Petition for Writ of Certiorari — Indian River County, Florida, et al., Petitioners v. Department of Transportation, et al.

Supreme Court briefMay 18, 2020

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No. _____

IN THE

Supreme Court of the United States

————

INDIAN RIVER COUNTY, FLORIDA; INDIAN RIVER

COUNTY EMERGENCY SERVICES DISTRICT,

Petitioners,

UNITED STATES DEPARTMENT OF TRANSPORTATION;

ELAINE L. CHAO, IN HER OFFICIAL CAPACITY AS

SECRETARY OF TRANSPORTATION; UNDER SECRETARY

OF TRANSPORTATION FOR POLICY; FEDERAL

RAILROAD ADMINISTRATION; PAUL NISSENBAUM,

IN HIS OFFICIAL CAPACITY AS ASSOCIATE

ADMINISTRATOR OF THE FEDERAL RAILROAD

ADMINISTRATION; AAF HOLDINGS LLC,

Respondents.

————

On Petition for a Writ of Certiorari

to the United States Court of Appeals

for the District of Columbia Circuit

————

PETITION FOR A WRIT OF CERTIORARI

————

DYLAN REINGOLD

County Attorney

INDIAN RIVER COUNTY

1801 27th St.

Vero Beach, FL 32960

J. MICHAEL LUTTIG*

728 West Lionshead Cir.

Vail, CO 81657

Admitted only in Virginia and

the District of Columbia

JEFFREY A. LAMKEN

Counsel of Record

JAMES A. BARTA

MOLOLAMKEN LLP

The Watergate, Suite 500

600 New Hampshire Ave., N.W.

Washington, D.C. 20037

(202) 556-2000

jlamken@mololamken.com

(Additional Counsel Listed on Inside Cover)

:,/621(3(635,17,1*&2,1&± ±:$6+,1*721'&

LAUREN F. DAYTON

MOLOLAMKEN LLP

430 Park Ave., 6th Floor

New York, NY 10022

(212) 607-8160

ELIZABETH K. CLARKE

MOLOLAMKEN LLP

300 N. LaSalle St., Suite 5350

Chicago, IL 60654

(312) 450-6700

Counsel for Petitioners

QUESTION PRESENTED

The Internal Revenue Code authorizes the issuance of

tax-exempt bonds to finance “qualified highway or surface freight transfer facilities.” 26 U.S.C. § 142(a)(15).

That term is defined, in relevant part, to mean “any surface transportation project which receives Federal assistance under title 23.” Id. § 142(m)(1)(A). The Department of Transportation has taken the position that a

facility is a project “which receives Federal assistance

under title 23” so long as it “benefits from” federal Title

23 expenditures, even if the facility does not receive, has

never received, and is not even eligible to receive such

assistance. In this case, the court of appeals deferred to

the Department of Transportation’s view under Skidmore v. Swift & Co., 323 U.S. 134 (1944). The court did

not, however, find that the statute was ambiguous or

discuss the meaning of the statutory term “receives”

before doing so. The question presented is:

Whether the court of appeals properly deferred to the

agency’s informal views under Skidmore, without finding

the statute ambiguous or applying (much less exhausting) traditional interpretive tools.

(i)

PARTIES TO THE PROCEEDINGS BELOW

Indian River County, Florida, and Indian River

County Emergency Services District were plaintiffs in

the district court and appellants in the court of appeals.

The United States Department of Transportation;

Elaine L. Chao, in her official capacity as Secretary of

Transportation; Derek Kan, in his official capacity as

Under Secretary of Transportation for Policy; the

Federal Railroad Administration; and Paul Nissenbaum,

in his official capacity as Associate Administrator of the

Federal Railroad Administration, were defendants in the

district court and appellees in the court of appeals.

Derek Kan resigned as Under Secretary of Transportation for Policy in June 2019, and a successor has not

been appointed. Joel Szabat, the Assistant Secretary for

Aviation & International Affairs, currently performs the

functions and duties of the Under Secretary.

AAF Holdings LLC intervened on behalf of the

defendants in the district court and was an appellee in

the court of appeals.

Martin County, Florida, and Citizens Against Rail

Expansion in Florida were plaintiffs in the district court.

They dismissed their claims during the district court

proceedings and did not participate in the court of

appeals proceedings below.

iii

STATEMENT OF RELATED PROCEEDINGS

The proceedings directly related to this petition within

the meaning of Rule 14.1(b)(iii) are:

x Indian River County, et al. v. Dep’t of Transp., et

al., No. 19-5012 (D.C. Cir.), judgment entered on

December 20, 2019; and

x Martin County, et al. v. Dep’t of Transp., et al.,

No. 1:18-cv-00333 (D.D.C.), judgment entered on

December 24, 2018.

TABLE OF CONTENTS

Page

Opinions Below.............................................................

Statement of Jurisdiction ...........................................

Statutory Provisions Involved ...................................

Preliminary Statement ...............................................

Statement ......................................................................

I. Statutory and Regulatory Background .......

A. Private Activity Bonds...........................

B. “Qualified Highway or Surface

Freight Transfer Facilities”

Under 26 U.S.C. § 142 ............................

C. The Department of

Transportation’s Implementation

of § 142(m) ................................................

II. Proceedings Below ..........................................

A. The Planned Passenger Rail Line .......

B. The Bond Allocations .............................

C. District Court Proceedings ...................

D. Court of Appeals Proceedings ..............

Reasons for Granting the Petition ............................

I. The Court of Appeals Deferred Under

Skidmore to an Informal Agency

Interpretation That Contradicts the

Statute’s Plain Meaning .................................

A. The Court of Appeals’ Decision

Defies the Statute’s Text .......................

B. The Court of Appeals Converted

Skidmore Deference into Judicial

Abdication ................................................

(v)

TABLE OF CONTENTS—Continued

Page

II. As This Case Illustrates, the Lower

Federal Courts Are in Disarray Over

Skidmore .......................................................... 25

A. This Court’s Guidance Regarding

Skidmore Has Been Inconsistent ........ 25

B. This Court’s Inconsistent

Decisions Have Contributed to

Disarray in Lower Federal Courts ...... 28

III. The Question Presented Is Important

and Recurring .................................................. 30

Conclusion ..................................................................... 33

Appendix A – Opinion of the Court

of Appeals (December 20, 2019) ............................ 1a

Appendix B – Judgment of the Court

of Appeals (December 20, 2019) ............................ 33a

Appendix C – Opinion of the District Court

(December 24, 2018) ............................................... 35a

Appendix D – Relevant Statutory Provisions.......... 116a

Appendix E – Letter of Edward V.A. Kussy

(October 7, 2015)...................................................... 128a

Appendix F – Declaration of Paul Baumer

(May 15, 2015) .......................................................... 133a

vii

TABLE OF AUTHORITIES

Page(s)

CASES

Air Transp. Ass’n of Am., Inc. v. FAA,

921 F.3d 275 (D.C. Cir. 2019) ........................... 31

Alaska Dep’t of Envtl. Conservation

v. EPA, 540 U.S. 461 (2004) ........................... 27, 28

Allentown Mack Sales & Serv., Inc.

v. NLRB, 522 U.S. 359 (1998) ........................... 22

Ammex, Inc. v. United States,

367 F.3d 530 (6th Cir. 2004) ...........................

Auer v. Robbins, 519 U.S. 452 (1997) ......... 14, 31, 32

Baylor Cty. Hosp. Dist. v. Price,

850 F.3d 257 (5th Cir. 2017) .............................. 31

Cervantes v. Holder,

597 F.3d 229 (4th Cir. 2010) .............................. 28

Chevron U.S.A. Inc. v. Nat. Res. Def.

Council, Inc., 467 U.S. 837 (1984) .............. passim

Christopher v. SmithKline Beecham

Corp., 567 U.S. 142 (2012) .............................. 31, 33

Davis v. Mich. Dep’t of Treasury,

489 U.S. 803 (1989) ............................................. 19

Delaware v. Surface Transp. Bd.,

859 F.3d 16 (D.C. Cir. 2017) ............................. 31

E.I. Du Pont De Nemours & Co.

v. Smiley, 138 S. Ct. 2563 (2018) ...................... 24

Epic Sys. Corp. v. Lewis,

138 S. Ct. 1612 (2018)......................................... 32

Estrada-Rodriguez v. Lynch,

825 F.3d 397 (8th Cir. 2016) .............................. 29

FDIC v. Meyer, 510 U.S. 471 (1994) ..................... 27

viii

TABLE OF AUTHORITIES—Continued

Page(s)

Fed. Express Corp. v. Holowecki,

552 U.S. 389 (2008) ....................................... passim

Gen. Dynamics Land Sys., Inc.

v. Cline, 540 U.S. 581 (2004) ................... 21, 22, 27

Gonzales v. Oregon,

546 U.S. 243 (2006) ............................ 22, 23, 26, 33

Gross v. FBL Fin. Servs., Inc.,

557 U.S. 167 (2009) .......................................... 16, 23

Hayes v. Harvey,

903 F.3d 32 (3d Cir. 2018) ................................. 31

Hughes Aircraft Co. v. Jackson,

525 U.S. 432 (1999) .......................................... 15, 22

INS v. Cardoza-Fonseca,

480 U.S. 421 (1987) .......................................... 22, 32

Kasten v. Saint-Gobain Performance

Plastics Corp., 563 U.S. 1 (2011) ...................... 33

Kisor v. Wilkie,

139 S. Ct. 2400 (2019)............................... 26, 31, 32

Kucana v. Holder,

558 U.S. 233 (2010) ............................................. 18

Landmark Legal Found. v. IRS,

267 F.3d 1132 (D.C. Cir. 2001) ......................... 26

Lopez v. Terrell,

654 F.3d 176 (2d Cir. 2011) ............................... 31

Mansour v. Holder,

739 F.3d 412 (8th Cir. 2014) .............................. 31

Marbury v. Madison,

5 U.S. (1 Cranch) 137 (1803) ................ 3, 4, 12, 32

TABLE OF AUTHORITIES—Continued

Page(s)

Massachusetts v. Mellon,

262 U.S. 447 (1923) .......................................... 12, 15

McMaster v. United States,

731 F.3d 881 (9th Cir. 2013) .............................. 31

Miller v. Clinton,

687 F.3d 1332 (D.C. Cir. 2012) ......................... 26

Nat’l Ass’n of Mfrs. v. Dep’t of Def.,

138 S. Ct. 617 (2018) ........................................... 19

Raymond B. Yates, M.D., P.C. Profit

Sharing Plan v. Hendon,

541 U.S. 1 (2004) ................................................. 26

Ross v. Blake, 136 S. Ct. 1850 (2016) .................... 15

Seaview Trading, LLC v. Comm’r,

858 F.3d 1281 (9th Cir. 2017) ............................ 28

Sebelius v. Cloer, 569 U.S. 369 (2013) .................. 23

Sec’y of Labor v. Am. Future Sys., Inc.,

873 F.3d 420 (3d Cir. 2017) ............................... 31

Skidmore v. Swift & Co.,

323 U.S. 134 (1944) ....................................... passim

United States v. Mead Corp.,

533 U.S. 218 (2001) .......................................... 25, 30

United States v. Miller,

833 F.3d 274 (3d Cir. 2016) ............................... 29

Unified Turbines, Inc. v. U.S. Dep’t of

Labor, 581 F. App’x 16 (2d Cir. 2014) ............. 28

Univ. of Tex. Sw. Med. Ctr. v. Nassar,

570 U.S. 338 (2013) .......................................... 22, 26

Valent v. Comm’r of Soc. Sec.,

918 F.3d 516 (6th Cir. 2019) .............................. 30

TABLE OF AUTHORITIES—Continued

Page(s)

Varsity Brands, Inc. v. Star Athletica,

LLC, 799 F.3d 468 (6th Cir. 2015).................... 31

Warner-Lambert Co. v. United States,

407 F.3d 1207 (Fed. Cir. 2005) ......................... 26

STATUTES

Administrative Procedure Act,

5 U.S.C. § 701 et seq. ..........................................

National Environmental Policy Act,

42 U.S.C. § 4321 et seq. ......................................

Safe, Accountable, Flexible, Efficient

Transportation Equity Act: A Legacy

for Users, Pub. L. 109-59,

119 Stat. 1144 (2005) ..........................................

23 U.S.C. § 101(a)(21) (2006) .......................... 6, 17, 19

23 U.S.C. § 103 (2006) ........................................... 5, 17

23 U.S.C. § 104 (2006) ............................................. 17

23 U.S.C. § 106 .........................................................

23 U.S.C. § 106(a)(2) (2006) .................................... 17

23 U.S.C. § 130 (2006) ................................. 5, 6, 17, 18

23 U.S.C. § 130(a) (2006)............................ 6, 18, 19, 20

23 U.S.C. § 130(e)(1) (2006) ....................................

23 U.S.C. § 133 (2006) ........................................... 5, 17

23 U.S.C. § 145 ......................................................... 23

23 U.S.C. § 145(a) (2006)......................................... 23

23 U.S.C. § 148(b) (2006) ........................................

23 U.S.C. § 149 (2006) ........................................... 5, 17

23 U.S.C. § 601(a)(8)(C) (2006) ........................... 17, 20

TABLE OF AUTHORITIES—Continued

Page(s)

23 U.S.C. § 602 (2006) .......................................... 17, 20

26 U.S.C. § 103(b)(1) ...............................................

26 U.S.C. § 141(a) ....................................................

26 U.S.C. § 141(b) ....................................................

26 U.S.C. § 141(c) ....................................................

26 U.S.C. § 141(d) ....................................................

26 U.S.C. § 141(e)(1)(A) ..........................................

26 U.S.C. § 142 ................................................... passim

26 U.S.C. § 142(a) .............................................. passim

26 U.S.C. § 142(a)(11).............................................. 18

26 U.S.C. § 142(a)(15)............................................ 7, 16

26 U.S.C. § 142(i) .....................................................

26 U.S.C. § 142(i)(1)................................................. 18

26 U.S.C. § 142(m) ............................................. passim

26 U.S.C. § 142(m)(1)(A) ................................... passim

26 U.S.C. § 142(m)(1)(C) ......................................... 20

26 U.S.C. § 142(m)(2)(A) .........................................

26 U.S.C. § 142(m)(2)(C) .........................................

26 U.S.C. § 147 .........................................................

28 U.S.C. § 1254(1) ..................................................

OTHER AUTHORITIES

Kent Barnett & Christopher J. Walker,

Chevron in the Circuit Courts, 116 Mich.

L. Rev. 1 (2017)................................................... 32

xii

TABLE OF AUTHORITIES—Continued

Page(s)

Lisa Schultz Bressman, How Mead Has

Muddled Judicial Review of Agency

Action, Vand. L. Rev. 1443 (2005) ................... 29

The Compact Oxford English Dictionary

(2d ed. 1996) ..................................................... 18, 19

Michael Herz, Chevron Is Dead; Long Live

Chevron, 115 Colum. L. Rev. 1867 (2015) ....... 30

Kristin E. Hickman & Matthew D. Krueger,

In Search of the Modern Skidmore

Standard, 107 Colum. L. Rev. 1235 (2007) ..... 29

Steven Maguire & Joseph S. Hughes, Cong.

Research Serv., Private Activity Bonds:

An Introduction (2018) .....................................

Nina A. Mendelson, Regulatory

Beneficiaries and Informal Agency

Policymaking, 92 Cornell L. Rev.

397 (2007)............................................................. 33

Staff of the Joint Committee on Taxation,

General Explanation of the Tax Reform

Act of 1986, 99th Cong. 1151 (1986) ............... 4, 14

Webster’s New Int’l Dictionary

(2d ed. 1954) ..................................................... 18, 19

IN THE

Supreme Court of the United States

————

INDIAN RIVER COUNTY, FLORIDA; INDIAN RIVER

COUNTY EMERGENCY SERVICES DISTRICT,

Petitioners,

UNITED STATES DEPARTMENT OF TRANSPORTATION;

ELAINE L. CHAO, IN HER OFFICIAL CAPACITY AS

SECRETARY OF TRANSPORTATION; UNDER SECRETARY

OF TRANSPORTATION FOR POLICY; FEDERAL

RAILROAD ADMINISTRATION; PAUL NISSENBAUM,

IN HIS OFFICIAL CAPACITY AS ASSOCIATE

ADMINISTRATOR OF THE FEDERAL RAILROAD

ADMINISTRATION; AAF HOLDINGS LLC,

Respondents.

————

On Petition for a Writ of Certiorari

to the United States Court of Appeals

for the District of Columbia Circuit

————

PETITION FOR A WRIT OF CERTIORARI

————

Indian River County, Florida, and Indian River County Emergency Services District (collectively, “Indian

River County” or the “County”) respectfully petition for

a writ of certiorari to review the judgment of the United

States Court of Appeals for the District of Columbia

Circuit in this case.

OPINIONS BELOW

The court of appeals’ opinion (App., infra, 1a-32a) is

reported at 945 F.3d 515. The district court’s opinion

(App., infra, 35a-115a) is reported at 348 F. Supp. 3d 17.

STATEMENT OF JURISDICTION

The court of appeals entered judgment on December

20, 2019. On March 10, 2020, the Chief Justice extended

the time in which to file a petition for a writ of certiorari

to and including May 18, 2020. No. 19A995. This Court

has jurisdiction under 28 U.S.C. § 1254(1).

STATUTORY PROVISIONS INVOLVED

Relevant provisions of Title 23 and Title 26 of the U.S.

Code are set forth in the appendix. App., infra, 116a127a.

PRELIMINARY STATEMENT

This case reflects an extreme example—bordering on

abdication of the judicial role—of deference to an agency’s informal interpretation of statutory text. It arises in

a case with profound implications for the federal fisc,

redirecting scarce federal resources to fund private

commercial ventures that do not qualify for federal assistance. The statute here authorizes the issuance of taxexempt bonds for a “project which receives Federal

assistance under title 23.” 26 U.S.C. § 142(m)(1)(A)

(emphasis added). Notwithstanding that clear statutory

provision, the court of appeals held that a project can be

said to “receive[ ] Federal assistance” even where it has

never received—and is not qualified to receive—a dime

of federal money.

In reaching that atextual result, the court of appeals

uncritically accepted the Department of Transportation’s

informal position that a “ ‘project * * * receives Federal

assistance under title 23’ ” as long as it “benefits from

assistance under Title 23” provided to others, App., infra,

26a (emphasis added)—even where, as here, the project

does not receive assistance under Title 23 and is not even

eligible for it. The court of appeals thus held that a

proposed passenger railway was eligible for a $2.1 billion

bond allocation to finance more than 160 miles of new

track because a freight railway with an adjacent track

was awarded $9 million in highway funds to improve

railway-highway crossings.

To reach that result, the court invoked Skidmore v.

Swift & Co., 323 U.S. 134 (1944), to defer to the agency’s

informal interpretation. But the court did not itself undertake an effort to engage in statutory construction, let

alone determine, after doing so, that the statute was

ambiguous. Worse, the court of appeals ended up deferring to an agency “construction” that did nothing to reconcile itself with the statute’s clear text. That surrender

of the judiciary’s constitutional role “to say what the law

is” is an extreme example, Marbury v. Madison, 5 U.S.

(1 Cranch) 137, 177 (1803)—and a perfect vehicle for

addressing the disarray in the federal courts over when,

and what is required before, the judiciary may defer to

an agency’s interpretation of the law under Skidmore.

Skidmore instructs courts to give “respect” to an

agency position if the statute is ambiguous and the agency’s position is well-founded, consistent, and persuasive.

323 U.S. at 140. But federal courts are in wide disagreement as to whether, under Skidmore, they need to

employ the customary tools of statutory construction to

interpret the statute for themselves before deciding

whether to defer to the agency’s interpretation, or

whether they may simply declare an agency’s interpretation reasonable without resort to and irrespective of

the statute’s language. This Court cannot long afford to

allow this disagreement to persist. The failure to obey

Skidmore’s prescriptions threatens judicial surrender of

the constitutional responsibility “to say what the law is.”

Marbury, 5 U.S. (1 Cranch) at 177.

STATEMENT

This case arises from the allocation of more than $2

billion dollars in tax-exempt private activity bonds to

finance a passenger railway in Florida.

I. STATUTORY AND REGULATORY BACKGROUND

A. Private Activity Bonds

States and local governments issue private activity

bonds, or “PABs,” to finance non-governmental activities

that putatively benefit the public, such as construction of

private airports, docks, and schools. See 26 U.S.C.

§§ 141(a)-(d), 142(a). Ordinarily, interest on bonds is subject to federal income tax. See id. § 103(b)(1). But

interest on qualified bonds is tax-exempt, which allows

issuers to offer lower interest rates. App., infra, 5a. The

savings can be significant. See Steven Maguire and Joseph S. Hughes, Cong. Research Serv., Private Activity

Bonds: An Introduction 3 (2018).

Because of the financial incentives, Congress has long

been concerned about abuse. See Staff of the Joint Committee on Taxation, General Explanation of the Tax

Reform Act of 1986, 99th Cong. 1151 (1986). During the

1986 overhaul of the Internal Revenue Code, Congress

tightened restrictions on tax-exempt private activity

bonds. See id. at 1152-1156. Congress sought in part to

ensure that “tax-exempt bonds for nongovernmental

persons should be used, to the extent possible, only for an

activity for which financing specifically has been approved.” Id. at 1154.

B. “Qualified Highway or Surface Freight Transfer Facilities” Under 26 U.S.C. § 142

The Internal Revenue Code authorizes issuance of

tax-exempt private activity bonds to finance 15 types of

“exempt” facilities. 26 U.S.C. § 142(a). Those facilities

include airports, docks, “high-speed intercity rail facilities” (i.e., passenger railways where trains can travel in

excess of 150 miles per hour), and—most relevant here—

“qualified highway or surface freight transfer facilities.”

26 U.S.C. § 142(a), (i); see id. § 141(e)(1)(A). At least 95%

of the net proceeds of any bond issued under § 142 must

be “used to provide” those facilities. Id. § 142(a).

The statute establishes eligibility requirements for

each type of facility, including “qualified highway or

surface freight transfer facilities.” 26 U.S.C. § 142(m).1

Under § 142(m), “any surface transportation project

which receives Federal assistance under title 23, United

States Code (as in effect on [August 10, 2005])” is a

qualified facility. Id. § 142(m)(1)(A).

In turn, Title 23—titled “Highways”—authorizes the

federal government to provide financial assistance to various projects, such as highways, bridges, and bus terminals. See 23 U.S.C. §§ 103, 130, 133, 149 (2006).2 A

“project,” for purposes of Title 23, encompasses “any

Enacted as part of the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (“SAFTEA-LU”), Pub. L.

109-59, 119 Stat. 1144 (2005), § 142(m)(2)(A) authorizes the issuance

of up to $15 billion of tax-exempt private activity bonds for such

facilities. The Secretary of Transportation must allocate that

amount among eligible facilities. 26 U.S.C. § 142(m)(2)(C).

Although the petition cites the version of Title 23 in effect on

August 10, 2005, no intervening amendments materially alter the

relevant language.

* * * undertaking eligible for assistance under th[at]

title.” Id. § 101(a)(21) (2006).

One source of eligible projects is the Railway-Highway

Crossings Program. See 23 U.S.C. § 130 (2006). That

program authorizes the Secretary of Transportation to

use funds from the Highway Safety Improvement Program—a federal-state program to improve safety “on

public roads,” id. § 148(b) (2006)—to pay up to the “entire

cost of construction of projects for the elimination of hazards of railway-highway crossings,” id. § 130(a), (e)(1)

(2006).

C. The Department of Transportation’s Implementation of § 142(m)

The Department of Transportation (“DOT”) has not

issued formal regulations construing 26 U.S.C. § 142(m),

but its officials have offered informal views.

For example, the Acting Chief Counsel of the Federal

Highway Administration, Edward V.A. Kussy, authored

a letter concerning § 142(m). App., infra, 128a-132a. The

letter acknowledged that § 142(m) defines a “qualified

highway or surface freight transfer facilit[y]” as “any

surface transportation project [which] receives Federal

assistance under title 23, United States Code.” Id. at

129a. The letter also acknowledged that Title 23 defines

the term “project.” Id. at 130a-131a. But the letter took

the position that an “entire transportation facility” is

eligible for financing through § 142(m) “even though only

a portion of that facility receives Federal assistance

under title 23.” Id. at 130a (emphasis added).

The Kussy letter expressed concern about the consequences of limiting PAB financing to only the portions of

a highway “actually subject to a funding agreement

under 23 U.S.C. § 106.” App., infra, 131a. Doing so, the

letter stated, “would induce State grantees to ‘sprinkle’

title 23 funds to every separate project or contract of an

entire facility to make full use of PAB proceeds.” Ibid.

The letter therefore stated that “any qualified facility

that includes a project funded with Federal-aid highway

funds made available under title 23” may be funded with

tax-exempt PABs, even if other elements of the facility

are not eligible for Title 23 funds. Id. at 132a. As a DOT

official later told Congress, even “a dollar” of Title 23

spending on any portion of a facility renders the whole

facility eligible for tax-exempt PABs. C.A. App. 299.

II. PROCEEDINGS BELOW

A. The Planned Passenger Rail Line

In 2011, AAF Holdings, Inc. (“AAF”) announced plans

to build a privately owned passenger railroad in Florida,

originally named All Aboard Florida and since renamed

Brightline, to connect Miami and Orlando. C.A. App.

4363. In Phase I, AAF added passenger service between

Miami and West Palm Beach. Ibid. Now, in Phase II,

AAF is building a line between West Palm Beach and

Orlando. Ibid.

Over 128 miles of track AAF is building for Phase II

will use an existing railroad right-of-way owned by the

Florida East Coast Railway (“FECR”). C.A. App. 43624363. That right-of-way already contains track that

FECR uses for freight trains. C.A. App. 4362. AAF is

adding a second track for passenger trains alongside the

existing freight track. C.A. App. 4363.

B. The Bond Allocations

In August 2014, AAF applied to DOT for an allocation

of tax-exempt private activity bonds under 26 U.S.C.

§ 142(a)(15) to finance Brightline. App., infra, 12a. That

provision authorizes bonds for a “surface transportation

project which receives Federal assistance under title 23.”

26 U.S.C. §142(m)(1)(A) (emphasis added).

AAF, however, had not received federal funds under

Title 23 to build Brightline. See App., infra, 59a-60a;

C.A. App. 308. AAF thus invoked prior improvements to

highway-railway crossings made by FECR along

FECR’s right-of-way, which were supported by about

$21 million in Title 23 funds. C.A. App. 4496-4510. Those

funds had been “awarded to the FE[C]R, not A[A]F,”

and the improvements were “built to accommodate the

heavy weight requirements of rail freight not passenger.”

C.A. App. 308. But DOT nonetheless provisionally approved AAF’s application for $1.75 billion in tax-exempt

PABs based on FECR’s prior improvements to crossings. C.A. App. 4511-4513. That provisional allocation

was later replaced with a final allocation of $600 million in

tax-exempt bonds for Phase I. C.A. App. 4517-4520.

To finance Phase II, AAF sought another $1.15 billion

in tax-exempt bonds. C.A. App. 4521-4539. AAF represented that its rail line had “received financial assistance

under Title 23 of the U.S. Code” because “approximately

$9 million” of Title 23 funds “ha[d] been invested in the

entire corridor” since the “planning process for All

Aboard Florida started in December 2011.” C.A. App.

4536 (emphasis added). DOT approved that application

as well. App. infra, 12a. It later increased the Phase II

allocation to $2.1 billion, bringing DOT’s total bond allocation to AAF to $2.7 billion. Ibid.

C. District Court Proceedings

1. Petitioner Indian River County is a local government on Florida’s Treasure Coast. The new Brightline

track would traverse the County, bisecting roads and

paths that residents regularly cross. App., infra, 38a;

C.A. App. 1736. Indian River County challenged the

Phase II bond allocation under the Administrative Procedure Act, 5 U.S.C. § 701 et seq. C.A. App. 14. The allocation was arbitrary, capricious, and contrary to law, the

County argued, because AAF’s passenger railroad had

not received federal assistance under Title 23. C.A. App.

15. The construction of AAF’s passenger railroad, the

County alleged, is not even “eligible for funding under

Title 23.” C.A. App. 96.3

Defending the bond allocation, DOT argued that it

“has never required a project sponsor to show that it has

received” Title 23 assistance; DOT instead deems projects eligible merely if they are “directly benefitted by

expenditures of Title 23 funds.” D. Ct. Dkt. 36-1 at 23-24

(emphasis added) (citing a declaration from an agency

official). According to DOT, it had allocated $1.34 billion

in bonds to an intermodal logistics park in Illinois “based

on” Illinois’s plans “to spend Title 23 funds to improve a

bridge near the facility and to widen and reconstruct a

nearby interstate freeway.” App., infra, 135a-136a (emphasis added). DOT also urged it had allocated $1.3 billion in PABs to a Maryland light-rail facility “based on”

Maryland’s “plans to spend $1 million in Title 23 funds to

upgrade” a “shared use trail adjacent to the planned rail

line.” Id. at 135a (emphasis added).

2. The district court granted summary judgment to

the defendants. App., infra, 37a. The court rejected

DOT’s challenge to the County’s standing, finding that

the County’s interests fall within the zone protected by

26 U.S.C. § 142(m). Id. at 47a-52a. But the court upheld

The County’s challenges under the National Environmental Policy

Act, 42 U.S.C. § 4321 et seq., and to DOT authorizations under 26

U.S.C. § 147, see C.A. App. 14, 16, are no longer at issue.

the challenged bond allocation, deferring to DOT’s position under Chevron U.S.A. Inc. v. Natural Resources

Defense Council, Inc., 467 U.S. 837 (1984). App., infra,

45a, 52a. “The court,” it reasoned, “must defer to any

reasonable agency interpretation, which need not be the

one ‘deemed most reasonable by the courts.’ ” Id. at 45a

(internal citations omitted).

The district court accepted DOT’s view that § 142(m)

“allow[s] for PAB allocation to projects based on direct

benefits from” prior “Title 23 spending” on a separate

project by a different entity. App., infra, 59a (emphasis

added). The court thought bond allocations could not

rest on “incidental and unintentional benefit[s].” Id. at

60a. But it held that a facility “receives Federal assistance under title 23” if “funds [a]re disbursed to benefit

the project.” Ibid. Applying that construction, the court

observed that “approximately $9 million” had been disbursed to improve highway crossings on a right of way

that AAF’s rail line would use. Ibid. The court admitted

that the $9 million had been disbursed to “FECR rather

than AAF.” Id. at 59a-60a. And it recognized that the

upgrades were to accommodate “planned increases in

FECR freight traffic.” Id. at 60a. While no evidence

showed that Florida had disbursed Title 23 funds to

FECR to benefit AAF’s passenger line, the court was

“skeptical” that Florida had “disbursed” the “Title 23

funding without the knowledge—if not purpose—of ” doing so. Ibid. The court thus held that AAF’s line had

“received” Title 23 assistance despite it never having received (or been eligible for) a single federal dollar. Ibid.

The court also rejected the argument that “Phase II of

the AAF railway” is not a “project” within the meaning of

§ 142(m). App., infra, 61a. Relying on the Kussy letter,

the court held that the “expenditure of Title 23 funds for

discrete highway-rail crossings * * * sufficed to render

the whole [rail] corridor eligible for PAB allocation.”

Ibid. The Kussy letter’s analysis, the court stated, “reflects a reasonable assessment of congressional intent

and the statutory text.” Ibid. The court did not identify

any statutory provisions that, in its view, supported the

letter’s assessment.

D. Court of Appeals Proceedings

The D.C. Circuit affirmed. App., infra, 4a.4 Like the

district court, the D.C. Circuit acknowledged that, to

qualify for PABs, the project must be one that “receives

Federal assistance.” Id. at 24a. Like the district court,

however, it deferred to DOT’s view that a facility need

not “receive[ ]” a single federal dollar—or even qualify

for federal money—to be a “project which receives

Federal assistance.” Instead, it accepted DOT’s position

that a “ ‘project * * * receives Federal assistance under

title 23’ ” if it merely, “in whole or part[,]” “benefits from

assistance under Title 23.” Id. at 26a (emphasis added).

The D.C. Circuit did not decide whether DOT’s informally expressed view of § 142(m) warrants deference

under Chevron. Instead, the court invoked Skidmore v.

Swift & Co., 323 U.S. 134 (1944). App., infra, 25a. “When

an agency’s interpretation of a statute has been binding

on agency staff for a number of years, and it is reasonable and consistent with the statutory framework,” the

court stated, “deference to the agency’s position is due

under Skidmore.” Ibid. (citing Fed. Express Corp. v.

Holowecki, 552 U.S. 389, 399-402 (2008)).

The court of appeals agreed that the County had standing. App.,

infra, 17a-23a.

The court found that DOT’s position was “consistent”

and “eminently reasonable.” App., infra, 25a-26a. The

court found “persuasive” the Kussy letter’s statement

that a “narrow reading of the word ‘project’ would ‘distort the longstanding way in which facilities are actually

funded’ ” and have other adverse impacts. Id. at 26a.

The court stated that it had “no reason to question”

DOT’s view because the “statute does not require an applicant for PABs to be the direct recipient of Federal

assistance under Title 23; rather, the ‘project’ at issue

must receive assistance under Title 23.” Id. at 26a-27a.

The court, however, did not point to any passage from

the Kussy letter addressing the meaning of “receive.”

Nor did it cite any other legal authority to support the

view that a “project which receives” Title 23 funding

means a “project which benefits from” Title 23 assistance

“received” by a different project.

Having deferred to DOT’s view, the court of appeals

upheld the (now) $2.1 billion bond allocation for Phase II

of AAF’s passenger railroad based on the “benefits” it

enjoyed from $9 million previously disbursed to another

company, FECR, to improve crossings along the right-ofway used by FECR’s freight trains. App., infra, 24a,

27a-28a. Observing that about $2.2 million of the funds

were used to upgrade crossings that AAF’s Phase II rail

line will traverse, the court stated that “the benefits

afforded to” AAF’s rail line “are obvious.” Id. at 24a, 28a.

REASONS FOR GRANTING THE PETITION

The Framers understood that “[i]t is emphatically the

province and duty of the judicial department to say what

the law is.” Marbury v. Madison, 5 U.S. (1 Cranch) 137,

177 (1803). The Constitution commits “to the judiciary

the duty of interpreting and applying” the written laws.

Massachusetts v. Mellon, 262 U.S. 447, 488 (1923). This

case represents an unconscionable abdication of that duty

under Skidmore v. Swift & Co., 323 U.S. 134 (1944).

The statute at issue here sets aside tax-exempt bonds

to finance surface-transportation facilities that are “project[s] which receive[ ] Federal assistance under title 23.”

26 U.S.C. § 142(m)(1)(A) (emphasis added). The statute

is unambiguous: To be eligible, the facility must receive

federal funds under Title 23. The court of appeals

reached the opposite result by deferring to the agency’s

counter-textual view that a facility need not “receive[ ]” a

dollar of federal assistance—or even qualify for federal

money—to be a “project which receives Federal assistance.” It accepted DOT’s position that a “ ‘project * * *

receives Federal assistance under title 23’ ” if it merely

“benefits from assistance under Title 23,” including from

Title 23 assistance afforded other applicants and projects. App., infra, 26a (emphasis added).

The court of appeals thus gave judicial imprimatur to a

$2.1 billion bond allocation to finance the construction of

more than 160 miles of a new passenger railroad based

on putative benefits “received” when $9 million was

awarded to a different railroad to eliminate hazards from

highway-railway crossings on a shared right-of-way.

App., infra, 28a. Under the court’s view, and the agency’s, a facility can be said to “receive” federal assistance

by “benefit[ing] from” federal spending nearby. In this

very case, DOT touted its allocation of $1.3 billion in taxexempt PABs to another rail facility “based on * * * plans

to spend $1 million in Title 23 funds to upgrade” a “trail

adjacent to the planned rail line.” Id. at 135a (emphasis

added).

Worse, the court of appeals did not even suggest the

statute was ambiguous before it embraced the agency’s

effort to rewrite it. The court did not ask what the

statute means using the traditional tools of statutory

construction. It did not inquire what it means to “receive[ ] Federal assistance,” as a matter of ordinary parlance or within Title 23 specifically. The court did not

discuss the legislative context or purpose of the statute—

a statute designed to restrict PABs to a defined set of

eligible facilities for “which financing specifically has

been approved.” Staff of the Joint Committee on Taxation, supra, at 1154. Rather, the court summarized a

letter from an agency official that offered a few policy

rationales for another point altogether, without addressing the relevant statutory terms and structural

considerations. See App., infra, 25a-26a. The court then

declared that the agency’s informal views were sufficiently “long-standing” and “reasonable” to warrant

“deference” under Skidmore. Ibid.

This Court has, in recent years, increasingly emphasized that deference under Chevron U.S.A. Inc. v. Natural

Resources Defense Council, Inc., 467 U.S. 837 (1984), and

Auer v. Robbins, 519 U.S. 452 (1997), do not displace the

judiciary’s responsibility to interpret and apply the text

that Congress has enacted into law. Skidmore deference

is not a license to abdicate those judicial responsibilities,

let alone an exemption from the requirement that courts

apply the traditional tools of statutory interpretation

before deferring to agency views.

Skidmore simply allows courts to give “respect” to an

agency’s construction of an ambiguous statute if the

agency’s position is well-founded, consistent, and persuasive. Skidmore, 323 U.S. at 140. Before deferring to an

agency’s interpretation, a court at least must examine the

statute and conclude that it is ambiguous. Yet the courts

of appeals are in disarray on whether, under Skidmore,

they must interpret the statute themselves before defer-

ring to agencies’ interpretations. The disarray in the federal courts promises to grow. The decision below is an

extreme example of the view that no judicial interpretation is called for or required.

As such, this case highlights the enormity of the constitutional problem that has developed in the lower

courts. Contrary to Congress’s intent, clearly expressed

in statutory text, billions of dollars of federally subsidized

bonds are being allocated to a manifestly ineligible

private commercial enterprise based on the notion that

Skidmore authorizes uncritical deference to an agency’s

informal interpretation without any judicial inquiry into

whether the statute is clear on its face or unambiguous.

Review of this important case from the D.C. Circuit is

warranted.

I. THE COURT OF APPEALS DEFERRED UNDER SKIDMORE TO AN INFORMAL AGENCY INTERPRETATION

THAT CONTRADICTS THE STATUTE’S PLAIN MEANING

In our system of government, “the duty of making

laws” lies with Congress and “the duty of interpreting

and applying them” lies with the courts. Mellon, 262 U.S.

at 488. Statutory interpretation “always” must “begin[ ]

with the text,” Ross v. Blake, 136 S. Ct. 1850, 1856 (2016),

and “end[ ] there as well” if “the statutory language provides a clear answer,” Hughes Aircraft Co. v. Jackson,

525 U.S. 432, 438 (1999). “The judiciary is the final

authority on issues of statutory construction and must

reject administrative constructions which are contrary to

clear congressional intent.” Chevron, 467 U.S. at 843 n.9.

The court below abdicated the judicial duty to apply

unambiguous statutory text. Section 142 authorizes DOT

to allocate tax-exempt private activity bonds only to

facilities that are “projects which receive Federal assistance under title 23.” 26 U.S.C. § 142(m)(1)(A) (emphasis

added). Invoking Skidmore, however, the decision below

deferred to a DOT construction of “projects which receive Federal assistance” so expansive that it encompasses facilities that do not receive, have never received,

and are not eligible for, Title 23 assistance. Rather than

require a project to “receive Federal assistance,” the

court accepted the agency’s view that § 142(m) extends to

any facility that happens to “benefit[ ] from” a project

funded under Title 23. App., infra, 26a. The court thus

upheld a $2.1 billion allocation of tax-exempt bonds to

finance the construction of AAF’s new passenger rail

line—which receives no Title 23 funds—based on the

claim that the line derives “benefits from” $9 million in

Title 23 funds received by another entity to spend on

railway-highway crossing improvements. Id. at 26a-28a.

A. The Court of Appeals’ Decision Defies the

Statute’s Text

1 . It is axiomatic that “ ‘[s]tatutory construction must

begin with the language employed by Congress and the

assumption that the ordinary meaning of that language

accurately expresses the legislative purpose.’ ” Gross v.

FBL Fin. Servs., Inc., 557 U.S. 167, 175 (2009). Here, the

statutory language could not be clearer. Under § 142,

tax-exempt private activity bonds may be issued “to

provide” a “qualified highway or surface freight transfer

facilit[y].” 26 U.S.C. § 142(a)(15). Such facilities include a

“surface transportation project which receives Federal

assistance under title 23.” Id. § 142(m)(1)(A) (emphasis

added). Thus, unless the “surface transportation project

* * * receives Federal assistance” under Title 23, it is not

eligible for a bond allocation. Ibid. Indeed, 95% of the

bond allocation must be dedicated “to provide” the “project which receives Federal assistance under title 23.”

Id. § 142(a), (m)(1)(A).

Section 142’s clear text should have made resolution of

this case straightforward. It was undisputed that no

Title 23 monies were provided to AAF to build the 168.5mile, $2.1 billion stretch of passenger rail line, or otherwise. The only identified projects that received Title 23

funds were improvements, costing about $9 million, that

another company, FECR, made to railway-highway

crossings along its right-of-way. See C.A. App. 309, 4536;

AAF C.A. Br. 34 n.7 (“FECR * * * was the direct

recipient of the Title 23 funds.”). The facility AAF seeks

to provide here, a new passenger railroad, thus was not a

“project which receives Federal assistance under title

23.” 26 U.S.C. § 142(m)(1)(A). Nor were the bonds allocated to AAF dedicated “to provid[ing]” the highwayrailway crossings that had received assistance. Id.

§ 142(a), (m)(1)(A). AAF obtained tax-exempt bonds to finance a facility that does not receive and has never

received a single federal dollar.5

In fact, AAF’s miles of new rail line were not even

eligible to receive Federal assistance under Title 23.

Title 23 defines “project” as an “undertaking eligible for

assistance under this title.” 23 U.S.C. § 101(a)(21) (2006).

It then defines eligible undertakings in detail. See, e.g.,

id. §§ 103, 104, 130, 133, 149 (2006). Section 130, for

example, authorizes the government to cover the cost of

“projects for the elimination of hazards of railway5

Title 23 contains mechanisms to avoid confusion about what is receiving assistance. For every project, “the State transportation department” must execute a “project agreement.” 23 U.S.C. § 106(a)(2)

(2006). Crossing upgrades cannot be confused with a new rail line.

Title 23 recognizes that those are different: While § 130 provides

assistance to crossings only, other provisions provide assistance to

“intercity * * * rail facilities” that meet different requirements. 23

U.S.C. § 601(a)(8)(C) (2006); see id. § 602 (2006).

highway crossings.” Id. § 130(a) (2006). It provides illustrative examples of what is encompassed within those

projects (e.g., “the reconstruction of existing railroad

grade crossing structures”). Ibid. But the bonds here

were not issued to finance projects eligible under § 130;

all of those projects were completed by 2014—three

years before the bonds here were allocated, see App.,

infra, 27a, 40a. The bonds here were issued to finance

the construction of 168.5 miles of new rail line in Phase

II, a project not eligible for funding under Title 23. See

C.A. App. 4524-4525, 4564-4565.

Other statutory provisions confirm that AAF’s passenger railroad is not eligible for federal funding. Section 142 makes “high-speed intercity rail facilities” eligible. 26 U.S.C. § 142(a)(11) (emphasis added). But that

category is limited to passenger rail lines supporting

speeds that exceed 150 miles per hour. Id. § 142(i)(1).

AAF’s lower-speed passenger line does not qualify. Had

Congress wished to finance such lower-speed lines

through tax-exempt bonds, “Congress could easily have

said so.” Kucana v. Holder, 558 U.S. 233, 248 (2010).

But it did not. To the contrary, Congress deliberately

excluded facilities like AAF’s lower-speed line.

2. The court of appeals reached the opposite result

only by “defer[ring]” to DOT’s view that a facility

“receives” Title 23 funding if it merely “benefits from

assistance under Title 23.” App., infra, 26a. As a matter

of ordinary English, the term “receives” does not mean

“benefits.” To “receive” something means to “take in

one’s hand, or into one’s possession,” or “to take delivery

of (a thing) from another.” The Compact Oxford English

Dictionary 1524 (2d ed. 1996); see Webster’s New Int’l

Dictionary 2076 (2d ed. 1954) (“To take, as something

that is offered, * * * paid, or the like”; “To come into

possession of, get, acquire, or the like”). By contrast, to

“benefit” is capacious. It means “[t]o receive benefit,” “to

get advantage,” or “to profit” from something. Oxford

English, supra, at 126; see Webster’s, supra, at 253 (“To

gain advantage; to receive benefit; to profit”). The concepts are different. If a city spends money on a beautification project, local merchants and their shops might

“benefit” from that. But no ordinary English speaker

would say they or their shops “received” city funds. Nor

would Congress. The court of appeals did not even

attempt to explain why the word “receives” can be

rewritten as “benefits from.”

Nor did the court explain how AAF’s construction of a

new railroad line is a “project” that “receives” funding

“under title 23.” The term “project” has a specific

meaning within Title 23, referring to “undertaking[s]

eligible for assistance under th[at] title.” 23 U.S.C.

§ 101(a)(21) (2006) (emphasis added). Those undertakings include the construction of railway-highway crossings; they do not include building rail lines like AAF’s.

See pp. 17-18, supra. Section 142(m), moreover, requires

that the facility receive funding “under”—i.e., “ ‘by

reason of the authority of ’ ”—Title 23. Nat’l Ass’n of

Mfrs. v. Dep’t of Def., 138 S. Ct. 617, 630 (2018). An

undertaking that is not eligible for Title 23 money cannot

possibly be said to receive assistance “under” Title 23.

The court also did not pause to grapple with § 142’s

“place in the overall statutory scheme.” Davis v. Mich.

Dep’t of Treasury, 489 U.S. 803, 809 (1989). DOT’s interpretation of § 142 is irreconcilable with the entire statutory framework. Section 142 delineates specific facilities

eligible for tax-exempt bonds. See 26 U.S.C. § 142(a).

Similarly, Title 23 distinguishes among “projects for the

elimination of hazards of railway-highway crossings,” 23

U.S.C. § 130(a) (2006), “project[s] for intercity * * * rail

facilities” meeting particular requirements, id.

§§ 601(a)(8)(C), 602 (2006), and other undertakings. But

DOT’s view, adopted below, renders those careful

restrictions illusory: It authorizes PAB allocations for

activities that are not projects eligible for Title 23

assistance so long as they “benefit[ ] from” assistance

provided to eligible projects.

DOT’s position in the courts below underscores the

extraordinary breadth of its view embraced by the court

of appeals. Defending the bond allocation here, DOT

touted that it had allocated $1.3 billion in PABs to a rail

line in Maryland “based on * * * plans to spend $1 million

in Title 23 funds to upgrade” a “trail adjacent to the

planned rail line.” App., infra, 135a (emphasis added).

DOT stated that it had allocated $1.34 billion in bonds to

an intermodal logistics park “based on” state plans “to

spend Title 23 funds to improve a bridge near the

facility” and “a nearby interstate freeway.” Id. at 135a136a (emphasis added).6 But § 142(m) does not authorize

the issuance of tax-exempt bonds for facilities that

happen to be “nearby” or “adjacent” to projects receiving

Title 23 assistance. It requires, in language that could

not be clearer, that the facilities actually “receive[ ]” Title

23 assistance.

By rewriting the statutory language, DOT and the

court of appeals denuded it of all intended meaning. The

resulting construction of § 142(m) is so broad that billions

of dollars in tax-exempt bonds can be allocated to

The bond allocation there was under 26 U.S.C. § 142(m)(1)(C),

which likewise requires the facility to “receive[ ] Federal assistance

under either title 23 or title 49.”

facilities that do not receive and are not even eligible to

receive Title 23 funding. In this case, for example, it

permitted DOT to allocate $1.15 billion—later increased

to $2.1 billion—in bonds to build a 168.5-mile stretch of

passenger rail line based on $9 million disbursed to a

different company, a freight-train operator, to improve a

few dozen railway-highway crossings along the same

right-of-way.

B. The Court of Appeals Converted Skidmore

Deference into Judicial Abdication

The court of appeals justified its atextual holding by

invoking Skidmore. App., infra, 25a-26a. The court,

however, did not construe the relevant text, let alone find

it ambiguous, before resorting to deference. Nor did the

court make any effort to resolve any putative ambiguity

through the traditional “devices of judicial construction.”

Gen. Dynamics Land Sys., Inc. v. Cline, 540 U.S. 581,

600 (2004). Instead, the court pronounced DOT’s view of

§ 142(m) to be “long-standing,” “consistent,” and “eminently reasonable.” App., infra, 25a-26a.

But Skidmore does not permit courts to so completely

jettison customary principles of interpretation or

abdicate their duty to say what the law is. In reading

Skidmore to sanction abandonment of statutory text—or

even an effort to construe that text—the court of appeals

fundamentally erred. This Court’s decision in Skidmore

recognizes that “respect” may be accorded an agency’s

views of a statute if those views have the “power to

persuade.” 323 U.S. at 140. But that power is not a

power to persuade in the abstract, but rather under the

language of the statute. Nowhere does Skidmore abrogate the constitutional imperative that courts construe

statutory text, a process that begins and ends with

statutory text if that “statutory language provides a clear

answer.” Hughes, 525 U.S. at 438. “Even for an agency

able to claim all the authority possible under Chevron,

deference to its statutory interpretation is called for only

when the devices of judicial construction have been tried

and found to yield no clear sense of congressional intent.”

Gen. Dynamics, 540 U.S. at 600 (citing INS v. CardozaFonseca, 480 U.S. 421, 446-447 (1987)). Nothing less is

tolerable under Skidmore’s less deferential standard.

See ibid.

Skidmore, moreover, permits a court to “follow an

agency’s rule only to the extent it is persuasive.” Gonzales v. Oregon, 546 U.S. 243, 269 (2006). Courts thus ask

whether the agency has considered “specific provisions”

of the statute, “the thoroughness evident in its consideration, the validity of its reasoning, [and] its consistency with earlier and later pronouncements.” Skidmore,

323 U.S. at 140. But certain considerations matter more

than others. An agency’s failure to consider “specific

provisions of [a] statutory scheme” should be disqualifying even if that failure to consider the text is

“longstanding.” Univ. of Tex. Sw. Med. Ctr. v. Nassar,

570 U.S. 338, 360-361 (2013). A consistent and longstanding error is still an error. See Allentown Mack Sales &

Serv., Inc. v. NLRB, 522 U.S. 359, 374 (1998).

In this case, the court did not even ask or consider

whether DOT had anchored its position in the statute’s

text and structure. Instead, the court recited the Kussy

letter’s statement that the agency’s construction would

avoid undesirable outcomes, crediting (without explanation) the letter’s assertion “that a narrow reading of the

word ‘project’ would ‘distort the longstanding way in

which facilities are actually funded’ ” and “ ‘create needless red tape.’ ” App., infra, 25a-26a. Such “policy arguments,” however, cannot overcome a statute’s clear text.

Sebelius v. Cloer, 569 U.S. 369, 381 (2013). And while the

court echoed the letter’s statement that the agency’s

reading accorded with Congress’s intent, App., infra,

26a, the court nowhere explained why it so believed,

much less why the statute’s text did not “ ‘accurately express[ ] the legislative purpose,’ ” Gross, 557 U.S. at 175.7

Moreover, the Kussy letter does not even address

what it means to “receive[ ] Federal assistance under title

23,” 26 U.S.C. § 142(m)(1)(A) (emphasis added), as the

court’s description makes clear, see App., infra, 26a. The

letter nowhere suggests that a project that “benefits”

from “nearby” federally funded improvements can be

said to “receive” Federal assistance. The letter merely

explains why DOT believes tax-exempt bonds can be

issued to support an entire facility if part of that facility

constitutes a “project funded with Federal-aid highway

funds.” Id. at 128a-132a. The Kussy letter cannot support the contention that, because FECR was awarded

funds to improve crossings along FECR’s right-of-way,

Brightline—which never received a federal dollar under

Title 23—can be deemed to have “received Federal assistance.” The Kussy letter’s failure to address key parts of

§ 142’s “text and design” deprives it of any “power to

persuade” on the actual issue—the meaning of “receives

Federal assistance.” Gonzales, 546 U.S. at 269-270.

The court’s textual analysis consisted of its conclusory

observation that it had “no reason to question” the

agency’s position “because the statute does not require

The Kussy letter cites 23 U.S.C. § 145, App., infra, 130a, but that

provision has no bearing on the phrase a “project which receives

Federal assistance under title 23.” It says the States can “determine

which projects shall be federally financed” under Title 23. 23 U.S.C.

§ 145(a) (2006).

an applicant for PABs” (like AAF) “to be the direct

recipient of Federal assistance.” App., infra, 26a-27a.

That misses the point. The issue is not whether Title 23

funds were “directly” or “indirectly” spent on AAF’s rail

line. The issue is whether AAF’s enterprise to build a

new rail line “receives” funds under Title 23. It does

not—and never has.

The court of appeals did emphasize that DOT’s position was “long-standing” and “consistent.” App., infra,

25a-26a. That alone does not make a position “persuasive.” See p. 22, supra. Moreover, DOT’s view that

“receives” means “benefits from” does not trace to the

Kussy letter, which says no such thing. It traces to a

declaration DOT filed in 2015 in related litigation over

the bond allocation for Phase I of AAF’s rail line. See

D. Ct. Dkt. 36-1 at 24 (citing D. Ct. Dkt. 19-2 in Martin

County v. Dep’t of Transp., No. 1:15-cv-00632-CRC

(D.D.C.) (filed May 15, 2015)). That DOT’s view traces

not to the statutory text, or even the Kussy letter, but

instead to a recent DOT litigation position, should have

rendered it utterly unpersuasive. See E.I. Du Pont De

Nemours & Co. v. Smiley, 138 S. Ct. 2563 (2018) (Gorsuch, J., statement respecting the denial of certiorari).

Regrettably, the decision below is just one example—

albeit an extreme one—of a now-familiar pattern: Courts

regularly invoke Skidmore to avoid judicial interpretation of a statute entirely. The result is deference to

agency interpretations that are not even arguably

persuasive. Although the court of appeals acknowledged

that an agency’s views under Skidmore are only “entitled

to a level of deference commensurate with their power to

persuade,” App., infra, 25a, its opinion relied on an impoverished concept of persuasion. The court did not

interrogate at all the “validity” of DOT’s reasoning or ask

whether DOT employed the sort of considerations a court

would in exercising independent judgment. Skidmore,

323 U.S. at 140. The court did not question the “thoroughness” of a letter that was silent on the critical statutory phrase. Ibid. Nor did the court even begin to exhaust the full suite of traditional interpretive tools to

determine the statute’s meaning. The court did little

more than recite the operative language from Skidmore

and declare that the agency’s informal policy rationale

for its atextual interpretation was “eminently reasonable.” App., infra, 25a-26a. That cannot be what Skidmore contemplates. If it is, the judiciary will have little

role to play in the interpretation and application of

congressional statutes.

II. AS THIS CASE ILLUSTRATES, THE LOWER FEDERAL

COURTS ARE IN DISARRAY OVER SKIDMORE

The uncritical deference the court of appeals extended

to DOT’s informal position below is tantamount to abdication of the court’s role. Unfortunately, the decision is

not an outlier. It is one (particularly egregious) example

of disarray in the lower federal courts regarding

Skidmore deference—disarray fueled in part by this

Court’s inconsistent guidance. As this Court has recognized, Skidmore “has produced a spectrum of judicial

responses, from great respect at one end, to near

indifference at the other.” United States v. Mead Corp.,

533 U.S. 218, 228 (2001) (citations omitted). This Court’s

clarification and correction is necessary.

A. This Court’s Guidance Regarding Skidmore

Has Been Inconsistent

Some of this Court’s decisions emphasize that judges

must “decide cases based on their independent judgment

and ‘follow [an] agency’s [view] only to the extent it is

persuasive.’ ” Kisor v. Wilkie, 139 S. Ct. 2400, 2447

(2019) (Gorsuch, J., concurring) (quoting Gonzales, 546

U.S. at 269) (second brackets in original); see, e.g.,

Nassar, 570 U.S. at 361-362; Raymond B. Yates, M.D.,

P.C. Profit Sharing Plan v. Hendon, 541 U.S. 1, 16

(2004). Put another way, Skidmore requires a court to

“proceed to determine the meaning of the [statute] the

old-fashioned way: * * * ‘decid[ing] for [itself ] the best

reading.’ ” Miller v. Clinton, 687 F.3d 1332, 1342 (D.C.

Cir. 2012); see Warner-Lambert Co. v. United States, 407

F.3d 1207, 1209 (Fed. Cir. 2005); Landmark Legal

Found. v. IRS, 267 F.3d 1132, 1136 (D.C. Cir. 2001).

Nassar illustrates that approach. There, the Court

considered the “plain language,” “structure,” and “design” of Title VII to decide whether the statute required

but-for causation. 570 U.S. at 352-353. Only then did it

consider agency views. See id. at 361-362. Although the

agency had a “longstanding” view that found support in

lower-court decisions, the Court rejected it as unpersuasive. Id. at 360-361. One of the agency’s rationales,

the Court explained, “fail[ed] to address the specific

provisions of this statutory scheme,” and another had

“circular” reasoning. Id. at 361-362. The longevity of the

agency’s view was secondary to what the statute said.

At other times, this Court has provided very different

guidance. In Federal Express Corp. v. Holowecki, 552

U.S. 389 (2008), this Court “defer[red]” under Skidmore

to the agency’s reading of the statutory term “charge.”

Id. at 395, 402. The statute “d[id] not define charge,” and

the agency’s regulations lacked sufficient content. Id. at

395. As the dissent noted, however, the Court did not

resolve the uncertainty by employing the usual presumption that undefined terms carry their ordinary

meaning. See id. at 408-409 (Thomas, J., dissenting)

(citing FDIC v. Meyer, 510 U.S. 471, 476 (1994)). Nor did

it ask whether the agency had conducted a similar

analysis or found the statute’s best reading. Instead, the

Court “defer[red]” to an informal agency position (despite admitted inconsistencies in application) because it

had “been binding on [agency] staff for at least five

years” and was “consistent with the design and purpose”

of the statute. Id. at 399, 402 (majority opinion).

Holowecki’s emphasis on longevity and consistency

with general goals can be read—as it was in this case—to

suggest that agency views deserve deference without

resort to “regular interpretive method[s]” to resolve statutory ambiguities. Gen. Dynamics, 540 U.S. at 600. In

“defer[ring],” moreover, this Court suggested that, under

Skidmore, courts are absolved from seeking the best

reading of a statute. When a statute contains a gap, the

Court stated, an “agency may choose among reasonable

alternatives.” Holowecki, 552 U.S. at 403. While there

might be “reasonable” alternatives to the agency’s position, the statute’s implementation was, in the Court’s

view, “a matter for the agency to decide.” Id. at 403, 407.

That decision could be read to depart from the view that

Skidmore requires courts to employ their independent

judgment, permitting deference to an agency’s considered view only after traditional interpretive tools fail to

supply answers.

Holowecki does not stand alone. In Alaska Department of Environmental Conservation v. EPA, 540 U.S.

461 (2004), the Court accepted the Environmental Protection Agency’s view that it had authority to review

state permitting decisions, again without examining the

ordinary meaning of the statutory terms—“requirement”

and “determine.” Id. at 488-495; compare id. at 503-517

(Kennedy, J., dissenting). The Court, moreover, describ-

ed Skidmore in terms that contemplate a diminished

judicial role. Skidmore, the Court stated, permits deference to agency constructions that are “permissible” and

“rational.” Id. at 493 (majority opinion). As in Holowecki, the decision nowhere suggested that courts should

search for the best reading of a statute. Rather, as the

dissent observed, the majority opinion “hid behind Chevron’s vocabulary” of reasonableness while invoking

Skidmore’s “less deferential” standard. Id. at 517-518

(Kennedy, J., dissenting).

B. This Court’s Inconsistent Decisions Have Contributed to Disarray in Lower Federal Courts

Lacking clear guidance from this Court, lower courts

have taken the example of Holowecki—and Skidmore

deference—to their unintended extremes. Here, for

example, the court of appeals seized on Holowecki’s

reasoning that “deference to [an] agency’s position is

due” when it is “binding on agency staff for a number of

years, and it is reasonable and consistent with the statutory framework.” App., infra, 25a (citing Holowecki, 552

U.S. at 399-402). The court below then applied that

formulation to avoid independent, judicial consideration

of statutory text and structure. The court of appeals

instead focused almost exclusively on DOT’s policy

rationales, without attempting to determine for itself

whether DOT’s informal views captured the statute’s

unambiguous meaning. See pp. 22-23, supra.

Other federal courts have likewise understood Skidmore to allow courts to emphasize consistency, longevity,

or policy to the virtual exclusion of statutory text. See,

e.g., Seaview Trading, LLC v. Comm’r, 858 F.3d 1281,

1287 (9th Cir. 2017) (deferring to agency’s “consistent

position”); Unified Turbines, Inc. v. U.S. Dep’t of Labor,

581 F. App’x 16, 18-19 (2d Cir. 2014); Cervantes v. Hol-

der, 597 F.3d 229, 234-235 & n.7 (4th Cir. 2010) (deferring

to agency that “consistently adhered to that reading”);

Ammex, Inc. v. United States, 367 F.3d 530, 535 (6th Cir.

2004). Some decisions even declare that “obviously some

level of deference” is due an agency’s longstanding view.

Ammex, 367 F.3d at 535.

Consistent with that understanding, some courts

proceed directly from the fact that the statute leaves a

term or phrase undefined to deferring to an agency construction, without themselves examining the language to

determine the statute’s meaning. See, e.g., EstradaRodriguez v. Lynch, 825 F.3d 397, 404-406 (8th Cir.

2016); Ammex, 367 F.3d at 535. For example, in United

States v. Miller, 833 F.3d 274 (3d Cir. 2016), the Third

Circuit noted that the relevant statutory phrase, “in the

business [of advising others],” was not defined and that

the court had not “previously interpreted the phrase.”

Id. at 281. But rather than construe that phrase, the

court treated a definition from an SEC interpretive release—a release that “represent[ed] only the views of the

SEC staff ”—as controlling. Ibid. Without analyzing the

statutory language, the court declared that “ ‘[n]o clearer

alternatives’ ” were within its “ ‘authority or expertise to

adopt.’ ” Ibid. (quoting Holowecki, 552 U.S. at 402).8

Scholars have remarked on lower courts’ inconsistent approaches to

Skidmore. “It is apparent,” a leading article states, that courts “lack

a coherent conception of how Skidmore’s sliding scale should

function.” Kristin E. Hickman & Matthew D. Krueger, In Search of

the Modern Skidmore Standard, 107 Colum. L. Rev. 1235, 1291

(2007); see id. at 1271 (courts split over whether Skidmore requires

exercise of “independent judgment”); Lisa Schultz Bressman, How

Mead Has Muddled Judicial Review of Agency Action, 58 Vand. L.

Rev. 1443, 1464-1465 (2005). A common misconception, another observes, is that Skidmore simply requires “ ‘weak deference’ ” and

These decisions illustrate how far courts have departed from the judicial role that Skidmore contemplates.

The courts have “become habituated to defer to the interpretive views of executive agencies, not as a matter of

last resort but first.” Valent v. Comm’r of Soc. Sec., 918

F.3d 516, 525 (6th Cir.) (Kethledge, J., dissenting)

(discussing Chevron), cert. dismissed sub nom. Valent v.

Saul, 140 S. Ct. 450 (2019). The judicial role begins with

the court’s interpretation of the statute, and urges

deference to the agency’s interpretation only to the

extent that interpretation has power to persuade. This

Court’s intervention is needed to clarify Skidmore’s injunction that courts must employ the tools of statutory

construction first to determine the statute’s meaning,

thereafter deferring only insofar as an agency’s interpretation is persuasive.

III. THE QUESTION PRESENTED IS IMPORTANT AND

RECURRING

Whether Skidmore requires courts to independently

interpret the statute—employing the usual tools of statutory interpretation—before invoking deference is an important and recurring question. Skidmore holds a prominent place in the law. Courts of appeals have invoked

Skidmore more than 1,300 times in the 19 years since this

Court’s Mead decision revitalized Skidmore. District

courts have cited Skidmore more than 1,700 additional

Chevron “ ‘strong deference.’ ” Michael Herz, Chevron Is Dead;

Long Live Chevron, 115 Colum. L. Rev. 1867, 1879 & n.59 (2015).

That “misconceives the distinction as one of degree when it is in fact

a difference in kind.” Ibid.

times. The subject matter of the decisions applying Skidmore is as varied as federal agencies themselves.9

The frequency with which courts confront questions

about Skidmore’s meaning and scope is destined to accelerate. Last term, this Court “reinforc[ed]” significant

“limits” on Auer deference. Kisor, 139 S. Ct. at 2415; see

id. at 2415-2418. The Court made clear, for example, that

courts “must make a conscientious effort to determine,

based on indicia like text, structure, history, and purpose,

whether the regulation really has more than one

reasonable meaning.” 139 S. Ct. at 2423-2424. But the

Court did not foreclose courts from applying Skidmore in

lieu of Auer deference, see Christopher v. SmithKline

Beecham Corp., 567 U.S. 142, 159 (2012) (taking that

approach)—now an increasingly likely scenario.

How courts apply Skidmore has predictably casedispositive effects. When courts exercise independent

judgments to determine the meaning of statutes, agen9

See, e.g., Air Transp. Ass’n of Am., Inc. v. FAA, 921 F.3d 275, 279

(D.C. Cir. 2019) (FAA construction of airport-development grant assurance statute); Hayes v. Harvey, 903 F.3d 32, 46 (3d Cir. 2018)

(HUD construction of § 8 housing statute); Sec’y of Labor v. Am.

Future Sys., Inc., 873 F.3d 420, 426 (3d Cir. 2017) (DOL construction

of FLSA); Baylor Cty. Hosp. Dist. v. Price, 850 F.3d 257, 264 (5th

Cir. 2017) (HHS construction of Medicare Rural Hospital Flexibility

Program Act); Delaware v. Surface Transp. Bd., 859 F.3d 16, 20

(D.C. Cir. 2017) (Board construction of Interstate Commerce

Commission Termination Act of 1995); Varsity Brands, Inc. v. Star

Athletica, LLC, 799 F.3d 468, 478 (6th Cir. 2015), aff ’d on other

grounds, 137 S. Ct. 1002 (2017) (Copyright Office construction of

(BIA construction of Immigration and Nationality Act); McMaster v.

United States, 731 F.3d 881, 892 (9th Cir. 2013) (DOI construction of

federal California Wilderness Act); Lopez v. Terrell, 654 F.3d 176,

185 (2d Cir. 2011) (BOP construction of good-time-credit statute).

cies prevail about 38.5% of the time. See Kent Barnett &

Christopher J. Walker, Chevron in the Circuit Courts,

116 Mich. L. Rev. 1, 6 (2017). The more deference courts

extend to agencies, the more agencies win, with the win

rate increasing to 77.4% under Chevron. Ibid. Whether

Skidmore requires courts to search for the best reading

of a statute or apply a more deferential standard under

which “reasonable” (or even atextual) views can prevail

thus makes an enormous difference—as this case bears

out.

The issue is also critical to the separation of powers.

The Constitution gives courts the authority—and responsibility—to interpret the law. See Marbury, 5 U.S. (1

Cranch) at 177. Doctrines that allow for consideration of

agencies’ views must be kept in check to preserve the

constitutional structure. This Court has “reinforc[ed]”

traditional constraints on deference, even for laws entrusted to agencies for administration. Kisor, 139 S. Ct.

at 2415. Chevron is explicit that courts must exhaust the

“traditional tools of statutory construction.” 467 U.S. at

843 n.9. “[D]eference is not due” to an agency’s construction, this Court has held, unless the application of

those tools leaves “an unresolved ambiguity.” Epic Sys.

Corp. v. Lewis, 138 S. Ct. 1612, 1630 (2018); see CardozaFonseca, 480 U.S. at 446-447. Similarly, in the context of

Auer deference, courts must conclude a regulation is

“genuinely ambiguous” and “exhaust all the ‘traditional

tools’ of construction” before deferring to agencies’

positions. Kisor, 139 S. Ct. at 2415.

Those limits, however, serve to constrain little if

courts do not similarly scrutinize informal agency interpretations. Agencies will be discouraged from undertaking laborious notice-and-comment processes to

promulgate formal rules if courts defer to informal

agency positions without scrutinizing them. Cf. Nina A.

Mendelson, Regulatory Beneficiaries and Informal

Agency Policymaking, 92 Cornell L. Rev. 397, 408, 420433 (2007). And they will prefer to “promulgate vague

and open-ended regulations that they can later interpret

as they see fit,” using informal positions to do so.

Christopher, 567 U.S. at 158.

This case illustrates the stark consequences that

result when Skidmore is invoked to disregard statutory

text. Statutes reflect deliberate and deliberated legislative judgments about how to allocate scarce resources

and balance competing public interests. Here, Congress

enacted a law that provides $15 billion in tax-exempt—

essentially taxpayer-subsidized—bonds for a carefully

defined list of projects. See 26 U.S.C. § 142(m). AAF’s

passenger rail line is not among them. Whatever DOT’s

reasons for wanting to finance that rail line, it evaded the

statute to allocate $2.7 billion in bonds to an undertaking

that Congress made ineligible—depriving eligible and

worthy facilities of more than $2 billion dollars in taxexempt bonds that Congress intended to make available

to them.10

CONCLUSION

Because AAF’s railroad did not receive and has never

received federal assistance under Title 23, it is ineligible

for tax-exempt private activity bonds under 26 U.S.C.

§ 142(m)(1)(A). The court of appeals’ contrary decision

rests on a conception of Skidmore deference that all but

The disarray is particularly intolerable given that many civil

statutes for which agencies may seek Skidmore deference also carry

criminal consequences. See Kasten v. Saint-Gobain Performance

Plastics Corp., 563 U.S. 1, 16 (2011); Gonzales, 546 U.S. at 261-262.

eliminates the judicial role in construing the law. It

represents an egregious example of the disarray in the

lower federal courts over Skidmore. Neither it, nor the

disarray it reflects, can be allowed to stand. The petition

should be granted, so that the Court can clarify what

courts must do before deferring to an agency’s informal

interpretation under Skidmore—and prevent displacement of the judiciary’s constitutional duty to construe

statutes and to say what the law is.

Respectfully submitted.

DYLAN REINGOLD

County Attorney

INDIAN RIVER COUNTY

1801 27th St.

Vero Beach, FL 32960

J. MICHAEL LUTTIG*

728 West Lionshead Cir.

Vail, CO 81657

Admitted only in Virginia and

the District of Columbia

JEFFREY A. LAMKEN

Counsel of Record

JAMES A. BARTA

MOLOLAMKEN LLP

The Watergate, Suite 500

600 New Hampshire Ave., N.W.

Washington, D.C. 20037

(202) 556-2000

jlamken@mololamken.com

LAUREN F. DAYTON

MOLOLAMKEN LLP

430 Park Ave., 6th Floor

New York, NY 10022

(212) 607-8160

ELIZABETH K. CLARKE

MOLOLAMKEN LLP

300 N. LaSalle St., Suite 5350

Chicago, IL 60654

(312) 450-6700

Counsel for Petitioners

MAY 2020

APPENDIX

APPENDIX A

UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

————

No. 19-5012

————

INDIAN RIVER COUNTY, FLORIDA AND INDIAN RIVER

COUNTY EMERGENCY SERVICES DISTRICT,

Appellants,

UNITED STATES DEPARTMENT OF

TRANSPORTATION, ET AL.,

Appellees.

————

Appeal from the United States District Court

for the District of Columbia

(No. 1:18-cv-00333)

————

OPINION

————

Argued September 24, 2019

Decided December 20, 2019

————

Philip E. Karmel argued the cause and filed the briefs

for appellants.

(1a)

Steven L. Brannock and Tracy S. Carlin were on the

brief for amicus curiae Indian River Neighborhood

Association in support of appellants.

Joan M. Pepin, Attorney, U.S. Department of Justice,

argued the cause for federal appellees. With her on the

brief were Jeffrey Bossert Clark, Assistant Attorney

General, Eric Grant, Deputy Assistant Attorney General,

Kevin W. McArdle, Attorney, Steven G. Bradbury,

General Counsel, U.S. Department of Transportation,

Paul M. Geier, Assistant General Counsel for Litigation

and Enforcement, and Charles E. Enloe, Trial Attorney.

Eugene E. Stearns argued the cause for intervenorappellee. With him on the brief were David H. Coburn,

Cynthia L. Taub, and Matthew Buttrick.

————

Before: GARLAND, Chief Judge, SRINIVASAN, Circuit

Judge, and EDWARDS, Senior Circuit Judge.

Opinion for the Court filed by Senior Circuit Judge

EDWARDS.

————

EDWARDS, Senior Circuit Judge: In 2011, Intervenor

AAF Holdings LLC (“AAF”) announced plans to construct and operate express passenger railway service

connecting Orlando and Miami, Florida. Phase I of the

All Aboard Florida Intercity Passenger Rail Project (also

“AAF Project” or “Project”), connecting Miami to West

Palm Beach, has been completed. Phase II, which will

extend service to Orlando, is presently under construction. In 2014, AAF applied for an allocation of taxexempt qualified Private Activity Bond (“PAB”) authority to partially finance Phase II of the Project. In

December 2017, the Department of Transportation

(“DOT”) allocated $1.15 billion in tax-exempt PABs to be

issued by the Florida Development Finance Corporation

to finance Phase II of the Project. AAF, the sponsor of

the Project, received the proceeds of the bond sales to

fund the Project and is responsible for repaying them.

In February 2018, Indian River County, the Indian

River County Emergency Services District (together

“County” or “Appellant”), and other parties filed a complaint in the District Court claiming that DOT exceeded

its authority under 26 U.S.C. § 142(m)(1)(A) when it

allocated $1.15 billion in PABs to fund Phase II of the

AAF Project. The complaint further alleged that the

allocation violated 26 U.S.C. § 147(f ), which requires

certain state or local governmental approvals before taxexempt PABs may be issued. Finally, the complaint

challenged the adequacy of the Environmental Impact

Statement (“EIS”) prepared by the Federal Railway

Administration (“FRA”) pursuant to the requirements of

the National Environmental Policy Act (“NEPA”). See

42 U.S.C. § 4332. With respect to all of its claims, Indian

River County raised causes of action under the

Administrative Procedure Act (“APA”). See 5 U.S.C.

§ 706(2)(A) (an agency action may be set aside if found “to

be . . . arbitrary, capricious, an abuse of discretion, or

otherwise not in accordance with law”); id. § 706(2)(C) (an

agency action may be set aside if it is “in excess of

statutory jurisdiction, authority, or limitations, or short

of statutory right”). On December 24, 2018, the District

Court rejected Appellant’s claims and granted summary

judgment to the federal defendants. Indian River Cty. v.

Dep’t of Transp., 348 F. Supp. 3d 17 (D.D.C. 2018).

The District Court ruled that because the complaint

arguably fell within the zone-of-interests protected or

regulated by § 142, Indian River County was among the

class of parties authorized by Congress to pursue a cause

of action under the APA. However, the District Court

found no merit in Indian River County’s claims. The

court ruled that the disputed Project constituted a

“surface transportation project” under § 142(m)(1)(A), as

required for DOT’s allocation of PABs qualifying for taxexempt status. The District Court also ruled that the use

of the disputed PABs did not violate 26 U.S.C. § 147(f ).

And, finally, the District Court ruled that the FRA’s

preparation of the EIS as required by NEPA was neither

arbitrary, nor capricious, nor an abuse of discretion, nor

otherwise in violation of the law. On appeal, Indian River

County challenges only the District Court’s rulings with

respect to § 142 and NEPA. DOT and Intervenor AAF,

in turn, contend that Appellant’s claims should be

dismissed because its interests are not within the zoneof-interests protected by 26 U.S.C. § 142(m). In the

alternative, they seek affirmance of the District Court’s

judgments on the merits.

For the reasons explained below, we affirm the

judgments of the District Court. We agree that Indian

River County’s interests are within the zone-of-interests

protected by 26 U.S.C. § 142 and, therefore, the

complaint raises claims that are cognizable under the

APA. However, we hold that DOT permissibly and

reasonably determined that the Project qualifies for taxexempt PAB financing under 26 U.S.C. § 142(m). We also

hold that the EIS for the Project adheres to the

commands of NEPA.

I. BACKGROUND

A. Statutory Background

1. Private Activity Bonds

Under 26 U.S.C. § 103(a) of the Internal Revenue

Code (“Code”), interest on state or local bonds is

generally not subject to federal taxation. 26 U.S.C.

§ 103(a). However, a PAB issued by state or local governments to finance private activities is not tax-exempt

unless it is a “qualified bond.” Id. § 103(b)(1). As the

District Court explained:

Congress has authorized interest earned on certain

types of PABs to be exempted from federal

taxation. See 26 U.S.C. §§ 103, 141. Because this

exemption allows the bondholder to keep all the

interest, bond issuers can sell the bond at a lower

interest rate. . . .

Section 141 outlines certain types of PABs that can

constitute “qualified bond[s],” including “exempt

facility bond[s].” Id. § 141(e)(1)(A). Under § 142(a),

a bond is an “exempt facility bond” if at least 95% of

proceeds from its issue are used to finance one of

fifteen enumerated categories of projects. Id.

§ 142(a). One such category is “qualified highway or

surface freight transfer facilities.” Id. § 142(a)(15).

Section 142(m) defines “qualified highway or

surface freight transfer facilities,” id. § 142(m)(1),

and authorizes the Secretary of Transportation, “in

such manner as [she] determines appropriate,” id.

§ 142(m)(2)(C), to allocate up to $15 billion of PAB

authority to eligible projects, id. § 142(m)(2)(A).

Put simply, Congress has enacted a mechanism

through which the Secretary can allocate tax

exemptions to bonds used to finance construction

of, or improvements to, certain types of facilities.

These exemptions lower the cost of selling the

bonds, better enabling state and local governments

to finance the projects.

The Secretary’s allocation is necessary . . . for a

bond to be tax-exempt because it finances a “quali-

fied highway or surface freight transfer facilit[y].”

Id. § 142(m)(2)(A).

Indian River Cty., 348 F. Supp. 3d at 28 (alterations in

original)

As noted, an “exempt facility bond” includes a bond

whose proceeds from its issue are used to finance “qualified highway or surface freight transfer facilities.” 26

U.S.C. § 142(a)(15). Section 142(m)(1)(A) defines “qualified highway or surface freight transfer facilities” as “any

surface transportation project which receives Federal

assistance under title 23, United States Code.” Title 23,

in turn, authorizes federal funding for, inter alia, “the

elimination of hazards of railway-highway crossings.” 23

U.S.C. § 130(a).

2. National Environmental Policy Act

As we recently explained in Mayo v. Reynolds, 875

F.3d 11 (D.C. Cir. 2017), Congress enacted NEPA in part

“to promote efforts which will prevent or eliminate

damage to the environment and biosphere and . . . enrich

the understanding of the ecological systems and natural

resources important to the Nation.” Id. at 15 (internal

quotation marks omitted) (quoting 42 U.S.C. § 4321). To

achieve these ends,

NEPA requires all federal agencies to include a

detailed environmental impact statement (“EIS”)

“in every recommendation or report on . . . major

Federal actions significantly affecting the quality of

the human environment.” Id. § 4332(2)(C). This

process ensures that an agency will consider every

significant aspect of the environmental impact of a

proposed action and inform the public of its

analysis. In other words, agencies must take a hard

look at [the] environmental consequences of their

actions, and provide for broad dissemination of

relevant environmental information.

....

Where NEPA analysis is required, its role is

primarily information-forcing. As the Supreme

Court has explained, “[t]here is a fundamental

distinction . . . between a requirement that mitigation be discussed in sufficient detail to ensure that

environmental consequences have been fairly

evaluated, on the one hand, and a substantive

requirement that a complete mitigation plan be

actually formulated and adopted, on the other.”

Robertson v. Methow Valley Citizens Council, 490

U.S. 332, 352 (1989). NEPA is not a suitable vehicle

for airing grievances about the substantive policies

adopted by an agency, as NEPA was not intended

to resolve fundamental policy disputes.

It is now well-established that NEPA imposes

only procedural requirements on federal agencies

with a particular focus on requiring agencies to

undertake analyses of the environmental impact of

their proposals and actions. It is equally clear that

NEPA does not impose a duty on agencies to

include in every EIS a detailed explanation of

specific measures which will be employed to

mitigate the adverse impacts of a proposed action.

875 F.3d at 15-16 (alterations in original) (citations and

quotation marks omitted).

In sum, because NEPA’s requirements are “essentially procedural,” the statute does “not mandate particular

substantive environmental results.” Theodore Roosevelt

Conservation P’ship v. Salazar, 661 F.3d 66, 68 (D.C.

Cir. 2011) (internal quotation marks and citations

omitted). Instead, NEPA “focus[es] Government and

public attention on the environmental effects of proposed

agency action.” Id. (alteration in original) (internal

quotation marks omitted). Those requirements “simply

. . . ensure that the agency has adequately considered and

disclosed the environmental impact of its actions.”

WildEarth Guardians v. Jewell, 738 F.3d 298, 308 (D.C.

Cir. 2013) (internal quotation marks and citation

omitted).

B. Factual Background

The dispute in this case emanates from financial and

environmental concerns relating to the construction and

operation of an express passenger railway service

connecting Miami, Fort Lauderdale, West Palm Beach,

and Orlando, Florida. The rail service, known as the All

Aboard Florida Intercity Passenger Rail Project, has

been spearheaded by AAF. The new rail service will run

along an existing rail corridor designed in the late 1800s

by the Florida East Coat Railway (“FECR”). The

FECR corridor accommodated both passenger and

freight rail service until 1968, when passenger rail

service was terminated. The AAF Project is designed to

restore portions of the existing rail corridor between

Miami and Cocoa and construct a new segment between

Cocoa and Orlando. The ultimate goal is to establish

speedy rail passenger service along a significant segment

of the east coast of Florida.

AAF announced its plans for the Project in 2011.

According to AAF, the high-speed passenger service will

include 32 daily departures that will cover the 235-mile

trip in about three hours. Phase I of the Project,

connecting Miami to West Palm Beach, with a stop in

Fort Lauderdale, was completed in January 2018. Phase

II, connecting West Palm Beach to Orlando, is still under

construction. When Phase II is completed, passenger

trains will run north from West Palm Beach to Cocoa,

turn west, and run inland along State Road 528 to

Orlando International Airport.

The record indicates that, in both Phases of the

Project, AAF is improving the existing rail corridor by:

(i) replacing portions of the existing mainline tracks

and reinstalling a second set of tracks where the

historic second track was previously removed; (ii)

adding a third track in certain locations within the

corridor to allow for more efficient service; (iii)

replacing or repairing existing bridges across

waterways; (iv) installing Positive Train Control

systems which will provide integrated command

and control of passenger and freight train

operations; and (v) upgrading railway-roadway

crossing safety features per federal regulations and

requirements, as well as specific requests from

counties and municipalities along the Project route.

JA1831-44. . . . In addition, AAF has been helping

counties and municipalities convert existing

crossings into “Quiet Zones,” which eliminates the

requirement for warning horns to be sounded as

trains approach. JA2291.

Intervenor’s Br. at 3.

10a

Id. at 5.

In 2013, an AAF subsidiary applied to FRA for a $1.6

billion loan pursuant to the Railroad Rehabilitation and

Improvement Financing program to help finance the

Project. Because projects benefiting from such loans are

subject to NEPA, FRA conducted an environmental

review of the entire AAF Project. The agency prepared

an Environmental Assessment and Section 4(f ) Evaluation for Phase I, which resulted in a Finding of No Significant Impact. FRA also commenced preparing an EIS

for Phase II, with the assistance of the U.S. Coast Guard

and U.S. Army Corps of Engineers. In 2015, AAF

withdrew its loan application, so FRA did not issue a

11a

Record of Decision on its EIS. In 2017, however, after

AAF resubmitted its loan application, FRA completed

the NEPA review process.

The NEPA review lasted over two years and included

an extensive period for public comment, including

numerous public meetings in counties along the Project

corridor. Over 15,400 written comments were received

from interested parties, including Indian River County.

FRA responded to comments in its Final EIS, which was

published on August 5, 2015. The Final EIS is over 600

pages in length, includes an additional 70 appendices, and

concludes that the existing FECR corridor was the only

feasible alternative for the north-south segment of the

Project. FRA also concluded that “[t]he Project would

have an overall beneficial effect on public health, safety,

and security in the rail corridor,” J.A. 1658, as well as

“beneficial cumulative impacts” on “transportation, air

quality, and economic resources,” id. at 1662. Finally,

the EIS set forth significant mitigation measures relating

to public safety, vehicular traffic, navigation, noise and

vibration, water resources, biological resources, essential

fish habitat, wetlands and other ecological systems,

threatened and endangered species, and historic

properties. Id. at 2503-21. After receiving additional

public comments, FRA issued a Record of Decision on

December 15, 2017. This included the agency’s analyses

regarding alternatives, environmental impacts, and

mitigation, id. at 4357-4412, and a separate addendum in

which it evaluated and responded to the comments on the

Final EIS, id. at 4414-48.

In the end, the loan that had been sought by AAF was

never made.

As explained below, AAF obtained

financing through the sale of tax-exempt PABs and

withdrew its loan application in February 2019.

12a

The allocation of the PABs in support of the Project

occurred as follows:

In 2014, AAF applied [to DOT] for an allocation

of tax-exempt PABs to partially finance the project.

To demonstrate that the Project is indeed a

“surface transportation project which receives

Federal assistance under title 23,” 26 U.S.C.

§ 142(m)(1)(A), AAF submitted documentation

showing that more than $9 million in Title 23funded improvements had been made to 72

separate grade crossings (railway-highway intersections) since 2012 along the N-S corridor and the

Miami to West Palm Beach corridor.

DOT

determined that the Project was eligible for PAB

funding and provisionally allocated $1.75 billion in

tax-exempt PABs to the project. In September

2016, however, AAF submitted a new request for a

$600 million allocation for Phase I only, and it asked

that the previous allocation be withdrawn. DOT

granted both requests in November 2016. The $600

million in PABs for Phase I were subsequently

issued by the Florida Development Finance

Corporation and sold to private investors.

A year later, AAF submitted a new application

for an allocation of PABs to finance Phase II. DOT

allocated $1.15 billion for Phase II in December

2017. The Florida Development Finance Corporation’s authority to issue those bonds was set to

expire at the end of 2018, but it was extended to

June 30, 2019. While this appeal has been pending,

DOT granted AAF’s request to modify the Phase II

allocation to allow for the issuance of an additional

$950 million in PABs. All $2.1 billion in bonds have

13a

been issued. See https://www.transportation.gov/

buildamerica/programs-services/pab.

DOT Br. at 6-7 (citations omitted).

C. Procedural History

In 2015, Indian River County filed a lawsuit

challenging DOT’s December 2014 allocation of $1.75

billion in PABs. Martin County filed a similar action, in

which it additionally claimed that the Project was not

eligible to receive an allocation of PABs under 26 U.S.C.

§ 142(m). The District Court denied a motion to dismiss

both Counties’ environmental claims, but granted

dismissal of Martin County’s claim that DOT exceeded its

authority under § 142. See Indian River Cty. v. Rogoff,

201 F. Supp. 3d 1, 20-21 (D.D.C. 2016). After AAF

requested that the initial PAB allocation be withdrawn,

the two cases pending in the District Court were

dismissed as moot. See Indian River Cty. v. Rogoff, 254

F. Supp. 3d 15, 17-18, 22 (D.D.C. 2017).

The litigation in the present case was initiated in

February 2018. Three claims were raised: First, the

complaint alleged that DOT exceeded its authority under

26 U.S.C. § 142(m) when it allocated $1.15 billion in PABs

to fund Phase II of the AAF Project. Second, the

complaint asserted that the allocation violated 26 U.S.C.

§ 147(f ), which requires certain state or local governmental approvals before tax-exempt PABs may be

issued. Finally, the complaint challenged the adequacy of

DOT’s NEPA review of the Project prior to allocating the

disputed PABs. AAF intervened to defend against the

complaint. Martin County and Citizens Against Rail

Expansion in Florida were originally named as coplaintiffs, along with Indian River County. However,

before this appeal was filed, they reached a settlement

14a

with AAF and stipulated to the dismissal of their claims

with prejudice.

In December 2018, the District Court granted

summary judgment to the federal defendants and AAF.

See Indian River Cty. v. Dep’t of Transp., 348 F. Supp.

3d 17 (D.D.C. 2018). As noted above, the District Court

ruled that because the complaint arguably fell within the

zone-of-interests protected or regulated by § 142, Indian

River County was among the class of parties authorized

by Congress to pursue a cause of action under the APA.

The court also ruled that the disputed allocation of PABs

did not violate § 142 or § 147(f ). As to Appellant’s claim

under § 142, the District Court upheld DOT’s determination that the Project is a “surface transportation

project” that has received federal assistance under Title

23 of the U.S. Code, as required by 26 U.S.C.

§ 142(m)(1)(A). With respect to the § 147(f ) claim, the

District Court ruled that DOT lawfully allocated the

disputed PABs after obtaining the State of Florida’s

approval, thus concluding that DOT was not obligated to

seek the approval of each local governmental authority in

areas through which Phase II will run.

Finally, the District Court found that FRA’s environmental review of the Project satisfied NEPA’s requirements. The District Court rejected Appellant’s claims

relating to pedestrian safety, noting the EIS’s thorough

study of every grade crossing along the entire corridor;

the extensive safety improvements that AAF is

mandated to make; and the record demonstrating that

the EIS considered the safety of trespassers who cut

across the tracks between formal crossings and addressed the safety problems posed by these situations.

The District Court also rejected Appellant’s claim that a

complete mitigation plan, detailing the location and

15a

design of fencing along the railway, was required in the

EIS. Finally, the District Court held that the EIS

adequately examined noise impacts.

Indian River County now appeals the District Court’s

grant of summary judgment with respect to its claims

under § 142 and NEPA, but it no longer presses its claim

under § 147(f ). DOT and AAF contend that the case

should be dismissed because Indian River County’s

asserted interests fall outside the zone-of-interests protected by § 142. In the alternative, DOT and AAF seek

affirmance of the District Court’s judgments on the

merits.

II. ANALYSIS

A. Standard of Review

“This court reviews the District Court’s ruling on

summary judgment de novo.” Feld v. Fireman’s Fund

Ins. Co., 909 F.3d 1186, 1193 (D.C. Cir. 2018). In

reviewing a summary judgment motion, courts are

required to “ ‘examine the facts in the record and all

reasonable inferences derived therefrom in a light most

favorable to’ the non-moving party.” Id. (quoting Robinson v. Pezzat, 818 F.3d 1, 8 (D.C. Cir. 2016)). We must

then determine whether “there are any genuine factual

issues that properly can be resolved only by a finder of

fact because they may reasonably be resolved in favor of

either party.” Anderson v. Liberty Lobby, Inc., 477 U.S.

242, 250 (1986). The District Court’s conclusion that

Appellant has a cause of action under the APA for its

§ 142(m) claim is also reviewable de novo, because it is a

question of law. Zuza v. Office of High Representative,

857 F.3d 935, 938 (D.C. Cir. 2017).

When, as in this case, the appeal is from a final

judgment issued by the District Court, we do not defer to

the District Court’s review of the agency action. Novicki

16a

v. Cook, 946 F.2d 938, 941 (D.C. Cir. 1991). Rather, “[w]e

review the administrative action directly, according no

particular deference to the judgment of the District

Court.” Mingo Logan Coal Co. v. EPA, 829 F.3d 710, 718

(D.C. Cir. 2016) (internal quotation marks and citation

omitted). The reason is that, under well-established law,

“when an agency acts pursuant to congressionallydelegated authority and the action has the force of law,

‘the agency itself is typically owed deference with respect

to its fact-finding, see NLRB v. Brown, 380 U.S. 278, 292

(1965), its application of law to facts, see Citizens to Pres.

Overton Park, Inc. v. Volpe, 401 U.S. 402, 416 (1971), and

its interpretation of the governing statute or regulation,

see Chevron U.S.A., Inc. v. Natural Res. Def. Council,

Inc., 467 U.S. 837, 843 (1984).’ ” EDWARDS & ELLIOTT,

FEDERAL STANDARDS OF REVIEW 145 (3d ed. 2018)

(quoting Novicki, 946 F.2d at 941).

Because neither NEPA nor 26 U.S.C. § 142 supplies a

private right of action, judicial review under both

statutes is governed by the APA. The APA requires that

we “hold unlawful and set aside agency action” that is

“arbitrary, capricious, an abuse of discretion, or

otherwise not in accordance with law.”

5 U.S.C.

§ 706(2)(A). Agency action is arbitrary and capricious “if

the agency has relied on factors which Congress has not

intended it to consider, entirely failed to consider an

important aspect of the problem, [or] offered an

explanation for its decision that runs counter to the

evidence before the agency.” Motor Vehicle Mfrs. Ass’n

v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983).

In evaluating contested agency action, the court must

“not . . . substitute its [own] judgment for that of the

agency.” Id.

17a

In reviewing NEPA challenges, we must be “mindful

that our role is not to ‘flyspeck’ an agency’s environmental analysis, looking for any deficiency no matter how

minor. Rather, it is simply to ensure that the agency has

adequately considered and disclosed the environmental

impact of its actions and that its decision is not arbitrary

or capricious.” WildEarth Guardians, 738 F.3d at 308

(citation and internal quotation marks omitted); see also

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

332 (1989) (making it clear that the courts must give

deference to agency judgments as to how best to prepare

an EIS).

B. Appellant’s Interests Fall Within the “Zone of

Interests” Protected by § 142

In Lexmark International, Inc. v. Static Control

Components, Inc., 572 U.S. 118, 129 (2014), the Supreme

Court explained the “lenient approach” that the courts

must follow in determining whether a party has stated a

cause of action under the APA:

First, we presume that a statutory cause of action

extends only to plaintiffs whose interests “fall

within the zone of interests protected by the law

invoked.” The modern “zone of interests” formulation originated in Association of Data Processing

Service Organizations, Inc. v. Camp, 397 U.S. 150

(1970), as a limitation on the cause of action for

judicial review conferred by the Administrative

Procedure Act (APA). We have since made clear,

however, that it applies to all statutorily created

causes of action; that it is a “requirement of general

application”; and that Congress is presumed to

“legislate against the background of” the zone-ofinterests limitation, “which applies unless it is

18a

expressly negated.” Bennett v. Spear, 520 U.S. 154,

163 (1997). . . .

We have said, in the APA context, that the test is

not “ ‘especially demanding,’ ” Match-E-Be-NashShe-Wish Band of Pottawatomi Indians v.

Patchak, 567 U.S. 209, 225 (2012). In that context

we have often “conspicuously included the word

‘arguably’ in the test to indicate that the benefit of

any doubt goes to the plaintiff,” and have said that

the test “forecloses suit only when a plaintiff ’s

‘interests are so marginally related to or inconsistent with the purposes implicit in the statute that

it cannot reasonably be assumed that’ ” Congress

authorized that plaintiff to sue. Id. That lenient

approach is an appropriate means of preserving the

flexibility of the APA’s omnibus judicial-review provision, which permits suit for violations of numerous

statutes of varying character that do not themselves include causes of action for judicial review.

Id. at 129-30 (citations and brackets omitted).

DOT and Intervenor AAF argue that this case should

be dismissed because Appellant’s interests are not within

the zone-of-interests of 26 U.S.C. § 142. In pressing this

position, DOT argues that the District Court erred in

concluding that “the interests at stake in § 142 . . . are

illuminated by § 147(f ), which requires State or local

government approval for certain PABs to qualify for tax

exemption.” Indian River Cty., 348 F. Supp. 3d at 29. In

DOT’s view, “the arguable existence of a cause of action

under Section 147( f ) does not give Plaintiffs a cause of

action to sue for an alleged violation of Section 142.”

DOT Br. at 16. DOT’s position is shortsighted, and it

reflects a distorted view of the District Court’s decision.

19a

What the District Court said was this:

In applying the zone-of-interests test, courts do not

look at the specific provision said to have been

violated in complete isolation. At the same time,

courts must police the extent to which they look

beyond the provision invoked to ensure that casting

a wider net does not deprive the zone-of-interests

test of virtually all meaning. Accordingly, a court

must limit its analysis to the provision invoked for

suit, as clarified by any provisions to which it bears

an integral relationship. In this case, then, the

Court must first determine whether § 147(f ) bears

an integral relationship with § 142, the provision

upon which Indian River County sues.

The Court concludes that the two provisions do

bear an integral relationship. They form adjacent

requirements for PABs used to finance certain

categories of facilities to qualify for tax-exempt

status: § 142 enumerates the types of facilities, and

§ 147(f ) ensures public approval and democratic

accountability for their construction.

Absent

§ 147(f ) approval, PABs used to finance a § 142

facility cannot be tax-exempt; and PABs approved

pursuant to § 147(f ) are not tax-exempt unless they

are used to finance a § 142 facility.

Most importantly, each requirement evinces a

common purpose: ensuring that when the public fisc

forgoes revenue through tax-exempt bonds, those

bonds are used to benefit the public.

Indian River Cty., 348 F. Supp. 3d at 29-30 (footnote,

citations, quotation marks, and brackets omitted). This is

a perfectly reasonable construction of the zone-ofinterests test. The simple point made by the District

Court is that “[b]y demonstrating that § 142 and § 147(f )

20a

bear an integral relationship, the County has illuminated

§ 142 in a way that suggests Congress’s intent was indeed

to allow State and local governments to ensure public

benefit would accrue from projects financed by taxexempt bonds.” Id. at 31. The District Court did not say,

as DOT suggests, that the arguable existence of a cause

of action under § 147(f ) gives Appellant a cause of action

to sue for an alleged violation of § 142.

In any event, we need not tarry further over the

District Court’s decision because we hold that Appellant

is within the zone-of-interests of 26 U.S.C. § 142(m) for

reasons analogous to those discussed in Match-E-BeNash-She-Wish Band of Pottawatomi Indians, 567 U.S.

at 224-28. Just as the Court noted in that case, we note

here that there is no dispute over the fact that

Appellant’s environmental and safety concerns are

matters of the sort that DOT surely will have “in mind”

when exercising its authority to allocate PABs pursuant

to § 142. Id. at 227. This alone is enough to show that

Appellant’s asserted interests at least arguably fall

within the zone-of-interests protected by § 142.

DOT has discretion under the statute to allocate PABs

to qualified facilities. 26 U.S.C. § 142(m)(2)(C). And

nothing in the statute precludes DOT from considering

local government concerns and environmental issues

when evaluating PAB allocations under § 142(m). Indeed,

DOT instructs PAB applicants to “[i]ndicate the current

status of milestones on [the estimated timeline provided],

including all necessary permits and environmental approvals.” Notice of Solicitation and Request for Comments, Applications for Authority for Tax-Exempt

Financing of Highway Projects and Rail-Truck Transfer

Facilities, 71 Fed. Reg. 642, 643 (Jan. 5, 2006) (emphasis

added). DOT also instructs applicants to “[p]rovide a

21a

copy of a resolution adopted in accordance with state or

local law authorizing the issuance of a specific issue of

obligations [as required by section 147(f )].” Id. AAF’s

application provided all of this required information. J.A.

4522, 4532-34, 4545.

DOT’s position regarding the zone-of-interests inquiry

is obviously wanting because it fails to take account of the

fact that Appellant’s cause of action arises under the

APA, not under the Code. As noted above, the zone-ofinterests test is not “especially demanding” with respect

to matters arising under the APA, and “the benefit of any

doubt goes to the plaintiff.” Match-E-Be-Nash-She-Wish

Band of Pottawatomi Indians, 567 U.S. at 225 (citation

omitted). Furthermore, the Supreme Court has “consistently held that for a plaintiff ’s interests to be arguably

within the zone of interests to be protected by a statute,

there does not have to be an indication of congressional

purpose to benefit the would-be plaintiff.” Nat’l Credit

Union Admin. v. First Nat. Bank & Tr. Co., 522 U.S.

479, 492 (1998) (internal quotation marks and citation

omitted). And a plaintiff certainly need not be expressly

listed as a beneficiary of a statutory provision in order to

be within its protected zone-of-interests. Finally, the

Supreme Court has emphasized that the zone-ofinterests test “forecloses suit only when a plaintiff ’s

‘interests are so marginally related to or inconsistent

with the purposes implicit in the statute that it cannot

reasonably be assumed that Congress intended to permit

the suit.’ ” Match-E-Be-Nash-She-Wish Band of Pottawatomi Indians, 567 U.S. at 225 (citation omitted).

That certainly is not this case.

In assessing whether a plaintiff ’s interests fall within

the zone-of-interests protected by a statute, we must

consider the “context and purpose” of the relevant

22a

statutory provisions and regulations at issue. Match-EBe-Nash-She-Wish Band of Pottawatomi Indians, 567

U.S. at 226. “ ‘[W]e do not look at the specific provision

said to have been violated in complete isolation[,]’ but

rather in combination with other provisions to which it

bears an ‘integral relationship.’ ” Nat’l Petrochemical &

Refiners Ass’n v. EPA, 287 F.3d 1130, 1147 (D.C. Cir.

2002) (second alteration in original) (citation omitted). In

applying these principles, it is quite clear that Appellant—a local government entity whose citizens will be

directly affected by the AAF Project—has compelling

interests that fall within the zone-of-interests protected

by the statute. The statutory context and purpose make

this clear.

26 U.S.C. § 141(e)(1)(A) outlines certain types of PABs

that can constitute “qualified bond[s],” including “exempt

facility bond[s].” An “exempt facility bond” includes a

bond whose proceeds from its issue are used to finance

“qualified highway or surface freight transfer facilities.”

26 U.S.C. § 142(a)(15). Section 142(m)(1)(A) then defines

“qualified highway or surface freight transfer facilities”

as “any surface transportation project which receives

Federal assistance under title 23, United States Code.”

Title 23, in turn, authorizes federal funding for, inter

alia, “the elimination of hazards of railway-highway

crossings.” 23 U.S.C. § 130(a). It cannot be doubted that

Indian River County is seriously concerned about the

effects of any surface transportation project that cuts

through the County. Nor can it be doubted that Indian

River County has a strong interest in limiting or

removing any hazards posed by railway-highway crossings in the County. Therefore, on the record in this case,

it is not difficult to conclude that DOT’s allocation of

PABs pursuant to § 142(m) implicates important interests

23a

of Indian River County. The County is a “reasonable—

indeed, predictable—challenger[ ] of the Secretary’s

decisions” regarding PAB allocations in a case of this

sort. Match-E-Be-Nash-She-Wish Band of Pottawatomi

Indians, 567 U.S. at 227.

Given this context, we reject the suggestion made by

DOT and Intervenor AAF that Indian River County’s

interests are only “marginally related to” DOT

allocations of tax-exempt qualified Private Activity Bonds

pursuant to 26 U.S.C. § 142(m)(1)(A). We therefore

affirm the judgment of the District Court that Indian

River County’s interests are within the zone-of-interests

of 26 U.S.C. § 142.

C. DOT Lawfully and Reasonably Allocated

Private Activity Bonds to the AAF Project

The principal issue on the merits is whether DOT

permissibly allocated PABs to the AAF Project.

Appellant’s argument on this point is straightforward:

The AAF passenger rail project is eligible to be

financed with private activity bonds only if it

“receives Federal assistance under title 23.” 26

U.S.C. § 142(m)(1)(A). The AAF project has not

received such funding. DOT approved the use of

PABs for the project on the theory that it will

indirectly benefit from highway safety projects on

railway-highway crossings that received federal

funding under 23 U.S.C. § 130. These highway

safety projects were made on the pre-existing

freight corridor to be utilized by the AAF project.

But a supposed benefit to the AAF project, even if

proven, would not satisfy the statutory language

that the AAF project itself receive federal

assistance under title 23. Not only has the project

not received such funding, it would not have been

24a

eligible for such funding because the only type of

project eligible to receive funding under 23 U.S.C.

§ 130 is a project to improve the safety of railwayhighway crossings. The AAF project is not a

project to improve the safety of railway-highway

crossings.

Appellant’s Br. at 10. We find no merit in Appellant’s

argument.

Section 142(m)(1)(A) authorizes allocations of PABs

for “any surface transportation project which receives

Federal assistance under title 23, United States Code.”

DOT has followed a consistent interpretation of the

statute that a project “receives assistance” for purposes

of § 142(m) even if only a constituent portion was directly

financed with Title 23 funds. Applying that interpretation here, railroad grade crossings are part of a

railroad “project” on any ordinary understanding, and

the record adequately supports the District Court’s

conclusion that crossing improvements were made in

contemplation of the All Aboard Florida initiative. See

Indian River Cty., 348 F. Supp. 3d at 34-35.

After the Project was announced, AAF received $9

million in Title 23 funds that were used to upgrade

railway-highway crossings on the Project corridor.

About $2.2 million of those funds were used to upgrade

39 crossings in Phase II of the Project. The Title 23

funds used to improve the safety of the grade crossings

clearly benefit the AAF Project and are important to

“eliminat[ing] hazards of railway-highway crossings” as

required by the statute. 23 U.S.C. § 130. Therefore,

DOT permissibly and reasonably determined that the

Project qualified for tax-exempt PABs under 26 U.S.C.

§ 142(m).

25a

In opposition, AAF argues that DOT’s interpretation

of the statute rests on an “informal document” written in

2005 by the then-Acting Chief Counsel of the Federal

Highway Administration and, therefore, it “does not

warrant deference under Chevron U.S.A., Inc. v. NRDC,

467 U.S. 837 (1984) (“Chevron”), and at most is entitled to

respect only to the extent it has the ‘power to persuade.’

Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944).”

Appellant’s Br. at 17; see also EDWARDS & ELLIOTT,

FEDERAL STANDARDS OF REVIEW 211-16, 248-51 (3d ed.

2018) (discussing Chevron and Skidmore). DOT, in

response, contends that “Chevron deference is appropriate in light of ‘the interstitial nature of the legal

question, the related expertise of the Agency, the

importance of the question to administration of the

statute, the complexity of that administration, and the

careful consideration the Agency has given the question

over a long period of time.’ ” DOT Br. at 25 n.4 (quoting

Barnhart v. Walton, 535 U.S. 212, 222 (2002)). We need

not decide whether Chevron deference is due because it

is clear on the record before us that DOT’s position easily

survives review under Skidmore.

When an agency’s interpretation of a statute has been

binding on agency staff for a number of years, and it is

reasonable and consistent with the statutory framework,

deference to the agency’s position is due under Skidmore. See, e.g., Fed. Express Corp. v. Holowecki, 552

U.S. 389, 399-402 (2008). This is because an agency’s

views that are within its area of expertise are entitled to

a level of deference commensurate with their power to

persuade. United States v. Mead Corp., 533 U.S. 218, 228

(2001).

DOT’s position has not only been consistent; it is also

eminently reasonable. After the enactment of § 142(m),

26a

DOT sent a letter, dated October 7, 2005, to the Internal

Revenue Service, explaining that “the most reasonable

reading of [the statute] permits the proceeds of [PABs]

authorized by this provision to be used on the entire

transportation facility that is being financed and

constructed even though only a portion of that facility

receives Federal assistance under title 23.” J.A. 4494.

The letter further explained that Title 23 grantees

typically build some segments of the facility with Title 23

funds and other segments with state or local funds, even

if the entire facility is eligible for Title 23 funding. Id. at

4493. The letter goes on to say that a narrow reading of

the word “project” would “distort the longstanding way

in which facilities are actually funded, create needless red

tape, and artificially result in the extension of Federal

requirements that have nothing to do with the bonding of

transportation facilities.” Id. at 4495. “This would result

in doing exactly what the Congress indicated it did not

intend to do. In summary, our view is that PAB proceeds

may be used on any qualified facility that includes a

project funded with Federal-aid highway funds made

available under title 23.” Id. DOT’s long-standing

position is based on persuasive considerations that are

consistent with the statute. It is therefore due deference.

Appellant contends that DOT’s position in this case

should be rejected because the disputed PABs were

approved for a surface transportation project that has

not received federal assistance under Title 23. We find

no merit in this claim. DOT has reasonably interpreted

“project which receives Federal assistance under title 23”

to mean a project which—in whole or part—benefits

from assistance under Title 23. We have no reason to

question this position because the statute does not

require an applicant for PABs to be the direct recipient

27a

of Federal assistance under Title 23; rather, the “project”

at issue must receive assistance under Title 23.

Appellant also insists that it is not enough that the

AAF Project received some assistance under Title 23;

rather, according to Appellant, in order to qualify for

PABs under § 142(m)(1)(A), the entire proposed Project

must be funded by Title 23. See Appellant’s Br. at 20.

However, there is nothing in the statute to support this

interpretation. In this case, DOT reasonably construed

§ 142 to authorize an allocation of PABs to a project that

has indisputably gained significant benefits from Title 23funded improvements to grade crossings throughout the

rail line.

Finally, Appellant argues that DOT’s approval of

PABs for the AAF project is arbitrary and capricious

because the federally funded highway safety improvement projects were not intended to benefit the AAF

project. Assuming without deciding that such intent is

required, the District Court correctly concluded that

sufficient evidence of intent was present here.

The District Court found that:

[T]he record indicates that a disproportionate

amount of the Title 23 funding was disbursed only

after the AAF project began. Over the ten-year

period from 2005 through 2014, the railway

received approximately $21 million dollars in Title

23 funding, approximately 43% of which came in the

three years following the commencement of AAF’s

planning. Given that the AAF project received

substantial attention in Florida, the Court is

skeptical that the State’s Department of

Transportation disbursed (and increased) this Title

23 funding without the knowledge—if not

purpose—of benefitting the project. In short, the

28a

record indicates that this is not an instance in which

the AAF project was such an ancillary or

unintended beneficiary of the funds as to prevent

the Secretary from concluding that it had

“receive[d] Federal assistance under title 23[.]” 26

U.S.C. § 142(m)(1)(A).

Indian River Cty., 348 F. Supp. 3d at 35 (second and

third alteration in original) (citation omitted). These

findings and the District Court’s conclusion are

supported by the record.

A large portion of the disputed Title 23 funds were

disbursed after the Project was announced and they

provided federal assistance to the Project by improving

grade crossings all along the corridor. The financial

assistance provided has been substantial, and the

benefits afforded to the Project are obvious. We

therefore affirm the judgment of the District Court.

D. The Environmental Impact Statement for the

AAF Project Complied with the Requirements

of NEPA

Finally, Appellant contends that the EIS prepared for

the Project does not comply with the requirements of

NEPA. Appellant argues that the EIS did not take a

“hard look” at the effects of the Project on public safety;

that it did not adequately disclose and mitigate safety

risks to trespassers cutting across the tracks at locations

other than at legal grade crossings; and that it did not

sufficiently analyze the noise impacts caused by both the

higher speeds of the freight trains on the improved

tracks and the train horns at grade crossings. The

record belies these claims.

The Supreme Court has emphasized that “inherent in

NEPA and its implementing regulations is a ‘rule of

29a

reason.’ ” Dep’t of Transp. v. Pub. Citizen, 541 U.S. 752,

767 (2004) (citation omitted). This standard “ensures

that agencies determine whether and to what extent to

prepare an EIS based on the usefulness of any new

potential information to the decisionmaking process.” Id.

“NEPA does not impose a duty on agencies to include in

every EIS a detailed explanation of specific measures

which will be employed to mitigate the adverse impacts

of a proposed action.” Mayo, 875 F.3d at 16 (internal

quotation marks and citation omitted). And once an

agency has taken a “hard look” at “every significant

aspect of the environmental impact” of a proposed major

federal action, it is not required to repeat its analysis

simply because the agency makes subsequent discretionary choices in implementing the program. Baltimore

Gas & Elec. Co. v. Nat. Res. Def. Council, Inc., 462 U.S.

87, 97 (1983) (quoting Vermont Yankee Nuclear Power

Corp. v. Nat. Res. Def. Council, Inc., 435 U.S. 519, 553

(1978)). In sum, the Supreme Court has made it clear

that we must give deference to agency judgments as to

how best to prepare an EIS. See Robertson, 490 U.S.

332.

As the District Court’s decision shows, the

environmental review process conducted by FRA was

thorough and it complied fully with the commands of

NEPA. The District Court aptly noted that “[a]gency

action is rarely perfect. But NEPA does not demand

perfection. Instead, it requires that an agency take a

‘hard look’ at the reasonably foreseeable impacts of a

proposed major federal action. The extensive Final EIS,

appendices, common responses, and Record of Decision

together demonstrate that FRA met that requirement

here.” Indian River Cty., 348 F. Supp. 3d at 61-62. We

agree.

30a

As noted above, FRA prepared an EIS, covering more

than 600 pages, examining the environmental impacts of

the Project. J.A. 1635-2574. This process also included

multiple public meetings and opportunities for public

comment. Id. at 2559-74. In September 2014, FRA

released a draft EIS and received more than 15,400

comments from a wide range of stakeholders. The public

commentary was then considered by FRA when it

prepared the Final EIS. Id. at 2569. In early August

2015, the Final EIS was released. Id. at 1667.

The EIS examines the Project’s impacts on land use,

transportation, navigation, air quality, noise and

vibration, farmland soils, hazardous material disposal,

coastal zone management, climate change, water

resources, wild and scenic rivers, wetlands, floodplains,

wildlife habitat, threatened and endangered species,

social and economic effects (including impacts on lowincome communities), public health and safety, parks,

and historic properties, as well as the Project’s

cumulative impacts when combined with other past,

present, or reasonably foreseeable future actions. See id.

at 1635-2574. The EIS also sets forth a host of mitigation

measures to ameliorate those negative impacts. Id.

The EIS additionally includes a thorough discussion of

pedestrian safety, at both formal and informal crossings.

And it examines and discusses mitigation of risks to

pedestrians, including those using informal crossings.

With respect to formal crossings, the EIS relies on a

survey of every grade crossing on the rail corridor. This

survey was conducted by FRA’s Office of Safety,

Highway Rail Crossing and Trespasser Program

Division, and it includes an accompanying analysis

summarized in engineering reports which are included in

the EIS as Appendix 3.3.5-B. Id. at 2604-19.

31a

The EIS further acknowledges that informal crossings

do occur and that this form of trespassing was “an

epidemic along this corridor.” Id. at 2607 (Appendix

3.3.5-B); see also id. at 1762. The EIS recognizes that

these informal crossings are illegal and unsafe, id. at

1762, and that the arrival of AAF’s passenger rail service

could increase the frequency of accidents involving trains

and pedestrians, id. at 2397, 2400.

To mitigate these risks, the EIS describes a twopronged approach: (1) AAF must discourage the use of

informal crossings by installing fencing, and (2) AAF

must encourage the use of formal crossings by adding

sidewalks. Id. at 1763-64. This mitigation approach also

includes a public information campaign, which will be

conducted in coordination with the rail-safety organization, Operation Lifesaver. Id.

Moreover, the EIS notes that the rail corridor is

already fenced in at certain locations, id. at 2199, and

that AAF will conduct field surveys along the right-ofway to determine where additional fencing and other

preventative measures are needed to prevent trespassing, id. at 2400. The EIS provides that the “corridor

will be fenced where an FRA hazard analysis review

determines that fencing is required for safety; this will be

in populated areas where restricting access to the rail

corridor is necessary for safety.” Id. at 1900. “Fencing

on the N-S Corridor would be upgraded based on

existing public access locations and the potential for

conflicts with the increased train frequency.” Id. at 2400.

In addition, the EIS takes a “hard look” at noise

impacts from the Project. It finds that, if left unmitigated, these noises (principally from the warning horns

that the trains, both freight and passenger, are required

to sound at public highway-rail grade crossings) could

32a

cause adverse impacts. To mitigate these impacts, AAF

committed to installing pole-mounted horns at 117

intersections in the Phase II corridor, id. at 2291,

including 23 in Indian River County, id. at 2671. To

further reduce horn noise, AAF is cooperating with local

governments that wish to establish “quiet zones” that

allow both passenger and freight trains to pass through

grade crossings without sounding horns. Id. at 2291.

It is unnecessary for us to detail other parts of the

EIS or the environmental review process. The District

Court’s opinion, which offers an impressively thorough

and thoughtful examination of the record, and which we

endorse, is more than sufficient. Indian River Cty., 348

F. Supp. 3d at 42-62. The bottom line is that the Final

EIS for the AAF Project clearly complies with the

requirements of NEPA.

CONCLUSION

For the reasons set forth above, we affirm the judgments of the District Court.

So ordered.

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APPENDIX B

UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

————

No. 19-5012

————

INDIAN RIVER COUNTY, FLORIDA AND INDIAN RIVER

COUNTY EMERGENCY SERVICES DISTRICT,

Appellants,

UNITED STATES DEPARTMENT OF

TRANSPORTATION, ET AL.,

Appellees.

————

Appeal from the United States District Court

for the District of Columbia

(No. 1:18-cv-00333)

————

September Term, 2019

Filed On: December 20, 2019

————

Before: GARLAND, Chief Judge, SRINIVASAN, Circuit

Judge, and EDWARDS, Senior Circuit Judge.

JUDGMENT

This cause came on to be heard on the record on

appeal from the United States District Court for the

District of Columbia and was argued by counsel. On

consideration thereof, it is

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ORDERED and ADJUDGED that the judgments of

the District Court appealed from in this cause are hereby

affirmed, in accordance with the opinion of the court filed

herein this date.

Per Curiam

FOR THE COURT:

Mark J. Langer, Clerk

BY:

Michael C. McGrail

Deputy Clerk

Date: December 20, 2019

Opinion for the court filed by Senior Circuit Judge

Edwards.

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APPENDIX C

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLUMBIA

————

NO. 18-CV-00333 (CRC)

————

INDIAN RIVER COUNTY FLORIDA1 et al,

Plaintiffs,

DEPARTMENT OF TRANSPORTATION et al,

Defendants.

————

MEMORANDUM OPINION

————

December 24, 2018

————

TABLE OF CONTENTS

Background ...................................................

[37a]

A. Factual Background ............................

[37a]

1. The proposed project .......................

[37a]

2. The Secretary’s bond allocation ......

[38a]

3. The environmental review

process ...............................................

[40a]

This case was captioned Martin County et al v. Department of

Transportation et al in all previous filings. The Court has adjusted

the case name to reflect Martin County’s voluntary dismissal. See

Joint Stipulation of Dismissal, ECF No. 48.

36a

B. Procedural Background ......................

[42a]

Analysis .........................................................

[44a]

A. The Bond Allocation ............................

[44a]

1. Section 142(m)...................................

[47a]

2. Section 147(f ) ....................................

[62a]

B. NEPA Compliance ..............................

[75a]

1. Public-safety effects of the

project ................................................

[77a]

2. Effects of vessel queuing at railroad bridges over navigable

waters ................................................

[91a]

3. Alternatives to the route and the

use of moveable bridges ...................

[97a]

4. Noise impacts ...................................

[102a]

5. Changes to freight operations........

[109a]

III. Conclusion ....................................................

[115a]

II.

————

AAF Holdings, Inc. (“AAF”) plans to construct and

operate an express passenger railway connecting Orlando and Miami, Florida. The initial segment of the line between Miami and West Palm Beach is currently operational. The extension of the line to Orlando is still in the

planning stages. To help AAF finance the extension, the

U.S. Department of Transportation has allocated $1.15

billion in federally tax-exempt bonds to be issued by a

Florida economic development agency.

The planned extension of the railway will run through

Indian River County on Florida’s Treasure Coast. The

County and its Emergency Services District (together,

“Indian River County” or “Plaintiff ”) have long objected

to the project. In this, its second lawsuit challenging the

37a

project, Indian River County seeks summary judgment

on two grounds. First, it contends that the Department

of Transportation exceeded its authority in allocating the

bonds because the project is not eligible to receive taxexempt funding under two separate provisions of the Internal Revenue Code. Second, the County maintains that

the Federal Railway Administration (“FRA”) violated

the Administrative Procedure Act (“APA”) and the National Environmental Policy Act (“NEPA”) by conducting a flawed and incomplete review of the public health

and safety consequences of the project. Defendants the

Department of Transportation, its component FRA, and

several of its officers (together, “federal Defendants,”

“the Department,” or “FRA”) filed a cross motion for

summary judgment, as did AAF, which has intervened as

a defendant. Because the Department’s allocation met

the tax code’s requirements and the FRA’s review complied with NEPA, the Court will deny Indian River

County’s motion for summary judgment and grant the

federal Defendants’ and AAF’s.

I. Background

A. Factual Background

1. The proposed project

AAF is in the process of constructing a private passenger train service that will ultimately provide service

between Miami and Orlando. Phase I of the project currently operates from Miami to West Palm Beach. AR

65115-16. Phase II will run from West Palm Beach north

along Florida’s east coast to Cocoa and then west and inland to Orlando. Id. AAF plans to lay a second track

along a 128.5 mile stretch of single-track train corridor

owned by the Florida East Coast Railway (“FECR”)

from West Palm Beach north to Cocoa. AR 65115. This

track is currently used only by freight trains, some of

38a

which carry hazardous materials, but historically was

used by both freight and passenger trains. AR 73914.

This corridor is referred to in the record and by the parties as either the FECR Corridor or the N-S Corridor.

AR 65115. The N-S Corridor bisects Indian River County. AR 73572. AAF also proposes constructing a new 40mile track that would connect Cocoa and Orlando. This

stretch of track is referred to as the E-W Corridor. AR

65115.

AAF plans to operate thirty-two passenger trains per

day in addition to the FECR freight trains that now run

along the N-S Corridor. AR 65116. These trains would

run through Indian River County for twenty-one miles.

AR 73753. There are thirty “grade crossings” in the

County. Id. A grade crossing is an intersection where

the railway crosses a road or path at the same level or

grade, rather than an intersection where trains cross

over or under the road using an overpass or tunnel. In

addition to these grade crossings, the trains will traverse

bridges that are either fixed or moveable (i.e., draw

bridges). Two of these moveable bridges are at issue in

this case: the St. Lucie River Bridge and the Loxahatchee River Bridge. AR 73915. When these bridges

are in the “down” position, trains can cross over but boats

on the river cannot cross under.

2. The Secretary’s bond allocation

AAF is partially financing the railway project through

private activity bonds (“PABs”) issued by the Florida

Development Finance Corporation (“FDFC”), an agency

of the State of Florida. Congress has authorized the

United States Department of Transportation to allocate

tax-exempt authority to PABs used to finance specific

types of transportation projects.

See 26 U.S.C.

§ 142(m)(2)(C). AAF initially applied for a PAB allocation

39a

in August 2014. In December 2014, the Department of

Transportation approved that application and provisionally allocated $1.75 billion in tax-exempt PABs for the

project. See Indian River Cty. v. Rogoff (“Indian River

Cty. I ”), 110 F. Supp. 3d 59, 65 (D.D.C. 2015). AAF

planned to use these PABs to finance both phases of the

railway.

In November 2016, the Department, at AAF’s request,

withdrew the provisional allocation and replaced it with a

$600 million allocation of PAB authority to finance only

Phase I of the project. See Indian River Cty. v. Rogoff

(“Indian River Cty. III ”), 254 F. Supp. 3d 15, 17-18

(D.D.C. 2017). Then, in December 2017, AAF applied for

a new allocation of $1.15 billion in PAB authority to finance Phase II of the project. See AR 74220-62. As part

of its application, AAF represented that the project had

received $9 million in Title 23 federal funds, disbursed by

Florida’s Department of Transportation for highway-rail

crossings along the rail corridor. AR 74235. AAF included in its application a resolution by FDFC approving

the issue of bonds to finance the project. AR 74240-53.

That resolution concluded that the bond issue had received requisite public approval for tax-exempt status

because a designee of the State’s Governor had approved

their issue after a properly noticed public hearing. AR

74242-44. AAF’s application highlighted that the bonds

had already received this public approval. AR 74221.

Further, AAF included in its application a bond counsel

validity opinion, by the law firm Greenberg Traurig,

which concluded that “interest on the Bonds . . . is excludable from gross income for purposes of federal income taxation under existing laws as enacted and construed[.]” AR 74256.

40a

The Department approved the application and provisionally allocated $1.15 billion in PAB authority on December 20, 2017. AR 74324-26. Its provisional allocation

letter conditioned final allocation on several requirements, including compliance with all applicable federal

laws, as well as “a final bond counsel tax and validity

opinion . . . issued at the time of the closing of the bond

issue in substantially the form provided with the application.” AR 74324. While FDFC will issue the bonds, AAF

is responsible for marketing and selling them to investors. The parties have represented that the bonds will be

marketed in the next several weeks.

3. The environmental review process

AAF originally sought federal loan funding for the

project through the Railroad Rehabilitation and Improvement Financing (“RRIF”) program. RRIF loans

are subject to NEPA review. 49 C.F.R. § 260.35. FRA

reviewed the potential environmental impacts of the project under NEPA. AR 73636. With respect to Phase I,

FRA issued a Finding of No Significant Impact in 2013.

AR 73570. FRA then began preparing an Environmental

Impact Statement (“EIS”) for Phase II. AR 73571. It

held five public scoping meetings in May 2013 and received 248 comments in response to those meetings and

more than 160 comments in the subsequent seventeen

months. AR 74155-56. As required, FRA coordinated

with federal, state, local, and tribal governments, including Indian River County. AR 74157-59.

FRA completed a draft EIS in September 2014. AR

74164. The draft attracted some 15,400 public comments.

Id. During the comment period, FRA also held eight

public meetings, id., which were attended by over 2,500

people, AR 74165. FRA issued a Final Environmental

Impact Statement (“FEIS”) in August 2015. See AR

41a

73568. FRA subsequently received additional comments

on the FEIS, including from Plaintiff. AR 65154. When

AAF withdrew its RRIF loan application in 2015, FRA

decided to not issue a Record of Decision (“ROD”). AR

65118. After AAF re-filed an RRIF application in 2017,

FRA resumed the NEPA process and published the

ROD in December 2017. AR 65109-65. Appendix C to

the ROD provides responses to the comments on the

FEIS. See AR 65154; AR 65266-300.

The FEIS selects AAF’s preferred route as the best

alternative for the project and determines that no further

environmental review is necessary. AR 73578. The

FEIS itself is 646 pages long and separately includes

numerous appendices including maps and analyses of

noise impacts, navigation patterns, and more. The FEIS

and ROD outline the purpose of and need for the project,

the alternatives considered, the affected environment,

the potential environmental consequences of the project

and reasonable alternatives, and the historic properties

affected by the project. The FEIS also includes a chapter on measures that would avoid, minimize, or mitigate

impacts that would result from the project. AAF has

committed to implementing a series of mitigation

measures during both the construction and operation

phases of the project.

As part of the NEPA process, AAF retained the environmental consulting firm Vanasse Hangen Brustlin

(“VHB”) as a third-party advisor to FRA. This arrangement was memorialized in an agreement between FRA,

VHB, and AAF. See AR 1045-62. Under that agreement, VHB’s “scope of work, approach, and activities

shall be under the sole supervision, direction, and control

of the FRA.” AR 1046. AAF also hired its own consultant, Amec Foster Wheeler (“Amec”). In general, Amec

42a

conducted initial technical work, which it then submitted

to VHB and FRA for review and comment. AR 897-98;

see also AR 1062. The record includes a series of technical memoranda produced by Amec on issues like noise

and vibration. See, e.g., AR 61081-238 (Amec’s “Technical Memorandum No. 5 Noise and Vibration for AAF

Passenger Rail Project”). The record also reflects significant back-and-forth regarding those memoranda between VHB and FRA on the one hand and Amec and

AAF on the other. See, e.g., AR 1083-87, 1305-43, 156162, 7302-06, 7349-51 (charts setting forth VHB/FRA

comments on Amec technical memoranda and Amec/AAF

responses).

B. Procedural Background

As noted above, this is the second time Indian River

County has sued in this Court to prevent or delay the

Secretary of Transportation’s allocation of tax-exempt

bond issuance authority to finance the AAF project. In

2015, both Indian River County and nearby Martin

County, through which the proposed railway would also

run, sought (among other relief) a preliminary injunction

vacating the Secretary’s authorization of the tax exemption, which allocated PAB authority for both phases of

the project. See Indian River Cty. I, 110 F. Supp. 3d at

66. Both counties alleged violations of NEPA, the National Historic Preservation Act (“NHPA”), and the Department of Transportation Act (“DTA”), each of which

sets forth certain procedural requirements for major federal actions. Martin County also alleged a violation of

§ 142 of the Internal Revenue Code. There, as here, AAF

intervened as a defendant. Initially, the Court concluded

that the counties had failed to show that their asserted

injuries—public-safety hazards and harms to environmental and historic sites from the construction and oper-

43a

ation of the railway—were traceable to the Secretary’s

action or redressable by the Court. Specifically, while

the counties had shown that the cost of financing the project would increase without the Secretary’s allocation of

tax-exemptions, they were unable to show “that these

costs would significantly increase the likelihood that

AAF would abandon the project[.]” Id. at 71. In short,

the plaintiffs had failed to show that if the Court were to

grant them precisely what they asked for, the project

would cease and their harms would be remedied. The

Court also held that the counties’ alleged procedural injury—stemming from the purported failure to conduct an

appropriate environmental review—was insufficient to

confer standing absent some tethering to a substantive

injury sufficient for standing. Id. at 73. The Court thus

denied the counties’ motions because they had not established standing to sue. See id.

Following Indian River County I, the Court granted

the counties permission to conduct jurisdictional discovery to demonstrate that, but for the PAB allocation, AAF

would not complete the railway. Subsequently, the Department of Transportation moved to dismiss the counties’ suits. The Court concluded that through jurisdictional discovery, the counties had shown “that invalidating [the Department’s] decision to authorize . . . PABs

would significantly increase the likelihood that AAF

would not complete . . . the project.” Indian River Cty. v.

Rogoff (“Indian River Cty. II”), 201 F. Supp. 3d 1, 4

(D.D.C. 2016). Further, the Court found that the plaintiffs had alleged sufficient facts to demonstrate that the

AAF project qualified as “major federal action” triggering certain requirements under NEPA, NHPA, and

DTA. Id. at 20. Consequently, it denied the motion to

dismiss those claims. It did, however, dismiss Martin

44a

County’s claim that the PAB allocation violated § 142 of

the Internal Revenue Code, concluding that the County’s

asserted injuries fell outside the zone of interests that

Congress sought to protect in § 142. Id. at 21.

Following the Court’s decision in Indian River County II that the counties had stated valid claims, AAF withdrew its application for a PAB allocation. It replaced

that application, which had sought to use the bonds to finance both phases of the project, with an application for a

smaller allocation to be used only for Phase I. Because

Phase I dealt only with a portion of the proposed railway

that did not run through the plaintiff counties, the Court

dismissed the cases at moot. Indian River Cty. III, 254

F. Supp. 3d at 22.

Since then, AAF applied for an allocation to help finance Phase II, which the Department of Transportation

provisionally approved. Indian River County, initially

joined by Martin County and a group of concerned citizens, has again sued. They contend that the PAB allocation violated two provisions of the Internal Revenue Code

and that FRA did not comply with its requirements under NEPA. AAF again intervened as a defendant. The

parties all moved for summary judgment. The Court

held a hearing on these motions on November 27, 2018.

Shortly before this hearing, Martin County and the citizens group reached a settlement with the federal Defendants and AAF and, therefore, are no longer plaintiffs

in the case.

II. Analysis

A. The Bond Allocation

To facilitate Phase II of the AAF railway, the Secretary of Transportation provisionally allocated tax-exempt

authority to $1.15 billion in PABs to be issued to finance

the project. The Secretary of Transportation’s allocation

45a

is subject to review under the APA. 5 U.S.C. §§ 702, 706.

Chevron, U.S.A. v. NRDC, 467 U.S. 837 (1984), establishes a two-part inquiry to determine whether an agency

has arrived at a permissible interpretation of the law it is

charged with administering. First, if a law directly addresses the precise question at issue, Congress’s directive controls. Id. at 842-43. Second, if the statute is silent or ambiguous regarding the matter at hand, “the

question for the court is whether the agency’s interpretation is based on a permissible construction of the statute

in light of its language, structure, and purpose.” Nat’l

Treasury Emps. Union v. Fed. Labor Relations Auth.,

754 F.3d 1031, 1042 (D.C. Cir. 2014) (quoting AFL-CIO v.

Chao, 409 F.3d 377, 384 (D.C. Cir. 2005)). The court must

defer to any reasonable agency interpretation, Loving v.

IRS, 742 F.3d 1013, 1016 (D.C. Cir. 2014), which need not

be the one “deemed most reasonable by the courts[,]”

Entergy Corp. v. Riverkeeper, Inc., 556 U.S. 208, 218

(2009).

Indian River County contends that the Secretary’s allocation violated two provisions of the Internal Revenue

Code. A brief overview of the statutory scheme contextualizes these challenges and the Department and AAF’s

responses. Congress has authorized interest earned on

certain types of PABs to be exempted from federal taxation. See 26 U.S.C. §§ 103, 141. Because this exemption

allows the bondholder to keep all the interest, bond issuers can sell the bond at a lower interest rate. A PAB

must be a “qualified bond” in order for it to be taxexempt. Id. § 103. Section 141 outlines certain types of

PABs that can constitute “qualified bond[s],” including

“exempt facility bond[s].” Id. § 141(e)(1)(A). Under

§ 142(a), a bond is an “exempt facility bond” if at least

95% of proceeds from its issue are used to finance one of

46a

fifteen enumerated categories of projects. Id. § 142(a).

One such category is “qualified highway or surface

freight transfer facilities.” Id. § 142(a)(15). Section

142(m) defines “qualified highway or surface freight

transfer facilities,” id. § 142(m)(1), and authorizes the

Secretary of Transportation, “in such manner as [she]

determines appropriate,” id. § 142(m)(2)(C), to allocate

up to $15 billion of PAB authority to eligible projects, id.

§ 142(m)(2)(A). Put simply, Congress has enacted a

mechanism through which the Secretary can allocate tax

exemptions to bonds used to finance construction of, or

improvements to, certain types of facilities. These exemptions lower the cost of selling the bonds, better enabling state and local governments to finance the projects.

The Secretary’s allocation is necessary, but not sufficient, for a bond to be tax-exempt because it finances a

“qualified highway or surface freight transfer facilit[y].”

Id. § 142(m)(2)(A). The Internal Revenue Code also establishes other requirements for PABs to be considered

“qualified” and thus tax-exempt. See id. § 141(e)(3).

These include a requirement that bonds used to finance a

facility must be approved by both “the governmental unit

. . . which issued such bond,” id. § 147(f )(2)(A)(i), and

“each governmental unit having jurisdiction over the area” in which any bond-financed facility is located, id.

§ 147(f )(2)(A)(ii).

In this case, Indian River County alleges first that the

Secretary violated the statute because the AAF passenger railway is ineligible for a PAB allocation under

§ 142(m). The County also contends that, in any event,

because it has not approved the bond issue as § 147(f ) requires, the PABs cannot be tax exempt. The Court turns

to each of these statutory provisions.

47a

1. Section 142(m)

Indian River County alleges that the Secretary’s allocation of PAB authority to the AAF railway violated 26

U.S.C. § 142(m). It contends that because the project is

not an eligible “qualified highway or surface freight

transfer facilit[y],” the Secretary exceeded her statutory

powers in allocating PAB authority to the project. In the

last round of litigation, Martin County raised a similar

argument, which the Court rejected as going beyond the

“zone of interests” protected by § 142. See Indian River

Cty. II, 201 F. Supp. 3d at 20-21. Both the federal Defendants and Intervenor-Defendant ask the Court to

reach the same result this time around. Alternatively,

they argue that the allocation complied with § 142. For

the following reasons, the Court concludes that Indian

River County has shown that its asserted interests arguably fall within the zone of interests Congress sought to

protect in § 142, but that its claim fails on the merits.

a. Zone of Interests

Before the Court reaches the substance of Indian River County’s § 142 claim, it “must . . . inquire whether the

plaintiff [ ] fall[s] within the class of persons whom Congress has authorized to sue under the Administrative

Procedure Act.” Mendoza v. Perez, 754 F.3d 1002, 1016

(D.C. Cir. 2014). To do so, it must determine whether Indian River County’s “grievance . . . arguably fall[s] within

the zone of interests protected or regulated by the statutory provision . . . invoked in the suit,” in this case § 142.

Id. (quoting Bennett v. Spear, 520 U.S. 154, 162 (1997)).

This inquiry “is not meant to be especially demanding”

and “forecloses suit only when a plaintiff ’s ‘interests are

so marginally related to or inconsistent with the purposes

implicit in the statute that it cannot reasonably be assumed that Congress intended to permit the suit.’ ”

48a

Match-E-Be-Nash-She-Wish Band of Pottawatomi Indians v. Patchak, 567 U.S. 209, 225 (2012) (quoting

Clarke v. Sec. Industry Ass’n, 479 U.S. 388, 399 (1987)).

When Martin County advanced its § 142 claim in the

last round of litigation, the Court concluded that it had

not cleared this hurdle. In that instance, like Indian River County does here, Martin County asserted interests in

public safety, environmental protection, and historic

preservation. Indian River Cty. II, 201 F. Supp. 3d at

21. It relied on SAFETEA, Pub. L. 109-59, 119 Stat.

1144 (2005)—the legislation through which Congress

amended § 142 to add PAB authorization for “qualified

highway or surface freight transfer facilities”—to contend that Congress sought to protect these interests

when it amended § 142. See Indian River Cty. II, 201 F.

Supp. 3d at 20-21. But as the Court explained at the

time, SAFETEA is a “massive statute with many objectives” and its relevant amendments to § 142 were “but a

tiny component of the overall legislation.” Id. at 21. As

such, it would have been—and remains—too dilutive of

the zone of interests test to allow a plaintiff to challenge

an allocation under § 142(m) based on an interest advanced anywhere in SAFETEA. Id. at 20 (citing Tax

Analysts & Advocates v. Blumenthal, 566 F.2d 130, 141

(D.C. Cir. 1977)). Instead, “the relevant unit of analysis”

for conducting the inquiry is § 142 itself. Id. And because “Martin County present[ed] no real argument that

its interests [were] more than marginally related [to]

those protected or regulated by Section 142 itself,” but

rather “place[d] all its eggs in the SAFETEA basket instead,” id. at 21, the Court dismissed the claim.

In this litigation, Indian River County has advanced

stronger arguments, focusing appropriately on the interests at stake in § 142 itself. Indian River County con-

49a

tends that these interests are illuminated by § 147(f ),

which requires State or local government approval for

certain PABs to qualify for tax exemption. “In applying

the zone-of-interests test, [courts] do not look at the specific provision said to have been violated in complete isolation[.]” Fed’n for Am. Immigration Reform, Inc.

(“FAIR”) v. Reno, 93 F.3d 897, 903 (D.C. Cir. 1996). At

the same time, courts must police the extent to which

they look beyond the provision invoked to ensure that

casting a wider net does not “deprive the zone-ofinterests test of virtually all meaning.” Air Courier Conference of Am. v. Am. Postal Workers Union, 498 U.S.

517, 530 (1991). Accordingly, a court must limit its analysis to the provision invoked for suit, as clarified by any

provisions to which it bears an “integral relationship.”

See, e.g., FAIR, 93 F.3d at 904. In this case, then, the

Court must first determine whether § 147(f ) bears an integral relationship with § 142, the provision upon which

Indian River County sues.

The Court concludes that the two provisions do bear

an integral relationship. They form adjacent requirements for PABs used to finance certain categories of facilities to qualify for tax-exempt status: § 142 enumerates

the types of facilities, and § 147(f ) ensures public approval and democratic accountability for their construction. 2

The fact that each provision specifically deals with “facilities” is important. Indian River County relies in part on the fact that § 142 and

§ 147 share a common subpart of the Internal Revenue Code, which

governs PABs eligibility. Courts have often found provisions contained in a common subsection to be integrally related. See, e.g.,

Int’l Union of Bricklayers & Allied Craftsmen v. Meese, 761 F.2d

798, 804-05 (D.C. Cir. 1985); Save Jobs USA v. DHS, 210 F. Supp. 3d

1, 11-12 (D.D.C. 2016). But a common subpart is less instructive

where, as here, the PABs subpart has multifarious purposes and covers several different types of bonds. But § 142 and § 147 each gov-

50a

Absent § 147(f ) approval, PABs used to finance a § 142

facility cannot be tax-exempt; and PABs approved pursuant to § 147(f ) are not tax-exempt unless they are used

to finance a § 142 facility. Cf. Wash. All. of Tech. Workers

v. DHS, 156 F. Supp. 3d 123, 135 (D.D.C 2015) (holding

that provisions share an integral relationship in part because they perform an “interlocking task”).

Most importantly, each requirement evinces a common purpose: ensuring that when the public fisc forgoes

revenue through tax-exempt bonds, those bonds are used

to benefit the public. As the Court explained in Indian

River County II: “Congress enacted 26 U.S.C. § 142 in

general, and Sections 142(a)(1) and 142(m) in particular,

to create a tax benefit to support the development and

construction of certain kinds of projects with significant

public benefits and a demonstrated need for financial assistance.” 201 F. Supp. 3d at 21. When Congress added

§ 142(m) to the Internal Revenue Code in 2005, it did so

against the backdrop of § 147(f ), which it had first added

to the Code in 1982 in a clear effort to ensure public benefit from tax-exempt bonds. As the Senate Finance

Committee Report explained at the time:

The committee believes that new restrictions are

needed on [bonds] to help eliminate inappropriate

uses and to help restore the benefit of tax-exempt

erns the use of bonds to finance facilities in particular, evincing a

closer relationship than § 142 shares with, for example, the rules

governing mortgage bonds that are also contained in that subpart.

The Court’s conclusion is not that the two bear an integral relationship simply because they share a common subpart, but because they

both deal with a common activity regulated by that subpart. Thus,

contrary to Defendants’ contentions, the Court’s conclusion that the

two provisions bear an integral relationship does not license any

plaintiff whose interests are protected by any provision within the

subpart to challenge a § 142(m) allocation.

51a

financing for traditional governmental purposes.

However, the committee believes that, in general,

state and local governments are best suited to determine the appropriate uses of [bonds]. The

committee believes that providing tax exemptions

for the interest on certain [bonds] may serve legitimate purposes in some instances provided

that the elected representatives of the state or local governmental unit determine after public input that there will be substantial public benefit

from issuance of the obligations[.]

S. Rep. No. 97-494(I), at 168 (1982).

This suggests a common purpose: § 142 reflects congressional judgment about the types of projects that

benefit the public enough to warrant tax-exempt financing, and § 147(f ) creates a mechanism of democratic accountability by which the public can confirm that a particular project does indeed confer public benefit. Cf.

Nat’l Petrochemical & Refiners Ass’n v. EPA, 287 F.3d

1130, 1148 (D.C. Cir. 2002) (holding that provisions

shared an integral relationship because one helped “accomplish[ ] one of the express goals” of the other).

The same legislative history and interlocking purpose

compel the Court to reconsider its holding in Indian River County II that local governments fall outside § 142’s

zone of interests. Indian River County has properly focused its attention not on SAFETEA as a whole, but on

§ 142 itself and its purpose of “support[ing] the development and construction of certain kinds of projects with

significant public benefits[.]” Indian River Cty. II, 201

F. Supp. 3d at 21. By demonstrating that § 142 and

§ 147(f ) bear an integral relationship, the County has illuminated § 142 in a way that suggests Congress’s intent

was indeed to allow State and local governments to en-

52a

sure public benefit would accrue from projects financed

by tax-exempt bonds. And because it appears from the

legislative history that Congress gave some deference to

State and local governments’ assessment of public benefit, Indian River County’s asserted interests at least arguably fall within the zone of interests protected by § 142.

Accordingly, the Court concludes that Indian River

County has plausibly stated a claim under that provision.

b. The merits of the County’s Section 142(m)

claim

Moving to the merits of Indian River County’s § 142

claim, the County contends that the Secretary’s allocation is inconsistent with the statute because Phase II is

not a “qualified highway or surface freight transfer facilit[y],” 26 U.S.C. § 142(a)(15), and thus is ineligible for

an allocation of PAB authority. The Court concludes that

the Secretary’s allocation conformed to the statutory requirements and was a reasonable exercise of her discretion. It will therefore grant summary judgment on this

issue to the Department and AAF.

Section 142 defines “qualified highway or surface

freight transfer facilities” to include “any surface transportation project which receives Federal assistance under title 23, United States Code[.]” Id. § 142(m)(1)(A).

The Secretary allocated PAB authority after concluding

that the project fell within this definition. Indian River

County challenges that allocation, contending that

§ 142(m)(1)(A) does not encompass the project and it was

thus ineligible for an allocation. Specifically, the County

contends that, when read in proper context, a “surface

transportation project” means only a highway project,

which necessarily precludes an allocation to any rail project. It also maintains that if the term “any surface

transportation project” did encompass rail projects, the

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AAF project has not received Title 23 federal assistance.

The Court addresses each point in turn.

i. Whether the AAF project is a “surface

transportation project” within the

meaning of § 142(m)(1)(A)

The plain meaning of § 142(m)(1)(A) is unambiguous.

It defines “qualified highway or surface freight transfer

facilities” to include “any surface transportation project[.]” 26 U.S.C. § 142(m)(1)(A). Because Congress did

not specify what “surface transportation” means, the ordinary meaning of the phrase controls. See, e.g., Johnson

v. United States, 559 U.S. 133, 138 (2010). The dictionary

definition of “surface transport” is “the movement of

people or goods by road, train, or ship, rather than by

plane.” Cambridge Business English Dictionary (2011).

This plainly includes rail projects. Defining “surface

transportation” to include rail comports with its use

elsewhere in federal law. For example, in SAFTEA, the

legislation through which Congress enacted § 142(m), a

provision in another portion of the bill defined “surface

transportation system” to include “freight and intercity

passenger bus and rail infrastructure and facilities.”

This text is long and has been trimmed here. Open the source document for the complete record.

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