Appeal from the United States District Court for the District of Columbia 90 cv 1195
Before: Wald, Sentelle, and Rogers, Circuit Judges.
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Opinion for the court by Circuit Judge Rogers.
Dissenting opinion by Circuit Judge Sentelle.
This appeal presents the question whether appellants, three environmental organizations and Diane Jensen, *fn1 have standing under the National Environmental Policy Act ("NEPA") to challenge the failure of the Secretary of the Treasury and the Commissioner of the Internal Revenue Service (together "the Secretary") to prepare an environmental impact statement prior to promulgating a final rule to allow a tax credit for an alternative fuel additive known as ethyl tertiary butyl ether ("ETBE"). The district court found that appellants lacked standing and granted summary judgment to the Secretary. Because we conclude that Ms. Jensen has standing, and we need not resolve the remaining standing claims, we reverse.
Section 40 of the Internal Revenue Code provides a tax credit of 60 cents for each gallon of alcohol used in the production of a "qualified mixture" of alcohol and gasoline. 26 U.S.C. Section(s) 40(a), (b)(1) (1988 & Supp. V 1994). *fn2 Prior to 1990, ETBE did not qualify for the tax credit because, while derived in part from ethanol (an alcohol produced by fermenting sugar contained in corn, sugar beets, and sugarcane), the final mixture contains no ethanol. Without the tax credit, ETBE could not compete commercially with a similar fuel additive, methyl tertiary ether. In 1988, sixty-one United States senators, including representatives from corn and sugar producing states, urged the Secretary to announce that ETBE qualifies for the tax credit.
In 1989, the Secretary issued a proposed rule that would re-interpret "qualified mixture" to include blends derived from but not containing alcohol. See Alcohol Fuels Credit; Definition of Mixture, 54 Fed. Reg. 48,639 (Nov. 24, 1989). Explaining that the rule was based on "policy considerations," 54 Fed Reg. at 48,639, the Secretary's notice indicated that the proposed ETBE tax credit:
will increase the substitution of ETBE for other octane enhancers that cause more pollution. Second, it makes ETBE a more viable means of increasing the oxygen content of gasoline, which should help smooth the transition to oxygenated fuels in those areas that are not in compliance with carbon monoxide standards. Third, it encourages the substitution of ETBE-gasoline blends (gasohol). ETBE does not absorb water, which means it is easier to transport than gasohol, and it can be blended into the gasoline with less pollution than the "splash blending' of gasohol. Fourth, it may increase the demand of domestic ethanol because ETBE is easier to use than ethanol, which would expand this alternative market for America's farmers. Fifth, ETBE is a fuel, not just an octane enhancer, and it will displace some gasoline consumption. Substituting a renewable and domestically-produced fuel for imported petroleum will enhance national energy security and will improve the trade balance.
Id. at 48,640 (emphasis added). Comments submitted to the Secretary anticipated that the proposed tax credit would enlarge the market for sugar-containing crops such as corn and sugarcane. The National Corn Growers Association stated the new rule would "help open the door to a whole new market for the nation's corn farmer." Letter from Alan Kemper, President, National Corn Growers Ass'n, to the Commissioner of the Internal Revenue Service (Dec. 8, 1989).
In 1990, the Secretary promulgated a final rule. Identical to the proposed rule, it interpreted Section 40's reference to a "qualified mixture" to include products derived from alcohol "even if the alcohol is chemically transformed in producing the product so that the alcohol is no longer present as separate chemical in the final product." Alcohol Fuels Credit; Definition of Mixture, 58 Fed. Reg. 8946 (1990) (codified at 26 C.F.R. Part 1). In the notice accompanying the final rule, the Secretary rejected the suggestion that the National Environmental Policy Act ("NEPA"), 42 U.S.C. Section(s) 4332, required him to prepare an environmental impact statement ("EIS") for this rule modification because Treasury Directive ("TD") 75-02 provided a "categorical exception" from the EIS requirement for IRS regulations "interpreting, implementing, or clarifying" Internal Revenue Code provisions.
Appellants filed a complaint for a declaratory judgment against the Secretary pursuant to 28 U.S.C. Section(s) 2201 and Federal Rule of Civil Procedure 57, and a permanent injunction barring the Secretary from enforcing the final rule on the ground that the Secretary had violated NEPA, 42 U.S.C. Section(s) 4332, by promulgating the ETBE tax credit without preparing an EIS. Asserting "a serious potential for harmful environmental consequences," appellants alleged that neither the Secretary "nor any other agency has undertaken any analysis of the ability of existing soil conservation and other environmental protection programs to mitigate adverse environmental consequences resulting from the ETBE tax credit." Appellants requested an order directing the Secretary to rescind the final rule and not to reissue a final rule until an adequate EIS has been prepared. They argued that the categorical exemption under TD 75-02 was invalid because it failed, contrary to NEPA regulations, 40 C.F.R. Section(s) 1508.4, to provide for "extraordinary circumstances" in which a normally excluded action may have a significant environmental effect requiring preparation of an EIS. With regard to their standing, appellants alleged that the tax credit would stimulate increased corn cultivation in Minnesota and Michigan, and increased sugarcane farming in Florida. Appellants asserted in their complaint that they regularly used wildlife refuges and other locations in these regions that would likely be adversely impacted as a result of this anticipated increase in farming. They further claimed that the Secretary's failure to prepare an EIS deprived them of information they needed to protect the areas in question. In response to the parties' cross-motions for summary judgment on standing, the district court granted the Secretary's motion. The district court concluded that appellants had not satisfied the geographical nexus and causation requirements necessary to establish standing under NEPA. Appellants filed this appeal, and our review is de novo. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Harbor Ins. Co. v. Stokes, 45 F.3d 499, 501 (D.C. Cir. 1995); Washington Post Co. v. U.S. Dep't of Health and Human Servs., 865 F.2d 320, 325 (D.C. Cir. 1989).
To meet the case or controversy requirement of Article III of the Constitution, a litigant in the federal courts must demonstrate that the litigant has suffered (1) an actual or threatened injury that (2) is fairly traceable to the challenged action and (3) is likely to be redressed by a favorable decision. See Valley Forge Christian College v. Americans United for Separation of Church and State, Inc., 454 U.S. 464, 472 (1982); City of Los Angeles v. National Highway Traffic Safety Admin., 912 F.2d 478, 483 (D.C. Cir. 1990). In Lujan v. Defenders of Wildlife, 112 S. Ct. 2130, 2136 (1992), the Supreme Court explained that to satisfy the injury-in-fact requirement, a litigant must demonstrate "an invasion of a legally-protected interest which is (a) concrete and particularized, and (b) actual or imminent, not conjectural or hypothetical." Defenders of Wildlife, 112 S. Ct. at 2136 (citations and internal quotations omitted). Moreover, the Court noted that to satisfy the "causal connection between the injury and the conduct complained of-the injury has to be "fairly ... trace[able] to the challenged action of the defendant, and not ... th[e] result [of] the independent action of some third party not before the court.' " Id. at 2136 (quoting Simon v. Eastern Ky. Welfare Rights Org., 426 U.S. 26, 41-42 (1976)).
To have standing under NEPA, appellants must show that the Secretary's alleged noncompliance with NEPA has "adversely affected" or "aggrieved" them, and that they are within the zone of interests protected by NEPA. City of Los Angeles, 912 F.2d at 492; Committee for Auto Responsibility (C.A.R.) v. Solomon, 603 F.2d 992, 997 (D.C. Cir. 1979), cert. denied, 445 U.S. 915 (1980); Administrative Procedure Act ("APA"), 5 U.S.C. 702. Under NEPA, a litigant is "aggrieved" by the agency's failure to prepare an EIS only if the litigant can show, first, that the failure "creat[es] ... a risk that serious environmental impacts will be overlooked," see City of Davis v. Coleman, 521 F.2d 661, 671 (9th Cir. 1975); see also City of Los Angeles, 912 F.2d at 492 ("NEPA gives rise to a cognizable injury from denial of its explanatory process, so long as there is a reasonable risk that environmental harm may occur."); and second, that the litigant has "a sufficient geographical nexus to the site of the challenged project that [the litigant] may be expected to suffer whatever environmental consequences the project may have." City of Davis, 521 F.2d at 671; see also City of Los Angeles, 912 F.2d at 483, 492. *fn3 The zone of interests requirement is satisfied so long as the litigant's interests are not "so marginally related to or inconsistent with the purposes implicit in the statute that it cannot reasonably be assumed that Congress intended to permit the suit." Clarke v. Securities Indus. Ass'n, 479 U.S. 388, 399 (1987); see also FAIC Securities, Inc. v. United States, 768 F.2d 352, 357 (D.C. Cir. 1985). A litigant who establishes injury within the zone of interests protected by NEPA "will necessarily have satisfied the constitutional injury requirement as well." City of Los Angeles, 912 F.2d at 483 (citation omitted).
Appellants forthrightly state that if any one of them has shown sufficient evidence to withstand summary judgment on standing, the court need not consider the standing of other appellants. See Watt v. Energy Action Educ. Found., 454 U.S. 151, 161 (1981); Legal Assistance for Vietnamese Asylum Seekers v. Dep't of State, 45 F.3d 469 (D.C. Cir. 1995); City of Los Angeles, 912 F.2d at 485. We therefore confine our discussion to Ms. Jensen who presented sufficient evidence to demonstrate that she has standing to seek declaratory and injunctive relief requiring the Secretary to conduct an EIS before implementing the ETBE tax credit.
A. Aggrievement under NEPA:
1. Risk of overlooking serious environmental harm.
The Secretary maintains that a complex and improbable sequence of events must ensue in order for the ETBE tax credit to affect the environment as appellants anticipate: namely, that the ETBE tax credit must prompt ETBE production, which must increase demand for ethanol, which must increase demand for corn, which must increase corn farming, which must cause environmental harm. With only one exception, however, the Secretary has failed to dispute appellants' proffered evidence establishing the likelihood of each of these causal links and the connections between them. The Secretary does not dispute record evidence that increased corn farming would adversely affect the environment by, among other things, increasing erosion and water pollution as farmers plant crops on now idle or underused land and expand their use of pesticides and fertilizers. It is also undisputed that an increased demand for ethanol would increase domestic corn production. Professor Peter Berck, an agricultural resource economist at the University of California (Berkeley), estimated that, as a result of the tax credit, the acreage of farm land devoted to growing corn would increase by between 281,000 acres to 14 million acres, depending on which of several projections regarding increased demand for ethanol proves to be correct. Insofar as estimates regarding increased ethanol production prove correct, the Secretary does not dispute Professor Berck's conclusions.
As a result, the question whether appellants have established the first prong of NEPA's injury-in-fact requirement depends solely on the likelihood that the ETBE tax credit will stimulate demand for ethanol.
While future demand for ethanol cannot be estimated with certainty, appellants need not proffer conclusive proof that an increase in demand will occur; rather, they need only establish a reasonable risk that such an increase will occur. See City of Los Angeles, 912 F.2d at 492; Salmon River Concerned Citizens v. Robertson, 32 F.3d 1346, 1355 (9th Cir. 1994) (upholding standing to challenge adequacy of EIS on proposed use of herbicides and noting that "[s]peculation that the application of herbicides might not occur is irrelevant"); see also Valley Forge Christian College, 454 U.S. at 462; Idaho Conservation League v. Mumma, 956 F.2d 1508, 1515 (9th Cir. 1992); ...