Wetlands Action Network (WAN) challenged the adequacy of the analysis of the United States Army Corps of Engineers (Corps) under the National Environmental Policy Act (NEPA)[1] for the dredge and fill of a wetland. The Ninth Circuit reversed the district court, holding that the Corps did not impermissibly limit the scope of its analysis and that the Corps's decision to issue an EA rather than an EIS was not arbitrary or capricious

Maguire Thomas Partners-Playa Vista (MTP-PV) planned a mixed-use development on the Playa Vista property. The property contains 186 acres of federally delineated wetlands, of which MTP-PV planned to fill 21.4 acres. MTP-PV proposed, and the Corps approved, a division of the development project into three separate permit applications that corresponded to the three phases of the project. Phase I, the only phase at dispute here, required a permit to fill eight acres of wetlands for development and another eight acres (four acres of which would be restored to wetlands) for the creation of a 51.1 acre freshwater wetland complex. The wetland complex was to mitigate for the total 21.4 acres of wetlands to be filled by all phases of the project.

The Corps issued a public notice of the permit application for Phase I in January 1991. The United States Fish and Wildlife Service (FWS), the National Marine and Fisheries Service (NMFS), and the Environmental Protection Agency (EPA) all expressed concern that, among other things, there was insufficient analysis of project alternatives and a lack of comprehensive consideration of the cumulative impacts of the entire development project. MTP-PV submitted comments and scientific studies addressing these concerns. The Corps and MTP-PV met with the federal agencies on several occasions, and in May 1992, special conditions were added to the permit to address these concerns. In July 1992, the Corps issued the permit, which included a revised environmental assessment (EA), a finding of no significant impact (FONSI), and the special conditions. In the EA, the Corps evaluated the cumulative impacts the project would have on the surrounding areas, but found that it did not need to include consideration of the upland development because it was outside Corps jurisdiction. The Corps also determined that an environmental impact statement (EIS) was not required because the project would result in a net increase in wetland values. In April 1993, MTP-PV began extensive filling, clearing, and grading in the permitted wetlands area.

WAN filed suit in December 1996, alleging four violations of NEPA.[2] The district court denied MTP-PV intervention as of right on the NEPA claims, but allowed permissive intervention in the remedial phase.[3] The district court granted WAN's motion for summary judgment, holding that the Corps's actions with regard to its NEPA requirements were arbitrary and capricious.[4] Specifically, the district court held that 1) the Corps had violated NEPA by improperly limiting the scope of its analysis in its EA and 2) even if the scope was proper, the Corps's decision to issue an EA rather than an EIS was arbitrary and capricious.[5] The district court rescinded MTP-PV's permit and enjoined further construction in the permit areas.

The Ninth Circuit first upheld the district court's denial of MTP-PV's motion to intervene as of right on the merits, stating, "[a]s a general rule, 'the federal government is the only proper defendant in an action to compel compliance with NEPA.'"[6] A private party cannot be a proper defendant in a NEPA action because a private party cannot violate NEPA.[7] This general rule applies even when the NEPA claim involves an attack on a permit issued to a private party.

Second, the Ninth Circuit reviewed the scope of analysis the Corps used in preparing the EA. An EIS is required for all "major Federal actions significantly affecting the quality of the human environment."[8] The Corps's scope of analysis for a NEPA review where the federally regulated portion is only one aspect of a larger private project is limited to the permit activity and "those portions of the entire project over which the district engineer has sufficient control and responsibility to warrant Federal review."[9] The Ninth Circuit has "upheld an agency's decision to limit the scope of its NEPA review . . . where the private and federal portions of the project could exist independently of each other."[10] The district court found that the scope of review was improperly limited to impacts of activities covered by the permits because the upland development and permitted wetland development were interdependent. The Ninth Circuit disagreed, determining that the upland development could proceed without the permit and that the permitted activity, which included development of the freshwater wetland complex, had value in itself. Control over the small segment of permit activity was not enough to federalize the entire project. Deferring to the Corps, the Ninth Circuit determined that the Corps's decision to limit its NEPA review was not arbitrary or capricious.

The Council on Environmental Quality's (CEQ) regulations implementing NEPA require that an agency consider cumulative actions within a single EA or EIS.[11] That is, several related actions must be reviewed together to prevent an agency from "dividing a project into multiple 'actions,' each of which individually has an insignificant environmental impact, but which collectively have a substantial impact."[12] The Ninth Circuit uses an "independent utility" test to determine whether an agency must consider multiple actions in a single NEPA review.[13] Here, the Corps concluded that each of the three development phases had independent utility. The Ninth Circuit determined the record supported this conclusion. Phase I included development of office space and dwelling units that could be utilized even if the later phases could not be constructed. It would have been impracticable for the Corps to consider all phases of the project in the first permit because planning for Phases II and III was not yet complete. Also, the Corps's determination of the scope of an EIS is entitled to deference. As a result, the Ninth Circuit held that the Corps was not required to consider the three phases together as cumulative actions.

The court then addressed the Corps's decision to issue a FONSI. The district court found the Corps's decision arbitrary and capricious because of the untested nature of the freshwater wetlands system, the lack of a complete mitigation plan, and the controversy surrounding the permit. The Ninth Circuit disagreed with the district court on all three grounds. First, the Ninth Circuit held that the "conclusion that the construction of the freshwater wetland system will result in a net environmental benefit was based on relevant and substantial data."[14] Therefore, the Corps took the necessary "hard look" before issuing the FONSI. Second, an agency decision to forego an EIS may be justified by mitigating measures.[15] The record supported the Corps's decision that the wetlands system was an adequate mitigating measure. The mitigation measures were deemed to have been developed to a reasonable degree and reviewed by the Corps and other agencies at the time the permit was issued. Third, a sufficient public controversy regarding an agency action's size, nature, or effect could require the Corps to prepare an EIS. However, if the public is only opposed to a particular use in general, the action is not rendered controversial.[16] The majority of objections to the freshwater system did not address the size, nature, or effect of the system, but rather expressed opinions that the system should be changed to saltwater or that the system should be relocated. Further, the Corps adequately addressed all the federal agencies' concerns over the effects of the freshwater system during the two-year review process for the permit. The court concluded the Corps's decision to forego preparing an EIS was not arbitrary or capricious. Thus, the Ninth Circuit reversed the district court's grant of summary judgment and remanded the case with instructions to vacate the injunction against MTP-PV.