Sierra Club v. United States Department of Agriculture

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
______________________________
)
SIERRA CLUB, )
)
Plaintiff, )
)
v. )
)
UNITED STATES DEPARTMENT OF )
AGRICULTURE, RURAL UTILITIES )
SERVICE, et al., ) Civ. Action No. 07-1860(EGS)
)
Defendants, )
)
and )
)
SUNFLOWER ELECTRIC POWER )
CORPORATION, )
)
Defendant-Intervenor. )
)
_____________________________)

MEMORANDUM OPINION

Plaintiff Sierra Club brought this action alleging that the

Department of Agriculture’s Rural Utilities Service (“RUS”) and

certain officials in the Department of Agriculture

(collectively, “the federal defendants”) violated the National

Environmental Policy Act of 1969 (“NEPA”) by failing to produce

an environmental impact statement in connection with its

involvement in the expansion of Sunflower Electric Power

Corporation’s (“Sunflower”) coal-fired generating plant in

Holcomb, Kansas. Sunflower intervened as a defendant.

On March 29, 2011, the Court granted plaintiff’s motion for
summary judgment, concluding that the federal defendants had

violated NEPA. NEPA requires federal agencies to include an

environmental impact statement (“EIS”) “in every recommendation

or report on proposals for legislation and other major Federal

actions significantly affecting the quality of the human

environment[.]” 42 U.S.C. § 4332(C). “If any significant

environmental impacts might result from the proposed agency

action then an EIS must be prepared before the [agency] action

is taken.” Sierra Club v. Van Antwerp, 661 F.3d 1147, 1153

(D.C. Cir. 2011) (internal quotations omitted). The Court found

that the financial assistance given to Sunflower by RUS in the

form of debt forgiveness and consent to a lien subordination, as

well as RUS’s approvals relating to the expansion of the power

plant, amounted to a “major federal action” within the meaning

of NEPA such that an EIS was required. Mem. Op. at 26, Mar. 29,

2011.

The Court ordered the parties to submit supplemental

briefing on the appropriate remedy. That issue is now before

the Court. Upon consideration of the supplemental briefs, the

responses and replies thereto, the applicable law, the entire

record, and for the reasons set forth below, the Court will

grant declaratory and limited injunctive relief and remand to

the agency for any necessary further proceedings.

2
I. BACKGROUND

The factual background of this case is set forth in detail

in the Court’s March 29, 2011 Memorandum Opinion. Briefly

stated, the Rural Electrification Administration (the

predecessor agency to RUS) approved a loan and loan guarantees

to Sunflower’s predecessor in 1980 after an EIS was completed.1

The loan and loan guarantees, totaling approximately $543

million, were provided for the construction of a coal-fired

generating station (“Holcomb Unit 1”) to be located near

Holcomb, Kansas. Administrative Record (“AR”) 03866. However,

soon after the construction of Holcomb Unit 1, the company

became unable to meet its debt repayment obligations to RUS and

other creditors. AR 04546. Accordingly, in 1987, the parties

entered into new agreements. Under the terms of these new

agreements, Sunflower’s predecessor issued three new classes of

1
The Rural Electrification Act of 1936 gave the Secretary of
Agriculture authority, which has been delegated to RUS, to “make
loans in the several States and Territories of the United States
for rural electrification and for the purpose of furnishing and
improving electric and telephone service in rural areas, . . .
and for the purpose of assisting electric borrowers to implement
demand side management, energy efficiency and conservation
programs, and on-grid and off-grid renewable energy systems.”
Id. § 902(a). The Rural Electrification Act further authorizes
RUS to make loans for rural electrification to corporations
organized “for the purpose of financing the construction and
operation of generating plants, electric transmission and
distribution lines or systems for the furnishing and improving
of electric service to persons in rural areas[.]” 7 U.S.C.
§ 904(a).

3
promissory notes, AR 00149.2 Furthermore, in order to secure the

notes, Sunflower granted a lien to RUS and its other secured

creditors on substantially all of its assets. AR 00276.

After the 1987 restructuring, the company was again unable

to make payments on all of the promissory notes. Of particular

concern, because the interest was capitalized on one class of

notes, the principal owed to RUS on these notes had increased

from the $98.3 million owed in 1987 to $413.9 million in 2002.

Because the company was at risk of defaulting, Sunflower and its

creditors elected to negotiate another restructuring. AR 00004-

11. The 2002 corporate and debt restructuring (the “2002

Restructuring”) divided the assets owned by Sunflower’s

predecessor between two new corporations, Sunflower Electric

Power Corporation (the party to this action, “Sunflower”) and

the Holcomb Common Facilities (“HCF”). Significantly, Sunflower

purchased the predecessor company’s assets by issuing an

entirely new set of notes to the holders of the old promissory

notes. AR 00173-175. Although HCF did not issue new promissory

notes, in exchange for the assets it received, RUS and the other

creditors received a security interest in HCF and an assignment

2
The three classes of notes were referred to as the A Notes,
B Notes, and C Notes. RUS’s share of the principal balance on
the A Notes was $294.5 million; on the B Notes it was $98.3
million; on the C Notes it was $61.4 million. Fed. Defs.’
Statement of Facts Supp. Cross-Mot. Summ. J. (“Fed. Defs.’
Statement of Facts”) ¶¶ 5-7.

4
of annual rent payments from the use of certain related

facilities. AR 00190. The 2002 Restructuring also affected the

lien held by RUS. The agency agreed that it will, in the

future, release portions of its lien, if and when a second

generating plant (“Holcomb Unit 2”) is developed. In exchange,

Sunflower agreed to grant to RUS a security interest in the rent

paid for the use of the relevant facilities.

In connection with the 2002 Restructuring, Sunflower also

agreed to obtain approval from RUS before undertaking a variety

of activities or entering certain types of contracts. Of

particular significance to the issue presently before the Court,

Sunflower agreed: (i) that it would not “enter into any

agreement or other arrangements . . . for the development of

Holcomb Unit 2 without the prior written approval of RUS,” and

“[a]ny RUS approval will be on such terms and conditions as RUS,

in its sole discretion, may require at such time” (AR 04391);

and (ii) that it would not “enter into any agreement or

arrangement . . . for Holcomb Site Development . . . or for

other use of the Holcomb Unit 1 site, the fair market value of

which would exceed $1 million annually[,] without the prior

written approval of RUS,” and “[a]ny RUS approval will be on

5
such terms and conditions as RUS, in its sole discretion, may

require at such time” (AR 04391).3

Since the 2002 Restructuring, Sunflower has sought approval

from RUS on a number of occasions in accordance with the

conditions outlined above. Most relevant to this action, on

several occasions Sunflower sought approvals relating to the

development of new generating plants at the Holcomb site. In

October of 2005, RUS granted conditional approval of Sunflower’s

execution of a Memorandum of Agreement with Tri-State Generation

and Transmission Association, Inc. (“Tri-State”) regarding the

proposed development of two new generating units at the Holcomb

site. AR 04574. Subsequently, in September of 2006, RUS

granted conditional approval for Sunflower to enter into a

3
In addition, and even more comprehensively, Sunflower also
agreed (i) that it will not “[c]onstruct, make, lease, purchase
or otherwise acquire any extensions or additions to its system
or enter into any contract therefore” without the prior written
approval of RUS (AR 04389); (ii) that it will not “[p]urchase,
lease or otherwise acquire any parcel or parcels of land or
enter into any contract therefore” without the prior written
approval of RUS (AR 04389); (iii) that it will not enter into
any contracts or arrangements regarding power purchase or sale
arrangements, power supply and delivery arrangements, power
marketing contracts, system management and maintenance
contracts, or any contracts relating to financial products such
as options, futures or hedges without the prior written approval
of RUS (AR 04389-04390); (iv) that it would not “charge, assign,
pledge, mortgage or otherwise encumber any of its property”
without prior written approval from RUS (AR 04459); and (v)
Sunflower agreed to limitations on mergers, sale of its business
or assets, leases and transfers of its capital assets in the
absence of prior approval from RUS (AR 04467-04468).

6
Purchase Option and Development Agreement with Tri-State, as

well as various other related agreements, again for the proposed

development of two new generating units at the Holcomb site. AR

04610-4611. In addition to the development of Holcomb Unit 2,

the agreements provided for the potential construction of a

“Holcomb Unit 3” and a “Holcomb Unit 4.”

In addition, on July 26, 2007, RUS also provided Sunflower

with a separate letter, referred to by the parties as the

“Additional Consideration Letter.” AR 08218-8216. The terms of

the Additional Consideration Letter modified the earlier

arrangement from 2002 whereby RUS and the other creditors had

received a security interest in HCF and an assignment of annual

rent payments for the use of certain facilities. Under the new

terms, for each additional power plant being considered for the

Holcomb site, RUS received an entirely new set of promissory

notes.4 These notes are interest bearing, but payment is due

only if and when the respective generating unit is placed into

commercial operation. Furthermore, each of these 2007

promissory notes, totaling $91 million, will be cancelled on

4
With respect to Holcomb Unit 2, Sunflower issued promissory
notes (the “2007 Holcomb 2 Notes”) in the amount of $52 million;
with respect to the 2007 Holcomb 3 Notes, the amount was $23
million; and with respect to the 2007 Holcomb 4 Notes, the
amount was $16 million. AR 08228, 08239, 08244.

7
December 31, 2021 if the respective generating unit has not been

placed into commercial operation.

The principal question before the Court in its March 29,

2011 Memorandum Opinion was whether NEPA applied to the actions

taken by RUS in connection with the Holcomb Expansion Project.5

Because NEPA requires that an EIS be prepared in connection with

any “recommendation or report on proposals for legislation and

other major Federal actions significantly affecting the quality

of the human environment,” 42 U.S.C. § 4332(C), the Court had to

determine whether a “major federal action” had taken place.

For the reasons detailed in the Court’s Memorandum Opinion,

the Court concluded that RUS’s involvement in the Holcomb

Expansion Project constituted a major federal action, both in

connection with the 2002 Restructuring and in connection with

the approvals granted in 2007. In short, the Court held that,

because RUS gave necessary approvals for the Holcomb Expansion

Project and because RUS provided financial assistance to the

project, the Holcomb Expansion Project was subject to “Federal

control and responsibility,” 40 C.F.R. § 1508.18, and therefore

RUS’s involvement amounted to a major federal action within the

5
The parties have referred to the plans involving the
development of additional generating units at the Holcomb site
as the “Holcomb Expansion Project,” and the Court will do the
same.
8
meaning of NEPA. Accordingly, by failing to prepare an EIS, the

agency violated NEPA.

II. ANALYSIS

The sole remaining issue before the Court is the

appropriate remedy. At the outset, the Court notes that the

plaintiff and the federal defendants are largely in agreement

regarding the appropriate remedy. Specifically, both maintain

that declaratory relief and prospective injunctive relief would

be sufficient to remedy the NEPA violation. Their agreement is

premised on the assumption that the approvals awarded by RUS in

2007 are no longer valid because Sunflower has significantly

altered the configuration of the proposed expansion of the

Holcomb site.

According to plaintiff and the federal defendants, at the

time of the 2007 approvals, the plans for the Holcomb Expansion

Project called for three coal-fired electric generating units,

each with a generating capacity of approximately 600-750

megawatts. Since then, however, Sunflower has revised the

configuration and now has plans to construct only a single

generating unit with a capacity of 875 megawatts. Accordingly,

plaintiff and the federal defendants argue that – in light of

the contractual arrangements between Sunflower and RUS that

obligate Sunflower to seek approval from RUS for plans and

agreements relating to the Holcomb expansion – Sunflower is

9
obligated to seek new approvals in light of these drastic

changes. The federal defendants, for example, assert that

“[d]ue to the material changes in the development of the Holcomb

Expansion Project . . . RUS has concluded that its approvals and

implementing documents require Sunflower to seek new approvals

from RUS for the drastic changes to the Holcomb Expansion

Project from the proposal RUS previously reviewed and approved

in 2007.” Fed. Defs.’ Supp. Br. at 8. Similarly, Sierra Club

asserts that “RUS has an affirmative role going forward because

RUS will have to grant additional consents and approvals before

the Expansion can lawfully proceed.” Pl.’s Supp. Br. at 6.

Accordingly, rather than asking the Court to vacate the 2002

restructuring or the 2007 approvals given by RUS in connection

with the Holcomb Expansion Project, the plaintiff and the

federal defendants ask that the Court simply order RUS to

prepare an EIS on the Holcomb Expansion Project.6

Sunflower, on the other hand, asserts that the 2007

approvals that it obtained from RUS are still valid, and it need

6
Plaintiff argues in the alternative that, if the Court
concludes that the 2007 approvals are still valid and Sunflower
need not return to RUS for additional approvals before
proceeding with the Holcomb Expansion Project, the Court should
vacate the 2007 approvals. Specifically, Sierra Club proposes
that the Court vacate two consents issued by RUS in 2007, namely
the July 26, 2007 “Additional Consideration Letter” mentioned
above, AR 08218-8216, and the letter approving Sunflower’s
execution of the effective date and purchase date documents with
Tri-State, AR 7444. Pl.’s Supp. Reply Br. at 25-26.
10
not seek additional approvals before proceeding with the

construction of an additional power plant. In particular,

Sunflower argues that the relevant agreements “clearly provide

for the possibility that anywhere from zero to three new

[generating] units could be constructed at Holcomb, and that new

generating units could be smaller or larger than 700 MW.”

Sunflower’s Supp. Br. at 7. According to Sunflower, “nothing

has occurred to invalidate the 2007 RUS Approvals.” Sunflower’s

Supp. Br. at 9. Sunflower takes the position that “[t]he only

appropriate relief in this case is to enter a declaratory

judgment setting forth how RUS violated NEPA and to remand to

RUS to determine what further action, if any, is appropriate[.]”

Sunflower’s Supp. Br. at 3.

A. Appropriate Injunctive Relief Against RUS

The Court has authority to grant an injunction to remedy a

NEPA violation. However, “a plaintiff seeking a permanent

injunction must satisfy a four-factor test before a court may

grant such relief.” Monsanto Co. v. Geertson Seed Farms, 130 S.

Ct. 2743, 2756 (2010)(quoting eBay Inc. v. MercExchange, L.L.C.,

547 U.S. 388, 391 (2006)). In particular, “[a] plaintiff must

demonstrate: (1) that it has suffered an irreparable injury; (2)

that remedies available at law, such as monetary damages, are

inadequate to compensate for that injury; (3) that, considering

the balance of hardships between the plaintiff and defendant, a

11
remedy in equity is warranted; and (4) that the public interest

would not be disserved by a permanent injunction.” Id.

In the instant case, the plaintiff and the federal

defendants essentially agree upon two proposals for injunctive

relief against RUS. First, the parties ask that the Court order

RUS to immediately conduct a review of the Holcomb Expansion

Project, including the preparation of an EIS. Specifically, the

plaintiff asks that the Court order RUS “to commence forthwith

preparation of a legally valid environmental impact statement

. . . evaluating the impacts of, and alternatives to, further

approval or support for the Holcomb Expansion Project.” Pl.’s

Proposed Order. Similarly, the federal defendants propose that

the Court enter an order first directing Sunflower “to seek

approval from RUS for the newly proposed 895 MW Holcomb

Expansion Project” and then order RUS “to conduct its review of

the changes to the configuration of the Holcomb Expansion

Project as a ‘major federal action’ within the meaning of 40

C.F.R. § 1508.18 and, for purposes of NEPA and RUS’s

implementing regulations, to conduct its review of the revised

Holcomb Expansion Project as a generation project receiving

federal financial assistance from RUS[.]” Fed. Defs.’ Proposed

Order.

Second, the parties request that the Court enter a

prospective injunction that would direct RUS to perform an EIS

12
before proceeding with any future actions in connection with the

Holcomb Expansion Project. The language proposed by plaintiff

would enjoin RUS “from taking any action, including any approval

of or consent to Sunflower’s actions pursuant to the governing

loan contracts, in support of the Holcomb Expansion Project”

until after an EIS is completed. Pl.’s Proposed Order. The

federal defendants propose similar language, suggesting that the

Court order RUS “not to issue any approvals or consents for

agreements or arrangements directly related to the Holcomb

Expansion Project” until RUS conducted its review of the

project. Fed. Defs.’ Proposed Order.

i. Proposed Order Directing the Agency to
Immediately Perform an EIS for the Holcomb
Expansion Project

With respect to the first of the parties’ proposals, namely

one that would essentially order an immediate EIS, the Court

finds that such an injunction is not appropriate for the

following reasons. First, the Court is not aware of any

proposals for any type of major federal action related to the

Holcomb Expansion Project presently being considered by RUS.

The Court, in its March 29, 2011 Memorandum Opinion concluded

that “RUS’s involvement in the Holcomb Expansion Project

constituted a major federal action, both in connection with the

2002 Restructuring and in connection with the approvals granted

in 2007[.]” Mem. Op. at 26-27, Mar. 29, 2011. However, the

13
record does not reflect that the agency is presently considering

a similar major federal action. Plaintiff and the federal

defendants both propose that the Court enter an injunction that

would require the agency to perform an EIS for the “newly

proposed 895 MW Holcomb Expansion Project.” However, although

NEPA would require an EIS if RUS were considering an approval,

financial assistance for the project, or some other major

federal action, the Court has not been made aware of any such

action. 42 U.S.C. § 4332.

Plaintiff and the federal defendants request that the Court

remedy this problem by simply entering an order requiring

Sunflower to seek additional approval from RUS. Then RUS would

have a “major federal action” for which an EIS would be

necessary. The plaintiff proposes that the Court “declare[]

that previous consents and approvals that specifically reference

one or more 600 to 700 MW coal-fired generation facilities do

not constitute approval for the current configuration of the

Holcomb Expansion Project, and that Sunflower will need

additional approval from RUS before taking any additional action

with respect to the Project.” Pl.’s Proposed Order. The

federal defendants similarly propose that the Court order

Sunflower “to seek approval from RUS for the newly proposed 895

MW Holcomb Expansion Project.” Fed. Defs.’ Proposed Order.

However, although the federal defendants have made it clear that

14
they consider the 2007 approvals to be insufficient in light of

subsequent changes to the scope of the proposed Project, and

have taken the position that Sunflower will need to seek

additional approvals before proceeding with the Holcomb

Expansion Project, the continuing validity of the 2007 approvals

is simply not before the Court in this action.

The federal defendants’ primary argument in this respect is

that Sunflower signed a settlement agreement in May 2009 with

the State of Kansas that drastically altered the plans for the

Holcomb Expansion Project. (For example, as noted above,

instead of three 700 MW generating units, the settlement calls

for the construction of a single 895 MW generating unit.) The

federal defendants assert that Sunflower failed to consult with

or seek approval from RUS before signing the settlement

agreement with the State of Kansas and argue that Sunflower

should now be ordered to seek such approval. The plaintiff

similarly reasons that the existing agreements between RUS and

Sunflower will require Sunflower to seek approvals from RUS in

the future, and the failure by Sunflower to obtain RUS approval

before entering into the settlement with the State of Kansas

constituted a breach of their existing contractual obligations.

The plaintiff and the federal defendants would have the

Court, at this late stage in the proceedings, delve into the

question of whether Sunflower is presently in breach of its

15
contractual obligations toward RUS, based largely on Sunflower’s

actions in 2009, a full two years after this action was

commenced. While RUS has clearly taken the position that

Sunflower is, or will be, in breach of its contractual

obligation to seek approvals from RUS for certain actions, that

question is not properly before this Court. Accordingly, an

injunction directing Sunflower to immediately seek approval from

RUS is inappropriate at this juncture.

ii. Proposed Order Directing RUS to Perform an EIS
for Any Future Actions Related to the Holcomb
Expansion Project

This brings the Court to the next proposal, again supported

by both the plaintiff and the federal defendants, for an

injunction that would essentially direct RUS to refrain from

granting any approvals, financial support or take any other

major federal action in connection with the Holcomb Expansion

Project without performing an EIS. While this proposal does not

suffer from the same flaws as the one previously discussed, the

Court must still consider whether plaintiff has satisfied the

four-factor test. The four factors, as noted above, are “(1)

that [plaintiff] has suffered an irreparable injury; (2) that

remedies available at law, such as monetary damages, are

inadequate to compensate for that injury; (3) that, considering

the balance of hardships between the plaintiff and defendant, a

remedy in equity is warranted; and (4) that the public interest

16
would not be disserved by a permanent injunction.” Monsanto,

130 S. Ct. at 2756 (internal quotations omitted).

The Court concludes that plaintiff has met its burden.

First, plaintiff has sufficiently demonstrated irreparable harm.

Plaintiff argues that “the Holcomb Expansion will emit

substantial quantities of air pollutants that endanger human

health and the environment” and thereby cause irreparable harm.

Pl.’s Supp. Reply Br. at 14. In support of its position,

plaintiff relies upon the affidavits submitted in support of its

motion for a preliminary injunction, particularly that of Dr.

Jonathan Levy, an Associate Professor of Environmental Health

and Risk Assessment at the Harvard School of Public Health.

Dr. Levy begins broadly with the assertion that “[c]oal-

fired power plants emit a number of pollutants of potential

concern for public health, including fine and coarse particulate

matter, sulfur dioxide, nitrogen oxides, volatile organic

compounds, mercury, and other hazardous air toxics.” Levy Decl.

¶ 4. He then discusses certain pollutants in detail. For

example, Dr. Levy considers particulate matter pollution,

defined as “a broad class of chemically and physically diverse

substances that exist as discrete particles (liquid droplets or

solids) over a range of sizes.” Levy Decl. ¶ 5. Particulate

matter pollution can be classified by particle size, and Dr.

Levy explains that “PM2.5” (particulates less than 2.5

17
micrometers in aerodynamic diameter) “pose[] a greater risk of

severe health problems (including premature death), given their

ability to penetrate deeper into the lungs. . . . [and] can

remain suspended for longer periods of time in the atmosphere

and can travel much greater distances.” Levy Decl. ¶ 7.

Relying upon various assumptions, Dr. Levy calculates the

expected quantities of PM2.5 from the Holcomb site and comes to

the conclusion that “construction and operation of the proposed

unit at the Holcomb site in Kansas would contribute to

particulate matter concentrations in the vicinity of the plant

and in downwind areas, increasing the health risks . . . to

individuals in those areas.” Levy Decl. ¶ 15. According to Dr.

Levy, “[e]xposure to airborne PM is associated with a number of

serious health problems, such as premature death, cardiovascular

and respiratory hospitalizations, and other forms of respiratory

and cardiovascular morbidity. These health problems are

particularly likely to occur in sensitive populations, including

the elderly, children, and individuals with diabetes or

cardiopulmonary disease.” Levy Decl. ¶ 6.

Similarly, Dr. Levy states that coal-burning power plants

are the “largest human-cause source of mercury emissions to the

air in the United States,” and that “[i]t is my opinion that

construction and operation of the proposed unit at the Holcomb

site in Kansas would increase concentrations of mercury in the

18
air, which may then be deposited locally or carried great

distances. Once this mercury enters the water, it will pose

health risks to persons exposed to it[.]” Levy Decl. ¶¶ 29-30.

Plaintiff also relies upon the declaration of Dr. Johannes

Feddema, a climate researcher, for an analysis of the increased

carbon dioxide emissions associated with new coal-fired power

plants. Feddema Decl. ¶¶ 4-27.

Sunflower’s main argument in opposition appears to be that

emissions from the planned 894 MW generating unit “will be

significantly below those of the average U.S. coal facility[.]”

Sunflower’s Supp. Br. at 20. In support of this assertion,

Sunflower has submitted an affidavit of Scott Bloomberg, a

consultant with expertise in “the electric sector, including new

investment options (generation choice), environmental risk and

compliance, climate policy, transmission, renewable portfolio

standards and fuel markets.” Bloomberg Aff. ¶ 2. Sunflower

also asserts that the Holcomb Expansion Project “has already

undergone, and continues to undergo, extensive environmental

review of its impact on the air, water, land, endangered

species, and human health in order to obtain the various permits

and approvals required to operate,” and that the Kansas

Department of Health and Environment has already evaluated the

potential hazardous air pollutant output for the plant.

Sunflower’s Supp. Br. at 20.

19
 Even assuming Sunflower’s assertions to be true, neither

adequately counters the declaration of Dr. Levy, which contains

specific, detailed estimates of various pollutants that would be

emitted by the Holcomb site and the resulting harms. Whether or

not some other coal facility emits greater quantities of

particulate matter or mercury, for example, has no bearing on

whether or not there will be irreparable harm here. Although

Sunflower does dispute plaintiff’s assertion that one coal

facility will create a sufficient quantity of carbon dioxide

emissions to have a measurable impact on the climate, Sunflower

fails to offer any persuasive evidence that would counter

plaintiff’s detailed submissions on other pollutants.7 Upon

consideration of these submissions, as well as the other

affidavits and arguments put forward by the parties, the Court

concludes that the plaintiff has demonstrated irreparable

injury.

7
Sunflower has also submitted the affidavit of L. Earl
Watkins, Sunflower’s President and Chief Executive Officer.
Sunflower cites specifically to Mr. Watkins’ assertions that he
“disagree[s] with Plaintiff’s assertion that somehow the
construction of [the single 895 MW coal-fired unit] will
endanger the health of Kansans[.]” Watkins Aff. ¶ 9. Mr.
Watkins asserts that the Kansas Department of Health and
Environment “found that [the single 895 MW coal-fired unit] will
conform to the obligations under the [Clean Air Act] related to
impacts on National Ambient Air Quality Standards (“NAAQS”) for
sulfur dioxide (“SO2”), nitrogen oxides (“NOX”), particulate
matter less than 10 microns (“PM10”), particulate matter less
than 2.5 microns (“PM2.5”) and carbon monoxide (“CO”).” Watkins
Aff. ¶9.

20
 With respect to the second factor, neither Sunflower nor

defendant disputes “that remedies available at law, such as

monetary damages, are inadequate to compensate for th[e]

injury,” Monsanto, 130 S. Ct. at 2756, and the Court concurs

that such a remedy is not available. As the Supreme Court has

explained, “[e]nvironmental injury, by its nature, can seldom be

adequately remedied by money damages[.]” Amoco Prod. Co. v.

Village of Gambell, 480 U.S. 531, 545 (1987).

This brings the Court to the third and fourth factors,

which consider the balance of hardships and the public interest.

Here, in light of the limited injunction being considered,

namely a prospective injunction that would require RUS to

perform an EIS before granting approvals or giving financial

assistance to Sunflower in connection with the Holcomb Expansion

Project, the balance of equities tips in plaintiff’s favor.

Regarding the balancing of the harms to the parties, the

federal defendants themselves have proposed a limited injunction

of this type and do not suggest any harm that would befall them

if it were granted. Moreover, although Sunflower details harms

that it might suffer if injunctive relief is awarded, its

recitation of harms appears to stem from the inaccurate

assumption that the injunction would permanently bar it from

proceeding with the Holcomb Expansion Project. See, e.g.,

Sunflower Supp. Br. at 22 (“Enjoining RUS approvals would shut

21
down Sunflower’s ability to function by preventing it from

complying with its obligations to meet reliability needs in

western Kansas and maintain and operate over 2,215 miles of

transmission lines, 76 substations, and 1,199 MW of existing

generation.” (citing Watkins Aff. ¶¶ 46, 54-56)). Similarly,

Sunflower asserts that injunctive relief would “erode

Sunflower’s liquidity and cash position” and potentially prevent

Sunflower from meeting its obligations to third parties.

However, Sunflower has failed to identify how mere delays caused

by RUS undertaking an EIS, rather than a complete bar, would

cause these or any other harms. Plaintiff, on the other, hand

has identified substantial and irreparable harm that would occur

if no injunctive relief is awarded.

Finally, Sunflower argues that the public interest is best

served by rejecting injunctive relief, citing to the interests

of RUS in carrying out its duties and the interests of energy

consumers, particularly rural consumers. Sunflower’s Supp. Br.

at 23-24. However, once again Sunflower’s arguments do not

address how a delay in the construction of the Holcomb Expansion

Project that may be necessary to allow the agency to conduct an

EIS will prejudice these interests. On the other hand, the

public has an interest in ensuring that federal agency actions

taken in connection with the building of coal-fired power plants

comply with the requirements of NEPA.

22
 Accordingly, the Court concludes that limited injunctive

relief is warranted. Specifically, an order directing RUS not

to issue any approvals or consents for agreements or

arrangements directly related to the Holcomb Expansion Project,

or to take any other major federal actions in connection with

the Holcomb Expansion Project, until an EIS is complete, is

appropriate.8

B. Appropriate Injunctive Relief Against Sunflower

In addition to an injunction against RUS, plaintiff

requests an injunction against Sunflower. Plaintiff has

proposed a broadly worded injunction that would bar Sunflower

8
Both the plaintiff and the federal defendants have proposed
an injunction for this purpose, and there are only minor
differences between the parties’ proposed language. Plaintiff’s
request is a broader one, asking the Court to enjoin “any
actions” in support of the Project, rather than just “consents
and approvals.” Furthermore, RUS has added the word “directly”
to their proposal. Plaintiff argues that “the word ‘directly’
does not appear in the governing loan documents . . . nor is it
otherwise defined,” and that it is “appropriate for the Court’s
injunction to track the language that RUS and Sunflower
negotiated in the loan documentation[.]” Pl.’s Supp. Reply Br.
at 4. The federal defendants, on the other hand, assert that
their version is the appropriate one because plaintiff’s version
“is ambiguous and could be read as proposing the broadest
possible injunction, which may have the effect of preventing RUS
from administering the complex contractual terms governing
Sunflower’s outstanding debt owed to the Agency.” Fed. Defs.’
Br. at 12-13. In addition, the federal defendants argue that
plaintiff’s proposed injunction “is not sufficiently tailored so
as to address the procedural violations the Court found and yet
not unduly burden RUS in the administration of its duties and
its mission[.]” Fed. Defs.’ Br. at 13. The Court concludes
that the federal defendants have the better argument here.

23
from: “a) commencing construction of the expansion of the

Holcomb 1 coal-fired generation facility; and b) entering into

any agreement or other arrangements for the development of the

Holcomb Expansion Project.” Pl.’s Proposed Order.

Plaintiff argues that an injunction against Sunflower is

necessary for two reasons. First, plaintiff asserts that if

Sunflower were to initiate any construction activity, it would

“significantly undermine” the NEPA process and would violate 40

C.F.R. § 1506.1.9 Second, plaintiff asserts that “[i]f the Court

were to only enjoin RUS from taking action . . . Sierra Club is

concerned that Sunflower would forego requesting required RUS

approvals and move ahead with the Project while the EIS is being

prepared.” Pl.’s Supp. Br. at 15. According to plaintiff, “an

injunction against Sunflower is necessary to preserve a

meaningful opportunity for RUS’s consideration of impacts and

alternatives in a full EIS.” Pl.’s Supp. Br. at 15.

In support of its position, plaintiff relies on Foundation

on Economic Trends v. Heckler, 756 F.2d 143, 155 (D.C. Cir.

9
Section 1506.1 provides: “(a) Until an agency issues a
record of decision . . . no action concerning the proposal shall
be taken which would: (1) Have an adverse environmental impact;
or (2) Limit the choice of reasonable alternatives. . . . If any
agency is considering an application from a non-Federal entity,
and is aware that the applicant is about to take an action
within the agency’s jurisdiction that would meet either of the
criteria in paragraph (a) of this section, then the agency shall
promptly notify the applicant that the agency will take
appropriate action to insure that the objectives and procedures
of NEPA are achieved.” 40 C.F.R. § 1506.1
24
1985), in which the D.C. Circuit held that “it is well

established that judicial power to enforce NEPA extends to

private parties where non-federal action cannot lawfully begin

or continue without the prior approval of a federal agency.

Were such non-federal entities to act without the necessary

federal approval, they obviously would be acting unlawfully and

subject to injunction.” Id. (internal citations and quotation

marks omitted).

The problem with plaintiff’s position is that, particularly

given the breadth of plaintiff’s proposed injunction against

Sunflower, plaintiff has not shown that all of the non-federal

action it seeks to enjoin “cannot lawfully begin or continue

without the prior approval of a federal agency.” Id. (emphasis

added). In Foundation on Economic Trends, the court affirmed a

preliminary injunction enjoining the National Institutes of

Health (“NIH”), a federal agency, from approving an experiment

that would release genetically engineered organisms into the

open environment until an appropriate environmental assessment

was complete. Id. In so doing, the Circuit explained that,

because federal regulations required that any entity seeking to

deliberately release such organisms obtain approval from the NIH

before doing so, “the [non-federal party] cannot lawfully go

forward with its experiment, and it can thus be enjoined by the

court.” Id.

25
 Here, however, unlike the plaintiff in Economic Trends,

plaintiff has failed to demonstrate that all of the “non-federal

action” envisioned by such a broad injunction “cannot lawfully

begin or continue without the prior approval of a federal

agency.” Found. on Econ. Trends, 756 F.2d at 155. This

proposed injunction is flawed for the same reasons that the

proposed injunction ordering RUS to immediately begin an EIS is

flawed. In order for such an injunction to be appropriate, the

Court would need to determine that the previous consents and

approvals granted by RUS do not constitute approval for the

current configuration of the Holcomb Expansion Project, and that

Sunflower could not lawfully take any additional action with

respect to the Holcomb Expansion Project until such approvals

are sought. As explained above, however, the continuing

validity of the 2007 approvals is simply not before the Court in

this action. Accordingly, plaintiff’s request for an injunction

against Sunflower, the non-federal party in this action, is

denied.

C. Whether Vacatur is Appropriate

The final question before the Court is whether the agency

action, specifically the 2002 restructuring and the 2007

approvals, must be vacated. The Administrative Procedure Act

(“APA”) provides that the reviewing court “shall . . . hold

unlawful and set aside agency action . . . found to be . . .

26
arbitrary, capricious, an abuse of discretion, otherwise not in

accordance with law[.]” 5 U.S.C. § 706. While vacatur may be

the default remedy for a NEPA violation, the Court is not

without discretion. “The decision whether to remand or vacate

‘depends on [1] the seriousness of the order’s deficiencies (and

thus the extent of doubt whether the agency chose correctly) and

[2] the disruptive consequences of an interim change that may

itself be changed.’” Milk Train, Inc. v. Veneman, 310 F.3d 747,

755-756 (D.C. Cir. 2002) (quoting Allied-Signal, Inc. v. U.S.

Nuclear Regulatory Comm’n, 988 F.2d 146, 150-51 (D.C. Cir.

1993)).

In Sugar Cane Growers Cooperative of Florida v. Veneman,

289 F.3d 89 (D.C. Cir. 2002), for example, this Circuit held

that the Department of Agriculture failed to comply with certain

provisions of the APA when it implemented a “payment-in-kind”

program for sugar, essentially offering sugar beet farmers an

incentive to destroy a certain amount of their crops. Rather

than vacate the agency action, however, the court ordered a

remand to the agency, explaining that:

Normally when an agency so clearly violates the APA we
would vacate its action . . . and simply remand for
the agency to start again. Unfortunately, because we
denied preliminary relief in this case, the 2001
program was launched and crops were plowed under. The
egg has been scrambled and there is no apparent way to
restore the status quo ante. . . . Appellants insist
that we have no discretion in the matter; if the
Department violated the APA – which it did – its

27
 actions must be vacated. But that is simply not the
law.

Id. at 97-98 (internal citations and quotation marks omitted).

Similarly, in Milk Train, Inc. v. Veneman, milk producers

challenged a subsidy program implemented by the Department of

Agriculture. Although the court found flaws in the subsidy

program, the court concluded that “there is at least ‘a serious

possibility’ that the Secretary on remand could explain [the

subsidy program] in a manner that is consistent with the statute

or choose an allocation method to correct the problem, a factor

that favors remanding rather than vacating.” 310 F.3d at 756.

In the instant case, the Court is persuaded that injunctive

relief requiring RUS to perform an EIS before any future

approvals or consents are given or any other major federal

action taken related to the Holcomb Expansion Project, coupled

with the federal defendants’ own emphatic conclusion that

Sunflower must seek additional approvals from RUS before the

Holcomb Expansion Project can proceed, create more than “a

serious possibility” that RUS will be able to correct the

problem caused by the earlier failure to comply with NEPA.10

10
As mentioned above, the federal defendants and plaintiff
are in agreement that the 2007 approvals “are no longer
effective in light of significant changes to the configuration
of this [Holcomb Expansion] Project.” Fed. Defs.’ Supp. Br. at
6; Pl.’s Supp. Br. at 1. The federal defendants have stated in
no uncertain terms that, “due to the significant changes
Sunflower made to the configuration of the Holcomb Expansion
28
That is to say, an EIS will be completed before the construction

of the Holcomb Expansion Project can proceed. See, e.g.,

Advocates for Highway & Auto Safety v. Fed. Motor Carrier Safety

Admin., 429 F.3d 1136, 1151 (D.C. Cir. 2005) (concluding vacatur

was not appropriate in part because the plaintiff conceded that

leaving the rule in place would “do no affirmative harm”).

Next, the Court must consider the “the disruptive

consequences of an interim change that may itself be changed[.]”

Milk Train, Inc., 310 F.3d at 756. Even plaintiff states that

“[o]n the complicated facts of this case . . . the ‘default

remedy’ of vacatur of the 2002 and 2007 decisions is

unnecessary” Pl.’s Supp. Br. at 5.11 Sunflower also provided a

detailed description of the disruptive impact that vacating the

2007 approvals would have. In particular, Sunflower asserts

that after the 2007 approvals were granted by RUS “a series of

transactions was promptly consummated in reliance on the 2007

RUS Approvals.” Sunflower Supp. Br. at 33-34. Sunflower

Project subsequent to the Agency’s approvals in 2007, the
Holcomb Expansion Project requires new RUS approvals.” Fed.
Defs.’ Supp. Br. at 1. Specifically they explain that “[d]ue to
material changes in the development of the Holcomb Expansion
Project . . . RUS has concluded that its approvals and
implementing documents require Sunflower to seek new approvals
from RUS for the drastic changes to the Holcomb Expansion
Project from the proposal RUS previously reviewed and approved
in 2007.” Fed. Defs.’ Supp. Br. at 8 (emphasis added).
11
Plaintiff only asks for vacatur in the alternative to the
other relief it requests.
29
identifies Tri-State as “an express third-party beneficiary of

the 2007 RUS Approvals” and also asserts that “RUS and

Sunflower’s other secured creditors entered into agreements with

Tri-State.” As noted above, Sunflower also issued promissory

notes, to RUS and other creditors, in conjunction with the 2007

approvals. Furthermore, Sunflower points out that bills of sale

were executed among Sunflower, HCF and the predecessor company,

also in conjunction with the 2007 approvals. None of these

other parties are before this Court. Sunflower also describes

various ways in which it, as well as other parties, would suffer

substantial financial loss if the Court were to vacate the 2007

approvals. The federal defendants agree that “vacatur would

involve unwinding complex financial instruments and would affect

third parties not party to this lawsuit.” Fed. Defs.’ Supp. Br.

at 6.

The Court need not reach the question of whether, standing

alone, the disruption described by Sunflower is enough to

counsel against vacatur. However, in combination with RUS’s

stated position that Sunflower will need to seek additional

approvals from RUS (subject to an EIS), the Court concludes that

vacating the 2007 approvals is not warranted in the instant

case.

30
III. CONCLUSION

For the foregoing reasons, the Court hereby DECLARES that

RUS violated NEPA by failing to prepare an EIS prior to

providing approvals and financial support for the Holcomb

Expansion Project. It is FURTHER ORDERED that RUS shall not

issue any approvals or consents for agreements or arrangements

directly related to the Holcomb Expansion Project, or take any

other major federal actions in connection with the Holcomb

Expansion Project, until an EIS is complete. It is FURTHER

ORDERED that this matter is REMANDED to RUS to determine what

further action, if any, is necessary or appropriate in light of

the Court’s opinion. An appropriate Order accompanies this

Memorandum Opinion.

SIGNED: Emmet G. Sullivan
United States District Court Judge
January 30, 2012

31