  The Wide Field Infrared Survey Telescope (WFIRST) will conduct a galaxy
redshift survey using the H$\alpha$ emission line primarily for spectroscopic
redshift determination. Due to the modest spectroscopic resolution of the
grism, the H$\alpha$ and the neighboring [NII] lines are blended, leading to a
redshift bias that depends on the [NII]/H$\alpha$ ratio, which is correlated
with a galaxy's metallicity, hence mass and ultimately environment. We
investigate how this bias propagates into the galaxy clustering and
cosmological parameters obtained from the WFIRST. Using simulation, we explore
the effect of line blending on redshift-space distortion and baryon acoustic
oscillation (BAO) measurements. We measure the BAO parameters
$\alpha_{\parallel}$, $\alpha_{\perp}$, the logarithmic growth factor $f_{v}$,
and calculate their errors based on the correlations between the line ratio and
large-scale structure. We find $\Delta\alpha_{\parallel} = 0.31 \pm 0.23 \%$
($0.26\pm0.17\%$), $\Delta\alpha_{\perp} = -0.10\pm0.10\%$ ($-0.12 \pm 0.11
\%$), and $\Delta f_{v} = 0.17\pm0.33\%$ ($-0.20 \pm 0.30\%$) for redshift
1.355--1.994 (0.700--1.345), which use approximately 18$\%$, 9$\%$, and 7$\%$
of the systematic error budget in a root-sum-square sense. These errors may
already be tolerable but further mitigations are discussed. Biases due to the
environment-independent redshift error can be mitigated by measuring the
redshift error probability distribution function. High-spectral-resolution
re-observation of a few thousand galaxies would be required (if by direct
approach) to reduce them to below 25$\%$ of the error budget. Finally, we
outline the next steps to improve the modeling of [NII]-induced blending biases
and their interaction with other redshift error sources.
