PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

HUGHES RIVER WATERSHED
CONSERVANCY, an unincorporated
association; SIERRA CLUB, a
corporation; WEST VIRGINIA RIVERS
COALITION, a corporation; RUSSELL
RICHARDS; WILSON LEWIS DAVIS;
JETTIE B. STANLEY; TED RICHARDS,
Plaintiffs-Appellants,

and

WEST VIRGINIA CITIZEN ACTION
GROUP, a corporation,
Plaintiff,

v.
                                       No. 95-3056
DANIEL R. GLICKMAN, in his official
capacity as Secretary of the United
States Department of Agriculture;
CHARLES B. FELTON, in his official
capacity as Director of the West
Virginia Division of Natural
Resources; PAUL W. JOHNSON, in his
official capacity as Chief
Administrator of the Soil
Conservation Service, United States
Department of Agriculture;
ARTHUR E. WILLIAMS, Lieutenant
General, in his official capacity as
Chief of Engineers, United States
Army Corps of Engineers;
ROBERT L. BENSEY, in his official
capacity as State Conservationist,
Natural Resources Conservation
Service, United States Department
of Agriculture; FRED FIELDS, in his
official capacity as Chairman of the
Board of Supervisors of the Little
Kanawha Soil Conservation District,
a political subdivision of the State
of West Virginia,
Defendants-Appellees,

and

MIKE ESPY, in his official capacity
as Secretary of the United States
Department of Agriculture; ROLLIN
SWANK, in his official capacity as
State Conservationist, Soil
Conservation Service, United States
Department of Agriculture; JOHN
SIMS, in his official capacity as
Chairman of the Board of
Supervisors of the Little Kanawha
Soil Conservation District, a
political subdivision of the State of
West Virginia; JAMES B. LAWRENCE,
in his official capacity as
Commissioner of the West Virginia
Division of Tourism and Parks;
JESSE L. WHITE, Doctor, in his
official capacity as Co-Chairman of
the Appalachian Regional
Commission,
Defendants.

AMERICAN RIVERS, INCORPORATED,
Amicus Curiae.

                   2
Appeal from the United States District Court
for the Northern District of West Virginia, at Clarksburg.
William M. Kidd, Senior District Judge.
(CA-94-113-1)

Argued: February 2, 1996

Decided: April 12, 1996

Before HALL and HAMILTON, Circuit Judges, and PHILLIPS,
Senior Circuit Judge.

_________________________________________________________________

Affirmed in part, vacated in part, and remanded for further pro-
ceedings by published opinion. Judge Hamilton wrote the majority
opinion, in which Senior Judge Phillips joined. Judge Hall wrote a
dissenting opinion.

_________________________________________________________________

COUNSEL

ARGUED: Robert Geoffrey Dreher, SIERRA CLUB LEGAL
DEFENSE FUND, Washington, D.C., for Appellants. Robert Law-
rence Klarquist, UNITED STATES DEPARTMENT OF JUSTICE,
Washington, D.C.; Christopher Burr Power, ROBINSON &
MCELWEE, Charleston, West Virginia, for Appellees. ON BRIEF:
Thomas R. Michael, MICHAEL & KUPEC, Clarksburg, West Vir-
ginia, for Appellants. Lois J. Schiffer, Assistant Attorney General,
J. Carol Williams, UNITED STATES DEPARTMENT OF JUS-
TICE, Washington, D.C.; William D. Wilmoth, United States Attor-
ney, Patrick M. Flatley, Assistant United States Attorney, Wheeling,
West Virginia; Jeffrey D. Eisenberg, UNITED STATES DEPART-
MENT OF AGRICULTURE, Washington, D.C.; Terry Clark, Assis-
tant District Counsel, UNITED STATES ARMY CORPS OF
ENGINEERS, Huntington, West Virginia, for Federal Appellees.
David L. Yaussy, ROBINSON & MCELWEE, Charleston, West Vir-
ginia, for Appellees Fields and Little Kanawha District; Darrell V.
McGraw, Jr., Attorney General, Rex Burford, Senior Assistant Attor-
ney General, Charleston, West Virginia, for State Appellees.

                    3
OPINION

HAMILTON, Circuit Judge:

The Hughes River Watershed Conservancy, the Sierra Club, the
West Virginia Rivers Coalition, and four private individuals (collec-
tively referred to as "the Conservancy") brought this action against
federal and West Virginia officials (collectively referred to as "the
Agencies") seeking judicial review of the decisions of the Natural
Resources Conservation Service (the NRCS) and the United States
Army Corps of Engineers (the Corps) approving construction of a
dam on the North Fork of the Hughes River in northwestern West
Virginia. The Conservancy alleged, among other things, that the
NRCS and the Corps violated the National Environmental Policy Act
(NEPA), 42 U.S.C. §§ 4321-70d, and the Wild and Scenic Rivers Act
(WSRA), 16 U.S.C. §§ 1271-87. The district court granted summary
judgment in favor of the Agencies and the Conservancy appealed. We
affirm in part, vacate in part, and remand for further proceedings.

I.

The North Fork of the Hughes River (the North Fork) is a free-
flowing river located in a rugged and mountainous area of northwest-
ern West Virginia. In addition to its extraordinary scenic value, the
North Fork is the habitat of an extensive variety of fish and wildlife.
It supports a population of twenty-two freshwater mussel species,
including two species under consideration for listing as threatened or
endangered under the Endangered Species Act. See 16 U.S.C. § 1533.
It also contains wetland areas, riffle and pool complexes, and vege-
tated shallows that provide habitats for various species. The North
Fork is listed on the National Park Service's Nationwide Rivers
Inventory as a possible addition to the National Wild and Scenic Riv-
ers System.

For more than twenty years, the Little Kanawha Soil Conservation
District and several municipalities in the North Fork area (the Local
Sponsors) have considered building a multipurpose dam on the North
Fork to curb periodic flooding, improve water supply, increase recre-
ational opportunities, and stimulate the area's economy. The proposed

                    4
dam eventually came to be known as the "North Fork Hughes River
Watershed Project" (the Project).

In 1971, the Local Sponsors applied to the NRCS 1 for assistance
in building the Project. The NRCS responded in 1975 with a proposal
for construction of the Project. This proposal remained dormant for
years because the Local Sponsors could not raise their share of the
funds needed to construct the Project.

Local interest in the Project was renewed in 1988, following a
drought. The Local Sponsors again sought assistance from the NRCS.
The NRCS accordingly began reexamining the feasibility of the Proj-
ect. In the meantime, the Appalachian Regional Commission (the
ARC) became interested in the Project. The ARC, a federal agency
established to assist in the economic development of the Appalachian
region, subsequently elected to pursue the Project as a special rural
economic stimulus project. Through the ARC, the cost of the Project
would be paid entirely with federal funds.

The NRCS entered into an agreement with the ARC requiring the
NRCS to assist in the planning, design, and construction of the Proj-
ect. The NRCS determined that in order to comply with NEPA, an
environmental impact statement (EIS) should be prepared before
going forward with the Project. After conducting a series of public
meetings, the NRCS released and circulated for comment a draft EIS
for the Project. The draft EIS proposed that a multipurpose dam creat-
ing a 305-acre lake be built on the North Fork.

In response to a request for public comment on the draft EIS, the
Sierra Club, the Department of the Interior, and the Environmental
Protection Agency (the EPA) informed the NRCS that they consid-
ered the draft EIS to be deficient for several reasons. They pointed out
that the EIS did not adequately analyze the adverse environmental
effects of the Project, did not adequately consider methods of mitigat-
ing those effects, and did not adequately explore possible alternatives
to the Project. Additionally, the Department of the Interior and the
_________________________________________________________________
1 The NRCS was then named the Soil Conservation Service. For sim-
plicity, we refer to both the Soil Conversation Service and the Natural
Resources Conservation Service as "NRCS."

                    5
EPA expressed concern that the Project would eliminate the North
Fork's potential for being designated as part of the National Wild and
Scenic Rivers System. And the Sierra Club questioned the reliability
of the NRCS's estimate of the Project's economic benefits.

In June 1994, the NRCS released a final EIS, which contained the
NRCS's responses to the comments it received regarding the draft
EIS. And in July 1994, the NRCS issued a record of decision
(NRCS's ROD) approving the Project.

Meanwhile, one of the Local Sponsors, the Little Kanawha Soil
Conservation District, applied to the Corps local district office (the
District Office) for a permit under § 404 of the Clean Water Act for
the Project.2 The District Office then issued a public notice soliciting
comments on the application. The public notice explained that the
comments would be used to assist the Corps in complying with its
obligations under NEPA.

Both the EPA and the Department of the Interior's Fish and Wild-
life Service (the FWS) responded to the public notice by recommend-
ing that the § 404 permit be denied because the Project would result
in substantial and unacceptable damage to the North Fork. When the
EPA received the public notice, it was in the process of reviewing the
NRCS's final EIS for the Project. The EPA informed the Corps that
the final EIS was inadequate and that the Corps should therefore pre-
pare a supplemental EIS before going forward with the Project. Both
the EPA and the FWS objected to the final EIS's inadequate analysis
of alternatives to the Project and to the elimination of the North
Fork's potential to be included in the National Wild and Scenic Riv-
ers System as a result of the Project. The EPA also warned the Corps
that the Project would probably cause infestation of the North Fork
by zebra mussels, a nonindigenous mollusk that destroys native mus-
sel populations.

Without resolving all the issues raised by the EPA and the FWS,
the District Office notified the EPA and the FWS that it intended to
issue a § 404 permit for the Project. The Conservancy then filed this
_________________________________________________________________
2 This permit was necessary because the Project involved discharging
fill material into the North Fork. See 33 U.S.C. § 1344(a).

                    6
action seeking judicial review of the NRCS's and the Corps's
approval of the Project and requesting temporary relief to prevent
construction of the Project.

Thereafter, the EPA and the FWS each requested that the Assistant
Secretary of the Army for Civil Works (the Assistant Secretary)
review the District Office's decision to issue the§ 404 permit.3 Both
the EPA and the FWS cited inadequate analysis of alternatives, zebra
mussel infestation, and National Wild and Scenic River System desig-
nation as concerns. Because the elevation requests suspended issu-
ance of the § 404 permit, the hearing on the Conservancy's motion for
temporary relief was continued.

The Assistant Secretary responded to the elevation requests by
directing the District Office to undertake a comprehensive reevalua-
tion of alternatives to the Project. During the reevaluation process, the
Conservancy wrote to the District Office, requesting that a supple-
mental EIS be prepared to address zebra mussel infestation and to
evaluate the potential of the North Fork to be included in the National
Wild and Scenic Rivers System. After consulting with the EPA and
the FWS, the District Office prepared a Memorandum for Record that
rejected all the alternatives to the Project. The EPA and the FWS
responded to the Memorandum for Record, registering their continued
dissatisfaction with the analysis performed by the District Office.4
Nevertheless, the Corps's headquarters concurred with the District
Office's Memorandum for Record and directed the District Office to
issue a § 404 permit for the Project.
_________________________________________________________________
3 Memoranda of Agreement between the Corps and the EPA and
between the Corps and the Department of the Interior allow the EPA and
the FWS to "elevate" the decision of a district office to issue a § 404 per-
mit by having the Assistant Secretary review the district office's deci-
sion. The elevation of permit decisions is limited"to those cases where
the net loss . . . from the project . . . will result in unacceptable adverse
effects to aquatic resources of national importance." (J.A. 567, 577).
4 The EPA has the authority to veto a decision by the Corps to issue a
§ 404 permit if the EPA determines that issuance of the § 404 permit
"will have an unacceptable adverse effect on municipal water supplies,
shellfish beds and fishery areas . . . , wildlife, or recreational areas." 33
U.S.C. § 1344(c). The EPA rarely exercises this authority and did not
exercise it in this case.

                    7
On June 2, 1995, the District Office issued the§ 404 permit.
Accompanying the § 404 permit was a record of decision (Corps's
ROD), which included an environmental assessment prepared by the
District Office.5 The Corps's ROD noted that the NRCS had already
prepared an EIS for the Project and concluded, "There has been no
new evidence or information that would require that the [EIS] be sup-
plemented." (J.A. 558).

Thereafter, the Conservancy filed an amended complaint, challeng-
ing the decisions of the NRCS and the Corps in approving the Project.
The parties agreed to stay construction on the Project pending a deci-
sion by the district court. The case was submitted to the district court
on cross-motions for summary judgment based on the administrative
records of the NRCS and the Corps. After hearing oral argument on
the motions, the district court granted summary judgment in favor of
the Agencies on October 30, 1995 and continued the stay until
December 1, 1995. This appeal followed. On December 13, 1995, we
denied the Conservancy's motion for a stay pending appeal and
granted the Conservancy's motion to expedite the appeal.

The Conservancy raises three issues on appeal. First, it argues that
the NRCS and the Corps failed to take a "hard look" at the problem
of zebra mussel infestation resulting from the Project before deciding
not to prepare a supplemental EIS. Second, it argues that the reliance
by the NRCS and the Corps on an inflated estimate of the Project's
economic benefits impaired fair consideration of the Project's adverse
environmental effects. Third, it argues that the NRCS and the Corps
failed to comply with the WSRA. We shall address each of these
issues in turn.

II.

The Conservancy first argues that the NRCS and the Corps violated
NEPA by failing to take a "hard look" at the problem of zebra mussel
infestation resulting from the Project before deciding not to prepare
_________________________________________________________________
5 An environmental assessment is a public document that federal agen-
cies prepare for the purpose of analyzing whether to prepare an environ-
mental impact statement for a proposed project. 40 C.F.R.
§ 1508.9(a)(1).

                    8
a supplemental EIS. To evaluate this argument, we begin by review-
ing the duties that NEPA imposes on federal agencies.

A.

NEPA declares a national policy of protecting and promoting envi-
ronmental quality. See 42 U.S.C. §§ 4321, 4331(a); Robertson v.
Methow Valley Citizens Council, 490 U.S. 332, 348 (1989). To imple-
ment this policy, NEPA requires federal agencies to follow certain
procedures before undertaking projects that will affect the environ-
ment. Thus, although NEPA establishes environmental quality as a
substantive goal, it is well settled that NEPA does not mandate that
agencies reach particular substantive results. Instead, it simply sets
forth procedures that agencies must follow. Robertson, 490 U.S. at
350; Vermont Yankee Nuclear Power Corp. v. Natural Resources
Defense Council, Inc., 435 U.S. 519, 558 (1978). In other words, "[i]f
the adverse environmental effects of . . . proposed action[s] are ade-
quately identified and evaluated, [agencies are] not constrained by
NEPA from deciding that other values outweigh the environmental
costs." Robertson, 490 U.S. at 350.

Central to NEPA's procedural focus is the requirement that federal
agencies prepare EISs to be included "in every recommendation or
report on proposals for . . . major Federal actions significantly affect-
ing the quality of the human environment." 42 U.S.C. § 4332(2)(C).
Preparation of an EIS serves the national policy of protecting and pro-
moting environmental quality in two ways. First, it ensures that an
agency, when deciding whether to approve a project, will carefully
consider, or take a "hard look" at, the project's environmental effects.
Robertson, 490 U.S. at 349. Second, it ensures that relevant informa-
tion about a proposed project will be made available to members of
the public so that they may play a role in both the decisionmaking
process and the implementation of the decision. Id.

But the preparation of an EIS does not complete an agency's
NEPA duties. NEPA requires agencies to take a hard look at the envi-
ronmental consequences of their proposed projects even after an EIS
has been prepared. Marsh v. Oregon Natural Resources Council, 490
U.S. 360, 374 (1989). An agency must prepare a supplemental EIS
when "[t]here are significant new circumstances or information rele-

                    9
vant to environmental concerns and bearing on the proposed action or
its impacts." 40 C.F.R. § 1502.9(c)(1)(ii). "`[T]he new circumstance
must present a seriously different picture of the environmental impact
of the proposed project from what was previously envisioned.'"
Hickory Neighborhood Defense League v. Skinner, 893 F.2d 58, 63
(4th Cir. 1990) (quoting Sierra Club v. Froehlke , 816 F.2d 205, 210
(5th Cir. 1987)).

In reviewing an agency's decision not to prepare a supplemental
EIS, a court must undertake a two-step inquiry. First, the court must
determine whether the agency took a hard look at the proffered new
information. Second, if the agency did take a hard look, the court
must determine whether the agency's decision not to prepare a sup-
plemental EIS was arbitrary or capricious. See Village of Grand View
v. Skinner, 947 F.2d 651, 657 (2d Cir. 1991); see also Marsh, 490
U.S. at 385. We undertake this inquiry without giving deference to the
district court's resolution of the issue. See Sabine River Auth. v.
United States Dep't of Interior, 951 F.2d 669, 679 (5th Cir.), cert.
denied, 506 U.S. 823 (1992); Roanoke River Basin Ass'n v. Hudson,
940 F.2d 58, 61 (4th Cir. 1991), cert. denied , 502 U.S. 1092 (1992).
With these principles in mind, we now review the decisions of the
NRCS and the Corps not to prepare a supplemental EIS.

B.

Although several entities commented on the NRCS's draft and
final EISs, none of those entities raised concerns regarding zebra
mussel infestation before the NRCS issued its final EIS. But when the
Corps solicited comments on the § 404 permit application, the EPA
warned that zebra mussels would infest the North Fork if the Project
were completed. The EPA explained to a District Office biologist that
zebra mussel infestation would have three adverse effects. First, the
zebra mussels would destroy indigenous mussels that dwell down-
stream from the dam. Second, the zebra mussels would clog intake
structures located downstream from the dam. Third, the zebra mussels
would have negative effects on the North Fork's ecosystem as a
whole.

The District Office biologist then discussed zebra mussel infesta-
tion in the district with an employee of the Corps's water quality sec-

                    10
tion. The employee stated that although the Ohio River was infested,
none of the district's reservoirs were.

Subsequently, the District Office issued a draft§ 404 permit for the
Project. The Statement of Findings accompanying the draft § 404 per-
mit dismissed the EPA's zebra mussel concerns, apparently based on
the biologist's single conversation with the water quality section
employee. The Statement of Findings asserted:

          The Corps Engineering Division Water Quality Section has
          sampled for zebra mussels in the reservoirs and the rivers of
          Huntington District for many years. The Ohio River has
          been found to be infested. According to the Water Quality
          Section, no Corps reservoir is infested with zebra mussels,
          but they expect that all reservoirs will become infested.

          . . . The position of the Corps is that the impacts to the
          warmwater fish and 22 species of mussels [located down-
          stream of the proposed dam] will be compensated ade-
          quately by conditions in the states [sic] certification and in
          any permit issued. Based on information available to this
          office, it appears that zebra mussel infestation of all waters
          may occur. Denying a permit for an impoundment because
          an infestation of zebra mussels may occur does not appear
          reasonable.

(J.A. 361-62).

Upon issuance of the draft § 404 permit, the Corps received addi-
tional indications of the significance of zebra mussel infestation. The
EPA and the FWS forwarded to the Corps the views of Dr. Richard
Neves, a professor of fisheries at Virginia Polytechnic Institute and
State University. According to Dr. Neves, if the Project went forward,
zebra mussel infestation would have a "devastating" effect on the
North Fork downstream from the dam. (J.A. 402). Dr. Neves stated
that available studies regarding zebra mussel infestation show that
zebra mussel infestation results from boating on rivers and from
releases of zebra mussel larvae into rivers from infested reservoirs.
Although Dr. Neves agreed with the Corps that all the district's reser-
voirs would eventually become infested, he disputed the Corps's con-

                    11
clusion that infestation of the reservoirs would inevitably lead to
infestation of rivers such as the North Fork that currently do not have
reservoirs or frequent boating. He concluded that if a dam is built on
the North Fork, the reservoir created by the dam will become infested
with zebra mussels, which will then infest the entire downstream
reach of the North Fork. On the other hand, the North Fork "would
not become heavily infested as a free-flowing river without frequent
navigational traffic." (J.A. 403).

Dr. Neves discussed zebra mussel infestation with five other
experts. Based on these discussions, he concluded that "there is gen-
eral concurrence" that dams provide the crucial sites for zebra mussel
infestations downstream. (J.A. 407). Dr. Neves provided the names
and telephone numbers of the experts to whom he spoke and urged
that the Corps contact them to verify his conclusions.

The Corps did not contact these experts. Instead, the District Office
biologist again called an employee of the Corps's water quality sec-
tion to request his opinion regarding zebra mussel infestation.
According to a memorandum summarizing the conversation, the
employee stated that "in his and WQ's opinion all waters will be
infested. If there is fishing now then possible infestation from fish bait
buckets [sic]." (J.A. 409).

The Corps's ROD accompanying its final decision to issue the
§ 404 permit restates, almost verbatim, the conclusion from the State-
ment of Findings accompanying the draft § 404 permit:

          The position of [the Corps] was that the impacts to the
          warmwater fish and 22 species of mussels will be compen-
          sated adequately by conditions in the states [sic] certifica-
          tion and in any permit issued. Based on information
          available to this office, it appears that zebra mussel infesta-
          tion of all waters may occur. Denying a permit for an
          impoundment because an infestation of zebra mussels may
          occur does not appear reasonable.

(J.A. 543). The Corps's ROD summarily concludes,"There has been
no new evidence or information that would require that the Environ-
mental Impact Statement be supplemented. . . . [A] permit for the

                     12
[Project] will be issued and . . . the NEPA obligations have been met."
(J.A. 558).6

C.

We conclude that the Corps did not take a hard look at the problem
of zebra mussel infestation resulting from the Project. The EPA, the
FWS, and Dr. Neves informed the Corps that zebra mussel infestation
of the North Fork would have "devastating" environmental conse-
quences. The Corps was also presented with evidence from Dr. Neves
and five other experts showing that the North Fork would not become
heavily infested without the Project. In response to this information,
a District Office biologist simply made two telephone calls to the
Corps's water quality section and elicited the opinions from two indi-
viduals that all the district's reservoirs would eventually become
infested and that the North Fork could possibly become infested from
fish bait buckets. These two telephone calls do not constitute the hard
look required by NEPA. Cf. Marsh, 390 U.S. at 378-85 (concluding
that the Corps took a hard look at new information when it obtained
expert opinion within the agency and consulted two outside experts,
gave careful scientific scrutiny to the new information, and explained
why the new information did not require the preparation of a supple-
mental EIS).

The Corps argues that it was entitled to rely on the opinions of its
water quality section employees. The Supreme Court has stated that
"[w]hen specialists express conflicting views, an agency must have
discretion to rely on the reasonable opinions of its own qualified
experts even if, as an original matter, a court might find contrary
views more persuasive." Id. at 378. Here, however, the record pro-
vides no basis for determining whether the opinions of the water qual-
ity section employees were reasonable or whether the employees were
_________________________________________________________________
6 A federal agency may adopt an EIS prepared by another federal
agency as long as the statement is adequate. 40 C.F.R. § 1506.3(a). Corps
regulations implementing NEPA generally allow Corps district offices to
adopt another federal agency's EIS unless the district office "finds sub-
stantial doubt as to technical or procedural adequacy or omission of fac-
tors important to the Corps decision." 33 C.F.R.§ 230.21. If the district
office has doubt about the EIS it must prepare a supplemental EIS.

                    13
qualified to render opinions about zebra mussel infestation. The only
glimmer of reasoning behind the Corps's conclusion that the North
Fork would become infested regardless of the Project is the notation,
"If there is fishing now then possible infestation from fish bait buck-
ets [sic]." (J.A. 409). And the only information regarding the qualifi-
cations of the person who supplied this reasoning is that he was an
employee of the Corps's water quality section.

Furthermore, the Corps's reliance on the opinions of its water qual-
ity section employees was misplaced because the opinions do not
address the expert evidence furnished to the Corps. In particular, they
do not address Dr. Neves' undisputed conclusion that heavy infesta-
tion of the river would not occur without the reservoir. See Marsh,
490 U.S. at 378 (holding that when determining whether an agency
decision not to prepare a supplemental EIS was arbitrary or capri-
cious, courts must consider whether the decision was based on a con-
sideration of the relevant factors); cf. 40 C.F.R. § 1503.4 (requiring
agencies, when preparing an EIS, to respond to comments by explain-
ing in the EIS why the comments do not warrant further agency
response and by citing the authorities or reasons that support the
agency's position).

In summary, we hold that the Corps violated NEPA by failing to
take a "hard look" at the problem of zebra mussel infestation resulting
from the Project. On remand, the district court shall direct the Corps
to take a hard look at the problem of zebra mussel infestation and to
determine, based on that hard look, whether to prepare a supplemental
EIS addressing zebra mussel infestation.7
_________________________________________________________________
7 Because of the somewhat unusual facts of this case, we do not hold
that the NRCS violated NEPA by failing to take a hard look at the prob-
lem of zebra mussel infestation. Although Marsh makes clear that the
NRCS had a continuing duty to consider the environmental conse-
quences of the Project even after it completed its EIS (see 490 U.S. at
371-72), the problem of zebra mussel infestation was never directly
brought to the NRCS's attention, except by the filing of this action. See
Roanoke River, 940 F.2d at 64 (holding in a NEPA case that an agency's
"failure to consider an effect that was not brought to its attention cannot
be faulted") (citing Vermont Yankee, 435 U.S. at 558).

                    14
III.

The Conservancy next argues that the NRCS and the Corps vio-
lated NEPA by relying on an inflated estimate of the Project's eco-
nomic benefits. The Conservancy asserts that reliance on this inflated
estimate of the Project's economic benefits impaired fair consider-
ation of the Project's adverse environmental effects.

A.

As we have already noted, an EIS serves two functions. First, it
ensures that agencies take a hard look at the environmental effects of
proposed projects. Second, it ensures that relevant information regard-
ing proposed projects is available to members of the public so that
they may play a role in the decisionmaking process. Robertson, 490
U.S. at 349. For an EIS to serve these functions, it is essential that the
EIS not be based on misleading economic assumptions.

Misleading economic assumptions can defeat the first function of
an EIS by impairing the agency's consideration of the adverse envi-
ronmental effects of a proposed project. See South La. Envtl. Council,
Inc. v. Sand, 629 F.2d 1005, 1011-12 (5th Cir. 1980). NEPA requires
agencies to balance a project's economic benefits against its adverse
environmental effects. Calvert Cliffs' Coordinating Comm. v. United
States Atomic Energy Comm'n, 449 F.2d 1109, 1113 (D.C. Cir.
1971). The use of inflated economic benefits in this balancing process
may result in approval of a project that otherwise would not have
been approved because of its adverse environmental effects. Simi-
larly, misleading economic assumptions can also defeat the second
function of an EIS by skewing the public's evaluation of a project.

Because of the potential for misleading economic assumptions to
defeat the functions of an EIS, we will engage in a"narrowly
focused" review of the economic assumptions underlying a project to
determine whether the economic assumptions "were so distorted as to
impair fair consideration" of the project's adverse environmental
effects. Sand, 629 F.2d at 1011.

B.

Before the NRCS prepared its EIS, it decided to estimate the eco-
nomic benefits that would result from recreational use of the Project.

                     15
An NRCS national recreation specialist and an NRCS agricultural
economist visited the Project site to provide guidance in evaluating
the Project's recreation benefits. They emphasized the importance of
calculating net, rather than gross, recreation benefits that would result
from the Project. To this end, they specifically recommended that the
value of the Project's recreation benefits be determined by estimating
future recreational use of the area both with and without the Project,
the recreational use that would simply be transferred to the Project
from existing recreational facilities, and current recreational use of the
North Fork that may be diminished by the Project. Application of
these standards would prevent the estimate of the Project's recreation
benefits from being inflated.

Thereafter, the NRCS commissioned a study (the WVU Study) by
two West Virginia University professors to quantify the recreation
benefits that would result from the Project. The contract between the
NRCS and West Virginia University expressly required that the WVU
Study calculate net, rather than gross, recreation benefits. But in dis-
regard of this requirement, the WVU Study actually calculated gross,
rather than net, recreation benefits. The WVU Study's inflated esti-
mate of recreation benefits was then incorporated into the EIS.

The EIS states that the Project's total average annual economic
benefits will be $6,913,700 and that the Project's total average annual
economic costs will be $3,403,900. Of the $6,913,700 in economic
benefits, $2,188,900 constituted recreation benefits derived from the
WVU Study.8 Thus, approximately thirty-two percent of the eco-
nomic benefits were attributable to recreation benefits.

Although the Agencies have conceded on appeal that the WVU
Study calculated gross, rather than net, recreation benefits, they con-
tend that reliance on the WVU Study's inflated estimate of recreation
benefits did not impair fair consideration of the Project's adverse
environmental effects. To support this argument, they point to general
_________________________________________________________________
8 The WVU Study, which was completed in December 1991, deter-
mined that the recreation benefits from the Project would be $1,903,421.
When the NRCS released its EIS in 1994, it stated the recreation benefits
to be $2,188,900, rather than $1,903,421, to reflect the value of the recre-
ation benefits in 1994 dollars.

                     16
statements in the WVU Study indicating that the cost of displacing
existing uses of the North Fork will be relatively minimal and indicat-
ing that demand exists for the recreational opportunities that the Proj-
ect will provide. But the Agencies do not argue, nor could they, that
these general statements validate the $2,188,900 figure included in
the EIS.

C.

We conclude that the EIS's use of the $2,188,900 figure impaired
the first function of the EIS--ensuring that the NRCS and the Corps
take a hard look at the Project's adverse environmental effects. Both
the NRCS and the Corps balanced the Project's economic benefits
against its environmental effects, as they were required to do under
NEPA. See Calvert Cliffs' Coordinating Committee , 449 F.2d at
1113. On the economic side of the scale, the EIS used by both the
NRCS and the Corps included an inflated estimate of recreation bene-
fits that accounted for a significant portion, approximately thirty-two
percent, of the economic benefits.

Moreover, it is clear that the NRCS and the Corps viewed the
inflated estimate of recreation benefits derived from the WVU Study
as crucial in their evaluations of the Project. The EIS prepared by the
NRCS stresses that a multipurpose dam would be economically feasi-
ble only because it could be used for flood control, water supply, and
recreation. The EIS concludes that the optimum size of the reservoir
created by the multipurpose dam "was found to be 305 acres and was
based on projected recreation uses." (J.A. 104). Furthermore, the
environmental analysis included in the Corps's ROD relies on the
NRCS's EIS and incorporates the value of recreation benefits derived
from the WVU Study. The Corps's ROD cites the WVU Study and
concludes, "The monetary benefits of flat-water recreation will pro-
vide a positive BCR [benefit/cost ratio] and economic stimulus to the
watershed." (J.A. 534).9
_________________________________________________________________
9 Funding for the Project was contingent on its having a positive
benefit/cost ratio. In the EIS, the NRCS calculates the benefit/cost ratio
to be 2:1. The EIS includes regional economic benefits in calculating this
benefit/cost ratio. The Corps's ROD, however, excludes regional eco-

                    17
We also conclude that the EIS's use of the $2,188,900 figure
impaired the second function of the EIS--ensuring that members of
the public have accurate information to enable them to evaluate the
Project. The WVU Study clearly purports to forecast net recreation
benefits resulting from the Project. Its introductory paragraph states,
"The purpose of this study is to estimate the net recreational benefits
generated by the construction of flood-control impoundments on the
North Fork of the Hughes River." (J.A. 193). The EIS incorporates
the WVU Study's calculation of the recreation benefits from the Proj-
ect without acknowledging that the WVU Study estimated gross,
rather than net, recreation benefits resulting from the Project. There-
fore, the EIS had the potential to mislead the public about the eco-
nomic benefits that would result from the Project. See Johnston v.
Davis, 698 F.2d 1088, 1095 (10th Cir. 1983) (requiring the NRCS to
revise an EIS because the EIS suggested without qualification that a
project would produce net economic benefits, without mentioning that
an unreasonably low discount rate was used in calculating the bene-
fits).

In summary, we hold that the reliance by the NRCS and the Corps
on the WVU Study's inflated estimate of the Project's recreation ben-
efits violated NEPA because it impaired fair consideration of the Proj-
ect's adverse environmental effects.10
_________________________________________________________________
nomic benefits. As a result, the Corps calculated the Project's total aver-
age annual economic benefits to be only $3,850,900, and the Project's
total average annual economic costs to be $3,403,900, yielding a positive
benefit/cost ratio of only 1.1:1. Of the $3,850,900 in economic benefits,
$2,188,900 constituted recreation benefits derived from the WVU Study.
Thus, under the Corps's analysis, approximately fifty-seven percent of
the economic benefits were attributable to recreation benefits.
10 The Conservancy also argues that the Corps arbitrarily omitted
regional economic benefits in evaluating the economic benefits and costs
of the Project and alternatives to the Project. The Corps determined that
none of the alternatives to the Project standing alone would satisfy the
Project's purposes. But several of the alternatives would satisfy the Proj-
ect's purposes when combined with other alternatives. These combina-
tions of alternatives were all rejected, however, because they had
negative benefit/cost ratios.

                    18
IV.

The Conservancy next argues that the district court erred in con-
cluding that the WSRA imposed no duties on the NRCS and the
Corps. This argument centers on matters of statutory interpretation,
which we review de novo. United States v. Jefferson-Pilot Life Ins.
Co., 49 F.3d 1020, 1021 (4th Cir. 1995). We begin by examining the
statutory scheme of the WSRA.

A.

The WSRA declares a national policy of preserving in free-flowing
condition rivers with "outstandingly remarkable scenic, recreational,
geologic, fish and wildlife, historic, cultural or other similar values."
16 U.S.C. § 1271. The WSRA implements this policy by instituting
a National Wild and Scenic Rivers System (the System). 16 U.S.C.
§ 1272. The WSRA designates the initial rivers composing the Sys-
tem and prescribes methods and standards by which additional rivers
may be added to the System. 16 U.S.C. §§ 1272-74.

Under WSRA § 7, certain protections apply to rivers in the System.
For example, the Federal Energy Regulatory Commission cannot
license the construction of dams on or directly affecting a designated
river, and no federal agency can assist in the construction of any
water resources project that would have a direct and adverse effect on
the river. See 16 U.S.C. § 1278(a). These protections do not preclude
development below or above a wild, scenic, or recreational river area,
_________________________________________________________________

The Conservancy argues that the combinations of alternatives rejected
by the Corps because of their negative benefit/cost ratios would generate
some regional economic benefits. The Conservancy asserts that the
Corps excluded these regional economic benefits from the benefit/cost
ratios of the Project and its alternatives so it could eliminate all the alter-
natives from consideration based on negative benefit/cost ratios. But as
the Conservancy acknowledges, it is not customary to include regional
economic benefits in a project of this type. We therefore conclude that
the Corps did not arbitrarily omit the regional benefits from its benefit/
cost analysis.

                     19
as long as the development will not diminish the river area's wild,
scenic, or recreational values. Id.

WSRA § 5(a) sets out a list of rivers that Congress has designated
for "potential addition" to the System. 16 U.S.C. § 1276(a). The Sec-
retary of the Interior must conduct studies to determine whether these
rivers should be added to the System. See 16 U.S.C. §§ 1275(a),
1276(b). The same protections that apply under WSRA§ 7(a), 16
U.S.C. § 1278(a), to rivers in the System also apply to potential addi-
tions to the System designated in WSRA § 5(a), but the protections
only apply for a limited period following designation of a river as a
potential addition to the System. See 16 U.S.C. § 1278(b).

B.

The North Fork is not part of the System and is not listed as a
potential addition to the System in WSRA § 5(a), 16 U.S.C.
§ 1276(a). Thus, none of the protections described above apply to the
North Fork. But the Conservancy argues that the North Fork is enti-
tled to certain protections under WSRA § 5(d), 16 U.S.C. § 1276(d),
which provides:

          (1) In all planning for the use and development of water
          and related land resources, consideration shall be given by
          all Federal agencies involved to potential national wild, sce-
          nic and recreational river areas, and all river basin and proj-
          ect plan reports submitted to the Congress shall consider and
          discuss any such potentials. The Secretary of the Interior
          and the Secretary of Agriculture shall make specific studies
          and investigations to determine which additional wild, sce-
          nic and recreational river areas within the United States
          shall be evaluated in planning reports by all Federal agen-
          cies as potential alternative uses of the water and related
          land resources involved.

          (2) The Congress finds that the Secretary of the Interior,
          in preparing the Nationwide Rivers Inventory as a specific
          study for possible additions to the . . . System, identified the
          Upper Klamath River . . . . The Secretary, acting through the
          Bureau of Land Management, is authorized under this sub-

                    20
          section to complete a study of the eligibility and suitability
          of such [river] for potential addition to the . . . System. . . .
          Nothing in this paragraph shall affect the authority or
          responsibilities of any other Federal agency with respect to
          activities or actions on this segment and its immediate envi-
          ronment.

The Conservancy interprets WSRA § 5(d)(1) to mean that when a
federal agency plans a water development project on any river, the
federal agency must consider whether the river involved has the
potential for inclusion in the System and must discuss that potential
in its project plan report. Additionally, if the Secretary of the Interior
or the Secretary of Agriculture has identified the river as a potential
candidate for inclusion in the System, the federal agency must evalu-
ate the benefits of designating the river as part of the System as an
alternative to the proposed project.

Applying its interpretation to this case, the Conservancy argues that
WSRA § 5(d)(1) requires the NRCS and the Corps to consider the
North Fork's potential as a wild and scenic river and to discuss this
potential in the EIS or in a separate document. Moreover, because an
eight-mile segment of the North Fork is listed on the Nationwide Riv-
ers Inventory (NRI), the Conservancy contends that the NRCS and
the Corps must evaluate the benefits of designating the North Fork as
part of the System as an alternative to building the Project.

The district court rejected the Conservancy's argument, holding
that WSRA § 5(d)(1) applies only to the rivers designated for poten-
tial addition to the System in WSRA § 5(a) and that no duties were
imposed on the NRCS and the Corps by the North Fork's listing on
the NRI. The district court alternatively held that even if WSRA
§ 5(d)(1) or the NRI did impose duties on the NRCS and the Corps,
they complied with those duties.

Assuming arguendo that the first sentence of WSRA § 5(d)(1)
required the NRCS and the Corps to consider and discuss the North
Fork's potential to be included in the System, we agree with the dis-
trict court that the NRCS and the Corps complied with that duty. The
EIS, which both the NRCS and the Corps relied on,"consider[s] and
discuss[es]" the potential of the North Fork for inclusion in the Sys-

                     21
tem. See 16 U.S.C. § 1276(d)(1). Specifically, the EIS discusses the
North Fork's listing on the NRI and acknowledges that rivers listed
on the NRI have the potential to be included in the System. The EIS
also discloses that the NRCS consulted with the National Park Service
regarding the North Fork's potential to be included in the System.
Moreover, the EIS acknowledges that the North Fork's potential for
inclusion in the System will remain high if the Project is not built.
The EIS explains that the Project will inundate 3.4 miles of the North
Fork, and that such inundation will eliminate the potential of that 3.4
miles to be included in the System. The Corps's ROD similarly con-
siders and discusses the North Fork's listing on the NRI and its poten-
tial to be included in the System. We thus conclude that, in this case,
the NRCS and the Corps considered and discussed the potential of the
North Fork to be included in the System. Therefore, we need not
decide whether the first sentence of WSRA § 5(d)(1) imposes a man-
datory duty on all federal agencies to consider and discuss the poten-
tial to be included in the System of every river on which a project is
proposed.

However, our inquiry does not end with the first sentence of
WSRA § 5(d)(1), for the Conservancy argues that the second sentence
of WSRA § 5(d)(1) requires the NRCS and the Corps to evaluate the
benefits of designating the North Fork as part of the System as an
alternative to building the Project. The Conservancy points out that
the National Park Service, a unit of the Department of the Interior, has
listed the North Fork on the NRI. According to the Conservancy, the
North Fork's listing on the NRI constitutes a determination by the
Secretary of the Interior, pursuant to the second sentence of WSRA
§ 5(d)(1), that the NRCS and the Corps must evaluate the benefits of
designating the North Fork as part of the System as an alternative to
building the Project. The argument raised by the Conservancy
assumes that the second sentence of WSRA § 5(d)(1) delegates to the
Secretary of the Interior and the Secretary of Agriculture the authority
to designate rivers that federal agencies must evaluate for potential
designation as part of the System.

The question whether the second sentence of WSRA§ 5(d)(1) del-
egates to the Secretary of the Interior and the Secretary of Agriculture
the authority to designate rivers that federal agencies must evaluate
for potential designation as part of the System is a difficult one, but

                    22
one we need not resolve in this case. This is so because even if the
second sentence of WSRA § 5(d)(1) operates as the Conservancy
argues, the NRI does not purport to impose any obligations on federal
agencies. Indeed, examination of the NRI compels the conclusion that
the NRI does not impose any obligation on the NRCS and the Corps
to evaluate the benefits of designating the North Fork as part of the
System. Nowhere does the NRI state that federal agencies must evalu-
ate the benefits of designating the listed rivers as part of the System
as an alternative to proposed projects on the listed rivers. In fact, the
NRI does not purport to impose any particular obligations on federal
agencies. It states:

          The rivers inventory was conducted by the Department of
          the Interior with the cooperation of state and local agencies.
          However, listing of these rivers is in no way an endorsement
          by the participating agencies that the rivers and river seg-
          ments are the best within their jurisdiction, nor that they feel
          any specific action should be taken to protect these rivers.

(J.A. 587). Thus, we conclude that the NRI does not require the
NRCS and the Corps to evaluate the benefits of designating the North
Fork as part of the System as an alternative to building the Project.

Congress' recognition, in WSRA § 5(d)(2), of the NRI as "a spe-
cific study for possible additions" to the System does not change this
conclusion. Nothing in this language indicates that the NRI designates
rivers that must be evaluated in planning reports by federal agencies.
The purpose of WSRA § 5(d)(2) clearly was not to give the NRI any
particular status that might trigger the duty imposed by the second
sentence of WSRA § 5(d)(1), but simply to authorize the completion
of the study of the Upper Klamath River, a river unrelated to this
case.

V.

In conclusion, we hold that the Corps violated NEPA by failing to
take a hard look at the problem of zebra mussel infestation and that
both the NRCS and the Corps violated NEPA by relying on an
inflated estimate of the Project's recreation benefits. We therefore
vacate those parts of the district court's judgment that held that the

                     23
NRCS and the Corps did not violate NEPA in these respects. On
remand, the district court shall direct the NRCS and the Corps to
reevaluate the Project in light of our holdings herein. In all other
respects, the judgment of the district court is affirmed. Pending the
NRCS's and the Corps's reevaluation of the Project in compliance
with NEPA, further construction of the Project is stayed.

AFFIRMED IN PART, VACATED IN PART, AND REMANDED
FOR FURTHER PROCEEDINGS

HALL, Circuit Judge, dissenting:

I must respectfully dissent. I believe that the federal agencies have
adequately considered all environmental consequences of the pro-
posed dam, and I would permit the project to go forward without fur-
ther ado.

We may order an agency to supplement an EIS only if the agency's
decision to forgo the supplement in the face of"new" information was
"arbitrary and capricious." 5 U.S.C. § 706(2)(A); Marsh v. Oregon
Natural Resources Council, 490 U.S. 360, 375-376 (1989). It seems
to me that the objections concerning potential zebra mussel infesta-
tion were not so much "new" information as"late" information.
Surely one of the purposes of a regulation permitting one federal
agency to adopt another agency's completed EIS is to make environ-
mental review "one-stop shopping" as near as can practicably be. The
prophets of zebra mussel infestation have no excuse for failing to
voice their concerns to the NRCS during its preparation of the EIS.
Accordingly, I would hold that the Corps' decision was not "arbitrary
and capricious."

It follows that I do not fault the Corps for not undertaking an
exhaustive NEPA-style investigation of the zebra mussel issue. The
Corps took a good enough look to satisfy itself that the dam should
be built. It reasoned that zebra mussels are so pervasive, and infesta-
tions so inevitable, that it made no sense to let them scuttle a much-
needed local improvement. This kind of balancing is the sole province
of the executive branch, and we have no role beyond ensuring that the
balancing was done. Robertson v. Methow Valley Citizens Council,
490 U.S. 332, 350 (1989). I am satisfied that it was done here.

                    24
Likewise, while the economic study relied on by the NRCS was
imperfect, perfection is not the standard of review. The EIS makes
clear that, because only the proposed multi-purpose dam would meet
all of the sponsors' goals, there are only two alternatives: build or not
build. Even if one were to indulge the elaborate assumption that all
of the recreational gains from the project would be offset by recre-
ational losses, the NRCS would still have had a positive cost-benefit
ratio before it.

In this regard, I very much agree with the district court's observa-
tion that sound decisionmaking is not strictly cost-driven. For exam-
ple, the Superintendent of Schools of Ritchie County attributed a
$40,000 "cost" to each day of instruction lost to the river's caprices.
This figure is, and must be, purely subjective. What is day of educa-
tion worth? Can a child's mastery of the Pythagorean Theorem or
appreciation of Mozart be expressed in dollars and cents?

Lastly, on this record, and as the majority concedes, the Wild and
Scenic Rivers Act does not prohibit construction of the dam.

The decisions of the Corps and NRCS were not arbitrary and capri-
cious. I dissent.

                     25
