United States Court of Appeals For the First Circuit
No. 21-1188
HISTORIC BRIDGE FOUNDATION; FRIENDS OF THE FRANK J. WOOD BRIDGE; NATIONAL TRUST FOR HISTORIC PRESERVATION IN THE UNITED STATES,
Plaintiffs, Appellants,
v.
PETE BUTTIGIEG, in his official capacity as Secretary of the United States Department of Transportation; TODD JORGENSEN, in his official capacity as the Administrator of the Maine Division of the FHWA; STEPHANIE POLLACK, in her official capacity as Deputy Administrator of the Federal Highway Administration; BRUCE VAN NOTE, in his capacity as Commissioner of the Maine Department of Transportation,
Defendants, Appellants.
APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MAINE
[Hon. Lance E. Walker, U.S. District Judge]
Before
Kayatta and Barron, Circuit Judges, and Talwani,* District Judge.
Andrea C. Ferster, with whom Phelps Turner and Conservation Law Foundation were on brief, for appellants. Elizabeth S. Merritt for National Trust for Historic Preservation in the United States, appellant. Jonathan M. Dunitz, with whom Martha C. Gaythwaite and Verrill Dana, LLP were on brief, for Waterfront Maine, Brunswick, LLC,
* Of the District of Massachusetts, sitting by designation. amicus curiae. Sommer H. Engels, with whom Jean E. Williams, Acting Assistant Attorney General, Environment and Natural Resources Division, U.S. Department of Justice, Ellen J. Durkee, Joshua P. Wilson, and Gregory M. Cumming, Attorneys, Environment and Natural Resources Division, U.S. Department of Justice, and Silvio Morales, Attorney, U.S. Department of Transportation, were on brief, for Pete Buttigieg, Todd Jorgensen, and Stephanie Pollack, appellees. Thomas A. Knowlton, Deputy Attorney General, with whom Aaron M. Frey, Attorney General, and James Billings, Chief Counsel, Maine Department of Transportation, were on brief, for Bruce Van Note, appellee.
January 4, 2022 KAYATTA, Circuit Judge. The Frank J. Wood Bridge ("the
Bridge") has served for nearly ninety years as a key connection
between Topsham and Brunswick in Maine. Now though, it is
potentially unsafe and getting worse. So the question is, what to
do? The state of Maine has decided to tear it down and replace it
with a modern bridge. Friends of the Frank J. Wood Bridge and
other historic preservation groups (collectively, "the Friends")
would rather the state rehabilitate the Bridge to preserve its
historic nature and that of the surrounding area. The Federal
Highway Administration (FHWA) eventually approved Maine's
decision. The Friends then asked the United States district court
to review and set aside that approval. In a careful opinion, the
district court considered and rejected the numerous arguments made
by the Friends in seeking to set aside the decision to replace the
Bridge. On de novo review, we now affirm all of the district
court's holdings, save one. Our reasoning follows.
I.
A.
The Frank J. Wood Bridge is a riveted steel through-
truss bridge constructed in 1932 to connect the towns of Topsham
and Brunswick, Maine. It is a "key vehicular and pedestrian
connection" between those communities, carrying pedestrians,
bicyclists, and nearly 19,000 vehicles a day across the
Androscoggin River. The Bridge is also a part of the Brunswick
- 3 - Topsham Industrial Historic District, which includes the historic
Cabot Mill and Pejepscot Paper Company.
Prompted by the collapse of a truss bridge in Minnesota
that caused thirteen deaths and a hundred injuries, the governor
of Maine issued an executive order in 2007 directing the Maine
Department of Transportation (MDOT) to "reassess the safety of
Maine's bridges and take appropriate action to mitigate any safety
concerns." MDOT prepared a report, which provided a "comprehensive
overview of the state of Maine's bridge infrastructure" and
identified forty-four fracture-critical bridges1 within the state,
including the Frank J. Wood Bridge.
In 2015, MDOT launched the Frank J. Wood Bridge
Improvement Project to address the Bridge's "poor structural
conditions and load capacity issues" and to improve "mobility and
safety . . . for pedestrians and bicyclists." MDOT hired an
engineering firm to present preliminary design plans for several
alternatives and to assess the potential cost of each alternative.
MDOT used its consultant's studies and analysis to create a
Preliminary Design Report (PDR), which was open for public comment
prior to the publication of a final report in 2017.
1 A fracture-critical bridge has elements that lack "redundancy," such that the failure of one of those elements "may ultimately lead to a catastrophic failure of the entire bridge."
- 4 - Between the preliminary and final reports, an inspection
of the Bridge was completed in June 2016. That inspection revealed
that the Bridge is "structurally deficient" and is therefore unable
to support some legal vehicle weights. So MDOT placed weight
limits on vehicles that may cross the Bridge. At the time of the
FHWA's final report under review, five-axle trucks and other
commercial vehicles that weigh more than twenty-five tons were
required to take a detour. The FHWA predicted that "[c]ontinued
deterioration will likely result in further [weight
restrictions] . . . and eventual closure" if the Bridge is not
either rehabilitated or replaced.2
To ensure that a roadway connection remained between
these communities, MDOT considered in detail three alternatives to
"no action": Two involved rehabilitating the Bridge to extend its
service life by 75 years -- the only difference between these two
alternatives was that one proposed an additional sidewalk. The
third alternative involved building a new steel girder bridge on
a curved alignment just upstream from the current Bridge, which
2 Though outside the record, we note that MDOT has recently restricted the traffic over the Bridge even further in response to new information revealed by a September 2021 inspection. Now, no commercial vehicle or vehicle that weighs over ten tons (such as fire engines and school buses) may traverse the Bridge. See News Release, MDOT, All Commercial Vehicles Prohibited from Frank J. Wood Bridge (Nov. 23, 2021), https://www.maine.gov/mdot/news/; News Release, MDOT, New Restriction for Frank J. Wood Bridge (Oct. 18, 2021), https://www.maine.gov/mdot/news/.
- 5 - would last for 100 years and would include sidewalks and five-foot
shoulders on both sides to accommodate pedestrians and bicyclists.3
MDOT estimated how much the construction and maintenance of each
alternative would cost. These estimates included myriad cost
assumptions and in-the-weeds decision points, for which MDOT
primarily deferred to its consultant. MDOT then considered how to
compare the alternatives -- either by discounting future costs to
current dollar equivalents (what the parties call the "life-cycle
cost analysis") or by comparing the total costs without taking
into account when those expenses would be incurred (what the
parties call the "service-life analysis"). Although it calculated
life-cycle costs using a discount rate, MDOT principally relied on
non-discounted future costs as the better basis upon which to
compare the alternatives. Its calculations revealed that
replacing the Bridge would cost $17.3 million over the expected
100-year life of the new bridge,4 while rehabilitating the historic
Bridge would cost $35.2 million over 75 years.5 Based on that
3 MDOT also considered three other alternatives but rejected them prior to detailed study: (1) building a new bridge on the same alignment, which would take longer than the other alternatives and require a detour; (2) building a new bridge downstream from the current Bridge, which would cause the river's water to rise substantially; and (3) rehabilitating the Bridge for a 30-year life, which would be imprudent because of the scope of repairs needed. 4 $13.7 million, if discounted. 5 $20.8 million, if discounted.
- 6 - $17.9-million differential and other benefits of a modern bridge,
MDOT concluded that it would seek to build a new bridge and
demolish the Frank J. Wood Bridge.
B.
Because federal funds would be used to construct the
replacement bridge, MDOT was required to apply to the FHWA, a
division of the federal Department of Transportation (DOT), for
approval of its plan. See 23 U.S.C. § 106 (detailing DOT's review
and oversight process for projects receiving federal funds). When
federal funds are sought for projects that may implicate historic
sites, two congressional enactments concerned with preserving
those sites come into play: The National Environmental Policy Act
(NEPA) and section 4(f) of the Department of Transportation Act
("section 4(f)"). See also 54 U.S.C. § 306108 (requiring all
federal agencies to "take into account the effect of [any]
undertaking on any historic property").
NEPA is primarily a procedural statute, aimed at
ensuring agencies will carefully consider detailed information
concerning the environmental impacts of their actions. NEPA does
not mandate any specific outcome; it only requires agencies to
conduct environmental studies. DOT v. Pub. Citizen, 541 U.S. 752,
756 (2004). But a full Environmental Impact Statement (EIS) is
only required when a proposed action will "significantly" impact
the "quality of the human environment." 42 U.S.C. § 4332(2)(C).
- 7 - If an agency does not believe an EIS will be required, it will
prepare -- like here -- an environmental assessment to document
its conclusions. If an agency ultimately determines that that an
EIS is not needed, it will issue a Finding of No Significant Impact
explaining that decision. 40 C.F.R. §§ 1501.4(c), 1508.9(a)(1),
1508.13 (2018) (amended and reconfigured by 85 Fed. Reg. 43,304,
43,324 (July 16, 2020)).
Section 4(f), conversely, "imposes a substantive
mandate." Neighborhood Ass'n of the Back Bay, Inc. v. Fed. Transit
Auth., 463 F.3d 50, 64 (1st Cir. 2006). If a protected property
is "use[d]," the agency may only approve the project if there is
"no prudent and feasible alternative." 49 U.S.C. § 303(c). By
regulation, an alternative is not feasible "if it cannot be built
as a matter of sound engineering judgment," and an alternative is
not prudent if, among other things, it "results in additional
construction, maintenance, or operational costs of an
extraordinary magnitude." 23 C.F.R. § 774.17.
In February 2018, the FHWA opened for public comment a
preliminary Environmental Assessment under NEPA and a Draft 4(f)
Evaluation, which analyzed the various alternatives for the Frank
J. Wood Bridge. The FHWA adopted MDOT's cost estimates and
concurred with MDOT's conclusion that a service-life analysis --
that is, one with no discounting -- was the most accurate
methodology to compare the "expected real costs" of the
- 8 - alternatives. Comparing only the non-discounted figures, the FHWA
concluded that the rehabilitation alternatives were "not prudent
due to [the non-discounted] Service Life Costs of extraordinary
magnitude." 6
The pro-preservation groups commented on these plans
with expert evaluations of various aspects of the state and federal
agencies' reports. One of plaintiffs' experts faulted the FHWA
for failing to discount before comparing its future cost estimates
for each alternative. The expert explained that, contrary to the
decision made here, the FHWA's Office of Asset Management's
"preferred method of comparing the costs of [] project
alternatives" is to discount future costs. See DOT, FHWA, Life-
Cycle Cost Analysis Primer (Aug. 2002). The expert then challenged
"a few cost estimate items," but he simply stated assumptions
without detailing his calculations and without reasoning why the
agency's conclusions were erroneous. The expert concluded that,
if his cost assumptions were used and discounted, rehabilitating
the Bridge would actually be about 4% cheaper over the life of the
project than replacing it, and thus "the replacement and
rehabilitations options are essentially a push."
6 FWHA was also required to consider environmental impacts associated with the project alternatives under NEPA and other statutory schemes, but we do not discuss them here because plaintiffs have not challenged any of the agency's environmental conclusions.
- 9 - The FHWA stood its ground. It issued a Final (Revised)
Environmental Assessment and Final Section (4) Evaluation in
February 2019 that maintained the conclusion that the
rehabilitation alternatives were not prudent. The FHWA explained
that it chose not to make a comparison of the discounted costs
"the primary basis for a decision on this project" because
discounting "is not an indicator of the actual costs a
transportation agency will expend on an alternative over the
timeframe used for the analysis" and because "[s]tate
transportation agencies are not often able to set money aside
today, and make interest earning investments, to pay for future
work." The FHWA then averred -- without any further explanation
-- that "[s]ervice life cost," i.e., the total money it would cost
to construct and maintain a bridge without "translat[ing] or
discount[ing] to current dollar equivalents," "provides a more
accurate comparison of the expected real costs to an agency."
The FHWA concluded that the service-life cost
differential -- $17.3 million over 100 years versus $35.2 million
over 75 years, or 103.4% -- was of such an "extraordinary
magnitude" that it may approve the replacement of the historic
Bridge because any alternatives to this "use" would be imprudent.
See 49 U.S.C. § 303(c). FHWA did not make a separate determination
that the differential after discounting -- $13.7 million over 100
years versus $20.8 million over 75 years, or 51.8% -- was also of
- 10 - such an "extraordinary magnitude" that it would be imprudent under
section 4(f). After finding no prudent alternative, the FHWA
approved MDOT's plan to construct a modern bridge upstream of the
current Bridge and to tear down the historic Bridge when
construction is finished. The next month, the FHWA issued a
Finding of No Significant Impact, explaining why the project did
not require a full Environmental Impact Statement.
C.
The Friends challenged the FHWA's decision in district
court. They claimed that the agency acted arbitrarily and
capriciously by failing to compare discounted life-cycle costs of
the alternatives. They also made a slew of line-item challenges
to various calculations of costs for each alternative, including
whether the agency justified the decisions: (1) to include a
$4 million temporary bridge in the construction costs of
rehabilitating the historic Bridge; (2) to charge only a
$1 million "premium" for a work trestle needed to construct the
replacement bridge, rather than the full cost of the trestle;
(3) to charge $1.44 more per unit for "structural steel erection"
to rehabilitate the Bridge than to replace it; (4) to estimate
that a rehabilitated Bridge would need to be repainted three times
over its 75-year lifespan at a cost of $4 million per painting;
and (5) to include two $1 million future substructure
rehabilitations in the rehabilitation alternatives' future costs,
- 11 - considering that a recent rehabilitation in 2006 in combination
with the current planned rehabilitation should last an additional
30–75 years.7
The district court rejected the preservation groups'
challenges and affirmed each of FWHA's conclusions. Although it
expressed some "skepticism" regarding certain cost estimates, the
court nevertheless concluded that the challenged estimates were
not "clearly erroneous or so implausible that they cannot be deemed
to reflect administrative expertise about the actual costs
associated" with rehabilitating the Bridge or building a new one.
Plaintiffs appealed.
II.
Agency determinations under NEPA and section 4(f) are
reviewed under the Administrative Procedure Act (APA) and
accordingly "shall not be overturned unless 'arbitrary,
capricious, an abuse of discretion, or otherwise not in accordance
with law.'" Conservation L. Found. v. FHWA, 24 F.3d 1465, 1471
(1st Cir. 1994) (quoting 5 U.S.C. § 706(2)(A)). "The task of a
court reviewing agency action under the APA's 'arbitrary and
capricious' standard is to determine whether the agency has
7 The plaintiffs also argued that a deck replacement scheduled for year 40 for the rehabilitated bridge was unnecessary until year 50 and that the new bridge's cost estimates did not include a similar deck replacement, but they did not press these arguments on appeal.
- 12 - examined the pertinent evidence, considered the relevant factors,
and 'articulate[d] a satisfactory explanation for its action
including a rational connection between the facts found and the
choice made.'" Airport Impact Relief, Inc. v. Wykle, 192 F.3d
197, 202 (1st Cir. 1999) (quoting Penobscot Air Servs., Ltd. v.
FAA, 164 F.3d 713, 719 (1st Cir. 1999)). We review the district
court's APA decisions de novo. Assoc. Fisheries of Me., Inc. v.
Daley, 127 F.3d 104, 109 (1st Cir. 1997) (explaining that this
court, in reviewing a decision based on the APA, applies "the same
legal standards that pertain in the district court and afford[s]
no special deference to that court's decision").
Although actions taken under NEPA and section 4(f) "are
subject to a highly deferential abuse of discretion standard of
review," Conservation L. Found., 24 F.3d at 1471, a court
confronting a NEPA challenge should nevertheless "carefully
review[] the record and satisfy[] itself that the agency has made
a rational decision" to "ensure that agency decisions are founded
on a reasoned evaluation of the relevant factors." Airport Impact
Relief, 192 F.3d at 203. And section 4(f) is "more stringent where
it applies." Save Our Heritage v. FAA, 269 F.3d 49, 58 (1st Cir.
2001); see also Citizens to Preserve Overton Park, Inc. v. Volpe,
401 U.S. 402, 415 (1971) (explaining that although "the Secretary's
decision is entitled to a presumption of regularity," that does
not "shield his action from a thorough, probing, in-depth review").
- 13 - III.
We begin with the plaintiffs' line-item challenges to
the cost estimates.8 To start, we see nothing irrational in the
FHWA's decision to rely on the estimates prepared by MDOT based on
conclusions by its contract engineering firm. And, following our
de novo review of the record provided on appeal, we find no basis
in the Friends' preserved arguments to reject any of the challenged
estimates as either unsupported by substantial evidence or as
arbitrary and capricious. Nor do we see any need to discuss them
all in detail in view of the district court's careful review of
the relevant estimates. That said, a few deserve a bit of
attention: (1) the cost differential of structural steel erection
between rehabilitating and replacing the Bridge; (2) the inclusion
of a $4 million temporary bridge in the cost estimates for the
rehabilitation alternatives; and (3) the decision to include only
a $1 million dollar "premium" for an admittedly more expensive
work trestle for the replacement alternative.
First, we acknowledge that there is little, if any,
explanation in the record for the difference in price estimates
used for "structural steel erection" between the alternatives. We
8 The Friends also complain that the FHWA did not adequately consider a 30-year rehabilitation alternative, but we find that it reasonably concluded that a 30-year plan was imprudent due to the substantial repairs necessitated by the results of the 2016 inspection.
- 14 - find no indication, though, that the Friends sought more of an
explanation before the FHWA in the first instance,9 so there was
no occasion for the agency to further explain itself and we decline
to require a more fulsome explanation now.10 See Quincy Com. Ctr.,
LLC v. Mar. Admin., 451 F.3d 1, 6 (1st Cir. 2006) ("Ordinarily, a
party forfeits its right to challenge agency action post hoc if it
has failed to apprise the agency of its positions in a timely
manner." (citing DOT v. Pub. Citizen, 541 U.S. at 764–66; Vt.
Yankee Nuclear Power Corp. v. NRDC, 435 U.S. 519, 553 (1978);
Valley Citizens for a Safe Env't v. Aldridge, 886 F.2d 458, 462
(1st Cir. 1989))).
Second, we have considered in particular the Friends'
arguments concerning a $4 million temporary bridge. The FHWA
reasoned that rehabilitating the existing Bridge would close it to
traffic for twenty months, resulting in detours. Estimating
traffic volume (at 19,000 vehicles per day), the resulting time
delays, and the value of that lost time to users ($22,000 per day),
9 At oral argument, the Friends contended that they had raised the price differential of structural steel erection before the agency, so we asked them to file a supplemental letter indicating where they had done so. The citations they provided show general complaints about the myriad cost estimates undergirding the FHWA's decision, but none (as described by the Friends) specifically challenge the difference in the cost estimate of structural steel erection between alternatives. 10 Given the possibility that the estimates include labor as well as raw materials, there is nothing self-evidentially off-base about the differing estimates.
- 15 - the agency calculated the bridge closure as imposing a user cost
of $13 million. To avoid that cost, the FHWA therefore adopted
MDOT's decision to include the construction of a temporary bridge
as part of the rehabilitation alternatives. The Friends argue
that the avoided $13 million cost is "fictional." But a longer
drive in distance and time certainly has a cost. And apart from
calling that cost fictional, the Friends do not challenge the
assumptions or calculations made in monetizing it.
The Friends argue, instead, that before deciding to
include a temporary bridge in the rehabilitation alternatives, the
FHWA was required to find either that the social or economic impact
of the detour was "severe" or that a detour would cause a "severe
disruption" to the community. See 23 C.F.R. § 774.17. We think
it would be unreasonable to conclude that all project design
questions -- such as, for example, how much steel to use -- must
be framed as separate alternatives to be compared against one
another under the section 774.17 criteria. While we do not reject
the possibility that some design judgments must indeed be treated
as project alternatives subject to weighing under those criteria,
the Friends offer no contextual or principled basis for why this
particular design judgment should have been treated as a project
alternative.
Further, the regulation on which the Friends rely
provides that an alternative is not prudent if it "still causes
- 16 - severe social [or] economic" impacts or "severe disruption to
established communities" only "[a]fter reasonable mitigation." 23
C.F.R. § 774.17. The regulation thus presumes that the project
design itself incorporates "reasonable mitigation" of possible
disruption impacts. Notably, the applicable guidance for
designing a bridge project provides that "[t]he method of
maintaining traffic during construction must be considered for all
bridge projects." MDOT, Bridge Design Guide 2-37 (Aug. 2003). A
temporary bridge is one of the ways to handle (that is, mitigate)
traffic issues during construction, one that is considered when
there are "long detour routes, poor quality roads, or high traffic
volumes." Id. at 2-39. Thus, following these types of
considerations, the FHWA decided that using a temporary bridge
would eliminate the need for a 20-month detour. Accordingly, there
was no cause for the FHWA to determine whether the disruption to
the community or economic impact was "still . . . severe" because
the detour was eliminated "[a]fter reasonable mitigation," i.e.,
the decision to use the temporary bridge. 23 C.F.R. § 774.17.
Finally, the Friends contend that the construction cost
estimate for the work trestle needed to demolish the existing
Bridge and build a new bridge is significantly "understated" and
thus clearly erroneous. In support of this contention, they point
to a report produced by a construction consultant hired by MDOT,
which estimated the cost of the work trestle to be between
- 17 - $1.5 million and $6.5 million. By contrast, the PDR cost estimate
includes only a $1 million "premium" for the work trestle. The
Friends thus argue that the estimate for the work trestle was so
off that it affected MDOT's cost estimates for the replacement
bridge.
The administrative record shows that the FHWA adequately
explained the figure. In response to questions received from the
public, MDOT and the FHWA explained that "[g]enerally, the major
bid items . . . include the cost of work platforms and trestles"
such that construction estimates do not typically include a
separate line item for a work trestle. But, because the site for
this bridge project "is considered more difficult due to its
topography," "an additional $1 million was added" as part of
"miscellaneous" costs. We thus do not see reason to conclude that
adding "only" $1 million to the estimate was unsupported by the
evidence. In short, all but $1 million of the work trestle cost
was already covered by the estimates.
IV.
The historic preservation groups also contend that the
FHWA acted arbitrarily and capriciously by failing to use a life-
cycle cost analysis (i.e., discounting future costs) to compare
the replacement and rehabilitation alternatives.11 Even though the
The Friends separately argue that, under NEPA, declining 11
to use a life-cycle cost analysis is "highly controversial" and
- 18 - agency calculated the life-cycle costs, it never purported to
determine whether the difference in discounted costs was of an
"extraordinary magnitude" because it placed primary weight on the
non-discounted service-life costs.
Discounting future costs customarily increases the
likelihood that there is an apples-to-apples comparison when
deciding between two options with different future effects. See
generally Amy Gallo, A Refresher on Net Present Value, Harvard
Business Review (Nov. 19, 2014) (explaining that discounting is
the "superior method" for businesses "compar[ing] projects and
decid[ing] which ones to pursue"). Indeed, the federal guidelines
we have seen on this topic -- including ones promulgated by DOT
and the FHWA itself -- explain that discounting is the standard
and preferred way to compare future costs. See, e.g., DOT, FHWA,
Life-Cycle Cost Analysis Primer 9 (Aug. 2002) (explaining why
life-cycle cost analysis, including discounting future costs, is
important in considering "several alternatives" for
thus required FHWA to conduct a full EIS. See 40 C.F.R. § 1508.27(b)(4) (2018) (requiring agencies to consider "[t]he degree to which the effects on the quality of the human environment are likely to be highly controversial") (amended by 85 Fed. Reg. 43,304, 43,322 (July 16, 2020) (removing "consideration of controversy" from the calculus)). We disagree. Whether an agency compares cost estimates of various alternatives using the appropriate methodology has no bearing on whether there is a controversy over the effects on "the quality of the human environment." Id. Accordingly, this dispute is not the sort that would require an EIS under the then-existing regulations.
- 19 - "implement[ing] . . . transportation improvement" such as deciding
between "a steel girder bridge" and a "concrete girder bridge");
FHWA, Improving Transportation Investment Decisions Through Life-
Cycle Cost Analysis, https://www.fhwa.dot.gov/infrastructure/
asstmgmt/lccafact.cfm (last updated June 27, 2017); see also OMB,
Guidelines and Discount Rates for Benefit-Cost Analysis of Federal
Programs, 1992 WL 12667340, at *3 (Oct. 29, 1992) ("Discounting
benefits and costs transforms gains and losses occurring in
different time periods to a common unit of measurement," which is
why "[t]he standard criterion for deciding whether a government
program can be justified on economic principles is net present
value"); EPA, Guidelines for Preparing Economic Analyses:
Discounting Future Benefits and Costs 6-6 (Dec. 2010),
https://www.epa.gov/sites/default/files/2017-09/documents/ee-
0568-06.pdf ("Trade-offs (benefits and costs) in this context
reflect the preferences of those affected by the policy, and the
time dimension of those trade-offs should reflect the
intertemporal preferences of those affected. Thus, social
discounting should seek to mimic the discounting practices of the
affected individuals."). We have been pointed to no agency
guideline or regulation (nor have we located any) recommending a
method akin to the service-life analysis applied here.
The FHWA maintains that no regulation actually requires
it to discount costs. This appears to be true, and we are not
- 20 - prepared to hold that failure to compare discounted future costs
is per se arbitrary and capricious. But the fact that a life-
cycle cost analysis is not required does not obviate the
requirement for reasoned decisionmaking. The key inquiry is why
the FHWA decided to forgo its own guidance and that of the Office
of Management and Budget, which say that comparing discounted
future costs is the way to go.
On that question, the only reason given for rejecting
the use of present-value discounting is that states usually do not
set aside funds for future expenses, so there will be no rate of
return as time goes by. But, while discounting "can be understood
in terms of the economic return that could be earned on funds in
their next best alternative use," it can also be understood as
"the compensation that must be paid to induce people to defer an
additional amount of current year consumption." DOT, FHWA, Life
Cycle-Cost Analysis Primer 16 (Aug. 2002) (emphasis added).
Moreover, the FHWA points to nothing about the funding here that
distinguishes it from the funding for projects for which its
guidance calls for discounting. And it seems to overlook the fact
that the source of state funds -- taxpayers -- may well earn funds
on set-aside dollars not spent today. See id. at 10
("[T]ransportation agency officials are expected to explain and
justify decisions concerning the expenditure of taxpayer dollars,
[and] [d]ocumentation associated with the [life-cycle cost
- 21 - analysis] process is a mechanism for transportation officials to
demonstrate their good stewardship of the public's transportation
infrastructure investment."). Perhaps the FHWA's avoidance of
discounting implies it expected inflation to equal the expected
rate of return over the next 75 years. But see id. at 16
("Analytically, adjusting for inflation and discounting are
entirely separate concerns, and they should not be confused by
attempting to calculate both at once."). If so, it offered no
support for such an implication. Cf. FCC v. Fox Television
Stations, 556 U.S. 502, 515 (2009) (explaining that an agency must
"display awareness that it is changing positions" and "must show
there are good reasons for the new policy").
In the face of guideline after guideline explaining why
agencies should discount future costs before comparing costs
incurred across time, the agency must do more than simply assert
that its choice is the "more accurate" one. Cf. Dist. 4 Lodge of
the Int'l Ass'n. of Machinists & Aerospace Workers Loc. Lodge 207
v. Raimondo, 18 F.4th 38, 47 (2021) ("Importantly, the Agency
subjected its estimates to peer review and . . . did indeed explain
how its estimates comported with and were derived from the hard
data that was available."). Nor does the provenance of the method
used by the FHWA provide any confidence that the agency acted
rationally. Even on appeal, defendants point to no literature or
other support for use of the counterintuitive service-life method.
- 22 - Rather, it was suggested by a town official with no apparent
relevant expertise and criticized at the time by one of MDOT's own
experts.
Tellingly, the federal defendants on appeal do not seem
to really take issue with the idea that discounting is the proper
and widely accepted best way to compare future costs. Rather, the
gestalt of the FHWA's brief -- as opposed to the state agency's
brief -- is that the failure to consider the discounted costs was
harmless error. The FHWA contends that it did in fact discount
costs, even though service-life analysis was the "primary basis"
for its decision, and that the record is clear that the agency
would have come to the same conclusion had it affirmatively relied
on a discounted-cost comparison. After all, reasons the federal
agency, adding $7.1 million to a project that will otherwise cost
only $13.7 million (i.e., a 53% increase) could be seen as quite
an extraordinary cost that taxpayers should not have to bear.
The Friends argue that if costs were both corrected (by
sustaining their challenges to the various line-item estimates)
and discounted to present value, the resulting delta would be less
than 10%, and thus, according to the Friends, "legally
inconsequential." But of course, we (like the district court)
have rejected the Friends' challenges to the line items that they
seek to reduce. So the point remains: Even with discounting to
- 23 - present value, the Friends' preferred option would increase costs
by over one-half.
That being said, and within boundaries not implicated
here, it is for the FHWA, not this court (or counsel on appeal),
to make the judgment call in the first instance regarding whether
the 53% delta represents an extraordinary cost increase against
which prudence counsels. See SEC v. Chenery Corp., 332 U.S. 194,
196 (1945) ("[A] reviewing court . . . must judge the propriety of
[agency] action solely by the grounds invoked by the agency. If
those grounds are inadequate or improper, the court is powerless
to affirm the administrative action by substituting what it
considers to be a more adequate or proper basis.").
For the foregoing reasons, we affirm in part and vacate
in part, with instructions that the matter be returned to the FHWA
for the strictly limited purpose of allowing the agency to further
justify use of the service-life analysis and/or to decide whether
a 53% price differential represents a cost of an extraordinary
magnitude under 23 C.F.R. § 774.17.
- 24 -