rates on the demand for water in the Basin region, and the consequent impact on the prices and demand for goods and services which use water. The assessment's conclusion that water charges at the proposed levels would not have a significant adverse impact on the human environment is based on data showing that the demand for water throughout the Basin is fundamentally inelastic. The scope of the assessment is, however, restricted to the impact of the charges on primary and secondary water use; it does not examine the environmental consequences of the "pooled water" concept underlying the charges. Nor does it examine the environmental consequences of the alternatives of charging only those users who directly benefit from the Reservoirs' increased storage capacity or the alternative of raising the necessary revenues from the signatory states alone.
Plaintiffs argue that the assessment -- and therefore the negative declaration -- is inadequate because of its failure to deal with the environmental effects of the pooled water concept or the alternatives specified in the proceeding paragraph. Plaintiffs also claim that the charges are "the first step in a systemwide water management regulation activity," including the construction of the Tocks Island Dam and Reservoir, aimed at augmenting the water supply. Defendant argues in response that whether the Tocks Island project should be built is a decision separate from the decision to implement the water charges, that the latter decision will not affect the former, and that no other water management questions are raised by the charges. Defendant also contends that examination of the environmental consequences of alternate means of raising revenue to pay the non-federal costs of the Reservoirs would be speculative and therefore not properly part of any environmental assessment.
Neither the Supreme Court nor this Circuit has passed upon the standard that a District Court should apply in reviewing an agency's decision that no environmental impact statement is required, and those Circuits which have ruled on the matter have split along three lines. Some Circuits have stated that the agency's negative determination would be upheld if it was not "arbitrary or capricious." First National Bank of Chicago v. Richardson, 484 F.2d 1369 (7th Cir. 1973); Rucker v. Willis, 484 F.2d 158 (4th Cir. 1973); Hanly v. Kleindienst, 471 F.2d 823, (2nd Cir. 1972). Other Circuits have adopted a more stringent "reasonableness" test under which an agency's negative determination will be sustained where there is supporting evidence in the record and a reasonable basis in law. Minnesota Public Interest Research Group v. Butz, 498 F.2d 1314 (8th Cir. 1974); Wyoming Outdoor Coordinating Council v. Butz, 484 F.2d 1244 (10th Cir. 1973); Save Our Ten Acres v. Kreger, 472 F.2d 463 (5th Cir. 1973). The District of Columbia Circuit has endorsed neither the "reasonableness" test nor the "arbitrary and capricious" test. Instead it has adopted a test suggested by Judge Friendly in his dissenting opinion in Hanly, cited supra. Under this test, an agency's assessment must provide convincing reasons that "arguably" potentially significant impacts do not require a detailed environmental impact statement. Maryland-National Capital Park and Planning Commission v. Postal Service, 159 U.S. App. D.C. 158, 487 F.2d 1029 (1973).
While this Court believes, for the reasons set forth Wyoming Outdoor Coordinating Council v. Butz, cited supra, that a higher standard of review than the "arbitrary and capricious test" is required in NEPA cases, the Commission's treatment of the environmental impact of the charges themselves clearly passes muster under any of the three standards outlined above. It is true, as plaintiffs assert, that a federal agency may, under certain circumstances, be required to prepare an environmental impact statement on the policy underlying a proposed rate scheme, SCRAP v. U.S., 346 F. Supp. 189 (1972), rev'd on other grounds, 412 U.S. 669, 93 S. Ct. 2405, 37 L. Ed. 2d 254 (1973). However, such a statement need only examine the impact of the policy insofar as it is implemented by those rates. Id., at 201. As for plaintiffs' contention that defendant failed to consider the relative environmental impact of alternatives to the proposed action, such as, for example, ignoring the exemption clause (Section 15.1(b) and charging all users of surface water, or taxing the Reservoir's costs against the signatory states alone, we believe that this type of inquiry is not required unless it is first found that the proposed action will significantly affect the environment. The particular appropriateness of this view
in this case is apparent from plaintiffs counsel's oral argument, in which he indicated that if the citizens of Philadelphia were compelled to consider how much of the Reservoirs' costs they would have to bear without the 15.1(b) exemption, or solely on a direct benefit basis, they might well decide that building the Reservoirs was too costly. What plaintiffs want is not an environmental, but a political impact statement, which is neither required by NEPA nor within the Commission's expertise to prepare.
Plaintiffs have failed to show that, absent the Commission's proposed charges, the Tocks Island Dam and Reservoir or the water management policy of which it is a part would not go forward. The proposed Tocks Island Dam and Reservoir project is currently undergoing its own environmental analysis.
Obviously this reservoir and the other reservoirs must be financed in some fashion, and plaintiffs' argument seems to be that since no other method of financing is politically acceptable, the method the Commission chose "causes" these reservoirs to be built. But once the Commission's preliminary assessment reveals that the chosen method of financing will not significantly affect the quality of the human environment, and this assessment is upheld on review, NEPA does not require the Commission to pass on the environmental significance, let alone the political feasibility, of possible alternative financing methods.
AND NOW, to wit, this 31st day of July, 1975, defendant's motion for summary judgment on plaintiffs' claim that it failed to comply with the National Environmental Policy Act of 1969 is hereby GRANTED, and plaintiffs' motion for summary judgment on this same issue is hereby DENIED.
Defendant's motion for summary judgment on plaintiffs' claim that Resolution 74-6 violated the Delaware River Basin Compact is hereby GRANTED, and judgment is hereby ENTERED in favor of defendant and against plaintiffs on this claim.
Defendant's motion for summary judgment on plaintiffs' claim that Resolution 74-6 violates the Federal Water Supply Act, having been treated by this Court as a motion for judgment on the pleadings, is hereby GRANTED, and judgment is hereby entered on behalf of defendant and against plaintiffs on this claim.
Judgment is entered in favor of defendant and against plaintiffs on all claims raised by plaintiffs.
AND IT IS SO ORDERED.
Clarence C. Newcomer, J.