Petition for Writ of Certiorari — Bersani v. United States Environmental Protection Agency
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IN THE ; ——
Supreme Court of the Anited States
OCTOBER TERM, 1988
JOHN A. BERSANI, NEWPORT GALLERIA GROUP,
ROBERT J. CONGEL and the PYRAMID COMPANIES,
Petitioners,
v.
UNITED STATES ENVIRONMENTAL PROTECTION
AGENCY, et al.,
Respondents.
PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS FOR THE
SECOND CIRCUIT
Gary H. Baise
Counsel of Record
Albert J. Beveridge, III
Virginia S. Albrecht
David M. Friedland
BEVERIDGE & DIAMOND, P.C.
1333 New Hampshire Ave., N.W.
Washington, D.C. 20036
(202) 828-0200
Attorneys for Petitioners.
PRESS OF BYRON S. ADAMS, WASHINGTON, D.C. (202) 347-8203
QUESTION PRESENTED
Section 404 of the Clean Water Act and its regu-
lations allow the Army Corps of Engineers to issue
permits for dredge and fill activities in wetlands where
no practicable alternative site “is available.’’ In this
case, the Corps issued a permit, finding that no al-
ternative site was available at the time of permit re-
view. EPA vetoed the permit on the ground that an
alternative was available to the applicant when it
“entered the market.”
The question for this Court is whether the Second
Circuit erred in upholding EPA’s “market entry”’ the-
ory of practicable alternatives where the theory pro-
vides no standard to guide the regulated community,
is inconsistent with the purpose of the Act and the
language of the regulations, overrides determinations
of state and local officials, and contradicts the settled
practice of the Corps of Engineers?
LIST OF PARTIES AND RULE 28.1 LIST
The parties to the proceedings below were the
Petitioners, John A. Bersani, Newport Galleria Group,
Robert J. Congel and the Pyramid Companies, and
the Respondents, United States Environmental! Pro-
tection Agency, United States Army Corps of Engi-
neers, Lee Thomas, in his official capacity as
Administrator of the United States Environmental
Protection Agency, Richard K. Dawson, in his official
capacity as Assistant Secretary for Civil Works,
United States Army, and Jennifer Joy Wilson, in her
official capacity as Assistant Administrator for Ex-
ternal Affairs, United States Environmental] Protec-
tion Agency.
Joseph Robichaud and Citizens in Support of At-
tleboro Mall intervened on behalf of Petitioners in the
court below. Sierra Club, Environmental Defense
Fund, National Wildlife Federation, National Audubon
Society, Conservation Law Foundation of New Eng-
land, Inc., Massachusetts Audubon Society, Citizens
for Responsible Environmental Management, Massa-
chusetts Society for Conservation Professionals, Au-
dubon Society of Rhode Island, Rhode Island
Association of Conservation Commissioners and Nat-
ural Resources Defense Council intervened on behalf
of Respondents in the courts below.
The caption of the Second Circuit’s opinion is in-
correct because it lists Intervenors Robichard and Cit-
izens in Support of Attleboro Mall and the
Homebuilding Association of Massachusetts as parties
adverse to Petitioners, when, in fact, these parties
intervened on behalf of Petitioners. The Homebuilding
Association of Massachusetts did not appeal the dis-
trict court’s decision. Petitioners have correctly cap-
tioned the case, John A. Bersani, Newport Galleria
Group, Robert J. Congel and the Pyramid Companies
v. United States Environmental Protection Agency, et
al., for this Petition for Certiorari.
Pursuant to Rule 28.1 of the Supreme Court Rules,
Petitioners Newport Galleria Group and the Pyramid
Companies submit the following information:
Petitioner Newport Galleria Group is a gen-
eral partnership, none of whose partners is
a corporation. Pyramid Companies is an as-
sociation of related partnerships, none of
whose partners is a corporation.
iv
TABLE OF CONTENTS
Page
QUESTION PRESENTED. .0...2..:0:.ccccccccscsscsscccsscssssssceeees i
LIST OF PARTIES AND RULE 28.1 LIST ................. ii
I OE IIIS sins innienennensiinntiscinsaeiansnaiine iv
ET [i SURED - cccosccénnvutansiacnsasenssadnsednotesdens vi
IIIT MIIIUIET sichnecpicnsanindisenhptenenasodennnanciintionnadsion 1
III llc snatintnsen adscasatinnsabeninapnedinnlibliatneniiininsocie 2
STATUTES AND REGULATIONS INVOLVED ........... 2
BE ATEEIICE OF TEER CAGE ccccscrccccessscccscccscccosssesccces 2
i SEIN ecseasdncinnindsctsdiiniunaadmineninnameiene 2
B. The Statutory And Regulatory Frame-
CE eeieenistiaatnnectintinnsecnitnditeaheitiniennesnns 4
C. Pyramid’s Project And The Site ............ 6
oe 7
1. State and Local Permit Proceedings
and Approval of Massachusetts
Supreme Judicial Court ..................... 7
2. Corps Regulatory Proceedings .......... 7
3. EPA Regulatory Proceedings ............ 8
4. District Court Opinion ...................00 9
5. Second Circuit Opinion ................c0 9
REASONS FOR GRANTING THE WRIT ..................... 10
I. THE PETITION FOR CERTIORARI
SHOULD BE GRANTED BECAUSE THE
MARKET ENTRY THEORY PROVIDES
NO STANDARDS AGAINST WHICH THE
REGULATED COMMUNITY CAN MEAS-
CORR Oee GHUPUPEPTADT © sinicenicciscnsenapinticiasnctnone 13
A. The Point Of Market Entry Remains
i ee 13
B. The Market Entry Theory Is Unworkable
eee, § | Be 15
Il. THE PETITION FOR CERTIORARI
SHOULD BE GRANTED BECAUSE THE
MARKET ENTRY THEORY IS CON-
TRARY TO THE STATUTORY AND REG-
CL sAUIESE GPUMEEEEEEED ‘cthsertinecscadossennscannsnccants 18
A. The Market Entry Theory Is Inconsistent
With The Purpose of Section 404 ......... 18
B. The Market Entry Theory Is Contrary To
The Language Of The Section 404(b\1)
GID | Kiciciintacstadiatdnaddtanmndsapenntiaisdnsiss 25
C. The Second Circuit Decision Distorts The
Regulatory Scheme By Allowing EPA To
Ignore Its Burden Of Proof Under Sec-
GRUUE SINE cntstetninseosossocsnnussaasbennbtasastiacents 27
CORT ATI ancscspscnssenennnnssencensencesscveninntintninennidinanitionate 28
TABLE OF AUTHORITIES
CASES: Page
Atchison, Topeka & Santa Fe Railway v. Wichita
Board of Trade, 412 U.S. 800 (1973) .............. 15
Bersani v. EPA, 674 F. Supp. 405 (N.D.N.Y.
QOD cccrsccestscvconestasnstecnniocnnssnieseinainiuennnensteneciecs 2.9
Bersani v. Robichaud, 850 F.2d 36 (2d Cir.
ROD cccoceccnncnstazecnectonecinesnsenismiecacinenians passim
Bethlehem Steel Corporation v. EPA, 723 F.2d 1303
QO Se nae 24
Chevron, U.S.A., Inc. v. NRDC, 467 U.S. 837
RR eee 10
Citizens for Responsible Environmental Manage-
ment v. Attleboro Mall, Inc., 400 Mass. 658,
B12 NIE.Be GER CAGED ccccecccssesccesscsssccessnssessese: 7
Commonwealth of Pennsylvania v. Union Gas Co.,
832 F.2d 1 (3d Cir. 1987), cert. granted,
__.U.S. —_, 108 S.Ct. 1219 (1988) ............... 10
Environmental Defense Fund, Inc. v. Ruckelshaus,
439 F.2d 584 (D.C. Cir. 1971) ..............cccc0ese 15
Friends of the Earth v. Hintz, 800 F.2d 822 (9th
Che. BIRD ccencesccnsstenvensphcnnibassonmenuieuinsianteionsonees 27
General Electric Co. v. Gilbert, 429 U.S. 125
CRIED cecerscnseststesnesseerserecuenennmamaennes 29
Gwaltney of Smithfield, Ltd. v. Chesapeake Bay
Foundation, __U.S. ~~, 108 S. Ct. 376
CRB TD cccoccsccsscavsssssniosssssscsusnescnensanssuecscssemnstensens 26
Hough v. Marsh, 557 F. Supp. 74 (D. Mass.
ROBY cccrncscnecsnsevsssesencenensssesnssetsunmuessnssnnmmenssadvenss 27
Industrial Union Department v. American Petro-
leum Institute, 448 U.S. 607 (1980) ................ 28
Mall Properties, Inc. v. Marsh, 672 F. Supp. 561
(D. Mass. 1987), appeal denied, 841 F.2d 440
(1st Cir. 1988), cert. denied sub nom. New Ha-
ven v. Marsh, __U.S. _—, 109 S.Ct. 128
(2BGED .ccersscssincisintsnaniadiabiienindgaaaaaien 21
vil
Table of Authorities Continued
Page
Monongahela Power Co. v. Marsh, 809 F.2d 41 (D.C.
Cir. 1987), cert. denied, __U.S. __, 108 S.Ct.
ee eerie aietehteenainnitithdipeadieeceateintceecnteetliiees 22,23
Morton v. Ruiz, 415 U.S. 199 (1974) .0.........00000..... 18
Natvonal Association of if Greeting Card Publishers v.
U.S. Postal Service, 462 U.S. 810 (1983) ....... 29
National Audubon Society v. Hartz Mountain De-
velopment Corp., 14 Envtl. L. Rep. 20724
(Envtl. L. Inst.) (D.N.J. Oct. 24, 1983) .......... 26
South Terminal Corp. v. EPA, 504 F.2d 646 (1st
Ne I lie rece t e 18
Steadman v. SEC, 450 U.S. 91 (1981) ........000000..... 28
Tull v. United States, __U.S. —, 107 S.Ct. 1831
TUTE? aidiciddendiestaltiidbaaitnepacdidacnaithenniteadaiiiaanitaiaaietnitinstnactiais 10
United Scenic Artists Local 829 v. NLRB, 762 F.2d
I I a i 28
United States v. Riverside Bayview Homes, Inc., 474
tials 10,23
FEDERAL STATUTES:
Administrative Procedure Act
eR a ee 18
RE Se re 2
Federal Water Pollution Control Act
Section 301, 38 U.S.C. § 13111 ............................ 4
Section 408, 38 U.S.C. § 1348 ........................... 19,20
Section 404, 33 U.S.C. § 1344 ......................00. passim
FEDERAL REGULATIONS
ee eT seiceesienaeiiiiaimiiinian 5
A 4
OU ira i 5
ee eae 18
eee ef 0 RE,
viii
Table of Authorities Continued
Page
40 C.FR. § ZOOM) rcccccccccccccccccccccccccccscccssscosessooes 16
44 Fed. Reg. 58,076 (October 9, 1979) ...........00+ 6
45 Fed. Reg. 85,336 (December 24, 1980) ....... 6,19,27,28
LEGISLATIVE HISTORY
S. 2770, and debate on same, 92d Cong. Ist Sess.
CRT ED ccnecaninicssnnssntnincsnstesiotesnntenssnnmstateneasensnonnsss 24
S. Conf. Rep. No. 1236, 92d Cong., 2d Sess.
COTE ‘snccendsatabbinndnctotnssniostintinninbéonesiscusianesnineaiouse 23
Senate Consideration of the Conference Report
ERIRTIID sccenecncenspovecinsnennnscehinpanvsssonsanensentonntatutssiness 24
H.R. 11896, 92d Cong., 2d Sess. (1971) ................ 24
MISCELLANEOUS:
EPA Final Determination of the Assistant
Administrator for External Affairs (May 13,
BOBS) nccaccccccccccnccccssccesccossssscccsnsassssescsscoesssocssooees passim
The Conservation Foundation, Protecting America’s
Wetlands: An Action Agenda, the Final Report
of the National Wetlands Policy Forum
CRIIEED . cccsiunnsuntnssnnennnianssinipinsanignanenniiniscmensagemsens 16
United States General Accounting Office, WET-
LANDS, The Corps Of Engineers’ Administra-
tion Of The Section 404 Program, Report to the
Chairman, Subcomm. on Investigations and
Oversight, Comm. on Public Works and
Transportation, House of Representatives
(Washington, D.C.: GAO/RCED-88-110, July,
RITE ccasndnincicstudedasnesaibisenisusisataninisintanhanniiamnenbess 4
IN THE
Supreme Court of the United States
OCTOBER TERM, 1988
No.
JOHN A. BERSANI, NEWPORT GALLERIA GROUP,
ROBERT J. CONGEL and the PYRAMID COMPANIES,
Petitioners,
Ve
UNITED STATES ENVIRONMENTAL PROTECTION
AGENCY, et al.,
Respondents.
PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES
COURT OF APPEALS FOR THE SECOND CIRCUIT
Petitioners John A. Bersani, Newport Galleria Group,
Robert J. Congel and the Pyramid Companies respectfully
pray that a writ of certiorari issue to review the judgment
and opinion of the United States Court of Appeals for the
Second Circuit, entered in this proceeding on June 8, 1988,
rehearing and suggestion for rehearing en banc denied,
September 2, 1988.
OPINIONS BELOW
The opinion of the United States Court of Appeals for
the Second Circuit, with the dissenting opinion of Judge
Pratt, (App. A), is reported at 850 F.2d 36 (2d Cir. 1988).
The Order of the United States Court of Appeals for the
Second Circuit, denying Petitioners’ Petition for a Re-
hearing and Suggestion for Rehearing En Banc, (App. D),
dated September 2, 1988, is not reported. The opinion of
the United States District Court for the Northern District
of New York, (App. B), is reported at 674 F. Supp. 405
(N.D.N.Y. 1987). The Final Determination of the Assistant
Administrator for External Affairs, United States Envi-
ronmental Protection Agency, Concerning the Sweedens
Swamp Site in Attleboro, Massachusetts Pursuant to Sec-
tion 404(c) of the Clean Water Act (‘Final Determina-
tion”), (App. C), dated May 13, 1986, is not reported.
JURISDICTION
The Petitioners brought suit in the United States Dis-
trict Court for the Northern District of New York, invok-
ing federal jurisdiction pursuant to 28 U.S.C. § 1331 and
the Administrative Procedure Act, 5 U.S.C. § 702. The
Second Circuit denied Petitioners’ petition for rehearing
on September 2, 1988. Jurisdiction is conferred on this
Court by 28 U.S.C. § 1254(1).
STATUTES AND REGULATIONS INVOLVED
The relevant statutory provision, Section 404 of the
Clean Water Act (“the Act’’), 33 U.S.C. § 1344, is repro-
duced in the Appendix (App. E), as is the key regulatory
provision, 40 C.F.R. § 230.10(a), (App. F).
STATEMENT OF THE CASE
A. Introduction
This case presents an issue that is critical to the admin-
istration of a permit program jointly administered by the
United States Army Corps of Engineers (the “‘Corps’’) and
the United States Environmental Protection Agency
(“EPA” or the ““Agency”), under Section 404 of the Clean
Water Act (“CWA” or “the Act’’). Section 404(a) of the
Act authorizes the Corps to issue permits for the discharge
of dredged or fill material into the Nation’s waters if the
proposed project satisfies regulations promulgated by EPA
and the Corps pursuant to Section 404(b). Under the Sec-
tion 404(b) regulations, no permit will be issued if a prac-
ticable alternative site “‘is available’ to the applicant.
Section 404(c) authorizes EPA to veto a Corps-issued per-
mit to protect certain environmental interests.
In this case, the Corps found that no alternatives were
available to the Petitioner at the time of permit review
and decided to issue a permit. EPA determined, however,
in a departure from settled administrative practice, that
availability of alternatives should be judged as of the time
the applicant “entered the market” and, applying that the-
ory, vetoed the applicant’s project.
As Judge Pratt observed in dissent below, the market
entry theory “‘approaches a sensitive environmental prob-
lem through a time warp, it ignores the statute’s basic
purpose, and it creates unfair and anomalous results.”’ 850
F.2d at 48; App. A 25a.
In addition, the theory establishes a standardless inquiry
that virtually invites arbitrary and unequal application. It
makes no sense in the real world of land use planning,
financing and development, and it severely erodes the abil-
ity of public facilities planners, state and local land use
planners and private investors to make reasoned judg-
ments in carrying out their responsibilities.
Moreover, the theory contradicts the practice and un-
derstanding of the Corps, which, as the permitting au-
thority under the Act, is the agency most intimately
involved in administering the relevant regulations. It is
also contrary to the language of the regulations and to
EPA’s own previous interpretation of those regulations. If
left uncorrected, the Second Circuit’s adoption of EPA’s
‘market entry’ theory as the only correct understanding
of the regulations will throw what had previously been
settled administrative practice of permit review into a state
of irremediable confusion.
B. The Statutory And Regulatory Framework
The Clean Water Act prohibits the discharge of any
pollutant, including dredged or fill materials, into the Na-
tion’s waters, including wetlands, except in compliance with
the Act. CWA § 301(a), 33 U.S.C. § 1311(a). Section 404
is an exception to the Act’s general prohibitions. It es-
tablishes a permit program under which the Corps may
authorize discharges of dredged and fill materials in cer-
tain circumstances. CWA § 404, 33 U.S.C. § 1844. The
program regulates a vast array of activities, ranging from
the construction of a tennis court in a homeowner’s back-
yard to construction of new residential subdivisions, office
parks, and shopping malls to large public construction proj-
ects involving, for example, highways, port improvements,
public marinas, parks, public housing, schools and colleges.
The Corps administers the program and reviews approx-
imately 14,000 individual permit applications every year.’
Thousands of other projects are regulated by general per-
mits issued in accordance with Section 404(e). 33 U.S.C.
§ 1344(e); 33 C.F.R. Part 330.
Although EPA has authority to issue permits under
other sections of the Act, Congress made the Corps the
permitting authority under Section 404, in recognition of
the Corps’ special expertise in this area. 33 U.S.C. §
1344(a); App. E 1lla. Section 404(b) provides that the
Corps must base its permit decision on guidelines (the
‘ United States General Accounting Office, WETLANDS, The Corps
Of Engineers’ Administration Of The Section 404 Program, Report to
the Chairman, Subcomm. on Investigations and Oversight, Comm. on
Public Works and Transportation, House of Representatives 11 (Wash-
ington, D.C.: GAO/RCED-88-110, July, 1988) (In 1986, the Corps issued
approximately 10,500 permits and denied an estimated 500 applications;
3,000 applications for permits were cancelled or withdrawn).
“‘404(bX1) guidelines’) developed by EPA in conjunction
with the Corps. 33 U.S.C. § 1344(b); App. E 1lla. These
guidelines require the Corps to consider a comprehensive
range of environmental, scientific, and economic factors in
making its permitting decisions. 40 C.F.R. Part 230. In
addition, the Corps applies a wide-ranging “‘public interest
review” under regulations that were already in effect at
the time the Clean Water Act was passed.’
Of particular importance here, the Corps may not issue
a permit if there is a “practicable alternative” available
to the applicant that ‘would have less adverse impact on
the aquatic ecosystem.” 40 C.F.R. § 230.10(a); App. F
113a-114a. An alternative is “practicable” if it is available
to, or can reasonably be obtained by, the applicant and
will fulfill the applicant’s project purpose. 40 C.F.R. §
230.10(aX2); App. F 113a. With respect to ‘‘non-water-
dependent activities’ proposed for wetlands (i.e., activities
that could be accomplished on non-wetland sites, such as
construction of a shopping mall), practicable alternatives
are “presumed to be available” unless the applicant clearly
demonstrates otherwise. 40 C.F.R. § 230.10(aX3); App. F
113a-114a.
Finally, Section 404(c) of the Act authorizes EPA to
overrule a Corps decision to grant a permit and so to
prohibit the use of a specific area as a discharge site for
dredged or fill material whenever EPA “determines ...
that the [proposed] discharge . . . will have an unacceptable
adverse effect” on one of five specifically enumerated en-
vironmental interests. 33 U.S.C. § 1344(c); App. E 1lla-
?In this review, the Corps balances the “national concern for both
protection and utilization of important resources,”’ considering a wide
range of factors such as “conservation, economics, aesthetics, general
environmental concerns, wetlands ... and, in general, the needs and
welfare of the people.”’ 33 C.F.R. § 320.4.
sceeiceietiiiiaatamaamiaaiiaineaiaitaailiaiiititiliiiiiaaiaaie
112a. In exercising this authority, EPA has the burden of
proving that an “unacceptable adverse effect’’ will occur.®
In this case, Pyramid sought to fill a wetland and in
an approximately 18-month period obtained all the nec-
essary permits from the local government and the State
of Massachusetts, including approval under the Massachu-
setts Wetlands Protection Act, and from the Corps pur-
suant to Section 404(a) and (b). In approving the project,
the Corps specifically found that no practicable alternatives
were available to Pyramid. EPA, however, overrode the
Corps’ decision, vetoing the permit on the ground that a
site optioned by a competing shopping center developer
three months before Pyramid began searching for sites in
the Attleboro, Massachusetts area “‘is available’ to Pyr-
amid within the meaning of the guidelines.
C. Pyramid’s Project And The Site
Pyramid is a large shopping center developer in the
Northeast. It began searching actively for suitable sites in
the Attleboro, Massachusetts area in September 1983. JA
225, JA 291.4 Pyramid purchased an 82-acre site (‘South
Attleboro”) from the Edward J. DeBartolo Corporation
(‘‘DeBartolo’’), another shopping center developer, in De-
cember 1983, and proposed to build a two-level shopping
mall. App. C 95a. The site contains 49.6 acres of red maple
swamp.
Pyramid has a competitor in the vicinity, New England
Development Company (““NED”’’). On July 1, 1983, before
Pyramid began looking for sites in the area, NED had
*45 Fed. Reg. 85,336, 85,338 (December 24, 1980); 44 Fed. Reg.
58,076, 58,080 (October 9, 1979).
‘ References to the Joint Appendix filed in the court below are as
follows: “JA ..”” References to documents in the Administrative
Record which are not included in the Joint Appendix are as follows:
“AR, _._..” References to the Appendix filed with this Petition are
as follows: “App. A —,” and so forth.
acquired a two-year option on another shopping center site
(“North Attleboro’’). Id.
D. Proceedings To Date
1. State and Local Permit Proceedings and Approval of
Massachusetts Supreme Judicial Court
After acquiring its site in December 1983, Pyramid ap-
plied for and obtained all necessary state and local ap-
provals.© Among other things, Pyramid obtained a state
wetlands permit for the project pursuant to the Massa-
chusetts Wetlands Protection Act, and the Massachusetts
Supreme Judicial Court upheld the permit. Citizens for
Responsible Environmental Management v. Attleboro Mall,
Inc., 400 Mass. 658, 511 N.E.2d 562 (1987).
2. Corps Regulatory Proceedings
Pyramid applied to the New England regional office of
the Corps (‘“‘“NE Corps’’) for an individual permit in July
1984. The application stated that North Attleboro was
“unavailable.”” AR, B-2 11. Because the NE Corps was
unable to resolve certain policy issues not relevant to this
Petition, the Corps’ Director of Civil Works ordered the
case to be elevated to Corps headquarters.
The Director of Civil Works determined that the project
satisfied the 404(bX1) guidelines and the Corps’ public in-
terest review regulations, and directed the local office to
issue a permit. On the key issue of availability of alter-
natives, the Director agreed with the NE Corps and found
* The land was rezoned for development as a shopping center, and
the Massachusetts Department of Public Works approved all necessary
roadway modifications. State water quality certification was issued in
March 1985, pursuant to Section 401 of the Clean Water Act, 33 U.S.C.
§ 1341. In accordance with the Massachusetts Environmental Policy
Act, an Environmental Impact Report was prepared and approved by
the Commonwealth’s Office of Environmental Affairs. AR, B-4. The
Mayor, City Council, City Planner, and the City’s economic development
agency all support the project. JA 89.
ata erin
that North Attleboro was not available “because it has
been optioned by another mall developer.” JA 83. On June
28, 1985, the NE Corps formally notified the regional of-
fices of EPA and the United States Fish and Wildlife
Service that it intended to issue a permit to Pyramid. AR,
B-16.
3. EPA Regulatory Proceedings
In July 1985, EPA’s Regional Administrator notified the
Corps and Pyramid that he intended to initiate veto pro-
ceedings under Section 404(c). AR, B-I8. On March 4, 1986,
the Regional Administrator recommended to EPA head-
quarters that Pyramid’s project be prohibited, urging a
legal rationale that headquarters would later reject. JA
119-196. EPA’s Assistant Administrator for External Af-
fairs (‘Assistant Administrator’’) issued a Final Determi-
nation on May 13, 1986, prohibiting the project because it
would have avoidable, and, therefore, “‘unacceptable,”’ ad-
verse effects on wildlife. App. C 108a.
In reaching this conclusion, the Assistant Administrator
first found that of the environmental interests protected
by Section 404(c), only wildlife would be adversely affected.
Id. at 82a. She then examined whether the adverse effect
was unacceptable “‘by reviewing whether there are prac-
ticable, less environmentally damaging alternatives” to the
South Attleboro site. Jd. at 83a.
Turning to “‘practicable alternatives,”’ the Assistant Ad-
ministrator rejected the longstanding Corps understanding
that the availability of alternatives is considered at the
time of permit review. Instead, she changed the rules of
the game and determined that availability should be tested
as of the time the applicant ‘‘entered the market.” Jd. at
95a. She did not, however, define what constitutes ‘‘mar-
ket entry.” This theory had never been advanced or sug-
gested, either by the Corps or EPA, before this proceeding.
Pyramid had begun its investigation of the trade area
in September 1983, approximately eight weeks after its
competitor NED had optioned the North Attleboro site.
The Assistant Administrator, however, applying the ret-
roactive market entry theory, relied on alleged “trade cus-
tom’”’ to find that Pyramid must have “entered the market”
before the date on which NED had optioned North Attle-
boro. Jd. at 95a n.15. Then, ignoring the fact that EPA’s
own regulations place the burden in a 404(c) proceeding
on the Agency, the Assistant Administrator concluded that
“{ojn this record, I cannot find that Pyramid has met its
burden of showing that the North Attleborough [sic] site
was unavailable.” Jd. at 95a-96a. Since, according to this
novel analysis, the North Attleboro site was “available’’
to Pyramid when it entered the market, the Assistant
Administrator concluded that any adverse effects resulting
from Pyramid’s project were ‘avoidable’ and therefore
“unacceptable.” Jd. at 108a. She therefore vetoed the per-
mit.
4. District Court Opinion
The district court upheld EPA’s Final Determination.
Although the court rejected the Agency’s “trade custom”
inference, it deferred to EPA’s interpretation of the reg-
ulation, holding that its “carefully circumscribed” function
was to “uphold a reasonable [EPA] interpretation, even if
the court would not have reached the same conclusion in
2 first instance.” 674 F. Supp. at 412; App. B 45a.
5. Second Circuit Opinion
The Second Circuit affirmed, with one judge dissenting.
850 F.2d at 43; App. A 5a. While it was uncertain whether
EPA’s interpretation merited deference, the court ruled
that the “‘market entry’’ theory was the only reasonable
interpretation of the regulations. 850 F.2d at 44; App. A
17a. Rejecting Pyramid’s argument that “market entry”
was little more than a standardless evasion, the court ob-
served that there was no need to “‘pin down the standard,”’
for to do so would only “‘confuse things further.’’ 850 F.2d
at 45; App. A 22a.
|
10
Judge Pratt dissented on the ground that the market
entry theory improperly focuses on the decision-making
techniques and tactics of a developer at the time it entered
the market, rather than the actual alternatives to devel-
opment in wetlands, which is Section 404’s central pur-
pose. 850 F.2d at 48; App. A 25a. The proper time to
analyze the availability of alternatives, Judge Pratt found,
is as of the time EPA makes its 404(c) decision, a position
that is “reinforced by the present-tense language of the
regulation, which commands EPA to determine whether
an alternate site ‘is available.’ ”” 850 F.2d at 49; App. A
29a.
REASONS FOR GRANTING THE WRIT
This case raises important issues of statutory and reg-
ulatory construction in the administration of the Clean
Water Act.* The Corps evaluates approximately 14,000 in-
dividual applications for Section 404 permits per year. The
cornerstone of the Corps’ Section 404 analysis is its thresh-
old determination whether there is a practicable alternative
site for the proposed project. Until the decision in this
case, the Corps and EPA had always evaluated the avail-
ability of alternatives as of the time of permit review.
*This Court has granted certiorari in other cases to review similar
issues. See, e.g., Commonwealth of Pennsylvania v. Union Gas Company,
832 F.2d 1343 (3d Cir. 1987), cert. granted, __._ U.S. —_., 108 S. Ct.
1219 (1988) (Certiorari granted to determine whether private parties
may sue states in federal court to recover cleanup costs under the
Superfund law); Tull v. United States, __U.S. ——, 107 S.Ct. 1831,
1835 (1987) (Certiorari granted to determine whether a jury trial is
required to determine liability and assess penalties for violation of Sec-
tion 404 of the Clean Water Act); United States v. Riverside Bayview
Homes, Inc., 474 U.S. 121, 126 (1985) (Certiorari granted to review
validity of Corps’ regulations defining ‘‘adjacent wetlands” as “waters
of the United States” under the Clean Water Act); Chevron, U.S.A.,
Inc. v. NRDC, 467 U.S. 837 (1984) (Certiorari granted to review validity
of EPA’s “bubble” concept under the Clean Air Act).
1]
In this case, the Second Circuit ignored this settled ad-
ministrative practice and endorsed EPA’s novel ‘market
entry’’ theory of practicable alternatives, which the Agency
had announced for the first time in this proceeding. But
EPA’s “market entry” theory provides no standard against
which the regulated community can measure its conduct,
no guidance for future regulatory decisions, and no stand-
ard against which a reviewing court can assess adminis-
trative decisions. Indeed, EPA appears to take the position
that it can review the availability of alternatives as of any
time it sees fit in each particular case. The Second Circuit
has compounded the harm caused by EPA’s erroneous rul-
ing by holding that the “market entry” theory is the only
correct interpretation of the regulation. What may have
been only an unfair, ad hoc ruling against Pyramid by
EPA has thus been converted into precedent binding on
EPA and, apparently, the Corps in the Second Circuit.
But the Corps disagrees with the “market entry” theory.
Unless the decision is reversed, the result will be to throw
the administration of the Section 404 program into a state
of unparalleled confusion and uncertainty.
Moreover, the market entry standard imposes an op-
pressive and unworkable burden on private and public per-
mit applicants. Since the applicant has the burden of
demonstrating the absence of alternatives during the per-
mitting stage (as opposed to the 404(c) veto stage) and
since the court below declined to define what acts con-
stitute market entry, no applicant will ever be able to
satisfy the market entry “‘standard.”’
Indeed, private investors are constantly searching for
attractive investment opportunities; they are never not in
the market. The impact on public capital facilities planning
can also be devastating. Consider, for example, a state
highway authority that assembles parcels of land over a
period of years to build a new road. Does the state high-
way authority enter the market when it first identifies the
a
12
need for a new road, or when it first selects a route, or
when it purchases the first parcel?
Finally, the market entry theory is contrary to the plain
language of the regulations and inconsistent with the in-
tent of the Clean Water Act to protect the Nation’s water
resources, including wetlands. To accomplish this purpose,
Congress mandated an inquiry into the wetland resource.
Until the decision in this case, the Corps and EPA had
always properly interpreted the statute as requiring a prac-
ticable alternatives analysis which focused on the wetland
resource: before the Corps could issue a permit, it had to
determine that there was no other available site whose
development would cause less environmental damage. The
“market entry” theory shifts the focus away from the
land, making the protection afforded the wetland depend-
ent on the owner’s business practices and the date the
owner is deemed to have entered the market. This inquiry
loses sight of the real purpose of the Clean Water Act.
In addition, the market entry theory subtly undercuts
Congress’ purpose in creating the Section 404 permitting
program within the Clean Water Act. That permitting pro-
gram reflects Congress’ recognition that environmental
protection must accommodate reasonable economic devel-
opment. In order to balance these conflicting goals, Con-
gress built the practicable alternatives analysis into the
Section 404 permitting decision. The Second Circuit de-
cision will destroy that balance by giving EPA discretion
to shift the timing of the alternatives analysis with each
new case, and will encourage ad hoc decision making. EPA
will always have grounds to veto a permit if it so chooses.
Unless reversed by this Court, the Second Circuit's opin-
ion will allow federal officials absolute discretion to deny
permits based on case-by-case determinations of the point
of “market entry,” regardless of other priorities contem-
plated by Congress or by local and state planning and
environmental authorities. Congress did not contemplate
a
13
giving EPA this kind of authority when it enacted Section
404.
I. THE PETITION FOR CERTIORARI SHOULD BE
GRANTED BECAUSE THE MARKET ENTRY THEORY
PROVIDES NO STANDARDS AGAINST WHICH THE
REGULATED COMMUNITY CAN MEASURE ITS CON-
DUCT
A. The Point Of Market Entry Remains Wholly Undefined
The “market entry”’ theory endorsed by the Second Cir-
cuit is virtually meaningless, providing no guidance to the
regulated community of the standard to which it will be
held.
The Second Circuit acknowledges that the Section
404(bX1) regulations are written in the present tense, on
their face mandating an inquiry into whether an alterna-
tive “is available’ to the applicant at the time the permit
is reviewed. 850 F.2d at 43; App. A l6a. Yet the court
ignores the regulatory language and Congressional intent
and asserts that EPA’s retrospective inquiry into possible
alternatives at the time of “market entry” is the only
possible interpretation of the regulatory term “‘is avail-
able.” 850 F.2d at 44; App. A 17a. Moreover, the court
compounds its error by ruling that it “is unnecessary to
pin down the [market entry] standard . . . and that it would
confuse things further to attempt to do so.” 850 F.2d at
46; App. A 22a. But confusion is precisely what this opin-
ion has sown.
EPA has consistently refused to define “market entry.”
In the Final Determination, EPA’s Assistant Administra-
tor referred to “‘market entry” alternatively as the “period
when the developer is selecting a site for its project,”
App. C 93a, “‘follow[ing] the market area,” id. at 95a n.15,
“exploring the ... trade area,” id. at 95a, or “searchfing]
for alternative sites.’ Jd. at 94a.’ In its district court briefs,
‘The Agency seemed to recognize that it was on difficult ground,
!
14
the government “defined” market entry as ‘‘the time of
project planning,”’ Defendants’ District Court Brief at 24,
“the time Pyramid began investigating the market,’’ id.
at 59, “searchfed] for a site,”’ id., “‘select[ed] the site,”
id. at 60, or “‘made its business decisions,” id. at 66.
On appeal, EPA once again refused to specify the point
in time at which the availability inquiry begins. Instead,
it claimed the need to “reserve judgment” on this decisive
question, Brief of Appellees at 32 n.20, stating opaquely
that the market entry theory “‘... tak[es] account of the
temporal continuum in which a wetland site-selection plan
evolves.”” Jd. at 28. As to which of numerous possible
events would “trigger the application of the ‘is available’
test,"” EPA commented blithely:
The plain answer is that while no one of these
points may be definitive, each may be germaine
[sic], individually and collectively.
Id. at 34 n.21 (emphasis in original).
EPA's equivocation is intolerable in light of the central
role the alternatives analysis plays in the regulatory frame-
work. An applicant simply cannot rebut the presumption
that an alternative is available if EPA is allowed to shift
the target date with each case.
The Second Circuit’s opinion suffers from the same flaw.
Though the court held that the “market entry” theory is
the only correct interpretation of the regulations, it too
declined to define the term either in the abstract or as
for, after announcing the new theory, the Assistant Administrator
stated, “I need not, and do not, decide here what the relevant time
period would be in other circumstances... .’’ App. C 93a n.14. Were
this true, the issue might not warrant this Court’s review. However,
given the Second Circuit’s declaration that “market entry” is the only
possible standard, and the Corps’ contrary practice, review is critical
to clarify this murky area of regulatory practice.
15
applied to this litigant in this case.* The point of market
entry is left wholly undefined, with the result that the
Second Circuit’s opinior fails to provide guidance for fu-
ture conduct by permit applicants and future decisions by
the Corps and EPA.
The potential for chaos in the administration of the Sec-
tion 404 program is compounded because the Corps does
not agree with EPA’s “market entry” concept. Thus, ap-
plicants for permits will not know what presumption it is
they will be required to rebut. And if it is the ‘“‘market
entry” presumption, they will not know how to rebut it
because the term is undefined and undefinable.
B. The Market Entry Theory Is Unworkable As A Practical
Matter
Moreover, as a practical matter, governmental public
facilities agencies planning to build schools, hospitals, and
airports; land use planners attempting to establish a com-
patible mix of land uses within their jurisdictions; and
private sector parties such as land developers, home build-
ers and industrial companies are constantly evaluating the
market for land use and development opportunities. They
are always in the market, and therefore, in the context
of their operations, ‘“‘market entry” is a meaningless con-
cept. As Judge Pratt, in dissent, observed: ‘‘Without an-
* The uncertainty resulting from the Second Circuit’s ruling stems in
part from its refusal to undertake the kind of judicial review required
in challenges to administrative action. As the District of Columbia Cir-
cuit has observed:
Judicial review must operate to ensure that the administrative
process itself will confine and contro] the exercise of discretion.
Courts should require administrative officers to articulate the
standards and principles that govern their discretionary decisions
in as much detail as possible.
Environmental Defense Fund v. Ruckelshaus, 439 F.2d 584, 598 (D.C.
Cir. 1971); see also Atchison, Topeka & Santa Fe Railway v. Board of
Trade, 412 U.S. 800, 806-07 (1973).
nT
16
swers to these questions [about the meaning of market
entry] a developer can never know whether to proceed
through the expense of contracts, zoning proceedings, and
EPA applications.” 850 F.2d at 49; App. A 27a.
The uncertainty is compounded by the difficulty in iden-
tifying wetlands and the possibility that a landowner may
be unaware that his property is a wetland. EPA’s own
regulations note that one needs a “‘specialist’’ to determine
wetland boundaries, 40 C.F.R. 230.41(aX2). The recent re-
port of the National Wetlands Policy Forum (convened by
the Conservation Foundation at the request of EPA) con-
firms the problem:
Determining whether a particular piece of
property is a wetland can sometimes be difficult.
To an untrained person, for instance, some for-
ested wetlands may appear very similar to nearby
upland forests. An expert in vegetation, soil, and
water conditions may be needed to tell the dif-
ference. For this reason, a landowner may not
even realize that a piece of land qualifies as a
wetland and is therefore subject to regulation.°
Notwithstanding these difficulties, the “market entry” the-
ory requires an applicant to survey the market long before
it may be aware that its site is even a wetland covered by
the Act. If it proceeds with construction unaware that the
site is a wetland, it will be impossible for an applicant, for
example, a commercial home builder, to show that it had
considered alternatives when it entered the market years
earlier. See Amici Petition for Certiorari of National As-
sociation of Home Builders et al.
Other practical difficulties with the ‘“‘market entry’’ the-
ory depend on the nature of the permit applicant, its pro)-
*The Conservation Foundation, Protecting America’s Wetlands: An
Action Agenda, The Final Report of the National Wetlands Policy Forum
36 (1988).
17
ect and its site. Many such problems are elaborated by
amici urging this Court to review the Second Circuit de-
cision. For present purposes, a few examples will suffice.
Local, state and regional planning efforts will be under-
mined. Under the market entry theory, EPA could, for
example, claim the authority to deny a municipality’s ap-
plication for a permit to construct a resource recovery fa-
cility on the ground that the town council did not consider
all alternative sites at its first public hearing concerning
the facility years earlier. See Amicus Petition for Certiorari
of American Planning Association.
The theory will be equally damaging to the nation’s port
authorities, many of which have owned substantial parcels
of wetlands adjacent to waterways for decades. If, for
example, a port authority applies for a permit to expand
commercial activity in a wetland, then, presumably, under
the Second Circuit holding, the Corps would be required
to consider alternatives available when the port “entered
the market.” It remains an open question whether market
entry occurred when the state passed legislation creating
the port authority forty years earlier, or when the port
purchased the property in question some twenty years ear-
lier, or when the port’s consultants first identified the need
for additional commercial development five years ago. The
uncertainty surrounding the timing of the alternatives
analysis will undoubtedly delay or impair the port’s ability
to upgrade deteriorating facilities as financial markets may
either refuse to finance such projects or exact high pre-
miums to compensate for the increased risks. Other public
facilities agencies will face similar problems, and the re-
quirement that they actually make inquiries about availa-
bility, thus virtually advertising their intentions to buy
property for roads, schools and the like, will undoubtedly
add to the cost of acquiring needed land."
’ Had EPA submitted its ‘“‘market entry”’ theory to formal rulemak-
18
Only this Court can rectify the chaotic situation created
by the Second Circuit opinion by requiring the agencies
to articulate a standard with sufficient clarity to apprise
the regulated community of the standard to which it will
be held.”
Il. THE PETITION FOR CERTIORARI SHOULD BE
GRANTED BECAUSE THE MARKET ENTRY THEORY
IS CONTRARY TO THE STATUTORY AND REGULA-
TORY SCHEME
A. The Market Entry Theory Is Inconsistent With The Pur-
pose of Section 404
The Second Circuit has held that the market entry the-
ory is the only correct interpretation of the regulations.
The court’s only justification for the decision is its asser-
tion that the market entry theory is consistent with the
objectives of the Clean Water Act, and that the Corps’
and EPA’s prior understanding of the regulation would
“thwart” these objectives.'? 850 F.2d 43-44; App. A 16a-
ing procedures, as its regulations require, it would have become aware
of these practical difficulties. The ‘‘market entry” theory is a modifi-
cation to the “basic application’ of the Section 404(b\1) guidelines.
Under the guidelines themselves, such modifications may only be ac-
complished by notice and comment rulemaking and in conjunction with
the Corps. 40 C.F.R. § 230.2(c). In addition, the Administrative Pro-
cedure Act, 5 U.S.C. § 552, requires that agency “policies affecting
individual rights and obligations be promulgated pursuant to certain
stated procedures so as to avoid the inherently arbitrary nature of
unpublished ad hoc determinations.”’ Morton v. Ruiz, 415 U.S. 199, 232
(1974). The “‘market entry” theory is such a policy.
1! See South Terminal Corp. v. EPA, 504 F.2d 646, 670 (1st Cir.
1974) (EPA regulation requiring denial of permit for construction of
parking spaces unless they ‘‘will not interfere’’ with attaining air quality
standards was held impermissibly vague: ‘“‘The prospective applicant for
a permit is utterly without guidance as to what he must prove, and
how. And the standard is so vague that it invites arbitrary and unequal
application’’).
2 The only evidence the court offers in support of its claim that
EPA's retrospective analysis is consistent with Congressional intent is
19
17a. The court is wrong.
Congress passed the Clean Water Act in 1972 to protect
the Nation’s water resources, including wetlands. 33 U.S.C.
§ 1251. Recognizing the need to accommodate reasonable
economic development and other values in the public in-
terest, Congress did not ban the “discharge’”’ of all “‘pol-
lutants” but set up permitting programs to regulate such
discharges. Section 404 established the permitting program
that regulates the discharge of dredged and fill materials.
33 U.S.C. § 1344(a); App. E llla. To effectuate the bal-
ancing between environmental and other goals, Congress
required the regulations governing Section 404 permitting
decisions to include consideration of whether the permit
applicant could accomplish its purpose at an alternative
site that would have less adverse environmental impacts."
one line from the preamble to EPA's regulations. According to the
court:
[T]he preamble to the 404(bX1) guidelines states that the purpose
of the ‘practicable alternatives’ analysis is ‘to recognize the special
value of wetlands and to avoid their unnecessary destruction, par-
ticularly where practicable alternatives were available in non-aquatic
areas to achieve the basic purpose of the proposal.’ 45 Fed. Reg.
85,338 (1980) (emphasis added by the court).
850 F.2d at 43-44; App. A 16a. The Agency's preamble is, of course,
not evidence of Congressional intent. In addition the phrase the court
quotes is out of context. Notwithstanding the court’s emphasis on the
past tense “were available,’’ the sentence was written in the past tense
because EPA was explaining the meaning of a regulatory test it had
once proposed to adopt but since had decided to reject. Quoted in its
entirety, the sentence reads: “The original purpose, which many com-
menters commended, was to recognize the special values of wetlands
and to avoid their unnecessary destruction, particularly when practic-
able alternatives were available in non-aquatic areas to achieve the basic
purposes of the proposal.’’ 45 Fed. Reg. 85,338-339.
's 33 U.S.C. § 1344(b) (requiring that the governing regulations be
based on the ocean discharge criteria contained in Section 403(c), 33
|
20
Thus, Congress commanded an objective inquiry into the
impacts on the physical environment that would result from
the choice of one site over another.
As Judge Pratt pointed out in dissent, the “market en-
try” theory strays from the statute’s central purpose. It
disregards the environmental impacts on the land in ques-
tion and on alternative sites and instead makes the pro-
tection afforded the wetland dependent on when the owner
“entered the market.’’ Such an inquiry, however, does not
protect the wetland:
The market entry theory in effect taints a par-
ticular developer with respect to a particular site,
while ignoring the crucial question of whether the
site itself should be preserved. Under the market
entry theory, developer A would be denied a per-
mit on a specific site because when he entered
the market alternatives were available, but la-
tecomer developer B, who entered the market
after those alternatives had become unavailable,
would be entitled to a permit for developing the
same site. In such a case, the theory no longer
protects the land, but instead becomes a distorted
punitive device: it punishes developer A by de-
nying him a permit, but grants developer B a
permit for the same property—and the only dif-
ference between them is when they ‘entered the
market.’
850 F.2d at 48; App. A 26a-27a (Judge Pratt dissenting).
Not only does the market entry theory fail to protect
the wetland but it leads inevitably to consideration of fac-
tors far different from those contemplated by Congress
when it mandated consideration of the relative environ-
mental impacts resulting from the use of alternative sites.
U.S.C. § 1343(c)); 33 U.S.C. § 1343(cX1\F) (requiring consideration of
“land based alternatives’’).
21
In this case, for example, EPA demanded copies of private
business memoranda, correspondence and other records
concerning Pyramid’s relationship with the previous owner
of the South Attleboro site, Pyramid’s business plans in
other trade areas outside of the Attleboro trade area, cost
estimates for various features of Pyramid’s proposed proj-
ect, and details of Pyramid’s dealings with real estate
agents and potential tenants for its shopping mall.“ JA
267-271. This is not the inquiry into the impacts on the
physical environment that Congress contemplated when it
established the alternatives analysis.
The court suggests that the ‘‘market entry’ theory vin-
dicates the Act’s goals because it creates an incentive for
‘The result of this and other similar tangents pursued by EPA is
that EPA simply lost sight of the purpose of the alternatives analysis,
which is to determine whether. in fact, an alternative “‘is available.”’
Instead, it recast the inquiry to determine whether the applicant had
been “truly fastidious” in investigating alternatives. Brief of Appellee
at 32 n.20. The bankruptcy of EPA’s position is summed up by a
hypothetical it posed:
A hypothetical case in which the applicant convincingly demon-
strates that when it undertook its market survey an alternative
was not obtainable, and only much later became so, might at least
in some circumstances possibly call for a different Section 404(c)
outcome.
Id. As this hypothetical so candidly suggests, EPA’s “‘market entry”
theory simply does not protect the wetland resource. It merely punishes
or rewards developers based on EPA’s perception of their bona fides.
‘8 See Mall Properties, Inc. v. Marsh, 672 F. Supp. 561, 566-68 (D.
Mass. 1987), appeal denied, 841 F.2d 440 (Ist Cir. 1988), cert. denied
sub nom. New Haven v. Marsh, __U.S. —_, 109 S.Ct. 128 (1988).
(Where Corps’ denial of permit is based on economic factors, such
factors must be “proximately related to changes in the physical envi-
ronment ... Corps may not... consider effects unrelated to the impact
which a proposed project will have on the environment.’’) Because the
date of market entry is totally unrelated to the impacts a given project
will have on the environment, it is an improper basis for a permit
decision under Section 404.
22
developers to search for alternative sites at the time they
first consider development.* Such an incentive, however,
exists regardless of the timing of the alternatives analysis.
No developer would choose a wetland site and risk its
costly investment on a hunch that by the time of permit
review all uplands sites would no longer be available. In-
deed, the applicant’s knowledge that it will be required
during permitting to establish the absence of uplands al-
ternatives is by itself a substantial incentive to avoid a
wetlands site.
Not only does the market entry theory lead the Agency
far afield of the inquiry Congress contemplated but it sub-
tly undermines the integrity of the balance Congress sought
to establish through the alternatives analysis. As Judge
Pratt pointed out in dissent:
Congress designed [Section 404} to preserve the
environment consistent with reasonable accom-
modation to the economic and social needs of the
public; it was not concerned with the identities
or past activities of particular developers.
850 F.2d at 48; App. A 26a.
Accordingly, Congress established a permit program un-
der Section 404(a) which is intended to authorize dis-
charges as long as there is compliance with certain
requirements.'? Congress contemplated that in making a
permitting decision the Corps would balance environmental
‘6 Conversely, the court argues that if alternatives were not available
when the developer purchased its site, but became available by the time
of permit application, the application would be denied. 850 F.2d at 44;
App. A 17a. Pyramid has always agreed with this statement. If a
feasible alternative is available at the time of permit review, the ap-
plication should be denied.
‘7 Monongahela Power Co. v. Marsh, 809 F.2d 41, 46 (D.C. Cir. 1987),
cert. denied, U.S. , 108 S.Ct. 68 (1988) (Section 404(a) estab-
lishes an exemption from ‘‘Section 301(a)'s broad ban on discharge of
pollutants into navigable waters’’).
i
23
protection and economic concerns, and that the Corps could
determine under Section 404(b) that economic concerns or
other competing values outweighed environmental protec-
tion in a particular case.* EPA, on the other hand, was
empowered under Section 404(c) to veto the Corps’ deci-
sion to grant a permit in the event EPA determined that
the proposed project “will have an unacceptable adverse
effect on municipal water supplies, shellfish beds and fish-
ery areas (including spawning and breeding areas), wildlife,
or recreational areas.’’’*
Thus, Congress gave discrete roles to the Corps and
EPA. It authorized the Corps to make the permitting de-
cision based on numerous environmental and economic fac-
tors in its public interest review and on the balancing
process inherent in the 404(bX1) guidelines’ practicable al-
ternatives analysis. Congress gave EPA the power to veto
a project based on environmental considerations. In this
case, EPA did not rely on its environmental expertise.
Rather, it rejected the Corps’ analysis of available alter-
natives and economic impacts, and offered its market entry
theory instead.” In doing so, the Agency upset the political
* “(Where it appears that a wetland covered by the Corps’ definition
is in fact lacking in importance to the aquatic environment—or where
its importance is outweighed by other values—the Corps may always
allow development of the wetland for other uses simply by issuing a
permit.” United States v. Riverside Bayview Homes, 474 U.S. 121, 135
n.9 (1985); Monongahela Power Co. v. Marsh, 809 F.2d at 46 (In en-
acting Section 404, “Congress insisted upon stringent federal discipline
in an effort to curb ecological pollution and degradation without in-
terfering unjustifiably with farming, forestry, and other legitimate ac-
tivities reserved for regulation primarily by local governments’’).
* 33 U.S.C. § 1344(c), App. E 1lla-112a; S. Conf. Rep. 1236, 92d
Cong., 2d Sess., at 141 reprinted in 1972 U.S. Code Cong. & Admin.
News 3776, 3818-19.
* In addition, as discussed more fully in the Petition for Certiorari
filed by the Citizens In Support of Attleboro Mall, EPA’s consideration
of cumulative impacts in the context of a Section 404(c) action was
rs |
24
compromise struck by Congress.”! The Second Circuit opin-
ion, by endorsing the market entry theory and giving EPA
unlimited authority to shift the time of market entry on
an ad hoc basis, effectively vitiates the Congressional com-
promise.”
Moreover, as Judge Pratt pointed out, the market entry
theory may also be easily circumvented:
wholly improper. Section 404(c) authorizes the Administrator to prohibit
or restrict the use of a “defined area’ when the Administrator “‘de-
termines ... that the discharge of ... materials into such area will
have an unacceptable adverse effect.’’ 33 U.S.C. § 1344(c); App. E
llla-112a. Clearly, the statute contemplates a site-specific inquiry. Thus,
the issue in a 404(c) case should be whether the environmental impacts
on the “defined area” are so great as to cause an unacceptable adverse
effect. EPA, however, ignored the Congressional intent and improperly
based its decision on the “cumulative loss” in Massachusetts. App. C
107a.
2: After considering several different administrative arrangements for
handling the discharge of dredged and fill materials, each of which
proposed a different allocation of permitting authority between the .
Corps and EPA, Congress ultimately decided to give the permitting
authority to the Corps. In so doing, it expressly carved the Section
404 program out of EPA’s permitting authority under other sections
of the Act. It made this choice in recognition of the Corps’ special
expertise on dredge and fill matters and long experience in managing
related permitting programs under Sections 9 and 10 of the Rivers and
Harbors Act of 1899, 33 U.S.C. §§ 401 and 402, and to avoid “‘creat{ing]
a burdensome bureaucracy.” S. 2770, 92d Cong., 1st Sess. (1971), re-
printed in Senate Committee on Public Works, A Legislative History
of the Water Pollution Control Act Amendments of 1972 (“1972 Leg.
Hist.”) at 1685-92; Senate Debate on S. 2770, 92d Cong., 1st Sess.
(1971), reprinted in 1972 Leg. Hist. at 1386, 1392; H.R. 11896, 92d
Cong., 2d Sess. (1971), reprinted in 1972 Leg. Hist. at 1063-64; Senate
Consideration of the Conference Report (Oct. 4, 1972), reprinted in
1972 Leg. Hist. at 177.
* See Bethlehem Steel Corp. v. EPA, 723 F.2d 1303, 1309 (7th Cir.
1983) (““{W]here a statute strikes a political balance but administration
of the statute is entrusted to an agency that may not embody that
balance, it is dangerous to defer automatically to the agency’s view. . .
The court must enforce the compromise, not the maximum position of
one of the interest groups among which the compromise was struck’’).
In this case, for example, if a Donald Trump had
“entered the market’’ after NED took the option
on the North Attleboro site and made it un-
available, under EPA’s approach he apparently
would have been entitled to a permit to develop
Sweedens Swamp. But after obtaining the permit
and the land, could Trump then sell the package
to Pyramid to develop? Or could he build the mall
and then sell the developed site to Pyramid? If,
on the one hand, the answer to these questions
is “‘yes’’, then the market entry theory is no more
than a troublesome mirage that could easily be
circumvented by Pyramid’s using a second party
to buy the land and obtain the permit. If, on the
other hand, the answer is ‘“‘no”, then Pyramid is
forever tainted, forever prohibited—somewhat like
a bill of attainder—from owning this particular
site, and only because at some time in the past
it had “entered the market” while an alternative
was still available.
850 F.2d at 48-49; App. A 27a.
In sum, the market entry theory is inconsistent with
the purpose of Section 404 itself. The result is a standard
that is unworkable in the real world and that will not
protect wetlands.
B. The Market Entry Theory Is Contrary To The Language
Of The Section 404(b)(1) Guidelines
The market entry theory is also inconsistent with the
language of the Section 404(b\1) guidelines. As noted ear-
lier, the guidelines require the Corps to determine whether
“there is a practicable alternative to the proposed dis-
charge.” 40 C.F.R. § 230.10(a) (emphasis added); App. F
113a. The term “practicable alternative’’ is also defined in
the present tense:
26
An alternative is practicable if it is available. . . .
If it is otherwise a practicable alternative, an
area not presently owned by the applicant which
could reasonably be obtained, utilized, expanded
or managed in order to fulfill the basic purpose
of the proposed activity may be considered.
40 C.F.R. § 230.10(aX2) (emphasis added); App. F 113a.
An alternative “is available,’’ then, only if it is available
to, or could reasonably be obtained by, the applicant at
the time the Corps makes its decision on the permit ap-
plication. By finding that it should consider availability
retroactively to the time the applicant “entered the mar-
ket,”” EPA distorted the language of the regulation.
Stated simply, EPA says “is” means “was.”
This Court recently rejected a similar effort to convert
present-tense language to the past tense, enjoining courts
and presumably agencies to give statutes their “most nat-
ural reading.’’ Gwaltney of Smithfield, Ltd. v. Chesapeake
Bay Foundation, __U.S. —— , 108 S.Ct. 376, 381 (1987).*
Furthermore, although no cases have directly addressed
the timing of the practicable alternatives test, in every
reported case the Corps has analyzed availability of alter-
native sites at the time of permit review, and the courts
have affirmed decisions based on that analysis. Indeed,
= The Second Circuit’s reading of the guidelines is both unnatural
and strained: “{Tyhe ‘present’ of the regulations might be the time the
application is submitted; the time it is reviewed; or any number of
other times."” 850 F.2d at 43; App. A 16a. The two specific times
mentioned by the Court are consistent with Petitioner's position. As
to what “any number of other times” might be, that is precisely what
we have been asking for over two years.
* See National Audubon Society v. Hartz Mountain Development Corp.,
14 Envtl. L. Rep. 20724, 20731 (Envtl. L. Inst.) (D.N.J. Oct. 24, 1983)
(Corps, with court approval, examined over a dozen alternatives avail-
able to applicant at time of permit review. Neither the Corps nor the
court speculated as to what alternatives might have been available to
8 TT EH
27
not only has the Corps applied a present-tense analysis,
but EPA itself has consistently done so in prior 404(c)
proceedings.”
C. The Second Circuit Decision Distorts The Regulatory
Scheme By Allowing EPA To Ignore Its Burden Of
Proof Under Section 404(c)
The Second Circuit opinion, by allowing EPA to ignore
its burden of proof under Section 404(c), distorts the reg-
ulatory scheme. When EPA invokes its 404(c) authority,
overriding a contrary Corps decision, the regulations place
on the Agency the burden of proving that an applicant’s
project will have an “‘unacceptable adverse effect” on the
proposed site.”
EPA simply ignored its burden, claiming that a veto
was warranted because it was not satisfied that Pyramid
had demonstrated, at the permitting stage under Section
able to applicant at time of permit review. Neither the Corps nor the
court speculated as to what alternatives might have been available to
the applicant at some indeterminate point when the company “entered
the market”); Friends of the Earth v. Hintz, 800 F.2d 822 (9th Cir.
1986) (Court affirmed Corps’ evaluation of alternatives available at time
of permit review despite the fact that filling had already occurred and
applicant was applying for an after-the-fact permit); cf Hough v. Marsh,
557 F. Supp. 74, 83-84 (D. Mass. 1982) (Court invalidates 404 permit
where it was doubtful that information used in alternatives analysis
accurately depicted market conditions at time of permit decision).
* Excluding the decision under review here, EPA had issued only
four 404(c) Final Determinations prior to its veto in this case. In two
of these cases, the question of practicable alternatives was not an issue.
In the two others, EPA examined only alternatives that were available
to the applicant at the time of the 404(c) proceeding. “Final Deter-
mination of the Assistant Administrator for External Affairs Concern-
ing the Jack Maybank Site on Jehossee Island, South Carolina Pursuant
to Section 404(c) of the Clean Water Act,” April 5, 1985 (“Maybank
Determination”), “Final Determination of the Administrator Concern-
ing M.A. Norden Site Pursuant to Section 404(c) of the Clean Water
Act,” June 15, 1984 (“Norden Determination’’).
* See 45 Fed. Reg. 85,336, 85,338 (December 24, 1980).
28
404(a), the absence of available alternatives. But EPA can-
not meet its burden during the veto proceeding by claiming
that an applicant did not meet its burden during the per-
mitting phase.”’ This is especially true where, as here, the
permitting authority found that the applicant had met its
permitting burden. JA 82. As EPA explained in the pream-
ble to its 404(c) regulations:
[T]he Administrator’s authority . . . under Section
404(c) operates independently of [the Corps’] per-
mitting authority in 404(a).... If the Adminis-
trator uses his 404(c) ‘veto,’ then he does have
the burden to justify his action, but that burden
does not come into play until he begins a 404(c)
proceeding.
45 Fed. Reg. at 85,338. The Agency’s administrative
sleight-of-hand does not meet its burden of proof, and the
Second Circuit, by failing to hold the Agency to its burden,
undermines the regulatory scheme.”
CONCLUSION
Because the Second Circuit’s endorsement of the market
entry theory is inconsistent with the language of the Sec-
tion 404(bX1) guidelines and the purpose of Section 404
of the Act, because that theory provides no guidance to
the regulated community, and because the lower court
opinion creates enormous confusion for any private or pub-
lic entity subject to Section 404 jurisdiction, the Petition
for Certiorari should be granted.
* Where an agency has the burden of proof, it must satisfy that
burden by a preponderance of the evidence. Steadman v. SEC, 450
U.S. 91, 102 (1981); see Industrial Union Department v. American
Petroleum Institute, 448 U.S. 607, 652-53 (1980) (agency cannot avoid
its statutory burden by relying on policy that imposed burden on in-
dustry); United Scenic Artists Local 829 v NLRB, 762 F.2d 1027, 1034
(D.C. Cir. 1985) (agency cannot create a presumption on grounds of
policy to avoid necessity for making findings required by statute).
* The Second Circuit properly declined to defer to EPA’s interpre-
ae te WR we
29
Respectfully submitted,
Gary H. Baise
Counsel of Record
Albert J. Beveridge, III
Virginia S. Albrecht
David M. Friedland
BEVERIDGE & DIAMOND, P.C.
1333 New Hampshire Ave., N.W.
Washington, D.C. 20036
(202) 828-0200
Attorneys for Petitioners
Date: December 1, 1988.
tation in this case. 850 F.2d at 45; App. A 20a. The Corps and EPA
disagree on the interpretation of the Section 404(bX1) guidelines; there-
fore, the Court must use its own judgment in construing the regula-
tions. General Electric Co. v. Gilbert, 429 U.S. 125, 144-145 (1976).
Moreover, because the Corps is the permitting authority, and addresses
the zoning, economic and financial issues implicated in the practicable
alternatives analysis in 14,000 permit applications each year, deference
to the Corps, not EPA, is warranted. See National Association of Greet-
ing Card Publishers v. U.S. Postal Service, 462 U.S. 810, 821 (1983)
(where statute divided ratemaking responsibility between two agencies,
Court deferred to agency in which ratemaking authority was ‘vested
primarily’).
INDEX TO APPENDICES
APPENDIX A:
Bersani v. Robichaud, 850 F.2d 36 (2d Cir.
a seassncenscscocores la
APPENDIX B:
Bersani v. EPA, 674 F. Supp. 405 (N.D.N.Y.
as scessnnssocscouscnss 3la
APPENDIX C:
EPA Final Determination of the Assistant Ad-
ministrator for External Affairs (May 13,
SITTIN caltinsemssdsonccscoscnsceccoccccocscccccscess 64a
APPENDIX D:
Bersani v. Robichaud, No. 87-6275, No. 87-6295,
(2d Cir. Sept. 2, 1988) (rehearing and sugges-
tion for rehearing en banc denied) ................. 109a
APPENDIX E:
a ss scscasscesconnecccccccooccccsess llla
APPENDIX F:
40 CPR. § 290.106) .....2.0.0.0000.00c0ccccececceseceseseee 113a
la
APPENDIX A
UNITED STATES COURT OF APPEALS,
SECOND CIRCUIT.
Nos. 852, 902, Dockets 87-6275, 87-6295.
John A. BERSANI, Newport Galleria Group, Robert J.
Congel and the Pyramid Companies,
Appellants.
v.
Joseph ROBICHAUD and Citizens in
Support of Attleboro Mall,
Intervenor-Plaintiffs-A ppellants,
Home Building Association of Massachusetts,
Intervenor-Plaintvff.
United States Environmental Protection Agency, United
States Army Corps of Engineers, Lee Thomas, in his of-
ficial capacity as Administrator of the United States En-
vironmental Protection Agency, Richard K. Dawson, in his
official capacity as Assistant Secretary for Civil Works,
United States Army, and Jennifer Joy Wilson, in her of-
ficial capacity as Assistant Administrator for External Af-
fairs, United States Environmental Protection Agency,
Appellees,
Sierra Club, Environmental Defense Fund, National Wild-
life Federation, National Audubon Society, Conservation
Law Foundation of New England, Inc., Massachusetts Au-
dubon Society, Citizens for Responsible Environmental
Management, Massachusetts Society for Conservation
Professionals, Audubon Society of Rhode Island, Rhode
Island Association of Conservation Commissioners and
Natural Resources Defense Council,
Intervenor-Defendants.
Argued March 16, 1988.
Decided June 8, 1988.
2a
On appeal from a judgment entered October 23, 1987
in the Northern District of New York, Thomas J. McAvoy,
District Judge, 674 F.Supp. 405, granting appellee’s mo-
tion for summary judgment and denying appellants’ motion
for summary judgment, in an action brought by developers
to challenge the final determination of the Environmental
Protection Agency denying them permission to construct
a shopping mall on a swamp, the Court of Appeals, Tim-
bers, Circuit Judge, held: (1) that EPA’s “market entry”
theory, considering availability of alternative sites at time
developer entered the market for site instead of at time
it applied for permit, was consistent with both regulatory
language and past practice; and (2) that EPA’s interpre-
tation, while not necessarily entitled to deference, was
reasonable and thus was properly upheld by district court.
Affirmed.
George C. Pratt, Circuit Judge, filed a dissenting opin- .
ion. |
Albert J. Beveridge, III, Washington, D.C. (Gary H. Baise,
Virginia S. Albrecht, Marc A. Zeppetello, David M. Fried-
land, and Beveridge & Diamond, Washington, D.C., on the
brief), for appellants.
Paul D. Kamenar, Washington, D.C. (Daniel J. Popeo,
Washington, D.C., and Henry M. Holzer, Brooklyn, N.Y.,
on the brief), for intervenor-appellants.
Donald A. Carr, Dept. of Justice, Washington, D.C.
(Roger J. Marzulla, Acting Asst. Atty. Gen., Peter R.
Steenland, Jr., Margaret N. Strand, Dept. of Justice, Gail
B. Cooper, E.P.A., Washington, D.C., and Ann H. Wil-
liams-Dawe, E.P.A., Boston, Mass., on the brief), for
appellees.
e———
:
3a
James T.B. Tripp, Environmental Defense Fund, New
York City (Michael E. Herz, Environmental Defense Fund,
New York City, Michael J. Bean, Environmental Defense
Fund, Washington, D.C., Hope Babcock, National Audubon
Society, Washington, D.C., Robert Dreher, Sierra Club Le-
gal Defense Fund, Washington, D.C., Jerry Jackson, Na-
tional Wildlife Federation, Washington, D.C., and Peter
Shelley, Conservation Law Foundation of New England,
Boston, Mass., on the brief), for intervenor-appellees.
R. Sarah Compton, Carl W. Schwarz, Kurt J. Olson,
and McDermott, Will & Emery, U.S. Chamber of Com-
merce, Washington, D.C., and Robin S. Conrad, National
Chamber Litigation Center, Washington, D.C., filed a brief
as amicus curiae.
Before TIMBERS, PRATT and MINER, Circuit Judges.
TIMBERS, Circuit Judge:
Appellants John A. Bersani, the Pyramid Companies,
Newport Galleria Group and Robert J. Congel (‘‘Pyramid”’,
collectively) appeal from a judgment entered October 23,
1987 in the Northern District of New York, Thomas J.
McAvoy, District Judge, granting summary judgment in
favor of appellees, the United States Environmental Pro-
tection Agency (“EPA”’), the United States Army Corps
of Engineers (the “‘Corps’’), Lee Thomas, the Administra-
tor of the EPA, Richard K. Dawson, Assistant Secretary
for Civil Works, United States Army, and Jennifer Joy
Wilson, Assistant Administrator for External Affairs of
the EPA (the “Federal Appellees’’ collectively), and de-
nying Pyramid’s motion for summary judgment. Bersani
v. EPA, 674 F.Supp. 405 (N.D.N.Y. 1987).
This case arises out of Pyramid’s attempt to build a
shopping mall on certain wetlands in Massachusetts known
as Sweedens Swamp. Acting under the Clean Water Act,
33 U.S.C. § 1251 et seg. (1982), EPA vetoed the approval
4a
by the Corps of a permit to build the mall because EPA
found that an alternative site had been available to Pyr-
amid at the time it entered the market to search for a
site for the mall. The alternative site was purchased later
by another developer and arguably became unavailable by
the time Pyramid applied for a permit to build the mall.
On appeal, the thrust of Pyramid’s argument is a chal-
lenge to what it calls EPA’s “market entry” theory, i.e.,
the interpretation by EPA of the relevant regulation, which
led EPA to consider the availability of alternative sites at
the time Pyramid entered the market for a site, instead
of at the time it applied for a permit. Pyramid argues
principally (1) that the market entry approach is contrary
to the regulatory language and past practice; and (2) that
since the Corps, another agency which was jointly re-
sponsible with EPA for administering the program in ques-
tion, interpreted the pertinent regulation in a different
way than EPA had, and since the market entry issue does
not involve environmental expertise, this Court should not
defer to EPA’s interpretation of the regulation. Other sub-
ordinate claims are raised by appellants as well as by two
intervenors and the amicus curiae.’
‘The amicus curiae, the United States Chamber of Commerce
(“Chamber of Commerce’’) filed a brief in support of Pyramid’s position.
This brief raises two points also raised in Pyramid’s brief, and one new
point: that EPA exceeded its authority under § 404(c) by engaging in
a de novo review of Pyramid’s compliance with the regulation in ques-
tion.
The Citizens in Support of Attleboro Mall and Joseph Robichaud
(“Citizens”’, collectively) nave intervened as plaintiffs/appellants and have
submitted a brief raising two issues not covered by Pyramid in its
brief: (1) whether EPA exceeded its authority under the relevant statute
by considering the historical and cumulative effects of discharges on
other wetlands, and (2) whether EPA arbitrarily rejected Pyramid’s
mitigation efforts.
The Conservation Law Foundation (““CLF’’) has intervened as a
defendant/appellee and has submitted a brief raising six points, four of
.
5a
We hold (1) that the market entry theory is consistent
with both the regulatory language and past practice; (2)
that EPA’s interpretation, while not necessarily entitled
to deference, is reasonable; and (3) that EPA’s application
of the regulation is supported by the administrative record.
We agree with the district court’s conclusion that EPA’s
findings were not arbitrary and capricious. We also hold
that Pyramid’s other arguments, and the arguments of one
intervenor and the amicus, lack merit.
We affirm.
I.
We shall summarize only those facts and prior proceed-
ings believed necessary to an understanding of the issues
raised on appeal.
A. Statutory and Regulatory Framework
One of the sections of the Clean Water Act (the ‘“‘Act’’)
relevant to the instant case is § 301(a), 33 U.S.C. § 1311(a)
(1982), which prohibits the discharge of any pollutant, in-
cluding dredged or fill materials, into the nation’s navig-
which are covered by the Federal Appellees in their brief. In the other
two points, CLF: (1) answers the arguments of the Citizens and the
Chamber of Commerce, asserting that EPA’s decision was wholly within
its authority, and (2) asserts that in any event the appropriate remedy
for any defects in EPA’s decision would be a remand.
Upon reviewing each of these new points, we hold (1) that EPA’s
decision was wholly within its authority, and (2) that EPA did not
arbitrarily reject Pyramid’s efforts at mitigation but rather had ample
basis to reject these efforts on the ground that they were not likely
to succeed. In light of our holding with regard to the district court’s
decision, discussed in the body of our opinion, we need not reach the
issue of whether remand would be the appropriate remedy for defects
in EPA’s actions.
The other arguments of the two intervenors and the amicus will be
dealt with in our discussion of the arguments of Pyramid and the
Federal Appellees.
6a
able waters, except in compliance with the Act’s provisions,
including § 404. It is undisputed that Sweedens Swamp is
a “navigable water’, as defined in 33 U.S.C. § 1362 (1982),
and that Pyramid’s shopping center proposal will involve
the discharge of dredged or fill materials.
Section 404 of the Act, 33 U.S.C. § 1344 (1982 & Supp.
III 1985), focusing on dredged or fill materials, provides
that the United States Army and EPA will share respon-
sibility for implementation of its provisions. EPA and the
Corps also share responsibility for enforcing the Act. 33
U.S.C. §§ 1311 (1982), 1319 (1982), 1344(n) and (s) (1982).
Section 404(a) authorizes the Secretary of the Army, acting
through the Corps, to issue permits for the discharge of
dredged or fill materials at particular sites. 33 U.S.C. §
1344(a) (1982). Section 404(b) provides that, subject to §
404(c), the Corps must base its decisions regarding permits
on guidelines (the ‘‘404(b\1) guidelines”) developed by EPA
in conjunction with the Secretary of the Army. 33 U.S.C.
§ 1344(b) (Supp. III 1985).
The 404(bX1) guidelines, published at 40 C.F.R. Part 230
(1987), are regulations containing the requirements for is-
suing a permit for discharge of dredged or fill materials.
40 C.F.R. § 230.10(a? covers “‘nonwater dependent activ-
* Section 230.10(aX2) and (3) provide:
“(a) Except as provided under section 404(b\2) [pertaining to nav-
igation] no discharge of dredged or fill material shall be permitted if
there is a practicable alternative to the proposed discharge which would
have less adverse impact on the aquatic ecosystem, so long as the
alternative does not have other significant adverse environmental con-
sequences.
(2) An alternative is practicable if it is available and capable of being
done after taking into consideration cost, existing technology, and lo-
gistics in light of overall project purposes. If it is otherwise a practicable
alternative, an area not presently owned by the applicant which could
reasonably be obtained, utilized expanded or managed in order to fulfill
7a
ities” (i.e., activities that could be performed on non-wet-
land sites, such as building a mall) and provides essentially
that the Corps must determine whether an alternative site
is available that would cause less harm to the wetlands.
Specifically, it provides that “‘no discharge of dredged or
fill material shall be permitted if there is a practicable
alternative” to the proposal that would have a “‘less ad-
verse impact”’ on the “‘aquatic ecosystem’’. It also provides
that a practicable alternative may include “an area not
presently owned by the applicant which could reasonably
be obtained, utilized, expanded or managed in order to
fulfill the basic purpose of the proposed activity.” 40 C.F.R.
230.10(aX2). It further provides that, “‘unless clearly dem-
onstrated otherwise’’, practicable alternatives are (1) “‘pre-
sumed to be available” and (2) “presumed to have less
adverse impact on the aquatic ecosystem”. 40 C.F.R.
230.10(aX3). Thus, an applicant such as Pyramid must re-
but both of these presumptions in order to obtain a permit.
Sections 230.10(c) and (d) require that the Corps not per-
mit any discharge that would contribute to significant deg-
radation of the nation’s wetlands and that any adverse
impacts must be mitigated through practicable measures.
In addition to following the 404(bX1) guidelines, the
Corps may conduct a “public interest review’. 33 C.F.R.
§ 320.4 (1987). This public interest review is not mandatory
the basic purpose of the proposed activity may be considered.
(3) Where the activity associated with a discharge which is proposed
for a special aquatic site [defined in Subpart E to include wetlands]
does not require access or proximity to or siting within the special
aquatic site in question to fulfill its basic purpose (i.e., is not “water
dependent’), practicable alternatives that do not involve special aquatic
sites are presumed to be available, unless clearly demonstrated oth-
erwise. In addition, where a discharge is proposed for a special aquatic
site, all practicable alternatives to the proposed discharge which do not
involve a discharge into a special aquatic site are presumed to have
less adverse impact on the aquatic ecosystem, unless clearly demon-
strated otherwise.”
8a
under § 404, unlike consideration of the 404(b) guidelines.
In a public interest review, the Corps’ decision must reflect
the ‘national concern” for protection and use of resources
but must also consider the “‘needs and welfare of the peo-
ple.” Jd.
Under § 404(c) of the Act, 33 U.S.C. § 1344(c), EPA
has veto power over any decision of the Corps to issue a
permit. It is this provision that is at the heart of the
instant case.
Specifically, § 404(c) provides that the Administrator of
EPA may prohibit the specification of a disposal site
‘“‘whenever he determines, after notice and opportunity for
public hearings, that the discharge of materials into such
area will have an unacceptable adverse effect” on, among
other things, wildlife. An ‘“‘unacceptable adverse effect”
is defined in 40 C.F.R. § 231.2(e) as an effect that is likely
to result in, among other things, “significant loss of or
damage to ... wildlife habitat”. The procedure under §
404(c) begins with the Regional Administrator (““RA’’) who,
under § 231.3(a), must notify the Corps and the applicant
when it is possible he will find an ‘unacceptable adverse
effect’’. If within 15 days the applicant fails to satisfy the
RA that no such effect will occur, the RA must publish
his proposed determination to veto the grant of a permit.
* Section 404(c), 33 U.S.C. § 1344(c), authorizes the Administrator:
“to prohibit the specification (including the withdrawal of specification)
of any defined area as a disposal site, and he is authorized to deny or
restrict the use of any defined area for specification (including the
withdrawal of specification) as a disposal site, whenever he determines,
after notice and opportunity for public hearings, that the discharge of
such materials into such area will have an unacceptable adverse effect
on municipal water supplies, shellfish beds and fishery areas (including
spawning and breeding areas), wildlife, or recreational areas. Before
making such determination, the Administrator shall consult with the
Secretary. The Administrator shall set forth in writing and make public
his findings and his reasons for making any determination under this
subsection.”
ee TG
9a
A period for public comment and an optional public hearing
follows, after which the RA either withdraws the deter-
mination or submits a recommended determination to the
national Administrator, whose decision to affirm, modify
or rescind the RA’s recommendation is the final deter-
mination of EPA for purposes of judicial review. The bur-
den of proving that the discharge will have an
“unacceptable adverse effect” is on EPA. 45 Fed.Reg.
85,336, 85,338 (1980); 44 Fed. Reg. 58,076, 58,080 (1979).
In short, both EPA and the Corps are responsible for
administering the program for granting permits for dis-
charges of pollutants into wetlands under § 404. The Corps
has the authority to issue permits following the 404(b\1)
guidelines developed by it and EPA; EPA has the au-
thority under § 404(c) to veto any permit granted by the
Corps. The Corps processes about 11,000 permit applica-
tions each year. EPA has vetoed five decisions by the
Corps to grant permits.
B. Factual Background of the Sweedens Swamp Project
Sweedens Swamp is a 49.5 acre wetland which is part
of an 80 acre site near Interstate 95 in South Attleboro,
Massachusetts. Although some illegal dumping and motor-
bike intrusions have occurred, these activities have been
found to have had little impact on the site which remains
a “high-quality red maple swamp” providing wildlife hab-
itat and protecting the area from flooding and pollution.
The effort to build a mall on Sweedens Swamp was
initiated by Pyramid’s predecessor, the Edward J. De-
Bartolo Corporation (‘DeBartolo’). DeBartolo purchased
the Swamp some time before April 1982. At the time of
this purchase an alternative site was available in North
Attleboro (the ‘“‘North Attleboro site”). Since Massachu-
setts requires state approval (in addition to federal ap-
proval) for projects that would fill wetlands, DeBartolo
applied to the Massachusetts Department of Environmen-
tal Quality Engineering (““DEQE”’) for permission to build
10a
on Sweedens Swamp. DEQE denied the application in April
1982.
Pyramid took over the project in 1983 while the appeal
of the DEQE denial was pending. In April 1983, Massa-
chusetts adopted more rigorous standards for approval of
permits. The new standards added wildlife habitat as a
value of wetlands to be protected and required the absence
of a “practicable alternative”. In March 1985, DEQE
granted approval under the old, less stringent, regulations.
The Massachusetts District Court reversed on the ground
that DEQE should have applied the new regulations, but
the Massachusetts Supreme Judicial Court ultimately up-
held DEQE’s approval. Citizens for Responsible Environ-
mental Management v. Attleboro Mall, Inc., 400 Mass. 658,
511 N.E.2d 562 (1987).
One of the key issues in dispute in the instant case is
just when did Pyramid begin searching for a suitable site
for its mall. EPA asserts that Pyramid began to search
in the Spring of 1983. Pyramid asserts that it began to
search several months later, in September 1983. The dif-
ference is crucial because on July 1, 1983—a date between
the starting dates claimed by EPA and Pyramid—a com-
petitor of Pyramid, the New England Development Co.
(‘““NED’’), purchased options to buy the North Attleboro
site. This site was located upland and could have served
as a “practicable alternative’ to Sweedens Swamp, if it
had been “available’’ at the relevant time. Thus, if the
relevant time to determine whether an alternative is
“available” is the time the applicant is searching for a
site (an issue that is hotly disputed), and if Pyramid began
to search at a time before NED acquired options on the
North Attleboro site, there definitely would have been a
“practicable alternative’ to Sweedens Swamp, and Pyra-
mid’s application should have been denied. On the other
hand, if Pyramid did not begin its search until after NED
acquired options on the North Attleboro site, then the site
arguably was not “available” and the permit should have
lla
been granted. Of course it also is possible that the North
Attleboro site remained “available” after NED’s acquisi-
tion of the options, since Pyramid arguably could have
purchased the options from NED. Moreover, since the
North Attleboro site indisputably was “‘available’’ when
Pyramid’s predecessor, DeBartolo, purchased Sweedens
Swamp, one might argue, as EPA does, that Pyramid
should be held to stand in its predecessor’s shoes. The
district court apparently agreed with Pyramid on the issue -
of when Pyramid entered the market, stating that ‘“Pyr-
amid initially became interested in developing a shopping
mall in the Attleboro area in September 1983”. Bersani
v. EPA, supra, 674 F.Supp. at 409.
In December 1983, Pyramid purchased Sweedens Swamp
from DeBartolo. In August 1984, Pyramid applied under
§ 404(a) to the New England regional division of the Corps
(the “NE Corps’’) for a permit. It sought to fill or alter
32 of the 49.6 acres of the Swamp; to excavate nine acres
of uplands to create artificial wetlands; and to alter 13.3
acres of existing wetlands to improve its environmental
quality. Later Pyramid proposed to mitigate the adverse
impact on the wetlands by creating 36 acres of replace-
ment wetlands in an off-site gravel pit.
During the review of Pyramid’s application by EPA, by
the Fish and Wildlife Service (““FWS’’) and by the Corps,
Pyramid submitted information on ‘“‘practicable alterna-
tives’, especially the North Attleboro site. In rejecting
that site as an alternative, Pyramid asserted that building
a mall there was not feasible, not that the site was un-
available. In the words of the district court, Pyramid
claimed that
“the site lacked sufficient traffic volume and sufficient
access from local roads, potential department store
tenants had expressed strong doubts about the fea-
sibility of the site and previous attempts to develop
12a
the site had met with strong resistance from the sur-
rounding community.”
Bersant, supra, 674 F.Supp. at 410 (emphasis added).
In November 1984, EPA and FWS submitted official
comments to the NE Corps recommending denial of the
application because Pyramid’s proposal was inconsistent
with the 404(bX1) guidelines. Pyramid had failed (1) to
overcome the presumption of the availability of alterna-
tives and (2) to mitigate adequately the adverse impact on
wildlife. EPA threatened a § 404(c) review. Pyramid then
proposed to create additional artificial wetlands at a nearby
upland site, a proposal it eventually abandoned.
In January 1985, the NE Corps hired a consultant to
investigate the feasibility of Sweedens Swamp and the
North Attleboro site. The consultant reported that either
site was feasible but that from a commercial standpoint
only one mall could survive in the area. On February 19,
1985, the NE Corps advised Pyramid that denial of its
permit was imminent. On May 2, 1985, the NE Corps sent
its recommendation to deny the permit to the national
headquarters of the Corps. Although the NE Corps ordi-
narily makes the final decision on whether to grant a
permit, see 33 C.F.R. § 325.8 (1982), in the instant case,
because of widespread publicity, General John F. Wall, the
Director of Civil Works at the national headquarters of
the Corps decided to review the NE Corps’ decision. Wall
reached a different conclusion. He decided to grant the
permit after finding that Pyramid’s offsite mitigation pro-
posal would reduce the adverse impacts sufficiently to al-
low the “practicable alternative’ test to be deemed
satisfied. He stated:
“In a proper case, mitigation measures can. be said
to reduce adverse impacts of a proposed activity to
the point where there is no ‘easily identifiable differ-
ence in impact’ between the proposed activity (in-
13a
cluding mitigation) versus the alternatives to that
activity.”
Although he did not explicitly address the issue, Wall
apparently assumed that the relevant time to determine
whether there was a practicable alternative was the time
of the application, not the time the applicant entered the
market. In other words, Wall appears to have assumed
that the market entry theory was not the correct approach.
For example, while addressing the traditional “‘practicable
alternatives” analysis as an alternative ground for his de-
cision, Wall found that the North Attleboro site was un-
available “‘because it has been optioned by another
developer”. Since the site was not optioned at the time
EPA argues Pyramid entered the market, this language
suggests (to Pyramid at least) that Wall could not have
been employing the market entry approach.
On May 31, 1985, Wall ordered the NE Corps to send
Pyramid, EPA and FWS a notice of its intent to grant
the permit. The NE Corps complied on June 28, 1985.
On July 23, 1985, EPA’s RA initiated a § 404(c) review
of the Corps’ decision. Following the procedure set forth
in 40 C.F.R. Part 231 (discussed above), EPA published
notice of its intent te prohibit the project in the Federal
Register; held a public hearing on September 26, 1985; and
permitted a period for public comment which closed on
October 4, 1985. A second hearing was held on November
18, 1985.
On March 4, 1986, the RA recommended that EPA veto
the permit because of adverse impacts on wildlife and
available “‘practicable alternatives’. In particular, the RA
found that Pyramid had not overcome the presumption
that an alternative existed, in part because Pyramid had
failed to provide information on the availability of the
North Attleboro site. After first refusing to provide the
information, Pyramid later had claimed “there is no fur-
ther or more detailed information. It simply does not
i
l4a
exist.’’ The RA alternatively reasoned that the North At-
tleboro site had been available to DeBartolo, and that EPA
should attribute this availability to Pyramid because Pyr-
amid had benefitted from DeBartolo’s application for state
approval.
On May 13, 1986, EPA issued its final determination,
which prohibited Pyramid from using Sweedens Swamp.
It found (1) that the filling of the Swamp would adversely
affect wildlife; (2) that the North Attleboro site could have
been available to Pyramid at the time Pyramid investigated
the area to search for a site; (3) that considering Pyramid’s
failure or unwillingness to provide further materials about
its investigation of alternative sites, it was uncontested
that, at best, Pyramid never checked the availability of
the North Attleboro site as an alternative; (4) that the
North Attleboro site was feasible and would have a less
adverse impact on the wetland environment; and (5) that
the mitigation proposal did not make the project preferable
to other alternatives because of scientific uncertainty of
success. In the second of these findings, EPA used what
Pyramid calls the ‘‘market entry’ approach.
On July 1, 1986, Pyramid commenced the instant action
in the district court to vacate EPA’s final determination
as arbitrary and capricious. After the parties filed cross-
motions for summary judgment, the newspapers reported
that Pyramid intended to enter a joint venture with NED
to build a mall at the North Attleboro site. Affidavits
submitted concerning this development did not indicate
whether Pyramid planned to continue the Sweedens Swamp
project. Since the joint venture agreement was still in
draft form, EPA did not take the position that the case
was moot.
On October 6, 1987, the court granted EPA’s motion
for summary judgment. The court stated that, with regard
15a
to the market entry theory, EPA’s interpretation of its
regulations was entitled to deference. This appeal followed.
For the reasons which follow, we affirm.
Il.
One of Pyramid’s principal contentions is that the mar-
ket entry approach is inconsistent with both the language
of the 404(bX1) guidelines and the past practice of the
Corps and EPA.
A.
With regard to the language of the regulations, Pyramid
reasons that the 404(b\1) guidelines are framed in the
present tense, while the market entry approach focuses on
the past by considering whether a practicable alternative
was available at the time the applicant entered the market
to search for a site. To support its argument that the
404(bX1) guidelines are framed in the present tense, Pyr-
amid quotes the following language:
‘“‘An alternative is practicable if it is available... . If
it is otherwise a practicable alternative, an area not
presently owned by the applicant which could reason-
ably be obtained, utilized, expanded or managed in
order to fulfill the basic purpose of the proposed ac-
tivity may be considered.”’
40 C.F.R. § 230.10(aX2) (emphasis added). It then argues
that EPA says “‘is’’ means “‘was’’. It cites Gwaltney of
Smithfield v. Chesapeake Bay Foundation, 108 S.Ct. 376,
381 (1987), to indicate that the Supreme Court believes
that the “‘most natural’’ reading of present tense langauge
in § 505(a) of the Act refers only to the present and future.
While this argument has a certain surface appeal, we
are persuaded that it is contrary to a common sense read-
ing of the regulations; that it entails an overly literal and
a
l6a
narrow interpretation of the language; and that it creates
requirements not intended by Congress.
First, while it is true that the language is in the present
tense, it does not follow that the “most natural” reading
of the regulations would create a time-of-application rule.
As EPA points out, ‘‘the regulations do not indicate when
it is to be determined whether an alternative ‘is’ avail-
able,” (emphasis in original), i.e., the “‘present’’ of the
regulations might be the time the application is submitted;
the time it is reviewed; or any number of other times.
Based upon a reading of the language in the context of
the controlling statute and the regulations as a whole,
moreover, we conclude that when the agencies drafted the
language in question they simply were not thinking of the
specific issues raised by the instant case, in which an ap-
plicant had available alternatives at the time it was se-
lecting its site but these alternatives had evaporated by
the time it applied for a permit. We therefore agree with
the district court that the regulations are essentially silent
on the issue of timing and that it would be appropriate
to consider the objectives of the Act and the intent un-
derlying the promulgation of the regulations. Bersani, su-
pra, 674 F.Supp. at 412.
Second, as EPA has pointed out, the preamble to the
404(b\1) guidelines states that the purpose of the “‘prac-
ticable alternatives” analysis is “to recognize the special
value of wetlands and to avoid their unnecessary destruc-
tion, particularly where practicable alternatives were avail-
able in non-aquatic areas to achieve the basic purpose of
the proposal.”’ 45 Fed. Reg. 85,338 (1980) (emphasis added).
In other words, the purpose is to create an incentive for
developers to avoid choosing wetlands when they could
choose an alternative upland site. Pyramid’s reading of the
regulations would thwart this purpose because it would
remove the incentive for a developer to search for an
alternative site at the time such an incentive is needed,
i.e., at the time it is making the decision to select a par-
l7a
ticular site. If the practicable alternatives analysis were
applied to the time of the application for a permit, the
developer would have little incentive to search for alter-
natives, especially if it were confident that alternatives
soon would disappear. Conversely, in a case in which al-
ternatives were not available at the time the developer
made its selection, but became available by the time of
application, the developer’s application would be denied
even though it could not have explored the alternative site
at the time of its decision.
Pyramid attacks this reasoning by arguing that few de-
velopers would take the risk that an available alternative
site would become unavailable and that EPA’s reading
improperly considers the motives and subjective state of
mind of the applicant. These arguments are wide of the
mark. Whether most real-life developers would take such
a risk is irrelevant. The point is that Pyramid’s time-of-
application theory is completely at odds with the expressed
intent of the regulations to provide an incentive to avoid
choosing wetlands. Similarly, EPA’s interpretation does
not require courts to investigate the subjective state of
mind of a developer. EPA discusses state-of-mind issues
only because it is discussing the purpose behind the reg-
ulations, which is concerned with incentives, and thus in
fact is indirectly concerned with the developer’s state of
mind.
In short, we conclude that a common-sense reading of
the statute can lead only to the use of the market entry
approach used by EPA.
B.
With regard to the past practice of the Corps and EPA,
Pyramid asserts that neither has ever applied a market
entry approach. It first cites two previous final determi-
nations of EPA, known as the “Final Determination of
the Assistant Administrator for External Affairs Concern-
18a
ing the Jack Maybank Site on Jehossee Island, South Car-
olina Pursuant to Section 404(c) of the Clean Water Act,”
April 5, 1985 (‘“‘“Maybank Determination”’), and the ‘Final
Determination of the Administrator Concerning M.A. Nor-
den Site Pursuant to Section 404(c) of the Clean Water
Act,” June 15, 1984 (““Norden Determination”). On the
basis of these determinations, Pyramid argues that, had
EPA been using a market entry approach in these cases,
it would have examined whether alternatives were avail-
able at earlier times and that EPA had failed to make
such an examination. Pyramid also cites National Audubon
Society v. Hartz Mountain Dev. Corp., 14 Envtl.L. Rep.
20724 (Envtl.L.Inst.) (D.N.J. Oct. 24, 1983), Friends of the
Earth v. Hintz, 800 F.2d 822 (9 Cir.1986), and Hough v.
Marsh, 557 F.Supp. 74 (D.Mass.1982), as examples of cases
in which courts have upheld Corps decisions which had
examined only those practicable alternatives that were
available at the time of the permit review.
Our examination of these prior decisions has satisfied
us, however, that the issue raised in the instant case sim-
ply has not been addressed before. In National Audubon
Society, the actual issue was whether the alternative site
had to be available to the applicant or any developer. In
Hintz, the court, while addressing other issues, simply ap-
proved a Corps decision in which only those alternatives
available at the time of the review were considered. In
Hough, the court invalidated a permit not because the
Corps had considered past alternatives but rather because
it assumed that such alternatives continued to exist during
the entire selection process. Similarly, the Maybank De-
termination in fact addressed another issue. In the Norden
Determination, where about 40 possible alternative sites
were identified, of which seven were available at the time
of application, EPA did not address the timing issue ex-
plicitly, because it was not required to—the presence of
the seven currently available alternatives made it unnec-
essary to reach the issue.
3
)
19a.
We believe that the issue essentially is one of first
impression. We view EPA’s action in the instant case as
an application of the regulatory language to the specific
needs of this case which arose here for the first time. We
therefore hold that EPA has not acted contrary to prior
practice under the regulations.
Ill.
We turn next to the issue of whether EPA’s interpre-
tation of the 404(bX1) guidelines is entitled to the defer-
ence usually accorded an agency with regard to its
interpretation of regulations it is charged with adminis-
tering, see EPA v. National Crushed Stone Ass’n, 449 U.S.
64, 83 (1980), and participated in formulating. See also
United States v. Hescorp. Heavy Equip. Sales Corp., 801
F.2d 70, 76 (2 Cir.), cert. denied, 107 S.Ct. 672 (1986).
The district court implied in its decision that it was ac-
cording EPA such deference in examining its market entry
approach.
Pyramid contends that such deference was unwarranted
because two agencies—EPA and the Corps—developed and
administered the regulations, and the Corps reached a dif-
ferent conclusion from that of EPA on the market entry
issue. It asserts that, contrary to EPA’s market entry
approach, the ‘Corps’ position is that the availability should
be determined as of the time an application is under re-
view.”” Pyramid points out that under § 404(b) the regu-
lations are to be developed by EPA “‘in conjunction with’”’
the Secretary of the Army (who acts through the Corps).
It cites General Elec. Co. v. Gilbert, 429 U.S. 125, 144-45
(1976), for the proposition that a court must use its own
judgment in construing a regulation when two agencies
with responsibility for administering it reach divergent
conclusions. It also contends that the Corps has greater
experience with and expertise in assessing the ‘‘availabil-
ity” of alternatives than EPA, because it is the Corps that
makes the initial decision on thousands of applications while
20a
EPA reviews under § 404(c) only rarely. Furthermore,
Pyramid claims that the availability analysis implicates zon-
ing, economic and financial issues, not environmental ones.
In response, EPA asserts that the Corps did not take
a developed opposing policy position on the issue of what
time is relevant in the “practicable alternatives’’ analysis.
The reason for this is that the Corps, acting through Gen-
eral Wall, based its decision primarily on its finding that
Pyramid’s mitigation proposal was workable. EPA also as-
serts, on the issue of its expertise, that its “selective and
most infrequent invocation” of its veto power underscores
EPA’s “seriousness” about using the veto. Finally EPA
asserts that the Act’s legislative history indicates that Con-
gress intended EPA to have the “final word’ on any dis-
putes with the Corps.
While none of EPA’s assertions is entirely persuasive,
there also are difficulties with Pyramid’s position. It is
undeniable, for example, that Wall in fact did find that
the North Attleboro site was “unavailable’’ and thus it
appears that the Corps tacitly was applying a time-of-
application test. On the other hand, it is possible that Wall
believed that Pyramid did not enter the market until after
NED had purchased the North Attleboro site. Accordingly,
Wall may have found the alternative site “unavailable”
under the market entry approach. Pyramid’s and EPA’s
other arguments similarly cut both ways or are inconclu-
sive.
Even if we are not thoroughly persuaded that EPA’s
interpretation was entitled to deference, however, we
nevertheless conclude that the district court’s decision in
its favor must be upheld. As Pyramid itself points out (to
the detriment of its argument), the issue of deference is
separate from the issue of the standards of review of the
district court and of our Court.
On appeal, we must subject the district court’s judgment
to plenary review, Potenze v. New York Shipping Ass'n,
2la
804 F.2d 235, 239 (2 Cir.1986), cert. denied, 107 S.Ct.
1955 (1987), and apply the same summary judgment test
as applied by the district court. See T.W. Elec. Serv., Inc.
v. Pacific Elec. Contractors Ass’n, 809 F.2d 626, 630 (9
Cir.1987). An agency’s interpretation of its own regula-
tions raises a question of law, White Indus. v. FAA, 692
F.2d 532, 534 (8 Cir.1982), and thus is freely reviewable
by our Court. Pennzoil Co. v. FERC, 789 F.2d 1128, 1135
(5 Cir.1986).
The standard of review for the district court in this case
is that the court shall set aside EPA’s findings, conclusions
or actions only if they are “arbitrary, capricious, an abuse
of discretion, or otherwise not in accordance with law.”
Administrative Procedure Act § 10(e), 5 U.S.C. § 706(2\A)
(1982). As stated by the Supreme Court in Motor Vehicle
Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S.
29 (1983),
“{A] reviewing court may not set aside agency rule
that is rational, based on consideration of the relevant
factors, and within the scope of the authority dele-
gated to the agency by the statute.... The scope of
review under the ‘arbitrary and capricious’ standard
is narrow and a court is not to substitute its judgment
for that of the agency. Nevertheless, the agency must
examine the relevant data and articulate a satisfactory
explanation for its action including a ‘rational con-
nection between the facts found and the choice
made.’ ”’
Id. at 42-43 (quoting Burlington Truck Lines, Inc. v. United
States, 371 U.S. 156, 168 (1962)).
Applying these standards, we are convinced that EPA’s
market entry interpretation was reasonable, and therefore
was neither “arbitrary and capricious” nor “not in ac-
cordance with law.” We therefore hold that the district
court correctly found that EPA’s interpretation of the reg-
ulations was reasonable.
22a
IV
Finally, we turn to Pyramid’s subordinate claims, three
of which warrant brief mention. Pyramid claims (1) that
the market entry theory violates administrative law prin-
ciples because it is not specific enough to put the public
on notice of when it must consider alternative sites; (2)
that EPA’s application of the market entry theory was
unfair in this case; and (3) that the district court exceeded
its authority in supplying a rationale for EPA’s decision
which was not offered by EPA.
As for the claim that the market entry approach is not
specific enough, Pyramid reasons that any number of points
in time could constitute “entry” into the market. It spec-
ulates whether market entry occurs “from the time the
first internal memorandum is written,”’ or the time ‘‘the
first consultant [is] hired,”’ or the time the ‘‘first negoti-
ation for a site [is] conducted.”” We are persuaded, how-
ever, that EPA is correct in asserting that it is unnecessary
to pin down the standard to such a degree and that it
would confuse things further to attempt to do so. Since
the point of “‘entry’’ necessarily will vary from case to
case, we believe the concept of “‘market entry”’ is the best
method and is specific enough to put a developer on notice
of when it should be considering alternative sites.
With regard to the claim that EPA applied the market
entry approach unfairly in the instant case, Pyramid as-
serts that the way EPA announced a “‘new”’ standard (the
market entry rule) and then applied it “retroactively” in
this case was fundamentally unfair. It also asserts that
EPA’s failure to address evidence that the North Attleboro
site was unavailable at the time of Pyramid’s market entry
was unfair. According to Pyramid, such fundamental un-
fairness violates the principles underlying the Administra-
tive Procedure Act. See Morton v. Ruiz, 415 U.S. 199, 232
(1974).
23a
As we held above, however, we view EPA’s interpre-
tation of the rules as a reasonable application of the reg-
ulatory language to the unique facts of this case—a case
in which it became necessary for the first time to reach
the issue of when availability should be determined. EPA
did not create and announce a “new” standard and apply
it retroactively to Pyramid. Rather, EPA interpreted the
law to apply it to the facts of this case.
ne Ae Re re
Moreover, we believe the extensive administrative re-
cord supports a finding that the North Attleboro site was
available to Pyramid when it entered the market. Even if
Pyramid were found not to have entered the market until
September 1983, after NED had acquired options to pur-
chase the North Attleboro site, it does not necessarily
follow that the site was unavailable. Aside from the fact
that NED did not acquire all the options for the North
Attleboro site until June 1984, it also was possible for
Pyramid to attempt to purchase the options from NED.
The record shows no such attempts to purchase the site,
or even to investigate its availability. Alternatively, even
though the district court apparently was not persuaded by
it, there also is evidence in the record to show that Pyr-
amid actually entered the market in the Spring of 1983,
before NED had purchased its options. Finally, the evi-
dence shows that the North Attleboro site had been avail-
able to DeBartolo, Pyramid’s predecessor. EPA could
reasonably have determined that Pyramid should be held
to “stand in the shoes” of DeBartolo, especially since it
was able to obtain state approval of the project under the
less-stringent state standards that had originally applied
to DeBartolo.
Finally, Pyramid contends that the district court im-
properly supplied a rationale for EPA’s final determination
that EPA itself did not articulate. It is true that the dis-
trict court rejected one of EPA’s grounds for finding that
Pyramid had failed to rebut the presumption that a prac-
ticable alternative was available. This ground was that the
= | |
24a
“trade custom” of developers was to investigate a poten-
tial development site for many months before purchasing
it. EPA reasoned that, if Pyramid had purchased Swee-
dens Swamp in December 1983, it was unlikely, in view
of the trade custom, that it had entered the market only
eight weeks earlier—in September 1983—as Pyramid
claimed. The court accepted what it characterized as EPA’s
finding that the North Attleboro site in any event was
still available in September 1983, when even Pyramid ad-
mitted it had entered the market.
Pyramid asserts that EPA did not make this finding
and that the court improperly supplied a rationale for
EPA’s determination that EPA did not articulate itself.
This assertion fails, however, because EPA did make the
finding. In its final determination it stated several reasons
why it believed the North Attleboro site should be deemed
to have been “‘available’’. It stated, among other things,
(1) that NED could “have been talked into relinquishing
its interest’’ in the site even in September or December
1983; (2) that Pyramid never investigated the availability
of the North Attleboro site because it believed it was too
far from the highway; and (3) that Pyramid had refused
to provide EPA with information on the time of its entry
into the market, stating that such information ‘simply
does not exist’’. Thus, the trade custom ground to support
the finding of availability was accompanied by several other
grounds in the final determination. The district court
therefore did not “supply” a rationale for EPA. Rather,
EPA supplied several for itself.
We affirm the district court’s decision in all respects.
V.
To summarize:
We hold (1) that the market entry theory is consistent
with both the regulatory language and past practice; (2)
that EPA’s interpretation, while not necessarily entitled
25a
to deference, is reasonable and its application of its rule
is supported by the record; and (3) that Pyramid’s other
arguments lack merit.
Affirmed.
GEORGE C. PRATT, Circuit Judge, dissenting:
Finding that a ‘“‘common-sense reading’ of 33 U.S.C. §
1344(c) “‘can lead only to the use of the market entry
approach’’, the majority today holds that in determining
whether an “alternative is available’, EPA is to look, not
at the present circumstances and most current data, but
rather at circumstances and data which existed, perhaps
years earlier, when the developer ‘“‘entered the market’.
This market entry theory approaches a sensitive environ-
mental problem through a time warp, it ignores the stat-
ute’s basic purpose, and it creates unfair and anomalous
results. I therefore dissent.
I. The Legislative History and Purpose of Section 1344.
Section 1344 was enacted by congress in 1972 as part
of a broad-based improvement to a national water policy
that had been, as congress termed it, “inadequate in every
vital aspect.”” S.Rep. No. 414, 92 Cong., 2d Sess. 7 (1972).
Specifically, the section was intended to address the del-
icate balance between those activities which endanger “‘ma-
rine environment [and] ecological systems” on the one
hand, and those activities “essential for the maintenance
of interstate and foreign commerce” on the other.
Conf.Rep. No. 1236, 92nd Cong., 2d Sess. 43-44 (1972).
Section 1344 is unusual: its primary purpose is neither
to punish those who illegally infringe on national wetlands,
nor, as the majority opines, “to provide an incentive [to
developers] to avoid choosing wetlands’’. To the contrary,
the statute is directed at the land itself without any regard
to whether the party seeking to develop it has clean hands.
Thus, if the “biological integrity’’ of a specific wetland
26a
area outweighs the “interstate and foreign commerce’’ ad-
vantages that the site could provide, the site should remain
undeveloped regardless of which developer is seeking the
permit. See S.Rep. No. 414, 92nd Cong., 2d Sess. 7 (1972);
Conf.Rep. No. 1236, 92nd Cong., 2d Sess. 43-44 (1972).
Conversely, if the balance weighs in favor of commerce
or other economic advantages, then the land should be
developed, again regardless of the specific developer in-
volved. Jd. In short, congress designed the section to pre-
serve the environment consistent with reasonable
accommodation to the economic and social needs of the
public; it was not concerned with the identities or past
activities of particular developers.
Il. The Purpose of Section 1344 and the Market Entry
Theory.
In this case I have no problem with EPA’s basic ap-
proach. It conscientiously attempted to weigh. the economic
advantages against the ecological disadvantages of devel-
oping Sweedens Swamp and, in approaching this deter-
mination, it properly looked to alternate available sites.
However, EPA went wrong—seriously wrong—when it
adopted the market entry theory to decide whether an
alternate site was available. By focusing on the decision-
making techniques and tactics of a particular developer,
instead of the actual alternatives to disturbing the wetland,
EPA ignored the statute’s central purpose.
The market entry theory in effect taints a particular
developer with respect to a particular site, while ignoring
the crucial question of whether the site itself should be
preserved. Under the market entry theory, developer A
would be denied a permit on a specific site because when
he entered the market alternatives were available, but
latecomer developer B, who entered the market after those
alternatives had become unavailable, would be entitled to
a permit for developing the same site. In such a case, the
theory no longer protects the land, but instead becomes
27a
a distorted punitive device: it punishes developer A by
denying him a permit, but grants developer B a permit
for the same property—and the only difference between
them is when they “entered the market’”’.
The market entry theory has further problems. In this
case, for example, if a Donald Trump had “entered the
market’’ after NED took the option on the North Attleboro
site and made it unavailable, under EPA’s approach he
apparently would have been entitled to a permit to develop
Sweedens Swamp. But after obtaining the permit and the
land, could Trump then sell the package to Pyramid to
develop? Or could he build the mall and then sell the
developed site to Pyramid? If, on the one hand, the answer
to these questions is “‘yes’”’, then the market entry theory
is no more than a troublesome mirage that could easily
be circumvented by Pyramid’s using a second party to buy
the land and obtain the permit. If, on the other hand, the
answer is “‘no’’, then Pyramid is forever tainted, forever
prohibited—somewhat like a bill of attainder—from owning
this particular site, and only because at some time in the
past it had “entered the market” while an alternative was
still available.
Furthermore, in a business that needs as much pre-
dictability as possible, the market entry theory will re-
grettably inject exquisite vagueness. When does a developer
enter the market? When he first contemplates a devel-
opment in the area? If so, in what area—the neighborhood,
the village, the town, the state or the region? Does he
enter the market when he first takes some affirmative
action? If so, is that when he instructs his staff to research
possible sites, when he commits money for more intensive
study of those sites, when he contacts a real estate broker,
when he first visits a site, or when he makes his first
offer to purchase? Without answers to these questions a
developer can never know whether to proceed through the
expense of contracts, zoning proceedings, and EPA appli-
cations. Such a vague standard as “market entry” falls
28a
far short of the requirement that an agency articulate its
standards with sufficient clarity so that the affected com-
munity may know what those standards are. See Motor
Vehicle Manufacturers Ass’n v. State Farm Mutual Insur-
ance Co., 463 U.S. 29, 48 (1983); Port Terminal Railroad
Ass'n v. United States, 551 F.2d 1336, 1344-45 (5th Cir.
1977).
Even more important, the result reached by EPA and
the majority is contrary to what congress sought to achieve
when it passed § 1344. Pyramid has been “‘punished’’ for
beginning its quest when the North Attleboro site was still
available; but Sweedens Swamp nevertheless could be de-
stroyed through an identical application by some other
developer who happened to enter the market after that
alternate site became unavailable. And this would be so
even if another, better-suited site should become available
after the second developer enters the market, because the
“common sense” market entry theory looks only, and
blindly, to the alternatives available at the time the ap-
plicant “‘entered the market”’.
III. The Proper Theory for Determining Whether an AIl-
ternate Site is Available.
Since congress delegated to EPA the responsibility for
striking a difficult and sensitive balance among economic
and ecological concerns, EPA should do so only after con-
sidering the circumstances which exist, not when the de-
veloper first conceived of his idea, nor when he entered
the market, nor even when he submitted his application;
rather, EPA, like a court of equity, should have the full
benefit of, and should be required to consider, the circum-
stances which exist at the time it makes its decision. This
is the only method which would allow EPA to make a
fully informed decision--as congress intended—based on
whether, at the moment, there is available a site which
can provide needed economic and social benefits to the
public, without unnecessarily disturbing valuable wetlands.
29a
Such a “time of decision’ theory is reinforced by the
present-tense language of the regulation, which commands
EPA to determine whether an alternate site ‘‘is available’.
See Gwaltney of Smithfield v. Chesapeake Bay Foundation,
108 S.Ct. 376, 381 (1987) (present tense language in reg-
ulation means agency should apply that regulation to pres-
ent, not past, circumstances). It is also supported by the
express statements of congress when it passed the statute,
and, I would submit, by true ‘“‘common sense”’. Any agency
given the unenviable task of balancing essentially incom-
parable factors in determining what is in the public’s best
interest, should look to the most up-to-date data, and eval-
uate the most current circumstances. Any other analysis
would effectively tie the agency to an irrelevant date in
the past, when the question to be decided is how to balance
the environmental and commercial interests of the present
and the future.
30a
UNITED STATES COURT OF APPEALS
SECOND CIRCUIT
UNITED STATES COURTHOUSE
FOLEY SQUARE
NEW YORK 10007
8 June, 1988
RE: BERSANI v EPA
Docket No.: 87-6275, 87-6295
Gentlemen:
The court has rendered a decision in the above-entitled
case. The decision of the district court has been
Judgment affirmed by published signed opinion.
Dissenting by published signed opinion.
Judgment filed.
A copy of the opinion will be mailed to you. Additional
copies of the opinion may be obtained from this office in
accordance with §0.17(7) of the rules of this court supple-
menting the Federal Rules of Appellate Procedure.
Judgment has been entered today and a mandate will issue
only to the District Court in accordance with Rule 41 of
the Federal Rules of Appellate Procedure.
Your attention is directed to the provision of Rule 39 of
the Federal Rules of Appellate Procedure requiring the
itemized and verified bill of costs, if any, to be filed with
proof of service, within 14 days after entry of judgment.
Very truly yours,
ELAINE B. GOLDSMITH, Clerk
by /s/ DONNA J. MORGAN
Deputy Clerk
) 3la
APPENDIX B
CLERK’S OFFICE
United States District Court
FOR THE
ND/NY
Civil Action No. 85-CV-772
John A. Bersani, et al
vs.
U.S. EPA, et al
There was entered on the docket Oct. 23, 1987
JUDGMENT: Defts’ motionf/summary judgment is granted;
Pitfs’ motion f/summary judgment is denied.
J.R. SCULLY, CLERK
32a
UNITED STATES DISTRICT COURT,
N.D. New York.
No. 86-CV-772.
John A. BERSANI, Newport Galleria
Group, Robert J. Congel and the
Pyramid Companies,
Plaintiffs,
and
Citizens in Support of Attleboro Mall
and Joseph Robichaud,
Intervenor-Plaintiffs,
cand
Home Builders Association of Massachusetts,
Intervenor-Plainttff,
v.
UNITED STATES ENVIRONMENTAL PROTECTION
AGENCY; United States Army Corps of Engineers; Lee
Thomas, in his official capacity as Administrator of the
United States Environmental Protection Agency; Richard
K. Dawson, in his official capacity as Assistant Secretary
for Civil Works, United States Army; and Jennifer Joy
Wilson, in her official capacity as Assistant Administrator
for External Affairs, United States Environmental Pro-
tection Agency,
Defendants,
and
Conservation Law Foundation of New England, Environ-
mental Defense Fund, National Audubon Society, Sierra
33a
Club Legal Defense Fund, and National Wildlife Federa-
tion, Intervenor-Defendants.
Oct. 6, 1987
Shopping mall developers brought action to challenge
final determination of Environmental! Protection Agency
that denied permission to construct shopping mall on
swamp. Agency moved for summary judgment. The Dis-
trict Court, McAvoy, J., held that: (1) Agency could con-
sider avoidability of loss in conjunction with its magnitude
in determining whether environmental effect was unac-
ceptable and significant; (2) Agency properly concluded that
alternative to construction of mall on swamp was feasible
and available; and (8) Agency did not act arbitrarily in
concluding that significant loss of wildlife resources would
result from construction of mall on swamp.
Motion granted.
Beveridge & Diamond, P.C., Washington, D.C., Levine,
Gouldin & Thompson, Binghamton, N.Y., for plaintiffs;
Gary H. Baise, Virginia S. Albrecht, Marc Zeppetello,
Washington, D.C., David M. Gouldin, Binghamton, N.Y.,
of counsel.
Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, Boston,
Mass., for intervenor-plaintiff Home Builders Ass’n of Mas-
sachusetts; Michael S. Gardener, of counsel.
Paul D. Kamenar, Washington, D.C., for intervenor-
plaintiffs Citizens in Support of Attleboro Mall and Joseph
Robichaud.
Lawrence R. Liebesman, U.S. Dept. of Justice, Land
and Natural Resources Div., Washington, D.C, for
defendants.
Gail B. Cooper, Office of General Counsel, E.P.A.,
Washington, D.C., for defendants.
Ann Williams-Dawe, Boston, Mass., for defendants U.S.
E.P.A.
34a
James T.B. Tripp, New York City, for defendant-inter-
venor Environmental Defense Fund.
Robert Dreher, Washington, D.C., for defendant-inter-
venor Sierra Club Legal Defense Fund.
McDermott, Will & Emery, Washington, D.C., for ami-
cus curiae United States Chamber of Commerce; R. Sarah
Compton, of counsel.
Chernin & Gold, Binghamton, N.Y., for amicus curiae
U.S. Chamber of Commerce; Donald M. Flanagan, of
counsel.
DECISION AND ORDER
McAVOY, District Judge.
Plaintiffs John A. Bersani, the Pyramid Companies’,
Robert J. Congel and the Newport Galleria Group? have
‘brought this action challenging a ‘“‘Final Determination”
rendered by the defendant United States Environmental
Protection Agency (the “EPA’’) on May 13, 1986, pursuant
to Section 404(c) of the Clean Water Act, 33 U.S.C. section
1344(c). This Final Determination vetoed a decision ren-
dered by the defendant United States Army Corps of En-
gineers (the “Corps’’) in June 1985, which decision granted
Pyramid permission to construct a shopping mall in certain
wetlands, known as ““Sweden’s Swamp,”’ located in South
Attleboro, Massachusetts. Pyramid seeks an order from
' Pyramid is an association of partnerships which is in the business
of developing, constructing and operating shopping centers in the
Northeastern United States.
* The plaintiffs will be collectively referred to as “Pyramid.”
*The EPA Administrator delegated the authority to make a final
decision regarding permits issued under Section 404(a) of the Act to
the Assistant Administrator of External Affairs at the time of the
proceeding at issue. This final determination constitutes final agency
action under Section 404(c) of the Act for the purposes of judicial
review. 40 C.F.R. sections 231.5 and 231.6.
———————
35a
this Court vacating the EPA’s determination on the
grounds that it is arbitrary, capricious and otherwise not
in accordance with the law. See 5 U.S.C. sections 704, 706.
The court has before it plaintiffs’ and defendants’ cross-
motions for summary judgment.‘
BACKGROUND
1. Statutory and Regulatory Framework
The Clean Water Act (the “‘Act’’), 33 U.S.C. sections
1251 et seg., the basic federal legislation controlling water
pollution, embodies Congress’ effort to restore and main-
tain the chemical, physical, and biological integrity of the
Nation’s waters. 33 U.S.C. section 1251. Section 301(a) of
the Act, 33 U.S.C. section 1311(a), forbids the discharge
of any pollutant into “navigable waters’’> unless permitted
by the Army Corps of Engineers pursuant to Section 404.
See 33 U.S.C. section 1344.
Section 404(a) authorizes the Secretary of the Army,
acting through the Corps, to issue permits for the dis-
charge of dredged or fill material at specified disposal
‘Both Intervenor-Plaintiffs and Intervenor-Defendants have submit-
ted motions for summary judgment. The arguments of the former are
incorporated into the discussion concerning the plaintiffs’ motion and
the arguments of the latter are incorporated into the discussion re-
garding the defendants’ motion.
Oral argument on these motions was heard by this court on April
2, 1987. Thereafter, Intervenor-Defendants’ raised the question of
whether this lawsuit was moot. After three months of discovery, the
parties withdrew their assertion of mootness.
* Section 502 of the Act defines navigable waters as “waters of the
United States.”’ 33 U.S.C. section 1362(7). There is no dispute that the
wetlands comprising Sweden’s Swamp are navigable waters. See 33
C.F.R. section 323.2. Nor is there any dispute that the plaintiff's pro-
posal involves the discharge of dredged and fill materials, which are
pollutants within the meaning of the Act, into those waters. See 33
U.S.C. section 1362(6) (pollutant includes dredged spoil).
36a
sites. 33 U.S.C. section 1344(a). Criteria known as the
Section 404(b) guidelines developed by the EPA, in con-
junction with the Corps, govern these permitting decisions.
33 U.S.C. section 1344(b).* Generally, the Corps must em-
ploy a “practicable alternative’ analysis in determining
whether to allow a proposed discharge. 40 C.F.R. section
230.10 provides, in part:
(a) Except as provided under section 404(b\2) [per-
taining to navigation] no discharge of dredged or
fill material shall be permitted if there is a prac-
ticable alternative to the proposed discharge which
would have less adverse impact on the aquatic eco-
system, so long as the alternative does not have other
significant adverse environmental consequences.
(2) An alternative is practicable if it is available
and capable of being done, after taking into ac-
count cost, existing technology, and logistics in
light of overall project purposes. If it is otherwise
a practicable alternative, an area not presently owned
by the applicant which could reasonably be obtained,
utilized, expanded or managed in order to fulfill the
basic purpose of the proposed activity may be con-
sidered.
(3) Where the activity associated with a discharge
which is proposed for a special aquatic site [defined
in Subpart E to include wetlands] does not require
access or proximity to or siting within the special
aquatic site in question to fulfill its basic purpose (i.e.,
is not “water dependent’), practicable alternatives
that do not involve special aquatic sites are pre-
sumed to be available unless clearly demonstrated
otherwise. In addition, where a discharge is proposed
for a special aquatic site, all practicable alternatives
to the proposed discharge which do not involve a dis-
charge into a special aquatic site are presumed to —
* The section 404(bX1) guidelines are published at 40 C.F.R. Part 230.
37a
have less adverse impact on the aquatic ecosystem,
unless clearly demonstrated otherwise.
40 C.F.R. sections 230.10(aX2) and (8) (emphasis added).’
When the proposed discharge involves a special aquatic
site such as wetlands, a more stringent standard is im-
posed. Indeed, Section 230.10(aX3) creates a presumption
that a practicable alternative exists when the discharge
involves wetlands and the activity, here a shopping mall,
is not ‘‘water dependent.” Then the applicant must “clearly
demonstrate” that no such alternative does in fact exist.
Section 404(c) grants the Administrator of the EPA au-
thority to prohibit, deny or restrict a Corps-issued permit
for the use of a specific site when the Administrator de-
termines that the proposed discharge ‘‘will have an un-
acceptable adverse effect on municipal water supplies,
shellfish beds and fishery areas (including spawning and
breeding areas), wildlife, or recreational areas.’’ 33 U.S.C.
section 1344(c) (emphasis added). An “unacceptable ad-
verse effect’”’ is one which has an “impact on an aquatic
or wetland ecosystem which is likely to result in significant
degradation of municipal water supplies (including surface
or ground water) or significant loss of or damage to
fisheries, shellfishing, or wildlife habitat or recreation
areas.”’ 40 C.F.R. section 231.2(e) (emphasis added). This
“veto” power must be exercised in accordance with es-
tablished procedure. See 40 C.F.R. Part 231.
2. Procedural History
Pyramid initially became interested in developing a shop-
ping mall in the Attleboro area in September 1983, and
7 The other Section 404(b\1) criteria which must be satisfied before
a permit may issue are (1) compliance with other applicable laws, (2)
the absence of significant degradation of the Nation’s waters, and (3)
the adequate mitigation of potential adverse impacts. See 40 C.F.R.
sections 230.10(b)-(b).
38a
focused its attention on an 82-acre site in South Attleboro
about one-fourth mile north of the Rhode Island border.
Although the project contemplated altering or filing 32.2
acres of 49.6 acres of wetlands, the plan also called for
excavating 9.0 acres of uplands (non-wetlands) to create
new wetlands and altering an existing 13.3 acres of wet-
lands to enhance its value for wildlife, fisheries and other
quality maintenance.* Another 4.0 acres of existing wet-
lands would remain undisturbed.’ Upon completion of con-
struction, 26 acres of wetlands including marsh areas, red
maple swamp and open water would remain. Additionally,
Pyramid proposed an off-site mitigation project which
would result in the creation of 36 acres of replacement
wetlands in an abandoned gravel pit.’
State Proceedings
In April 1982, the Massachusetts Department of Envi-
ronmental Quality Engineering (MDEQE) denied state per-
mission to construct a mall at the Sweden’s Swamp site
to Pyramid’s predecessor, the Edward J. DeBartolo Cor-
poration. The DeBartolo Corporation requested an adju-
dicatory hearing, prior to which Pyramid assumed control
of the project. In March 1985, the MDEQE issued a
*The May 13, 1986 Final Determination of the Assistant Adminis-
trator for External Affairs (FD) is document H-119 in the certified
index to the Administrative Record. The March 5, 1986, Recommen-
dation of the EPA Regional Administrator (RD) is document B-25 in
the certified index. The Statement of Findings and Environmental As-
sessment of the Corps (SOF/EA) is document B-16 in the certified
index. All other documents will be referred to by the number assigned
them in the certified index.
The alteration of these additional 13.3 acres is necessary to provide
onsite capability for storage and treatment of stormwater runoff from
the development. FD, Plaintiffs Exhibit B, at 5; B-2, “Section 404
Application,”” at 31-64.
*SEOF/EA at 1.
“ FD at 5; C-54, “Final Report on Mitigation Site,” at 1-6.
‘
39a
Superseding Order of Conditions which overturned the in-
itial denial and authorized the project. This decision was
appealed on the ground that the MDEQE had improperly
reviewed Pyramid’s project under the state’s 1978 wet-
lands protection regulations rather than under the more
stringent regulations which had taken effect in April 1983.
On September 30, 1986, a state court rule that the
MDEQE’s decision to grandfather the project was error
and remanded the matter to the MDEQE to determine
the rights of the parties under the 1983 regulations. As
a consequence of this ruling, the new regulations, which
prohibit the filling of more than 5,000 square feet of bor-
dering vegetated wetlands, applied to Pyramid’s proposal,
see Laurie Carroll v. DEQE, No. 76012, (Mass.Super.Ct.
September 30, 1986), and barred its implementation. This
decision was reversed on appeal. See Citizens for Respon-
sible Environmental Management v. Attleboro Mall, Inc.,
400 Mass. 658, 511 N.E.2d 562 (1987).
Federal Proceedings
In May 1984, the Corps, the Fish and Wildlife Service
and the EPA held a meeting with Pyramid wherein Pyr-
amid’s proposal was discussed and compared to that of its
predecessor, the DeBartolo Corporation. Pyramid re-
quested that the project be authorized under a Corps “‘na-
tionwide permit,” a general permit requiring no application
or public review. At that time, the EPA informed Pyramid
of the rebuttable presumption that practicable, less envi-
ronmentally damaging alternatives exist for non-water de-
pendent projects located in wetlands. RD at 3. See 40
C.F.R. section 230.10(a). Thereafter, the Corps exercised
its discretionary authority and required Pyramid to apply
for an individual Section 404(a) permit.
The state regulations differ from the federal regulations in that
they do not include the protection of wildlife habitat or the existence
of practicable alternatives as considerations. See RD at 5.
40a
In connection with its August 1984, Section 404(a) ap-
plication, Pyramid submitted information concerning prac-
ticable alternative sites for its shopping mall.'* A site three
miles north in North Attleboro, Massachusetts was chiefly
considered by the Corps and the EPA." Pyramid relied
on séveral factors in concluding that the North Attleboro
site was not a practicable alternative; namely, the site
lacked sufficient traffic volume and sufficient access from
local roads, potential department store tenants had ex-
pressed strong doubts about the feasibility of the site and
previous attempts to develop the site had met with strong
resistance from the surrounding community.'* In Novem-
ber 1984, after Pyramid had first presented its offsite
mitigation proposal to convert a gravel pit into wetlands,
the EPA recommended that the Corps deny the permit
because of Pyramid’s perceived failure to overcome the
presumption that a less environmentally damaging prac-
ticable alternative existed. In January 1985 the Corps re-
tained a consultant to examine the practicability of a mall
at the North Attleboro site and the Corps and the EPA
conducted an on-site investigation of the North Attleboro
property. RD at 5. As a result, the Corps advised Pyramid
that refusal of its permit was imminent. Jd. In April 1985,
Pyramid presented its plan for the creation of 36 acres
of new wetlands in an effort to mitigate the loss which
would occur at Sweden’s Swamp.
On May 2, 1985, the Division Engineer of the New
England Division of the Army Corps sent his recommen-
2 At this time, Pyramid had not yet proposed any off-site mitigation.
B-2; B-4.
RD at 4; B-2; B-173, ‘Feasibility Analysis’’ prepared for State
Properties of New England (New England Development Co); B-226,
“Letter dated December 10, 1984 from State Properties of New Eng-
land. to Corps, EPA and FWS.”’
'* B-2 at 13-15; RD at 34-37.
‘RD at 5. Pyramid eventually dropped the site from consideration.
4la
dation on Pyramid’s application to the Director of Civil
Works, Major General Wall, at Corps Headquarters in
Washington, D.C. This recommendation urged that the
permit be denied because a practicable alternative with a
less adverse effect on the aquatic ecosystem existed.'* In
his review of the application, Major General Wall con-
cluded:
In a proper case, mitigation measures can be said
to reduce adverse impacts of a proposed activity to
the point where there is no “easily identifiable dif-
ference in impact” between the proposed activity (in-
cluding mitigation) versus the alternatives to that
activity. In such a case, mitigation measures would
have made a contribution to the satisfaction of 40
C.F.R. 230.10(a) [the practicable alternatives test].
B-13 at 5 (emphasis added); SOF/EA, Views of the Chief
of Engineers at 5. Under this interpretation, proposed mit-
igation at one site would suffice to establish that no less
damaging practicable alternative existed. However, Major
General Wall also employed a traditional analysis of the
practicable alternatives and found:
[]Jrom the point of view of the applicant in this case,
i; appears that the North Attleboro site is not avail-
eble. The north site is controlled by a competitor who
tas an interest in developing a regional shopping mall
in the same trade area as the applicant. Even if it
vere available to the applicant, he makes a convincing
ergument that it would not successfully fulfill the pur-
poses of his proposed project, from his particular point
d view.
B-13 at 1; SEOF/EA, Views of Chief of Engineers at 1.
RD at 6; B-11, “Corps Recommendation dated May 2, 1985"; B-
12, ‘Corps Recommendation.”
42a
Although Sweden’s Swamp is characterized in this report
as a wetland of relatively low value and degraded by un-
controlled use and by dumping of solid waste, its function
as a wildlife habitat is recognized. Jd. at 2. Major General
Wall directed the New England Division of the Corps to
prepare a notice of intent to issue the permit and to rec-
oncile its findings with the foregoing determination. Jd.
Accordingly, the Corps concluded that no practicable
alternative to the South Attleboro site existed because the
North Attleboro site was not available to Pyramid and
substantial doubt existed as to whether the site would
fulfill Pyramid’s purpose. Although the Corps determined
that the proposed project would not have an adverse effect
on water quality, flood control or drinking water supplies,
it expressed concern that the proposed reduction in on-
site wetland acreage “‘could cause substantial adverse im-
pact on local stocks of those species associated with for-
ested wetland cover type ... (i.e., red-shouldered hawk,
small birds, small mammals such as skunk, possum and
raccoon, and certain reptiles and amphibians.’’) SOF/EA
at 16. The Corps, therefore, conditioned the issuance of
any permit specifying Sweden’s swamp as a disposal site
upon the Corps’ approval of Pyramid’s mitigation efforts.
Id. at 36.
On June 28, 1985, the Division Engineer notified the
regional offices of the EPA and the United States Fish
and Wildlife Service (FWS) of the Corps’ intent to issue
a permit to Pyramid.
EPA’s Decision
On July 23, 1985, the EPA’s Regional Administrator
notified the Corps and Pyramid that he intended to initiate
Section 404(c) proceedings.'’ The EPA based this decision
upon its belief that an unacceptable adverse effect to wild-
* RD at 7: B-316.
————————————
|
43a
life could result from filling Sweden’s Swamp. On March
4, 1986, the Regional Administrator made a ‘‘Recom-
mended Determination” to prohibit the specification of
Sweden’s Swamp as a disposal site for dredged or fill
material. The Recommendation was based upon the finding
that Pyramid’s project was likely to have unacceptable
adverse impacts on the wildlife habitat at Sweden’s Swamp.
On May 13, 1986, the EPA issued its Final Determination
prohibiting the specification of Sweden’s Swamp as a dis-
posal site for fill material.
The Final Determination described Sweden’s Swamp as
a typical, well-established functioning red maple swamp
which provides excellent wildlife habitat for a variety of
birds, mammals, and amphibians, and provides flood stor-
age capacity, groundwater discharge and water purifica-
tion. FD at 30. It further found that the destruction of
the wetlands proposed by Pyramid would adversely affect
wildlife by driving away or killing animals currently living
there. See FD at 10-12. The EPA declared:
In determining whether these adverse impacts are un-
acceptable [within the meaning of section 404(c)], it
is relevant to examine next the avoidability of this
wetland loss by reviewing whether there are practic-
able, less environmentally damaging we to
the proposed project.
FD at 13.
In the EPA’s opinion, another less environmentally dam-
aging site in the area, i.e., the North Attleboro site, was
a feasible alternative which had been available at the time
Pyramid initially selected a site for its project. FD at 16-
26, 31. Thus, the EPA reasoned that any adverse effects
resulting from Pyramid’s project were avoidable and were
therefore unacceptable within the meaning of Section
404(c). The Final Determination concluded that ‘‘based on
the excellent wildlife value of the wetland ... its site and
setting, the avoidability of the loss, and the significance
a
44a
of such areas in Massachusetts, . . . filling Sweden’s Swamp
to build the proposed mall would have unacceptable ad-
verse effects within the meaning of section 404(c).’’ FD
at 31.
DISCUSSION
I. Summary of Arguments
The plaintiffs contend that the EPA’s decision to deny
the permit is incorrect as a matter of law because (1) the
EPA impermissibly relied on the “‘avoidability’’ of envi-
ronmental impacts in determining their ‘‘unacceptability”’
under Section 404(c) and (2) the EPA impermissibly re-
considered the Section 404(b) availability question and
backdated that inquiry.’® Plaintiffs also argue that even if
the EPA’s statutory and regulatory interpretations are up-
held as reasonable, the EPA’s conclusion was arbitrary
and capricious. The defendants, on the other hand, argue
that Section 404(c) clearly allows the EPA to prohibit the
filling of a wetland where that filling would have an un-
acceptable adverse impact on wildlife. The EPA contends
that it was authorized to consider the Section 404(b\1)
guidelines in determining whether the environmental im-
pacts were unacceptable and that its decision to assess the
practicable alternatives available at the time of project
planning was proper and consistent with the Act’s and the
regulations’ goals.
2. Standard of Review
As noted, the court has before it now the parties’ cross-
motions for summary judgment. Summary judgment is ap-
propriate when there is no genuine issue as to any material
fact and the moving party is entitled to judgment as a
matter of law. Fed. R.Civ.P. 56(c). The facts in this case
‘* The plaintiffs also allege that the EPA impermissibly amended a
regulation without the procedures mandated by the Administrative Pro-
cedure Act. The court rejects this contention.
45a
are undisputed. In reviewing the EPA’s decision, the court
must engage in a two-fold inquiry and determine (1)
whether the EPA’s interpretation of Section 404 and its
implementing regulations was reasonable and (2) whether
the EPA’s application of this interpretation to the facts
was rational.
An agency’s interpretation of the statute and regulations
it is charged with administering is entitled to deference.
See EPA v. National Crushed Stone Ass’n., 449 U.S. 64,
83, 101 S.Ct. 295, 307, 101 S.Ct. 295, 307, 66 L.Ed.2d
268 (1980). This is also true when the agency participated
in formulating a disputed regulation. See United States v.
Hescorp. Heavy Equip. Sales Corp., 801 F.2d 70, 76 (2d
Cir.1986) (treasury regulation construed) (citing Miller v.
Youakim, 440 U.S. 125, 144, 99 S.Ct. 957, 968, 59 L.Ed.2d
194 (1979)). Its interpretation need not be the only rea-
sonable one, and the court must uphold a reasonable inter-
pretation, even if the court would not have reached the
same conclusion in the first instance. A court may not
substitute its own construction of a statutory provision for
a reasonable interpretation made by the administrator of
an agency when a “statute is silent or ambiguous with
respect to the specific issue. [Then] the question for the
court is whether the agency’s answer is based upon a
permissible construction of the statute.’’ The court, must,
however, reject administrative constructions which are con-
trary to clear congressional intent. United States v. Riv-
erside Bayview Homes, Inc., 474 U.S. at 121, 131, 106
S.Ct. 455, 461, 88 L.Ed.2d 419 (1985); Chemical Mfrs.
Ass’n v. Natural Resources Defense Council, Inc., 470 U.S.
116, 126, 105 S.Ct. 1102, 1108, 84 L.Ed.2d 90 (1985);
Chevron, U.S.A., Inc. v. Natural Resources Defense Council
Inc., 467 U.S. 837, 104 S.Ct. 2778, 2782, 81 L.Ed.2d 694
(1984); Biggs v. Lyng, 823 F.2d 15, 18 (2d Cir.1987).
Because the Clean Water Act does not set forth the
standards for review of the EPA’s substantive decisions,
the court must look to the standards articulated in the
46a
Administrative Procedure Act for guidance. See Avovelles
Sportsmen’s League, Inc. v. Marsh, 715 F.2d 897 (5th
Cir.1983). The proper inquiry for the court is whether the
EPA’s Final Determination is “arbitrary and capricious,
an abuse of discretion, or otherwise not in accordance with
the law.”’ See Administrative Procedure Act section 10(e),
5 U.S.C. section 706(2KA); Buttrey v. United States, 690
F.2d 1170, 1183-85 (5th Cir.1982), cert. denied, 461 U.S.
927, 103 S.Ct. 2087, 77 L.Ed.2d 298 (1983). In undertaking
this task, the court must remain mindful of the carefully
circumscribed nature of its function. In Motor Vehicle Mfrs.
Ass’n v. State Farm Auto Ins. Co., 463 U.S. 29, 42-43,
103 S.Ct. 2856, 2866-67, 77 L.Ed.2d 443 (1983), the
Supreme Court delineated the boundaries of the court’s
review in applying the arbitrary and capricious standard.
[A] reviewing court may not set aside an agency rule
that is rational, based on consideration of the relevant
factors, and within the scope -of the authority dele-
gated to the agency by the statute ... The scope of
review under the “arbitrary and capricious” standard
is narrow and a court is not to substitute its judgment
for that of the agency. Nevertheless, the agency must
examine the relevant data and articulate a satisfactory
explanation for its action including a “rational con-
nection between the facts found and the choice made.”
Burlington Truck Lines, Inc. v. United States, 371
U.S. 156, 168 [83 S.Ct. 239, 246, 9 L.Ed.2d 207]
(1962). In reviewing that explanation, we must “‘con-
‘sider whether the decision was based on a consider-
ation of the relevant factors and whether there has
been a clear error of judgment.”’ Bowman Transpor-
tation, Inc. v. Arkansas-Best Freight System, Inc., 419
U.S. 281, 285; [95 S.Ct. 438, 442, 42 L.Ed.2d 447
(1974)}; Citizens to Preserve Overton Park v. Volpe,
401 U.S. 402, 416 [91 S.Ct. 814, 824, 28 L.Ed.2d 136
(1971)]. Normally, an agency rule would be arbitrary
and capricious if the agency has relied on factors
j ™
47a
which Congress has not intended it to consider, en-
tirely failed to consider an important aspect of the
problem, offered an explanation for its decision that
runs counter to the evidence before the agency, or is
so implausible that it could not be ascribed to agency
expertise.
Accord Sierra Club v. United States Army Corps of En-
gineers, 772 F.2d 1048, 1051 (2d Cir.1985); Avovelles
Sportsmen’s League, Inc. v. Marsh, 715 F.2d 897, 904 (5th
Cir.1983); Great Salt Lake Minerals and Chems. v. Marsh,
596 F.Supp. 548, 553 (D.Utah 1984). In reviewing the
EPA’s determination of the facts in the case at bar, the
court is limited to a review of the administrative record.
Camp v. Pitts, 411 U.S. 138, 142, 93 S.Ct. 1241, 1244,
36 L.Ed.2d 106 (1973); accord Buttrey v. United States,
690 F.2d 1170, 1184 (5th Cir.1982) (reviewing decision of
Corps under Section 404(b) Guidelines). Keeping these
principles in mind, the court now turns to an examination
of the issues at hand.
3. Use of Section 404(b)(1) Guidelines in Section 404(c)
Review
Pyramid contends that the avoidability of potential ad-
verse environmental impacts of a proposed disposal of fill
material may not be considered in evaluating the unac-
ceptability of those impacts and challenges the EPA’s use
of this criterion. Pyramid would have this court adopt a
narrow construction of Sections 404(b) and (c) and the
regulations promulgated thereunder. Pyramid contends that
the EPA may not consider nonenvironmental findings al-
ready made by the Corps at the permitting stage in de-
termining whether a proposal will have unacceptable
adverse environmental results within the meaning of Sec-
tion 404(c) and 40 C.F.R. section 231.2(e). The EPA, on
the other hand, argues that the use of the “practicable
alternatives” test set forth in the Section 404(b\1) guide-
lines governing the Corps’ decision are equally applicable
48a
to an EPA decision under Section 404(c). Moreover, the
EPA asserts that independent consideration of the “‘prac-
ticable alternatives’ test was proper.
Statutory Language
Section 404(c) allows the EPA to forbid specification of
a particular disposal site when it determines that a pro-
posed discharge “‘will have an unacceptable adverse ef-
fect.” 33 U.S.C. section 1344(c). The statute itself restricts
the EPA in only two ways. First, the EPA must provide
for notice and a public hearing, which it undeniably did
in the case at bar, and second, the EPA must evaluate
unacceptable adverse effects in terms of municipal water
supplies, shellfish beds and fishery areas, wildlife or rec-
reation areas. 33 U.S.C. section 1344(c). The 404(c) reg-
ulations reiterate this latter limitation and define an
“unacceptable adverse effect” as an “impact on an aquatic
or wetland ecosystem which is likely to result in significant
loss of or damage to”’ any of the environmental interests
enumerated in Section 404(c), including wildlife areas.
Pyramid contends that neither the statute itself nor the
implementing regulations authorize the EPA to take into
account the existence of a “practicable alternative’’ when
making a determination that a proposed project will have
an unacceptable adverse impact and result in significant
degradation to one of the enumerated environmental in-
terests. Section 404(c) does not define the term “unac-
ceptable adverse effects” or specify the factors relevant
to an “unacceptability”’ determination. On the other hand,
nothing in the statute prohibits the use of the 404(b\1)
guidelines in making that determination. In addition, the
Section 404(c) regulations note that the EPA should con-
sider the “‘relevant portion of the [404(b)] guidelines’”’ in
making a Section 404(c) unacceptability determination. 40
C.F.R. section 231.2(e).
These guidelines are based in part on the Section 403(c)
criteria regulating ocean discharges. Section 403(c) iden-
49a
tifies a broad range of factors to be considered by the
Administrator in promulgating guidelines under Section
403(c).** Section 403(cX1XF) includes the availability of
other “‘possible locations and methods of disposal’’ as a
factor. The 404(bX1) guidelines likewise mandate consid-
eration of the availability of other possible locations in
order to minimize unnecessary destruction of aquatic re-
sources. Under Pyramid’s analysis, however, the only rel-
evant portions of the 404(bX1) guidelines are those which
directly pertain to the five resources listed in Section
404(c).
The court rejects Pyramid’s contention that the fact that
Section 403(c) and Section 404(b) are concerned with a
greater number of environmental factors than is Section
404(c) limits the manner in which the EPA may determine
the effect on the 404(c) resources, including the use of the
practicable alternatives test. Both the 404(b\1) guidelines
and the section 403 criteria, upon which they are pat-
terned, provide a means to evaluate the desirability of
discharges into the aquatic environment. Applying these
* Section 403(c) states, in part:
(cX1) The Administrator shall . . . promulgate guidelines for determining
the degradation of the waters of the territorial seas, the contiguous
zone, and the oceans, which shall include:
(A) The effect of disposal of pollutants on human life . . .;
(B) the effect of disposal of pollutants on marine life. . . .;
(C) the effect of disposal of pollutants on aesthetic, recreation and
economic values;
(D) the persistence and permanence of the effects of the disposal
of pollutants; :
(E) the effect of the disposal at varying rates, of particular vol-
umes and concentrations of pollutants;
(F) other possible locations and methods of disposal or recycling
of pollutants including land-based alternatives; and
(G) the effect on alternate uses of oceans, such as mineral ex-
ploitation and scientific study.
33 U.S.C. section 1343(cK1KAHG).
50a
standards to a proposed discharge in a particular context
does no violence to the policy underlying the Act. These
guidelines provide a useful tool for evaluating discharges
into the aquatic environment. Furthermore, the fact that
Section 403(c) explicitly allows an agency to consider a
certain factor does not necessarily mean that the absence
of such a provision in Section 404(c) precludes consider-
ation of that factor. Instead, use of these criteria makes
the general standard workable. Moreover, the EPA did
not use the Section 404(bX1) guidelines to find an unac-
ceptable adverse impact on any resource not specified in
Section 404(c). The unacceptability of the site was deter-
mined with respect to wildlife, a category explicitly enum-
erated thereunder.”
Alternatively, Pyramid argues that the EPA’s interpre-
tation is in contravention to the clear language of the
regulations. An unacceptable adverse effect is defined as
an “impact on the aquatic or wetland ecosystsm which is
likely to result in sign
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