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No Means No: EPA Told Again Not to Regulate Through Guidance

August 16, 2012

The U.S. District Court for the District of Columbia has ruled that U.S. EPA overstepped its authority under the Clean Water Act (CWA)[1] and the Surface Mining Control and Reclamation Act (SMCRA) and infringed on state authority under those statutes when it issued a “Final Guidance” for so-called mountain-top removal coal mining. National Min. Ass’n v. Jackson (National Mining).[2] Specifically, the Final Guidance called out certain CWA permits for additional environmental review and to implement (among other things) acceptable “conductivity” levels for streams impacted by coal mining. The district court’s recent decision follows a decision in October 2011 by the same judge, Reggie Walton, that EPA exceeded its statutory authority and violated the Administrative Procedure Act (APA) by relying on interpretive guidance – rather than a regulation – to modify the CWA permitting process for mining activity. See R. Prugh, DC District Court Puts Another Nail in Coffin of EPA Reliance on Guidance Documents, Marten Law Environmental News (November 16, 2011). Taken together, Judge Walton’s two decisions in National Mining determine that EPA’s mountain-top mining Guidance is invalid on both procedural and substantive grounds. The decisions thus narrow EPA’s role in regulating water quality impacts from mining.

Statutory Background

National Mining concerns CWA permits for coal-mining activities in Appalachia. The CWA establishes a permitting scheme for pollutants discharged into bodies of water, and coal mining operations typically must obtain both CWA and SMCRA permits. Coal-mining activities generally require a “dredge and fill” permit issued under CWA Section 404. The U.S. Army Corps of Engineers (Corps) regulates discharges of dredged or fill material to “navigable waters” under CWA Section 404.[3] The Corps has sole authority to issue Section 404 permits;[4] however, it must do so according to guidelines developed in conjunction with EPA under Section 404(b).[5] The Corps and EPA developed regulations to implement Section 404(b)(1),[6] and these regulations specifically provide that no “modifications to the basic application, meaning or intent of these guidelines shall be made without rulemaking” by EPA under the APA.[7] CWA Section 404(c) provides EPA with limited veto power over the Corps Section 404 permitting decisions; however, EPA must publish findings for its reasons when vetoing a permit.[8] Finally, CWA Section 404(q) directs the Corps to coordinate with other federal agencies to make a Section 404 permitting decision, “to the maximum extent practicable,” within 90 days of publication of the application notice.[9]

Under CWA Section 402, National Pollutant Discharge Elimination System (“NPDES”) permits are typically issued by states for the discharge of all other pollutants not covered by Section 404 permits (i.e., non-dredged or fill material).[10] In accordance with CWA Section 301, NPDES permits typically contain numerical limits called ‘effluent limitations’ that restrict the amounts of specified pollutants that may be discharged.[11] The procedure for determining the need for effluent limits is called a reasonable potential analysis. If the discharge does have the reasonable potential to cause an excursion above a numeric or narrative water quality standard set in accordance with CWA Section 303, then the state must develop permit limitations to ensure compliance with that water quality standard.[12] Section 303 “requires states to adopt water quality standards applicable to their intrastate and interstate waters.”[13] While states are responsible for developing the water quality standards, the EPA is required to review the standards for approval.[14] The EPA may assume the role of actually promulgating water quality standards only if (1) it determines that a state’s proposed new or revised standard does not measure up to the Clean Water Act’s requirements and the state refuses to accept EPA-proposed revisions, or (2) a state does not act, and the EPA determines that a new or revised standard is necessary.[15]

The SMCRA requires those engaging in surface coal mining operations to comply with permitting requirements and environmental standards.[16] The Department of the Interior’s Office of Surface Mining Reclamation and Enforcement administers and enforces the SMCRA,[17] but a state may assume primary jurisdiction over the regulation of surface mining within its borders by having its proposed program approved by the Secretary of the Interior.[18] Once a state program is approved, the state has the primary responsibility for all aspects of the regulatory program.[19] However, the SMCRA does not supersede the CWA.[20]

The SMCRA provides only a limited role for the EPA. First, the statute requires the Secretary of the Interior to obtain the EPA’s written concurrence on any SMCRA-implementing regulations that relate to air or water quality standards. Second, the Office of Surface Mining may not approve a proposed state program until it has solicited and publicly disclosed the EPA’s views and obtained the EPA’s written concurrence as to any aspects of the state program that relate to water quality standards promulgated under the CWA. However, oversight authority of the state permitting authorities belongs to the Secretary of the Interior.[21]

The National Mining Case

In June 2009, EPA and the Corps signed a Memorandum of Understanding on Implementing the Interagency Plan on Appalachian Surface Coal Mining (“MOU”). The MOU announced “a set of short term actions to be implemented to existing policy and guidance,” including coordinated environmental reviews of pending Section 404 permit applications. Also in June 2009, EPA and the Corps jointly issued an “enhanced coordination memorandum” to “facilitate” review of pending Section 404 permits surface coal mines (EC Memo).[22] The EC Memo outlined a two-step process between EPA and the Corps, under which EPA would identify pending applications that raised environmental concerns and thus warranted further environmental review and coordination. The first step involves the Multi-Criteria Resource (MCIR) Assessment, a screening process under which “EPA appl[ies] the 404(b)(1) guidelines and direct[s] the Corps on which permit applications must go through … further review and coordination.”[23] If EPA identified a permit application that warranted further review through the MCIR Assessment process, that permit would then be subjected to the enhanced coordination process (as outlined in the EC Memo).

In April 2010, EPA issued an “interim guidance” document intended to “provide further clarification of EPA’s roles and expectations” in coordinating with EPA’s federal and state partners and to ensure “more consistent, effective, and timely compliance of Appalachian surface coal mining operations” with the CWA and other environmental laws (Interim Detailed Guidance).[24] The Interim Detailed Guidance applied to both CWA Section 404 and 402 (water quality) permits, and (among other things) identified acceptable “conductivity” levels for streams impacted by coal mining.[25]

NMA filed suit in district court against EPA and the Corps challenging the EC Memo, the MCIR Assessment, and the Interim Detailed Guidance. NMA sought a preliminary injunction regarding the EC Memo and several other actions. On January 14, 2011, the district court denied the injunction, but signaled that EPA had likely violated the CWA and the APA by relying on the guidance documents.[26] See R. Prugh, District Court Says EPA Cannot Shortcut Rulemaking Process by Issuing Interpretive Guidance, Marten Law Environmental News (February 3, 2011). Following that ruling, the court consolidated the case with four others transferred from district courts in West Virginia and Kentucky. The court bifurcated the briefing schedule, agreeing to hear challenges to the EC Memo and the MCIR Assessment first, while reserving argument regarding the Interim Detailed Guidance.[27] NMA then moved for summary judgment on the EC Memo and the MCIR Assessment.

Late last year, the court ruled that EPA exceeded its statutory authority and violated the Administrative Procedure Act (“APA”) by relying on interpretive guidance – rather than a regulation – to modify the permitting process for mining activity under the CWA.[28] The court’s October 2011 decision granted summary judgment to NMA on the first set of issues and invalidated EPA’s “process” guidance. The court held that EPA had exceeded its statutory authority under the CWA with the EC Memo and the MCIR Assessment by expanding its role in the Section 404 permitting process against Congress’ clear directive.[29] The court further concluded that the EC Memo and MCIR Assessment “are legislative rules not exempt from the APA’s notice and comment rulemaking requirements.”[30]

The Court’s July 2012 Ruling

Judge Walton’s new decision in July 2012 concerns the parties’ cross-motions for summary judgment regarding the Final Guidance memo EPA issued on July 21, 2011 regarding “conductivity” levels. EPA argued in its defense that the Final Guidance is not final agency action, or, alternatively, if it is, that exclusive jurisdiction for its review rests with the D.C. Circuit Court of Appeals, that the Final Guidance is not ripe for review, and that the plaintiffs lack standing to challenge the Final Guidance. As to the first issue, the court found that the “Final Guidance constitutes final agency action because it is both the consummation of the EPA’s decision making process, and, even if facially nonbinding, it has been applied by the regional field offices in their review of draft permits in a manner that has had the practical effect of changing the obligations of the state permitting authorities. Therefore, the Final Guidance is a de facto legislative rule.”[31] As to the jurisdictional issue, the court held that the NMA’s appeal was not within the six very specific categories of agency action for which a challenge must be brought as an original proceeding in the D.C. Circuit Court of Appeals and, therefore, that the District Court possesses original jurisdiction to review the Final Guidance.[32] Finally, the court further held that the Final Guidance is ripe for review and NMA has demonstrated that they have standing to challenge the Guidance.

Reaching the substantive issue of EPA’s authority to issue the Final Guidance, the court granted summary judgment to the NMA holding that “overstepped its statutory authority under the CWA and the SMCRA, and infringed on the authority afforded state regulators by those statutes.”[33]

Regarding the EPA’s authority under the SMCRA, the court started with the proposition that once the EPA has given its assent to approve a state SMCRA permitting program, the SMCRA affords it no further authority in the oversight or administration of the SMCRA regime.[34]The court then rejected EPA’s argument that “there is substantial overlap between issues that are appropriately considered by the SMCRA permitting authority during its permit process, and issues that are properly considered by the Corps during its CWA Section 404 permit process or by State permitting authorities during the 402 permitting process.” The court held that under the CWA, the EPA possesses neither the authority to apply the 404(b)(1) Guidelines to Section 404 permits, nor, once it has approved state permitting programs, the authority to work with the regulated industry on their Section 402 permits. “In circumstances where the EPA lacks the authority to issue the permits, whether there is overlap between requirements for SMCRA permits and CWA permits is of no moment. Accordingly, the EPA cannot justify its incursion into the SMCRA permitting scheme by relying on its authority under the CWA—it has no such permitting authority. The EPA has therefore impermissibly interjected itself into the SMCRA permitting process with the issuance of the Final Guidance.”[35]

The court further concluded that the EPA overstepped its CWA authority when it issued the Final Guidance. The court first held that CWA Section 303 did not allow EPA to issue the Final Guidance because it had not followed the proper rulemaking process to exercise its general CWA Section 303 authority to develop water quality standards. “[I]n light of [the court’s] earlier determination that the Final Guidance’s conductivity benchmarks were being treated as binding by the EPA’s regional offices, the Court must again conclude that the Final Guidance impermissibly sets a conductivity criterion for water quality.” Finally, the court held that EPA also lacked authority under CWA Section 402 to issue the Final Guidance because the “presumption” in the Guidance that the states must conduct a reasonable potential analysis for conductivity prior to issuing a Section 402 permit improperly usurped the state regulators’ designated authority to make such decisions. Such a presumption is inconsistent with an EPA regulation – 40 C.F.R. § 122.44(d)(1)(ii) – that leaves it to the states to determine whether and when to conduct a reasonable potential analysis. For these reasons, the court held that the Final Guidance is illegal and granted summary judgment to NMA.

For more information on CWA permits and Marten Law’s water quality and water resources practices please contact Jeff Kray.

[1] 33 U.S.C. § 1251 et seq.

[2] ___ F. Supp. 2d ___ , 2012 WL 3090245 (July 31, 2012)(“2012 Decision”).

[3] See 33 U.S.C. § 1344.

[4] Id. § 1344(a).

[5] Id. § 1344(b).

[6] 40 C.F.R. part 230.

[7] Id. § 230.2(c).

[8] 33 U.S.C. § 1344(c).

[9] Id. § 1344(q).

[10] See 33 U.S.C. § 1342(a).

[11] 33 U.S.C. § 1313; 40 C.F.R. §122.44(d)(1)(i).

[12] 33 U.S.C. § 1311(b)(1)(A) & (C).

[13] 33 U.S.C. § 1313(a)-(c).

[14] See 33 U.S.C. § 1313(c).

[15] 33 U.S.C. § 1313(c)(3)-(4)).

[16] 30 U.S.C. §§ 1202, 12561266 (2006).

[17] 30 U.S.C. § 1211(c)(1).

[18] 30 U.S.C. § 1253.

[19] See In re Permanent Surface Mining Regulation Litigation, 653 F.2d 514, at 516(D.C. Cir. 1981)(citing 30 U.S.C. § 1201.

[20] See U.S.C. § 1292.

[21] Id. at 519.

[22] See EPA/Corps, Enhanced Surface Coal Mining Pending Permit Coordination Procedures (June 11, 2009) (EC Memo), available here.

[23] NMA, 2011 WL 4600718 at *2.

[24] EPA, Detailed Guidance: Improving EPA Review of Appalachian Surface Coal Mining Operations under the Clean Water Act, National Environmental Policy Act, and the Environmental Justice Executive Order (Apr. 1. 2010) (Interim Detailed Guidance), available here.

[25] “An increase in conductivity means that the water is getting saltier. Salinity is often expressed as specific conductance, or conductivity, which is a measure of the ability of water to conduct an electrical current. It is highly dependent on the amount of dissolved solids … in the water. As conductivity levels rise, fish, amphibians, mussels, and other aquatic organisms can be adversely affected.”2012 Decision at p. 4, n.8. EPA’s Interim Detailed Guidance stated the following regarding conductivity:

As a general matter, EPA expects that the conductivity impacts of projects with predicted conductivity levels below 300 μS/cm generally will not cause a water quality standard violation and that in-stream conductivity levels above 500 μS/cm are likely to be associated with adverse impacts that may rise to the level of exceedances of narrative state water quality standards. If water quality modeling suggests that in-stream levels will exceed 500 μS/cm, EPA believes that reasonable potential likely exists to cause or contribute to an excursion above applicable water quality standards; unless, based on sitespecific data, the state has an alternative interpretation of their water quality standards that is supported by relevant science. Similarly, if water quality monitoring suggests that in-stream levels will exceed 300 μS/cm but will be below 500 μS/cm, EPA should work with the permitting authority to ensure that the permit includes conditions that protect against conductivity levels exceeding 500 μS/cm. In circumstances where conductivity levels in waters proposed for new mining related discharges already exceed 500 μS/cm, EPA will coordinate with the permitting authority on a site-specific basis to ensure these new discharges will not cause or contribute to a violation of water quality standards. Once EPA’s draft conductivity report is finalized following SAB review, we will evaluate whether changes to the conductivity benchmarks identified here are appropriate.
Interim Detailed Guidance, at 12 (footnote omitted).

[26] Nat’l Mining Ass’n v. Jackson, 768 F. Supp. 2d 34 (D.D.C. 2011).

[27] NMA, 2011 WL 4600718 at *1 n.1.

[28] Nos. 10-1220, -0295, -0446, -0447, 2011 WL 4600718 (D.D.C. Oct. 6, 2011).

[29] Id. at *6.

[30] Id. at *10.

[31] 2012 Decision at 6-8 (“whether intentional or not, has caused EPA field offices and the state permitting authorities to believe that permits should and will be denied if [EPA’s] ‘suggestions’ and ‘recommendations’ are not satisfied.”).

[32] Id. at 10.

[33] Id. at 15.

[34] Id. at 11.

[35] Id.

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