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<br />...J ~' <br /> <br />-3- <br /> <br />Evaluation" to be used in determining feasibility for water resource <br /> <br />projects. <br /> <br />EDF has a claimed nation-wide membership of 29,000 persons, composed <br /> <br />of scientists, c~ucators, lawyers, and other citizens dedicated to the <br /> <br />"protection of the environment and the wise use of natural resources" on <br /> <br />behalf of the general public. <br /> <br />The lawsuit (Civil Action No. 1005-72), filed with the U.s. District <br /> <br />Court for the District of Columbia, leveled its main attack against the <br /> <br />discount ,rates established in the December 24, 1968 regulation which <br /> <br />allegedly are too low and operate to approve water projects to the detri- <br /> <br />ment of the environment. <br /> <br />The plaintiff urged the Court to declare the regulation, in whole <br /> <br />or in part, to be null and void, as arbitrary, capricious, and beyond the <br /> <br />statutory authority of the defendants to promulgate, and urged the Court <br /> <br />to enter an order requiring defendants to revoke and rescind the regula- <br /> <br />tion, in whole or in part, and to issue a new regulation relating to the <br /> <br />discount rate more applicable to federal water projects in conformity with <br /> <br />the laws of the united States. <br /> <br />The plaintiff, in a four-count complaint, stated these objections: <br /> <br /><::> <br />~ <br />~ <br />C\J <br /> <br />-The 4 5/8 percent discount rate as set for 1969 with an escalation <br /> <br />factor of one-quarter of one percent increase per year thereafter is <br /> <br />arbitrary, capricious, and is beyond the defendants' statutory authority, <br /> <br />and is in violation of the 1936 Flood Control Act in that: it does not <br /> <br />reflect the actual cost of capital or the opportunity cost of government <br /> <br />investment which is currently about ten percent; the use of an interest <br /> <br />rate lower than the opportunity cost biases the design of projects in <br /> <br />favor of those with higher near term costs and lower near term benefits; <br /> <br />and the use of an interest rate lower than the opportunity cost biases <br /> <br />federal decision-making in favor of development and against preservation <br /> <br />of the natural environment. <br />