The U.S. Department of Transportation (Department) and the California Department of Transportation (Caltrans) proposed a project to relieve the traffic congestion on California State Highway 1. The project proposed to realign the highway system through HattonCanyon to the city of Carmel-by-the-Sea (Carmel). Carmel and other environmental groups challenged the project because it was insufficient to meet the requirements of the National Environmental Policy Act (NEPA)[1] and the California Environmental Quality Act (CEQA).[2] The Ninth Circuit held that the Environmental Impact Statement/Report (EIS/R) did not adequately discuss the impacts on wetlands or reasonable alternatives. The court remanded the case for the district court to decide if the cumulative impacts analysis was adequate.

The first challenge by Carmel alleged that the EIS/R did not adequately discuss the effects on wetlands. The EIS/R, written in 1987, claimed that twelve acres of wetlands would be lost but mitigation would reduce the effects to almost no net loss of wetlands. Several reports by various agencies showed that the new wetlands had been created and some wetlands had moved due to an earthquake in 1989. Finding that the Department and Caltrans had relied on "stale scientific evidence" for its analysis of the wetlands, the Ninth Circuit required a reexamination of the EIS/R.

The court next looked at the proposed mitigation of wetlands by the agencies. While not ruling on the mitigation findings because it had already found that the EIS/R was inadequate in its analysis of the wetlands, the court did point out some problems with the mitigation. First, a letter from the Fish and Wildlife Service (USFWS) stated that Caltrans had bulldozed a wetland in 1984 and in 1986 without a permit. USFWS maintained that Caltrans should not be allowed to use its restoration of the bulldozed wetland as part of its mitigation. Furthermore, the Corps of Engineers criticized the EIS/R's idea to use a drainage channel for highway runoff as part of its mitigation because it would be filled with pollutants and toxins. The agencies also proposed enhancing existing wetlands while not compensating for the loss of other wetlands. The court noted that this mitigation plan could cause problems. Since the mitigation was also based on stale scientific evidence, the court found that the EIS/R's mitigation analysis was inadequate.

The next challenge by Carmel was directed at the cumulative impacts analysis. The regulations of NEPA require agencies to analyze the cumulative impacts of a proposed project, which includes the impacts of "past, present, and reasonably foreseeable future actions."[3] The cumulative impacts analysis for the EIS/R was only slightly more than one page long. Carmel also argued that the EIS/R did not take a "hard look" at the project's impact on Hickman's onion, a plant noted as a likely candidate for listing under the Endangered Species Act.[4] The court pointed out that the EIS/R did calculate the percentage of onions that would be lost as a result of the project. The court adopted the Fifth Circuit's test for cumulative impacts analysis. The Fifth Circuit stated that an adequate cumulative impacts analysis would identify, 1) the area in which effects of the proposed project will be felt, 2) the impacts that are expected in the area from the proposed project, 3) other actions-past, proposed and reasonably foreseeable--that have had or are expected to have impacts in the same area, 4) the impacts or expected impacts from these other actions, and 5) the overall impact that can be expected if the individual impacts are allowed to accumulate.[5]

The Ninth Circuit found that the cumulative impacts analysis was insufficient under this test. The court remanded this question to the district court because the Ninth Circuit was unable to examine a part of the analysis that was in the Carmel Valley Master Plan EIS/R.

The court then turned to the alternatives analysis of the EIS/R. The regulations require that all agencies shall "[r]igorously explore and objectively evaluate all reasonable alternatives."[6] The court explained that there are six levels of service for traffic congestion. Level A is the best, allowing easy flow of traffic. Level F is the worst and has severe traffic jams. The agencies specified a number of alternatives that included widening the existing road to building a separate road through Hatton Creek, each ranked from level of service C to level E. The Draft EIS/R purpose and need expounded a number of goals including improving capacity, safety, and air quality. However, the purpose and need of the Final EIS/R stated that a C[7] level of service was the minimum acceptable level. Thus, the agencies changed the purpose and need but neglected to change the alternatives to meet this new purpose and need. The new purpose and need effectively eliminated all alternatives except for alternative 1C Modified, which would improve the traffic flow to level of service C. Alternative 1C Modified was the preferred alternative of the agencies. The court pointed out that merely changing the purpose and need of an EIS/R was not an abuse of discretion. However, the court held that where all the alternatives were formed to meet one purpose and need, and then statement of purpose and need is later changed to eliminate all alternatives except for one then there is an abuse of discretion. The Ninth Circuit accordingly held that the alternatives analysis was inadequate.

Carmel also challenged the analysis of the effects on the Monterey Pines. The court found that the EIS/R adequately considered the effects on the Monterey Pines. The EIS/R stated that twenty-one acres of Pines would be destroyed but the agencies would mitigate the loss by planting 20.3 acres of pines. The agencies acknowledged that the trees' seedlings might not survive. The court found that this analysis was adequate.

Finally, the court ruled on the issue of attorney's fees. A federal statute allows recovery of attorney's fees for the prevailing party if the United States was not substantially justified in its position.[8] The court found that Carmel was the prevailing party on the issues of wetlands mitigation, cumulative impacts analysis, and reasonable alternatives analysis. Furthermore, the court found that the agencies were not substantially justified because their position failed the reasonable person test. Accordingly, the court awarded attorney's fees to Carmel for the issues it prevailed on.

Judge Trott lodged a long dissent to the findings of the court on the issues of wetlands mitigation, cumulative impacts analysis, and reasonable alternatives analysis. He compared the task of trying to complete this project, which had been in the works for over fifty years, to the woes of Sisyphus in his never-ending quest to push the boulder up over the hill.

First, he attacked the holding on the alternatives analysis. He found that the statements of purpose and need in the Draft EIS/R and the Final EIS/R were not materially different. The agencies pointed out several times in the Draft EIS/R that they expected the level of service C to be a minimum, even though they never specifically mentioned it in the statement of purpose and need. Judge Trott found that anyone making comments was on notice of the minimum because of the statements in the Draft EIS/R. Therefore the statement of purpose and need in the Final EIS/R was not materially different from the statements in the Draft EIS/R. If the alternatives analysis was adequate for the Draft EIS/R then it should also be adequate for the Final EIS/R.

Judge Trott also found fault with the majority's holding regarding wetlands mitigation. First, he argued that the EIS/R is only required to discuss mitigation; the agencies do not actually have to carry out the mitigation.[9] Furthermore, he found that the mitigation proposed was more than adequate.

Finally, Judge Trott found that the cumulative impacts analysis was adequate. He stated that the plaintiffs have the burden of showing that some impacts were not discussed. Carmel did not point out any other actions that would impact the project. Judge Trott also found that the impacts would be the same no matter what alternative was chosen. Thus, the alternatives analysis was adequate.