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Case Law Updates on the Environment (CLUE)

Case Law Update Details

Case Title

Indian River County v. Rogoff

Case No.

2016 WL 4385776

Court

U.S. District Court - Washington DC

State

Florida

Date

8/16/2016

Project

All Aboard Florida

Project Type

Rail

Project Description

The project involves establishing privately owned and operated express passenger rail service between Miami and Orlando, Florida, over an existing railway corridor. The project was undertaken by AAF Holdings, LLC (AAF). Phase I of the project, which was already funded and in development at the time of the case, connects Miami to West Palm Beach. For Phase II, which would connect West Palm Beach to Orlando, AAF applied for a $1.6 billion loan through the Railroad Rehabilitation and Improvement Financing program administered by the Federal Railroad Administration (FRA). AAF also requested that USDOT exempt from federal taxes $1.75 billion in Private Activity Bonds (PABs) under a program that allows USDOT to exempt from federal taxes bonds issued by state or local government agencies to finance certain infrastructure projects. FRA issued a draft EIS in September 2014 and a final EIS in August 2015. At the time of the case, FRA had not yet issued a ROD or made a determination on the loan application. USDOT issued provisional authorization for PABs in December 2014 (prior to issuance of the FEIS and ROD), subject to certain conditions, including (1) AAF must facilitate FRA’s completion of the environmental review process, even if it decides not to pursue the loans; (2) AAF cannot use the bond proceeds until 45 days after issuance of the FEIS; and (3) AAF must complete and implement the avoidance, minimization, and mitigation measures in the FEIS.

Case Summary

Two counties through which Phase II of the railway would run filed this lawsuit against USDOT, claiming that USDOT’s provisional authorization of PABs prior to completion of the environmental review process violated NEPA, Section 106, and Section 4(f). One of the counties also claimed that USDOT exceeded its authority under the law authorizing PABs. AAF intervened as a defendant in the proceedings. In a prior ruling in 2015, the court denied the plaintiffs’ request for a preliminary injunction on the grounds that they did not prove standing, because they had failed to show that enjoining USDOT’s authorization would significantly increase the likelihood of halting construction on Phase II of the project, the portion that runs through their borders. Rather than dismissing the case altogether, the court allowed the counties an opportunity to conduct discovery (fact-gathering) to uncover evidence to prove their standing.

Following the close of discovery, USDOT and AAF again moved to dismiss the case for plaintiffs’ lack of standing. USDOT and AAF also argued that the case should be dismissed because authorizing PABs was not a federal action subject to NEPA, Section 106, and Section 4(f). Based on additional evidence presented by the plaintiffs, the court held that the counties demonstrated that they had standing to bring the NEPA, Section 106, and Section 4(f) claims; furthermore, the court held that authorizing PABs was a federal action that triggered NEPA, Section 106, and Section 4(f). The court also ruled that the county could not bring its claim that USDOT exceeded its authority under the law authorizing PABs because the county’s interests were not within the zone of interests intended to be protected by the law.

Key Holdings

Litigation Procedure

Standing. To establish standing, plaintiffs must demonstrate that they would suffer a “concrete and particularized” and “actual or imminent” injury as a result of the defendants’ conduct, and that the relief requested from the court would alleviate the alleged injury. Thus, the counties had to establish that invalidating the conditional authorization of PABs would significantly increase the likelihood that AAF would be unable or unwilling to proceed with Phase II of the project. Based on the extensive evidence produced during the jurisdictional discovery process, the court concluded that the plaintiffs had standing to challenge the USDOT’s approval of the PABs.  The court explained its reasoning as follows:

Plaintiffs’ burden is not to demonstrate with certainty that invalidating the PAB authorization would grind the project to a halt. They must show, rather, that denying AAF access to PABs would significantly increase the likelihood that AAF would not proceed with Phase II of the project. Plaintiffs have met their burden, because they have sufficiently called into question AAF’s commitment to completing the project absent PABs and shown the difficulty AAF would face in obtaining any other form of financing. The Court thus finds that removing PABs from the equation would significantly increase the likelihood that AAF would be unable or unwilling to proceed with Phase II, thereby averting Plaintiffs’ claimed injury. This showing of redressability satisfies Plaintiffs’ obligation to demonstrate standing to proceed with this action.

NEPA

Applicability of NEPA and Other Laws.  USDOT and AAF also argued that the court should dismiss plaintiffs’ claims under NEPA, Section 106, and Section 4(f) because those statutes did not apply to USDOT’s authorization for PABs.  USDOT’s position was that its approval of PABs – essentially, approval to issue tax-exempt bonds – was not a type of federal financial assistance that required compliance with NEPA and related laws. The court considered the extent of federal financial assistance and the extent of federal involvement and control. First, the court found that the tax benefit conferred by PABs, although indirect and long term, had a substantial enough impact on the public fisc (in the form of forgone tax revenue) to constitute federal financial assistance. Second, the court found that USDOT had discretion to exercise substantial control over PAB approval, as demonstrated by the conditions regarding environmental impacts that USDOT imposed on AAF. Based on its findings that the PABs were federal financial assistance over which USDOT had control, the court held that authorizing PABs was major federal action that required compliance with NEPA, Section 106, and Section 4(f).

Other Laws

Ability to Challenge Issuance of PABs.  Finally, the court considered whether it could hear the claim that USDOT exceeded its authority under the law authorizing PABs. For claims brought under the Administrative Procedure Act, the plaintiff must demonstrate that its interests are within the zone of interests intended to be protected or regulated by the statute. The court held that the relevant statute for analysis was the section of the Internal Revenue Code that authorizes PABs, not the law (SAFETEA-LU) that added certain types of projects to the existing section of the Internal Revenue Code that authorizes PABs. The court concluded that the county’s asserted interests in public safety, environmental protection, and historic preservation were not within the zone of interests that Congress intended to be protected by the Internal Revenue Code section authorizing PABs. Thus, the court dismissed the county’s claim.

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