In the continuing saga of Millennium Bulk Terminal’s efforts to build the largest coal export terminal in North America, on March 17, 2020, the Court of Appeals issued an unpublished decision with interesting holdings on “piecemealing” under the State Environmental Policy Act (SEPA) and the Shorelines Management Act (SMA) and the proper record for the Shorelines Hearings Board (Board) review.

Millennium proposes to build its 190-acre Columbia River facility in two stages. Stage 1 requires dredging in the Columbia River and the construction of two docks, one shiploader, conveyors, two stockpile pads, train unloading facilities, one rail track, and up to eight rail storage tracks. The throughput capacity would be 25 million metric tons. Stage 2 would increase the maximum annual throughput capacity from 25 million metric tons up to 44 million metric tons, with an additional shiploader, two stockpile pads, and conveyors.

Millennium applied for permits for Stage 1, which required shoreline substantial development and conditional use permits under the SMA as well as a Section 10 Rivers and Harbors Act permit and a Section 404 Clean Water Act permit. The proposal required the preparation of an environmental impact statement (EIS) under SEPA as well as a draft EIS under the National Environmental Policy Act (NEPA) (DEIS). The EISs analyzed the entire project, including both Stage 1 and Stage 2.  

After conducting a hearing, the Hearing Examiner denied the applications under his SEPA substantive authority—which allows decision-makers to deny an action if the proposal would result in significant adverse impacts identified in an EIS and reasonable mitigation measures are insufficient to mitigate the identified impact. RCW 43.21C.060. A decision-maker relying on this authority must cite the relevant agency SEPA policy that is the basis for the denial and discuss why the project is inconsistent with that policy. RCW 43.21C.060; WAC 197-11-660(1)(a)-(b), (f).

Millennium and Cowlitz County petitioned the Board for review, and numerous environmental groups intervened. The Board granted the environmental intervenors’ motions for summary judgment prior to the hearing on the matter. Millennium then sought judicial review of the Board’s decision. Division II of the Court of Appeals accepted direct review. The Court’s holdings regarding piecemealing and the appropriate record on review are summarized below.

Piecemealing. Both SEPA and the SMA seek to avoid misleading, piecemeal environmental review and the potential snowballing effect decisions made without review of the entire proposal may have. WAC 197-11-060(3)(b); RCW 90.58.020. For purposes of SEPA and SMA review, the Board’s test for impermissible piecemealing is whether “a proposal is really a single project that has been divided into segments that are interrelated and interdependent.” This test is quite fact dependent.

Millennium contended that Stage 1 was independent of later phases. The Court observed, however, that the DEIS concluded that in order for a coal export terminal to be economically viable, Millennium needed to have an annual throughput capacity of 40 to 50 million metric tons of coal.

In a twist on the typical piecemealing case, Millennium contended that the Board erred when it concluded that the Hearing Examiner properly considered impacts from the whole project rather than Stage 1 only. The Court disagreed, holding that the completion of Stage 1 would have an effect on the completion of Stage 2, and therefore Millennium’s argument was an impermissible attempt to piecemeal its project.

Practice tip: If a proposed project’s development will be done in phases that are truly independent of each other, consider whether to use phased environmental review under WAC 197-11-060(5).

The Record Before the Board. Hearings before the Board are de novo unless otherwise required by law. WAC 461-08-500(1). The Board reviews the exercise of SEPA substantive authority to condition or deny a proposal under the “clearly erroneous” standard of review. The Board concluded that under this standard, where there has been an open record hearing below and there is an unchallenged EIS that identifies significant adverse unmitigated environmental impacts, the appropriate scope of review is limited to the record created during that hearing. Millennium Bulk Terminals-Longview, LLC et al. v. Cowlitz County Hearing Examiner et al., SHB 17-107c (Order on Motions) at 16.

Millennium contended that the Board erred in this determination. The Court of Appeals disagreed, noting that Millennium could have presented any admissible evidence with its summary judgment motion but chose not to submit materials beyond the record before the Hearing Examiner to the Board.

The lesson of Millennium v. Ecology for practitioners with controversial projects is that in anticipating potential appeals based on the exercise of SEPA substantive authority, it is important to place in the local government’s record any evidence you may wish to have considered later, or be stuck with a limited record later on appeal.