On April 3^rd, the U.S. District Court of Colorado vacated the U.S. Army Corps of Engineers’ (“USACE”) Record of Decision, Final Environmental Impact Statement, and approval of a dredge-and-fill permit for Denver Water’s expansion project of the Gross Dam and Reservoir in Colorado and remanded the matter back to the agency.  The Court temporarily enjoined Denver Water from continuing construction on the dam pending a hearing on what is “reasonable and necessary” to ensure that the dam will be structurally safe and issued a permanent injunction prohibiting the enlargement of the Gross Reservoir.

The Court’s order addressing the remedy in Save the Colorado v. Semonite (Civil Action No. 18-cv-03258-CMA) comes months after the Court ruled on a Petition for Review of Agency Action.  Save the Colorado, Sierra Club, and other environmental groups challenged USACE’s decision to issue the dredge-and-fill permit, arguing that USACE failed to properly evaluate less damaging alternatives, dismissed the potential impacts of climate change, and narrowly defined the project’s goals to justify the dam expansion.  Denver Water’s expansion project would have required the removal of more than 500,000 trees, the excavation of 1.6 million tons of rock, and the flooding of approximately 400 acres of forested land.   In its October 2024 ruling, the same judge held that USACE violated the Clean Water Act (“CWA”), § 404(b)(1), the Administrative Procedure Act (“APA”), § 706(2), and the National Environmental Policy Act (“NEPA”) and its regulations.  USACE was asked to redefine the project purpose, consider alternatives that were eliminated without adequate analysis, reassess its “Least Environmentally Damaging Practicable Alternative” (LEDPA) finding, use a supported cost metric, and “seriously consider” the implications of climate change data.

In choosing the appropriate remedy for the violations, the Court considered the two factors of the Allied-Signal vacatur test: (1) the seriousness of the agency action’s deficiencies, and (2) the disruptive consequences of an interim change.  The Court held that its determinations on both factors weighed in favor of remand with vacatur. 

On the first factor, the Court explained that when an agency bypasses a fundamental procedural step, the vacatur inquiry asks whether the agency could justify its decision to skip that procedural step.  The Court found that the deficiencies of USACE are “extensive and serious” and not of the type that can be supported by better reasoning.  Further, USACE inappropriately combined the basic and overall project purposes and framed the purpose-and-need statement to constrain the definition of practicability, contrary to advice by the Environmental Protection Agency.  This resulted in USACE irrationally rejecting numerous viable alternatives that avoid the disturbance of wetlands.  Finally, the Court found that USACE’s failure to prove the financial feasibility of the project and quantify climate change’s effects on precipitation supports vacatur.

On the second factor, the Court considered the potential disruptive consequences to the project and the potential environmental damage that might persist while USACE revisits its determinations.  The Court disagreed with the respondents’ arguments that vacatur has no impact on further construction given Denver Water’s Federal Energy Regulatory Commission (“FERC”) license and that remand with vacatur would cause environmental harm.  Rather, the Court cited to its power to order mitigation of adverse environmental effects resulting from previous or future construction. 

On injunctive relief, the Court held that a preliminary injunction is appropriate pending a hearing given the petitioners’ substantial likelihood of success on the merits of the case, the irreparable injury to the petitioners if the preliminary injunction is denied, the threatened injury to the petitioners outweighing injury to the respondents, and pubic interest.  The Court permanently enjoined the enlargement of the Gross Reservoir, including tree removal, water diversion, and impacts to wildlife.

Days after the Court’s determination on remedy, Denver Water brought an emergency motion to stay pending appeal both the preliminary injunction order and the underlying October 2024 order.  The Court denied the motion but granted a 14-day temporary stay of the preliminary injunction to allow Denver Water an opportunity to seek a stay from the Tenth Circuit.

This decision underscores the importance of the agency’s thorough analysis of all practicable alternatives, climate concerns on a project’s long-term feasibility, and costs for an agency’s informed decision-making.  It also cautions against project proponents hastily starting construction on projects when there are serious environmental law challenges by stakeholders.

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