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Permit Denials for Pacific Northwest Coal Terminals Raise Question of Precedent for Major Waterway Projects

December 4, 2017

In late September 2017, the Washington Department of Ecology (Ecology) denied a request by Millennium Bulk Terminals-Longview (“Millennium”) for Section 401 Water Quality Certification for its proposed coal export terminal near Longview, Washington. Although Ecology identified numerous grounds for the denial, a key theme was Ecology’s contention that Millennium failed to provide required – and repeatedly requested – information on several water quality issues, inhibiting Ecology’s ability to assess whether the proposed project would comply with water quality standards. The Millennium denial may also have important ramifications for other future infrastructure projects requiring a 401 certification, and more broadly for the entire 401 certification process in Washington. Millennium has appealed Ecology’s denial and petitioned for judicial review; the outcome of these challenges will likely prove instructive for prospective 401 certification applicants in Washington in the future.

Millennium’s proposal joins two other proposed Pacific Northwest coal terminals that have received denials of necessary approvals. All three terminals were proposed to export coal from the Powder River Basin – hard hit by the shift away from coal in the electric power sector. Together, these three denials raise important questions for other projects – private and public – affecting waterways. Applicants will need to evaluate whether the decisions are precedential for all projects or represent a particular opposition to projects involving coal. In one case, the parties have agreed that the project denial will have no precedential effect, possibly indicating that the problem with the project was the commodity – coal – rather than the impacts to waterways.

The Proposed Millennium Bulk Terminals-Longview Project

The proposed Millennium Bulk Terminals-Longview project involves the construction and operation of a coal export terminal in and along the Columbia River that would transfer coal from trains to marine vessels. According to Ecology’s written decision on the permit denial, the terminal would occupy approximately 190 acres and would include two docks, ship loading systems, stockpiles and equipment, rail car unloading facilities, a rail track, rail storage tracks with parking for up to eight trains, associated facilities, conveyors, and necessary dredging.[1] The project, to be built in two stages, is estimated to impact approximately 32 acres of wetlands and six acres of ditches.[2]

Stage 1 of the proposed terminal would consist of the construction of facilities to unload coal from trains, stockpile the coal, and re-load it onto marine vessels.[3] Following the completion of Stage 1, the terminal would possess a throughput capacity of a nominal 25 million metric tons per year (MMTPY) of coal.[4] Stage 2 would involve the construction of an additional ship loader and two stockpile pads, conveyors, and other equipment necessary to increase throughput to 44 MMTPY.[5]

Ecology’s Denial of Section 401 Water Quality Certification

Ecology describes the water quality certification process as follows:

Pursuant to Section 401 of the Clean Water Act, in order for Ecology to issue a water quality certification it must have reasonable assurance[6] that the Project as proposed will meet applicable water quality standards and other appropriate requirements of state law. Consequently, an applicant must submit adequate information regarding a project for agency review before Ecology can determine compliance with the state water quality standards and other applicable regulations.[7]

Millennium first submitted a request for certification in 2012, but withdrew the request in 2013 pending the completion of the Environmental Impact Statement (EIS) process. In July 2016, Millennium re-applied for certification. Ecology denied Millennium’s application with prejudice in a written decision on September 26, 2017.

State Environmental Policy Act

Ecology opened with an analysis of the project under the State Environmental Policy Act (SEPA). Ecology noted that Ecology and Cowlitz County issued a Final EIS in April 2017 which “identified nine areas of unavoidable and significant adverse impacts that would result from the construction and operations of the Project.”[8] These are: (1) air quality, (2) vehicle transportation, (3) noise and vibration, (4) social and community resources, (5) rail transportation, (6) rail safety, (7) vessel transportation, (8) cultural resources, and (9) tribal resources.[9] Ecology concluded that these adverse impacts “cannot be reasonably mitigated” and “conflict with Ecology’s SEPA policies.”[10]

Water Quality Concerns

Proceeding to its analysis of the 401 water quality certification, Ecology identified four chief areas of water quality concern: (1) wetlands impacts and mitigation, (2) stormwater and wastewater discharges, (3) water rights, and (4) toxics cleanup.

1. Wetlands Impacts and Mitigation

First, Ecology found that the proposed impacts to wetlands and the associated planned mitigation failed to comply with state water quality standards. Millennium submitted a “conceptual mitigation plan” in June 2017, which it supplemented in September 2017 in response to Ecology’s questions. However, Ecology concluded Millennium still had failed to supply an adequate credit/debit analysis, a boundary verification, or adequate hydrologic information concerning the proposed mitigation site.

2. Stormwater and Wastewater Discharges

Second, Ecology found that Millennium had failed to provide sufficient information necessary to fully analyze the wastewater and stormwater discharges associated with the proposed project.[11] According to Ecology, both Millennium’s initial and supplemental submissions lacked sufficient information on wastewater characterization, including the likely sources, volumes, and pollutant concentrations of the wastewater that would be discharged by the project.[12] Further, Ecology found Millennium’s All Known, Available, and Reasonable Methods of Prevention, Control and Treatment (AKART) analyses—which are required by several Washington statutes—to be deficient on several fronts.[13] Among the purported problems were that Millennium’s AKART analysis addressed only existing Millennium operations, not the wastewater that would be generated by the construction and operation of the project.[14] Further, best management practices for various aspects of stormwater management were not included in Millennium’s submissions.[15] Finally, several required engineering reports were omitted.[16]

Among several other deficiencies identified by Ecology was the absence of information necessary to evaluate the project’s compliance with the antidegradation policy included in water quality standards.[17] Washington antidegradation regulations require a “Tier II analysis…for new or expanded actions when the resulting action has the potential to cause a measurable change in the physical, chemical, or biological quality of a water body.”[18] A Tier II analysis is designed to ensure that waters that currently exceed water quality criteria are not degraded unless it is necessary and in the overriding public interest. According to Ecology, despite several notifications about this requirement, “Millennium’s submittals did not include a detailed Tier II analysis for process wastewater and stormwater to determine whether the Project has the potential to cause measurable degradation at the edge of the chronic mixing zone.”[19]

3. Water Rights

Third, Ecology’s permit denial identified concerns surrounding Millennium’s water rights. While Millennium’s proposal included “ongoing reuse of stormwater for industrial dust control,” Millennium did not submit to Ecology information concerning the extent and validity of the water rights associated with the property on which the project was proposed to be located.[20] Nor did Millennium submit any new water rights applications to Ecology.[21] Accordingly, Ecology did “not have reasonable assurance that Millennium will be able to legally carry out its proposal.”[22]

4. Toxics Cleanup

Fourth, Ecology found that Millennium’s application did not provide sufficient information to evaluate the potential discharge of contaminated water from the proposed project site, which is the former home of the Reynolds Metals aluminum smelter and is a Washington Model Toxics Control Act cleanup site due to the presence of soil and groundwater contamination associated with the former smelting operations.[23]

With Ecology’s denial of Section 401 certification, the Millennium Bulk Terminals proposal joins two other Pacific Northwest coal export proposals that have been denied key approvals. As discussed at greater length in a prior article, the permit denials for the Gateway Pacific and Morrow Pacific terminals were based on impacts to tribal fishing.[24]

Gateway Pacific Terminal at Cherry Point

The largest of the proposed terminals, the Gateway Pacific Terminal at Cherry Point on Puget Sound in Washington, would have exported up to 54 million dry metric tons of bulk materials per year, mostly coal.[25] The terminal would have included a substantial new dock:

The new wharf is proposed to be 3,000 feet long and 107 feet wide built on 730 48-inch steel piling, with access provided by a 1,285-foot long by 50-foot wide trestle built on 64 piles, 24 to 30 inches in diameter.[26]

In a decision issued on May 9, 2016, the U.S. Army Corps of Engineers (Corps) denied permit applications under Section 404 of the Clean Water Act and Section 10 of the Rivers and Harbors Act for the Gateway Pacific Project, determining that the proposal would have more than a de minimis impact on treaty fishing rights of the Lummi Nation under the Treaty of Point Elliott,[27] and, therefore, could not be approved without Congressional authorization.[28]

The Corps noted that it has a “fiduciary duty to take treaty rights into consideration in making its permit decision.”[29] Citing a prior unpublished U.S. District Court decision involving plans by the Corps to dredge in Bellingham Bay near Cherry Point, the Corps identified the relevant standard as whether there is a “greater than de minimis” impact to either the usual and accustomed treaty right to access fishing areas or the right to take fish: “If the impact to either is greater than de minimis, in other words the impact is legally significant, the Corps would be required to deny the permit because only Congress can abrogate a treaty right.”[30]

On February 7, 2017, the applicant – Pacific International Holdings, LLC – withdrew its local applications, stating:

We are currently considering various alternatives including challenges to the USACE decision and modifications to the proposed project to further reduce environmental impacts. In the meantime, we do not wish to continue processing an environmental impact statement for the [local] applications listed above, since elements of the project may change. [31]

No new application has been filed.

Ambre Energy North America’s Morrow Pacific Project

The other Pacific Northwest proposal was much smaller in scale, but suffered a similar fate. Ambre Energy North America (Ambre) proposed the Morrow Pacific project solely for export of coal. Ambre estimated the project initially would handle 3.5 million metric tons of coal per year, potentially rising to a full permitted capacity of 8 million metric tons per year.

The project would have received coal by rail at a new barge terminal – the Coyote Island Terminal – at the Port of Morrow, on the Columbia River near Boardman, Oregon. In order to avoid transporting coal by rail through the Columbia River Gorge and the heavily populated Portland-Vancouver metropolitan area, Ambre proposed to offload and store the coal in an enclosed facility, and transfer it via enclosed conveyors to covered barges designed specifically for transporting coal. The barges would travel over 200 miles downriver to the Port Westward Industrial Park, owned by the Port of St. Helens, where coal would be transloaded to ocean-going vessels at an existing dock – again using an enclosed system.

In February 2012, Ambre’s subsidiary, Coyote Island Terminal, LLC, filed a Joint Permit Application (JPA) with the Corps and Oregon Department of State Lands (ODSL) for the new terminal at the Port of Morrow. The JPA is a form by which applicants seek approval from the Corps under Section 404 of the Clean Water Act and authorization from ODSL under Oregon’s statute and rules governing “removal/fill” in waters of the state.[32] After more than two years of providing supplemental information, eight extensions of the 120-day deadline for a decision by ODSL, three public comment periods, and approximately 20,000 comments,[33] the applicant submitted a revised and consolidated application on August 1, 2014 in anticipation of a decision by ODSL no later than August 18, 2014.[34]

ODSL’s Denial of the Removal-Fill Permit

On August 18, 2014, ODSL issued its “Findings & Order” denying the removal-fill permit for the Coyote Island Terminal. ODSL concluded that the applicant had failed to address the availability of an alternative with less impact to the waters of the state: transporting the coal by rail downriver to Port Westward.[35] ODSL also determined that there was persuasive evidence of a “small but important long-standing fishery at the project site.” Although the applicant had proffered a range of possible mitigation measures, ODSL noted that “the applicant did not commit to any specific action or set of actions.”[36]

ODSL’s decision did not expressly rest on treaty rights. Rather, ODSL relied on its own standards for issuance of removal-fill permits. In light of what appeared to be an available alternative – transporting coal by train to Port Westward – and the impact to tribal fishing, ODSL could not make the required finding that the removal-fill “is consistent with the protection, conservation and best use of the water resources of this state as specified in ORS 196.600 to 196.990.”[37]

As an alternative basis for denial, ODSL also concluded the proposed project “would unreasonably interfere with the paramount policy of this state to preserve the use of its waters for navigation, fishing and public recreation”[38] due to the impact on the fishery at the project site.

The Morrow Pacific Contested Case

The Morrow Pacific project then became enmeshed in a protracted contested case proceeding – essentially an administrative trial – brought by the applicant and the Port of Morrow to challenge the denial of the removal-fill permit before a State of Oregon administrative law judge. The proceeding also involved “limited parties”: tribes (Confederated Tribes of the Umatilla Indian Reservation, Confederated Tribes of the Warm Springs, Nez Perce Tribe, and Yakama Nation), environmental groups (Columbia Riverkeeper, Sierra Club, and Friends of the Columbia Gorge) and two states (Montana and Wyoming).

The contested case proceeding ended in November 2016 when the parties resolved the case through a Consent Agreement[39] and Final Order.[40] The Consent Agreement recites that the applicant “no longer intends to build the Morrow Pacific Project as described in the JPA.” Under the Consent Agreement, the applicant and the Port of Morrow agreed to withdraw the JPA. The Final Order provides that ODSL’s Findings & Order of August 18, 2014 – as well as rulings in the contested case – cannot be relied on precedent and cannot be cited or used as grounds for denial of future applications at the Port of Morrow. In this case, at least, future applicants can proceed with the prospect that projects not burdened by the politics of coal may receive a different reception.

Latest Developments

These three significant denials notwithstanding, it appears the fate of coal export terminals in the Pacific Northwest may not yet be sealed. Millennium has filed a Notice of Appeal communicating its intent to challenge Ecology’s 401 certification denial.[41]

Millennium also filed suit against Ecology in Cowlitz County Superior Court, alleging that “Ecology created from whole cloth a uniquely onerous and unfair environmental review process for this Project that it justified based on its animus towards the commodity that would be handled” and that Ecology should have given Millennium the opportunity to cure the purported deficiencies in its submissions before denying the certification with prejudice.[42] Millennium’s primary argument is that Ecology violated Section 401 of the Clean Water Act because it denied Millennium’s 401 certification for reasons unrelated to water quality, such as “the capacity of the interstate rail system, the impact of trains operating anywhere in that system, and impacts of the Project on the overall capacity of the Federal Columbia River Navigation Channel to accommodate additional vessels calling on our state ports.”[43] Millennium also argues that Ecology also ignored its own EIS, which Millennium contends “expressly and unambiguously found that the [export terminal] will not result in significant adverse effects on water quality, aquatic life and designated uses, and that any effects it would generate in these areas can be fully mitigated.”[44]

Millennium’s appeal and petition for judicial review may have important implications for the 401 certification process in Washington moving forward, and the regulated community should take a keen interest in the outcome of these actions.

For more information please contact Richard Allan or Alexa Shasteen in Marten Law’s Portland office.

[1] Section 401 Water Quality Certification Denial (Order No. 15417) for Corps Public Notice No. 2010-1225 Millennium Bulk Terminals-Longview, LLC Coal Export Terminal—Columbia River at River Mile 62, near Longview, Cowlitz County, Washington, Sept. 26, 2017, at 1 [hereinafter “Permit Denial”].

[2] Id. at 2.

[3] Id. at 1.

[4] Id. at 2.

[5] Id. at 2.

[6] See 33 U.S.C. § 1341(a).

[7] Permit Denial, at 13.

[8] Id. at 3.

[9] Id. at 4-12.

[10] Id. at 3; see also WAC 173-802-110.

[11] Id. at 14.

[12] Id. at 15.

[13] Id.; see also RCW 90.48; RCW 90.52; RCW 90.54; WAC 173-220.

[14] Permit Denial, at 15.

[15] Id.

[16] Id.; see also WAC 173-240.

[17] Permit Denial, at 16-17.

[18] Id.; see also WAC 173-201A-320.

[19] Permit Denial, at 17.

[20] Id.; see also RCW 90.03 (requiring a water right permit for the collection and reuse of stormwater for a beneficial use such as industrial dust control).

[21] Permit Denial, at 17.

[22] Id.

[23] Id. at 18 (emphasis in original).

[24] “Two Pacific Northwest Coal Terminal Proposals Founder on Shoals of Tribal Fishing Rights,” June 9, 2016.

[25] http://www.ecy.wa.gov/geographic/gatewaypacific/

[26] U.S. Army Corps of Engineers, Memorandum for Record, Application NEW-2008-260 (May 9, 2016)(hereafter “Corps Memorandum”) at 5.

[27] Treaty of Point Elliott, January 22, 1855, ratified March 8, 1859,and proclaimed April 11, 1859, 12 Stat. 927. See http://www.goia.wa.gov/treaties/treaties/pointelliot.htm

[28] U.S. Army Corps of Engineers, Memorandum for Record, Application NEW-2008-260 (May 9, 2014) (hereafter “Corps Memorandum”).

[29] Id. at 20, citing Northwest Sea Farms, Inc. v. United States, 931 F. Supp. 1515 (W.D. Wa. 1996).

[30] Id., citing Lummi Indian Nation v. Cunningham, No. C92-1023C (W.D. Wa. Sept. 1, 1992).

[31] Letter from Skip Sahlin, Vice President, Project Development, Feb. 7, 2017.

[32] ORS 196.800 through 196.990; OAR Ch. 141, Div. 85.

[33] Oregon Department of State Lands, Fact Sheet, Coyote Island Terminal Project (Port of Morrow) Removal-Fill Permit Application No. APP0049123 (rev. Nov. 23, 2015).

[34] Removal-Fill Application No. 49123-RF (hereafter “Coyote Island Application”).

[35] Id.

[36] Id.

[37] OAR 141-085-0565(3)(b).

[38] See OAR 141-085-0565(3)(c).

[39] Consent Agreement, Office of Administrative Hearings Case Nos. 1403883, 1403884 (Nov. 1, 2016).

[40] Final Order, Office of Administrative Hearings Case Nos. 1403883, 1403884 (Nov. 10, 2016).

[41] Notice of Appeal, http://www.millenniumbulk.com/wp-content/uploads/2017/10/PCHB-Notice-of-Appeal-with-Exhibits.pdf

[42] http://www.millenniumbulk.com/wp-content/uploads/2017/10/Complaint-and-Petition-for-Judicial-Review-and-Declaratory-and-Injunctive-Relief-with-Exhibits.pdf

[43] Id. at 3.

[44] Id. at 12.

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