Brownfields, Environmental Justice, and Indian Lands:The Future of Real Estate Development in New Mexico

I. Introduction

A look at the land development options in the Albuquerque metropolitan area illustrates that brownfields initiatives, the environmental justice movement, and leasing and development of Indian lands may become increasingly significant components of the New Mexico real estate lawyer's day-to-day practice. Bounded on the east by the Sandia Mountains and the Cibola National Forest, on the south by Kirtland Air Force Base, on the north by the Sandia Pueblo lands, the available undeveloped land in the Albuquerque area appears limited. On top of that, Albuquerque has a surprising number of properties contaminated by past industrial and commercial activities.⁽¹⁾ There are, for example, at least four "Superfund sites" in Albuquerque.⁽²⁾

A number of other contaminated areas throughout the city also have sufficient environmental contamination to adversely impact their perceived development potential. Federal and state brownfields programs, like New Mexico's Voluntary Remediation Act, are designed to stimulate development or revitalization of such properties by offering those who undertake remediation of such sites limited insulation from further environmental liability. To obtain the benefits of New Mexico's Voluntary Remediation Act, a developer must submit its remediation plan and remediation activities at the site to public comment and, potentially, on-going public participation.

To manage growth and control "urban sprawl" Albuquerque may take its own steps to encourage redevelopment of the contaminated properties in the City. The City's plan for redevelopment of such contaminated property, however, may be at odds with the surrounding community's ideas about the best use for that land. While the City may want to see the site redeveloped as a "clean, high-tech" manufacturing facility, which would provide new jobs and other economic benefits, the surrounding neighborhood may instead want the land to be converted to a park or a site for a new school. If the property is located in an impoverished area or in an area which has a predominantly minority population, opponents of the proposed "high tech" project may be able to significantly delay or even block construction of the project by pursuing environmental justice claims.

Some developers may find the purported benefits of brownfields programs are not an adequate incentive to redevelop contaminated sites or they may decide that public support for their proposed development is lacking and that delays that that lack of support could cause in project start up are too great. Those developers may then either abandon their project altogether or they may look at putting their project on "clean lands." In the Albuquerque area, the lands of some of the surrounding Pueblos may present an attractive site for a development project. As Indian tribes seek to diversify their economic activities, they may become more amenable to such proposals. Leasing tribal lands for commercial or industrial development, however, requires, at a minimum, the preparation of an environmental assessment under the National Environmental Policy Act.⁽³⁾ Moving to "clean lands" on a Pueblo thus would alter the nature of, but not eliminate, public participation in the development project.

This paper looks at the role of public participation in land development in light of brownfields initiatives, the environmental justice movement, and the leasing of tribal lands. The paper begins with a brief discussion of the background and development of brownfields initiatives, including New Mexico's Voluntary Remediation Act. The paper then turns to a consideration of the history and impact of the environmental justice movement on land use projects. After that, some of the unique public participation issues associated with leasing and developing projects on Indian lands are considered. Finally, the paper concludes with a discussion of selected ethical issues that the real estate lawyer may encounter in addressing the public participation aspects of land development projects.

II. Brownfields Programs and Environmental Justice

Two environmental movements are increasingly exerting influence on commercial and business land development projects. The first of those is the brownfields movement. Brownfields initiatives are designed to encourage redevelopment of environmentally contaminated properties by providing the entity undertaking the redevelopment some limited insulation from future environmental liability associated with the site. Under most brownfields redevelopment programs, a developer agrees to undertake remediation of a site pursuant to federal or state regulatory oversight and pursuant to a remediation plan which has been the subject of some public participation and input. Many brownfields programs, including New Mexico's Voluntary Remediation Act, only expressly authorize public participation and input into the design of the remedial plan, and not in the selection of the post remediation use of the property.

The second movement having an impact on land development projects is the environmental justice movement. While that movement initially directed its efforts towards litigation raising constitutional and civil rights claims designed to block the siting of waste disposal or treatment facilities in low income or minority communities, the movement is now multi-faceted, seeking to promote community empowerment, to increase public participation in the permitting and regulatory process, and to engraft Title VI of the Civil Rights Act of 1964 into the nation's environmental laws. President Clinton's 1994 Executive Order on environmental justice and EPA's 1998 Interim Guidance for Investigating Title VI Administrative Complaints Challenging Permits have had a significant impact on the Environmental Justice movement. Land development plans which require the issuance of an environmental permit (i.e., air, water discharge, hazardous waste, etc.) are particularly vulnerable to environmental justice challenges. Not only does the public have the opportunity to participate in the permitting process, but, under EPA's Interim Guidance, challenges to the issuance of the permit (and thus to the viability of the project as a whole), can continue long after a final permitting decision has been made.

Both the brownfields initiatives and the environmental justice movement require a lawyer advising a client on land development projects to consider not only the technical legal issues surrounding the project, but a myriad of other non-legal issues including social and political considerations. The technical legal issues the lawyer must address include not only traditional issues like the status of title and the permissibility of the project under existing zoning, but also whether environmental permits are required and, if so, whether there is a risk of a challenge to the permitting decision under Title VI of the Civil Rights Act. The broader social or political issues the lawyer must consider include, among other items, whether the proposed project is likely to draw community opposition and, if so, whether that opposition can be overcome or whether that opposition will unduly delay the issuance of any necessary environmental permits or approval. This section of the paper provides background on both the brownfields and environmental justice movements and discusses some of the legal and practical problems those movements raise for the real estate practitioner.

A. What are "Brownfields"?

The term "brownfields" refers to abandoned or under-utilized properties that sit idle and undeveloped because of environmental contamination and associated liability concerns.⁽⁴⁾

Those liability concerns grow out of the federal and state statutes which hold current owners of contaminated property liable for clean up costs, even if they did not cause or actively contribute to the pollution. Under the federal Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"),⁽⁵⁾ the United States Environmental Protection Agency ("EPA") may either order a "responsible party"⁽⁶⁾ to pay for remediation of contaminated property or undertake the remediation itself and then sue one or more of the "responsible parties" to recover those response costs.⁽⁷⁾ Courts have interpreted CERCLA broadly to impose strict, joint and several liability.⁽⁸⁾ Many states similarly impose liability on past or current owners or operators.⁽⁹⁾

Fearful of the potential liability associated with simply taking title to contaminated property, developers have tended to move toward previously undeveloped, uncontaminated properties (so-called "greenfields") for development. That in turn resulted in the migration of jobs, tax revenues, and the like. To try to reverse that trend, both the federal and state governments have initiated a variety of programs over the last decade which seek to promote redevelopment of brownfields. Those programs include voluntary remediation schemes, prospective purchaser agreements,⁽¹⁰⁾ and innovative funding agreements, among others. Brownfield programs have proliferated in the past decade and have become the program of choice at both the federal and state levels to encourage reuse and redevelopment of contaminated properties.

B. Federal and State Brownfields Programs:

The federal government has promulgated a wide array of brownfield redevelopment programs. The EPA, for example, has developed the "Brownfields Economic Redevelopment Initiative" which seeks to stimulate redevelopment and reuse of brownfields through a variety of means including (1) guidance concerning the use of prospective purchaser agreements to limit environmental risks and liabilities for property purchasers; (2) pilot projects designed to test redevelopment models;⁽¹¹⁾ and (3) projects to facilitate coordinated site assessment, remediation and redevelopment at the federal, state and local levels. Congress has enacted a targeted tax deduction for brownfields redevelopment⁽¹²⁾ and has amended CERCLA to reduce the risk of liability for lenders loaning money on brownfields sites.⁽¹³⁾

At the state level, the majority of states have enacted statutes and adopted regulations governing voluntary clean up programs which are designed to promote the remediation and redevelopment of brownfields sites. While there is wide variation in the specifics of each states' program, those programs all share some common elements. Typically, these programs provide that a party may voluntarily agree to investigate and remediate a brownfields site. Based upon an initial investigation to determine the level of contamination, the party who has volunteered to undertake the remediation then undertakes that work to meet either generic or site specific clean up standards. At the conclusion of the remediation process, the party who undertook the remediation receives some liability protection from the state, but no liability protection from the federal government (except in those states with whom the EPA has agreed to refrain from pursuing enforcement actions).

Many state brownfields programs provide for limited public participation in the process, if any. Public participation has not been widely accepted in state programs because of the concern that such participation could delay remediation design and implementation, even to the point of causing the developer to abandon the proposed remediation altogether. There is a growing push, however, to build extensive public participation into these brownfields schemes. Some of the literature on brownfields projects, in fact, concludes that significant public participation is essential.⁽¹⁴⁾ As one author put it, "community relations can make or break a brownfields project."⁽¹⁵⁾ New Mexico's Voluntary Remediation Act provides for public participation in the design and implementation of the remedial scheme, but not necessarily in selection of post-remediation use of the site. The issues associated with this public participation are discussed below.

C. New Mexico's Voluntary Remediation Act:

During the 1997 legislative session, New Mexico adopted its Voluntary Remediation Act (the "VRA" or the "Act").⁽¹⁶⁾ That Act declares that is intended "to provide incentives for the voluntary assessment and remediation of contaminated property with state oversight, and to remove future liability of lenders and landowners."⁽¹⁷⁾ The Act's implementing regulations were promulgated in July, 1999.⁽¹⁸⁾

1. Eligibility:

To be eligible for a voluntary remediation agreement, a party must either (1) own the site; (2) operate a facility located on the site; (3) be a prospective owner of the site; or (4) be a prospective operator of a facility at the site.⁽¹⁹⁾ At the time of submitting an application for a voluntary remediation agreement, the applicant must pay a $1,000.00 non-refundable application fee and must agree to pay all costs of the New Mexico Environment Department's ("NMED") oversight of the voluntary remediation.⁽²⁰⁾ The NMED must reject an application for a voluntary remediation agreement if it determines that:

(1) the contaminants at the site constitute, with reasonable evidence, an unreasonable threat to human health or the environment or Native American cultural or religious sites;

(2) an administrative state or federal or judicial state or federal enforcement action is pending that concerns remediation of contamination described in the application;

(3) a federal grant requires an enforcement action at the site;

(4) the application is incomplete or inaccurate and the alleged incompleteness or inaccuracy cannot be remedied by the applicant within thirty (30) days;

(5) the site has a state or federal permit that addresses a contaminant described in the application, or a permit is pending;

(6) an agreement between the Department and the Environmental Protection Agency precludes the site from being addressed under this statute; or

(7) the applicant has, within ten (10) years immediately preceding the date of submission of the application:

(a) knowingly misrepresented a material fact in an application for a permit or plan submitted pursuant to state environmental laws;

(b) refused or failed to disclose any material information required under this Act;

(c) exhibited a history of willful disregard for environmental laws of any state or of the United States; or

(d) had an environmental permit revoked or permanently suspended for cause pursuant to provisions of any environmental laws of any state or of the United States.⁽²¹⁾

After the Secretary determines that an applicant is eligible, the Secretary may enter into a voluntary remediation agreement with the applicant.⁽²²⁾ The voluntary remediation agreement must be on a standard form developed by NMED and must include, among other items, "a preliminary work plan, describing the proposed voluntary remediation activities as they are currently envisioned as being submitted to a final voluntary remediation work plan" and a reference to "applicable statutes, regulations, standards, and guidance that must be complied with . . .."⁽²³⁾ Interestingly, the regulations do not require the applicant to disclose anything about its proposed post-remediation use of the property.

2. Public Comment:

Before a proposed voluntary remediation agreement may be approved, the proposal must undergo a period of public notice and comment. The applicant must

(1) make the proposed voluntary remediation agreement available for public inspection at a location in reasonable proximity to the site;

(2) notify the following entities and advise them of the proposed voluntary remediation agreement and the opportunity to submit comments to the Department;

(a) any local, state, federal, tribal, or pueblo governmental agency potentially affected by the proposed voluntary remediation agreement;

(b) those parties that have requested notification;

(c) the general public by posting at the site on a form provided by the Department; and

(d) the general public by publishing in a newspaper of general circulation in the community potentially affected by the voluntary remediation agreement . . ..⁽²⁴⁾

A thirty (30) day public comment period runs from the date of publication of the notice in the newspaper.⁽²⁵⁾ During that comment period, interested persons may submit comments concerning the proposed voluntary remediation agreement and may request a public meeting.⁽²⁶⁾ A public meeting "will be held if the Secretary of Environment determines that there is a significant public interest . . .."⁽²⁷⁾ If a public meeting is to be held, the applicant, at its expense, must "at least ten (10) calendar days before the meeting, mail a notice of the time and place of the meeting to all persons who have submitted written comments or a request for public meeting, and publish the notice in a newspaper of general circulation in the state and a newspaper published in the area where the site is located, in the legal advertisement section of the newspaper and at one other place in the newspaper chosen to give the general public the most effective notice."⁽²⁸⁾ The published notice "shall be published in both English and Spanish" if NMED determines that is appropriate.⁽²⁹⁾ At the public meeting, all interested persons must be given "a reasonable chance to submit data, views, or arguments orally or in writing, and to ask questions of the [NMED] and of the applicant, or its authorized representatives."⁽³⁰⁾ In deciding whether to enter into a voluntary remediation agreement, the Secretary must consider public comments.⁽³¹⁾

3. Certificate of Completion:

If a party completes work in accordance with an approved voluntary remediation work plan, the NMED then will issue a certificate of completion.⁽³²⁾ Following issuance of the certificate of completion,

The Secretary of Environment shall provide a covenant not to sue to a purchaser of the site that did not contribute to the site contamination for any direct liability, including future liability for claims based upon the contamination covered by the agreement or over which the Department has authority. Except as may be provided under federal law or as may be agreed to by a federal government entity, the covenant not to sue shall not release a participant from liability to the federal government for claims based on federal law. Except as may be agreed to by a third party, the covenant not to sue shall not release a person from liability to third parties.⁽³³⁾

The covenant not to sue "shall be transferable with title to the site."⁽³⁴⁾

The limited public participation under the VRA may pose a problem for the lawyer advising the VRA applicant. First, failure to adequately anticipate and address public concerns regarding remediation standards or the timetable for remediation may delay Secretarial approval of the remediation plan. Failure to maintain good relations with the relevant community can also impede the implementation of that plan. The VRA's implementing regulations provide that "if members of the public request to participate in the voluntary remediation activities, then a mailing list of interested parties will be developed. These interested parties will be kept informed of the availability of key project submittals as they are received by the Department. Such submittals will be made available by the [NMED] for public review and comment upon request."⁽³⁵⁾ Neither the VRA nor its implementing regulations makes clear the timetable or procedure for submission of such comments. Similarly, there is no direction as to whether the Secretary or the NMED must consider such comments or exactly how such comments should be handled. The VRA's implementing regulations do contain a provision for resolution of disputes "regarding the requirements for the voluntary remediation agreement, . . ., [the] regulations, or the Act . . .."⁽³⁶⁾ To invoke the dispute resolution mechanism, "the participant may notify the secretary by certified mail that a dispute has arisen and the participant desires to invoke the dispute resolution provisions . . .."⁽³⁷⁾ That notification must be made within fifteen (15) calendar days after the participant receives the decision of the Secretary that causes the dispute or the applicant is deemed to have waived its right to dispute that decision.⁽³⁸⁾ The participant and the Secretary then have a period of up to sixty (60) days to negotiate a resolution. If they are unsuccessful in negotiating a resolution by the end of that sixty day period, "the secretary shall issue a binding final decision, including a written statement of the reason for the decision."⁽³⁹⁾ Neither the VRA nor the Act expressly provides for judicial review of the Secretary's decision. As a practical matter, disputes with citizens who are participating in the remediation process may delay completion of that work. More significantly, the disputes could lead to final Secretarial decisions which arguably are not subject to judicial review and could result in increased cost or time for the remediation program.

A further problem arises from the fact that the VRA regulations do not require an applicant to disclose what use, if any, the applicant proposes to put the site to upon completion of remediation. An applicant and its counsel will have to carefully consider how to handle that issue. If the applicant refuses to disclose the intended use of the property after remediation, the local community may be suspicious of the applicant and its plans for development. That suspicion could manifest itself as heightened interest in participation in both hearings on the proposed voluntary remediation plan and increased public participation in ongoing remediation activities. That, in turn, could delay work on the project. If an applicant elects to disclose a potential use of the post-remediation property, and that use subsequently changes because of changed business conditions or other factors, the applicant and its counsel will have to work carefully to insure that that change is timely conveyed to the neighboring community to avoid creating an air of suspicion which make future development of the property more controversial.

D. Environmental Justice:

While brownfields initiatives and the environmental justice movement share some common goals, the two movements also diverge from one another in some essential respects. Both movements are compatible in that they, theoretically, seek to eliminate environmental hazards and promote healthier communities. It is in the selection of the use of the remediated property where the two movements diverge. Many brownfields programs foster industrial or commercial redevelopment of remediated properties and, as demonstrated above, provide little or no community input into the determination of the post-remediation use of the property. Environmental justice proponents, on the other hand, seek to promote greater community involvement in both the remedial activities at the property and the selection of the post-remediation use of that land. Because environmental permitting has become more pervasive, requiring a broader array of industrial or commercial enterprises to obtain some form of permit, environmental justice advocates can exercise influence over the post-remediation use by both actively participating in the permitting process and by challenging permitting decisions after the fact under Title VI of the Civil Rights Act of 1964.

This section provides a short background of the environmental justice movement. Then the paper reviews the impact of President Clinton's Executive Order on environmental justice and the EPA's Interim Guidance for handling Civil Rights Act complaints about permitting decisions.

1. Background:

Most major state and federal environmental laws are facially neutral and are intended to restore, maintain, and protect the nation's environment to promote public health and welfare.⁽⁴⁰⁾ Given that facial neutrality, the assumption was that the benefits afforded by those statutes and the burdens of treating and disposing of the nation's waste would be borne more or less equally by all segments of society. Beginning in the mid-1980s, however, a series of studies shook that assumption, concluding that poor and minority communities were bearing a disproportionate burden of the society's environmental hazards.⁽⁴¹⁾ The environmental justice movement evolved in the wake of those studies, seeking means to address the perceived inequities. In its earliest stages, the environmental justice movement focused on litigation challenging the siting of hazardous waste facilities.⁽⁴²⁾ Those challenges, however, largely failed to change siting decisions or to prevent start up of such facilities. The movement then began to look for new approaches to achieve its goals.

a. Executive Order 12898

In February, 1994, the environmental justice movement gained significant impetus when President Clinton issued Executive Order 12898 directing that "each federal agency shall make achieving environmental justice part of its mission . . .."⁽⁴³⁾ That Executive Order specified that each federal agency must develop an agency-wide environmental justice strategy to identify those programs, policies, public participation processes, enforcement activities, and/or rulemakings related to human health or the environment that should be revised to promote environmental justice. Executive Order 12898 directed that each federal agency's environmental justice strategy list programs, policies, planning and public participation processes, enforcement, and/or rulemakings related to human health or the environment that should be revised to,

at a minimum: (1) promote enforcement of all health and environmental statutes in areas with minority populations and low-income populations; (2) insure greater public participation; (3) improve research and data collection relating to the health of and environment of minority populations and low-income populations; and (4) identify differential patterns of consumption of natural resources among minority populations and low-income populations.⁽⁴⁴⁾

President Clinton's February 11, 1994 memorandum accompanying Executive Order 12898 emphasized the connection between the Civil Rights Act of 1964 and federal environmental statutes.

Environmental and civil rights statutes provide many opportunities to address environmental hazards in minority communities and low-income communities. Application of these existing statutory provisions is an important part of this administration's efforts to prevent those minority communities and low income communities from being subject to disproportionately high and adverse environmental effects.⁽⁴⁵⁾

b. Civil Rights Claims

President Clinton's memorandum accompanying Executive Order 12898 paved the way for federal agencies to utilize the 1964 Civil Rights Act as a tool to advance the goals of environmental justice.

In accordance with Title VI of the Civil Rights Act of 1964, each federal agency shall insure that all programs or activities receiving federal financial assistance that affect human health or the environment do not directly, or through contractual or other arrangements, use criteria, methods, or practices that discriminate on the basis of race, color, or national origin.⁽⁴⁶⁾

Title VI of the Civil Rights Act of 1964 provides that "no person in the United States shall, on the ground of race, color, or national origin, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving federal financial assistance."⁽⁴⁷⁾ Under Title VI,

Each federal department and agency which is empowered to extend federal financial assistance to any program or activity, by way of grant, loan, or contract other than a contract of insurance or guaranty, is authorized and directed to effectuate the provisions of § 601 with respect to such program or activity by issuing rules, regulations, or orders of general applicability which shall be consistent with achievement of the objective of the statute authorizing the financial assistance in connection with which the action is taken.⁽⁴⁸⁾

Title VI of the Civil Rights Act can be a potent litigation device. A plaintiff invoking Title VI has three options: (1) suing the recipient of the federal funding who has engaged in the discriminatory activity; (2) suing the funding agency; or (3) pursuing a claim through the funding agency's administrative procedures under Title VI.⁽⁴⁹⁾ EPA has adopted Title VI non-discrimination regulations to prohibit "any program or activity receiving EPA assistance" from discriminating "directly or through contractual, licensing, or other arrangements on the basis of race, color, national origin, or, if applicable, sex . . .."⁽⁵⁰⁾ Under those regulations, EPA assistance is defined as "any grant or cooperative agreement, loan, contract (other than a procurement contract or a contract of insurance or guaranty, or any other arrangement by which EPA provides or otherwise makes available assistance in the form of (1) funds; (2) services of personnel; or (3) real or personal property or any interest in or use of such property . . .."⁽⁵¹⁾ Recipient, in turn, is defined as "any state or its political subdivision, any instrumentality of a state or its political subdivision, any public or private agency, institution, organization, or other entity, or any person to which federal financial assistance is extended directly or through another recipient, including any successors, assignee, or transferee of a recipient, but excluding the ultimate beneficiary of the assistance."⁽⁵²⁾ Under Title VI, "program or activity" is broadly defined to make an entire program subject to the Title VI as long as even the smallest part of that program receives any federal funds.

EPA's regulations further impose requirements on applicants for and recipients of EPA assistance to insure compliance with Title VI. Applicants for EPA assistance must "submit an assurance with their applications stating that, with respect to their programs or activities that receive EPA assistance, they will comply with the requirements" of the EPA's Title VI regulations.⁽⁵³⁾ Recipients are further required to "collect, maintain, and on request of the [EPA Office of Civil Rights] provide the following information to show compliance with this part: (1) a brief description of any lawsuits pending against the recipient that allege discrimination which this part prohibits; (2) racial/ethnic, national origin, sex and handicap data . . .; (3) a log of discrimination complaints which identifies the complaint, the date it was filed, the date the recipient's investigation was completed, the disposition, and the date of disposition; and (4) reports of any compliance reviews conducted by any other agencies."⁽⁵⁴⁾

c. EPA's Interim Guidance on Title VI

In February, 1998, EPA issued its Interim Guidance for Investigating Title VI Complaints Challenging Permits (the "Interim Guidance"). The Interim Guidance sought to "accommodate the increasing number of Title VI complaints that allege discrimination in the environmental permitting context"⁽⁵⁵⁾ by providing the procedures for the EPA's Office of Civil Rights (the "OCR") to use for investigating Title VI administrative complaints against state and local permitting authorities. The Interim Guidance established a multi-step framework for handling such complaints. Both the Interim Guidance itself and EPA's implementation of that Guidance created a firestorm of controversy which ultimately resulted in a Congressional suspension of funding for implementation of the policy until EPA issues final guidance. EPA had initially indicated that it would issue final guidance by mid-1999. To date, however, EPA has not issued that final guidance.

The Interim Guidance is nonetheless instructive concerning some of the environmental justice issues facing a land development project. Under the Interim Guidance, once a written complaint is filed with the EPA Office of Civil Rights challenging a state or local environmental agency's pollution permitting decision, the Office of Civil Rights must conduct a "disparate impact assessment" to determine if the permitting action in fact has a disparate impact on a minority or low income population. The Interim Guidance, however, fails to provide any concrete guidance on defining disparate impact. Indeed, identifying the types of harm that should be considered in determining the existence of an adverse impact is a source of significant controversy. One side of that controversy argues that the types of harm should include all "burdens" imposed on a community by environmental decisions, including social, economic, psychological, and physiological impacts.⁽⁵⁶⁾ Others, however, argue that the determination should be based solely upon demonstrable scientific evidence of disproportionate adverse health effects.⁽⁵⁷⁾

If the EPA Office of Civil Rights determines that there is a disparate impact, then the agency accused of violating Title VI has an opportunity to rebut the charges or to justify the disparate impact by showing a "legitimate interest" and the non-existence of a less discriminatory alternative to its permitting decision.⁽⁵⁸⁾ If the agency cannot rebut the charges or justify the disparate impact, then the EPA Office of Civil Rights will issue a written notice of non-compliance. Within ten (10) calendar days of receipt of the formal determination, the agency must either come into voluntary compliance or the OCR will commence procedures "to deny, annul, suspend or terminate EPA assistance [to the permit program at issue] . . . and consider other appropriate action, including referring the matter to" the Department of Justice for litigation.⁽⁵⁹⁾

The Interim Guidance contained a number of significant problems from the perspective of the regulated community. First, EPA's administrative review of environmental justice complaints begins only after the state or local permitting decision is final. That review may extend for a period of six months. Those "after the fact" reviews create tremendous uncertainty for developers and the regulated community, because a permit could be canceled or revoked months after it has initially been granted by the state or local permitting agency. EPA's administrative review of environmental justice complaints also intrudes on state or local land use planning decisions and may conflict with state or local redevelopment initiatives, including brownfields initiatives.

III. Indian Lands

Leasing of Indian lands is a third area in which environmental regulation and public comment can have significant impact on a proposed development project. As a matter of federal law, leasing Indian land for business or commercial development triggers the requirements of NEPA and the attendant public participation. A lawyer advising a client concerning leasing of Indian lands must be alert to the delays and potential pitfalls associated with obtaining requisite NEPA review and Secretarial approval of the lease. Those issues are discussed below. As a word of caution, there are also a number of other significant legal issues that must be considered when leasing Indian lands, including waivers of immunity from suit, dispute resolution provisions, and other matters. Those issues will be covered in the oral presentation at this conference but are not discussed in this paper.

As a general proposition, an Indian tribe or an individual Indian may lease its trust lands,⁽⁶⁰⁾ but any such lease must be approved by the Secretary of the Interior.⁽⁶¹⁾ The general leasing statute⁽⁶²⁾ requires that the Secretary of the Interior "satisfy himself that adequate consideration has been given to . . . the effect on the environment of the uses to which the leased lands will be subject."⁽⁶³⁾ Secretarial approval of a lease constitutes a "major federal action significantly affecting the quality of the human environment" requiring compliance with the National Environmental Policy Act ("NEPA").⁽⁶⁴⁾ Thus, at a minimum, an Environmental Assessment, followed by either a Finding of No Significant Impact ("FONSI") or a full-blown Environmental Impact Statement ("EIS"), will have to be completed before the Secretary may approve a proposed lease of Indian land. The same is also true of a proposed mineral development agreement under the Indian Mineral Development Act.⁽⁶⁵⁾

The regulations implementing NEPA⁽⁶⁶⁾ address the extent of public participation, notice, and hearings. Those regulations require "public notice of NEPA-related hearings, public meetings, and the availability of environmental documents" so that interested persons and agencies can be informed.⁽⁶⁷⁾ The regulations further require federal agencies to "solicit appropriate information from the public," but do not tie this requirement to the public notice requirements.⁽⁶⁸⁾ The regulations further require agencies to hold public hearings or meetings "whenever appropriate" or in accordance with applicable statutory requirements.⁽⁶⁹⁾ Agencies must consider whether there is "substantial environmental controversy" or substantial public interest in holding a hearing.⁽⁷⁰⁾

Under the regulations, determining whether to hold hearings or public meetings is left to the discretion of the responsible federal agency unless the hearing is required by statute. While public meetings and hearings are discretionary with the agency, the regulations do dictate that agencies "shall involve . . . the public, to the extent practicable, in preparing [environmental assessments]."⁽⁷¹⁾ Also, FONSIs shall be released to the public,⁽⁷²⁾ and any FONSI involving unprecedented actions shall not be finalized until public review has taken place.⁽⁷³⁾

The requirement that NEPA be satisfied before Secretarial approval of a proposed lease provides a potent weapon for opponents of a proposed project on Indian lands. Several cases demonstrate the way in which third parties can use NEPA to challenge a proposed project on Indian lands. In Davis v. Morton,⁽⁷⁴⁾ the Pueblo of Tesuque entered into a 99-year lease of some 1,300 acres of tribal lands with the Sangre de Cristo Development Company, Inc. to develop a planned residential community which would also include some recreational and commercial uses. The BIA approved the lease without first evaluating the proposed project under NEPA. The BIA took the position that because the only "federal action" was the BIA's approval of the lease and because the government was not otherwise involved in the project, there was no "major federal action" which could trigger NEPA. More than a year and one-half after the lease was approved and work on the project was underway, a group of environmental organizations and landowners brought suit in federal court to enjoin the project because they claimed that the lease approval was invalid since the BIA had not complied with NEPA prior to approving the lease. The district court agreed with the BIA that NEPA was not applicable. On appeal, however, the Tenth Circuit Court of Appeals reversed and remanded with directions to enter the requested injunction.

After the Tenth Circuit's decision in Davis, Sangre de Cristo and the BIA worked together for more than four years to prepare an environmental impact statement for the project. In the meantime, new leadership at the Pueblo began to question whether to proceed with the project. Then, in 1976, some six years after the initial BIA approval of the lease, the Pueblo asked the BIA to void the lease, and, roughly a year later, the BIA rescinded its 1970 approval of the lease "based upon environmental considerations as well as the Pueblo's opposition to the lease."⁽⁷⁵⁾ Shortly thereafter, Sangre de Cristo filed bankruptcy. The bankruptcy trustee filed suit against the United States seeking damages for an unconstitutional taking arising from the rescission of the lease. The district court dismissed the trustee's claims and the Tenth Circuit affirmed, holding that, because the lease was never validly approved by the Secretary, Sangre de Cristo did not have a vested interest in a valid, enforceable lease at the time of cancellation.⁽⁷⁶⁾ The fact that the Secretary initially approved the lease was of no consequence, because, the court held: "Not just any Departmental approval will suffice - the approval must have been a valid approval."⁽⁷⁷⁾

A more troubling example of how NEPA can be used to delay or potentially thwart a proposed project is Rosebud Sioux Tribe v. Gover.⁽⁷⁸⁾ In that case, the Rosebud Sioux Tribe and a partnership entered into a lease of tribal lands for operation of a hog farm. The Bureau of Indian Affairs prepared an EA, conducted a public hearing and received comments, and ultimately issued a FONSI. Following publication of notice of availability of the FONSI, the lease received Secretarial approval. None of the parties who had filed comments or participated in the hearing initiated administrative appeals. The partnership thus initiated construction on the project. Two months into construction, a coalition of groups that had participated in the EA process, filed suit against the Secretary and Assistant Secretary in federal court seeking to suspend approval of the lease because, they claimed, the EA did not support the issuance of an FONSI, and NEPA required that a full EIS be prepared prior to approval of the lease. The parties further asserted that approval of the lease without preparation of a full EIS rendered the lease void. Though the federal defendants filed an answer denying any violation of NEPA, the day after filing that answer, the Assistant Secretary issued a notice stating that the lease was void due to the BIA's failure to comply with NEPA.

The Tribe and the partnership then filed suit against the Secretary and Assistant Secretary in federal court in South Dakota. After a hearing, the federal court issued a preliminary injunction preventing the Assistant Secretary from enforcing the declaration that the lease was void. The court found that the Assistant Secretary lacked authority to revoke a lease approval unilaterally on the grounds of alleged failure to comply with NEPA. The district court's order made a compelling case for the significant harm that would flow from the Assistant Secretary's action:

Defendants have strenuously argued in this case that the Assistant Secretary has the authority, at virtually any time, stretching out over a period of years, to sua sponte void a lease for a claimed failure of the BIA to comply with NEPA although (1) the lease was approved and authorized by the BIA Agency Superintendent and the high ranking BIA area director who have the legal authority to approve leases in Indian country; (2) the tribe was and continues to be in full support of the lease; (3) neither the tribe nor the lessee have done "anything wrong"; (4) no administrative appeal was ever taken from the action of the area director who approved the lease and the time for appeal has expired; and (5) the lessee has already taken possession of the leased premises and has constructed improvements on the leased land. If this were to be allowed, what lender would ever loan money for an economic development project in Indian country? What company would ever agree to build a factory and employ Native Americans? There would be no certainty. Bureaucrats in Washington come and go, especially high ranking officials not protected by civil service. Administrations come and go and philosophies change. A new Assistant Secretary could void a lease from a previous administration. The previous administration might not have crossed every "T" and dotted every "I." Compliance with NEPA is not a matter of mathematics. The answer to the question of compliance involves subjective as well as objective judgments. . . . This type of unending uncertainty in Indian country would make investments in a third world country look like a "sure thing."⁽⁷⁹⁾

IV. Ethical Considerations

The increased role of public participation in land development projects described above raises several ethical issues for the real estate lawyer. This section of the paper considers three such issues.

A. Role as Advisor:

SCRA 16-201 is particularly relevant to the lawyer rendering advice to a client facing the public relations and public participation issues described earlier in this paper. That rule directs that

In representing a client, a lawyer shall exercise independent professional judgment and render candid advice. In rendering advice, a lawyer may refer not only to law but to other considerations such as moral, economic, social and political factors, that may be relevant to the client's situation.

While the language of the second sentence of that rule is permissive, the comments to the rule make clear that a lawyer may do a disservice to a client if the lawyer fails to refer to "other considerations" in rendering advice.

Advice couched in narrowly legal terms may be of little value to a client, especially where practical considerations, such as cost or effects on other people, are predominant. Purely legal advice, therefore, can sometimes be inadequate.

Thus, the real estate practitioner must be aware of the impact that community relations and public perceptions may have on a proposed development involving environmental permitting. Indeed, the comments go on to note that "[m]atters that go beyond strictly legal questions may also be in the domain of another profession . . .. Where consultation with a professional in another field is itself something a competent lawyer would recommend, the lawyer should make such a recommendation." Read literally, that comment indicates that a lawyer may have an obligation to advise the client to consult with a marketing or public relations specialist or a similar professional to assist in developing an effective strategy to handle the public relations and public input. The lawyer may have an obligation to assemble a team of appropriate professionals to assist the client.

B. Professional Independence:

This leads to a second ethical consideration - fee sharing and partnership with non-lawyers (now better known as "multidisciplinary practice"). SCRA 16-504(A) declares that "[a] lawyer or law firm shall not share legal fees with a nonlawyer . . .." That Rule mandates that "[a] lawyer shall not form a partnership with a nonlawyer if any of the activities of the partnership consist of the practice of law"⁽⁸⁰⁾ and that

A lawyer shall not practice with or in the form of a professional corporation or association authorized to practice law for a profit, if:

(1) a nonlawyer owns any interest therein, except that a fiduciary representative of the estate of a lawyer may hold the stock or interest of the lawyer for a reasonable time during administration;

(2) a nonlawyer is a corporate director or officer thereof; or

(3) a nonlawyer has the right to direct or control the professional judgment of a lawyer.⁽⁸¹⁾

While Rule 16-201 may impose an obligation on a lawyer to advise the client to consult with another professional concerning matters that "go strictly beyond legal questions," the lawyer may not share a fee with or form a partnership or corporation with that other professional.

C. Advocate in Nonadjudicative Proceedings:

A third ethical consideration concerns the lawyer's role in the administrative process. Rule 16-309 directs that "[a] lawyer representing a client before a legislative or administrative tribunal in a nonadjudicative proceeding shall disclose that the appearance is in a representative capacity and shall conform to the provisions of" the ethical rules governing candor toward a tribunal,⁽⁸²⁾ fairness to opposing party and counsel,⁽⁸³⁾ and impartiality and decorum of the tribunal.⁽⁸⁴⁾