The Federal Highway Administration (FHWA) has released the final report of its fourth audit evaluating the Arizona Department of Transportation's (ADOT) performance in assuming FHWA's environmental responsibilities under the National Environmental Policy Act (NEPA). Conducted from March 27 to March 31, 2023, the audit assessed ADOT's compliance with a 2019 memorandum of understanding (MOU) that allows the state to handle NEPA reviews for federal-aid highway projects. This development is significant as it marks the completion of the mandatory annual audits required by 23 U.S.C. 327 during the first four years of state participation. The report finds ADOT generally compliant but identifies non-compliance observations requiring corrective actions, while highlighting successful practices and areas for improvement. This audit underscores the ongoing evolution of state-federal partnerships in environmental reviews, potentially influencing similar programs nationwide.
Background and Program Overview
The Surface Transportation Project Delivery Program, established by the Moving Ahead for Progress in the 21st Century Act (MAP-21) and codified at 23 U.S.C. 327, enables states to assume FHWA's NEPA responsibilities for highway projects. Arizona joined the program effective April 16, 2019, following a public comment period and execution of an MOU with FHWA. Under this agreement, ADOT takes sole responsibility and liability for environmental reviews, consultations, and compliance for projects requiring environmental assessments (EAs), environmental impact statements (EISs), and certain categorical exclusions (CEs). Key players include ADOT's Environmental Planning Office (EP), FHWA's audit team, the Arizona Attorney General's Office (AGO), the Arizona State Historic Preservation Officer (SHPO), and tribal representatives such as the Salt River Pima-Maricopa Indian Community Tribal Historic Preservation Officer (THPO).
The program builds on precedents like the National Historic Preservation Act (Section 106) and Clean Air Act conformity requirements (40 CFR 93). FHWA's audits ensure adherence to federal standards, with this fourth review covering NEPA approvals from January 1 to December 31, 2022. The audit methodology involved document reviews, interviews with 18 stakeholders, and examination of all seven relevant project files, focusing on elements like program management, documentation, quality assurance, and training.
Audit Findings and Compliance Assessment
The audit team concluded that ADOT has carried out its assumed responsibilities consistent with the MOU terms. It reviewed six program elements and additional focus areas, including project-level conformity, Section 106 consultations, and environmental commitment tracking. ADOT processed seven NEPA decisions during the period, including three EA re-evaluations, one EA with a Finding of No Significant Impact, one draft EA, and two unlisted CEs.
Evidence from ADOT's self-assessment, pre-audit information request responses, and project files supported the overall positive assessment. For instance, ADOT's monthly meetings with FHWA's Arizona Division improved communication, as noted in interviews. However, the report identifies three non-compliance observations and 13 general observations, requiring corrective actions under MOU Part 13.2.2.
Successful Practices
The report highlights four successful practices. First, ADOT's monthly coordination with FHWA has enhanced issue resolution. Second, new guidance on alternative delivery projects improves environmental commitment handling. Third, ADOT has advanced tribal engagement through letters, a new ambassador position, and a project-specific Tribal Environmental Engagement Plan. Fourth, early involvement of AGO attorneys in project reviews ensures timely legal guidance, with AAGs participating in team meetings and providing updates on federal changes.
These practices reflect ADOT's proactive adaptations, potentially serving as models for other states. For example, the tribal engagement efforts address historical consultation challenges, aligning with the FHWA/ADOT Tribal Consultation Letter Agreement of August 5, 2022.
Non-Compliance Observations and Procedural Gaps
Two new non-compliance observations emerged. Non-Compliance Observation #1 involves incomplete reporting to the Federal Infrastructure Permitting Dashboard, missing permits, milestones, and project updates, contrary to MOU Part 8.5.1 and standards tied to Executive Order 13807 (issued by President Trump, though later rescinded). Non-Compliance Observation #2 concerns inadequate documentation and implementation of environmental commitments, with inconsistent tracking across ADOT divisions and no consolidated reporting mechanism.
Additionally, a prior non-compliance issue from Audit #3 persists regarding incomplete identification of MOU responsibilities in non-EP divisions. General observations include deficiencies in manuals (e.g., unclear re-evaluation processes), tribal engagement needs, project file incompleteness, Section 4(f) analysis gaps, air quality conformity issues, inconsistent MOU disclosure statements, re-evaluation documentation problems, and training gaps. For instance, project files lacked supporting documents like public involvement plans and noise analyses, increasing non-compliance risks.
Perspectives and Implications
Stakeholders offered varied views. ADOT staff emphasized procedural improvements, while the SHPO and THPO stressed the need for better tribal trust and transparency. The AGO highlighted early legal involvement but noted limitations due to attorney-client privilege assertions, which restricted FHWA's assessment—a unique stance among western states.
Short-term implications include ADOT's need to implement corrective actions before MOU renewal, potentially affecting project timelines. Long-term, unresolved issues could lead to litigation risks or program monitoring extensions. Different perspectives exist: proponents see NEPA assignment as streamlining reviews, while critics, including some tribal representatives, worry about reduced federal oversight. The audit avoids endorsing views but notes potential for improved efficiency if gaps are addressed.
In summary, the FHWA's fourth audit affirms ADOT's overall compliance with its NEPA assignment but underscores the need for targeted improvements in reporting, documentation, and interagency coordination. As ADOT transitions from annual audits to ongoing monitoring under 23 U.S.C. 327(h), it faces opportunities to refine its processes through updated manuals, enhanced training, and better tribal relationships. Potential next steps include developing comprehensive commitment tracking systems and fully implementing prior agreements. Ongoing debates may center on balancing state autonomy with federal standards, influencing future program expansions. Challenges remain in areas like tribal consultation and legal transparency, which could shape ADOT's program renewal and similar initiatives elsewhere.
