Cancellation in 1994 of a fifty-year timber contract dating to the 1950s released uncut timber in the TongassNational Forest in Alaska from the contract sale. After the contract was cancelled, the U.S. Forest Service offered the uncut released timber on a competitive bid basis to other logging companies. Environmental groups filed suit, seeking to enjoin the sale. They argued that the Forest Service failed to reconsider alternative uses of the land as required by the National Environmental Policy Act (NEPA) and the Alaska National Interest Lands Conservation Act (ANILCA).

The Forest Service manages national forests pursuant to its regional forest plans, which are subject to NEPA and ANILCA. The Tongass Forest Plan designated the contested lands as lands managed for multiple use (including timber) and for resource development. The plaintiffs argued that the contested lands' designation should be re-evaluated in a supplemental environmental impact statement (SEIS) since they have been released from the contract requirements. The Forest Service had determined that the areas were not in need of supplemental EISs because the need for timber and timber related jobs had not changed since the contract termination, and therefore the termination was not a significant change requiring the evaluation of new factors.

The Ninth Circuit first addressed whether the agency action should be reviewed with an arbitrary and capricious standard or a reasonableness standard. Because the court determined that the question of whether the Forest Service was required to undergo a formal SEIS is a legal issue, the strong deference granted to agencies for factual and technical matters was not warranted. Therefore, the Ninth Circuit applied a reasonableness standard in reviewing the agency actions.

Addressing the merits, the court agreed with the plaintiffs that the Forest Service had to consider alternatives in a SEIS. The Forest Service argued that since there were no new circumstances, only new parties, a SEIS was not required because a SEIS is only required when "significant new circumstances or information relevant to environmental concerns and bearing on the proposed action of its impacts" arise.[1] The court disagreed, finding that the previous Forest Plan and EISs had been constructed around the pre-existing contract obligations, and that the cancellation of a contract which had previously limited the range of alternatives that an EIS could consider was a significant new event. The court also found that because the timber volume requirements found under the contract no longer existed, the Forest Service only had to meet market demand for timber, as required by the Tongass Timber Reform Act. Therefore, this gave the Forest Service flexibility it previously lacked in making site specific plans. Furthermore, the designation of the land as multiple use land is only a broad guideline, not a mandate, and did not exempt those lands from compliance with NEPA and ANILCA. Finally, the court found that because the contract existed before ANILCA, it had not met ANILCA section 801,[2] requiring the subsistence needs of the village residents be met. Release from contract obligations now freed the Forest Service to meet these needs.

In addressing whether to issue an injunction, the court stated that it must balance the harms between sustaining a "crippling" blow to the timber industry and economy against the injury to Alaska natives, tourism, and environmental concerns. The court decided to extend the temporary injunction and remand to the district court who could better weigh the alternatives, as this was essentially a factual question.

Three days after this opinion was originally filed, Congress enacted the Salvage Rider, which stated that an EIS or ANILCA subsistence evaluation prepared for timber sales in certain areas of Alaska, including this area in dispute, is deemed sufficient if the Forest Service sells the timber to an alternate buyer.[3] This provision was passed specifically to affect the outcome of this case. The court addressed this sufficiency language, holding that EISs in question here were not prepared "for a timber sale" because they were created around the pre-existing timber contract. The court recognized that Congress could change the underlying substantive law in a pending case, but that it had not done so here because "there is not the slightest indication that Congress intended" to vitiate the EIS process by eliminating the consideration of alternatives requirements of NEPA and ANILCA.