Powell

Appellants Lands Council, Kootenai Environmental Alliance, Ecology Center, and Idaho Sporting Congress, Inc. (collectively “the Lands Council”) challenge the timber harvest approved by the United States Forest Service (“Forest Service”) as part of a “watershed restoration” project in the Idaho Panhandle National Forest (“the Forest” or “IPNF”). The district court granted summary judgment in favor of the Forest Service, finding that it had complied with the National Environmental Policy Act, 42 U.S.C. § 4321 et seq. (“NEPA”) and the National Forest Management Act, 16 U.S.C. § 1601 et seq. (NFMA), and thus did not act arbitrarily and capriciously by approving the plan. For the reasons discussed below, we reverse the decision of the district court and *742 grant summary judgment in favor of Lands Council.

I

The Lands Council contests a decision of the United States Forest Service to proceed with Modified Alternative Eight of the Iron Honey Project (“Project”). The Project area is at the headwaters of the Little North Fork of the Coeur d’Alene River, and the fourteen watersheds within the Project area account for one-fifth of the watershed 1 of the Little North Fork. In the Little…