NATIONAL WILDLIFE FEDERATION v. SNOW

Opinion for the Court by Circuit Judge LEVENTHAL.

Dissenting opinion by Circuit Judge WILKEY.

LEVENTHAL, Circuit Judge:

Appellant National Wildlife Federation brought this case to challenge two Federal Highway Administration regulations governing the number and timing of public hearings on federally assisted highways.1 Appellant alleged that the regulations should have been promulgated in accordance with the notice and comment rulemaking requirements of the Administrative Procedure Act2 (APA). The District Court held that the challenged regulations were exempt from those requirements. We affirm that ruling. Appellant also alleged that the regulation permitting advance acquisition of highway right of way parcels, without any public hearing on issues of location or any environmental impact statement, violated the public participation requirement of the Federal-Aid Highway Act,3 the National Environmental Policy Act4 (NEPA) and the Clean Air Act.5 The District Court dismissed that count on the ground that it was not ripe for decision. We reverse that ruling and remand for the entry of appropriate relief.

I.

The applicability of notice and comment requirements to promulgation of the regulations involved in this case turns on the scope of the exemption contained in 5 U.S.C. § 553(a). Subsection (a) provides that Section 553 applies:

The Federal Highway Administration (Administration) considered both of the regulations challenged in this appeal as relating to grants, and therefore within the § 553(a)(2) exemption from notice and comment rule-making. The issue is one of first impression.6

The regulations at issue are in form procedural ones governing the timing and number of public hearings to be held before building a federal-aid highway. Section 128 of the Federal Aid Highway Act requires a state highway department to certify to the Federal Highway Administration (FHWA) that it has had or offered public hearings on a highway project, and that it has considered the "economic, social, environmental, and other effects of the plan or highway location or design and various alternatives which were raised during the hearing or which were otherwise considered."7 The Administration, which exercises by delegation the functions vested in the Secretary of Transportation, has implemented § 128 by providing a two-stage preliminary hearing and approval sequence for a proposed highway—one stage for the highway route location, and one for the design. Location approval determines the corridor through which the proposed highway is to pass, and is preceded by a "corridor public hearing." 23 C.F.R. § 790.3(a).8 Design approval determines the major technical specifications of the highway as a whole and its exact location, and is preceded by a "design public hearing." 23 C.F.R. § 790.3(b).9 In cases where a corridor hearing held previously is considered inadequate because of new information or proposals and a new corridor hearing is held, one of the regulations challenged in this appeal now permits the Administration's division engineers to approve requests of state highway agencies to combine the corridor hearing and the design hearing, and to request location and design approval simultaneously.10 The other challenged regulation11 authorizes federal funding for acquisitions of highway rights-of-way prior to the corridor hearing.12 Both of these modifications in existing procedures are alleged to have substantially restricted the public's opportunity to participate in the highway planning process.

Appellant Federation urges that these major changes in existing procedures cannot be achieved unless FHWA observes the notice and comment promulgation procedures provided in § 553. It argues that the § 553(a)(2) exemption for agency grants should be read narrowly, in accord with the Congressional intent revealed in the APA's legislative history, and that the exemption does not extend to regulations governing the procedures under which grants are given, as opposed to the grants themselves. A serious gap in the APA would be created, says appellant, if the (a)(2) exemption omits from the APA's procedural protections all regulations addressed to the rights or welfare of the general public that are promulgated in connection with any of the massive federal grant-in-aid programs.

We do not disagree with appellant's diagnosis of the problem. Yet we conclude that, as written, the APA does create a serious gap in the procedural protections the APA was enacted to provide. At least in the context of the federal highway grant-in-aid program, we can find no principled way to remedy that gap by a narrowing construction. As a matter of policy, Congress might have done better to anticipate that the federal grant and benefit programs the government would come to administer would have a direct policy impact on individual citizens and society as a whole. Its desire that legislative functions in administrative agencies "be exercised only upon some form of public participation after notice"13 might better have been served by recognizing that spending money always involves public choices, often significant public choices that could benefit from the ventilation of views that public participation entails. A number of agencies apparently exempt from rulemaking under subsection (a)(2) have recognized these benefits and have provided by regulation for notice and comment procedures prior to adoption of policy regulations for grant or benefit programs. See, e. g., Rodway v. U.S. Department of Agriculture, 168 U.S.App.D.C. 387, 514 F.2d 809 (1975); 29 C.F.R. § 2.7 (1975).14 The FHWA has also engaged in notice and comment rulemaking but it has not bound itself to follow this course. We must determine FHWA's procedural obligations under the Act.

National Wildlife cites legislative history indicating that the (a)(2) exemption was limited to "proprietary matters,"15 and urges that proprietary matters be construed as limited to those functions that are essentially managerial and do not ordinarily involve questions of substantive public policy. Congress may well have provided an exemption in contemplation of "proprietary matters" relatively innocuous or insignificant. However, the use of that term in the legislative history was apparently only a shorthand reference to the public property, loans, grants, benefits and contracts exempted in subsection (a)(2). Congress viewed these activities as proprietary in character and exempted them because "the principal considerations in most such cases relate to mechanics and interpretations or policy, and it is deemed wise to encourage and facilitate the issuance of rules by dispensing with all mandatory procedural requirements."16 The mechanical implementation of "proprietary" programs was prominent, but it did not define the exemption. Congress instead included matters of interpretation and policy17 by way of example, and implicitly recognized that the exemption would also cover cases where those "principal considerations" it expected to characterize "most cases" would not apply.18

The House and Senate Committee reports do indicate that the excepted subjects must be "directly" or "clearly and directly involved" in order to make the exemption operative.19 But this does not mean that when excepted subjects are clearly involved, the exemption reaches only mechanical rules on those subjects. Clearly Congress meant to confine the (a)(2) exemption to its express terms, to prevent its use as an all purpose escape clause. But there can be no doubt that the regulations challenged in this case are both clearly and directly related to a federal grant program. One changes the approval process necessary to maintain state highway department eligibility for federal funds; the other allows federal funds to be used for right-of-way acquisitions before the normal location and design approvals have been given. These regulatory decisions go beyond mere managerial mechanics.20 They directly affect the general public's hearing and participation rights in the administration of the federal grant-in-aid program. However, there is a clear and direct connection with an exempted "proprietary" subject, and this excuses the FHWA from an overall statutory obligation to comply with notice and comment procedures in promulgating the challenged regulations.

II.

There remains the issue whether the advance acquisition regulation is consistent with the Federal Highway Act.21 Evaluation of this contention requires a factual understanding of the Federal Highway Act and its administration, and how the challenged practice fits into the overall scheme of regulation. To that setting we now turn—albeit with diffidence if not trepidation, in view of the rudimentary guidance given us by both counsel.

A.

Although there has been a federal-aid highway program of sorts ever since 1921, the Federal Aid Highway Act of 1944, establishing the "A-B-C" system, set the basic framework for the current aid program. The 1956 Act made clear the nation's priority commitment to build a nationwide highway system of 40,000 miles, and worked out a funding system to finance it into reality.22 The Act established a series of federally approved requirements for state highway departments seeking federal funding for their planned highways. In theory, the Administration evaluates state compliance with federal standards through a review of documentary evidence; in practice the FHWA division engineer cooperates to help the state highway department "improve its planning and engineering capabilities through a process of continuous and close working liaison."23

Because building highways can be controversial and disruptive, Congress has super-imposed on the federal-aid highway program a series of steps and standards that seek to incorporate into the process of highway designations deliberate attention to a number of objectives: citizen participation; relocation assistance; environmental quality; transportation planning that is comprehensive; and other social values.24 Questions have been raised as to whether the FHWA has integrated these various standards into the administrative process in a way that would assure systematic consideration of the values they represent at optimal points in the decision process.25 Thus FHWA hearing regulations recite that the "need"26 for the highway is for comment at a corridor public hearing. But by the time of this location phase, need has already been established to the satisfaction of those planning the highways.27 By the time a proposed route reaches the location phase— when a NEPA statement28 and the first public hearing are normally required29—the route has already been put on a federal-aid system by the FHWA and has been included in the construction program submitted annually by the state.30 And prior to the time of submission of the construction program, the state will have made a determination as to the need for the highway projects included in the program, established project priorities, and coordinated these proposals with state and local planning.31 "Thus, although the need for [a highway] might be disputed, the determination that it should be built has already been made by planners and politicians alike."32

To implement the legislative scheme for consideration of environmental and social values, courts have taken steps to assure consideration at a point that is meaningful. They have ruled that location approval, given after the first public hearing, constitutes major federal action triggering NEPA requirements. See Indian Lookout Alliance v. Volpe, 484 F.2d 11, 16-17 (8th Cir. 1973) and cases cited. They have concluded that acquisition of land for a highway may preclude the objectivity required by NEPA, and have enjoined further acquisition of land until compliance with NEPA can be demonstrated. Lathan v. Volpe, 455 F.2d 1111 (9th Cir. 1971).33 In recognition of "ever increasing congressional concern that highway planners be directly and publicly confronted with opposing views," this Court has refused to hold that a statute directing construction of certain portions of the Interstate Highway System was an implied repeal or modification of § 128 hearing requirements. D.C. Federation of Civic Associations v. Volpe, 140 U.S.App.D.C. 162, 167, 434 F.2d 436, 441 (1970).

We are similarly called upon in this case to assure that the procedures adopted by FHWA are consistent with Congress's clear intent to incorporate new values into the highway decisionmaking process. The challenged regulation permits state highway departments to be reimbursed for right of way parcels that they have acquired in advance of any public hearing or environmental analysis of the location or desirability of the planned highway.34 Such acquisitions are allowed in "exceptional circumstances," defined as "hardship acquisitions" and acquisitions involving "protective buying." 23 C.F.R. § 712.204(d). Hardship acquisitions are purchases necessary to "alleviate particular hardship to a property owner . . . because of an inability to sell his property." Protective buying is buying necessary to "prevent imminent development and increased costs of a parcel which would tend to limit the choice of highway alternatives." Though termed "exceptional" by the FHWA, these situations are essentially the basic reasons for any advance acquisition program.35

Use of Federal funds for advance acquisition of rights-of-way antedates World War II and explicit statutory authorization of the practice.36 The first clear indication of Congressional intent that advance acquisition could be used to facilitate the highway program came in the Federal-Aid Highway Act of 1956. As a practical matter, however, the rules of apportioning money under the highway trust fund worked to preclude states from investing funds in the acquisition of property in advance of current needs. To make the advance acquisition authorization operational, Congress in 1968 established a right-of-way revolving fund and authorized advances to a state agency—to be charged against the state's future federal highway fund allocations—for advance acquisitions of right-of-way parcels. The "advance" acquisitions were limited in time terms—to parcels acquired no less than 2 nor more than 10 years prior to actual construction.37

In the same act, Congress amended Section 128(a)'s public hearing requirement, to mandate consideration of social and environmental effects of a highway location and its consistency with community urban planning objectives.38 The amendment responded to a recognized "need to increase the effectiveness of public hearings."39 There was no provision in the language of either amendment concerning the central question of timing at stake in this appeal— whether, in order to give effect to the public hearing section of the Act, a hearing is a necessary precondition to any advance acquisition otherwise authorized by the Act. There is legislative history, however, as we shall develop in part C. But first we interject to discuss the issue of ripeness.

B.

The District Court did not reach the central question of statutory construction, on the ground that it was not ripe for decision. We reverse.

In a trilogy of food and drug cases, the Supreme Court articulated standards governing the timing of judicial review in pre-enforcement suits challenging administrative regulations. See Abbott Laboratories v. Gardner, 387 U.S. 136, 87 S.Ct. 1507, 18 L.Ed.2d 681 (1967); Toilet Goods Ass'n, Inc. v. Gardner, 387 U.S. 158, 87 S.Ct. 1520, 18 L.Ed.2d 697 (1967); and Gardner v. Toilet Goods Ass'n, Inc., 387 U.S. 167, 87 S.Ct. 1526, 18 L.Ed.2d 704 (1967). Before accepting such a suit, the court must "evaluate both the fitness of the issues for judicial decision and the hardship to the parties of withholding court consideration." Abbott Laboratories, supra, 387 U.S. at 149, 87 S.Ct. at 1515. In the two cases held to be ripe for review, the Court concluded that the issues presented were legal ones that would not be enhanced by a further factual record, and that hardship to the parties would result if court review were withheld. The same consideration applies to the case before us. The question is a legal one, whether the advance acquisition regulation is consistent with the FHWA's statutory authority under the Highway Act. Appraisal of the statutory requirements will not be enhanced by a factual record. The allegation that advance acquisitions will subjectively undermine the effectiveness of subsequent public hearings and environmental analysis is not one predictably susceptible to proof in a particular highway approval process. Plainly, the failure to follow procedures designed to insure objective consideration of environmental values works an injury which is difficult to repair after the decisionmaker has reached a commitment to a particular proposed project or course of action. Calvert Cliffs Coordinating Comm. v. AEC, 146 U.S.App.D.C. 33, 449 F.2d 1109 (1971).

Since the challenged regulation is presently being implemented, the prospect of present and continuing harm to petitioners is substantial—if they are right in their assertion that the procedures mandated by the Highway Act and NEPA are being evaded. The issue of harm and the issue on the merits are intertwined.40 Sound principles of judicial administration lead us to conclude that review of the core legal question cannot fairly be delayed until after particular location decisions have been made and approved. We therefore turn to the merits of petitioner's claim.41

C.

And so we come to the issue of Congress's intent when in 1968 it simultaneously made substantial amendments to Highway Act sections dealing with public hearings and advance acquisitions. Respondents contend that the statute is unambiguous, and that the only legislative history relevant to the question of interpretation is that of the Federal-Aid Highway Act of 1956, which gave statutory authorization for advance acquisitions. We find those arguments unpersuasive.

The statute as presently written says nothing about when a public hearing should take place in relation to an advance acquisition. Indeed it says nothing about when a public hearing should take place in relation to the responsibilities the Administration exercises routinely when no advance acquisitions are proposed.42 It simply provides for a hearing on the location of a highway and for consideration of effects and alternatives, before applying for federal approval of a highway project, and for federal approval of advance acquisitions of rights-of-way in anticipation of later construction. We look to the legislative history for guidance.

We are engaged in interpreting the federal aid highway statute, as amended and as a whole. Insofar as this case is concerned, the 1968 amendments to that statute are of controlling significance. As demonstrated by the 1967 Department of Transportation study on advance acquisition of rights-of-way commanded by § 10 of the Federal Aid Highway Act of 1966,43 the advance acquisition program authorized in 1956 had never gotten off the ground because of inadequate funding. The Study confirmed the utility of acquiring right-of-way parcels significantly in advance of construction. It concluded that an advance acquisition program can minimize costs by forestalling costly development of land ultimately required for highway purposes (protective buying); that more orderly relocation of existing property users can be achieved (hardship buying); that better community planning is possible with early identification of highway locations; that resultant leadtime facilitates advance engineering planning and design; that negotiations can go forward without the pressure of short deadlines; and that economic waste is diminished.44 These enumerated benefits are based on the assumption that advance acquisition signals a commitment to building a highway. Indeed the study cautions that "a program of advance right-of-way acquisition should be undertaken with great caution to make sure that commitments are not made only to be abandoned after further study is made. Advance planning and engineering must be of sufficient depth and scope as to minimize the necessity for changes in the highway location or right-of-way requirements."45 Accordingly the study recommended that in the execution of the "substantially new program"46 it suggested, and Congress later adopted, "no advance right-of-way shall be acquired prior to at least one public hearing and firm establishment of location."47 The premise of the architects of the funded acquisition program—that firm commitment to location would necessarily precede any advance acquisition of right-of-way—is undercut by the current FHWA position that its regulations are designed to prevent advance acquisitions from influencing the environmental assessment of a project, the decision whether or not to build a project, and the selection of a specific location. 23 C.F.R. § 712.204(d)(3).48 Section 108's limitation of Federal reimbursement to those parcels actually used in highway construction is similarly persuasive that Congress assumed that the parcels would be bought with the firm intention of building a highway over them.

Like the inoperative advance acquisition program prior to 1968, the public hearing provision of the Act prior to 1968 was limited in impact, requiring a hearing limited to "economic effects" whenever a highway either "bypasses or enters into" an urban area. In 1968, Section 128(a) was amended to require consideration of social, environmental, and community urban planning effects. Rather like NEPA's effect of inserting new environmental values wholesale into the federal government's established decision process, Sec. 128 mandated the insertion of new values into the federal highway decision process. In both instances, however, the reforms envisioned by these enactments were not spelled out in the statute in detail. Section 128 was designed to sweep broadly—to respond to the "need to increase the effectiveness of public hearings;" to "emphasize the importance of these hearings;" and to make clear that participant views would be "considered and weighed."49 As long as its goals could be satisfied, § 128 left room for some interpretation by agency or court. But as a House Report explained in 1970, "the hearings would be a useless formality" if a final determination of location was made before the location hearing was held.50

This examination of the background of the advance acquisition and public hearing provisions leads us to conclude that the firm commitment to location Congress generally envisioned as a condition precedent to advance acquisitions can be made only after a location hearing considering alternatives to that location has been held. Otherwise the hearing process becomes little more than a charade. Given the plain desire of Congress to increase the effectiveness of those hearings, an agency interpretation of the statute directly contrary to that intent cannot be given customary deference. Nor can we defer to an agency's changing its mind about how to administer a program when the change seeks to exercise a discretion not properly found in the Act. By allowing advance acquisitions without prior hearings whenever protective buying or hardship buying is the object, the Administration has effectively drafted an exception from § 128's requirements whenever advance acquisition authority is exercised. No such broad exclusion is suggested on the face of the statute or in accompanying expressions of Congressional intent.51

Our reconciliation of the purposes expressed in the advance acquisition and public hearing sections is confirmed by both legislative and executive commentary in the legislative history. Congressional understanding of the interrelation between the beefed-up public hearing and advance acquisition sections was shaped by a letter from the Secretary of DOT, as well as by the study report already referred to. Secretary Boyd noted that the proposed legislation would implement the conclusions of the DOT study and continued:

In language tracking that of both the DOT study and the Secretary's letter, the report of the Senate Public Works Committee stated:

We read this express consideration of the interrelation of the two sections as an adoption of the Secretary's representation that no advance right of way would be acquired prior to public hearing, and as an affirmation of our independent reconciliation of the goals those provisions sought to implement. This decision does not make advance acquisitions possible only when a public hearing is held. We have already adverted to the possibility that narrower regulations could be drafted. And the truly federal character of the federal aid highway system—its recognition that a state need not immediately decide whether its planned highway will be built with federal aid—allows a state to finance such acquisitions out of its own funds, and later decide to include the proposed highway in the federal aid system.54 We simply conclude that federal funds cannot ordinarily be used to finance advance acquisition of right-of-way parcels prior to a location hearing.

The judgment dismissing the complaint is vacated and the case remanded for entry of a decree in accordance with this opinion.

So ordered.

WILKEY, Circuit Judge (dissenting):

I concur with Judge Leventhal's opinion for the majority in regard to parts I and II.A. I respectfully dissent in regard to part II.B, the question of timing, "whether, in order to give effect to the public hearing section of the Act, a hearing is a necessary precondition to any advance acquisition otherwise authorized by the Act."1

There are two valid reasons for prospective purchases (advanced acquisition) from the revolving highway fund: (1) to relieve individual hardship of prospective sellers when a well founded belief exists that a projected highway will take a certain route, and yet the actual implementation of the purchases has not begun; and (2) to protect the government (taxpayers) by purchasing in advance of the public decision, thus avoiding speculative price increases, which is simply good business-like management of government property. Prospective purchasing thus is a highly necessary authority for the Federal Highway Administration (FHWA) to have—and to be able to exercise effectively.

This power on which the disputed regulations are based was granted by statute in 1956. The authority was not taken away by the 1968 changes enacted by Congress, however you may read the letter of the Secretary of Transportation and the Senate Committee report. Neither Executive Branch comments, "understandings" etc., nor Congressional committee reports repeal laws; the power once granted by statute is there until taken away by statute. The majority opinion points to no language in the 1968 legislation which does this.

It is thoroughly impractical and ineffective to telegraph the likely highway routes by public hearings, for then the power of prospective purchasing simply becomes a nullity. There is nothing prospective about it, and the benefits due the taxpayer by the wise employment of government funds before prices become inflated is lost.

The opposing consideration is, of course, that "advance acquisitions will subjectively undermine the effectiveness of subsequent public hearings and environmental analyses."2 Obviously this is an important factor, and to the majority, the decisive consideration.

Of course I recognize the impact of the acquisition of right of way in advance by prospective purchasing, both the financial bias and the psychological tilt toward the ultimate decision which results. Probably the psychological twisting of the ultimate decision toward the right of way prospectively acquired is even greater than the financial bias involved. The financial bias can be cured by the resale of the land acquired and the purchase of other right of way. Yet the asserted bias by route purchase is a matter of degree. In Gage v. Atomic Energy Commission,3 this court pointed out that all decisions preliminarily made influence the ultimate decision on site or route location. However, such influence is a matter of degree; some decisions influence the ultimate decisions more than others, a matter which must be evaluated in any individual case.

My position is simply that the task of balancing, and hopefully reconciling, two or more desirable goals, each of which has been authorized by statute, is not primarily the task of this court. A little judicial modesty would become us here.

First, it should be up to the responsible agency, the Federal Highway Administration, to implement the regulations by making prospective purchases without previous public environmental hearings in those instances in which the agency deems this action necessary. Certainly many, perhaps nearly all, purchases will be made after full consideration and public hearing on the environmental issues.

We have nothing in the way of a record on this point, and so until it is shown otherwise, I would believe that the responsible government agents would make prospective purchases with some consideration of the environmental impact, and that prospective purchases with only inadequate consideration of the environmental impact will turn out to be infrequently made.

Second, if the officials responsible for the employment of the highway revolving fund abuse their power to make prospective purchases, then we may anticipate that loud complaints will be registered with Congress. It will then be up to Congress to hold hearings and determine if, on the overall record of prospective purchases made and their ultimate environmental impact, there has been abuse of this authority to make prospective purchases, which unquestionably was granted by the 1956 legislation. If such turns out to be the case, then Congress can change the rule and deny completely or more carefully restrict the exercise of such prospective purchase power. Surely the judgment of Congress on this question, after holding the type of hearings on the facts of the situation which a court would find difficult to hold—certainly this appellate court—should reach a more just result than we can today, de hors any factual experience record whatever.

The power granted by the 1956 statute and the regulation to make prospective purchases in some instances will mean less environmental consideration given to the highway routes than would otherwise be desired. Whether this is desirable or undesirable seems to me to be a balancing judgment which Congress might have made at the time of enacting the 1968 changes, but on the record certainly did not make by repealing the 1956 authority to make prospective purchases, no matter what some testimony before a committee or a committee report said. It may well be that the power of prospective purchase of highway right of way, which to be effective usually must be without public hearings, is a power the government should have if it is exercised reasonably.

In my opinion, the way to determine whether this power is exercised reasonably, and thus should be continued, is not for an appellate court in advance to assume that the power will be abused, and therefore to require a public hearing before the power of prospective purchasing is exercised, which would as a practical matter negate all benefits to be derived from prospective purchasing. Such a holding is not only based on an assumption of abuse of power, but also makes the policy choice in favor of environmental considerations, irrespective of other advantages to the government which are unquestionably found in prospective purchasing, duly authorized by statute.

I think it inappropriate for this Court to make this public policy judgment on the balance of valid competing considerations in the face of the authority granted by Congress in the 1956 Act; I would think it appropriate for Congress itself to make such a judgment as to which values it finds uppermost, balancing the environmental considerations in the statutes which it has enacted with the power of prospective purchasing which Congress also has authorized and has not repealed.