to travel far. For each

resource, the Board determined the scope of its impact

analysis—for example, 300 meters on each side of the center

of the ROW for soil surveys and 1,500 feet on each side of

the center of the ROW for cultural resources. For other

resources such as fish and wildlife, however, the Board did

not limit the scope to the area surrounding the ROW. Some

studies the Board reviewed covered a 6,000-square-mile area

for mammals and birds and another covered a 7,500-square-

mile area for birds. Further, for water and air quality analysis,

the Board’s review was not limited to the ROW and covered

much more of the neighboring area. We hold that the Board

did not err in limiting the scope of the studies.

E. Single EIS

Petitioners also claim that the Board erred by not creating

a single comprehensive EIS to cover the various TRRC appli-

21458 NORTHERN PLAINS RESOURCE v. TONGUE RIVER RR

cations. Petitioners contend that a single EIS is required

because the TRRC applications were closely related, and

under the regulations, should be discussed under a single

impact statement. See 40 C.F.R. § 1508.25(a)(1) (“Connected

actions . . . should be discussed in the same impact state-

ment.”).

Actions are “connected” if they “[c]annot or will not pro-

ceed unless other actions are taken previously or simulta-

neously.” 40 C.F.R. § 1508.25(a)(1)(ii). We have explained

that “[p]roposals or parts of proposals which are related to

each other closely enough to be, in effect, a single course of

action shall be evaluated in a single impact statement.”

Klamath-Siskiyou Wildlands Ctr., 387 F.3d at 998 (citing 40

C.F.R. § 1502.4(a)). “The purpose of this requirement is to

prevent an agency from dividing a project into multiple

actions, each of which individually has an insignificant envi-

ronmental impact, but which collectively have a substantial

impact.” Great Basin Mine Watch v. Hankins, 456 F.3d 955,

969 (9th Cir. 2006) (citation and quotation marks omitted). In

determining whether there is a connection between projects,

this circuit employs an “independent utility” test. Wetlands

Action Network v. U.S. Army Corps of Eng’rs, 222 F.3d 1105,

1118 (9th Cir. 2000), abrogated on other grounds by Wilder-

ness Soc. v. U.S. Forest Serv., 630 F.3d 1173 (9th Cir. 2011).

The test asks whether “each of two projects would have taken

place with or without the other.” Id. (citation omitted). If the

answer is yes, then the projects have “independent utility” and

do not require the same EIS. Id. “To prevail, plaintiffs must

show that [the agency] was arbitrary and capricious in failing

to prepare one comprehensive environmental statement.”

Native Ecosystems Council v. Dombeck, 304 F.3d 886, 894

(9th Cir. 2002) (citing Kleppe, 427 U.S. at 412).

Petitioners argue that all the projects lack independent util-

ity. In particular, because TRRC II and TRRC III connect to

TRRC I on one end, neither railroad would lead anywhere

without TRRC I. Conversely, the Board argues that the proj-

NORTHERN PLAINS RESOURCE v. TONGUE RIVER RR 21459

ects should not be considered as one single project, because

TRRC II and TRRC III were additions and modifications to

the TRRC I project. The Board contends that it had no way

of knowing, at the time of TRRC I, that TRRC II or TRRC

III would be later proposed. Thus, the Board contends that it

did what was required of it, and supplemented the EISs for

TRRC II and TRRC III to consider the impact of the entire

railroad line.

[16] Both parties make thought-provoking arguments.

However, the timing of the TRRC applications precluded

them from being filed as a single EIS. The railroad approved

in TRRC I had independent utility in and of itself. The TRRC

II and TRRC III applications do not have much utility outside

of TRRC I. Nevertheless, when the Board approved TRRC II

and TRRC III, it did incorporate the findings of the previous

EISs and looked at the total environmental impact of the

entire 130-mile railroad line even though it did not prepare

one single comprehensive EIS. While we hold that the

Board’s EIS preparation is arbitrary and capricious in other

ways, see supra Section I.A-C, we do not find that its incor-

poration of the previous EISs is per se in error for reasons

already discussed. In other words, we believe that the Board’s

method of incorporating the EISs—which considered the

entire railroad line—may have been appropriate had it cured

the other deficiencies cited supra in Section I.A-C.

F. Tiering

[17] Petitioners’ final argument is that the Board violated

NEPA when it tiered its EIS to five other site-specific EISs.

Tiering is the process of incorporating by reference coverage

of general matters in broader environmental impact state-

ments, such as national program or policy statements, into

subsequent narrower environmental analysis, such as site-

specific statements. 40 C.F.R. § 1508.28. Tiering under

NEPA is permitted in two circumstances: (1) “a program,

plan, or policy impact statement” may be tiered to “a pro-

21460 NORTHERN PLAINS RESOURCE v. TONGUE RIVER RR

gram, plan, or policy statement or analysis of lesser scope or

to a site-specific statement or analysis,” and (2) “an environ-

mental impact statement on a specific action at an early stage”

may be tiered “to a supplement . . . or a subsequent statement

or analysis at a later stage.” Id. § 1508.28(a), (b). Only docu-

ments that have undergone NEPA analysis may be tiered.

Kern, 284 F.3d at 1073.

[18] The Board contends that it did not impermissibly tier

any other site-specific EISs but relied on the EISs only for

general background information. We agree. In the TRRC III

FSEIS, the Board stated:

Additionally, the Tongue River region has been stud-

ied extensively, not only by SEA in conducting the

environmental analysis for Tongue River I and

Tongue River II, but also by BLM and MT DNRC

in the preparation of EISs for Powder River I, Mon-

tco Mine, CX Ranch, and the Tongue River Reser-

voir Dam reconstruction, as well as the analysis of

coal-bed-methane-production wells. Where appropri-

ate, SEA has relied on these other environmental

analyses.

The Powder River I, Montco Mine, CX Ranch, Tongue River

Reservoir Dam, and coal-bed-methane production wells EISs

are site-specific EISs that do not fall into either situation

where tiering is permitted. However, Petitioners fail to

explain what aspect of the TRRC environmental analysis

directly relies on the incorporation of these other EISs. Thus,

we reject Petitioners’ contention that the Board engaged in

illegal tiering.

To summarize our holdings in Section I, we reverse and

remand on (1) the Board’s cumulative impact analysis in

TRRC III as to the reasonably foreseeable coal bed methane

projects, the Otter Creek Coal Mine, and water quality analy-

sis; (2) the adequacy of the baseline data in TRRC III as to

NORTHERN PLAINS RESOURCE v. TONGUE RIVER RR 21461

the pallid sturgeon, sage grouse, fish and aquatic life, other

wildlife, and sensitive plants; and (3) the Board’s reliance on

stale data, consistent with the analysis outlined above in Sec-

tion I. We affirm the Board as to Petitioners’ other environ-

mental claims.

II. Railroad Claims

A. The 49 U.S.C. § 10901 Standard

Petitioners contend that the Board did not apply the correct

statutory standard when it granted permission to construct the

rail lines in TRRC II and TRRC III. We disagree.

[19] 49 U.S.C. § 10901 governs when the Board may

authorize the construction and operation of railroad lines. As

the statute existed prior to 1980, the Board could authorize

construction of a rail line only if it found that “the present or

future public convenience and necessity require or will be

enhanced by the construction or acquisition (or both) and

operation of the railroad line.” 49 U.S.C. § 10901 (1976)

(emphasis added). The Staggers Act of 1980 changed the lan-

guage to authorize construction of a rail line if the Board finds

that “the present or future public convenience and necessity

require or permit the construction or acquisition (or both) and

operation of the railroad line.” 49 U.S.C. § 10901 (1980)

(emphasis added).

1. TRRC II

TRRC II was submitted to the Board in 1989. In its deci-

sion approving the construction, the Board reasoned that the

Staggers Act amended Section 10901 to relax the burden on

railroad companies because construction could be granted as

long as public convenience and necessity “permit” the con-

struction, whereas public convenience and necessity must

have “required” or “be enhanced” by the construction prior to

1980. Petitioners argue that this interpretation was erroneous.

21462 NORTHERN PLAINS RESOURCE v. TONGUE RIVER RR

They contend that the Staggers Act amendment aimed only to

“harmonize” the standard between Section 10901 governing

construction of railroads with Section 10903 governing aban-

donment of railroads.

To the extent Petitioners argue that the Staggers Act

worked to “harmonize”—i.e., to bring into agreement—the

language for when a railroad can be abandoned and when a

railroad can be constructed, we agree. However, we fail to see

why this harmonization necessarily forecloses Congress’s

intent to lower the standard for railroad construction to match

the standard for railroad abandonment.

Nothing in the history of textual changes to the statute com-

pels the conclusion that the standards for construction and

abandonment were historically ever in sync, at least until the

passage of the Staggers Act. When Congress passed the

Transportation Act of 1920—giving the ICC authority over

railroad construction and abandonment—the statute called for

construction of railroads when “present or future public con-

venience and necessity require or will require” the construc-

tion and abandonment when “present or future public

convenience and necessity permit” the abandonment. Trans-

portation Act of 1920, 41 Stat. 477-78, Section 402, ¶ 1(18).

The Railroad Revitalization and Regulatory Reform Act of

1976 separated the two standards into different sections of the

Code, and called for construction when “present or future

public convenience and necessity require or will be enhanced

by” the construction and abandonment when “present or

future public convenience and necessity require or permit”

the abandonment. 49 U.S.C. §§ 1(18)(a), 1a(1) (1976). These

two sections were not harmonized until the 1980 Staggers

Act, which called for construction or abandonment when “the

present or future public convenience and necessity require or

permit” the construction or abandonment. 49 U.S.C.

§§ 10901, 10903 (1980).

Petitioners have a different view of what it means to “har-

monize” the standards. Instead of construing the change in

NORTHERN PLAINS RESOURCE v. TONGUE RIVER RR 21463

language as bringing the two standards into agreement, they

argue that the Staggers Act aimed to restore the traditional

standards which were in place prior to 1976. Neither the plain

language of the statute nor the legislative history supports this

assertion.

[20] The change in language in Section 10901 from allow-

ing construction if the public convenience and necessity “re-

quire or will be enhanced by” the proposed construction to

allowing construction when public convenience and necessity

“require or permit” the proposed construction signals that

Congress intended to relax the policy concerning railroad con-

struction. Indeed, the Eighth Circuit also has concluded as

much:

As first enacted, § 10901 directed the [Board] to

approve a project only if public convenience and

necessity ‘require or will be enhanced by’ the con-

struction. Congress subsequently relaxed this restric-

tive policy by providing that the [Board] need only

find that public convenience and necessity ‘permit’

the proposed construction.

Mid States Coalition, 345 F.3d at 552 (8th Cir. 2003) (internal

citations omitted). Furthermore, this relaxed standard is con-

sistent with the legislative history of the Act. Specifically, the

conference report states that:

The Senate Bill changes existing law to permit eas-

ier entry, consistent with the policy of this Act to

encourage greater reliance on marketplace forces

than on government regulation. Under present law,

the Commission may authorize the construction of a

railroad only if it finds that the public convenience

and necessity ‘require or will be enhanced’ by the

construction. This is a more stringent test than that

applied to either the abandonment of rail lines or

mergers. There does not appear to be any reason

21464 NORTHERN PLAINS RESOURCE v. TONGUE RIVER RR

why the Commission should apply a more difficult

standard for the construction of new facilities than

for the abandonment of old facilities. The Senate Bill

changes the test applied by the Commission from

‘require or will be enhanced’ to ‘require or permit’.

H.R. Conf. Rep. 96-1430, P.L. 96-448, Staggers Rail Act of

1980, 115 (1980) (emphasis added). Thus, we conclude that

the Board did not misinterpret the standard under § 10901 in

rendering its decision on TRRC II.

2. TRRC III

In 1995, Congress further amended 49 U.S.C. § 10901 with

the passage of the ICCTA, to read as follows:

The Board shall issue a certificate authorizing activi-

ties for which such authority is requested in an appli-

cation filed under subsection (b) unless the Board

finds that such activities are inconsistent with the

public convenience and necessity.

49 U.S.C. § 10901 (1996) (emphasis added). The TRRC filed

an application for the 17.4-mile Western Alignment known as

TRRC III in 1998.

[21] Petitioners contend that the pre-1996 § 10901 should

apply to TRRC III even though it was filed in 1998, due to

the ICCTA’s savings clause. The savings provision of the

ICCTA states that any proceeding or application that is pend-

ing before the ICCTA’s effective date (generally, January 1,

1996) shall be continued and unaffected and review shall be

taken as if the ICCTA was never enacted. ICCTA, Pub. L.

No. 104-88, § 204, 109 Stat. 803, 941 (1995) (codified at 49

U.S.C. § 701 Note). Petitioners argue that TRRC III should be

covered by the savings provision because the TRRC origi-

nally tried to reopen TRRC II for the 17.4-mile Western

Alignment alternative. Petitioners also argue that the Board

NORTHERN PLAINS RESOURCE v. TONGUE RIVER RR 21465

considered TRRC III supplemental to TRRC II from an envi-

ronmental standpoint. We disagree with both contentions.

[22] TRRC II and TRRC III were separate proceedings.

TRRC III was filed in 1989 and clearly was not “pending”

before the ICCTA took effect on January 1, 1996. Further,

Petitioners fail to show how the Board may have abused its

discretion in treating the TRRC’s application for the Western

Alignment as a new application. A final agency decision in

TRRC II had already been issued on October 28, 1996.7

Rather than reopen those proceedings, the Board asked TRRC

to file a new proceeding and the Board correctly applied the

version of Section 10901 that was in place at that time.

Second, Petitioners argue that even if the post-ICCTA ver-

sion of Section 10901was applicable, the Board impermiss-

ibly read into the standard a presumption that construction

should be approved. Petitioners argue that this presumption

was not the intent of Congress, and that the Board cannot read

it into the statute.

[23] Review of the Board’s decision in TRRC III does not

indicate that an impermissible presumption was read into the

statute. We start with the plain language of the statute. See

Pension Benefit Guar. v. Carter & Tillery Enters., 133 F.3d

1183, 1185-86 (9th Cir. 1998). The plain language of the

post-ICCTA Section 10901 states that applications “shall” be

approved “unless the Board finds that such activities are

inconsistent with the public convenience and necessity.” This

language loosens the prior standard, which allowed approval

only when public convenience and necessity “required or per-

7

We note that TRRC II was also decided after the January 1, 1996 effec-

tive date of the ICCTA. However, TRRC II does fall within the ICCTA

savings clause, discussed supra, because it was filed in 1989 and was

pending when the ICCTA was enacted. Thus, the law that applies to the

TRRC II application is the law in effect prior to the enactment of the

ICCTA. See ICCTA, Pub. L. No. 104-88, § 204, 109 Stat. 803, 941 (1995)

(codified at 49 U.S.C. § 701 Note).

21466 NORTHERN PLAINS RESOURCE v. TONGUE RIVER RR

mitted” the construction. The Board’s construction of this

statute is reasonable and consistent with the Eighth Circuit’s

interpretation:

Congress’s latest iteration of the statute relaxes the

standard even further, directing that the Board “shall

issue” construction licenses, “unless the Board finds

that such activities are inconsistent with the public

convenience and necessity.” 49 U.S.C. § 10901(c)

(emphasis added). When read in conjunction with

Congress’s broad policy directives to promote “ef-

fective competition among rail carriers” and to “re-

duce regulatory barriers to entry into . . . the

industry,” 49 U.S.C. § 10101, we believe that the

Board correctly maintains that there is a statutory

presumption that rail construction is to be approved.

Mid States Coalition, 345 F.3d at 552. We agree with the

Eighth Circuit and the Board’s interpretation, and find the

Board did not improperly apply a presumption for construc-

tion in TRRC III.

B. The Board’s Public Convenience and Necessity

Findings

Petitioners also challenge the Board’s findings regarding

public convenience and necessity and whether the findings are

supported by the record.

1. The Public Convenience and Necessity Test

Petitioners first challenge the test that the Board applied to

evaluate “public convenience and necessity.” In TRRC II, the

Board formulated the following test for public convenience

and necessity:

The transportation issues that are raised in rail entry

cases include: (1) whether the applicant is fit, finan-

NORTHERN PLAINS RESOURCE v. TONGUE RIVER RR 21467

cially and otherwise, to undertake the construction

and provide rail service; (2) whether there is a public

demand or need for the service; and (3) whether the

competition would be harmful to existing carriers.

While Petitioners acknowledge that the test includes three fac-

tors and that the Board’s use of the word “include” in the test

indicates that other factors may be considered, they contend

that the Board only considered the three factors in subsequent

cases. In any event, Petitioners claim that the test described

varies from the test for public convenience and necessity that

has been used traditionally.

The parties agree that Congress did not define public con-

venience and necessity. See I.C.C. v. Parker, 326 U.S. 60, 65

(1945). Citing Public Convenience Application of Utah Ter-

minal Ry., 72 ICC 89, 93-94 (1922), Petitioners argue that the

Board has previously defined the term as a “strong or urgent

public need.” However, since then, it appears that the Board

historically has “draw[n] its conclusion from the infinite vari-

ety of circumstances which may occur in specific instances.”

N.M. Navajo Ranchers Ass’n v. I.C.C., 702 F.2d 227, 232

(D.C. Cir. 1983) (quoting Parker, 326 U.S. at 65).

We are not persuaded that the Board erred in considering

the factors it did in making its TRRC II decision. Petitioners

fail to explain how the test—under these specific

circumstances—was unreasonable. In particular, Petitioners

do not cite any additional factors the Board should have con-

sidered that would affect public convenience and necessity.

Further, the Board has traditionally looked to a “variety of cir-

cumstances,” and the Supreme Court has confirmed that the

Board has discretion to do so. See Parker, 326 U.S. at 65

(“The Commission has assumed, as its duty under these ear-

lier subsections, the finding of facts and the exercise of its

judgment to determine public convenience and necessity. This

Court approved this construction.”).

21468 NORTHERN PLAINS RESOURCE v. TONGUE RIVER RR

The Petitioners also fail to show that the Board erred in

considering the factors it did in making the TRRC III deci-

sion. In that decision, the Board applied the following test:

[T]he agency has traditionally looked at whether: (1)

the applicant is financially able to undertake the

project and provide rail service; (2) there is a public

demand or need for the proposed service; and (3) the

proposal is in the public interest and will not unduly

harm existing services. The agency accords the inter-

ests of existing shippers substantial importance in

assessing the [public convenience and necessity] in

railroad construction proceedings.

Petitioners argue that the inclusion of the “public interest” in

this test somehow lessened the public convenience and neces-

sity standard. We disagree. The public interest was one of

many factors the Board considered and analyzed that, taken

together, constituted their consideration of public convenience

and necessity for the construction of the railroad.

[24] We conclude that the Board did not err in considering

the factors it did in analyzing the public convenience and

necessity standard of Section 10901.

2. TRRC’s Financial Fitness

Petitioners’ next argument is that, assuming that the factors

the Board considered were correct, the Board’s conclusion as

to each factor was not supported by the record. Petitioners

first contend that the Board did not properly consider TRRC’s

financial fitness. The Supreme Court has elaborated on the

purpose behind this factor:

Congress undertook to develop and maintain, for the

people of the United States, an adequate railway sys-

tem. It recognized that preservation of the earning

capacity, and conservation of the financial resources,

NORTHERN PLAINS RESOURCE v. TONGUE RIVER RR 21469

of individual carriers, is a matter of national concern;

that the property employed must be permitted to earn

a reasonable return; that the building of unnecessary

lines involves a waste of resources, and that the bur-

den of this waste may fall upon the public; that com-

petition between carriers may result in harm to the

public, as well as in benefit; and that, when a rail-

road inflicts injury upon its rival, it may be the pub-

lic which ultimately bears the loss.

Texas & P. Ry. Co. v. Gulf, C. & S.F. Ry. Co., 270 U.S. 266,

277 (1926). Petitioners claim that the Board must consider the

effect on the public and carriers as part of this test.

[25] While we agree with Petitioners that the Board should

consider the protection of the public, the carriers, and existing

shippers, we conclude that the Board adequately weighed

these issues. Petitioners argue that the Board’s decision

focused only on protecting service for existing shippers and

not on protecting the TRRC and its investors. The Board first

noted that the effect on existing shippers would be small

because there were no current TRRC shippers and any ship-

pers TRRC may service in the future are at liberty to return

to using the longer BNSF route if necessary. The Board next

evaluated the financial fitness of the TRRC. Based on a

review of data submitted, the Board concluded that the TRRC

was financially fit and able to construct the line and sustain

operations and service. Petitioners submitted no evidence to

refute this finding.

[26] Similarly, as to TRRC III, the Board performed a

detailed financial analysis, taking into account construction

costs, financing, and operating revenues. The Board consid-

ered the objections raised by Petitioners at that time, and per-

formed a reasoned analysis. Petitioners argue that the Board

evaluated the TRRC’s financial fitness under too liberal a

standard, but they do not contest any specific Board calcula-

tions, nor do they explain why the analysis fails under their

21470 NORTHERN PLAINS RESOURCE v. TONGUE RIVER RR

perceived more-stringent standard. We affirm the Board’s

findings concerning the financial fitness of both TRRC II and

TRRC III.

3. Clear Public Need or Demand

[27] Petitioners also argue that the Board misapplied the

public need or demand factor in both TRRC II and TRRC III.

Petitioners assert that the Board did not consider whether the

need could be adequately met by the existing BNSF road, and

complain that no existing shippers currently using BNSF

wrote to support TRRC’s application. However, in both its

TRRC II and TRRC III decisions, the Board cited support for

the project from a variety of sources, including coal produc-

ers, public utilities, and dairy farmers, who favored the project

for its reduced transportation costs, as well as several Mon-

tana state officials, who favored the project because of

increased employment and development and a broadened tax

base. Petitioners do not cite to any authority, or explain why

the public demand and needs of these parties are not properly

considered over the needs of existing shippers. We hold that

the Board did not err in concluding that there is a clear public

need or demand for the railroad.

4. Harm to Existing Carriers

Finally, Petitioners argue that the Board misapplied the

harm to existing carriers factor in granting both TRRC II and

TRRC III. Petitioners contend that the Board should have not

only considered direct harms to the TRRC’s competitors—

BNSF as to TRRC II and Dakota, Minnesota & Eastern Rail-

road Corporation (DM&E) as to TRRC III—but also should

have considered possible harm to the communities that rely

on the operation of the competitors. As an initial matter, Peti-

tioners do not cite any authority supporting their claim that

the Board must consider harmful effects other than those to

direct competitors under this factor. See, e.g., Indiana & Ohio

Ry. Co.—Construction and Operation, 9 I.C.C. 2d 783, 794

NORTHERN PLAINS RESOURCE v. TONGUE RIVER RR 21471

(1993). Furthermore, the Board addressed some of these con-

cerns in its public interest section, which we will discuss

infra, in Section II.B.5.

[28] In TRRC II, the Board concluded that BNSF’s direct

interests would not be harmed significantly because its rail-

road’s only overlap with the TRRC railroad constitutes a

small segment of the total haul. In TRRC III, the Board con-

cluded that DM&E’s direct interests would not be signifi-

cantly harmed here because the DM&E and TRRC lines

would serve different customers and transport different types

of coal. Because BNSF actively supported TRRC in its TRRC

III application, we do not find that the Board erred in failing

to address the competitive harm to BNSF in TRRC III.

Accordingly, the Board was not arbitrary and capricious in its

harm to competitors findings.

5. Public Interest

In addition to the factors addressed supra, the Board also

considered the public interest in its public convenience and

necessity analysis. In particular, the Board considered (1) the

loss of railroad jobs, (2) loss of mining jobs, (3) harm to

ranchers, and (4) Native American interests. After examining

each factor, the Board found that TRRC III would be in the

public interest. The Board concluded that any lost jobs would

be offset by new jobs created by the construction and opera-

tion of the new rail line, that the construction would foster the

development of new mines and increase mining jobs, that

ranchers would be adequately compensated for their lands,

and that the TRRC will adhere to a Programmatic Agreement

developed with the Native American interests in mind.

Petitioners object to this public interest analysis on proce-

dural grounds. Indeed, Petitioners do not contest the Board’s

actual findings regarding the public interest. Instead, Petition-

ers argue that the Board primarily relied on environment doc-

uments in making its determination, and that the environment

21472 NORTHERN PLAINS RESOURCE v. TONGUE RIVER RR

proceedings are conducted in a different manner from those

where a public convenience and necessity determination is

made.

[29] When conducting a public convenience and necessity

test, the Board may “draw its conclusion from the infinite

variety of circumstances which may occur in specific

instances.” N.M. Navajo Ranchers, 702 F.2d at 232 (quoting

Parker, 326 U.S. at 65). Thus, consideration of the public

interest is permissible under this test. While Petitioners object

to the evidence that the Board considered in its analysis, Peti-

tioners fail to identify how they are prejudiced by the way the

Board conducted its analysis. Moreover, they do not claim

that they were barred from submitting the testimony of any

witnesses or reports for the consideration of the Board. Based

on the record before us, we conclude that the Board did not

act arbitrarily or capriciously in addressing this issue.

C. Transportation and Environmental Division

In TRRC II, after the Board made its public convenience

and necessity determination, the Board balanced the transpor-

tation concerns with environmental concerns. Petitioners

argue that the Board’s balancing analysis violated 49 U.S.C.

§ 10901 because some factors considered “environmental”

should have actually been considered under the traditional

public convenience and necessity analysis. In particular, Peti-

tioners contend that the railroad employee concerns and

Native American issues should have been handled under tra-

ditional public convenience and necessity analysis.

As an initial matter, we note that Petitioners’ argument con-

tradicts its position in TRRC III that these factors are not

properly considered under the public convenience and neces-

sity test. See supra Section II.B.5. As we previously noted, we

agree with Petitioners’ position that these factors may fit more

into a traditional public convenience and necessity analysis.

However, as applied to TRRC II, Petitioners fail to show that

NORTHERN PLAINS RESOURCE v. TONGUE RIVER RR 21473

the Board’s treatment of these factors under its environmental

label led to an arbitrary or capricious finding.

As to railroad employees, the Board found that, at most, 57

BNSF railroad employees would be displaced by TRRC II.

The Board found that TRRC would have to hire 64 employees

to operate the new railroad. Thus, the Board concluded that

the construction and operation of TRRC II would result in a

net employment gain for railroad employees.

The Board addressed the Native American issues exten-

sively during the development of the EIS. In its Notice of

Availability of Draft Environmental Impact Statement, the

Board dedicated over 20 pages evaluating the project’s

impacts to the Northern Cheyenne Indian Reservation and the

Crow Indian Reservation. The Board’s evaluation included

socio-economic effects, as well as impact on tribal cultural

values and religious practices.

[30] Petitioners fail to explain how the Board’s treatment

of these issues is insufficient simply because the analysis was

conducted as part of the Board’s environmental analysis. Peti-

tioners cite no contradictory evidence in the record disputing

the Board’s findings, nor do the Petitioners articulate why the

Board’s decision regarding the public convenience and neces-

sity analysis would have been different if the Board had used

different procedural approaches. Thus, we conclude that the

Board’s treatment of these factors was not arbitrary and capri-

cious.

D. Lack of an ALJ decision

Petitioners argue that the Board’s decision in TRRC II

should be set aside because the Board should have permitted

an administrative law judge (ALJ) to issue the initial decision.

After an ALJ conducted the hearings in TRCII, the Board’s

predecessor, the ICC, set the application for hearing pursuant

to 49 C.F.R. § 1150.10(g).

21474 NORTHERN PLAINS RESOURCE v. TONGUE RIVER RR

49 U.S.C. § 10327 sets the time line for “a division, indi-

vidual Commissioner, employee board, or employee desig-

nated under Section 10305 of this title to make an initial

decision.” 49 U.S.C. § 10327(b) (1994).8 This requirement for

initial decision under Section 10327 may be voided, however,

by the Board “on a finding that the matter involves a question

of Commission policy, a new or novel issue of law, or an

issue of general transportation importance, or that it is

required for the timely execution of its functions.” Id.

§ 10327(c).

The Board reserves for itself consideration and disposition

of “[a]ll investigations and other proceedings instituted by the

Board, except as may be ordered in individual situations.” 49

C.F.R. § 1011.2. 49 U.S.C. § 10305 permits the ICC to “dele-

gate to a division, an individual Commissioner, an employee

board, or an employee appointed under Section 3105 of title

5, a matter before the Commission for action.” 49 U.S.C.

§ 10305(a) (1994).

Petitioners contend that the Board’s assignment of the case

for hearing before the ALJ effectively delegated the case.

Petitioners argue that, therefore, the Board could forgo having

the ALJ issue the initial decision only if it finds that doing so

would enable timely execution of the agency’s functions.

[31] Here, however, the Board never explicitly delegated

authority to the ALJ to issue a decision pursuant to 49 U.S.C.

§ 10305. In particular, the Board notes that the ALJ’s only

express grant of authority was “to conduct an oral hearing in

Montana or Wyoming and to certify the transcript of the hear-

ing to us to assist us in deciding the case.” “[U]pon comple-

tion of the record and consideration of the environmental

impact, we will issue a decision.” Thus, under 49 U.S.C.

§ 10327, the ALJ was not required to issue the initial deci-

8

Neither Section 10327 or Section 10305 was preserved following the

enactment of the ICCTA in 1995.

NORTHERN PLAINS RESOURCE v. TONGUE RIVER RR 21475

sion. Furthermore, the Board went on to state that the case

was already protracted, and given the importance of the case,

the Board decided that it was better on balance to have the

Board issue the initial decision directly. We agree with the

Board, and conclude that Petitioners fail to show that the

Board’s decision was not within its statutory authority.

E. Labor Finding under 49 U.S.C. § 10901(e)

As to TRRC II, Petitioners also argue that the Board’s deci-

sion must be set aside because it failed to address labor pro-

tection for railroad employees. Petitioners seek protection for

BNSF employees. The Board responds that it is not required

to provide employee protection for non-applicant employees

—including the BNSF employees.

When TRRC II was filed, Section 10901(e) provided that:

The Commission may require any rail carrier pro-

posing both to construct and operate a new railroad

line pursuant to this section to provide a fair and

equitable arrangement for the protection of the inter-

ests of railroad employees who may be affected

thereby no less protective of and beneficial to the

interests of such employees than those established

pursuant to section 11347 of this title.

49 U.S.C. § 10901(e) (emphasis added) (1994).9 The plain

language of the statute indicates that the Board has discretion

whether to impose protections. See Ry. Labor Execs.’ Ass’n

v. I.C.C., 914 F.2d 276, 278 (D.C. Cir. 1990) (“Thus, for

transactions under section 11343, employee protection is

mandatory, while under section 10901, it is discretionary.”),

cert. denied, 499 U.S. 959 (1991). Moreover, the Board gen-

9

Even though TRRC II was decided post-January 1, 1996 on October

28, 1996, the ICCTA’s revocation of Section 10901(e) does not apply to

TRRC II due to the ICCTA’s savings provision. See supra note 7.

21476 NORTHERN PLAINS RESOURCE v. TONGUE RIVER RR

erally does not impose labor protections unless “exceptional

circumstances are shown.” Id.

The Board also has consistently interpreted Section

11347’s employee protection to apply only to the applicant

railroad’s employee—in this case, TRRC employees—and

not to non-applicant railroads’ employees, such as BNSF

workers. See id. at 280 (“[T]he Commission’s view that sec-

tion 11347 does not require labor protection for employees of

nonapplicant carriers like CNW is firmly supported by previ-

ous decisions in this and other circuits.”); see also Crounse

Corp. v. I.C.C., 781 F.2d 1176, 1192-93 (6th Cir. 1986)

(“Every court of appeals that has considered the question has

concluded that section 11347 does not apply to employees not

directly involved in the transaction.”), cert. denied, 479 U.S.

890 (1986); Missouri-Kansas-Texas R.R. Co. v. U.S., 632

F.2d 392, 411-12 (5th Cir. 1980), cert denied, 451 U.S. 1017

(1981).

[32] Here, Petitioners requested employee protection only

for non-applicant BNSF employees. And, as previously noted,

courts have consistently found that the protections of 49

U.S.C. § 11347 apply only to applicant employees. In light of

Section 10109(e)’s explicit reference to the interests of the

employees that would be established pursuant to Section

11347, we see no reason to read the two sections inconsistently.10

Thus, we conclude that Section 10901(e)’s employee protec-

tions do not apply to non-applicant employees, such as the

BNSF employees in this case. In addition, even if the provi-

10

Petitioners cite Railway Labor Executives Association v. I.C.C., 784

F.2d 959 (9th Cir. 1986), to argue that the Ninth Circuit has provided for

protection for affected non-applicant employees. However, in that case,

Northwestern Pacific Railroad Company (NWP) wanted to abandon its

railroad line and sold the interests in the line to two acquiring companies.

Id. at 960. The primary issue presented was whether labor conditions

should be imposed on the vendor NWP and the two acquiring companies.

Id. at 969. The opinion is not apposite because it does not address any dif-

ference between applicant versus non-applicant employees.

NORTHERN PLAINS RESOURCE v. TONGUE RIVER RR 21477

sion did apply, Petitioners have not shown that they could

meet the “exceptional circumstances” standard.

F. Viability of TRRC II

Finally, Petitioners contend that we should set aside the

Board’s decision in TRRC II because even TRRC concedes

that it is no longer viable from an operational and engineering

standpoint. In TRRC II, the Board considered two alternative

routes—the TRRC’s “preferred route” and the Four Mile

Creek Alternative. The TRRC offered the Four Mile Creek

alternative at the request of the Board’s SEA. The Board

approved TRRC II, adopting the Four Mile Creek Alternative.

After the Board rendered its decision on October 28, 1996,

TRRC filed a petition seeking to reopen the application on the

basis that the Four Mile Creek Alternative presented serious

operational issues, and was not viable. BNSF sought to inter-

vene in the proceedings and supported TRRC’s argument.

The Board denied the motion to reopen TRRC II because it

found that the TRRC could have presented evidence of any

defects during the review period.

At the time it decided TRRC II, the Board’s decision was

not arbitrary and capricious. In responding to the Board’s

decision respecting the Four Mile Creek Alternative, TRRC

argued that it was concerned about the 2.31 percent grade for

loaded unit trains on the Four Mile Creek Alternative, and

that the route is 10 miles longer than its preferred route. The

Board acknowledged TRRC’s concerns, but relied on the

findings of the SEA that there were design and operating

options that the TRRC could use to mitigate potential safety

problems. The SEA also consulted with the Federal Railroad

Administration (FRA), which concurred that the Four Mile

Creek Alternative could be safely operated. Furthermore, the

TRRC acknowledged that the line could operate, but that it

would be faced with increased construction and operating

costs. In a June 7, 1994 letter, the TRRC stated that it had

21478 NORTHERN PLAINS RESOURCE v. TONGUE RIVER RR

undertaken an exhaustive review of possible routings, and that

its engineering consultants, who had studied the routings, con-

cluded that the TRRC’s preferred alignment and the Four

Mile Creek Alternative were the only feasible options.

[33] Thus, the evidence in the record shows that prior to

October 1996, when the Board issued its decision in TRRC II,

the Board properly considered the evidence presented and

concluded that even the TRRC agreed at that time that the

Four Mile Creek Alternative could be safely operated, albeit

at an increased cost. Any new evidence that the TRRC and

BNSF put forth regarding the new safety concerns was not

before the Board when it issued its TRRC II decision, and we

do not consider such evidence in our review. See, e.g.,

Humane Soc. of the United States v. Locke, 626 F.3d 1040,

1058 (9th Cir. 2010) (“As a general matter, judicial review of

agency decisions is limited to the record considered by the

agency in making its decision.” (citing Camp v. Pitts, 411

U.S. 138, 142 (1973))). Thus, we hold that the Board did not

act arbitrarily and capriciously in finding that the Four Mile

Creek Alternative was viable when it rendered its decision in

TRRC II.

[34] However, as Petitioners observe, the current viability

of TRRC II may be important to the extent that the approval

of the TRRC III application relied on the Board’s TRRC II

application as its “no-build” alternative. And unlike in TRRC

II, by the time of the TRRC III application in 1998, the Board

was aware of the safety, operational, and viability concerns

that both the TRRC and BNSF had about the Four Mile Creek

Alternative.

When the TRRC and BNSF raised new safety concerns,

instead of investigating these concerns and reopening TRRC

II, the Board denied the motion to reopen and suggested that

if the TRRC desired to propose an alternative, it could do so

by submitting a new application—TRRC III. In denying the

motion to reopen, the Board rejected TRRC’s “new” evidence

NORTHERN PLAINS RESOURCE v. TONGUE RIVER RR 21479

because it was not new. The Board stated that “[e]ither the

concerns [the TRRC] addresses have already been extensively

considered and disposed of by SEA or the Board or the evi-

dence, relating to a construction project first proposed 5 years

before SEA issued its FEIS, could have and should have been

developed and presented earlier.” As for the evidence in the

“new” studies conducted by the TRRC’s contractor, Mission

Engineering, and studies conducted by BNSF, the Board

stated that “[t]his evidence, although newly introduced, is not

new because it also could have been presented earlier, but was

not.” Thus, the record indicates that the Board may not have

evaluated the TRRC and BNSF’s new evidence of safety con-

cerns on the merits, but instead rejected the motion to reopen

on the grounds that the evidence should have been presented

earlier.

However, in evaluating the new TRRC III application, the

Board still did not review the new evidence of operational and

safety concerns, and instead considered the Four Mile Creek

Alternative as “currently authorized,” and the “no-build”

alternative considered in TRRC III. By the time the Board

prepared the DSEIS in October 2004, the Board was well

aware of the concerns that the TRRC and BNSF had raised

about the viability of the Four Mile Creek Alternative from a

safety and operational perspective. Moreover, in 2004, the

Board was aware that the TRRC had asked to suspend pro-

ceedings due to financial problems in 2000, after which

review was suspended for almost three years. The Board also

did not revisit the financial viability of the Four Mile Creek

Alternative when it considered it the “no-build” alternative in

TRRC III in light of the changed financial circumstances.

Thus, we conclude that the Board’s decision in TRRC III was

arbitrary and capricious in light of the evidence it had before

it regarding the TRRC and BNSF’s safety concerns that arose

subsequent to the Board’s approval of TRRC II.

[35] To summarize our holdings for Section II, we find

that the Board’s decision not to review new evidence of oper-

21480 NORTHERN PLAINS RESOURCE v. TONGUE RIVER RR

ational and safety concerns for the Four Mile Creek Alterna-

tive in TRRC III to be arbitrary and capricious, and we

reverse and remand on that ground. We affirm the Board on

Petitioners’ other railroad claims.

CONCLUSION

For the foregoing reasons, we AFFIRM in part and

REVERSE and REMAND in part. Each party shall bear its

own costs on appeal.

NORTHERN PLAINS RESOURCE v. TONGUE RIVER RR 21481

APPENDIX