National Wildlife Federation v. Snow

• Decision Date: 28 October 1976
• Docket Number: No. 75-1214,75-1214
• Citation: 561 F.2d 227,182 U.S.App.D.C. 229
• Parties: , 182 U.S.App.D.C. 229, 7 Envtl. L. Rep. 20,022 NATIONAL WILDLIFE FEDERATION, Appellant, v. John W. SNOW, in his official capacity as administrator, Federal Highway Administration, et al.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 227

561 F.2d 227

41 A.L.R.Fed. 905, 182 U.S.App.D.C. 229,

7 Envtl. L. Rep. 20,022

NATIONAL WILDLIFE FEDERATION, Appellant, v. John W. SNOW, in his official capacity as administrator,

Federal Highway Administration, et al.

No. 75-1214.

United States Court of Appeals, District of Columbia Circuit.

Argued Jan. 21, 1976.

Decided Oct. 28, 1976.

Russell H. Carpenter, Jr., Washington, D. C., with whom Oliver A. Houck and Kenneth S. Kamlet, Washington, D. C., were on the brief for appellant.

Francis J. Mulcahy, Jr., Atty., Federal Highway Administration, Dept. of Transportation, Washington, D. C., with whom Earl J. Silbert, U. S. Atty., John A. Terry, Eric B. Marcy, Mary-Elizabeth Medaglia, Asst. U. S. Attys., and Stuart M. Gerson, Asst. U. S. Atty., Washington, D. C., at the time the brief was filed, were on the brief for appellees.

Before McGOWAN, LEVENTHAL and WILKEY, Circuit Judges.

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 Act ² (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 Act ⁴ (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:

except to the extent that there is involved

(1) a military or foreign affairs function of the United States; or

(2) a matter relating to agency management or personnel or to public property, loans, grants, benefits, or contracts.

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 rulemaking. 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 regulation ¹¹ 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 policy ¹⁷ 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...