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organization think this has been beneficial because many projects have been improved, really bad ones have been scrapped, and the agencies have learned better planning methods over the years. But in the international context, this aspect of NEPA's effectiveness has been a liability. I have participated in many discussions, trying to persuade foreign government leaders of the value of NEPA, both when I was at CEQ and since. It has been difficult to overcome their fears of the legal delays and serious embarrassments that agencies here have suffered. They associate that phenomenon with NEPA, regardless of the fact that their own legal systems may not permit legal challenges to government projects.

During the UNEP EIA negotiations, a long slow process was required to convince governments, especially in developing countries, that EIA was useful to them, and could be adapted to their own special circumstances. Especially successful in convincing many officials was the argument that an EIA did not automatically mean the same thing as an EIS under NEPA

Based on this history, I believe there is no way to amend NEPA SO as to apply to United States votes in the MDBS without at the same time giving the impression to countries around the world that we are trying to apply NEPA to them. Logically, and legally, of course, both the Subcommittee and NRDC's proposed language are careful to clarify that only the Department of the Treasury and the United States vote are under the control of the statute. But since it is clear that Treasury cannot carry out the EIS mandate by itself, the use of the language of Section 102 of NEPA would likely be interpreted as an attempt to bind the MDBs or the borrowers without having any legal jurisdiction to do so. Although it is possible that developing countries have changed their minds on this issue recently, I am afraid that we would antagonize them just as they are getting used to the concept of EIA through the efforts of UNEP.

Given that NEPA has historically carried with it such a load of fear and misinterpretation abroad, especially about litigation, I cannot help but feel that trying to apply NEPA itself might set back the cause of universal environmental impact assessment.

Alternative Recommendations

There might be several ways of accomplishing the same objective without the same magnitude of risk of unintended negative consequences.

1. UNEP EIA Guidelines

As mentioned above, UNEP has sponsored international negotiations for several years, which have recently produced a set of


guidelines for EIA (See Goals and Principles of Environmental Inpact Assessment, adopted by the Governing Council of UNEP, 17 June 1987, Decision 14/25). The guidelines are fairly vague and full of platitudes. Significantly, however, they recommend thorough consideration of the relevant environmental factors, examination of alternatives and a meaningful opportunity for public comment. The most important point is that they have been adopted by the member governments of UNEP, with the participation and support of many developing countries.

This means we can accomplish the goal of the proposed NEPA amendment without even mentioning NEPA. Rather than attempt to impose specific U.S. law, the United States legitimately can refuse to vote for any MDB loan for a project which does not have an adequate EIA, prepared under the internationally accepted "Goals and Principles of Environmental Impact Assessment." Since the UNEP guidelines recommend that "government agencies, members of the public, experts in relevant disciplines and interested groups should be allowed appropriate opportunity to comment on the EIA" (Principle 7), the Department of the Treasury easily could ask for the EIA directly from the borrowing country, well before its decision on an MDB loan.

Most significant of all is that using the international guidelines, not NEPA, as the standard, could enhance the likelihood that other donor governments would join forces with the United States in establishing similar requirements.

We have seen remarkable cooperation among the members of the World Bank's board in the last year, pushing jointly for the environmental reforms. Part of the reason for this is that the reform campaign has embraced citizen groups from around the world, including borrowing countries. This led to the growing sense that it is an internationally accepted imperative, not just a United States crusade. I recommend that rather than acting unilaterally in pressing for the next steps, the United States again enlist the forces of international concensus by seeking agreement among major donors on an EIA requirement.

In this regard, the experience and expertise of the Council on Environmental Quality (CEQ) could be helpful in determining an appropriate legislative vehicle and functional procedures. The Environmental Quality Improvement Act, 42 U.S.C. 4371-4374 (1970) may prove to be more useful here than NEPA. The Congress could instruct the Department of the Treasury in consultation with CEQ, to negotiate among the donor governments an acceptable formula for requiring preparation of EIAs prior to MDB votes. A statutory deadline for these negotiations, after which the Congress would again consider unilateral action, might be appropriate.


2. World Bank Review

The United States Congress has had a major effect on the environmental performance of the MDBS already, even though the legislative vehicle has been the indirect one of requiring Treasury to promote certain policies. Many significant reforms are underway at the MDBs. At the World Bank improved policies, changes in organization, increased staff and innovative studies have been announced. Whether or not these changes result in improved projects, or more systematic preparation of environmental impact assessments, it is too early to tell.

I understand the World Bank intends to undertake an examination, beginning in July (which is the end of the first year of the reorganization) of the results of the changes so far. If this review is in fact going to be done, and if it includes specific attention to the question of whether EIAs are routinely prepared where needed, the results of the review would be valuable to the deliberations of this Subcommittee. I recommend that the Subcommittee, working with CEQ and the Department of the Treasury, ask the World Bank first-year environmental review examine the questions of current EIA practice and whether improvements are needed. Similar questions might be asked of the Inter-American, African, and Asian Development Banks. With such up-to-date information, the Subcommittee can tailor its legislative proposal specifically to the EIA problems of the World Bank and the regional MDBs.

3. NEPA for United States Agencies Working Abroad

In the 1970s, after several lower court cases raised the issue of whether NEPA applied to actions of United States agencies abroad (See testimony of Larry Williams, Sierra Club, pp. 1-3) a compromise was reached which avoided a final Supreme Court decision on the question. An Executive Order was issued (E.O. 12114, 1973), requiring agencies to prepare environmental assessments for certain categories of actions abroad, especially those affecting the "global commons", and those with spillover effects on third countries, outside the specific project area of the United States action. Agencies such as the U.S. Army Corps of Engineers, the Bureau of Reclamation, and the Department of Transportation have advised on, helped to plan, or even helped to build projects in other countries. Because of the many loopholes in the Executive Order, it has never been entirely clear how NEPA applies to such actions.

The reasons given by the Executive Branch in the 1970s for not applying NEPA directly to such actions stem from perceived hostility by foreign governments to the idea of United States agencies attempting to study environmental impacts of projects within their territory. This logic may have been faulty at the

time: some countries might have welcomed free EIAs prepared by the United States. But if U.S. preparation of an EIS for projects in which the United States is a direct actor is still seen as a problem, I think the imposition of NEPA would be even more of an interference in the case of MDB projects, where the role of the United States is indirect.

Times may have changed, however, especially since the adoption of the UNEP Guidelines. Countries may in fact be less worried about environmental impact statements than I fear. Thus it may be time to reexamine the whole question of the application of NEPA abroad. One thing is clear: it is more appropriate to apply NEPA to United States direct actions abroad than to apply it to MDB votes.

I therefore recommend that the Subcommittee first examine the possibility of clarifying that NEPA applies to all actions of United States agencies whether at home or abroad. This should take precedence over the effort to apply NEPA to decisions of multilateral institutions.


June 16, 1988


I. Introduction

Mr. Chairman, I appreciate the opportunity to submit this statement for the record. I am Jim Barnes, Senior Attorney at the Environmental Policy Institute (EPI). EPI is one of this nation's leading environmental organizations, and has been working for a number of years to reform the lending practices of the multilateral development banks (MDBs). These include the World Bank, Inter-American Development Bank, Asian Development Bank and African Development Bank.

The projects financed by the MDBs often have enormous adverse effects on the environment of the countries they are supposed to be benefitting, as well as on indigenous and local peoples. Typically, the locally affected people and knowledgeable non-governmental organizations (NGOS) have little or no role in planning MDB projects. Often they are the last to know about an investment which may cause them to lose their land and livelihood. At the same time, information in the hands of those who stand to be directly affected, which may have led decision makers at the MDBS and in donor governments to reach a different decision, is unavailable to them.

EPI submits that some sort of formalized environmental impact assessment process should be carried out by the MDBs, which includes consultation with those who will be affected by the project or program and with NGOs. This would be a significant step forward in achieving implementation of earlier Congressional initiatives regarding the environmental performance of the MDBs. During the past three years Congress has enacted a series of important legislative directives designed to refocus the lending priorities of the MDBS toward sustainable development projects. Those directives have had a catalytic effect on both the MDBS and on other member governments.

In addition, EPI urges that NEPA procedures be firmly applied to overseas activities of U.S. agencies engaged in planning, evaluating and carrying out projects that could have serious environmental impacts.

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