Supreme Court Finds No Permitting Role for EPA When Corps Issues Fill Permits Under Clean Water Act

In a 6-3 decision issued on June 22 in Coeur Alaska, Inc. v. Southeast Alaska Conservation Council,[1] the U.S. Supreme Court held that the Army Corps of Engineers (“Corps”), rather than EPA, has jurisdiction to issue permits under the Clean Water Act (“CWA”) for the discharge of wastes into navigable waters. The decision: (1) affirms that discharges allowed by the Corps under § 404 “do not require permits from the EPA” under § 402 of the CWA;[2] and (2) sustains the Corps’ and EPA’s reading of the relationship between those two sections of the CWA, despite the fact that the interpretation was based on an internal memorandum rather than formal rulemaking or regulations that would have required Chevron deference.[3]

The opinion is the Court’s final environmental ruling of the term, and once again (for the fourth time this year) reverses a decision of the Ninth Circuit Court of Appeals[4] and reinstates the decision of a district court. The Ninth Circuit had held that CWA § 306 required dischargers to comply with the effluent limitations for new source standards of performance and did not contain any exception for discharges that otherwise qualify for regulation under CWA § 404 as dredged or fill material. For more background on the district court opinion and the Ninth Circuit opinion, see Interplay Between Clean Water Act Fill Permit and Water Quality Permit Debated in Case Involving Controversial Alaskan Gold Mine, Marten Law Group Environmental News (August 23, 2006); Ninth Circuit Limits Scope of Corps’ Authority Over Discharge of Fill Material, Marten Law Group Environmental News (June 20, 2007). The Supreme Court’s decision to accept certiorari in the case was also previously reported in this newsletter. See S. Jones, Supreme Court to Resolve Conflict between Clean Water Act Permitting Schemes, Marten Law Group Environmental News (August 20, 2008).

Background

At issue in the case was Coeur Alaska’s plan to revive the previously closed Kensington Gold Mine, to operate a “froth flotation” mill facility, and to dispose of the waste material, a rock and water mixture called “slurry,” by pumping it into a lake near Juneau, Alaska. The company proposed to dispose of approximately 4.5 million tons of mine tailings contained in process wastewater over the life of the mine by pumping the wastewater into Lower Slate Lake, located in the Tongass National Forest.[5] As conceived, the proposed discharge would raise the bottom of the lake 50 feet, and would adversely affect all fish and nearly all aquatic life in the lake.[6] In order to use the lake as a disposal site, the company would create an impoundment by damming the lake’s outfall point, and would divert stormwater and creeks around the lake.[7]

The Corps initially issued a § 404 permit to Coeur Alaska in 2005, allowing it to pump the mine tailing slurry into Lower Slate Lake.[8] The Corps reasoned that the CWA’s dredge and fill permit program, rather than the CWA’s effluent discharge permit program, applied to Coeur Alaska’s planned discharges, because the proposed tailings discharge met the regulatory definition of “fill material” and would raise the lake’s bottom elevation.[9] In granting the permit, the Corps considered the environmental consequences of the proposed discharge and determined that the proposed discharge plan would be “the least environmentally damaging practical way to dispose of the tailings.”[10] The EPA had the statutory authority to veto the Corps’ permit decision under § 404(c), but elected not to do so. The EPA also issued a permit under § 402 for discharges from the lake into a downstream creek.

The District Court and Ninth Circuit Decisions

In September 2005, environmental groups brought suit challenging the Corps’ authority to issue a permit for the discharge of the process wastewater into Lower Slate Lake. The plaintiffs also argued that EPA’s previously promulgated performance standards under § 301 and § 306 prohibited such discharges. After the complaint was filed, the Corps decided to suspend the permit and reconsidered its decision to issue the permit, requesting a voluntary remand of the case before briefing on the merits began, which the district court granted. Following reconsideration, the Corps reinstated the original permit, without changes, and issued a revised record of decision in which it explained its rationale.[11] The plaintiffs filed an amended complaint in response. Coeur Alaska, Goldbelt, Inc. and the State of Alaska intervened as defendants. On August 4, 2006, the district court granted summary judgment to the defendants, holding that the Corps had authority to issue the § 404 permit for the discharge of mine tailings into Lower Slate Lake.[12]

Reviewing that decision on appeal, the Ninth Circuit relied on the CWA’s plain language, holding that §§ 301 and 306 unambiguously require dischargers to comply with applicable effluent limitations and standards of performance, and do not contain any exception for discharges that otherwise qualify for regulation under § 404 as dredged or fill material. Given this clear language, the Ninth Circuit determined that §§ 301 and 306 applied to the proposed mine tailing discharge into Lower Slate Lake.[13]

The court also found support for its reading of the CWA in the agencies’ own interpretation of “fill material.”[14] At the time the Corps and EPA adopted their joint definitions of “fill material” and “discharge of fill material,” they emphasized that the rule would not change “any determination that we have made regarding discharges that are subject to an effluent limitation guidelines and standards, which will continue to be regulated under section 402 of the CWA.”[15] Consequently, the Ninth Circuit concluded that the agencies themselves did not intend for the definition of “fill material” to replace EPA’s performance standard for froth flotation mills. Based on this determination, the Ninth Circuit held that a permit under § 402 of the CWA was a prerequisite for the discharge into Lower Slate Lake.

The Ninth Circuit reversed the district court’s decision and remanded the case to the district court to vacate the mine tailings permit issued by the Corps pursuant to § 404. The court also vacated a second permit issued to Goldbelt, Inc. for construction of the associated Cascade Point Marine Facility and the Forest Service’s Record of Decision approving the general plan, because both actions depended upon the validity of the Corps’ § 404 permit to Coeur Alaska.

CWA Permitting Programs

In general, two types of discharges are regulated as part of the CWA’s regulatory structure. First, the CWA regulates the discharge of dredge or fill material into waters of the United States pursuant to permits issued by the Corps under § 404,[16] which provides that the Corps “may issue permits … for the discharge of dredged or fill material into the navigable waters” under guidelines developed jointly by the Corps and EPA.[17] Those regulations define “fill material” for purposes of § 404 as “material placed in waters of the United States where the material has the effect of: i) replacing any portion of a water of the United States with dry land; or ii) changing the bottom elevation of any portion of a water of the United States.”[18] Examples of fill material include rock and “overburden from mining and other excavation material.”[19] In addition, the term “discharge of fill material” refers to the “addition of fill material into waters of the United States,” including the placement of overburden, slurry, or tailings or similar mining-related materials.”[20]

The EPA administers a second and separate permitting system under § 402, applying effluent limitations and performance standards issued pursuant to § 301 and § 306. Under this permitting program, those who discharge pollutants from a point source into waters of the United States are required to obtain a permit from EPA, or the state if it has been delegated permitting authority.[21] Discharges pursuant to a permit issued under § 402 must comply with applicable EPA-established “effluent limitations” under § 301 for existing sources, and “performance standards” under § 306 for new sources.[22] Of particular relevance to Coeur Alaska’s mine tailing discharge plan are performance standards issued by EPA under both §§ 301 and 306, which prohibit discharges of process wastewater from certain new froth flotation mills into navigable waters.[23]

The Supreme Court Decision

The Supreme Court overruled the decision of the Ninth Circuit Court of Appeals, holding that the Corps, not EPA, has the authority to permit the slurry discharge into Lower Slate Lake, and that the Corps acted in accordance with law in issuing the discharge permit to Coeur Alaska.

Writing for the majority, Justice Kennedy first held that, because the slurry that Coeur Alaska proposed to discharge into Lower Slate Lake was “fill material” under Corps regulations, Coeur Alaska properly obtained its permit from the Corps. In reaching this decision, the Court relied on the express language of § 402, which forbids EPA from exercising regulatory authority over discharges governed by § 404. Section 402(a) states:

Except as provided in section[] * * * 1344 of this title [i.e., Section 404 of the CWA], the Administrator [of EPA] may * * * issue a permit for the discharge of any pollutant, or combination of pollutants * * * upon condition that such discharge will meet * * * all applicable requirements under sections 1311, 1312, 1316, 1317, 1318, and 1343 of this title.[24]

Based on this language, the Supreme Court decided that EPA may not regulate discharges of dredge and fill material where the Corps has authority to do so. The Court found support for its position in EPA’s own regulations, which state that: “[d]ischarges of dredged or fill material into waters of the United States which are regulated under section 404 of the CWA do not require [§ 402] permits from the EPA.”[25] Because all parties agreed that the slurry met the definition of “fill material” under the CWA, the Corps and not EPA had authority to permit the mine slurry discharge from the Coeur Alaska facility.

The Court noted that EPA has a role related to the environmental consequences of fill. EPA writes guidelines for the Corps to follow in making its permitting decision, and may exercise its authority under CWA § 404(c) to “veto” any Corps’ permit decision if EPA determines that a particular discharge “will have an unacceptable adverse effect on municipal water supplies, shellfish beds and fishery areas …, wildlife, or recreational areas.”[26] EPA did not exercise its veto power here.

In deciding that the Corps had permitting authority, the Court rejected an argument advanced by the environmental groups that the Corps may not permit discharges of fill material under § 404 “if that material is subject to an EPA new source performance standard.” The Court found the environmental groups’ reading to be unsupported by either the language of the CWA or EPA’s regulations and guidelines.[27] The Court further observed that the division of permitting authority proposed by environmental groups would burden the regulated industry:

As the regulatory regime now stands, a discharger must ask a simple question – is the substance to be discharged fill material or not? The fill regulation, 40 CFR § 232.2, offers a clear answer to that question; and under the agencies’ view, that answer decides the matter – if the discharge is fill, the discharger must seek a § 404 permit from the Corps; if not, only then must the discharger consider whether any EPA performance standard applies, so that the discharger requires a § 402 permit from the EPA…. Under SEACC’s interpretation, however, the discharger would face a more difficult problem. The discharger would have to ask – is the fill material also subject to one of the many hundreds of EPA performance standards, so that the permit must come from EPA, not the Corps?

After concluding that the Corps had authority to issue the slurry discharge permit, the Court next considered whether the Corps lawfully issued the permit to Coeur Alaska, and decided that it had. Environmental groups had argued that the permit was unlawful under § 306(e) because the slurry discharge would violate the new source performance standard under § 306. The petitioners, the federal agencies and the State of Alaska had argued that the permit was lawful because the performance standard and § 306(e) did “not apply to fill material regulated by the Corps.”[28] If the performance standard were to apply, “it would allow no discharge of process wastewater from the mine.”[29]

The Court agreed that EPA’s performance standards did not apply and that the Corps acted in accordance with law in issuing the permit. The Court found that both the CWA and EPA’s regulations were ambiguous on the question of whether EPA’s performance standards apply to discharges of fill material regulated under § 404. In light of this ambiguity, the Court found instructive an internal memorandum prepared by EPA which concluded that: “As a result [of the fact that the discharge is regulated under § 404], the regulatory regime applicable to discharges under section 402, including effluent limitations guidelines and standards, such as those applicable to gold ore mining . . . do not apply to the placement of tailings into the proposed impoundment [of Lower Slate Lake]. See 40 CFR § 122.3(b).”[30] The Court determined that EPA’s interpretation set forth in the memorandum warranted deference as it was not “plainly erroneous or inconsistent with the regulation[s].”[31] Although EPA’s performance standards did not apply to the initial discharge of slurry into the lake, they would apply to discharges from the Lake impoundment to surrounding waters. The Court therefore reversed the decision of the Court of Appeals and remanded the cases for further proceedings.

Writing in dissent, Justice Ginsburg, joined by Justice Stevens and Justice Souter, relied on a literal reading of the text of § 306, which makes it “unlawful for any new source to operate … in violation of” an applicable performance standard.[32] Based on this language, Justice Ginsburg would have held that a discharge covered by a performance standard must be authorized, if at all, by EPA. 

Conclusion

The Court’s holding should not only serve to streamline permitting for members of the regulated community, but will also clarify the interplay between sections § 404 and § 402 of the CWA and whether compliance with the effluent and performance standards of §§ 301 and 306 is necessary for any discharge to navigable waters. In addition, the acceptance of the agencies’ interpretation of the CWA based on an internal memorandum without the full benefit of Chevron deference may signal an increased willingness to follow the interpretation of agencies in both the administration and interpretation of regulatory statutes.

For more information please contact Steve Jones.