United States Court of Appeals, District of Columbia Circuit
Indian River County, Florida and Indian River County Emergency Services District, Appellants
United States Department of Transportation, et al., Appellees
September 24, 2019
from the United States District Court for the District of
Columbia (No. 1:18-cv-00333)
E. Karmel argued the cause and filed the briefs for
L. Brannock and Tracy S. Carlin were on the brief for amicus
curiae Indian River Neighborhood Association in support of
M. Pepin, Attorney, U.S. Department of Justice, argued the
cause for federal appellees. With her on the brief were
Jeffrey Bossert Clark, Assistant Attorney General, Eric
Grant, Deputy Assistant Attorney General, Kevin W. McArdle,
Attorney, Steven G. Bradbury, General Counsel, U.S.
Department of Transportation, Paul M. Geier, Assistant
General Counsel for Litigation and Enforcement, and Charles
E. Enloe, Trial Attorney.
E. Stearns argued the cause for intervenor-appellee. With him
on the brief were David H. Coburn, Cynthia L. Taub, and
Before: Garland, Chief Judge, Srinivasan, Circuit Judge, and
Edwards, Senior Circuit Judge.
EDWARDS, SENIOR CIRCUIT JUDGE
2011, Intervenor AAF Holdings LLC ("AAF") announced
plans to construct and operate express passenger railway
service connecting Orlando and Miami, Florida. Phase I of the
All Aboard Florida Intercity Passenger Rail Project (also
"AAF Project" or "Project"), connecting
Miami to West Palm Beach, has been completed. Phase II, which
will extend service to Orlando, is presently under
construction. In 2014, AAF applied for an allocation of
tax-exempt qualified Private Activity Bond ("PAB")
authority to partially finance Phase II of the Project. In
December 2017, the Department of Transportation
("DOT") allocated $1.15 billion in tax-exempt PABs
to be issued by the Florida Development Finance Corporation
to finance Phase II of the Project. AAF, the sponsor of the
Project, received the proceeds of the bond sales to fund the
Project and is responsible for repaying them.
February 2018, Indian River County, the Indian River County
Emergency Services District (together "County" or
"Appellant"), and other parties filed a complaint
in the District Court claiming that DOT exceeded its
authority under 26 U.S.C. § 142(m)(1)(A) when it
allocated $1.15 billion in PABs to fund Phase II of the AAF
Project. The complaint further alleged that the allocation
violated 26 U.S.C. § 147(f), which requires certain
state or local governmental approvals before tax-exempt PABs
may be issued. Finally, the complaint challenged the adequacy
of the Environmental Impact Statement ("EIS")
prepared by the Federal Railway Administration
("FRA") pursuant to the requirements of the
National Environmental Policy Act ("NEPA").
See 42 U.S.C. § 4332. With respect to all of
its claims, Indian River County raised causes of action under
the Administrative Procedure Act ("APA").
See 5 U.S.C. § 706(2)(A) (an agency action may
be set aside if found "to be . . . arbitrary,
capricious, an abuse of discretion, or otherwise not in
accordance with law"); id. § 706(2)(C) (an
agency action may be set aside if it is "in excess of
statutory jurisdiction, authority, or limitations, or short
of statutory right"). On December 24, 2018, the District
Court rejected Appellant's claims and granted summary
judgment to the federal defendants. Indian River Cty. v.
Dep't of Transp., 348 F.Supp.3d 17 (D.D.C. 2018).
District Court ruled that because the complaint arguably fell
within the zone-of-interests protected or regulated by §
142, Indian River County was among the class of parties
authorized by Congress to pursue a cause of action under the
APA. However, the District Court found no merit in Indian
River County's claims. The court ruled that the disputed
Project constituted a "surface transportation
project" under § 142(m)(1)(A), as required for
DOT's allocation of PABs qualifying for tax-exempt
status. The District Court also ruled that the use of the
disputed PABs did not violate 26 U.S.C. § 147(f). And,
finally, the District Court ruled that the FRA's
preparation of the EIS as required by NEPA was neither
arbitrary, nor capricious, nor an abuse of discretion, nor
otherwise in violation of the law. On appeal, Indian River
County challenges only the District Court's rulings with
respect to § 142 and NEPA. DOT and Intervenor AAF, in
turn, contend that Appellant's claims should be dismissed
because its interests are not within the zone-of-interests
protected by 26 U.S.C. § 142(m). In the alternative,
they seek affirmance of the District Court's judgments on
reasons explained below, we affirm the judgments of the
District Court. We agree that Indian River County's
interests are within the zone-of-interests protected by 26
U.S.C. § 142 and, therefore, the complaint raises claims
that are cognizable under the APA. However, we hold that DOT
permissibly and reasonably determined that the Project
qualifies for tax-exempt PAB financing under 26 U.S.C. §
142(m). We also hold that the EIS for the Project adheres to
the commands of NEPA.
Private Activity Bonds
26 U.S.C. § 103(a) of the Internal Revenue Code
("Code"), interest on state or local bonds is
generally not subject to federal taxation. 26 U.S.C. §
103(a). However, a PAB issued by state or local governments
to finance private activities is not tax-exempt unless it is
a "qualified bond." Id. § 103(b)(1).
As the District Court explained:
Congress has authorized interest earned on certain types of
PABs to be exempted from federal taxation. See 26
U.S.C. §§ 103, 141. Because this exemption allows
the bondholder to keep all the interest, bond issuers can
sell the bond at a lower interest rate. . . .
Section 141 outlines certain types of PABs that can
constitute "qualified bond[s]," including
"exempt facility bond[s]." Id. §
141(e)(1)(A). Under § 142(a), a bond is an "exempt
facility bond" if at least 95% of proceeds from its
issue are used to finance one of fifteen enumerated
categories of projects. Id. § 142(a). One such
category is "qualified highway or surface freight
transfer facilities." Id. § 142(a)(15).
Section 142(m) defines "qualified highway or surface
freight transfer facilities," id. §
142(m)(1), and authorizes the Secretary of Transportation,
"in such manner as [she] determines appropriate,"
id. § 142(m)(2)(C), to allocate up to $15
billion of PAB authority to eligible projects, id.
§ 142(m)(2)(A). Put simply, Congress has enacted a
mechanism through which the Secretary can allocate tax
exemptions to bonds used to finance construction of, or
improvements to, certain types of facilities. These
exemptions lower the cost of selling the bonds, better
enabling state and local governments to finance the projects.
The Secretary's allocation is necessary . . . for a bond
to be tax-exempt because it finances a "qualified
highway or surface freight transfer facilit[y]."
Id. § 142(m)(2)(A).
Indian River Cty., 348 F.Supp.3d at 28 (alterations
noted, an "exempt facility bond" includes a bond
whose proceeds from its issue are used to finance
"qualified highway or surface freight transfer
facilities." 26 U.S.C. § 142(a)(15). Section
142(m)(1)(A) defines "qualified highway or surface
freight transfer facilities" as "any surface
transportation project which receives Federal assistance
under title 23, United States Code." Title 23, in turn,
authorizes federal funding for, inter alia,
"the elimination of hazards of railway-highway
crossings." 23 U.S.C. § 130(a).
National Environmental Policy Act
recently explained in Mayo v. Reynolds, 875 F.3d 11
(D.C. Cir. 2017), Congress enacted NEPA in part "to
promote efforts which will prevent or eliminate damage to the
environment and biosphere and . . . enrich the understanding
of the ecological systems and natural resources important to
the Nation." Id. at 15 (internal quotation
marks omitted) (quoting 42 U.S.C. § 4321). To achieve
NEPA requires all federal agencies to include a detailed
environmental impact statement ("EIS") "in
every recommendation or report on . . . major Federal actions
significantly affecting the quality of the human
environment." Id. § 4332(2)(C). This
process ensures that an agency will consider every
significant aspect of the environmental impact of a proposed
action and inform the public of its analysis. In other words,
agencies must take a hard look at [the] environmental
consequences of their actions, and provide for broad
dissemination of relevant environmental information.
. . . .
Where NEPA analysis is required, its role is primarily
information-forcing. As the Supreme Court has explained,
"[t]here is a fundamental distinction . . . between a
requirement that mitigation be discussed in sufficient detail
to ensure that environmental consequences have been fairly
evaluated, on the one hand, and a substantive requirement
that a complete mitigation plan be actually formulated and
adopted, on the other." Robertson v. Methow Valley
Citizens Council, 490 U.S. 332, 352 (1989). NEPA is not
a suitable vehicle for airing grievances about the
substantive policies adopted by an agency, as NEPA was not
intended to resolve fundamental policy disputes.
It is now well-established that NEPA imposes only procedural
requirements on federal agencies with a particular focus on
requiring agencies to undertake analyses of the environmental
impact of their proposals and actions. It is equally clear
that NEPA does not impose a duty on agencies to
include in every EIS a detailed explanation of specific
measures which will be employed to mitigate the adverse
impacts of a proposed action.
875 F.3d at 15-16 (alterations in original) (citations and
quotation marks omitted).
because NEPA's requirements are "essentially
procedural," the statute does "not mandate
particular substantive environmental results."
Theodore Roosevelt Conservation P'ship v.
Salazar, 661 F.3d 66, 68 (D.C. Cir. 2011) (internal
quotation marks and citations omitted). Instead, NEPA
"focus[es] Government and public attention on the
environmental effects of proposed agency action."
Id. (alteration in original) (internal quotation
marks omitted). Those requirements "simply . . . ensure
that the agency has adequately considered and disclosed the
environmental impact of its actions." WildEarth
Guardians v. Jewell, 738 F.3d 298, 308 (D.C. Cir. 2013)
(internal quotation marks and citation omitted).
dispute in this case emanates from financial and
environmental concerns relating to the construction and
operation of an express passenger railway service connecting
Miami, Fort Lauderdale, West Palm Beach, and Orlando,
Florida. The rail service, known as the All Aboard Florida
Intercity Passenger Rail Project, has been spearheaded by
AAF. The new rail service will run along an existing rail
corridor designed in the late 1800s by the Florida East Coat
Railway ("FECR"). The FECR corridor accommodated
both passenger and freight rail service until 1968, when
passenger rail service was terminated. The AAF Project is
designed to restore portions of the existing rail corridor
between Miami and ...