Flint Ridge Development Company v. Scenic Rivers Association of Oklahoma – Oral Argument – April 27, 1976

Media for Flint Ridge Development Company v. Scenic Rivers Association of Oklahoma

Audio Transcription for Opinion Announcement – June 24, 1976 in Flint Ridge Development Company v. Scenic Rivers Association of Oklahoma

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Warren E. Burger:

We will hear arguments next in 75-510, Flint Ridge Development against Scenic Rivers Association and the consolidated case.

Howard E. Shapiro:

Mr. Chief Justice, may it please the Court.

This case is here writs of certiorari to the United States Court of Appeals for the Tenth Circuit.

The question is whether an environmental impact statement must be prepared by the administrator of the Office of Interstate Land Sales Registration before the registration of subdivision lots under the Interstate Land Sales Full Disclosure Act of 1968 may become effective.

To state the meaning of the question, I’ll have to explain the Disclosure Act.

The Disclosure Act requires developers selling or leasing 50 or more unimproved lot pursuant to a common promotional plan to file a registration statement called the statement of record with the administrator.

The administrator is the delegate of the Secretary of Housing and Urban Development to whom the functions of carrying out the Disclosure Act have been assigned by Congress.

The Act also requires the developer to furnish a document called a property report to each purchaser of a lot within the registered subdivision.

The property report contains information from the statement of record which purchasers need to make their decisions and the statement of record is a detailed description of the property, its ownership, title, access roads, and so on.

In some respects, the entire process is like a security’s registration and the property report is a good deal like a security’s prospectus describing a particular subdivision.

Potter Stewart:

But the law was more patterned on the Securities Act of 1933, wasn’t it?

Howard E. Shapiro:

Yes it was Your Honor and I think that’s quite a significant point in viewing the Act because the Securities Act of 1933 really represented a choice for Congress to go two ways.

It could have decided in favor of some degree of substantive regulation of the economic merits of securities issues and instead it opted simply for a disclosure requirement.

When Congress decided that there were problems about the interstate sale of subdivision lots, it could’ve done the same thing.

It could’ve empowered the administrator to consider the merits of subdivision lots and make comments and recommendations on them.

Instead it opted for not substantive regulation, but simply a system of full disclosure.

This law was enacted in 1968, Your Honor.

Now, unless these disclosure statements are on file and in effect, the developer may not use the mails or facilities of interstate commerce to sell or lease the lot.

The statute provides that the administrator has 30 days from the date the developer files the disclosure statements with his office to determine whether they are accurate and complete in their disclosures under the Act and the regulations.

William H. Rehnquist:

If only he has authority to determine.

Howard E. Shapiro:

That’s all he has authority to—

William H. Rehnquist:

He can’t hold it up because he thinks it’s a bad deal for buyers or because he thinks it’s a bad use of the land.

Howard E. Shapiro:

No, in fact the Act is explicit on that, Your Honor.

It provides in Section 1716 of the U.S. Code, 15 U.S.C 1716 that a registration may not be taken to mean that the secretary was delegate here, the administrator has passed upon the merits, that’s the language of the statute, has passed upon the merits of the development or has approved it.

So the Congress was quite clear, they did not want any kind of comment by the Federal Government or controlled by the Federal Government over the merits of land use planning or the use of subdivisions in anyway.

They simply wanted disclosure to protect purchasers.

Byron R. White:

I think there are some statements that are required in the filling that relate to the environment.

Howard E. Shapiro:

Yes, they do.

The statute calls for disclosure of information about nuisances and sewage and drainage.

Byron R. White:

What if they just thought that some of those statements are false?

Howard E. Shapiro:

Well, if anything required by the statute or regulation is false, we —

Byron R. White:

Who do you call in the administrator?

Howard E. Shapiro:

The administrator.

Byron R. White:

How does the administrator know whether they’re false or not?

Howard E. Shapiro:

Well, he has a field force which does some inspecting in connection with registrations.

And if there are false statements that violates the statute, it could be a criminal offense to violate the statute.

In any event, the administrator has the power to suspend the registration just as the SEC does for false or inaccurate statements.

Warren E. Burger:

Or an incomplete statement.

Howard E. Shapiro:

Or an incomplete statement and this brings to the time limits in the statute.

The process works under strict time limits.

The developer submits his disclosure statements when he’s ready to begin sales and he wants to use the facilities of interstate commerce.

The statements in this record which I think are plaintiff’s Exhibit One are typical.

It’s a document several inches thick.

Once the statements are filed, the 30-day limit that Congress has imposed on the administrator to complete clearance of those statements goes into effect, starts ticking away.

That, can it be extended?

Howard E. Shapiro:

If the administrator finds that they are — that the registration statements proposed by the developer are deficient.

He can suspend it until corrections are made and when the — well, what he’ll do is advice that the registration is suspended.

The administrator has — I mean the developer then has a strong incentive to get the corrections in and when the corrections are filed, another 30 days starts ticking away and the effort is then made by the administrator to complete his review before that 30 days.

When that’s over, the administrator sends a letter, nothing more, just a letter to the developer saying, “Your registration is effective.”

And that letter is not an approval of the merits of the project or a report of any kind.

It’s not even a license.

It’s simply a notification.

But he does — the administrator does act affirmatively to that extent.

Howard E. Shapiro:

To that extent.

And he does so in every case.

Howard E. Shapiro:

In every case to ensure that there is adequate disclosure.

Now, the petitioners in this case are the secretary and the acting administrator and a private developer who’s the disclosure statements were suspended by the Court’s below until HUD had prepared an environmental impact statement on the merits of the project involved.

That project known as Flint Ridge is located on heights above the Illinois River which is 70 miles east of Tulsa roughly in northeastern Oklahoma.

Respondents, the plaintiffs below were environmental groups concerned with the preservation of the Illinois River in its natural state.

They sued to prevent Flint Ridge’s disclosure statements from becoming effective until HUD had prepared an environmental impact statement on the development.

Howard E. Shapiro:

The District Court and the Court of Appeals agreed with the respondents and suspended Flint Ridge’s registration until an impact statement is completed by the administrator.

Now, in our view this case only involves one issue whether Section 102 (2) (C) of the National Environmental Policy Act or NEPA applies to HUD’s supervision of developer’s disclosures under the Lands Sales Disclosure Act.

There’s no question here that the NEPA applies in full to HUD’s activities respecting substantive regulation of any kind or grants or other substantive activities.

But we’re dealing with a narrow question that is what Section 102 (2) (C) requires in a situation like this where this is no substantive regulation.

Section 102 (2) (C) of NEPA in effect requires federal agencies to include in every recommendation or report on proposals for legislation and other major federal actions significantly affecting the quality of the human environment, a detailed statement concerning environmental effects and alternatives.

It requires a federal agency to weigh the environmental merits of their planning and substantive decision making.

But in our view, it doesn’t apply at every point of federal contact with the private sector.

There has to be a federal proposal or recommendation for and a report on major federal action.

The language of 102 (C) is qualified.

Now, the administrator here is empowered to review disclosure statements as this has already been indicated only for accuracy and completeness.

This, we submit, is not major federal action within the meaning of the statute.

It’s not major federal action because the administrator cannot pass on the merits of projects and of course, you cannot write an environmental statement without passing on its merits at least to waive them and to list alternatives so that that point seems quite clearly barred by the statute itself expressly and it’s also barred because of the nature of the function since we are only dealing with the disclosure function.

Secondly, we submit that the administrator makes no recommendation or report on a proposal for major federal action.

Now, I’ve already indicated that the statute bars the administrator from passing on the merits or proving any subdivision.

What Congress intended, was that land use planning should be reserved to that state.

In fact, it went so far as to say that no developer can represent that the secretary has approved or recommends any particular development and that’s even reflected in the property report as described in the regulations since on the face of every property report there’s a disclaimer.

That this property report does not represent any approval by the Secretary of Housing and Urban Development or any comment on the merits.

Byron R. White:

Is it your view that the phrase major federal action is the critical phrase?

Howard E. Shapiro:

Is it exactly in that phrase.

It’s qualified.

Byron R. White:

And that the statute is that the National Environmental Policy Act of 1969 does not apply if the — even though the action is major unless the federal participation in the action is also major, is that it?

Howard E. Shapiro:

That is essentially it, Your Honor, because what we’re dealing with here, what really what we’re saying is that you cannot turn major private action into major federal action by virtue of Environmental Act.

Byron R. White:

By virtue of minor participation by the Federal Government.

Howard E. Shapiro:

That is exactly the point Your Honor and we think that this was clearly Congress’ intent in the Disclosure Act because of the provisions they included in it barring comment on the merits because the legislative history where Congress in the Senate Report expressly said that the Government may not pass upon the quality of what is being sold or upon such questions as land value, land use or zoning.

They clearly left the whole question of land use planning to the states.

Byron R. White:

Is it your plan that this is not federal action at all?

Howard E. Shapiro:

No, no.

Clearly the administrator has a federal responsibility.

Byron R. White:

I suppose that was your position.

Howard E. Shapiro:

Yes, that’s correct and this becomes even clear when you look at what the administrator does not do.

Howard E. Shapiro:

He has no land use planning functions.

He doesn’t disperse any funds.

He doesn’t give any HUD guarantees.

He has no control over the design of subdivisions.

He’s not permitted to stop a private development or to direct the developer to go ahead.

He’s not in any sense in partnership with the private developer.

Indeed in this case, there are no federal funds of any kind involved and no federal planning involved in the Flint Ridge Development.

It’s a private enterprise.

When you consider this in light of the fact that the administrator normally has 30 days in which to complete his review before one of his statements automatically becomes effective, it’s apparent that you cannot get an environmental impact statement requirement out of the statute.

Byron R. White:

An impact statement ought to be prepared and filed so that the administrator can tell whether the disclosures are adequate and accurate?

Howard E. Shapiro:

I think one reason is that it’s the administrator who has to prepare the impact statement.

What the argument would be —

Byron R. White:

That’s just a — that the statement is a statement of facts.

Howard E. Shapiro:

Yes it is Your Honor, but —

Byron R. White:

So, he would — instead of making an investigation of this field force and have them write a report to him, he has them write a environmental impact statement saying, “Here are the facts.

Here’s what this will do.”

And then he tries to tell whether the disclosures and the filing are adequate and accurate.

Howard E. Shapiro:

Well, the impact statement in that context would serve as primarily as a checkup on the developer, that’s what you’re implying that we could have it as a checkup on the developer.

Byron R. White:

But he has to do that, doesn’t he?

He has to make his mind whether he’s going to approve this filing or not?

Howard E. Shapiro:

Well, that the principal check on the developer is the obligation to make truthful statements and there’s criminal sanctions that follow if doesn’t —

Byron R. White:

Does he send people out, I suppose that you’ve suggested to see if this disclosure were enacted.

Howard E. Shapiro:

They usually they inspect the registered subdivisions themselves to see that there haven’t been changes as a very limited field force.

But the statute itself wouldn’t permit the preparation of this within the 30 days.

I mean the most environmental impact statements take at least to 120 days to prepare.

On a major project the great deal longer, so that the administrator really has to rely on the submission by the developer and most developers are truthful.

There’s another function which an impact statement could serve, I suppose, and that is that it could tell purchasers about the nature of the development, but that’s not involved in this case because —

Byron R. White:

It could also state — tell state enforcement authorities.

Howard E. Shapiro:

Yes.

Byron R. White:

Something that they might not know.

Howard E. Shapiro:

And that’s one of things the amici argued here, but that’s not involved in this kind of a case because there hasn’t been any request here that the basic document for giving information to purchasers and the state authorities, namely the registration statement be amended to include more environmental information.

They haven’t requested that the regulations be amended.

They simply say that, “Well, we’d like more information, therefore you must file an impact statement.”

Now, given the fact that Congress intended land use planning to be for the states, it seems to me rather difficult to argue, for a state particularly to argue that “Well, we need more information so the Federal Government ought give us information.”

Potter Stewart:

So, are there any provisions of the National Environmental Policy Act that require impact statements or their equivalents by anybody but the federal agencies?

Howard E. Shapiro:

No.

Section 102 (2) (C) as I understand that applies only to the Federal Government.

There’s no provision for private developers to file.

Potter Stewart:

Any aspect or any under circumstances to argue?

Howard E. Shapiro:

Present time, under present law.

That is my understanding.

William H. Rehnquist:

Has it ever been suggested or held that the Securities and Exchange Commission ought to file an environmental impact statement when it permits of registration to go into effect?

Howard E. Shapiro:

No it has not.

The court below misread a decision called National Resources Defense Counsel against SEC in out of the District Court of the District of Columbia.

There is a case — that case held that SEC in adopting regulations dealing with more environmental disclosure would have to adhere to the Administrative Procedure Act and make fuller disclosure arguably than it had made.

But there was no case holding that environmental impact statements are necessary in each SEC filing.

In fact, if we to had to have them, the impact on the nation’s capital markets would be just devastating because the number of securities issues that are involved.

William H. Rehnquist:

Well, has even that been held?

Howard E. Shapiro:

That has not been held.

William H. Rehnquist:

Anywhere other than in the District of Columbia.

Howard E. Shapiro:

Even the District of Columbia case didn’t go that far, Your Honor, and no case to my knowledge has gone that far.

Byron R. White:

Did they make litigation on it beyond that District of Columbia litigation that you know of?

Howard E. Shapiro:

That I know of, no Your Honor.

Byron R. White:

And you claim in other words.

Howard E. Shapiro:

No.

What has been going on is a very elaborate rule making proceeding before the SEC with respect to how much additional disclosure is necessarily.

That’s still going on.

There have been hearings and the proposals, but certainly there’ve been no —

Potter Stewart:

Environmental kind of disclosure?

Howard E. Shapiro:

Yes, environmental disclosure which of course, is a different question than we’ve got here.

Howard E. Shapiro:

The plaintiffs here did not go to the administrator and say, “Amend your regulations to require more environmental disclosures in statements of record and property reports.”

Thank you.

Warren E. Burger:

Mr. Thieman.

F. Paul Thieman, Jr.:

Mr. Chief Justice, may it please the Court.

What is major federal action?

That’s the issue in this case.

Congress commanded all agencies of the Federal Government in those instances where it proposed to take action which as major federal action which has a significant effect upon the environment that it must prepare an impact statement.

This impact statement must be prepared by the agency prior to the time that it undertakes the action.

The impact statement itself is a detailed written statement prepared by the agency.

It describes the impact of the proposed action upon the environment.

It describes what alternatives there are to the proposed action.

The purpose of the impact statement is to be used by agency as a tool to asses that in its decision making processes.

In that connection the agency weighs the impact of the proposed action upon the environment.

It measures the benefits of the action against the burdens on the environment.

Most importantly, what the purpose of the impact statement is, is that it gives to the agency the power to take in to consideration as to whether or not it should permit the project to go forward, whether it should modify the project or whether or not it should stop the project altogether because the environmental consequences are so severe.

Now, if the agency under its Organic Act doesn’t have the power to permit the project to go ahead, to modify it, to reduce the environmental impact or to stop the agency’s action altogether, then there’s no really no use or purpose fulfilled in the preparation of the statement because it’s meaningless.

Now, to determine whether or not an agency has the power to permit action to go forward, to modify the proposed action or to stop it altogether, you have to look to the Organic Act under which the agency was created to determine whether or not the agency has such authority and powers under the Act.

In this case when you look at ILSA, you will see that ILSA was passed by Congress and dealt with the subject of sales.

In the spectrum of land development, sales is at the very end because what has preceded sales is land acquisition, the planning, the financing and to a substantial extent, development and development afterwards.

All of those things which preceded sales HUD has no involvement in and has no authority and has no jurisdiction over the developer’s activities.

Take for instance Flint Ridge in this case.

Flint Ridge acquired this property in February of 1973.

No federal approval was required by HUD in connection with that acquisition.

When Flint Ridge was doing its planning and when it was doing all of the things that had to be done to comply with the state and local laws of Oklahoma, there was no approval required by HUD in connection with those approvals.

And when Flint Ridge obtained it’s financing, no federal approval was required by HUD in connection with that.

And more importantly at the time that Flint Ridge began it’s construction which was in 1973, which was more than six months prior to the time that HUD that it filed it’s registration statement with HUD.

It actually undertook its construction activities and by the time of the trial of this case, it has spent over $3.5 million in construction on this development.

And in connection with all of this expenditure of money, all of the construction activities, Flint Ridge did not have to obtain the approval of HUD.

Potter Stewart:

What sort of development was this?

F. Paul Thieman, Jr.:

It’s a second home residential subdivision, Your Honor.

Potter Stewart:

In to how many units?

F. Paul Thieman, Jr.:

The first — this was the so called first phase and there was a 1014 lots in the first phase.

Potter Stewart:

And how many structures?

F. Paul Thieman, Jr.:

The property was being sold as vacant lots to purchasers.

Potter Stewart:

I see.

F. Paul Thieman, Jr.:

Of course what happens in this type of a development, the developer never knows beforehand how many of the lots within the subdivision that he is going to sell with houses on them.

How many he will be selling with contracts to build houses, how many he will be selling to other developers and by the way all of those types are exempt sales under the Act.

So, what a developer really does is that he registers all of these lots to keep his options open.

Potter Stewart:

You were talking about the timing and you said that HUD doesn’t plan any party even as a recipient until the time comes from sales and I was wondering how much is then been done.

Not very much actual construction of structures, is that right?

F. Paul Thieman, Jr.:

Your Honor, it’s not in the record but what is in the record is that between July of ‘73 and July of ‘74, over $3.5 million had been spent in actual construction of the development.

Potter Stewart:

Including sewage or septic tanks or whatever?

F. Paul Thieman, Jr.:

No these were just roads, a water treatment plant, improvements, and clubhouses, those types of improvements.

Potter Stewart:

But not the individual units?

F. Paul Thieman, Jr.:

Not the individual units.

So, we have a situation that if HUD doesn’t have any control over the development activities of the developer which really is what causes the impact upon the environment, then HUD should not be required to do an environmental impact statement.

Warren E. Burger:

The developer has expended all of his money to roads, clubhouses and other facilities at his own peril.

F. Paul Thieman, Jr.:

Well if you use the term peril–

Warren E. Burger:

In the sense that he doesn’t know what the ultimate consequence is going to be for the project.

F. Paul Thieman, Jr.:

Is Your Honor talking about when you say at his peril —

Warren E. Burger:

It has been held up now, I take it.

F. Paul Thieman, Jr.:

That’s correct but we say erroneously so.

Warren E. Burger:

I’m talking about but the hard reality.

F. Paul Thieman, Jr.:

Yes, we have been held — I’d like to save the balance of my time for rebuttal.

Warren E. Burger:

Very well.

Andrew T. Dalton:

Mr. Chief Justice may it please the Court.

What we have here is an action brought by several thousand people of the State of Oklahoma who have come together in one way or another, in action against the Federal Government to seek compliance and enforcement of federal law.

The shorthand law is NEPA, of course we have a problem when we used the shorthand of sometimes forgetting what the meaning of the language is.

It’s the National Environmental Policy Act.

There has been intent to interject before this Court, issues a fact and law that were not litigated in the trial court, were not presented before the Tenth Circuit and have no basis in the record or anything we’re doing here today.

Andrew T. Dalton:

For example, we’ll start off with this proposition; the Department of Housing and Urban Development absolutely refuses to comply with the National and Environmental Policy Act, period.

That’s what started this lawsuit.

The issue before this Court or non issues before this court, is not how you do an environmental impact statement but for example, CEQ and HUD co-sponsored a study concerning the environmental consequences of these second home developments and one of the purposes of that study was to provide an outline and an environmental information based handbook that can be used to evaluate the consequences.

Other people have developed handbooks, there’s one by (Inaudible).

It’s a detailed handbook on how to do these things.

It’s not the type of EIS that is involved here.

We can’t get to that issue until we agree to do something.

Another things not at issue before this Court is what to do with environmental impact statement and whatever form it takes once it is done.

Now, the State of New Mexico has filed an amicus brief and is suggested in their brief many things that can be done, and perfectly consistent with the Act in 102 (G), and I believe it is now of circulating it among the states and local agencies the information that can be obtained and they say that they will utilize it and they need it very desperately.

Byron R. White:

Do you suggest that the environmental impact statement which you think should be filed will bear at all on the decision by the administrator with respect to the filing?

Andrew T. Dalton:

It could very well provide information with respect to the accuracy of the filing.

It could very well provide information with respect to the administration of the Act itself.

In other words, there are many things that the administrative —

Byron R. White:

I take it you would — I take it you would be here, however, even if the filing required nothing at all with respect to the environment.

No facts at all that could be called environmental.

Andrew T. Dalton:

Yes sir.

And in the record also, we have sworn testimony from several officials from the state of Oklahoma from offices of planning and development, from offenses of pollution control and recreation concerning the use and utilization which they would put with the information and asking for the information and that’s consistent with the Act itself.

It’s one of the purposes of the Act.

Another thing that’s not before this Court in terms of issue is whether you can disapprove a filing on environmental grounds.

Now, there are cases such as Zabel v. Tabb of the Fifth Circuit that say you can disapprove on environmental grounds.

I believe they did similar things in Marco Island here just recently, 101 (b).

William H. Rehnquist:

What was the reasoning of the Fifth Circuit in the Zabel case?

Andrew T. Dalton:

Simply that the National Environmental Policy Act in particularly 101 provides substantive authority to the agency involved and consider environmental matters and could reduce or suspend or prevent a permit on environmental grounds.

William H. Rehnquist:

Was that consistent with your first SCRAP opinion in which we said that the NEPA does not alter or amend any other statutory provision and here you do have a statutory provision, don’t you think that the administration doesn’t express any position on the merits.

Andrew T. Dalton:

I don’t think it’s a matter of amendment, I think it’s a matter of an enlargement giving the agency one more thing to consider.

William H. Rehnquist:

What was the argument in first SCRAP and was rejected by this Court?

Andrew T. Dalton:

Well, I don’t myself understand SCRAP to mean that.

I understand SCRAP one to mean NEPA did not revive a judicial remedy that has been previously excluded.

Potter Stewart:

The opinion said something along the line, it said it didn’t amend any other statutes, did it?

Andrew T. Dalton:

Yes sir.

Potter Stewart:

That’s the language to which my brother was referring to.

Andrew T. Dalton:

Yes sir.

I don’t think that in another issue is not what the HUD can do anything about environmental degradation it finds.

Although there are I believe many things they can do about it, provide information to others for example and in HUD — HUD has promulgated what is called Handbook 1390.1.

There are guidelines for compliance with the National Environmental Policy Act and part of that, part of that requires and directs the members of the department to meet with and discuss these matters with the developer or the applicant to work out an amicable way of resolving some of these things without necessarily through an enforcement procedure.

Now, there are other things that are not at issue before this Court and I think it goes to the question of what really is at issue.

The facts are not an issue, the significance of the degradation is not at issue.

Judge Bohanon found actual potential effect in all aspects of the environment.

For example, upon the depth and course of the river itself, upon social economic conditions, aesthetic conditions, the habitat, fish and wildlife, these were un-appealed from and not an issue before this Court and you will find that his finding number 14.

Another matter that is not an issue before this court and which is admitted is that the filing and the permission to sell interstate commerce facilitates the developer in obtaining money in interstate commerce and without that, this development would not exist.

They talked about there would degradation anyway.

Well, that’s a talking about something in the abstract because in the facts of this case, there would not be degradation anyway.

We note that they have said, they are not doing anything now.

Much of this money is spent for other things in environmental degradation.

For example, in the record and it reflects that less than one half of the payrolls are in place.

Less than one-third of the unpaid rolls are in place.

There are only 16 of a potential of 3,000 septic tanks in an area that’s ill-suited for septic tanks according to the findings of the Court.

There virtually no structures existing on the 7,000 acres.

The human involvement there is minimal at best.

The socio economic problems that would ensue as a result of this development are yet to occur and will occur in the future and perhaps by thinking about it now, we may be able to mitigate that either to state, local or federal level.

Another problem of that argument is they can ask you to freeze in point and time the question of environmental impact.

And consider the Flint Ridge as in a vacuum which the Court did not do.

There are peripheral effects, other developments may occur, side issues with respect to developments.

So, there are satellite developments and this sort of thing may occur and this is a very fragile ecosystem, the Illinois River basin.

We also see that many of the effects that will flow from this development will be continuing in nature.

We also suggested the option for example for 14,000 more acres has been dropped and some of the things they talk about, about exempting laws and so forth, they haven’t done it.

In fact, in a letter to this Court asking that it be advanced for hearing, they did complain of the fact that they were at a stand still if you will.

So, there is significance to what the Tenth Circuit said and what Judge Bohanon said about money in interstate commerce and the connection between the filing, the approval to sell interstate commerce and the obtaining of money, and the environmental degradation.

The issue in this case must be considered to what HUD is trying to do.

HUD is trying to get this court to condone their excessively narrow construction of their operating authority inspite of what Congress said.

Andrew T. Dalton:

The issue is very simple, must HUD under the facts of this case prepare an environmental impact statement in a format tailored to the circumstances of this case, prior to giving permission to sell in interstate commerce.

The answer is simple, yes they must and why?

It is compelled by the language of statute itself by this legislative history of the statute by all cases which are construed in the National Environmental Policy Act to date, by CEQ guidelines and by HUD’s own Handbook 1390.1.

Do we have major federal action significantly affecting the quality of the human environment?

And you can’t bifurcate that language.

It’s all part of the same term and whether you have two or three tests really don’t make any difference under the facts of this case.

We have proven in the record and accepted by the trial court and the Tenth Circuit facts to reflect each test.

We have proven magnitude, we have proven controversy, we have proven cumulative effect, we have proven —

Warren E. Burger:

The federal action as —

Andrew T. Dalton:

The major federal action?

Warren E. Burger:

What is the major federal action?

Andrew T. Dalton:

Well, the federal action to begin is the giving of permission to sell in interstate commerce as the result of a filing.

It becomes major when you consider the end result that occurs and that is the substantial, actual, potential or cumulative effect of the environment.

They stated for example in Simmons v. Grant which is cited in the briefs but for this filing the degradation will not take place.

In other words, they are not going to do anything unless they get that money in interstate commerce as stated in the Minnesota PIRG case v. Butz.

It makes little sense to call a federal action minor when the end result whether it be by public authority or by private authority, is major.

Potter Stewart:

But what if the federal action consisted only in carrying some of the correspondence of this developer in the United States mails and yet the development was absolutely mammoth and had a tremendous impact on the environment and there was federal action that was essential to get his financing from the New York bankers.

Would that require an environmental impact statement?

Andrew T. Dalton:

Well, I’m not certain that’s a federal action in terms of a —

Potter Stewart:

It’s essential for getting his financing without carrying it in United States mails, is that not possible to be accomplished?

Andrew T. Dalton:

If we assume hypothetically that there is a statute which requires the use of the United States mails to send —

Potter Stewart:

No just in fact that this was sent in the mails, and you have the present legislation, and you have the present language of the National Environmental Policy Act of 1969.

Andrew T. Dalton:

And they utilized the mails to mail documents to bankers and so —

Potter Stewart:

To get the financing.

Warren E. Burger:

And to solicit sales.

Andrew T. Dalton:

And to solicit sales, I think probably in that situation you may have nothing, I believe nothing which would result in degradation substantially because of federal involvement although I can see, I can see in the —

Byron R. White:

Well, you have in mind the facts of my hypothetical.

Andrew T. Dalton:

Sir?

Byron R. White:

You have in mind that —

Andrew T. Dalton:

Yes sir, if that’s a necessary —

Byron R. White:

The financing — financing wouldn’t be possible but without —

Andrew T. Dalton:

Fine.

And that being the case, that being the case that becomes major federal action significantly affecting the quality in the environment and would require compliance in my opinion, yes sir.

Thurgood Marshall:

To every construction in the country, doesn’t it?

Mr. Dalton —

Thurgood Marshall:

If it involves money, it involves a major federal intervention because you get money through the interstate commerce, isn’t that your position?

Andrew T. Dalton:

You can get money through interstate commerce although there is the option available here not to get money in the interstate commerce.

In other words, to — there are specific exemptions in the Act itself in which they could obtain money in interstate commerce but not have to qualify under the Interstate Land Sales Act.

And they could’ve also gone strictly intrastate.

Thurgood Marshall:

But that’s your only basis for this federal major — major federal intervention.

That’s the only one?

Andrew T. Dalton:

In as far as the Department of Housing and Urban Development is concerned, the only thing they do is administer the Interstate Land Sales Act.

Thurgood Marshall:

But in this particular case, what was the major federal action?

Andrew T. Dalton:

The giving of permission to sell in the interstate commerce which resulted in significant effect on the quality of the human environment.

Thurgood Marshall:

And that’s all?

Andrew T. Dalton:

Yes, sir that’s all, in any case.

William O. Douglas:

Mr. Dalton, let me give you another one.

Suppose there is a securities registration statement filed with respect to a bond issue, the procedure what will be used for the an off shore oil rig which if installed would certainly have the environmental consequences.

Does the SEC because it could disapprove have to file an environmental impact statement?

Andrew T. Dalton:

Yes, sir.

In my opinion, they would.

I think probably, to maybe get to some of these questions, they’re more directly.

The National Environmental Policy Act is one thing, is an administrative reform statute.

And it is designed to achieve a certain amount of cooperation among all of the federal agencies.

Now, one of the problems with the arguments that’s been presented today and probably one of the underlying premises of the question is that we’re talking about HUD existing in a vacuum.

There are other federal agencies.

Now, if HUD can’t do anything about it, they are required to provide the information and should provide the information to other federal agencies, state agencies and local agencies which may in fact be able to do something about it whether HUD can or will.

So, I think probably the answer to your question is very definitely yes.

William O. Douglas:

(Inaudible)

Andrew T. Dalton:

The answer to your question is definitely yes because we cannot consider the lead agency or the responsible agency in the vacuum.

Andrew T. Dalton:

They are required to cooperate with other agencies which may and can and probably will do something about it.

Harry A. Blackmun:

Thus affirmative answer then really mean, the SEC in almost every securities registration situation has to file an environmental impact statement.

Andrew T. Dalton:

That’s true but you know and probably there’s a fear that environmental impact statement may look something like the (Inaudible) situation.

I think we can tailor to the circumstances at hand.

Harry A. Blackmun:

Mr. Dalton, do you think, it would be enough to satisfy the need of other agencies and of local authorities, if the administrator here or if the SEC in that context had a rule which required detailed information from the filer?

Andrew T. Dalton:

Yes Sir, well, in this case, the HUD Handbook 1390.1 requires such information.

Harry A. Blackmun:

With that — assume it’s true, assume every filing would be true, would the environmental information then be there of public record?

Andrew T. Dalton:

It should be, yes sir.

Harry A. Blackmun:

Why would the agency have to prepare a statement to inform –-

Andrew T. Dalton:

Well that could be the format of the environmental impact statement takes.

The development of that type of information which —

Harry A. Blackmun:

Then, why shouldn’t you — why isn’t there a more sensible way of going about the problem under this Act to start — to attack the rules to say that there should be a different rule about the filing and its contents?

Andrew T. Dalton:

In our opinion, when we began this Act or this action, we felt that our position was limited to the facts of this case, the Illinois River in the State of Oklahoma.

We discern or felt we may have some problems with respect to standing in some other issues limited amount of approach.

We could take and we directed our question to the Illinois River.

Harry A. Blackmun:

I take it from what you said a minute ago that you might not be here at all if the administrator had what you sought was an adequate rule with respect to what the developer had to file.

Andrew T. Dalton:

If that rule were consistent with the National Environmental Policy Act, yes.

And we’re promulgated in response to the National Environment Policy Act.

I see no —

Potter Stewart:

Your claim is that in this case that the Act that the statute requires the agency to file an impact statement.

That’s what’s at issue here, isn’t it?

That’s the only issue.

Andrew T. Dalton:

Yes, the agency is required to file it.

I don’t know that the development of the information necessarily must come out of the minds and pockets of the agency.

Potter Stewart:

It’s not but if you’re correct the statute, the 1969 Act requires the federal agency to file the impact statement.

Andrew T. Dalton:

Well, that’s true to some extent.

Of course, NEPA has been amended to allow certain circumstances, state agencies which have statewide e jurisdiction to participate or prepare this instance.

Potter Stewart:

Certainly and to help in the preparation, and maybe, the agency can contract it out or all every other — there are all sorts of questions but the Act requires the agency ultimately to file it, doesn’t it?

Andrew T. Dalton:

They will accept responsibility for it, yes sir.

Potter Stewart:

Right, and if you’re right, then that’s the agency that must file.

Potter Stewart:

This case doesn’t have anything to do with what the agency might or might not have or should require the applicant, the builder, the developer to file, does it?

Andrew T. Dalton:

Well, only in the sense that the Act is a mandate to be innovative and to try to develop ways and means to the fullest extent possible comply with the Act which is the language of the Act itself.

And also not to use an excessively narrow construction of his operating authority to avoid compliance, which is the language of Congress.

Potter Stewart:

The issue here and the only issue as I understand it and you tell me if I’m wrong, also then and maybe again, whether or not the agency has to file an environmental impact statement.

Isn’t that the only issue here?

Andrew T. Dalton:

That’s correct.

William O. Douglas:

Is it even quite that?

The statute doesn’t speak in terms of filing the statement.

It speaks in terms of the agency including a statement with a proposal or recommendation.

I was curious to know precisely, what is the proposal that is supposed to incorporate the environmental impact statement under your theory of the sequence of events that the agencies just to follow here.

Andrew T. Dalton:

I think it is proposal for recommendation and so forth, it falls within the category of other major federal action significantly affecting the quality of the human environment term in that section which has to do with the decision to permit the sales in interstate commerce and that is the triggering action.

William H. Rehnquist:

But the administrator really has almost no discretion in deciding whether to permit those sales.

Thus, once he’s satisfied that the truthful disclosure has been made?

Andrew T. Dalton:

And once he’s satisfied, true but he has tremendous or she has tremendous discriminate or discretion in determining what is necessary before there is adequate compliance.

Not only what is necessary in protection of the purchaser, what’s necessary in the protection of the public interest and which would make the filing not misleading under the circumstances.

These are left for the secretary and her administrator to determine

William H. Rehnquist:

But then all goes to what the secretary may require to be filed by the developer.

Now, instead if the secretary or the administrator himself may file in terms of a proposal.

Andrew T. Dalton:

No, but these, yes that’s a thing — it is what is developed in compliance with the Act and when you have superimposed upon the Interstate Land Sales Act, the requirement of compliance with NEPA, this will include environmental information sufficient to apprise all parties, all agencies of the Government, state local, and federal, environmental consequences.

See, what we have here, I think is a statutory mandate to exercise compliance with the Act to the fullest extent possible.

It is not inherently flexible.

We must construe this statute, the Natural Environmental Policy Act from its four corners.

We can’t pick out 102 (2) (C) and say that this is the only part of the Act.

I think all of the cases and you know statutory construction do tell us that.

It’s a mixed question of a law and fact involved in this case and I think that is one of the things they said SCRAP in this case.

They talked about a so-called conflict and this does deals with this 30-day thing.

We must begin with the preface that in order to avoid compliance, the Act, it must be impossible or it must expressly prohibited.

Now first of all, is question of conflict was never raised in the trial of courts, so it’s not been litigated and there are no facts before this Court in respect the conflict.

Again, we’re not talking about how you do in EIS.

The Tenth Circuit described this as a superficial argument and quite correctly.

Andrew T. Dalton:

The ILSA, the Interstate Land Sales Act and NEPA are very compatible.

They’re both Full Disclosure Laws, they both provide information in the public interest, and in fact if you get into the legislative history of both of them, they use virtually identical language.

There is no specific exemption to compliance in ILSA.

Now, both the Interstate Land Sales Act and NEPA have been amended and in fact since the investigation of this litigation.

Now, I’m sure that Congress knows how to exempt the Department of Housing and Urban Development from compliance.

They do so by saying that nothing herein shall be considered major federal actions significantly affecting the quality of the human environment.

They have done it in several statutes but not in this one.

To come before this Court and argue that there is a conflict is to admit a specific violation of Section 103.

Section 103, required all these agencies, HUD included, to review their operating authority and their statutory mandate, to determine whether there are any inseparable barriers to compliance.

There’s nothing to indicate that that review process was to await the taking of major federal actions significantly affecting the quality of the human environment.

It was to be done by date certain.

We must conclude therefore that HUD did it, and found no inseparable barrier to compliance.

As the Court said Calvert Cliffs, it’s too late now to raise this argument.

Compliance is consistent with CEQ guidelines.

CEQ guidelines talked about a license and entitlement to use or a permit.

And in fact, the CEQ itself, in the letter dated January or July 7th, 1975 from the director, to David O. Meeker of Housing and Urban Development, talked of several items that needed further discussion and attention.

And among these evidence that concerned about NEPA compliance in the Office of the Interstate Land Sales and suggested ways of complying such as the incorporate information in the environmental impacts in the statement of record, establish thresholds to determine significance, prepare program EIS and this sort of thing.

And he said, “We believe that HUD could solve the issue by taking steps in line with the above suggestions.”

So, CEQ themselves feels that there is not compliance and of course they’re entitled — their determination entitled a great weight.

Is there a conflict by administrative burden?

They talked about the administrative burden in their briefs.

We begin with the preface that Congress did intend to interrupt business as usual in these agencies which here to for have not cared one iota.

And before this Court today, the Department of Housing and Urban Development, does not care one iota about the environment.

The GAO, I think and we’ve cited this in our brief has criticized them, and I think they’ve quite correctly characterized their lack of concern as based on empire building.

We could go further and to say they flat don’t care.

The facts of the case control was the type of compliance and it’s not that difficult.

One of the purposes, I think, we pointed out has been partially fulfilled and that is inter-agency cooperation.

The statute must be read as whole and to foster inter-agency cooperation as one of the purposes.

Whether HUD can or will do anything about the substantial destruction or the total destruction of this river in the whole basin is not an issue, it is whether maybe somebody else can and resolve the information as being take or the actions being taken.

It’s just not impossible to comply.

Andrew T. Dalton:

They can pre-file it, they can include it in their filing, they can use their 1390.1 format, they can make a rule.

Gentlemen, the cases below are correct in all respects.

They’re legally correct based upon the statute, the legislative history, the cases that have construed the Act to date, and all of the regulations in guidelines that are involved.

They’re economically correct.

We’re trying to internalize our true costs and recognize those ultimately.

One of the purposes of the National Environmental Policy Act was to learn and quantify all of these costs and so that they can be taken into consideration for the protection of the public and the public interest.

It is ethically correct.

We have tried to evolve through time, a course of ethics that people dealing with the people and the people dealing with their society.

Today, we have not really realized a firm ethic between or among people of their society and their environment.

The National Environmental Policy Act says, “To create, foster and maintain a state or productive harmony between man and his environment.”

That is nothing more than a statement of the principle of ethics.

To reverse this case, will be to deny the ethical content of the Act and to deny the evolutionary principles of ethics involved.

We must continue to restore and maintain that state of productivity, and if we do not, we’re in for a lot of trouble, particularly in Illinois River basin.

NEPA is a vehicle to provide us the information.

And until we have that information to act intelligently, to make intelligent decisions, then we will continue to operate in the dark.

And to violate the expressed and exact intent of Congress that we no longer continue to ignore the environmental consequences of our decisions at every agency level at the lowest level possible in Congress.

Thank you, we ask that you would affirm.

Warren E. Burger:

Mr. Shapiro, do you have anything further or Mr. Thieman?

You have about three minutes left.

Howard E. Shapiro:

One very brief point, Your Honor.

We want to make clear that if the developer completely discloses all the facts required under the Act in the regulation, the administrator must allow his disclosure statement to become effective.

He can’t suspend it for any reason except inaccuracy or incompleteness.

Byron R. White:

Does the regulation require the disclosure of any environmental facts at all?

Howard E. Shapiro:

Yes, it does Your Honor.

Both the statute and the regulation both do — yes the regulations at 24 CFR 17 —

Byron R. White:

Are they in the papers we have?

Howard E. Shapiro:

They are in the papers, you have to Code of Federal Regulations.

It’s 24 Code of Federal Regulations 1710.105 and they described in detail, the contents of the statements of record.

Among those items that affect the environment would be.

Byron R. White:

1710.105?

Howard E. Shapiro:

1710.105.

24 CFR 1710.105.

Among the factors that bear on the environment are requirement for description of the topography of the climate, nuisances, noises, access and roads, local utilities including such things as water, sewage, drainage, flood control.

There has to be a description of recreational and common facilities which would include things like the human act, factor in the environment, schools, fire, police, health, shopping facilities and the like.

Byron R. White:

What statute bears on this if any?

Howard E. Shapiro:

In the statute, specifically that the 12 items that are specifically required to be included in —

Byron R. White:

And you have it in your brief?

Howard E. Shapiro:

This is the appendix to the brief.

I was looking at the petition but it’s in the brief also.

Byron R. White:

At the 5 (a) or –?

Howard E. Shapiro:

At 4 (a) or 5 (a) it’s Section 1406 on page 5 (a), it’s 15 U.S.C. 1705 —

Byron R. White:

Where is that subsection?

Howard E. Shapiro:

And it’s subsections — subsection 2 which requires a description of topography and subsection 3, we’ll, that’s the title.

Subsection 5 in particular which calls for a description of noise and safety and other facilities, municipalities and in these are expanded.

It’s 2 in 5 as expanded by the regulations.

William H. Rehnquist:

That’s kind of environment from the purchaser’s point of view?

Howard E. Shapiro:

Yes, which is the purpose of the statute, Your Honor.

And going back to my point, if the developer discloses all of information required by the statute and regulations, then the administrator has no choice but to allow his registration statement to go into effect and that doesn’t matter — and that is so regardless of the quality of the development.

Whether it’s —

Byron R. White:

(Voice Overlap) the disclosure as this is very noisy?

Howard E. Shapiro:

They could disclose it’s noisy, they could disclose that the development is under water —

Byron R. White:

And terrible drainage?

Howard E. Shapiro:

That’s right.

As long they disclose the truth, the facts required —

Warren E. Burger:

These clients must come in and act on that statement?

Howard E. Shapiro:

Yes, Your Honor.

Warren E. Burger:

The –Not to expect the HUD to do the impact statement.

Howard E. Shapiro:

I’m sorry.

Warren E. Burger:

And not expect HUD.

Howard E. Shapiro:

To do the impact statement.

Howard E. Shapiro:

That is right.

The only thing they could do would be to ask that the regulations be broadened, to include more environmental information for the use of all interested parties.

Warren E. Burger:

If we look at this page — this data and found that asserted that there were false statements and the noise was greater than disclosed, that the drainage was not as good as it is disclosed, then what would they do about it?

Howard E. Shapiro:

Then —

Warren E. Burger:

To do their remedy?

Howard E. Shapiro:

As long as they were not purchasers, their only remedy would be to complain to HUD and to the Attorney General alleging that there had been violations to the Act and the regulations.

Warren E. Burger:

Well, would they intend to do that?

Howard E. Shapiro:

Well, they could at least write a complaint in as any citizen can.

They would not have any standing to bring a legal proceeding as such.

Warren E. Burger:

The matter is between the registrat and HUD, isn’t it?

Howard E. Shapiro:

Well, the purchaser also has certainly.

If they were purchasers, if they bought a lot, then they would have standing to revoke, to sue for injunctive relief and for certain damages.

These are contained in the Act and of course, to complain of the violation.

Warren E. Burger:

How about the thousand people who owned homes around the perimeter, out of the development area?

Howard E. Shapiro:

Their remedy would only be to go to HUD and say, you ought to have better regulations and petition for better regulations which is at these —

Warren E. Burger:

No standing, you think in any —

Howard E. Shapiro:

In any legal proceeding.

Warren E. Burger:

Legal proceedings.

Howard E. Shapiro:

That is right.

William H. Rehnquist:

Is the filing of a deliberately false statement by a developer subject to criminal liability?

Howard E. Shapiro:

Yes, it is Your Honor.

William H. Rehnquist:

Well, I supposed anyone can write to the criminal division or the US Attorney and say —

Byron R. White:

Anybody can be uninformed.

Howard E. Shapiro:

That is right, Your Honor.

William H. Rehnquist:

That 25% or —

Howard E. Shapiro:

Well, there’s no fee but we do depend on in the enforcement and then there have been criminal actions brought under the statute, where there has been misrepresentation.

Warren E. Burger:

Thank you gentlemen.

The case is submitted.