On May 27, 2015, the United States Court of Appeals for the Ninth Circuit upheld the US Bureau of Land Management’s (BLM) grant of a right-of-way over federal land for a road (the Road Project) for a wind energy project developed by North Sky River Energy, LLC (North Sky) on private land (the Wind Project).[1] On the facts before it, the court held that the Wind Project was neither a federal action nor connected to the federal Road Project, and that therefore, the BLM was not required to consult with the US Fish and Wildlife Service (FWS) for the Wind Project under the Endangered Species Act (ESA) or to prepare an Environmental Impact Statement (EIS) under the National Environmental Policy Act (NEPA).

The court’s holding has important implications for project developers who propose projects that span both private and federal land. Careful structuring of such projects may allow streamlined environmental review of the portions of the project on private land.

BLM’s decision and the court’s ruling

North Sky applied to the BLM for an easement over federally owned land in order to connect its Wind Project to an existing state highway. North Sky originally proposed to place wind turbines on BLM land, but it amended its application to seek only to improve and expand existing BLM roads. The revised application also identified a second viable route of access—a route through private land only—that served as an alternative link from the Wind Project to the state highway. North Sky had rejected this private option in favor of the Road Project because the level of environmental disturbance that the private option required outweighed the expected environmental impact of the federal Road Project.

Before issuing a permit for the Road Project, the BLM informally consulted with the FWS under the ESA and issued a Finding of No Significant Impact under NEPA. The BLM concluded that North Sky’s private road option served as a viable alternative route, and noted that because of this, North Sky was likely to move forward with the Wind Project regardless of whether the BLM approved the right-of-way over federal land. Thus, the BLM limited both its NEPA review and its informal consultation with the FWS to the Road Project and did not, as the plaintiffs requested, treat the Wind Project as part of the project it was approving.

The plaintiffs filed a lawsuit challenging the BLM’s approvals, arguing that the BLM should have analyzed the Wind Project as part of the Road Project under both NEPA and the ESA.  The court rejected both arguments.

Under the ESA, federal agencies are required to ensure, in consultation with the appropriate wildlife agencies, that their actions are not likely to jeopardize the existence or critical habitat of any endangered species. However, this consultation requirement is triggered only by federal agency actions that are “authorized or carried out by the agency.” Specifically, the federal agency must consider all the direct and indirect effects of its proposed action, as well as the “effects of other activities that are interrelated or interdependent with that action.”[2]

The Ninth Circuit quickly dismissed the claim that the North Sky Wind Project itself constituted agency action.  The BLM “was required to and did consult on the direct effects of the Road Project,”[3] however, it was not required to do so for the private Wind Project. The Ninth Circuit held that the Wind Project was not a “direct effect” of the Road Project either, as the Wind Project was not directly funded, authorized, or carried out by the BLM, nor was there any element of discretionary federal involvement or control.

The court next analyzed whether North Sky’s Wind Project was an “indirect effect” of the Road Project. In order to prove this, Sierra Club had to demonstrate that the Wind Project was caused by the proposed Road Project; that it occurred later in time than the Road Project; and that the Wind Project was reasonably likely to occur. The court only discussed the causal element of this test, and here too the Ninth Circuit found that Sierra Club failed to make its case. The court reasoned that it could not be “fairly said that the Road Project caused the Wind Project or brought it into existence.”[4] Quite the contrary: because North Star had presented a viable alternative route through private land, the court found that the Wind Project likely would have been completed regardless of whether the BLM approved the Road Project.

Sierra Club’s final argument was that the Wind Project was “interrelated or interdependent” with the Road Project. Sierra Club claimed that, but for the BLM’s approval of the Road Project, the Wind Project would not have occurred. The court dismissed this argument, reasoning again that North Sky had a viable private route option. Because North Sky was prepared to use the private road option to complete its Wind Project if necessary, the BLM’s approval of the Road Project could not have been the “but for” cause of the Wind Project. The court further held that the Road and Wind Projects were independent and had separate utility from one another. The court agreed with the BLM’s finding that the Road Project served purposes independent from the Wind Project, including dust control and erosion reduction. “In sum,” the court held, “these projects fail the ‘but for’ causation test, and neither is an integral part of the other, neither depends on the other for its justification, and each has utility independent from the other.”[5]

Using a line of reasoning that mirrored its ESA analysis, the court found that the Wind Project did not trigger the BLM’s duty to prepare an EIS under NEPA. NEPA requires federal agencies to prepare an EIS in connection with any “major federal action” that significantly affects the quality of the human environment. This includes actions that are connected, cumulative, or similar to the “major federal action,” which is defined as an action that is “potentially subject to Federal control and responsibility.”[6]

Because the BLM had no control or responsibility over the Wind Project, the court held that the Wind Project did not constitute a “major federal action” under NEPA. Accordingly, the court’s NEPA analysis hinged whether the Wind Project was connected to the Road Project.[7] The Ninth Circuit employed an independent utility test, which focuses on whether “each of the two projects would have taken place with or without the other.”[8] Because the Wind and Road Projects both had independent utility, the court quickly dismissed the connectivity argument. In any event, the court found that the BLM’s environmental assessment of the Road Project “sufficiently evaluated the Wind Project as a cumulative effect of the Road Project.” [9] The agency’s assessment had included a detailed analysis of wind farms within a specified 25-mile distance of the Road Project, including the North Sky wind farm, which the court found to be sufficient consideration.

Moving Forward: The Implications

Key factors that led the BLM to conclude that the Wind Project and the Road Project were independent—and the key factors that developers should consider when structuring their own projects to avoid duplicative federal environmental review—are as follows:

  • There was a private alternative to the Road Project. Perhaps the single most important factor that the BLM (and subsequently the court) considered was the fact that North Sky had identified an alternative, viable private option to the Road Project. The significance of this option is apparent, as the court specifically points out that the BLM had initially planned to seek a consultation for the Wind Project as an interdependent or interrelated activity under the ESA. The BLM’s view on this changed once the private road option was submitted and considered as a viable alternative, indicating that the BLM’s decision not to pursue consultation rested largely (if not entirely) on the existence of this private option. The court noted that the BLM’s change of stance in this regard was adequately justified, and that it was permissible because “the BLM’s evolving analysis was not a change in published regulation or official policy.”[10]
  • The private alternative option was viable. The court reviewed the BLM’s decision to grant the federal right-of-way under an “arbitrary and capricious” standard. Under the Administrative Procedure Act, a court may overturn an agency’s decision only if it is “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law.”[11] The court was thus highly deferential to the BLM’s conclusion that the alternative private route was, in fact, a viable one, and it did not discuss in detail what factors made the private project viable. However, the court did note that the BLM “had analyzed the Private Road Option as a ‘technically and economically feasible’ alternative to the Road Project. The BLM determined that North Sky’s pursuit of the Private Road Option . . . was ‘neither remote nor speculative.’” The court upheld the BLM’s decision that the private road was a viable option yet acknowledged that the private route “would ‘greatly impact vegetation and wildlife habitat,’ and possibly cause erosion[,]” among other constraints.[12]
  • The Road Project had “independent utility.” Here again, the court relied on the BLM’s findings that the Road Project had separable utility and was independent from the Wind Project. Specifically, the BLM had concluded that the Road Project “served the independent purposes of dust control, reducing erosion, and controlling unauthorized vehicle access to a national trail.”[13] From the court’s discussion, it appears that the independent utility factor was much more important to its NEPA analysis, whereas the existence of the private road option dominated the ESA analysis.
  • The BLM did undertake compliance measures with respect to the Road Project. The court notes that the BLM both submitted the Road Project for informal consultation under the ESA, as well as issued a finding of no significant impact under the NEPA.The Council of Environmental Quality (CEQ) has issued regulations that establish the minimum criteria agencies must meet when implementing the procedural provisions of NEPA. The CEQ regulations also call for agencies to adopt their own regulations, in order to supplement those promulgated by the CEQ. So while this case applies important principles, it is important to note that the result could be different under a different agency’s regulations.
  • This case did not specifically analyze the agency-specific regulations that the BLM (part of the Department of the Interior) uses in determining compliance procedures under NEPA. Rather, the controversy revolved around whether the BLM’s decisions complied with the CEQ regulations generally. But a couple of examples demonstrate how regulations can vary across agencies:
  • Beware Regulatory Differences Among Agencies
  • Department of the Interior (DOI). The DOI’s department-specific NEPA regulations state that whether an action is subject to the procedural requirements of NEPA “depends on the extent to which bureaus exercise control and responsibility over the proposed action and whether Federal funding or approval are necessary to implement it. If Federal funding is provided with no Federal agency control as to the expenditure of such funds by the recipient, NEPA compliance is not necessary.”[14] Agencies of the DOI, including both the BLM and the FWS, in turn can consult a DOI departmental manual (DM) that provides supplementary guidelines for implementing NEPA and DOI provisions. For example, the DM chapter pertaining to the BLM provides that an EIS level analysis should be completed when a proposed action meets one of two criteria: “(1) If the impacts of a proposed action are expected to be significant; or (2) [i]n circumstances where a proposed action is directly related to another action(s), and cumulatively the effects of the actions taken together would be significant, even if the effects of the actions taken separately would not be significant.”[15]
  • U.S. Army Corps of Engineers (part of the Department of Defense). According to the Corps’ specific regulations, in those situations where a permit applicant seeks to conduct activity requiring a Department of the Army permit which is itself only one component of a larger project, the district engineer must determine which portions of the larger project the agency has “sufficient control and responsibility” over to necessitate federal review.[16] Under these regulations, the district engineer is said to have this control “where the Federal involvement is sufficient to turn an essentially private action into a Federal action. These are cases where the environmental consequences of the larger project are essentially products of the Corps permit action.”[17] The Corps’ regulations were specifically upheld by the Ninth Circuit under a Chevron deference analysis[18] in Sylvester v. U.S. Army Corps of Engineers.[19]

In sum, while the court’s holding in this case does help define the contours of NEPA and ESA, it is important to be mindful of the fact that regulations and procedures vary across agencies.