Petition — County of Suffolk v. Secretary of the Interior

*~ Supreme Court, U. S,

“TH FiLVED

| NOV 14 1977

IN THE

Supreme Court of the United SETURL RODAK, JR., CLERK

OCTOBER TERM 1977

No.77- GRA

COUNTY OF SUFFOLK and CONCERNED CITIZENS

OF MONTAUK, INC.,

Petitioners,

We

SECRETARY OF THE INTERIOR,

Respondent,

NATIONAL OCEAN INDUSTRIES ASSOCIATION and

NEW YORK GAS GROUP,

Intervenor-Respondents.

PETITION OF COUNTY OF SUFFOLK AND CON.

CERNED CITIZENS OF MONTAUK, INC. FOR

WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE SECOND CIRCUIT

IrvING LIKE

200 West Main Street

Babylon, New York 11702

Telephone: 516—669-3000

Special Counsel for Petitioner

County of Suffolk

Wiiuiam F. Dupin, JR.

Attorney for Petitioner Concerned

Citizens of Montauk, Inc.

405 Lexington Avenue

New York, New York 10017

Telephone: 212—OX 7-7660

Dated: November 11, 1977

TABLE OF CONTENTS

ES tg Fe ee

Ne ck aweudh ch bibdekkes

i sa sk seek be ones vekessea's

Nee ea Veale

ee sg. ace ececeeeeusctuece

1.

9

ane

Second Circuit Errors Regarding Tanker/

EN EE rd shad Rae:k stock n sb ese 604s

Second Cireuit Errors Regarding the Cost/

beso ised ya ANNS be wes bee sda

Reasons for Granting the Writ ...................

1.

2.

National Importance of the Case ...........

Conflict with Supreme Court and other Ap-

pellate Deesions regarding Standard of Re-

Wee NEE BD BO) ois cc inasavacecesss

Conflict with Decisions of the Supreme Court

and other Circuits on the Requisites of an

Adequate NEPA Administrative Record ....

Certiorari Granted in Pendng Case involving

Similar Questions Relating to Adequacy of

Administrative Record and Scope of Judi-

i ce. coc ccikvavenschbeeeerehaedes

Conflict with Decisions in other Circuit Courts

as to Environmental Divisibility of a Project

Subject to NEPA Review .................

19

21

ii TABLE OF AUTHORITIES

CN fo ak ae eee eee eka cuales ee 27

Appendix A—Second Cireuit’s Opinion, August

Op a ea ee erarieer werterariers argc a ck: ae

Appendix B—District Court’s Opinion, August

Pebraary 17, 1077 « .occ cscs cccccesecceccnses Adi

Appendix C—Second Circuit Judgment, August

i REED .45y cbaseWee sn veRRaS UNS AGRO LOR Awan s A124

Appendix D—Excerpts of George Donkin Testi-

IE 6 i ov cbc be ndes'ctucsnnte) coneeuneeesaes A126

TABLE OF AUTHORITIES

Cases:

Allied General Nuclear Services, et al. v. NRDC,

Docket No. 76-654; 76-762; 76-769; 76-744 ...... 27

Calvert Cliffs’ Coordinating Committee v. AEC, 449

Oe RP (I. Cae. TTA) sci ch kak cnseseies’ 22

Chelsea Neighborhood Association v. United States

Postal Service, 516 F.2d 378 (2d Cir. 1975) .... 22

Citizens to Preserve Overton Park v. Volpe, 401 U.S.

Oe CRITE 5a ckc wen wise eeee suns ceecceecen 3, 21, 22

Commissioner of Internal Revenue v. Duberstetn,

eit Be |) BAe re 20

Committee for Nuclear Responsibility v. Seaborg, 463

Oe THO CURE. GO TURD hic cos ceckeseceesss 22

Conservation Society of Southern Vermont, Ine. v.

Secretary of Transportation, 508 F. 2d 927 (2d

Ge SES On rok ee eens laae ks 26

Ely v. Velde, 451 F. 2d 1180 (4th Cir. 1971) ........ 23

TABLE OF AUTHORITIES iii

PAGE

Environmental Defense Fund v. Corps of Engineers

(Tombigee Dam), 492 F. 2d 1123 (5th Cir. 1974) 22

Environmental Defense Fund v. Froehlke, 473 F.2d

ee ey ia occ eG oe ae anaee 22

Environmental Defense Fund v. Tennessee Valley Aw

thority, 468 F.2d 1164 (6th Cir. 1972) .......... 26

International Harvester Company v. Ruckelshaus, 478

B. Sn Wee Rae. ae Be eek Sivcevcedbees svar 22, 23

Izaak Walton League of America v. Schlesinger, 337

Bee Sie TGs MPa edi eeiwekabeees 26

Kleppe v. Sierra Club, 427 U.S. 390 (1976) ......... 23

Natural Resources Defense Council v. Morton, 458

saan ee Ce Sk TEE ike oe a ccctentcnceees 22

National Resources Defense Council v. Nuclear Regu-

latory Commission, 539 F.2d 284 (2d Cir. 1976)

reer ee rere oh er er rey 26, 27

National Resources Defense Council v. Nuclear Reg-

ulatory Commission, 547 F.2d 633, 9 E.R.C. 1149

(D.C. Cir. July 21, 1976) (Cert. granted Feb.

aa, 1977, 97 B. Ct. 10GB) 2... cc nvccevcvecs 22, 23, 24, 26

New York v. NRC, 550 F.2d 745 (2d Cir. 1977) ....9, 21, 26

Scherr v. Volpe, 466 F.2d 1027 (7th Cir. 1972) ...... 26

Scientists’ Institute for Public Information v. AEC,

Bl F.2a 1079 (D.C. Cir. 1978) . 2... ccc eccess 26, 27

Silva v. Lynn, 482 F.2d 1282 (1st Cir. 1973) ........ 23

Union Oil Co. v. Morton, 512 F.2d 743 (9th Cir. 1975) 25

United States v. Singer Mfg. Co., 374 U.S. 174 (1963) 20

United States v. United States Gypsum Co., 333 U.S.

Se I 6 hse bade daducueeades cuss etic 20

iv TABLE OF AUTHORITIES

Statutes: PAGE

eC TID in bv nxcis do diths Be knsaadee sees esees 24

Se TS SCENES war s-e ccadwaseaunaeeeaseaes 4, 22

Gateway National Recreational Area (16 U.S.C. See.

NS ine sak os pan koe unwkik Geena eaaeke nen 11,12

National Environmental Policy Act of 1969 (NEPA),

ey an WO is OO OUR, bg ns kneed specu desns passim

Regulations and Other Authorities:

9 C. Wright & A. Miller, Federal Practice & Pro-

gee RE kL ere err eee 20

CEQ Guidelines, See. 1500.8(a)(4) and (8) ........ 5, 22

Federal Rules of Civil Procedure, 52(a) ...... 3, 9, 10, 14,

19, 20, 21

La Rue, Moore & Schafer, “Calculation of New Oil

Costs, United States, years 1959 through 1974.”

Dallas, Texas: Petroleum Consultants (May 1,

rr rer re es Sey ems 17

In THE

Supreme Court of the United States

OCTOBER TERM 1977

No. 77-

-

.

County oF SUFFOLK AND CONCERNED CITIZENS OF

Montauk, Inc.,

Petitioners,

v.

SECRETARY OF THE INTERIOR,

Respondent,

NaTionaL Ocean Insivsrries ASSOCIATION AND

New York Gas Grovp,

Intervenor-Respondents.

-%

aa

PETITION OF COUNTY OF SUFFOLK AND CON-

CERNED CITIZENS OF MONTAUK, INC. FOR

WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE SECOND CIRCUIT

This petition for certiorari arises out of the Second Cir-

cuit’s reversal on August 25, 1977 of a decision by the

United States District Court for the Eastern District of

New York rendered February 17, 1977 voiding certain off-

shore oil leases sold by the Secretary of the Interior in

violation of the National Environmental Policy Act

(NEPA), and enjoining further activities on the leases

until the environmental impacts thereof are properly evalu-

ated under NEPA by the Secretary. The leases are for

2

exploration and production of oil and gas on the Outer

Continental Shelf (OCS) Sale 40 area in the Baltimore

Canyon area off New Jersey and below Long Island.

Sale 40 is the first in the Mid-Atlantic OCS area. It

involves 154 tracts, comprising an area of 867,750 acres,

a potential of 50 oil producing platforms, more than 1,000

wells and 450 miles of offshore pipelines, increased oil

tanker traffic as well as massive onshore petro-chemical

and other support facilities. Thus, the Second Circuit’s

reversal clears the way for profound and irrevocable

alteration of the Mid-Atlantic seascape and landscape de-

spite the admittedly unresolved major risk of oil pollution

to the Atlantic fishing grounds, and the risk of oil fouling

of ocean beaches and parks and other grievous environ-

mental impacts in America’s most densely populated

coastal area.

Opinions Below

The Second Circuit’s opinion of August 25, 1977 is set

forth in Appendix A to the Petition (unofficially reported

10 Environment Reporter Cases (E.R.C.) 1513.*

*The judgment of the Second Circuit is set forth in Appen-

dix C.

Prior opinions forming the historical background of this liti-

gation are:

1. The District Court’s decision dated August 13, 1976,

preliminarily enjoining Sale 40, scheduled for August 17,

1976. (9 E.R.C. 1769)

2. The Second Cireuit’s opinion dated August 16, 1976

(9 E.R.C. 1793), staying enforcement of District Court’s pre-

liminary injunction.

3. The Supreme Court’s opinion dated August 19, 1976

(by Cireuit Justice Marshall) (50 L. Ed.2d 38) declining

to vacate the Second Cireuit’s stay of enforcement of the

District Court’s preliminary injunction.

4. The Second Circuit's opinion on October 14, 1976 (9

E.R.C. 1794) reversing the District Court’s preliminary in-

junction order.

3

The District Court’s opinion of February 17, 1977 is set

forth in Appendix B. (9 E.R.C. 1798)

Jurisdiction

Petitioner’s motion dated September 12, 1977 to stay

issuance of the mandate of the Second Cireuit pending

application to the Supreme Court for a writ of certiorari

pursuant to Rule 49(b) of the Federal Rules of Appellate

Procedure, was denied by Order of the Second Circuit

dated October 4, 1977. This Petition for certiorari is being

filed within the prescribed ninety days after August 25,

1977. The jurisdiction of this Court is invoked under 28

U.S.C. Section 1254(1).

Questions Presented

1. Whether the Second Circuit erroneously substituted

the “rule of reason” for the “clearly erroneous” rule (Rule

d2a, F.R. Civ. Proc.) to justify its de novo review and re-

versal of the District Court’s evidentiary findings on the

inadequacy of the Secretary’s environmental evaluation.

2. Whether the Second Circuit misapplied Citizens to

Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402 (1971),

in denying the power of the District Court to review and

find arbitrary, the Secretary’s decision, which is based on

an incomplete and defective administrative record, contain-

ing grossly erroneous cost-benefit data relied on by the

Secretary in authorizing Sale 40, which data was unsup-

ported and unexplained and was not even circulated to the

public as required by NEPA.

3. Whether the Second Circuit erred in validating the

Sale 40 Environmental Impact Statement (EIS) despite its

recognition of the EIS’s “apparent failure to deal as thor-

oughly with some environmental consequences of trans-

4

portation (of Sale 40 oil) as might be hoped” on the

assumptions (unsupported by the EIS) that Sale 40 is

environmentally divisible and that the Secretary has the

power to and will at some undetermined future date deal

thoroughly with the oil transportation problem.

Statutes Involved

The statutes involved are:

Administrative Procedure Act, 5 U.S.C. Section

706 (2) ;

National Environmental Policy Act, 42 U.S.C. Section

4332.

Statement of the Case

The Sale 40 Draft EIS was published on December 10,

1975. The Sale 40 Final EIS was released on May 25, 1976.

Neither contained a cost/benefit analysis; the Final EIS

noted that a cost/benefit analysis would be provided in a

separate Sale 40 Program Decision Option Document

(PDOD) prepared for the Secretary.

A separate Sale 40 PDOD was drafted and received by

the Secretary on June 22, 1976. It was not circulated for

public comment. In three pages of tables it estimated: a)

the low and high case timetable of oil and gas development ;

b) the acreage, facilities and equipment expected to

develop the Sale 40 resources; and c) the investment costs

for low and high cases. The PDOD did not explain, docu-

ment or support the estimates and the assumptions under-

lying the estimates and simply attributed the sources of

its information to the United States Geological Survey,

and the Atlantic Offshore Operator’s Committee (a

petroleum industry organization).

The cost-benefit data was not attached to the Environ-

mental Impact Statement for Sale 40 (or otherwise

5

circulated) as recommended by the Guidelines of the

Council of Environmental Quality, 40 C.F.R. See. 1500.8

(a)(8), although the Seeond Cireuit Court mistakenly as-

sumed it was attached. (Appendix A, A30) The PDOD did

not set forth responsible opposing views as to Sale 40 costs

and benefits held by the relevant technical community.

On June 30, 1976, the Secretary announced his decision

to hold Sale 40 on August 17, 1976. County of Suffolk,

and others challenged this decision by moving for & pre-

liminary injunction. Discovery was expedited and the

ease was set for hearing on the earliest possible date the,

parties could be ready. Subsequently, Respondent National

Ocean Industries Associates together with eleven of its

members, and the New York Gas Group, intervened as

defendants. Evidentiary hearings consumed three weeks.

Many distinguished experts testified for both sides. The

attorneys worked days, nights and weekends to speed the

trial because of the need for a prompt decision compelled

by the August 17, 1976 sale date.

On August 13, 1976 the District Court issued its decision

preliminarily enjoining Sale 40. Its opinion concluded that

the Secretary's decision violated NEPA and insufficiently

analyzed environmental dangers because the Final EIS

and PDOD inadequately assessed the impact of state and

local decisions on a) whether pipelines or tankers would

be used to bring the oil ashore, and b) where onshore

facilities could be located.

Respondents then moved in the Second Circuit Court of

Appeals for a stay of enforcement of the District Court’s

preliminary injunction. The Second Circuit, forced to act

on August 16, 1976, the eve of the sale, granted the motion,

ruling that the sale in and of itself would not cause the

petitioners any irreparable injury.

On the following day, August 17, 1976, the petitioners

applied to Cireuit Justice Marshall to vacate the stay. He

declined to dissolve the stay. In his opinion of August 19,

6

1976 he noted that he only had a few hours to review the

District Court’s opinion, the briefs of the parties and the

four-volume EIS, and that he did not have nor could he

meaningfully have considered the voluminous record com-

piled in the District Court. Mr. Justice Marshall found

plaintiffs would not be irreparably injured if the Secretary

were permitted to open bids, but if the government were

to make an irreversible commitment of resources without

preparing an adequate impact statement, this would con-

stitute irreparable injury warranting injunctive relief. He

made clear that invalidation of any resultant leases was a

very real possibility should plaintiffs prevail on the merits,

In a brief opinion on October 14, 1976, the Second Cir-

cuit reversed the District Court’s preliminary injunction

order, holding that petitioners had not demonstrated that

they would suffer irreparable harm between the date of

the preliminary hearing and the trial, and that on its re-

view of the record concerning the NEPA violation found

by the District Court, there was some doubt whether peti-

tioners would succeed on the merits at the trial. Respond-

ents were advised that by proceeding with leasing prior to

a final determination, they assumed the risk of an ultimate

adverse decision.

After further pre-trial hearing and discovery, a trial on

the merits was held before District Judge Jack B. Wein-

stein, at which all parties introduced extensive additional

proof. Twelve hundred pages of new testimony were taken

and numerous additional documents were received in evi-

dence. In all, a total of 4,043 pages of testimony were

taken, 32 witnesses were heard, 273 documents were re-

ceived and the affidavits and proffers of proof for a sub-

stantial number of other persons considered,

The following disputed factual questions were decided by

the District Court: |

a) whether sufficient meaningful information was

available to the Secretary at the EIS Sale 40 stage

7

with which to project likely and feasible pipeline routes

to shore;

b) whether such information could be used to assess

the impact of state and local regulatory powers on the

environmental and economic consequences of the Sale

40 ;

¢) was such information essential to the Secretary’s

cost-benefit analysis of Sale 40;

d) was Sale 40 a unitary «project without separate

controlled arrangement for pipeline /tanker transpor-

tation problems via a Development Plan EIS and the

Secretary’s retained regulatory powers;

e) whether despite meaningful information readily

available to him, the Secretary’s cost/benefit analysis

was so grossly inaccurate and defective as to preclude

him, as the trustee and fiduciary of the public interest

OCS resources, from making an informed evaluation

of Sale 40 in comparison with the possible alternatives;

f) whether the Secretary failed to meaningfully con-

sider alternatives such as the separation of explora-

tion and production;

g) whether the pre-Sale 40 historical evidence of the

Secretary’s ‘‘firm’’ commitment to proceed with Mid-

Atlantie OCS leasing considered in conjunction with

the Secretary’s failure to adequately assess the vitally

linked tanker/pipeline, cost/benefit alternatives and

other critical NEPA issues—justified a finding that

the NEPA review was a charade.

The District Court’s second opinion (Appendix B) ren-

dered February 17, 1977, on the evidence, found all of the

subsequent questions of fact in the affirmative, and ac-

cordingly, enjoined further activities pursuant to the

leases sold in August 1976, and declared the leases null

and void.

. a

8 | 9

The opinion, (which included Appendices totalling 36 While there was substantial evidence that the Sec-

pages® listing the witnesses and exhibits considered by the retary’s decision was not based upon a good faith con-

Court), concluded that the massive new evidentiary record sideration of relevant NEPA documents, but on

served to confirm and expand the bases of the Court’s decisions made privately and in advance of public

earlier tentative conclusion in its decision of August 13, hearings, we find it unnecessary to make any such

1976 that NEPA had been violated. The Court sum- finding. It is enough for purposes of this proceeding

marized the factual findings for its conclusion that NEPA to detail the abstract and misleading aspects of the

had been violated in a number of respects, as follows: operative NEPA documents that prevented any realis-

tic appraisal of either environmental dangers or the

effects of local governmental licensing, permitting, and practical advantages and disadvantages that would

result from the specific Sale 40 leases. Each of the

review powers in the NEPA documents; (2) failed to . ;

consider the environmental impact of specific probable inadequacies, considered below in detail, constitutes a

violation of both the letter and spirit of NEPA and

pipeline routes from the outer continental shelf, in Hay , . os

spite of the fact that projection of such routes is rou- requires rescission of the Secretary's leasing decision.

We find that the Secretary (1) ignored the practical

tinely made by industry ? , caggeeno vee

the ear, ab ee ap can air have ori —_ re! On August 25, 1977, the Second Circuit handed down its

sail. oil and vas iad ag a an apna opinion (Appendix A) reversing the District Court’s in-

and gas p on for Sale and signifi- junction decision.

cantly understated the cost of such production, inelud-

ing pipeline construction; this resulted in a serious lack

of consideration of the likelihood and attendant dan-

gers of increased tanker traffic and an overestimate of

the net value of the entire project; (4) failed to con-

sider the possible impact of particular tract-selection

choices on the feasibility and sites of pipelines; there

was no consideration of the alternatives of either ex-

cluding industry-preferred tracts, or including less

highly desired tracts in the final sale offer because of

In an unusual usurpation of the District Court’s fact

finding functions, as applied to a massive fact intensive

evidentiary record containing much sharply disputed live

and expert testimony from which conflicting inferences

could be drawn, the Second Circuit proceeded ad seriatim

to burrow into the record,’ review the evidence and to ap-

praise and set aside each of the District Court’s factual

findings. In doing so, it violated Rule 52(a) that District

Court findings (particularly as to disputed issues of evi-

related onshore impacts and developments; and (5) <dentiary fact) “shall not be set aside unless clearly

failed to consider the alternative of separating ex- erroneous”. The Second Circuit substituted the substan-

ploration from production leasing. Adequate consid- tive “rule of reason” test for the procedural “clearly

eration of these factors might have led to modifications erroneous” rule, delving into the trial record as if it were

in the Sale 40 leasing program, resulting in greater the District Court.

environmental protection without impairing reasonable

exploitation of offshore hydrocarbon resources. 1 Despite the Second Cireuit’s holding in New York v. NRC,

550 F2d 745, 752 (2nd Cir. 1977) that it was not required to

* Not printed hereir “burrow into the documentary record in exactly the same way the

eee ee District Court (did).

10

In this process, the Second Circuit committed a number

of errors. First was its erroneous assumption that the Dis-

trict Court’s finding of EIS inadequacy under NEPA was

based. on reasons unrelated to testimonial credibility. In

fact, the District Court relied heavily on live testimony

which: a) sharply disputed data and statements in the EIS

and PDOD; b) raised issues as to the credibility of con-

flicting expert opinions; and (ce) from which conflicting

inferences relevant to specific issues could be drawn.’

Second was the Second Circuit’s application of the “rule of

reason” as a standard of appellate review, in place of the

Rule 52(a) constraints, on the assumption that it was in

as good a position as the District Court to test the ade-

— of the NEPA administrative and evidentiary rec-

ords.

The incorrect standard of appellate review adopted by

the Second Circuit led it to commit major factual errors.

Second Circuit Errors Regarding Tanker/Pipeline Issue

The Second Circuit, not enjoying the proximity of the

District Court to the complex scientific and technical live

testimony and the conflicts engendered thereby, was not

in as good a position to determine whether the Secretary

satisfied the ‘‘rule of reason’’.

As a result, its usurpation of the District Court’s fact

finding prerogative led the Second Circuit into serious

factual errors and faulty legal premises leading to erro-

neous conclusions.

* For example, the conflicting estimates of Shell Oil Co. wit-

ness Brunjes “desk study” pipeline costs and petitioner's expert

witness economist Donkin’s actual experienced pipeline costs based

on FPC, petroleum consultants, and major oil company data

sources; conflict between Donkin’s detailed documented testimony

on oil and gas investment costs, reserves and peak production

levels, and those contained in the Seeretary’s uncireulated 2-page

PDOD cost/benefit analysis for Sale 40. — ls

ee

ll

The Second Circuit rejected the District Court’s finding

that it was possible for the Secretary at the EIS Sale 40

stage to specify probable pipeline destinations. It adopted

the contra premise that it was not possible to do so—a

false premise because the Second Circuit overlooked the

following meaningful information’ available to the Secre-

tary which permitted him to project an inevitable pipeline

route leading to the Philadelphia refinery area and to

assess its environmental impact and that of tanker trans-

portation alternatives—First, recent Environmental Pro-

tection Agency decisions raising the possibility of excluding

the entire Atlantic Coast of New Jersey from any offshore

oil lines, thus foreing any pipeline route to use a water

route to reach refinery areas; Second, the likelihood that

pipelines would follow a shore approach location in the

Delaware Bay up the Delaware River to the Philadelphia

area which contains the largest concentration of refineries

in the Northeast (much larger than New Jersey); Third,

the grave environmental and economic consequences, if a

water route pipeline route to Philadelphia were constructed

because of its impact on oyster beds and other important

marine life, swimming, boating and other recreational ac-

tivities on and around the Delaware Bay and River;

Fourth, the fact that the alternative of using tankers to

transport Sale 40 oil via the sealanes converging in the

New York-New Jersey port refinery area posed a signifi-

eant risk of oil pollution through tanker spills* (a con-

’ Appendix B, A71, A72, A74, A77, A78. a.

‘Testimony a@t the trial by New York Coastal Zone Manage-

ment Planner DeWitt Davies established the significant risk of

oil pollution to the New York-New Jersey Coastal Zone from in-

creased tanker traffic carrying Sale 40 oil using the congested

sea-lanes leading to the New York-New Jersey refinery area—a

factor contributing to the likelihood of a pipeline route to the

Philadelphia refinery area. Another such factor may be the legal

inhibition of the Gateway National Recreational Area (16 U.S.C.

(footnote continued on following page)

12

tingency which the Second Circuit itself ruled unaccept-

able, Appendix A, A25, A26); Fifth, the fact that the

Secretary's estimated pipeline costs seriously understated

their true costs.

The Second Circuit’s false premise blinded it to the fact

that the Secretary could have evaluated these factors and

predicted the probable pipeline destinations, and their en-

vironmental and economic costs, and that these factors

could have affected the Secretary’s decision of whether or

not to proceed with the Sale 40 project in its present form.

The Second Circuit's false factual premise regarding the

tanker/pipeline issue led it to the erroneous conclusion that

the Sale 40 project was environmentally divisible, and that

the Secretary could defer confronting the transportation

problem to the Development Plan stage. This is an un-

tenable conclusion, because at this later point the vested

grandfathered rights of existing OCS Sale 40 lessees, and

massive expenditures and irretrievable commitments of

resources would make unlikely any substantial modification

or abandonment of the Sale 40 project, despite potential

intractable transportation problems, and would foreclose

the option of not proceeding with lease Sale 40 in its

present form.

Second Circuit Errors Regarding the Cost/Benefit Issue

The District Court found that the Secretary’s (PDOD)

cost benefit analysis (an essential part of the NEPA re-

view) was so arbitrary because of its gross understate-

ment of pipeline and other oil and gas investment costs,

and because of its serious overestimate of oil and gas re-

serves and peak levels of production, that the Secretary

(footnote continued from preceding page)

See. 460ce-1), which authorized the Secretary to acquire lands

located in the New York Harbor area (as defined in Sec. 460cc)

owned by the States of New York or New Jersey or any political

subdivisions thereof, only by donation.

Oe ete gees

13

could not reach an informed reasoned judgment as to tlie

net value of project 40 and its comparison to alternatives

and whether to hold Lease Sale 40, and hence that his

decision was arbitrary.

The District Court’s findings were based on the ex-

haustive expert written and live testimony of economist

George Donkin, based on data readily available to the

Secretary at the time of his June 22, 1976 Sale 40 PDOD.

The respondents did not shake Donkin on cross-examina-

tion and did not present rebuttal evidence.

Nonetheless, the Second Circuit rejected the District

Court’s findings as substituting its judgment for that of

the Secretary and exceeding the permissible scope of

judicial review. On the basis of its own review of the dis-

puted evidence, which as will be shown, was substantially

inaccurate and incomplete, the Second Circuit adopted as

its premises that the Secretary’s cost/benefit analysis had

been circulated through the NEPA review process, and

received a proper NEPA review, that the NEPA ad-

ministrative record was complete, and that in any event

the Secretary’s cost/benefit estimates were reasonable.

The Second Cirecuit’s premise that the cost/benefit

analysis received a proper NEPA review was based on its

mistaken assumption that the cost/benefit analysis was

attached to the EIS and circulated through the NEPA

review process, thus providing an opportunity to the

relevant scientific and technical community to comment on

and air the technical issues presented by the cost/benefit

analysis.

The Second Cireuit’s premise was false because, in

truth, the Secretary failed to attach the cost/benefit

analysis to the EIS and to circulate it through the NEPA

comment and review process, thus enabling the cost/benefit

analysis to escape the critical scrutiny of independent ex-

perts on oil and gas matters, and to evade the airing and

14

consideration of dissenting views in the Secretary’s final

environmental statement.

The Second Circuit's false premise led it to the erroneous

conclusion that the cost/benefit analysis received a NEPA

review, that the NEPA record was complete, that the

Serretary’s decision to hold Lease Sale 40 was an informed

judgment, and could not be disturbed by the District

Court's review which inquired into and reached the con-

clusion that the Secretary’s judgment was uninformed and

arbitrary because of gross defects in the cost/benefit

analysis.

As with the pipeline, tanker issue, the 2d Cireuit bur-

rowed into the record on the cost/benefit issue in dis-

regard of Rule 52a, and stumbled into a substantially in-

complete and inaccurate review of the record.

The 2d Cireuit concluded that the finding cost estimates

relied upon by Mr. Donkin were not strictly comparable

with those used by the Secretary and that the Interior

Department's pipeline cost estimate of $1,000,000 per mile

was reasonable. (Appendix A, A34-A35)

The 2d Cireuit stated that Mr. Donkin’s finding cost in-

cluded exploratory overhead, which is “not necessarily

classified as capital investment cost’’. (Appendix A, A34)

The 2d Circuit completely missed the point by ignoring

Mr. Donkin’s testimony* that the Secretary should have

included exploration overhead cost as part of the invest-

ment or finding cost for the commodity (III J.A. 1887) and

that the FPC treats exploration overhead as an invest-

ment cost (III J. A. 1890-1891). By not including ex-

ploration overhead as an investment cost, the Secretary

understated the true investment costs of Sale 40.

In any event, as can be readily seen from Exhibit 250

(GLD-2), exploration overhead only accounts for between

* Relevant excerpts are printed as Appendix D.

Me EA PIE wee She fee A eA ee

15

4.9 percent and 12.6 percent of the total finding costs used

by Mr. Donkin in developing his estimates of the extent

to which the Secretary underestimated the total investment

expenditures required to develop the OCS Sale #40

acreage. Thus, even if it is assumed that exploration over-

head was inappropriately included by Mr. Donkin (and

there is no record evidence to support this assumption),

then Exhibit 250 (GLD-1) and (GLD-2) shows that Mr.

Donkin’s finding costs still would exceed those relied on

by the Secretary by as much as 115.5%, and thus the

Secretary’s costs were not reasonable.

The 2d Circuit also said that Donkin “assumed that the

Secretary's figures included such items as wages during

pre-production activity whereas the EIS did not treat such

items as capital investment costs’’. (Appendix A, A34)

Again the 2d Circuit misinterpreted Donkin. The Secre-

tary’s figures did in fact include such items as pre-pro-

duction wages, as part of the capital investment costs.

As Donkin testified, the $3 million exploratory well cost

figure (a capital cost item) used by the Secretary already

included the labor (i.e. pre-production wages) associated

with the drilling of those wells. (III J.A. 1882)°

The 2d Circuit also completely misinterpreted those por-

tions of Mr. Donkin’s testimony relating to pipeline costs.

For example, the Court stated the following:

“Donkin admitted that in 1973 pipeline costs were only

about $485,000 per mile, and testified that by October

1976 the costs had risen 150%, which would imply a

figure of about $1,200,000.’’ (Appendix A, A34)

What Mr. Donkin actually referred to in his testimony was

a 1976 report wherein it was stated that since 1973, off-

* Table III—31, FES Sale 40, Vol. 2, p. 223 confirms Don-

kin’s testimony. It says the estimated exploratory well cost of

$3 million is derived from the assumption that wages paid for

exploratory drilling will be $1,500,900 per year per exploratory

drilling rig.

16

shore pipeline costs had increased nearly 150 percent from

$556,658 per mile (III J.A. 1863-1864), as opposed to the

$485,000 per mile figure cited by the Court, a figure sup-

plied by government counsel. If the $556,658 figure for

1973 is escalated by 150% this “would imply a figure of

about’’ $1,400,000 per mile (as opposed to the 2d Circuit’s

$1,200,000). The figure of $1,400,000 is approximately

40% greater than the Secretary's $1 million per mile esti-

mate. Thus by the terms of the 2d Circuit’s own reason-

ing, the Secretary’s estimate is a gross understatement of

pipeline costs.

As a further example of the extent to which the Second

Circuit misunderstood Donkin’s testimony, the Court

stated:

(Donkin’s) “statistics relating to pipeline costs in-

volved a project to be constructed well after the time

the EIS was drafted, which would require that due al-

lowance be made for inflation in costs and revenues.”

(Appendix A, A34)

This statement implies that Donkin's pipeline cost esti-

mates included an inflationary allowance, whereas that

used by the Secretary did not. This of course would be a

valid criticism only if (1) Donkin’s cost estimate was made

subsequent to that of the Secretary and the two estimates

were expressed in terms of current dollars; or (2) Irre-

spective of when the estimates were made, they were ex-

pressed in terms of noncomparable dollars with respect

to time. Support for either of these conditions is not

found in the record. As shown in Ex. 250 (GLD-3),

Donkin used a pipeline cost estimate dated September 8,

1975 which is approximately nine months prior to the

June 1976 Sale 40 PDOD (J.A. 3501) (Thus condition (1)

was not satisfied). Moreover, although counsel for the

government was given ample opportunity to provide evi-

dence showing that the PDOD pipeline cost estimates

were not stated in terms of 1976 dollars as was assumed

Oe mk

17

by Donkin, no such evidence was forthcoming. (J.A. 1864,

1865). (Thus condition (2) was not satisfied). Accord-

ingly, it was proper to compare Donkin’s pipeline cost

estimate of $1.75 million per mile with the Secretary's

figure of $1 million.

Finally, the 2d Cireuit concluded ‘‘it is not surprising

that the Department’s peak production figures were high,

since it envisioned getting the same amount of oil and gas

out of the ground over a shorter period of time.’’ ( Appen-

dix A, A35) This erroneous conclusion was based upon

a misinterpretation of the record. To illustrate, the Court

stated that Donkin’s peak production estimates were based

on a 27.08 to 30 years field life, as opposed to the Depart-

ment’s assumed field life of 25 years. In fact, as shown in

Exhibit 250 (GLD-5), Mr. Donkin assumed that 85.2 per-

cent of the gas reserves in the potential gas fields asso-

ciated with this acreage would be produced within fifteen

years. Although Mr. Donkin made no direct reference to

the field life for gas production, the depletion schedule

adopted clearly indicated a field life below the Depart-

ment’s assumed 25-year life. Similarly, the record shows

that Donkin assumed a 27.58 years (not 30 years) field life

for oil fields in his analvsis,* which is virtually the same as

that used by the Department. Indeed, whether the field

life is 20 years, 25 years, or 27.08 years, the following

testimony of Mr. Donkin reveals the irrelevance of this

issue:

Now, I’m aware that in the Gulf of Mexico there are

reservoirs that will produce 15 percent of their re-

serves in a given year. Then you have a much faster

rate of decline thereafter, and believe me, I did it

several ways. You can change the assumption any

*See Ex. 250-GLD-5, p. 2, Table 26 of “Calculation of New

Oil Costs, United States, years 1959 through 1974", La Rue,

Moore & Schafer, Petroleum Consultants, Dallas, Texas (May 1,

1975).

18

way you want to, but the results are going to be the

same. You will not be able to reach peak production

in 1989 as long as you are bringing them (reserves) on

in 1981. (III J.A. 1893)

As shown at page 4 of Exhibit 250 (GLD-6), if peak gas

production in the high reserves case is to obtain in 1989,

given the production schedule assumed by the Department,

a total gas reserve for this acreage of 14.2 trillion cubic

feet is required. This reserve is 51 percent greater than

the 9.4 trillion cubic feet resource estimate contained in

both the EIS and the Sale #40 PDOD. Similar figures

for the oil reserves required to attain the Department’s

peak oil production estimates in 1989 are 1.75 million bar-

rels vs. 1.40 million barrels (a 25 percent error). Thus, it

is clear that the extent of error associated with the Depart-

ment’s natural gas production estimates is far greater than

the error reflected in the oil production forecasts and, as

testified by Mr. Donkin:

‘*There is no way that you can produce 3,080,000 MCF

per day in 1989 if you are going to produce a billion

cubic feet a day in 1985 and 240,000 MCF per day in

1983 ete.’’ from a reserve of 9.4 trillion cubic feet of

gas. (III J.A. 1897; Exhibit 250 GLD-6, p. 404)

Thus, regardless of the field life assumed for natural gas,

the Department’s production forecasts for the Sale +40

acreage are in error by such a large magnitude that they

simply cannot be construed as being within any zone of

reasonableness and should be rejected in total as reflective

of the annual benefits to be derived from this acreage.

The above excerpts of Mr. Donkin’s testimony clearly

show the many faults in the Second Circuit’s analysis of

the cost/benefit issue. But more importantly, they demon-

strate the more basic error committed by the Second Cir-

cuit in undertaking trial court fact finding functions by its

de novo review of the evidence.

DARD Feet ee et tee ABO hn

4 ee en ee ee ee ee ee ee eee |

19

Reasons for Granting the Writ

1. National Importance of the Case

The Sale 40 project opens up a virgin area of the Mid-

atlantic to massive exploitation of oil and gas resources

sought as part of this nation’s development of new sources

of energy.

The litigation is of substantial importamece to the na-

tional OCS leasing program, the parties and to millions of

people living in this region whose environment and liveli-

hood may be affected. It has substantial irrevocable eco-

nomic, social, environmental and political impacts on the

most densely populated area of the United States. This

Country’s most valuable fisheries area and recreational

beaches are threatened with irreparable harm from Sale

40 activities.

2. Conflict with Supreme Court and Other Ap-

pellate Decisions regarding Standard of Re-

view under Rule 52(a)

The Second Circuit improperly construed the “clearly

erroneous” standard of Rule 52(a), F.R. Civ. P. in apply-

ing a less restrictive standard of review of the District

Court's factual determinations to set aside those findings.

The Second Cireuit gave the following reasons for its de-

parture from the “clearly erroneous” standard of Rule

d2(a):

a—The District Court’s findings of fact were based on

documentary proof, which the Second Circuit was

in as good a position as the District Court to ap-

praise.

b—The District Court's determination that the EIS

fails to contain sufficient information to satisfy

Section 102(2)(c) of NEPA, was for reasons un-

related to testimonial credibility.

20

e—The “rule of reason”, is the appropriate standard

of review governing the Appellate Court, and it

supplants the “clearly erroneous” standard of Rule

52(a).

In each of these respects, the Second Cireuit erred, and

its decision represents a substantial departure from deci-

sions in other circuits, and the Supreme Court.

The District Court’s findings of fact were based on an

evidentiary record consisting not only of documents, but on

a vast amount of live testimony, raising sharply disputed

issues of highly complex and technical evidentiary fact,

involving conflicting inferences and matters relating to

testimonial credibility.

The Second Circuit was not in as good a position as the

District Court to appraise the massive evidentiary record.

The Second Circuit’s major factual errors and omissions

previously noted, attest to its inferior position as weigher

of the evidence and fact finder. As shown in the analysis

of Donkin’s testimony, the Second Circuit could not pos-

sibly grasp the complex and technical issues as did the

District Court.

In eschewing the Rule 52(a) clearly erroneous standard,

the Second Circuit’s decision conflicts with the view of the

Supreme Court that the “clearly erroneous” test applies

to all the District Court’s findings, regardless of the nature

of the evidence.

United States vy. Singer Mfg. Co., 374 U.S. 174,

194, n. 9 (1963)

Commissioner of Internal Revenue v. Duberstein,

363 U.S. 278, 291 (1960)

United States v. United States Gypsum Co., 333

U.S. 364, 394 (1948)

See also: 9C. Wright d A. Miller, Federal Practice & Pro-

cedure: Civil § 2587 at 745, 746 (1971).

21

The Second Circuit’s decision represents a view not sup-

ported by some prior decisions in its own circuit, and con-

fliets with decisions in other circuits, all of which are ex-

haustively reviewed in New York vy. NRC, 550 F2d 745,

750-753 (2d Cir. 1977).

The Second Circuit also erred in confusing the Rule

02(a) standard of appellate review with the “rule of rea-

son” test applicable in NEPA cases. The latter test ap-

plies to the issue of whether the documentary proof (i.e.

the EIS) is factually adequate to meet NEPA’s require-

ments. The District Court must decide this issue on the

basis of a full administrative and evidentiary record satis-

fying the requisites of NEPA. (See discussion, infra,

pp. 21-24).

Thus, upon appellate review of the District Court’s fac-

tual findings on whether the EIS satisfies the “rule of

reason”, the Second Circuit is also governed by Rule 52(a)

and may not set aside such findings unless shown to be

“clearly erroneous”. It did not make such showing.

3. Conflict with Decisions of the Supreme Court

and Other Circuits on the Requisites of an

Adequate NEPA Administrative Record

The Secretary’s decision was not based on an adequate

NEPA administrative record, and could not be deemed a

well reasoned informed judgment taking a hard look at the

major questions before him.

The Supreme Court, this and other circuits have laid

down the requisities of a NEPA administrative record on

which judicial review is to be based.

The judicial review is to be based on the full administra-

tive record that was before the Secretary at the time he

made his decision. Citizens to Preserve Overton Park v.

Volpe, 401 U.S. 402, 419-420 (1971); a complete record

must be generated in which the factual issues are fully de-

22

tailed, developed, explained, documented and ventilated.

NRDC vy. NRC, 547 F2d 633 (D.C. Cir. 1976), cert.

granted Feb. 22, 1977, 97 S.Ct. 1098. The agency must

acknowledge, consider and develop in the record a fair

representation of responsible dissenting scientific and

technical opinion, and foster a real give and take on the

key issues NRDC v. NRC, supra; Committee for Nuclear

Responsibility, Inc. v. Seaborg, 463 F2d 783, 787 (D.C.

Cir. 1971). Cost/benefit data and analysis are relevant

factors to be contained in a NEPA record. Chelsea

Neighborhood vy. U.S. Postal Service, 516 F2d 378 (2d Cir.

1975): Calvert Cliffs’ Coordinating Committee v. AEC, 449

F2d 1109 (D.C. Cir. 1971); Natural Resources Defense

Council v. Morton, 458 F2d 827 (D.C. Cir. 1972); EDF v.

Corps of Engineers (Tombigee), 492 F2d 1123 (5th Cir.

1974); EDF vy. Froehlke, 473 F2d 346 (Sth Cir. 1972). The

NEPA record, including the cost/benefit analysis must be

circulated, 42 U.S.C. Sec. 4332(2)(c), CEQ Guidelines, See.

1500.8(a)(4) and (8), to achieve the required airing of

differing views and completion of the record.

In order to test the adequacy of the record on which the

Secretary acted, the District Court, as the reviewing court,

was required to engage in a substantial inquiry, a

thorough, probing, in-depth, searching and careful review

of the record, immersing itself in and scrutinizing the rec-

ord as a whole, including its supporting materials and evi-

dence on technical and specialized matters, to enable it to

penetrate to the underlying decisions of the Secretary.

The reviewing court performs such an examination and

diagnosis to determine whether the Secretary has (1)

provided genuine opportunities to participate in a mean-

ingful way; (2) taken a good hard look at the major ques-

tions before him; (3) exercised a reasoned discretion; (4)

made an informed and adequately explained judgment; (5)

acted arbitrarily, made a clear error of judgment or other-

wise failed to satisfy 5 U.S.C. See. 706(2)(A). Citizens,

etc. v. Volpe, supra; NRDC v. NRC, supra; International

23

Harvester Company v. Ruckelshaus, 478 F2d 615 (D.C. Cir.

1973) ; Silva v. Lynn, 482 F2d 1282, (1st Cir. 1973); Ely v.

Velde, 451 F2d 1130 (4th Cir. 1971); Kleppe v. Sierra Club,

427 U.S. 390 (1976).

Measured by these controlling standards as to the requi-

sites of the administrative record, and the scope of per-

missible judicial review, the evidence before the District

Court justified the scope of its inquiry and its factual find-

ing that the Secretary’s cost-benefit analysis was so grossly

defective as to prevent the Secretary from reaching an

informed decision on whether to hold Lease Sale 40.

In setting aside such factual findings, the Second Circuit

imposed an unduly narrow scope of judicial review for the

District Court, while at the same time, assumed for itself

a far broader review role of the District Court’s decision,

thus compounding the errors committed by the Circuit

Court.

4. Certiorari Granted in Pending Case involving

Similar Questions relating to Adequacy of Ad-

ministrative Record and Scope of Judicial

Review

This Court has granted certiorari in a case involving

similar questions to those presented by this petition. In

NRDC v. NRC, 547 F2d 633, 644-646 (D.C. Cir. 1976), cert.

granted February 22, 1977, 97 S.Ct. 1098, this Court will

decide what constitutes an adequate administrative record,°

and the scope of judicial review of an agency determina-

tion based on administrative record lacking in elements

which the reviewing Court perceives as necessary to fully

develop and ventilate the issues. Although this involves

an administrative record made in rule making proceedings

‘The administrative record here concerned numerical values

quantifying the health effects of the reprocessing and high level

waste management steps of the nuclear fuel cycle and was in-

tended to be used for purposes of NEPA cost-benefit analysis in

a nuclear reactor licensing proceeding.

24

under 5 U.S.C. Section 553, the holding in NRDC v. NRC

would seem to apply a fortiori to the instant case where

the agency provided no notice and opportunity to comment

on an essential part (the cost/benefit analysis) of its

NEPA administrative record, and where uncontradicted ex-

pert testimony demonstrated that the cost/benefit analysis

was grossly defective.

5. Conflict with Decisions in other Circuit Courts

as to Environmental Divisibility of a Project

Subject to NEPA Review

The Second Circuit acknowledged that bringing the oil

ashore presents the greatest environmental risks (Appen-

dix A, A8-AQ9). It also recognized that there was a ‘‘failure

of the EIS, despite its length, to deal as thoroughly with

some environmental consequences of transportation as

might be hoped’’, citing five (5) specific deficiencies in the

EIS (Appendix A, A43-A44). Despite these risks and de-

ficiencies and the defectire cost/benefit analysis the Second

Cireuit concluded, sua sponte that tanker/pipeline trans-

portation problems arising out of the project are easily

divisible and continuously controllable through the require-

ment of a Development Plan EIS and the Secretary’s

retained regulatory powers (Appendix A, A44-A45). In

raising this sua sponte suggestion, the Appellate Court

apparently relied on Secretary Andrus’ announcement in

a news release issued Mareh 1, 1977 (after the District

Court’s February 17, 1977 decision) that

‘‘If our appeal is successful, I intend to require the

preparation of an environmental impact statement

prior to approving development plans for these

leases.” (J.A. 3650)

The Second Cireuit’s conclusion that the Sale 40 project

is environmentally divisible rests on the legal premise that

if the supplemental EIS at the development stage disclosed

25

that because of the danger of tanker spills, only pipelines

were environmentally acceptable, but were not technically

or economically feasible, the Secretary could exercise his

regulatory power to suspend OCS operations until a

technology is developed under which use of pipelines is

economically and technically feasible. Implicit in the

Second Circuit’s legal premise are three assumptions:

First is the assumption that the Secretary could or would

suspend operations under existing Sale 40 leases, even if

suspension prevented the transportation, refining and

marketing of the Sale 40 oil and lead to a delay or shut-

down of production operations and injury to OCS Sale 40

lessees’ investments. Second is the assumption that the

Secretary would or could suspend such operations and

thereby substantially modify or abandon the Sale 40 proj-

ect despite the massive expenditures and resources com-

mitments made in connection with such project. Third is

the assumption that despite such massive expenditures and

resource commitments, divisibility of the project does not

foreclose selection of alternatives to proceeding with the

Sale 40 project.

The Second Circuit’s legal premise concerning the Secre-

tary’s powers of suspension is untenable, as are its under-

lving assumptions, and conflicts with the Ninth Circuit’s

decision in Union Oil Co. v. Morton, 512 F2d 743 (9th Cir.

1975).

The Second Circuit posits the legal theory that the

Secretary may promulgate regulations providing for

indefinite suspension of Sale 40 leases awaiting develop-

ment of an environmentally and economicaliy feasible pipe-

line technology. Since indefinite suspension is_ the

equivalent of cancellation, the Second Circuit’s legal

premise flies in the face of Union Ou Co. v. Morton, 512

F2d 743 (9th Cir. 1975), which ruled that the Secretary

may not cancel an OCS lease for violation of rules issued

after the lease has been executed.

26

The Second Circuit's theory of environmental divisibility

also represents incremental decision making of the type

NEPA is intended to prevent, and is in conflict with deci-

sions in its own and other circuits: New York v. NRC,

550 F2d 745, 750-753 (2d Cir. 1977); NRDC v. NRC, 539

F2d 284 (2d Cir. 1976); NRDC v. NRC, 547 F2d 633

(D.C. Cir. 1976), cert. granted Feb. 22, 1977, 97 S.Ct. 1098;

Scientists’ Institute for Public Information v. AEC, 481

F2d 1079 (D.C. Cir. 1973); Scherr v. Volpe, 466 F2d 1027,

1034 (7th Cir. 1972); Environmental Defense Fund v.

T.V.A., 468 F2d 1164, 1183-1184 (6th Cir. 1972): Jzaak

Walton League v. Schlesinger, 337 F. Supp. 287, 2%

(D.D.C. 1971); Conservation Society of Southern Vermont,

Inc. v. Secretary of Transportation, 508 F2d 927 (2d Cir.

1974).

Divisibility of the Sale 40 project will not accomplish

the environmental protection purposes envisaged by the

Second Circuit because the commitment and expenditures

of massive resources on the Sale 40 project without suf-

ficient forethought having been given to the tanker/pipeline

and cost/benefit issues, make future modification of that

project unlikely, despite the fact that undesirable en-

vironmental consequences are disclosed by the Supple-

mental Development Plan EIS if and when it is ultimately

drafted New York v. NRC, 550 F2d 745, 750-753 (2d Cir.

1977).

Furthermore, divisibility by encouraging irretrievable

commitments and fragmented growth tips the cost/benefit

balance in favor of development and forecloses serious con-

sideration of more desirable alternatives or less detri-

mental options than Sale 40.° Natural Resources Defense

&

* Such alternatives were not considered in the EIS, but were

identified in the expert testimony of George Donkin and include

increasing Gulf of Mexico oil and gas production through efforts

to develop and produce reserves on: Producible shut-in leases:

(footnote continued on following page)

27

Council v. NRC, 539 F2d 284 (2nd Cir. 1976), cert. granted

March 28, 1977, sub nom Allied General Nuclear Services,

et al. v. NRDC, Docket No. 76-654; 76-762; 76-769; 76-744;

Scientists Institute v. AEC, 481 F2d 1079 (D.C. Cir.

1973).

If the scales were not so tipped, it would result in the

reductio ad absurdum of no benefit despite gargantuan

eost. Thus, if the Second Circuit had grasped the de-

fectiveness of the cost/benefit analysis as a factor invalidat-

ing the Sale 40 project, it could not have reached the non

sequitur conclusion that the Sale 40 project was environ-

mentally divisible.

Conclusion

The serious environmental consequences incident to the

transportation problems, and the defective cost-benefit

analysis require a hard look by the Secretary now before

irretrievable resources are committed to such an extent

that the momentum of the program cannot be slowed much

less stopped. With each further commitment, additional

options are foreclosed. Even assuming the good faith of

the Secretary, it is not proper review under NEPA to

evade any of the hard environmental questions by leaving

them to the Secretary for future resolution.

Deferral will lead to the contradiction of a faulty cost-

benefit analysis skewed in favor of continued Sale 40 de-

velopment and operations, despite the risk of increased

environmental damage due to tanker oil spills, and fore-

closure of alternatives.

For the foregoing reasons the petition for certiorari

should be granted to permit review and correction of

(footnote continued from preceding page)

non-producing reservoirs; drilling new wells in currently pro-

ducing oil and gas reservoirs; increasing production from existing

production wells up to levels approximating their respective

MPR’s (Maximum Production Rates). (Ex. 73)

28

the serious errors of the Second Circuit, whose decision

departs substantially from the controlling standards ap-

plicable to a) appellate review of District Court factual

determinations, b) scope of judicial review of agency

determinations; and ¢c) agency compliance with NEPA.

Dated: November 11, 1977

Respectfully submitted,

Irvinc LIKE

200 West Main Street

Babylon, New York 11702

Telephone: (516) 669-3000

Special Counsel for Petitioner

County of Suffolk

Wituuam F. Duprye, Jr.

Attorney for Petitioner Concerned

Citizens of Montauk, Inc.

405 Lexington Avenue

New York, New York 10017

Telephone: (212) OX 7-7660

-Al-@

APPENDIX A.

SECOND CIRCUIT'S OPINION, AUGUST 25, 1977

UNITED STATES COURT OF APPEALS

For tHE Sgeconp Circurr

=

i

Nos. 1187, 1258—September Term, 1976.

(Argued April 25, 1977 Decided August 25, 1977.)

Docket Nos. 77-6049, 77-6050

ww

County oF Surrotk, County or Nassau, Town or Isp,

Town or Hempstead, Town or NortH Hempstead, Town

or Oystezk Bay, Town or Huntincton, and the Boarp

or TRUSTEES OF THE Town oF HuntTinGTON and Con-

CERNED CiT1zENs OF Montauk, Inc.,

Plaintiff s-A ppellees,

—against—

SECRETARY OF THE INTERIOR, et al.,

Defendants-Appellants,

NationaL Ocean Inpustries Assocution, et al.,

and New York Gas Grovp,

Intervenor-Lefendants-Appellants.

”

q

Tse Natura, Resources Derense Councn, Inc.,

Plaintiff-A ppellee,

—against—

SECRETARY OF THE INTERIOR, et al.,

Defendants-A ppellants,

Nationa Ocean Inpustries Association, NaTionaL SuPPLY

Company, ConTinentaL Om Company, Diamonn M.

5521

-A2?-

Appendtx A.

Drituinc Company, Dicrcon, Inc., Dresser INDUSTRIES,

Inc., Houston Om & Mryerats Corporation, LEvINGs-

ton SHipsuitpinc Company, Murpuy Om Corporation,

Ocean Propuction Company, Transco Companies, Ino.

and Zapata CoRPORATION,

Intervenor-Defendants-A ppellants.

—

>

=

Oo

Before:

MansFIELD, Circuit Judge, Smitu, Chief Judge,°

and Paumiert, District Judge.**

~~ =

Appeal from a judgment of the United States District

Court for the Eastern District of New York, Jack B.

Weinstein, Judge, voiding leases made by the Secretary

of the Interior of an area of the Atlantic Continental Shelf

known as Sale 40 for failure to comply with the require-

ments of §102(2)(C) of the National Environmental Policy

Act, 42 U.S.C. §4332(2)(C).

Reversed.

tenia i

or

Irvine Lrxg, Special Counsel for County of Suf-

folk, Babylon, N.Y. (Patricia A. Dempsey,

Attorney, Richard C. Hand, Esq., Babylon,

N.Y., of counsel), for Plaintiff-Appellee

County of Suffolk.

WiuiaM GiteLMan, County Attorney of Nassau

County, Mineola, N.Y. (John F. Picciano,

Deputy County Attorney, Mineola, N.Y., of

a Of the United States District Court for the District of Montana,

sitting by designation.

ee Of the United States District Court for the Southern District of New

York, sitting by designation.

5522 |

-A3-

Appendiz A.

counsel), for Plaintiff-Appellee County of

Nassau.

Wau F. Duping, Jr., Esq., New York, N.Y.,

for Plaintiff-Appellee Concerned Citizens

of Montauk, Inc.

J. CHRISTOPHER JENSEN, Assistant United States

Attorney, Brooklyn, N.Y., Joun J. Z1mMeER-

MAN, Attorney, Department of Justice,

Washington, D.C. (David G. Trager, United

States Attorney for the Eastern District of

New York, Bernard J. Fried, Cyril Hyman,

Assistant United States Attorneys, Brook-

lyn, N.Y., Lawrence R. Hoese, Attorney, De-

partment of Interior, Washington, D.C., of

counsel), for Federal Defendants-Appel-

lants,

Jon M. Kaurman, Esq., New York, N.Y. (Kom-

mel, Rogers, Kaufman, Lorber & Shenk-

‘ man, Sarah Chasis, Attorney, Natural Re-

sources Defense Council, Inc., New York,

N.Y., of counsel), for Plaintiff-A ppellée Na-

tural Resources Defense Council, Inc.

E. Epwarp Bruce, Esq., Washington, D.C.

(Mark D. Nozette, Esq., Covington & Burl-

ing, Washington, D.C., Gene W. Lafitte,

Esq., J. Berry St. John, Jr., Esq., Liskow

& Lewis, New Orleans, La., George A. Bur-

rell, Esq., New York, N.Y., of counsel), for

Intervenor-Defendants-Appellants National

Ocean Industries Association, et al.

Sugarman & Sterno, New York, N.Y. (Robert

L. Clare, Jr., Esq., W. Foster Wollen, Esq.,

Joseph T. McLaughlin, Esq., Kenneth M:

5523

-A4-

Appendtx A.

Kramer, Esq., New York, N.Y., of counsel),

for Amici Curiae Exxon Corp., Gulf Oil

Corp., Mobil Oil, Shell Oil; Robert M. Perry,

Esq., Houston, Texas, of counsel for Exxon

Corp.; James A. Boone, Esq., A. Paul

Brandimarte, Jr., Esq., New Orleans, La.,

of counsel for Gulf Oil Corp.; E. M. Sutter,

Esq., R. B. Shaw, Esq., New Orleans, La.,

of counsel for Shell Oil Corp.; Arthur Ait-

kens, Esq., New York, N.Y., of counsel for

Mobil Oil Corp.

Baxer & Borts, Washington, D.C. (Gordon

Gooch, Esq., John P. Mathis, Esq., Thomas

B. Hudson, Esq., Washington, D.C.; Gray

Castle, General Counsel, John T. Rafferty,

Esq., NL Industries, Inc., New York, N.Y.,

of counsel), for Amicus Curiae NL Indus-

tries, Inc.

Davip J. Mucnow, General Counsel, American

Gas Association, Arlington, Va. (Kevin B.

Belford, Assistant General Counsel, Arling-

ton, Va., of counsel), for Amicus Curiae

American Gas Assoctation.

Wiuticox, Prrozzoto & McCarrxy, Boston, Mass.

(Jack R. Pirozzolo, Esq., Richard F. Mce-

Carthy, Esq., Boston, Mass., of counsel),

for Amicus Curiae New England Council.

RoseNMAN Cotin FrReuND Lewis & Conen, New

York, N.Y. (Samuel H. Lindenbaum, Eszq.,

Martin S. Baker, Esq., Thomas J. DeZure,

Esq., New York, N.Y., of counsel), for

Amicus Curiae Association For A Better

New York, Inc.

5524

—

Appendiz A.

Vinson & Exins, Washington, D.C. (Rush

Moody, Jr., Esq., Michael J. Henke, Esq.,

Washington, D.C., of counsel), for Amicus

Curtae The Business Roundtable.

Stantey C. Van Ness, Public Advocate of the

State of New Jersey, Trenton, N.J. (Robert

P. Corman, Assistant Deputy Public Ad-

voeate, Division of Public Interest <Ad-

vocacy, Department of the Public Advocate,

Trenton, N.J., of counsel), for Amicus Cu-

riae Tri-County Committee.

Winer, Neusurcer & Sive, New York, N.Y.

(David Sive, Esq., William Ginsberg, Esq.,

New York, N.Y., of counsel), for Amtct Cu-

riae Friends of the Earth, Inc., The Sterra

Club and its Atlantic Chapter, The Wilder-

ness Society, Long Island Sound Task

Force, Inc., Long Island Envtronmental

Council, Inc., Group for Amertca’s South

Fork, Inc.

Drexet D. Journey, General Counsel, Federal

Power Commission, Washington, D.C.

(Robert W. Perdue, Deputy General Coun-

sel, Allan Abbot Tuttle, Solicitor, John J.

Lahey, Attorney, Federal Power Commis-

sion, Washington, D.C., of counsel), for

Amicus Curiae Federal Power Commission.

=

or

MANSFIELD, Circuit Judge:

As our energy demands escalate, so loes the running

battle between the environmentalists and the exploiters of

our natural resources. This appeal represents another

5525

-A6-

Appendtiz A.

skirmish in that confrontation. The principal issue is

whether an Environmental Impact Statement (EIS) pre-

pared by the Department of Interior for the purpose of

determining whether to authorize a program for exploita-

tion of our oil and gas resources contained sufficient in-

formation with respect to the environmental consequences

of the proposed action and alternatives to satisfy the re-

quirements of §102(2)(C) of the National Environmental

Policy Act (NEPA), 42 U.S.C. §4332(2)(C). The genesis

of the appeal lies in the decision of the Executive Branch

of the United States, as part of this nation’s development

of new sources of urgently needed energy, to accelerate

the leasing to private industry of our federally-owned

Outer Continental Shelf (OCS) for oil and gas explora-

tion, development, and production, provided such oper-

ations might be undertaken in compliance with our Na-

_ tional Environmental Policy Act, 42 U.S.C. §$4321, et seq.

Following the President’s proposal in J anuary, 1974, that

off-shore leasing be accelerated to the extent consistent with

environmental safeguards, a “programmatic environmental

impact statement” (PEIS) was prepared by the Depart-

ment of Interior which focused generally on the basic en-

vironmental impacts of such a major program and analyzed

alternative energy sources (onshore oil and gas resources,

oil shale, geothermal energy, solar energy and conserva-

tion). After nine days of hearings in Alaska, California

and New Jersey, at which the testimony of some 344 wit-

nesses was taken, the PEIS was revised and published in

final form in three volumes on July 11, 1975. On September

29, 1975, the Secretary of Interior (Secretary) adopted a

proposed accelerated leasing schedule.

Steps were soon taken to implement the Secretary’s

action. With respect to the mid-Atlantic OCS area, the

Bureau of Land Management of Interior (BLM) designated

a broad area off the New J ersey-Delaware-Maryland coast

5526

-A7Jo=

Appendtx A.

known as the Baltimore Canyon Trough for consideration,

obtaining from 13 different government agencies reports

as to the potential mineral resources in the area and the

effect of exploitation on the resources and environment.

Out of the designated area BLM selected 1,151 tracts (6.5

million acres) and asked private industry to specify those

tracts which it might be willing to lease and state and

local governments to designate those tracts which they be-

lieved should not be offered for leasing. Industry nomi-

nated 557 tracts (3.2 million acres), and the coastal states

offered various comments. BLM then consulted with repre-

sentatives of private industry and of Geological Survey to

determine which tracts were believed to have the highest

hydrocarbon potential and which posed environmental haz-

ards, such as dangers to navigation and shipping, marine

resources and habitat. On August 20, 1975, the BLM an-

nounced that 154 tracts located some 50 to 90 miles off the

coast of New Jersey had tentatively been selected out of

the 557 for proposed leases to be known as Sale 40.

Pursuant to this decision BLM prepared a draft site-

specific Sale 40 Environmental Impact Statement (EIS)

evaluating the environmental consequences of opening up

this first offshore field in the Atlantic coastal area for oil

and gas development. During August to October, 1975,

interested parties, state representatives and those repre-

senting various federal agencies and bureaus were given

an opportunity to review the working draft, which was

published in December and became the subject of hearings

in January, 1976, at which the testimony of 137 witnesses

was taken and written comments were received and studied.

On May 25, 1976, the Final EIS, consisting of four volumes

totalling some 1,998 pages (not including some exhibits)

which had been revised and amplified as a result of the

testimony and comments, was published,

5527

-A8-

Appendiz A.

On June 30, 1976, the Secretary, after reviewing a Pro-

gram Decision Option Document (PDOD) prepared by his

staff, and after holding meetings to discuss the issues with

his staff, announced his decision to go forward with lease

Sale 40 on August 17, 1976. Within a matter of days the

National Resources Defense Council, the State of New

York,? and a number of Long Island counties and towns,

in an action consolidated with an earlier action by the

Counties of Suffolk and Nassau before Judge Weinstein of

the United States District Court for the Eastern District

of New York, brought suit to enjoin the proposed sale,

alleging that the EIS did not comply with the requirements

of $102(2)(C) of the National Environmental Policy Act,

42 U.S.C. §4332(2)(C).2 On August 13, 1976, Judge Wein-

stein, after hearings, granted a preliminary injunction

against the lease sale. Recognizing that oil spills presented

the greatest environmental risk of offshore oil development,

1 The State of New York subsequently withdrew from the case.

2 In addition, plaintiffs alleged violations of the Coastal Zone Manage-

ment Act, 16 U.S.C, §$1451 et seg.; the Administrative Procedure Act,

5 U.S.C. §$§704-706; the Outer Continental Shelf Lands Act, 43 U.S.C.

$§1331 et seg.; laws dealing with state ownership of land up to 3 miles

offshore, 48 U.S.C. §§1301-1303, 1311 et seg.; laws relating to the ad-

ministration of public lands, 43 U.S.C. §§1361 et seq.; laws regulating

the administration of fish, shellfish and wildlife resources, 16 U.S.C.

§§742a et seq.; laws relating to the protection and conservation of wild-

life, 16 U.S.C. $§661 et seq.; laws protecting migratory game and birds,

16 U.S.C. §§701 et seq.; laws governing fish restoration and manage-

ment projects, 16 U.S.C. $777; the Federal Water Pollution Control

Act, 33 U.S.C, §$1251 et seq.; laws relating to land and water conser-

vation funds, 16 U.S.C. §§460e-5 et seg.; the Anadromous Fish Con-

servation Act, 16 U.S.C. $$757a et seg.; the Migratory Bird Treaty Act,

16 U.S.C. §$703 et seg.; the Historic Sites Act, 16 U.S.C. §§1531 et

seq.; the Marine Mamma! Protection Act, 16 U.S.C. §§1361 et seq.; the

Intergovernmental Cooperation Act, 42 U.S.C. §§4201 et seq.; fair value

market requirements for sales and leases, 31 U.S.C. §483a; the Energy

Supply and Environmental Act, 15 U.S.C. $4791 et seg.; the Energy

Policy and Conservation Act, 42 U.S.C. §$6201 et seg.; Executive Order

No. 11912, and a number of manuals, guidelines, and orders relating

to the preparation of environmental statements.

5528

-A9—

Appendiz A.

that tankers generally spill far more oil than pipelines in

transporting oil to shore, and that the EIS assumed that

pipelines would be used at the Sale 40 site, the court found

sua sponte that the EIS had not explored adequately the

possibility that affected state and local governments would

bar the landing of pipelines on their shores and thereby

necessitate the use of tankering and increase the hazards

of oil pollution.

Three days later we stayed enforcement of the prelim-

inary injunction, finding no reason to believe that irrepar-

able harm would occur pending the ultimate resolution of

the lawsuit if the lease sale were allowed to take place.

Justice Thurgood Marshall refused to vacate our stay,

noting in his written opinion issued August 19, 1976, that

the sale could always be voided in the event NEPA viola-

tions were ultimately found. 429 U.S. 1307 (1976). On

August 17, therefore, the Secretary conducted lease Sale

40 as scheduled accepting bids on 93 tracts within the sale

area, for which bonuses totalling $1.128 billion were paid,

and executing leases of those tracts to the successful

bidders for exploration and development of oil and gas.

We reversed the grant of the preliminary injunctive relief

for substantially the same reasons as those underlying

our stay of its enforcement, —— F.2d —— (2d Cir. Oct.

14, 1976).

The suit came to trial in early 1977 and, on the basis

of further testimonial and documentary evidence, the

district court again concluded that the requirements of

NEPA had not been met. Relying on the testimony of a

Shell Oil Company executive called by defendant-intervenor

National Ocean Industries Association, Judge Weinstein

found that the EIS could have and should have projected

possible pipeline routes, and that it then would have been

possible to evaluate the acceptability of those routes under

existing state and local land use controls, the environ-

5529

-Al0-

Appendix A.

mental impacts of those routes, and the economic feasibility

of pipelining. Secondly, the court found that the EIS and

its accompanying program decision option document

(PDOD) substantially overestimated the projected daily

production of the field and underestimated finding costs

and the costs of pipeline construction, thereby overstating

the economic feasibility of pipelining oil to shore and

rendering the picture of overall costs and benefits un-

realistically attractive. Thirdly, the court held that the

EIS should have discussed the effect of tract selection on

pipeline routes and evaluated the alternatives of offering

for lease less-environmentally hazardous tracts, which had

not been offered, in lieu of tracts actually offered. Finally,

the court found that the EIS inadequately discussed the

alternative of postponing the decision to lease until after

further federal exploration of the area. For these reasons

Judge Weinstein, concluding that the EIS violated NEPA,

declared the leases null and void and enjoined the parties

from exercising any powers purportedly granted by the

leases.

Defendants here challenge all of Judge Weinstein’s

findings of deficiencies in the EIS. In addition, they con-

tend that the district court should not have considered

de novo testimony as to the accuracy of the Department’s

scientific and economic data, that it should not have

reviewed the PDOD at all, and that even if the EIS was

inadequate the district court had no power to remedy any

violation by voiding the leases. Because we agree with

appellants that the EIS and its accompanying PDOD were

not inadequate, we reverse. |

Discussion

A threshold issue is the standard of review by which we

are governed. To the extent that Judge Weinstein’s find-

5530

-All-

Appendiz A.

ings resolve any disputed issues of evidentiary fact we are,

of course, governed by the mandate of Rule 52(a), F.R.

Civ.P., that they “shall not be set aside unless clearly

erroneous.” Moreover, where such findings are based on

demeanor testimony, as distinguished from documentary

proof which we are in as good a position as the district

court to appraise, the district judge’s findings will be set

aside only in exceptional circumstances, United States v.

Aluminum Co. of America, 148 F.2d 416, 433 (2d Cir. 1945)

(L. Hand); see also Alabama Power Co. v. Ickes, 302 U.S.

464, 477 (1938); Adamson v. Gilliland, 242 U.S. 350, 353

(1917); Davis v. Schwartz, 155 U.S. 631, 636 (1895). How-

ever, a less restrictive standard of review is to be applied

upon review of a district judge’s determination for reasons

unrelated to testimonial credibility that an EIS fails to

contain sufficient information to satisfy §102(2)(C) of

NEPA. In making such a determination a court is governed

by the “rule of reason,” under which an EIS need not be

exhaustive to the point of discussing all possible details

bearing on the proposed action but will be upheld as

adequate if it has been compiled in good faith and sets

forth sufficient information to enable the decision-maker

to consider fully the environmental factors involved and

to make a reasoned decision after balancing the risks of

harm to the environment against the benefits to be derived

from the proposed action, as well as to make a reasoned

choice between alternatives. Natural Resources Defense

Council v. Callaway, 524 F.2d 79, 93 n.12 (2d Cir. 1975) ;

Sierra Club v. Froehlke, 534 F.2d 1289, 1299 (8tn Cii.

1976) ; Sierra Club v. Morton, 510 F.2d 813, 819 (5th Cir.

1975); Environmental Defense Fund, Inc. v. Corps of

Engineers, 492 F.2d 1123, 1131 (5th Cir. 1974); Natural

Resources Defense Council, Inc. v. Morton, 458 F.2d 827,

834 (D.C. Cir. 1971).

5531

-Al2-

Appendiz A.

Such a determination, althongh it may be labelled a “find-

ing” by the district court, is not strictly a finding of fact

but rather an exercise in judgment as to what is reasonable

under given cireumstances which, of course, may vary from

case to case. Although the district judge’s evidentiary

findings may remain undisturbed, it is our duty to insure

that the district court has properly applied the rule of

reason in judging the adequacy of an impact statement and

has interpreted NEPA in light of its evident purposes,

which are “ ‘to enable those who did not have a part in [the

EIS’} compilation to understand and consider meaning-

fully the factors involved,’ and to compel the decision-

making to give serious weight to environmental factors

in making discretionary choices.” Sierra Club v. Morton,

510 F.2d at 819. In performing this duty we are in as good

a position as the district court to determine on the undis-

puted facts what could reasonably be demanded of the EIS

in issue. With these principles in mind we turn to the

district court’s decision.

Claim that EIS failed to consider effect of state and

local regulations on the mode of transportation to be

used and to project “likely” pipeline routes and land-

falls.

The district court found that the EIS, after assuming

that pipelines rather than tankers would be used to trans-

port any discovered oi! ashore, “virtually ignored” the

powers of state and local governments alang the coast to

block or impose heavy burdens on pipelines and thereby

to necessitate the use of tankers and increase the risk of

oil pollution. Referring to the zoning ordinances of numer-

ous municipalities along the coast, which could be used to

bar or restrict placement of pipelines within their respec-

tive jurisdictions, the district court noted that “the number

5532

~Al3-

Appendiz A.

of authorities with power to affect the [pipelining] opera-

tion multiplies into the thousands.”

In fact, as the district court acknowledged, the EIS does

contain numerous references to state and local regulatory

powers and procedural requirements that could be invoked

to restrict pipelines, their landfalls, onshore routes, activi-

ties, operation, and effects. Repeatedly the EIS advises

that all onshore development associated with the offshore

oil and gas operations, including pipeline sites, routing and

use, would be controlled by state and local authorities and

be subject to their approval and regulation through land

use controls." However, the district court brushed these

references aside as too vague and abstract. Judge Wein-

stein reasoned that in order to assist a decision-maker in

3 The EIS states that onshore development “can ultimately be broadly

controlled by the states,’ Vol. I, EIS, p. 40, that “any OCS-related

facility development in the coastal zone would be subject to these [state]

regulations,” id. p. 50, that the location of onshore facilities, including

terminal and storage facilities, operations bases, gas processing plants

and onshore pipelines, depends on how land use controls are exercised

by the states, Vol. IJ, EIS, pp. 450-51, 453-54, that “state and local

planning and regulatory authorities provide the primary framework”

for location of pipelines id. p. 456, that pipeline planning must be

coordinated by the Secretary with the affected states, that pipeline

upproval “would be within the jurisdiction of the State,” id. p. 586,

und that the use of pipelines would depend on the “receptivity of state

and local jurisdictions to the approval of the necessary pipeline land-

fulle.”

Similarly, the PEIS repeatedly makes it clear that all onshore devel-

opment, including pipelines, is subject to state regulatory authority,

Vol. I, PEIS, pp. 131-33, Vol. II, PEIS, pp. 193-94, 774, 908-9, 951-52,

1004-5.

State regulatory programs with respect to onshore activities are thor-

oughly discussed in the CIS, Vol. I, pp. 58-61, as is the statue of state

Coasicl Zone Management Act programs under federal and state legis-

lation, Vol. II, EIS, pp. 266-91.

Finally, Volume II! of the EIS, which publishes the responses of

the Department of Interior to questions, criticisms, and comments, re-

peatedly adverts to the fact that the placement of pipelines in state

waters and cx shore is subject to state and local land use regulations

and approvals. See, e.g., Voi. III, EIS, p. 32.

5533

-Al4-

Appendtx A.

making practical determinations the EIS should have pro-

jected routes that pipelines would be “likely” to take from

the field to refineries in New York, Philadelphia and Balti-

more, even though no oil had as yet been discovered within

the half-million acres of ocean bottom, some 50 miles by

50 miles in size, which was under consideration for lease,

and even though one could not specify the location or

locations where it should be discovered, much less the

quantity and quality of oil that might be discovered. Any

projected routes would of necessity, therefore, have to be

arbitrary, and might bear no similarity to the routes that

would actually be proposed upon discovery of oil. The

court nevertheless concluded that, if projections of such

“likely” routes had been prepared and used, the EIS could

then have assessed the extent to which the proposed devel-

opment of the Sale 40 area conformed to existing state

and local land use regulations prevailing in the locations of

the projected routes, the environmental consequences of

such pipeline routes, and the extent to which it was realistic

in political and economic terms to expect that pipelines

would in fact be used. In support of his analysis, Judge

Weinstein noted that Shell Oi] Company had made such

projections as part of its feasibility and cost study in

developing a bidding strategy for the sale.

Appellants contend that such route projections and con-

comitant examinations of existing land use controls would

be of no value to a decision-maker, since the building of

pipelines is at least three years down the road, and likely

routes cannot be projected until oil is discovered, its

source located, and its quality, quantity and pumpability

determined. Since the pipeline routes can be fixed only

after these factors are known and their location is subject

to control by the government, the issues raised are divisible

from those presented by the sale of the leases and can

finally be resolved at a later point. In taking this position

5534

-A15-

Appendiz A.

appellants do not go so far as to suggest that the EIS

should dispense with the necessity of collecting such

relevant facts as are now available and of discussing their

possible environmental significance. It is recognized that

the EIS must consider all significant environmental conse-

quences that can reasonably be expected to flow from the

decision to which the EIS relates. An EIS cannot safely

ignore clear environmental consequences of the decision at

hand on the ground that another statement will be forth-

coming later. Since the lease contract presented for the

Secretary’s consideration would grant to each lessee of a

tract the right for five years to search for oil and gas in

economic quantities and upon such discovery to produce

and transport the oil and gas to shore as long as it could

be produced in paying quantities, it was essential to con-

sider and weigh the environmental aspects of transporta-

tion, as well as of exploration and production, to the extent

“meaningfully possible,” see NRDC v. Morton, 458 F.2d at

837, before deciding whether to authorize the leasing

program.

The EIS here does indeed discuss in considerable detail

the environmental risks involved in transporting any oil

that might be discovered. Its discussion proceeds, how-

ever, on the basis that, because the development of our

nation’s offshore oil and gas deposits is too massive and

long-term a project to be covered adequately in any single

EIS of practical utility for decision-making purposes, the

project must logically be broken down into possibly three

stages according to the federal action proposed to be

taken, with a separate EIS and evaluation by the Secretary

before proceeding with each such step. The first stage or

step was to decide whether to accelerate the Department’s

offshore leasing program at all and, if so, in what order

to offer the various offshore fields. This threshold decision

was aided by the preparation of a programmatic environ-

5535

-Al6-

Appendix A.

mental impact statement (PEIS), which discussed other

major alternatives for meeting the nation’s energy needs

and evaluated in general terms the environmental problems

of offshore oil and gas production. If the Secretary had

decided not to authorize leasing of the OCS, no further

action would be required. However, on the basis of the

PEIS, the Secretary announced an accelerated leasing

program on September 29, 1975, which necessitated pro-

ceeding further.

The second stage was to decide what specific offshore

areas might be offered for lease. Since the PEIS would

not be sufficient for use in deciding whether to go forward

with the leasing of specific areas, it was contemplated that

the Department would prepare a more detailed site-specific

impact statement for each sale area. Accordingly, to aid

the Secretary in deciding whether to proceed with lease

Sale 40, the instant EIS was prepared, discussing oil and

gas pollution problems that might be expected to arise in

the Sale 40 area generally, including problems arising out

of transportation of oil to shore. The Sale 40 EIS, however,

although it assumes that pipelines will be used, does not

commit the Department to specific routes or modes of

transportation. Instead, the EIS contemplates that a more

specific consideration of and commitment to routes and

modes of transportation will occur once it has been deter-

mined where, if anywhere, oil or gas exists within the

rather sizeable sale area (over 500,000 acres) and in what

quantity and quality. The lessee of a tract where oil is dis-

covered will be required, before beginning production and

transportation, to present a development plan, including

specific pipeline routes, that will be subject to the review

and approval of both the Secretary and affected coastal

states. The Secretary has announced that before consider-

ing whether to approve any such plans a Development

Plan EIS will be prepared, which will include a survey of

5536

-Al7-

Appendiz A.

the environmental consequences and feasibility of specific

pipeline corridors and of any other problems relating to

specific proposals for the transportation of oil and gas

actually found.

With this program for consideration of environmental

consequences according to developmental stages in mind,

the question upon this appeal is not whether the Sale 40

EIS failed completely to discuss the environmental risks

involved in transporting oil to shore from the tracts under

consideration for lease but whether a limited discussion,

with the balance deferred until preparation of a Develop-

ment Plan EIS, satisfies the “rule of reason” by which we

are governed in determining whether there has been com-

pliance with NEPA. In our view the answer, and the

extent to which treatment of a subject in an EIS for a

multistage project may be deferred, depends on two

factors: (1) whether obtaining more detailed useful in-

formation on the topic of transportation is “meaningfully

possible” at the time when the EIS for an earlier stage is

prepared, see National Resources Defense Council vy.

Morton, 458 F.2d at 837, and (2) how important it is to

have the additional information at an earlier stage in

determining whether or not to proceed with the project,

see Natural Resources Defense Council v. Callaway, 524

F.2d at 88.

If the additional information would at best amount to

speculation as to future event or events, it obviously would

not be of much use as input in deciding whether to pro-

ceed. As we said in Callaway, supra, referring to Morton,

supra:

“NEPA does not require a ‘crystal ball’ inquiry. An

KIS is required to furnish only such information as

appears to be reasonably necessary under the circum-

stances for evaluation of the project rather than to be

5537

-Al18-

Appendtz A.

so all-encompassing in scope that the task of preparing

it would become either fruitless or well nigh impossible,

Indian Lookout Alliance v. V olpe, 484 F.2d 11 (8th Cir.

1973). A government agency cannot be expected to

wait until a perfect solution of environmental con-

sequences of proposed action is devised before pre-

paring and circulating an EIS.” 524 F.2d at 88.

Where the major federal action under consideration, once

authorized, cannot be modified or changed,‘ it may be

essential to obtain such information as is available, specula-

tive or not, for whatever it may be worth in deciding

whether to make the crystallized commitment (e.g., the

construction of a bridge of a specified type between two

precise points). But where a multistage project can be

modified or changed in the future to minimize or eliminate

environmental hazards disclosed as the result of informa-

tion that will not become available until the future, and

the Government reserves the power to make such a

modification or change after the information is available

and incorporated in a further EIS, it cannot be said that

deferment violates the “rule of reason.” Indeed, in con-

sidering a project of such flexibility, it might be both un-

wise and unfair not to postpone the decision regarding the

next stage until more accurate data is at hand.

Applying these principles here, although it was possible

to project hypothetical pipeline routes from various parts

of the enormous Sale 40 area to points on shore, just as

Shell Oil Company had done as part of a study of the

economic feasibility of pipelining oil and gas from the area

in preparation for bidding on the Sale 40 tracts, it is clear

that such a procedure would not yield information of

practical use to the Secretary for the purpose of determin-

4 See generally F. Anderson, NEPA in the Courts (1973) and sources

cited therein.

5538 |

-Al19-

Appendiz A.

ing what onshore zoning and environmental problems would

be encountered. In effect the procedure would amount to a

meaningless exercise, for several reasons. The placement

of a pipeline depends on a number of vital factors just as

important as compliance with local land use requirements

—the size and location of the oil discovery, its distance

from shore, the type of oil discovered, its final destination,

and the ocean bottom. It is not known where, if at all, oil

or gas will be discovered in the enormously far-flung Sale

40 area. Thus it is impossible to determine where in the

field the pipelines would originate. Second, no comprehen-

sive ocean bottom survey has been conducted of the vast

region between the field and the coasts of New Jersey and

Delaware; a determination of the best ocean bottom cor-

ridors would therefore also be entirely speculative. Third,

under the Coastal Zone Management Act, 16 U.S.C. §§1451,

et seq., the location of pipeline landfalls and onshore pipe-

line routes must conform to the Coastal Zone Management

Act (CZMA) plans of the affected states. Until the relevant

states finish drafting their CZMA plans, therefore, onshore

pipeline routes cannot be determined. Finally, at the time

the EIS was drafted it was not even known whether com-

panies with refineries in New York, Baltimore, or Phila-

delphia would make successful bids. It is still not known

which companies will find oil, nor is it known whether any

oil found will be of a type that existing refineries can pro-

cess. Thus it is not possible at this point to specify probable

pipeline destinations. To require the EIS to specify such

routes at this stage would be equal to demanding that the

Department specify the probable route of a highway that

may never be built from points as yet unknown to other

points as yet unknown over terrain as yet uncharted in

conformity with state plans as yet undrafted. A more

speculative exercise can hardly be imagined. While specula-

tion in an EIS is not precluded, the agency is not obliged to

5539

-A20-

Appendiz A.

engage in endless hypothesizing as to remote possibilities.

There comes a point when the chain of “ifs” gets too long

and too tenuous to be of any practical use. That point was

reached here.

Moreover, even if “likely” pipeline routes could be pro-

jected and existing land use regulations affecting the pro-

posed onshore routes could be analyzed, the information

would be of little or no utility in determining the impact

of state and local exercise of regulatory powers, since each

of the states and municipalities affected could change its

regulations from favorable to unfavorable, or vice versa,

between the publication of the EIS and the date, some

three years or more later (assuming discovery of oil and

approval! of the corridors by the Secretary), when applica-

tions might be made to local authorities for the necessary

land ‘use authorizations. It is extremely unlikely that in

the meantime any state or municipalities would issue an

advisory opinion or statement of intent based on projected

landfalls or onshore routes that would be purely specula-

tive in nature. The exercise of power over land use could

not, therefore, be ascertained by any meaningful degree

for some time to come.

Judge Weinstein’s reliance on the testimony of Franklin

Brunjes and the pipeline feasibility study made by him for

Shell Oil Company, moreover, is misplaced. That study

did not purport to project probable or “likely” pipeline

routes. It merely hypothesized some lines from arbitrarily-

selected points in the ocean to similar points on shore, in

order to show that pipelines could be used economically

over long and circuitous routes. It demonstrated that

routes might be shifted as much as a dozen miles north or

south without substantially altering the cost of pipelining

oil to shore. As Brunjes conceded, in order to make his

analysis he was forced to assume not only that oil would be

discovered but such basic facts as the location of the dis-

5540

-A21-

Appendix A.

covery, the “timing, quantity, quality, destination, what

the cost for various routes and modes of transportation

are”. He further agreed that changes could occur in some

or all of these key variables which would materially change

his estimates. Subject to these conditions, the study sup-

ports the EIS’s assumption that pipelining would be

economically feasible. But, for the reasons we have noted,

5 The tenuousness of Mr. Brunjes’ hypothesis is attested to by his tes-

timony as follows:

Q. Would you state to the Court the basic criteria or assumptions

under which the cost information is developed?

A. To do a study... [o]ne has to assume oil will be found and

also where the oil would be found.

We also had to assume how it would be developed and what the

decline rate would be on the production, generally the life of the

field.

We also had to assume the quality of oil, whether it was pump-

able or not, what its characteristics are.

We also had to assume there would be... a normal type of

that could be processed by existing refineries in the Northeast area

and particularly the Philadelphia area.

Pumped for purposes of transportation—and we assumed that

on the right of way that wherever possible that existing corridors

would be used.

In summary on this, what it tells us is that as the distance in-

creases, as far as pipelines are concerned, and as the assumed vol-

ume drops off, that pipeline costs do increase and they do compare

fairly close to tanker transportation. I think we looked at—in

looking at lesser volumes, lower than 125 thousand barrels a day

production rate, that tankers and pipelines became much closer.

That is comparing the long route—comparing the short route to the

tanker, even at low production rates, the pipelines are much less

expensive.

Q. Let’s see if I understand. What that means is that the cost

figures that you put into testimony yesterday in your expert opinion,

any one of those numbers could be wrong by 25 percent?

A. Right. They could vary one way or the other up to 25 per-

cent. That's what we strive for.

5541

-A22-

Appendtx A.

a determination of the environmental impact of pipeline

routes and of their conformity with land use controls

requires speciticity that is not possible at this stage, simply

because the specific information is not available. Informa-

tion of the type used by Mr. Brunjes, while useful for

economic feasibility purpeses, would be virtually useless

speculation for environmental] impact purposes. In fact,

Mr. Brunjes himself testified that it was “very premature

at this time to speculate as to an exact routing involved and

who would participate, the exact destination”.®

Nor does it appear that such information as to pipeline

routes was essential to enable the Secretary to make the

necessary environmental assessment to proceed with this

stage of the project, see Natural Resources Defense Council

v. Callaway, supra, 524 F.2d at 88, since his decision does

not preclude him from requiring in the future that pipeline

routes be modified or altered or from imposing additional

conditions and safeguards on pipelining that will in effect

6 In effect Mr. Brunjes confirmed that due to the hypothetical nature

of the assumptions used in his study and the fact that state and local

laws might be changed during the period of at least two years before

pipelining and pipeline sites would be selected, it would be necessary

to study the conditions later, testifying:

Q. What are the many conditions that you refer to which you say

could seriously affect facets of the study and which have not yet

been defined by state and Federal authorities?

A. One facet that occurs to me is possibly that you know, any

local entity, a county, any state government, could adopt regula-

tions or laws that would affect the routing of the pipeline.

Q. Are you able to tell us, then, what is meant here by facets

of the study that have yet to be defined by Federal authorities?

A. I believe in general terms that there are laws, regulations

that are in fairly constant state of evolvement, and while I am

no expert in the area I believe that there are—like EPA regula-

tions that are continually being reviewed and promulgated, and

that one, you know, should not make any decision on until they get

to the point or near the point of making the decision and then try

to determine what al! of the latest laws and regulations and likely

regulations that would be involved that would affect the pipeline.

5542

-A23-

Appendiz A.

permit its use only if it is environmentally acceptable.

Should oil be discovered and the information essential for

pipeline-routing become available, any lessees discovering

oil must present development plans to the Department, in-

cluding proposed pipeline routes, for approval. Before

making that decision the Secretary will prepare a Develop-

ment Plan EIS that should furnish the detail needed to

assess the environmental consequences of any decision

with respect to routes. By that time, moreover, the Secre-

tary will also have the benefit of federal-state-local pro-

grams developed under tlie Coastal Zone Management Act,

16 U.S.C. §1451 et seg., (CZMA), under which each affected

coastal state, working in coordination with the federal

government, prepares a coastal zone program defining

areas authorized for various facilities, including pipelines,

CZMA §304(5), 16 U.S.C. §1453(5), to which the offshore

lessees must adhere. As Judge Weinstein acknowledged,

“The states concerned with Sale No. 40 leasing have made

substantial efforts to carry out the Management Act’s pur-

poses. They are in the advanced stages of the work.”

(Mem. Op. 8/13/76). The mid-Atlantic CZMA programs

will be prepared and federally-approved long before any

pipeline-siting and construction could occur as part of the

development phase of lease Sale 40, so that the development

plans submitted to the Secretary for approval will be re-

quired under §307(c)(3) of CZMA to certify that they are

consistent with the relevant states’ programs, 16 U.S.C.

§1456(c)(3). Indeed, New Jersey expects to submit its

CZMA program for federal approval in 1977," In the mean-

7 In its Final Memorandum opinion the district court quotes a state-

ment by New Jersey Governor Brendan Byrne at Department of Interior

hearings on Jan. 27, 1976, regarding the Sale 40 EIS as support for

the court's conclusion that the federal government should have consid-

ered “likely” or specific pipeline routes and landfalls. On the contrary,

Governor Byrne was in fact arguing that route and pipeline siting should

be deferred until the federal and state governments could coordinate

5543

-A24-

Appendtz A.

time, under Department of Interior regulations, 30 CFR

250.34 as modified, OCS lessees must, 30 days before sub-

mitting their development plans to the U.S. Geological

Survey, furnish detailed information to affected coastal

states, (OCS Order No. 15, 41 F.R. No. 204, 10/20/76), and

the governors of the affected states are then given 60 days

after submission of a development plan to review and com-

ment on it, and to delay approval! until their objections are

resolved. Each development plan, moreover, must be sub-

mitted at least six months in advance of the contemplated

date for commencement of operations in order to allow time

for adequate review by the affected states.

Appellees, relying on Union Oil Company v. Morton, 512

F.2d 743 (9th Cir. 1975), argue in effect that, while the

Secretary may have some leeway to alter or influence the

location of future pipeline routes, he is in effect boxed in by

his current decision and that by authorizing the lease sale

he has irrevocably committed himself to allowing trans-

portation of any oi] that may be discovered in economic

quantities, even if it should turn out that the means to be

used, whether tanker or pipeline, are not environmentally

acceptable, because of land use, economic, technical or other

reasons. Hence, they contend, the environmental! problems

raised by specific pipeline routes must be resolved now. We

disagree.

Had the Secretary retained less power to regulate the

transportation phase of the Sale 40 project, appellees’

coastal planning activities as envisaged by the CZMA, which is the

procedure being followed by the Departmert, and contending that no

such sites should be specified or assumed “without adequate consultation

with State or loca] officials now engaged in developing a coastal man-

agement strategy and program pursuant to State and federal law” (Fina)

Memorandum, p. 12). Confirming this approach the State of New Jersey

later published ‘Interim Land Use and Density Guidelines of the Coastal

Area of New Jersey,” which states that “detailed site selection .

would be premature at this time.” (Ex. 225, p. 21).

5544

-A25-

Appendiz A.

arguments might have some merit. However, under §5(a)

(1) of the Outer Continental Shelf Lands Act, 43 U.S.C.

§1334(a)(1), the Secretary possesses full power to pre-

scribe “such rules and regulations as may be necessary”

to protect the environment from hazards posed by exploita-

tion of the continental shelf. Although a lease may be forin-

ally cancellable only for violation of pre-existing regula-

tions, 43 U.S.C. §1334(b), §5(a)(1) provides ikat “The

Secretary may at any time prescribe and amend such rules

and regulations ... and, notwithstanding any other pro-

visions herein, such rules and regulations shall apply to all

operations conducted under a lease issued or maintained

under the provisions of this subchapter” (emphasis sup-

plied), and the Sale 40 leases provide that each lessee must

in its OCS operations comply with the Secretary’s regula-

tions as they may be revised or supplemented to provide

for prevention of waste, for conservation of the OCS and

for protection of correlative rights therein. In any event, a

willful violation of subsequently-issued regulations would

constitute a misdemeanor, 43 U.S.C. §1334({a)(2), and

could provide the basis for injunctive relief. A properly-

adopted later regulation would have the force of law, the

public interest in compliance would be persuasive in induc-

ing the courts to grant relief, Virginian Ry. Co. v. System

Federation No. 40, 300 U.S. 515, 552 (1937), and the govern-

ment’s contro! over the seabed and its threatened resources

by virtue of the OCS Lands Act, 43 U.S.C. §1332(a), would

give it standing to seek injunctive relief, see United States

v. Ray, 423 F.2d 16, 22 (5th Cir. 1970).

Nor are the Secretary’s powers with respect to pipeline

routes limited by the provision in Stipulation No. 4 that

no crude oil may be transported ashore by tankers if the

laying of pipelines “is technically and economically

feasible.” As we read the stipulation the Secretary retains

the power to require that environmentally safe pipelines

5545

-A26-

Appendiz A.

be used even if the use of tankers or more hazardous pipe-

lines might be cheaper. Indeed, under Stipulation No. 4 of

the lease the Secretary “specifically reserves the right to

require that any pipeline to be used for transporting

production from this lease to shore be placed in certain

designated areas or corridors.” Economic feasibility is not

to be determined merely by comparing pipeline costs with

tanker costs and deciding which would be more profitable

for thedessees. Nor does the stipulation in any other way

limit the power of the Secretary to mandate the use of an

environmentally acceptable means of pipeline transporta-

tion if technically feasible.

Finally, appellees argue that in the event use of pipe-

lines is not economically and technically feasible, the

Secretary will nevertheless be required to permit trans-

portation of the oil ashore, by tankers if necessary, citing

Union Oil Company, supra. Should the Secretary deter-

mine that only pipelining is environmentally acceptable,

however, even though economically and technically un-

feasible at the moment, under §1334(a)(1) he retains ample

authority to suspend operations until a technology is

developed under which use of pipelines is economically and

technically feasible. See 30 C.F.R. §250.12(c); Union Oil

Company, 512 F.2d at 751-52.

We therefore conclude that projection of specific pipe-

line routes was neither “meaningfully possible,” nor

“reasonably necessary under the circumstances.” The

Secretary will be in a much better position to make a

realistic and specific assessment of problems relating to

specific routes when, assuming oi! is discovered, the lessees

submit development plans. At that time, after preparing

and examining the Development Plan EIS he may modify

or disapprove the pipeline routing for environmental

reasons. We agree with the Fifth Circuit’s conclusion,

when faced with a similar contention:

5546

-A27-

Appendiz A.

“This project is an easily divisible one. In this con-

tinuously controllable project, the fact that a tract may

prove productive would not mandate that an unsound

method of delivering that production be utilized. We

are not unmindful of the rule that the sufficiency of an

EIS must be determined without reference to possible

future action. Today’s statement, however, includes

sufficient pre-statement analysis of possible environ-

mental hazards from pipeline location, construction or

leakage.” Sierra Club v. Morton, 510 F.2d 813, 824

(Sth Cir. 1975) (emphasis in original).

We therefore cannot agree with the district court that

failure to project specific pipeline routes and to assess their

conformity with existing land use regulations rendered the

EIS fatally defective.

The Cost-Benefit Analysis Of The Sale 40 Project.

To aid the Secretary’s decision on lease Sale 40, the

Bureau of Land Management drafted, in addition to, the

Sale 40 EIS, a program decision option document (PDOD)

outlining possible alternative courses of action for the

Secretary’s consideration. This PDOD was not merely a

summary of the EIS, but included in addition a cost-benefit

analysis of the Sale 40 project, most of which was not

duplicated in the EIS. After reviewing both of these docu-

ments, the Secretary authorized the lease sale. |

The district court found that “the economic costs and

benefits of the planned action were seriously and grossly

misrepresented or omitted” by the PDOD, due to under-

estimates of finding and pipeline costs and overestimates

of peak production rates, resulting in an overstatement of

the likelihood that pipelines would be used and in an in-

adequate balancing of economic benefits against environ-

mental costs. (Final Mem. Dee. p. 58, 2/17/77).

5547 ©

-~A28-

Appendtz A.

The court based these conclusions entirely on the testi-

mony of one George L. Donkin, an economist called by

plaintiffs, whom the court found to be “completely reliable

and credible,” and on documentary evidence relied on by

Donkin, Although professing not to make a “substantive

review of the administrative decision,” the district judge

found the Secretary’s balance of economic benefits against

environmental costs to “be arbitrary and capricious and in

violation of NEPA.” (Fin. Mem. Dec. pp. 79-81, 2/17/77).

We disagree. In our view, the Department of Interior made

an adequate compilation of relevant information, analyzed

it reasonably, and did not ignore pertinent data. The

district court, on the other hand, by substituting its judg-

ment and its appraisal of the evidence for that of the

Department, exceeded the proper scope of judicial review.

Before getting to the cost-benefit data itself, it is im-

portant to define the role of the district court in reviewing

this aspect of an EIS for the purpose of determining

whether there has been compliance with NEPA. The

district court does not sit as a super-agency empowered to

substitute its scientific expertise or testimony presented to

it de novo for the evidence received and considered by the

agency which prepared the EIS. Environmental Defense

Fund v. Froehlke, 368 F. Supp. 231, 240 (W.D. Mo. 1973),

aff'd, 497 F.2d 1340 (8th Cir. 1974). The court’s task is

merely “to determine whether the EIS was compiled in

objective good faith and whether the resulting statement

would permit a decisionmaker to fully consider and balance

the environmental factors.” Sierra Club v. Morton, 510

F.2d at 819. “The court is not empowered to substitute

its judgment for that of the agency.” Scenic Hudson

Preservation Conference v. FPC, 453 F.2d 463, 468 (2d

Cir. 1971) cert. denied, 407 U.S. 926 (1972), quoting

Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S.

402, 416 (1971). This is particularly true when it comes to

5548

-A29-

Appendtiz A.

evaluating the factual conclusions of the EIS. If the

agency’s conclusions have a “substantial basis in fact,”

FPC vy. Florida Power & Light Co., 404 U.S. 453, 463

(1972), and if the EIS has set forth responsible opposing

scientific views, Committee for Nuclear Responsibility v.

Seaborg, 463 F.2d 783 (D.C. Cir. 1971), it is not for the

district court to resolve conflicting scientific options.

Evidence-weighing must be left to the agency making the

policy decision. See Udall v. Washington, Virginia and

Maryland Coach Company, 398 F.2d 765, 769 (D.C. Cir.

1968), cert. den., 393 U.S. 1017 (1969). Were the court to

invade that province, the judiciary rather than the agency

would become the policy-maker. Any agency decision with

which the court disagreed on the merits could then be

nullified as “arbitrary” merely because the court, upon

receiving additional evidence, chose to rely upon it or to

give it greater weight than that considered by the Executive

Branch.

The question before the district court was whether the

authors of the EIS made an objectively adequate effort,

judged in light of the “rule of reason,” to compile and

present all significant environmenial factors and alterna-

tives for the decision-maker’s consideration. Where evi-

dence presented to the preparing agency is ignored or

otherwise inadequately dealt with, serious questions may

arise about the adequacy of the authors’ efforts to compile

a complete statement.

All of this does not mean that the district court erred

in considering the PDOD upon its review of the EIS or

in receiving additional evidence, such as the testimony of

Mr. Donkin and the FPC statistics upon which he relied.

A nonadjudicatory, nonrulemaking agency decision is sub-

ject to “thorough, probing, in-depth review,” Citizens to

Preserve Overton Park v. Volpe, 401 U.S. 402, 415 (1971).

Although review of deliberative memoranda reflecting an

5549

-A30-

Appendix A.

agency’s mental process (such as the PDOD)’ is usually

frowned upon, see United States v. Morgan, 313 U.S. 409,

422 (1941) ; Montrose Chemical Corp. v. Train, 491 F.2d 63,

68 (D.C, Cir. 1974), in the absence of formal administrative

findings they may be considered by the court to determine

the reasons for the decision-maker’s choice. See Overton

Park, 401 U.S. 420; Camp v. Pitts, 411 U.S. 138 (1973);

Nattonal Nutritional Foods Association v. Food ¢& Drug

Administration, 491 F.2d 1141, 1145 (2d Cir.), cert. den.,

419 U.S, 874 (1974); Bradley v. Weinberger, 483 F.2d 410,

414 n.4 (1st Cir. 1973). Whatever may be the scope of

immunity accorded to internal deliberative memoranda

communicating views of agency personnel and summarizing

information found elsewhere in the record, the PDOD here

contained information germane to the decision and not

duplicated elsewhere in the record.

As we stated in Chelsea Neighborhood Associations vy.

United States Postal Service, 516 F.2d 378, 386 (2d Cir.

1975), “NEPA, in effect, requires a broadly defined cost-

benefit analysis of major federal activities.” The guide-

lines of the Council on Environmental Quality, 40 C.F.R.

§1500.8(a)(8) provide that “agencies that prepare cost-

benefit analyses cf proposed actions should attach such

analyses, or summaries thereof, to the environmental

impact statement....” Here the Bureau of Land Manage-

ment included its cost-benefit analysis in the PDOD and

attached it to the EIS as recommended by §1500.8(a) (8).

It was not, therefore, immune from NEPA réziew.

Nor was the court obligated to restrict its review to the

administrative record. Although the focus of judicial in-

quiry in the ordinary suit challenging nonadjudicatory,

nonrulemaking agency action is whether, given the infor-

mation available to the decision-maker at the time, his

decision was arbitrary or capricious, and for this purpose

“the focal point for judicial review should be the adminis-

5550

-A3l-

Appendiz A.

trative record already in existence, not some new record

made initially in the reviewing court”, Camp v. Pitts, 411

U.S. 138, 142 (1973), in NEPA cases, by contrast, a pri-

mary function of the court is to insure that the information

available to the decision-maker includes an adequate dis-

cussion of environmental effects and alternatives, Natural

Resources Defense Council, Inc. v. Callaway, 524 F.2d 79,

90-94 (2d Cir. 1975); Greene County Planning Board v.

FPC, 455 F.2d 412, 419-20 (2d Cir. 1972), which can some-

times be determined only by looking outside the administra-

tive record to see what the agency may have ignored.

A suit under NEPA challenges the adequacy of part of

the administrative record itself—the EIS. Glaring sins

of omission may be evident on the face of the statement,

see, e.g., Chelsea Neighborhood Associations v. United

States Postal Service, 516 F.2d 378 (2d Cir. 1975) ; Silva v.

Lynn, 482 F.2d 1282, 1283 (1st Cir. 1973). Other defects

may become apparent when the statement is compared with

different parts of the administrative record.’ See, e.g.,

1-291 Why? Association v. Burns, 372 F. Supp. 223 (D.

Conn. 1974), aff'd per curiam, 517 F.2d 1077 (2d Cir. 1975).

Generally, however, allegations that an EIS has neglected

to mention a serious environmental consequence, failed

adequately to discuss some reasonable alternative, or other-

wise swept “stubborn problems or serious criticism .. .

8 Compare Environmental Defense Fund, Inc. v. Ruckelshaus, 439 F.2d

584, 595-96 (D.C. Cir. 1971), with Bradley v. Weinberger, 483 F.2d 410,

413-15 (lst Cir. 1973), and Proietti v. Levi, 530 F.2d 836, 838 (9th

Cir. 1976).

9 A district court should identify that evidence which it finds to be part

of the administrative record, since the failure of an EIS to note prob-

lems or data elsewhere in the record may be probative of the extent to

which the EIS has been compiled in objective good faith. What con-

stitutes part of the administrative record may be very unclear in a

NEPA case, where there is no forma] factfinding process. At the very

least, however, the record should include all relevant studies or data used

or published by the agency compiling the statement.

9551

-A32-

Appendiz A.

unde= the rug,” Silva v. Lynn, 482 F.2d at 1285, raise issues

sufficiently important to permit the introduction of new

evidence in the district court, including expert testimony

with respect to technical matters, both in challenges to the

sufficiency of an environmental impact statement’® and in

suits attacking an agency determination that no such state-

ment is necessary.**

Nor can we accept appellants’ contention that plaintiffs’

failure to present the evidence to the Department in the

first instance for incorporation into the EIS™ barred its

10 See, ¢.g., National Resources Defense Council, Inc. v. Callaway, 389

F. Supp. 1263 passim (D. Conn. 1974), rev'd, 524 F.2d 79, 82, 94 n.14

(2a Cir. 1975) ; Cape Henry Bird Clud v. Laird, 359 F. Supp. 404, 415-16

(W.D. Va. 1973), aff'd on opinion below, 484 F.2d 453 (4th Cir. 1973) ;

Sierra Club v. Lynn, 502 F.2d 43, 51 (5th Cir. 1974), cert. dented, 421

U.S. 994, 422 U.S. 1049 (1975); Natural Resources Defense Fund, Inc.

v. IVA, 367 F, Supp. 128, 133 (E.D. Tenn. 1973), afd on opinion

below, 502 F.2d 852, 854 (6th Cir. 1974); Environmental Defense Fund

v. TVA, 371 F. Supp. 1004, 1007-14 (E.D. Tenn. 1973), af’d on opinion

below, 492 F.2d 466, 468 (6th Cir. 1974); Sterra Club v. Froehike, 534

F.2d 1289, 1291, 1295, 1303 (8th Cir. 1976); Iowa Citizens for EBnviron-

mental Quality, Inc. v. Volpe, 487 F.2d 849, 850 (8th Cir. 1973);

Cady Vv. Morton, 527 F.2d 786, 796 (9th Cir. 1975); Friends of the Earth

v. Coleman, 513 F.2d 295, 300 & n.6 (9th Cir, 1975); Trout Unlimited

v. Morton, 509 F.2d 1276, 1281, 1284 (9th Cir. 1974); Life of the Land

v. Brinegar, 485 F.2d 460, 463, 469-73 (9th Cir. 1973), cert. dented,

416 U.S. 961 (1974); Sierra Club v. Stamm, 507 F.2d 788, 789 (10th

Cir. 1974); Natural Resources Defense Council, Inc, v. Morton, 458 F.2d

827, 830 (D.C. Cir. 1972).

1] See, ¢.9., Massachusetts Air Pollution ¢ Noise Abatement Committee

v. Brinegar, 499 F.2d 125, 126 (lst Cir. 1974); Conservation Society

of Southern Vermont, Inc. v. Volpe, 343 F. Supp. 761, 763 (D. Vt. 1972),

aff'd, 508 F.2d 927 (2d Cir. 1974), vacated on other grounds, 423 U.S.

809 (1975); Rucker v. Willis, 484 F.2d 158, 162 & n.6, 163 n.7 (4th

Cir. 1973); Nucleus of Chicago Homeowners Association v. Lynn, 524

F.2d 225, 229, 231 (7th Cir. 1975), cert. denied, 424 U.S. 967 (1976);

Minnesota Public Interest Research Group v. Butz, 358 F. Supp. 584

passim (D. Minn. 1973), aff'd, 498 F.2d 1314, 1322 (8th Cir. 1974)

(en banc); Fund for Animals v. Prizzel, 530 F.2d 982, 987 &n.11 (D.C.

Cir. 1975).

12 Most comments received by the Department were reprinted verbatim

in Volume ITI of the EIS.

5552

-A33-

Appendiz A.

consideration by the district court. To so hold would in

effect shift the burden of insuring the adequacy of the EIS

to environmental challengers, even though the primary and

nondelegable responsibility for providing such an analysis

lies with the agency. Greene County Planning Board v.

FPC, 455 F.2d 412, 420 (2d Cir. 1972); Calvert Cliffs’

Coordinating Committee, Inc. v. United States Atomic

Energy Commission, 449 F.2d 1109, 1119 (D.C. Cir, 1971).

Here, moreover, much of the disputed information is con-

tained in the PDOD, which was not circulated along with

the draft EIS at all and was not made available to plain-

tiffs until they obtained it by court order after the final

EIS had been published. For these reasons we conclude

that, while the failure of the plaintiffs to offer such evidence

to the Department when comments on the EIS were

solicited might cast reflections upon the probative signif-

icance of the belatedly-offered evidence, the district court

properly admitted the testimony of Mr. Donkin and the

data on which it was based. The evidence introduced for

the first time in the district court, however, would be pro-

bative only insofar as it tended to show either that the

agency’s research or analysis was clearly inadequate or

that the agency improperly failed to set forth opposing

views widely shared in the relevant scientific community.

Applying these principles here, the evidence relied upon

by the district court fell far short of demonstrating that

the Department of Interior’s cost-benefit comparison was

unfounded or that it ignored any data. To begin with,

the Donkin testimony consists primarily of opinions and

estimates rather than hard facts. The opinions, moreover,

were of necessity furnished without benefit of certain

essential relevant facts as yet unknown (e.g., the existence,

location, quantity and quality of oil and gas in the leased

tracts). The proof, therefore, calls for application of the

principle that “appropriate allowance for the inexactness of

5553

BEST COPY AVAILABLE

-A34-

Appendtz A.

all predictive ventures” must be made, see K leppe v. Sierra

Club, 427 U.S. 390, 402-03 n.14 (1976).

In essence Mr. Donkin testified (1) on the basis of data

from the FPC, Congressional hearings, and major oil com-

panies, that the PDOD underestimated finding costs by as

much as 168%, (2) on the basis of FPC statistics, that the

PDOD and EIS underestimated per mile pipeline costs by

73%, (3) that, because of these errors in estimating finding

and pipeline costs, the PDOD underestimated the total

investment required, and (4) on the basis of industry

statistics, that the PDOD overestimated peak production

levels. However, the FPC data relied on by Donkin in-

cluded items not necessarily classifiable as capital invest-

ment cost (e.g., exploratory overhead) and Donkin assumed

that the Secretary’s figures included such items as wages

during pre-production activity whereas the EIS did not

treat such items as capital investment costs. Thus the cost

estimates relied upon by Donkin were not strictly compar-

able with those used by the Secretary. Moreover, the FPC

statistics relating to pipeline costs involved a project to be

constructed well after the time the EIS was drafted, which

would require that due allowance be made for inflation in

costs and revenues. Donkin admitted that in 1973 pipeline

costs were only about $485,000 per mile, and testified that

by October 1976 the costs had risen 150%, which would

imply a figure of about $1,200,000. Although Donkin indi-

cated that pipeline cost should be estimated at $1,750,000

per mile,** Mr, Brunjes, whose testimony Judge Weinstein

credited “in full,” testified that the Secretary of Interior’s

estimate of $1 million per mile was reasonable. Thus, when

viewed against the uncertain and changing nature of avail-

able estimates, the Department's estimate of $1 million per

13 The $1,750,000 per mile figure, moreover, was based on a submission

to the FPC of a pipeline between offshore areas within a field, whereas

the EIS $1 million per mile figure was based on a field-to-shore Pipeline.

5554

-A35-

Appendiz A.

mile in late 1975 appears to have substantial evidentiary

support and to be consistent with at least some of the evi-

dence received by the district court.‘ Finally, Donkin’s

estimate of peak production was based on an assumed field

life of 27.08 to 30 years. Since the Department assumed a

shorter 25-year field life based on OCS experience (and

there was no evidence that this assumption was unreason-

able), it is not surprising that the Department’s peak

production figures were high, since it envisioned getting

the same amount of oil and gas out of the ground over a

shorter period of time.

In short, none of the statistics submitted by plaintiffs

tended to demonstrate any fault in the Department’s factual

analysis or that the analysis was not conducted in good

faith. In crediting Donkin’s conclusions over those of the

Department’s experts, Judge Weinstein substituted the

court’s judgment for that of the Department and its ex-

perts, exceeding the proper scope of judicial review. The

district court’s finding that the Department’s cost-benefit

analysis was not compiled in good faith was thus clearly’

erroneous.

Alternative of Separating Exploration of Tracts

From Leasing For Oil and Gas Preduction.

The district court concluded that the EIS failed to com-

ply with NEPA because it gave “no consideration” or

“failed to adequately consider” the alternative of separat-

ing exploration of the tracts from production so that the

government, either alone or through a joint venture, could

first determine whether there was oil or gas in the area and

14 Any such estimates of future pipeline costs must of necessity en-—

gage in various assumptions (which might be characterized as “crystal-

balling’) with respect to numerous variables (e.g., costs of on-site in-

vestigation, compliance with regulatory requirements, sea bottom condi-

tions, terrain problems, etc.).

5555

-A36-

Appendtaz A.

then offer the hydrocarbon-producing tracts for lease on

terms that would provide greater government control over

environmental impacts. However, the PEIS does in fact

discuss at some length possible types of separate explora-

tion and production, including “Special Limited Leasing”

in such pioneer areas as the mid-Atlantic Sale 40 tracts,

“Leases for Exploration Only,” “Federal Exploratory

Drilling Program,” “Federally Conducted Off-Structure

Stratigraphic Drilling” and “Privately Condueted” off-

structure drilling.

The “Alternatives” section of the EIS, moreover,

reviews the possibility of government exploratory drilling

prior to leasing, pointing out that, while this procedure

would give the government detailed data upon which to

base resource estimates and evaluate tracts before leasing,

there would be a heavy strain on personnel, on procedures

for contracting and hiring, and on the federal budget. It

estimates that 60 or more exploratory wells might be

required at a cost of $4 million to $7 million each, with the

government taking the discovery risk, whereas leasing for

exploration and sale would yield a substantial bonus to the

government (over $1 billion). It also points out that no oil

has yet been discovered in the Destin Dome, which was the

subject of the government’s MAFIA lease sale, for which

it received $1 billion in advance bonus payment, thus con-

firming the precariousness of the government’s entry into

the exploration business.

In addition to consideration of the separate exploration

alternative in the PEIS and EIS, the Department in March

1975 prepared for the Secretary’s consideration a working

paper, “Government Exploration of the OCS”, and in June

1975 a “Position Paper on Separating of Decisions to Ex-

plore and to Develop OCS Area.” These papers led to the

Secretary’s decision in August 1975 to amend OCS regula-

tions to require a pause between exploration and develop-

5556

-A37-

Appendtx A.

ment in order to provide coastal states with resulting data

for use in considering development plans submitted by OCS

lessees for approval.

Although faced with this extensive consideration by the

Secretary of separate exploration-production alternatives,

the district court nonetheless brushed the data aside as too

brief, as “mere window dressing,” and as offering reasons

for rejection with which the court disagreed (e.g., that a

federal exploration program would place too much risk on

the federal government; that budgetary and manpower

demands on the federal government would be too high; that

such a leasing procedure would violate the Outer Continen-

tal Shelf Lands Act of 1953). This was clear error. Here

again the district court appears to have misconceived its

role and allowed its concept of the substantive merits of

the issues to dominate its limited reviewing role, which is

impermissible, see Scenic Hudson Conference v. Federal

Power Commission, 453 F.2d 463, 468 (2d Cir. 1971),

cert. denied, 407 U.S. 926 (1972).

The grounds for the Secretary’s rejection of the alterna-

tive of separate government exploration were well within

the range of reasonableness, particularly since the adoption

of this alternative, in addition to its other disadvantages,

would require legislation by Congress to amend the OCS

Lands Act, §8(b) of which, 43 U.S.C. §1337(b), mandates

that the lessee be granted the right to explore for and

produce any oil discovered in paying quantities. See Gulf

Oil Co. v. Morton, 493 F.2d 141, 145 (9th Cir. 1973) ; Unton

Oil Co. v. Morton, 512 F.2d 743 (9th Cir. 1975). Although

an alternative may not necessarily be exempt from EJS

consideration merely because it cannot be put into effect

without legislation, this factor weighs heavily against its

being explored at length, in view of the practical handicaps

involved. See NRDC v. Callaway, 524 F.2d at 93.

Nor do we find any substantial support for the district

5557

-~A38-

Appendiz A.

court’s decision in the testimony of Ms. Judith Gresham,

an employee of the New York office of the Bureau of Land

Management of Interior, upon which the court so heavily

relied. She testified that during the period when Interior

was selecting and identifying tracts to be offered as lease

Sale 40, which was prior to Interior’s making of the lease

proposal and its preparation of the EIS in connection with

that proposal, the alternative of separation of exploration

and production was not discussed by the New York office.

Aside from the fact that consideration of such an alterna-

tive was not apparently part of her duties, it would in any

event have been premature, since lease Sale 40 had not yet

emerged as a proposal and no EIS had as yet been pre-

pared in connection with lease Sale 40. It is elementary

that the EIS, including its review of alternatives, need not

be prepared and considered until tle time when the agency

publishes a proposal and holds hearings on the proposal.

Aberdeen ¢ Rockfish Ratlroad Co. v. SCRAP (SCRAP IT)

422 U.S. 289, 320 (1975).

The Possibility of Leasing Tracts Other Than

Those Selected For Lease Sale 40.

The district court further found the EIS inadequate for

the reason that in considering the impact of tracts selected

for lease Sale 40 the Secretary failed to consider the

alternative of “excluding industry-preferred tracts, or in-

cluding less highly desired tracts in the final sale offer

because of related onshore impacts and developments.”

The district court reasoned that if a tract believed less

likely to have hydrocarbons in it than those selected were

located “contiguous to potentially acceptable pipeline land-

falls” (which erroneously assumes that such corridors of

landfalls have been determined), the Secretary had a duty

to consider selecting such a tract in lieu of others selected

for lease.

5558

-A39-

Appendix A.

The criticism ignores the logical procedure which was

followed by the Department of Interior. In deciding what

publicly-owned areas should be made available for oil and

gas exploration the first step taken by the Department was

to identify those sites which were reasonably believed on

the basis of geological and other data to have a potential

hydrocarbon content. It then sought to find out whether

qualified lessees might be willing to explore any of them

by asking for tract nominations. Then, armed with knowl-

edge of what was within the realm of the possible, the

Department examined the 557 tracts nominated by private

industry for possible lease and, after considering some

sixteen environmental criteria, eliminated all but 154 tracts,

which became the subject of the Sale 40 proposal and of

the EIS then repared. In addition to considering the on-

shore impact of these tragts, the EIS dealt at length with

the alternative of deleting still more tracts from the pro-

posal or “substituting tracts within the call for nomina-

tions,” so that the leased area would be smaller or in a

somewhat different location in the mid-Atlantic.

In our view this procedure was reasonable and gave

proper consideration to alternatives of the type suggested

by the district court. Moreover, it is significant that,

although the states and localities that might be most

affected onshore by the proposal offered various comments

with respect to it, none suggested that other tracts should

have been substituted for those offered, much less that

tracts should have been selected initially on the basis of

possible onshore environmental impacts rather than poten-

tial hydrocarbon content. The district court’s criticism

in this regard appears to be unrealistic since, as actual

experience in the tract selection process demonstrates, it

ignores the strong probability that nobody would have bid

on less desirable tracts if they had been substituted. In-

deed, as it was, bids were submitted on only 101 of the 154

5559

tracts offered by the Department for lease and the Depart-

ment accepted bids on 93 of the 101 tracts. The evidence

was clear, as Ms. Gresham testified, that there was a “non-

existent” interest in leasing tracts of the type suggested

sua sponte by the district court because there was an in-

sufficient indication of the existence of hydrocarbons in

those tracts.

The Claims of Lack of Good Faith on the Part

of the Secretary of Interior

In August, 1976, at the conclusion of the hearing on

plaintiff’s application for preliminary injunctive relief, the

district court found, in response to claims of bad faith on

the part of the Secretary, that “on balance, the court has

not been convinced that the Secretary and his subordinates

did not attempt to execute NEPA honestly.” (Memo. opin.

p. 32-33, 8/13/76). Following our reversal of preliminary

relief, no substantial additional evidence was introduced on

the subject of the Secretary’s good faith. Indeed, that

matter was not listed by the trial judge among the issues

to be discussed in post-trial briefs. Nevertheless, the

court’s fina] opinion concludes that there was persuasive

evidence that the Secretary’s decision to proceed with Sale

40 was made “long before the ostensible decision dates, and

before fulfillment of NEPA’s requirements, and that the

Bureau of Land Management simply went through the

NEPA motions in order to validate the decisions previously

made,” and “that the Department of Interior had little

interest in properly fulfilling its obligations under NEPA.”

These statements were presumably based on the same evi-

dence the court had examined before its original contrary

finding in which it concluded:

It must be recognized that both the accelerated

program and Sale No. 40 involve significant political

5560

-A4l1-

Appendiz A.

considerations of widespread interest. As a result, it

is not realistic to assume that discussion and debate

among high public officials and decisionmakers will not

take place prior to a final decision. The fact that this

dialogue precedes the decision and was engaged in by

the eventual decisionmaker does not, as plaintiffs

assert, indicate that the Secretary cannot consider the

environmental data presented him with good faith

objectivity.

The only additional evidence bearing on the Secretary’s

good faith offered at trial was the testimony of one witness

that he had been advised in 1965 by the “people” in the

Department of Interior that they were “planning on ahout

a 1970 sale in the Atlantic.” However, this conversation,

which occurred four years before NEPA was passed, was

hardly probative on the question of compliance. The

district court’s about-face on this issue was not its only

change made without any new evidentiary support. With

respect to the EIS in general it originally concluded:

But, on balance, the impartial reader of the EIS is

driven to the conclusion that, within the limit of reason-

able researchers and writers, a studied effort was

made to present a fairly grim picture of possible

environmental difficulties. If anything, the studies are

almost too detailed and encyclopedic for a lay execu-

tive to fully comprehend. The Fina] EIS Sale No. 40,

together with the PDOD prepared by staff to sum-

marize and clarify the issue for decision, satisfactorily

meets both the spirit and the letter of NEPA require-

ments in all respects except one, addressed below.

Although the district court based its decision on grounds

other than had faith, we nevertheless feel compelled to

advert to this unfortunate discussion, not only because of

5561

-A42-

Appendiz A.

the possibility that the court might otherwise be inclined to

resurrect it but because of the needless damage it inflicts

on governinent servants. As it is, a government policy-

maker is placed by NEPA in a difficult enough posture

with respect to controversial federal programs of the type

under review. On the one hand, in response to public

pressure to find means of satisfying our ever-increasing

and widespread national energy needs, he is expected to

originate and consider proposals for exploitation of our

natural resources. On the other, he is obligated by NEPA

to proceed with such proposals only when, in his honest

judgment and after full detailed study and balancing of

all relevant factors, he concludes that the project is worth

the environmental cost. Although the task might be

lightened by placing the burden of making the final decision

elsewhere—such a procedure conceivably could lead to

more objective resolution of the conflict, see Note, The

Least Adverse Alternative Approach to Substantive Re-

view under NEPA, 88 Harv. L. Rev. 735, 737, 739-40 (1975)

—under present law it continues to rest on the same per-

son’s shoulders, undoubtedly in part because he and his

subordinates are more familiar with all of the relevant

facts and circumstances than anyone else in government.

There is always the risk that a government official who

originates a project may be too partial toward it to be

completely objective in weighing environmental objections

to it. However, to suggest that because he originated it

before exposing it to NEPA review the latter was a

“charade” and the outcome a “foregone conclusion” is not

only unnecessary but does a disservice in the absence of

supporting proof. Here we fail to find such proof. The

various statements of federal officials from the President

on down taken out of context by the district court, in which

they emphasize the importance of going forward with

5562

~A43-

Appendtz A.

leasing of the OCS for oil and gas exploration, were made

on the understanding that the proposal was subject to

thorough environmental analysis and compliance with

NEPA. As the EIS states—(Vol. I, p. 34) with reference

to the OCS planning schedule first proposed in November,

1974, and modified in 1975:

This proposed OCS planning schedule does not repre-

sent a decision to lease in any of these particular

areas. It represents only the Department’s intent to

consider leasing in such areas and to proceed with the

leasing development of such areas if it should be

determined that leasing and development in such areas

would be environmentally, technically, and econom-

ically acceptable.

Con “LUsIon:

The district court appears to have allowed its views

regarding the substance of the Secretary’s proposal to

becloud its understanding of its reviewing function and its

analysis of the Sale 40 EIS for adequacy, leading to the

court’s unfortunate characterization of the Secretary’s

motives, its substitution of testimony received by it for

that considered by the Secretary, and its adoption sua

sponte of grounds for inadequacy that were not suggested

by the parties. Were the major federal action at issue one

that irrevocably committed specific public resources to

irreversible damage from the outset, see e.g., NRDC v.

Callaway, 524 F.2d 79 (2nd Cir. 1975) (ocean dumping

site), rather than one subject to substantial modification

by the government to satisfy environmental objections as

it progresses we, like the district court, might be troubled

by the apparent failure of the EIS, despite its length, to

deal as thoroughly with some environmental consequences

5563

-~A44-

Appendtx A.

of transportation as might be hoped."* Since our questions

pertain to the transportation stage and the multistage

project is environmentally divisible, we place them in the

same category as those of concern to the district court.

15 The following are a few examples of questions raised by the EIS:

(1) In assessing the risk of oil spills at drilling sites and through

pipeline accidents the EIS relies almost entirely on spill data from

Gulf of Mexico offshore operations, which are represented to pro-

vide the most complete tabulation of information on the subject.

However, the EIS, unlike the PEIS, fails to take into account the

probability that in the pioneer mid-Atlantic area greater spill risks

are presented because of heavier weather and rougher seas (witness

the recent North Sea blow-out). In contrast to the EIS, the PEIS

multiplied the Gulf of Mexico statistics by a risk factor in order

to account for the added risk faced in the Atlantic. Moreover, in

discussing blow-outs the EIS, using statistics dating back to 1970,

does not include the Santa Barbara disaster, which occurred in 1969.

(2) Models for determining the possible impact of spills were

apparently limited to tests made on the basis of surface currents

without considering bottom currents and the risk that they would

lead to heavy onshore tar residue deposits,

(3) A key chart in the EIS (Table III-23, Vol. II, page 91)

estimates that there is only a 39% chance that during the 25-year

life of the Sale 40 operations one spill of greater than 1,000 barrels

will go ashore and a 90% chance that one spill of 50 to 1,000

barrels will go ashore. However, the percentages are based on a

study of oil spill trajectories originating at the drill sites 45 to

100 miles offshore, whereas available data indicates that 67.62% of

all oil spilled in the Gulf of Mexico since 1967 has come from pipe-

lines, which are located nearer to shore than the drilling sites. More-

over, other oil spills occur closer to shore as the result of tanker

accidents and the like.

(4) Although the EIS assumes that the pipelines will be buried

it fails to discuss, in using Gulf of Mexico data, (1) whether the

pipelines there are also buried, (2) whether ocean “seour” in the

mid-Atlantic would expose buried pipelines in some areas, and (3)

whether it may be impossible to bury pipelines in other large areas

of the ocean bottom, such as the gravel area off Monmouth County.

Accepting the fact that 92.31% of all pipeline accidents are caused

by ships dragging anchors across the pipelines, the EIS fails to

compare shipping and particularly fishing trawler traffic in the mid-

Atlantic with the Gulf, thus putting into question the applicability

of the Gulf statistics to the mid-Atlantic area.

(5) No effort appears to be made to furnish statistics as to the

present tanker spillage in the area offshore that could possibly be

5564

-A45-

Appendiz A.

We are satisfied that the Department of Interior, which

will have continuous control over the venture, will deal

with them thoroughly in the Development Plan EIS before

approving any plans for transportation of such oil as may

be discovered in the Sale 40 area and after the Department

has the essential information regarding the location,

quantity and quality of any discovered oil, an ocean bottom

survey, and the Coastal Zone Management Act programs

that will have been enacted.

The decision of the district court is reversed, the in-

junction is vacated and the cases are remanded with direc-

tion to dismiss the consolidated complaints.

used to transport oi] from the mid-Atlantic to onshore refineries if

pipelining became unfgasible, much less to explain whether tank-

washing (which accounts for 85% of present worldwide tanker spill-

age) and bilge bunkering would occur in the area between tho

Sale 40 field and shore. Worldwide tanker spill statistics, although

stated, are deemed inapplicable without explanation. The probable

consequences of using smaller tankers in lieu of the larger inter-

national types are not explained.

5565

A47

APPENDIX B

District Court’s Opinion, February 17, 1977.

UNITED STATES DISTRICT COURT

Eastern District oF New York

Fryat MEMORANDUM AND ORDER

75 C 208

=

—

County oF SuFFOLK, et al.,

Plaintiffs,

against

SECRETARY OF THE INTERIOR, et al.,

Defendants,

Nationa, Ocean Inpvustries AssociaTIon, et al.,

Intervenor-Defendants.

76 C 1229

Tue Natvurat Resources Derense Covnen, Inc.,

Plaintiff,

against

SECRETARY OF THE INTERIOR,

Defendant.

a.

4

Appearances:

Davip G. TRAGER

United States Attorney

By: Cyrm Hyman and J. CHrisTtoPHER JENSEN

Assistant United States Attorneys

225 Cadman Plaza East

Brooklyn, New York 11201

and

A48

Appendix B,

Peter R. Tart and Jouy J. Zimmerman,

Department of Justice;

Lawrence Hoese and Jack Hvuaues,

Department of Interior;

Irvine Like

Special Counsel, County of Suffolk

200 West Main Street

Babylon, New York 11702

Joun M. Kavrmay, Saran Cnasis and Rospert STOVER,

KommMe., Rogers, Kavrman, Lorser & SHENKMAN

380 Madison Avenue

New York, New York 10036

For Natural Resources Defense Council, Ine.

Joun Picctano

Of Counsel to County Attorney, County of Nassau

Nassau County Environmental Management Council

1505 Pelum Place

Mineola, New York 11501

Hyman Herman

Special Counsel, County of Suffolk

P. O. Box 313

163 Half Hollow Road

Deer Park, New York 11729

Francis G. Catprrra

Town Attorney, Town of Islip

Town Hall

Main Street

Islip, New York 11751

W. Kennetu Cuave, Jr.

Town Attorney, Town of Hempstead

Front Street

Hempstead, New York 11550

A49

Appendix B.

Francis J. Doran

Town Attorney, Town of North Hempstead

Town Hall

220 Plandome Road

Manhasset, New York 11030

JosePH CoLBy

Town Attorney, Town of Oyster Bay

Town Hall

Audrey Avenue

Oyster Bay, New York 11771

AntHony R. Corso

Board of Trustees, Town of Huntington

Town Hall

227 Main Street

Huntington, New York 11743

Warren H. Guntuer and P. Peter O’Hara

Cutten & DyKMaAN

177 Montague Street

Brooklyn, New York 11201

For Intervenor-Defendant New York Gas Group

Grorce A. BuRRiLL

220 Fifth Avenue, New York, New York 10001

E. Epwarp Bruce, Rosert J. Popr,

Covineton & BuRLING

888 Sixteenth Street N.W., Washington, D.C. 20006;

Wiiiiam M. Meyers and Gene Lafitte,

J. Berry St. Joun, JR.,

Liskow & Lewis

225 Barone Street, New Orleans, Louisiana 70112

For Intervenors National Ocean Industries

Association

Wiuiam F, Dupine

Concerned Citizens of Montauk, Inc.

405 Lexington Avenue, New York, New York 10017

A50

Appendix B.

TABLE OF CONTENTS

. Bammaary OF Praia... cakes cesesvadks

Shy SORE ry Toes onc cca cwe kk oeackeSaus

A. Failure to Consider Impact of State and

Local Exercise of Regulatory Powers ....

1. Effect of Coastal Zone Management

WU esos decide ut cus ccs ge ee ueeiece

bo

Recognition of State and Local Powers

a ee er a ork,

3. Effect of State and Local Powers on

Pipeline Routing—Absence of Any Pro-

jection of Likely Pipeline Locations ...

4. Economie Consequences of State and

ENR TIO gos soe bcc kekeeuces

B. Defective Cost-Benefit Analysis of Lease

ME Fa os coal cehas ans ce ae eae nese

1. Underestimate of Finding Costs .......

2. Underestimate of Pipeline Construction

i eee en rere

3. Underestimate of Total Investment

BEE occ acd ce dace eaetevat ere cs

4. Overestimate of Peak Levels of Pro-

SG i ct it OR aT Dee a ee

d. NEPA Consequences of Gross Misesti-

mates of Costs and Benefits ..........

A57

Adl

Appendix B,

ii TABLE OF CONTENTS

PAGE

C. Failure to Evaluate Separation of Explora-

tion and Production Leasing ............. A97

D. Failure to Consider Impact of Leasing Al-

I TNE a once dcdcae nates cadens A106

E. The Issue of Secretary’s Lack of Good

aR eas A a 5 eR ne pene A109

Ses EN Bias Gc S ER cae ee Oe see es cc kes eset ads A115

A. Creation of Coordinating Agency ........ A115

B. Ignore the Violation ..............++0+5 A119

i ©. Giier RIRPMOVOS «ow. w vcccccccssvescses A123

OV, SO, oe cla geese cnccsdeussedansdoa0es A123

APPENDICES

A. Summary of Testimony at Preliminary Hearing 97

B. Summary of Testimony at Final Hearing ...... 103

C. Exhibits in Evidence at Preliminary and Final

Pare were re Tee Tee TT ee eee 110

D. Chart of Sale 40 Lease Area Showing Tracts,

Prospective Pipelines and Public Recreation

PO or ses ecet ans bacebeneanessanuanys% 131

E. Crude Oil Transportation Unit Cost Versus

TN a tony CWS REN EK EERE EROS 132

A52

Appendix B.

Wernstern, District Judge:

After extensive hearings held in July and August of

1976 this court determined that the National Environ-

mental Policy Act (NEPA), 42 U.S.C. $§ 4321 et seq., re-

quired issuance of a preliminary injunction preventing the

Secretary of the Interior from proceeding with Lease

Sale Number 40 of outer continental shelf lands in the mid

Atlantie region for exploration and production of oil and

gas. The text of the memorandum filed by this court on

August 13, 1976 as a result of those preliminary hearings

is reaffirmed and deemed incorporated as part of this

memorandum and final order following final hearings. For

reasons set forth in the two memoranda, the court has con-

cluded that the Secretary of the Interior has violated

NEPA and that Sale 40 leases are void. While the pre-

liminary memorandum indicated, on the basis of a pre-

liminary hearing, only one ground for declaring NEPA

violated, the final hearings revealed that NEPA had been

violated in a number of respects, as indicated below.

The issue before this court is not the wisdom or desir-

ability of this country’s total “energy program,” or of any

of its specific aspects. It is not this court’s function to

pass on the substantive merits of the Sale 40 lease project,

either in its present or potentially medified form. It is,

rather, concerned with whether the Secretary of the In-

terior, in reaching his decision to lease these lands, com-

plied with the statutory requirements governing his re-

sponsibilities as trustee and administrator of the public

resources of the outer continental shelf; specifically, the

question posed is whether his decision was fully and accu-

rately informed and made after adequate consideration of

viable alternative programs and potential adverse environ-

mental impacts.

Our preliminary finding, as outlined in this court’s opin-

ion of August 13, 1976, was that the Secretary had not met

A53

Appendix B.

his NEPA responsibilities. In deciding to proceed with

Sale 40 in its present configuration he virtually ignored

the power of states and their political subdivisions to regu-

late the siting, construction and use of nearshore and on-

shore facilities through measures such as special land-use

laws, air and water pollution laws, pipeline regulations

and zoning and building codes.

We noted that if the states or municipalities bordering

the Sale 40 area prevented pipelines from drilling sites

from crossing their shores—as they have the power to do—

then the only alternative for transporting oil would be by

tankers or longer pipelines. Evidence indicated that state

or municipal decisions banning pipelines or ordering their

special routing were probable given the substantial impact

that construction of a pipeline, or oil spillage from it, would

have on coastal lands.

We found that the Final Environmental Statement for

Sale No. 40 contained no meaningful discussion and re-

flected no real awareness of the fact that state and muni-

cipal action may severely restrict pipelines and related on-

shore facilities, and that without an analysis of these state

and local provisions and the probable extent of state and

municipal cooperation or opposition a realistic appraisal

of the impact of Sale 40 on the environment was not

possible.

We also noted that the Sale 40 Program Decision Option

Document assumed that pipelines will be used. It was

relied upon by the Secretary in making his decision to

lease, and assumes the use of pipelines as both economi-

cally and technically feasible in case of a large oil dis-

covery.

We concluded that if the assumption by the Secretary

that pipelines will transport the oil in case of a large strike

might have been different if the state situation had been

brought home to him in a meaningful way, then the NEPA

decision making process was invalid.

A5d4

Appendix B.

Accordingly, a preliminary injunction preventing Lease

Sale 40 was granted pending further hearings and decision

on applications for a permanent injunction. On August

16, 1976 the Court of Appeals for the Second Circuit stayed

the order of this court; on October 14, 1976 it held that

plaintiffs had not demonstrated that they would suffer

irreparable harm between the date of the preliminary hear-

ing and the trial, and that there was some question whether

plaintiffs would succeed on the merits at the trial.

The parties were advised that, by proceeding with leas-

ing prior to a final determination, they assumed the risk

of an ultimate adverse decision. Justice Marshall, in

declining to overturn the Court of Appeals’ stay of the

preliminary injunction, focused on the extremely narrow

grounds for the stay, making clear that invalidation of any

resultant leases was a very real possibility should plain-

tiffs prevail on the merits.

The Court of Appeals concluded that plaintiffs would

not be irreparably injured if the Secretary were per-

mitted to open the bids. I cannot say that the court

abused its discretion. It is axiomatic that if the Govern-

ment, without preparing an adequate impact state-

ment, were to make an ‘irreversible commitment of

resources,’ Natural Resources Defense Council v. NRC,

539 F.2d 824 at 844 (2 Cir. 1976), a citizen’s right to

have environmental factors taken into account by the

decisionmaker would be irreparably impaired. For this

reason, the lower courts repeatedly have enjoined the

Government from making such resource commitments

without first preparing adequate impact statements.

Indeed this past Term, in Kleppe v. Sierra Club, ...

we indicated that it would have been appropriate for

the Court of Appeals to have enjoined the approval

of mining plans had that court concluded that ‘the

impact statement covering [the mining plans] in-

A55

Appendix B.

adequately analyzed the environmental impacts of, and

the alternatives to, their approval.’ —— U.S., at ——

n. 16, 96 S.Ct., at 2729.

In the instant case, however, the Court of Appeals

apparently decided that the opening of bids does not

constitute an ‘irreversible commitment of resources.’

I am unprepared to say that the court was wrong in

so holding. In the first instance, it is quite clear that

the actual opening of the bids does not involve a com-

mitment of any kind, since the Secretary reserves the

right to reject all bids. Thus it is not until a bid is

accepted—which may not happen for 30 days—that an

irreversible commitment is even arguably made. More-

over, even after the bids are accepted, J cannot say

that the Court of Appeals would be without power to

declare the leases invalid if the court determined that

the Government entered into leases without compliance

with the requirements of NEPA.

N.Y., Natural Resources Defense Council, Inc. v. Kleppe,

— US. : , 97 S.Ct. 4, 7 (1976) (footnotes

omitted; emphasis added).

The Secretary of the Interior proceeded to lease a total

of 93 tracts in the Sale 40 area. He accepted bids totalling

over 1.1 billion doilars. The successful bidders have begun

to take preliminary steps required for full exploitation of

their leaseholds.

After further pre-trial hearings and discovery, a final

hearing was held at which all parties introduced extensive

additional proof. The resulting twelve hundred pages of

new testimony and numerous documents serve to confirm

and expand the bases of the court’s earlier tentative con-

clusion that NEPA has been violated. In all a total of

4,043 pages of testimony were taken, 32 witnesses were

heard, 273 documents were received and the affidavits and

proffers of proof for a substantial number of other per-

A56

Appendix B.

“sons considered. Set forth as appendices “A”, “B” and

“C” to this opinion for the assistance of the appellate

courts are lists of witnesses and exhibits considered by the

court.

I. Summary of Findings

We find that the Secretary 1) ignored the practical ef-

fects of local governmental licensing, permitting and re-

view powers in the NEPA documents; 2) failed to consider

the environmental impact of specific probable pipeline

routes from the outer continental shelf, in spite of the fact

that projection of such routes is routinely made by in-

dustry and could have been made by the Secretary or his

agents; 3) greatly overstated peak oil and gas production

for Sale 40 and significantly understated the cost of such

production, including pipeline construction; this resulted

in a serious lack of consideration of the likelihood and at-

tendant dangers of increased tanker traffic and an over-

estimate of the net value of the entire project; 4) failed

to consider the possible impact of particular tract selection

choices on the feasibility and sites of pipelines; there was

no consideration of the alternatives of either excluding in-

dustry-preferred tracts, or including less highly desired

tracts in the final sale offer because of related onshore im-

pacts and developments; and 5) failed to consider the

alternative of separating exploration from production leas-

ing. Adequate consideration of these factors might have

led to modifications in the Sale 40 leasing program, re-

sulting in greater environmental protection without im-

pairing reasonable exploitation of offshore hydrocarbon

resources.

While there was substantial evidence that the Secretary’s

decision was not based upon a good faith consideration of

relevant NEPA documents, but on decisions made privately

and in advance of public hearings, we find it unnecessary

A57

Appendiz B.

to make any such finding. It is enough for purposes of

this proceeding to detail the abstract and misleading aspects

of the operative NEPA documents that prevented any

realistic appraisal of either environmental dangers or the

practical advantages and disadvantages that would result

from the specific Sale 40 leases. Each of the inadequacies,

considered below in detail, constitutes a violation of both

the letter and spirit of NEPA and requires rescission of

the Secretary’s leasing decision.

II. NEPA Violations

A. Failure to Consider Impact of State and Local

Exercise of Regulatory Powers

As we noted earlier, evidence adduced at the final hear-

ings strongly reinforced the preliminary conclusion of the

court that the powers of state and municipal authorities to

affect the scope of outer continental shelf operations vgs

virtualiy ignored in deciding to proceed with Lease a

in its present form. This failure is particularly stri =

in light of the fact that there are hundreds of political su

divisions with varying degrees of nega over various

le 40 related development.

wa rash of Nassau and Suffolk alone, the following

municipalities, bordering the Atlantic, may be harmed by

il spills:

_— Village of Atlantic Beach

City of Long Beach

Village of Lawrence

Village of Woodbury

Village of Hewlett Neck

Village of Hewlett Harbor

Village of Island Par

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