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Clean Water Act: EPA Has After-The-Fact Veto Authority Over Corps of Engineers’ Water Quality Permit

June 21, 2013

A three-judge panel of the D.C. Circuit Court of Appeals, reversing a lower court, has held for the first time that EPA has express authority under the Clean Water Act (CWA)[1] to veto a Section 404 dredge and fill permit that the U.S. Army Corps of Engineers (Corps) had issued years earlier. Mingo Logan Coal Co. v. Environmental Protection Agency. The appellate court held that Section 404 of the Act imposes no temporal limit on EPA’s authority to deny or restrict disposal sites "whenever" the EPA Administrator makes a determination that an "unacceptable adverse effect will result."[2] The practical effect of the decision is to create uncertainty and risk to a broad range of businesses – including those in the construction and mining industries – that EPA will veto a CWA Section 404 permit long after it has been issued by the Corps. Mingo Logan recently requested that the D.C. Circuit review the decision en banc, a likely precursor to seeking U.S. Supreme Court review of the issue.

Clean Water Act Permitting Process

The CWA prohibits the discharge of a pollutant by any person, except in compliance with specified statutory requirements.[3] Under CWA Section 404, the Corps has authority to issue permits for the discharge of dredged or fill material to waters of the United States.[4] The Corps must choose the disposal site through application of EPA guidelines, but EPA has the final authority to prohibit a disposal site.[5] CWA Section 404(c) grants EPA the power to veto or restrict a CWA Section 404 permit if the discharge would have an unacceptable adverse effect on municipal water supplies, shellfish beds and fishing areas, wildlife, or recreational areas.[6] CWA Section 404(c) also provides the EPA with authority to prohibit or restrict use of sites for discharges even if no permit application is pending. Courts have consistently given substantial deference to EPA when its CWA Section 404(c) vetoes have been challenged.[7] However, prior to the Mingo Logan case, no court had been called upon to determine whether EPA had authority to veto a disposal site after-the-fact of the Corps issuing a permit.

Case Background

Mingo Logan owns and operates the Spruce No. 1 mountaintop coal mine in Logan County, West Virginia.[8] Mountaintop mining involves removing the top of a mountain to recover the coal within it.[9] This process generates excess rock, topsoil, and debris (spoil) that cannot be returned to the mined area.[10] Typically, these materials are deposited in adjacent valleys, creating valley fills.[11]

In 1998, Mingo Logan obtained a permit under the Surface Mining Control and Reclamation Act (SMCRA)[12] from the State of West Virginia. The original design called for the mine to discharge spoil in portions of several streams.[13] Mingo Logan also applied for and obtained a National Pollutant Discharge Elimination System (NPDES) permit under CWA Section 402 from the State of West Virginia. EPA initially opposed the proposed permit, but ultimately withdrew its objections.[14]

Mingo Logan further applied to the Corps for a CWA Section 404 permit, the subject of the litigation discussed in this article.[15] Mingo Logan sought to discharge material from the Spruce No. 1 Mine into the same streams addressed in its state mining permit.[16] The Corps began the process of developing an EIS for the project.[17] EPA commented on a preliminary draft EIS in August 2001 and a draft EIS in August 2002. In December 2005, the West Virginia Department of Environmental Protection granted state certification for the permit based on its determination that the project would not violate state water quality standards or anti-degradation regulations.[18] The Corps released the final EIS in September 2006, and EPA again submitted comments.[19]

On January 22, 2007, the Corps issued Mingo Logan a CWA Section 404 permit for the Spruce project.[20] The permit authorized Mingo Logan to discharge dredged or fill material into the designated stream segments until December 31, 2031.[21] The permit stated that the Corps “may reevaluate its decision on the permit at any time the circumstances warrant.”[22] The permit made no mention of any future EPA action.[23]

On September 3, 2009 – almost two years after the Corps issued the Section 404 permit to Mingo Logan – EPA sent a letter to the Corps, requesting that it use its discretionary authority to suspend, revoke, or modify the permit on grounds that recent data and analyses had revealed downstream water quality impacts that were not adequately addressed by the permit.[24] The Corps rejected EPA’s request, finding no grounds to suspend, revoke, or modify the permit.[25]

Six months later, on March 26, 2010, EPA published a notice of its proposed determination to withdraw or restrict the specification of some of the applicable streams as disposal sites for fill material.[26] On January 13, 2011, EPA issued its Final Determination to “withdraw the specification of Pigeonroost Branch, Oldhouse Branch and their tributaries … as a disposal site for dredged or fill material in connection with the construction of the Spruce No. 1 Surface Mine … .”[27] The streams EPA sought to withdraw from specification as disposal sites make up roughly eighty-eight percent of the total discharge area authorized by Mingo Logan’s permit.[28]

Mingo Logan Suit and District Court Decision

Mingo Logan brought suit under the Administrative Procedure Act (APA) seeking a declaration from the Court that EPA lacked the authority to modify or revoke Mingo Logan’s Section 404 permit, that its attempt to modify the permit was unlawful, and that the permit is still operative. In addition, Mingo Logan asked the Court to vacate EPA’s Final Determination on the grounds that it exceeded the agency’s statutory authority under CWA Section 404(c), and that it was arbitrary, capricious, and not in accordance with law for a number of reasons. Mingo Logan and EPA filed cross-motions for summary judgment.

The U.S. District Court for the District of Columbia had held that the EPA exceeded its authority under the CWA when it attempted to invalidate the permit the Corps issued authorizing Mingo Logan Mingo Logan to discharge fill material from coal mining into nearby streams. A copy of the district court’s opinion is here. EPA’s decision was the first time in the forty-year history of the Act that it had determined to “veto” a permit after it had been issued by the Corps. The district court concluded that the CWA does not give EPA the power to render a permit invalid once it has been issued by the Corps.

The parties and the court all agreed that Congress gave EPA the right to step in and veto the use of certain disposal sites at the start, thereby blocking the Corps from issuing permits for those sites.[29] Stating, however, that “EPA’s attempt to withdraw the specification of discharge sites after a permit has been issued is unprecedented in the history of the Clean Water Act,” the district court concluded that EPA exceeded its authority under CWA Section 404(c) when it attempted to invalidate an existing permit by withdrawing the specification of certain areas as disposal sites after the Corps had issued Mingo Logan a permit under CWA Section 404(a). Based on considering the provision in question, the language and structure of the entire statutory scheme, and the legislative history, the court concluded that the statute does not give EPA the power to render a permit invalid once it has been issued by the Corps. “EPA’s view of its authority is inconsistent with clear provisions in the statute, which deem compliance with a permit to be compliance with the Act, and with the legislative history of section 404.” The court held that it could deem EPA’s action to be unlawful without venturing beyond the first step of the two-step analysis called for by Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc.[30]

The district court further concluded, however, that “it is undeniable that the provision in question [CWA Section 404(c)] is awkwardly written and extremely unclear.” Therefore, the court went on to rule – under the second step of the Chevron analysis – that even if the absence of a clear grant of authority to EPA to invalidate a permit is seen as a gap or ambiguity in the statute, and even if the court accords the agency some deference, EPA’s interpretation of the statute to confer this power on itself is not reasonable. The court held that “neither the statute nor the Memorandum of Agreement between EPA and the Corps makes any provision for a post-permit veto, and the agency was completely unable to articulate what the practical consequence of its action would be.”

Mingo Logan argued that it should be able to rely on a valid permit issued by the Corps and that EPA’s interpretation of its authority runs counter to the unambiguous Congressional directive embodied in the CWA. The district court agreed, writing that “[i]n short, the Clean Water Act deems any discharges made without a permit to be unlawful, but it also expressly provides that discharges made pursuant to a permit are lawful.”[31] On these grounds, therefore, the court granted Mingo Logan’s motion for summary judgment.

D.C. Circuit Decision

The D.C. Circuit reversed the district court concluding that EPA has post-permit withdrawal authority and remanded the case for further proceedings to address Mingo Logan’s APA challenge to EPA’s Final Determination to remove the streams as disposal sites.[32] Because the district court did not address that issue, it has yet to weigh the merits of EPA’s decision to withdraw approval for the disposal sites.

Like the district court, the D.C. Circuit applied the two-part Chevron test to its analysis. However, the Circuit Court construed CWA Section 404(c) under Chevron step 1 because the court concluded – in direct contradiction of the district court’s decision – that the language of the statute unambiguously expresses Congress’s intent. The D.C. Circuit found that in CWA Section 404(c), Congress granted EPA a broad environmental “backstop” authority over the selection of discharge sites.[33] It further found that “Section 404 imposes no temporal limit on the Administrator’s authority to withdraw the Corps’ specification but instead expressly empowers him to prohibit, restrict or withdraw the specification ‘whenever’ he makes a determination that the statutory ‘unacceptable adverse effect” will result.”[34]

The appellate court was persuaded by Congress’ use of the word “withdraw,” indicating that such withdrawal could only happen after the Corps had issued a permit. The Corps supported EPA on appeal. Mingo Logan asserted that EPA’s interpretation of Section 404(c) conflicted with Section 404 as a whole in that it shifted final permitting authority to EPA rather than the Corps. Mingo Logan further argued that EPA’s interpretation also conflicted with the goal of giving such permits certainty and finality. Finally, Mingo Logan argued that legislative history confirms Congress limited EPA’s veto authority to pre-permit. Returning consistently to the plain language of the statute, the D.C. Circuit found “none of Mingo Logan’s arguments persuasive.”[35]

The D.C. Circuit’s Mingo Logan decision sets precedent on a previously open question about the relationship between the EPA and the Corps in administering CWA Section 404 permits. Under the decision, EPA’s role in specifying whether a disposal site is valid does not end when the Corps issues the permit. EPA retains authority to veto the permit and the permitted party cannot wholly rely on the permit as issued. The decision creates new uncertainty to a broad range of businesses that operate under CWA Section 404 permits, including those in the construction and mining industries.

Mingo Logan’s parent company, Arch Coal Inc., recently hired former U.S. Solicitor General Paul Clement to work on the case. On June 7, 2013, Mingo Logan filed pleadings asking the full bench of the D.C. Circuit to rehear the case en banc. The company wrote that “It makes no sense to allow EPA to effectively nullify a permit issued by the Corps based on nothing more than the fact that EPA – but not the Corps – has changed its mind.” Mingo Logan’s actions indicate that it is willing to pursue the case to the U.S. Supreme Court if it is not successful in rehearing at the D.C. Circuit.

For more information on Marten Law’s water quality and Clean Water Act practice please contact Jeff Kray.

[1] 33 U.S.C. § 1251 et seq.

[2] Opinion at 9, citing 33 U.S.C. § 1344(c).

[3] 33 U.S.C. § 1311(a).

[4] 33 U.S.C. § 1344.

[5] 33 U.S.C. § 1344(c).

[6] Id.

[7] James City County v. EPA, 12 F.3d 1330 (4th Cir. 1993); Bersani v. EPA, 850 F.2d 36 (2nd Cir. 1988).

[8] District Court Opinion at p. 3.

[9] Id.

[10] Id.

[11] Id.

[12] 30 U.S.C. § 1201, et seq.

[13] District Court Opinion at p. 3.

[14] Id.

[15] District Court Opinion at p. 4.

[16] Id.

[17] Id.

[18] District Court Opinion at p. 5.

[19] Id.

[20] District Court Opinion at p. 6.

[21] Id.

[22] Appellate Opinion at p. 4.

[23] Id.

[24] Opinion at p. 7.

[25] Id.

[26] Id.

[27] Opinion at pp. 7-8.

[28] Id.

[29] Opinion at pp. 11-12, citing 33 U.S.C. § 1344(c).

[30] 467 U.S. 837 (1984).

[31] Opinion at p. 16, citing 33 U.S.C. § 1344(p); Natural Res. Def. Council v. EPA, 822 F.2d 104, 111 (D.C. Cir. 1987).

[32] Appellate Opinion at p. 3.

[33] Id. at p. 8.

[34] Id. at p. 9 (emphasis in opinion).

[35] Id. at p. 11.

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