The construction industry stands to benefit from a recent district court decision that blocked the U.S. Environmental Protection Agency (EPA) from further regulating Clean Water Act (CWA) Section 404 “dredge and fill” discharges (concerning surface mining activities) through guidance, calling instead for notice-and-comment rulemaking under the Administrative Procedures Act (APA). The ruling builds on an earlier U.S. Supreme Court decision that now affords recipients of CWA compliance orders the right to challenge their alleged violations under the APA before EPA brings an enforcement action. These decisions warn EPA that it may not practically treat guidance documents as regulation and serve as a useful check on EPA overreach of CWA authority.
The mining industry recently won a notable lawsuit brought against EPA concerning the binding application of “interpretive guidance” on the issuance of CWA Section 404 discharge permits for surface coal mining operations. In the case of National Mining Association v. Jackson, the U.S. District Court for the District of Columbia struck down EPA’s guidance document, “Improving EPA Review of Appalachian Surface Coal Mining Operations Under the Clean Water Act, National Environmental Policy Act, and the Environmental Justice Executive Order” (guidance), as unlawful under the APA, as well as the CWA and other related statutes. See ___ F. Supp. 2d ___, 2012 WL 3090245 (July 31, 2012).
The National Mining Association (NMA), along with the states of West Virginia and Kentucky, among others, objected to EPA’s binding application of the guidance—namely the effect it was having on the Section 404 permitting process—as well as the fact that the guidance document infringed upon states’ roles in CWA permitting and effectively set de facto water quality standards.
The U.S. Army Corps of Engineers (Corps) regulates discharges of dredged or fill material – via mining and construction activities, for example – into “waters of the United States” under the CWA Section 404 permitting program. The Corps has the sole authority to issue Section 404 permits; however, it must do so according to the CWA Section 404(b)(1) Guidelines, developed in conjunction with EPA. The Corps and EPA published regulations to implement the “Guidelines” that specifically provide that no “modifications to the… guidelines shall be made without rulemaking” by EPA under the APA. See 40 CFR Part 230.
EPA Cannot Regulate Through Guidance
Throughout the NMA litigation, EPA continually stated the guidance document was not binding, did not constitute “final” agency action and was therefore unreviewable under the APA. The APA generally requires agencies to provide public notice and seek comment prior to enacting new regulations.
APA Gives Regulated Community Right to Challenge CWA Compliance Orders
The APA also lays out the process for judicial review of rules in federal court. The U.S. Supreme Court recently ruled that the APA entitles persons to seek immediate judicial review of CWA administrative compliance orders issued by EPA. This decision is important for groups that seek to challenge EPA’s seizure/control of their property – predicated on the government’s presumption that the land is a “water of the United States”– before being caught up in an enforcement action. See Sackett v. United States Environmental Protection Agency, 566 U.S. ___ (2012).
EPA enforcement chief Cynthia Giles recently sent out a memo instructing her staff to add language to CWA Section 309(a) administrative compliance orders specifying that recipients can challenge the allegations in court before the agency seeks to enforce them or impose penalties.
As previously reported by AGC, Mike and Chantell Sackett attempted to build a home on their property in Idaho. After they began clearing the lot, they received a compliance order from EPA to stop construction, remove the gravel and return the land to EPA's liking. EPA claimed federal control over the Sackett’s property under CWA Section 404 (as a “water of the United States”) and accused the Sacketts of illegally placing fill material into jurisdictional wetlands on their property without a Section 404 discharge permit. After EPA denied them a hearing on the matter, the Sacketts filed a lawsuit demanding an opportunity to contest the jurisdictional basis of the compliance order. The case was dismissed by the lower courts for being filed prematurely, since EPA had yet to initiate a court action against the couple.
The Supreme Court held that the administrative compliance order at issue in the case was a “final agency action” (it assessed daily civil penalties for failure to comply and consummated the agency’s decision-making process) under the APA and therefore eligible for judicial review. The High Court’s holding underscores the need for EPA staff to ensure that compliance orders are backed by “the legal and factual foundation” for the alleged violation, the Giles memo states.
The district court found, however, that EPA took a “comply-or-else attitude” with respect to the guidance, and that “the record before the Court...confirms the plaintiffs’ allegations that the Final Guidance is being implemented as binding and having a practical effect on the [CWA Section 404] permitting process for new Appalachian surface coal mining projects.” As such, the district court held that the guidance was reviewable under the APA. See also Appalachian Power Company v. EPA (249 F.3d 1032 (D.C. Cir. 2001)).
The district court’s decision criticizes the use of guidance documents that have the practical effect of rules but have not been subjected to APA requirements. AGC currently is working to avoid this type of APA violation regarding a draft CWA guidance that describes the scope of federal jurisdiction over work in “waters of the United States.” The draft guidance, if finalized, would significantly increase the circumstances under which construction projects require expensive and timely Section 404 discharge permits. AGC has asked EPA and the Corps to withdraw the guidance and instead engage in a formal rulemaking to better define key jurisdictional terms under the CWA (i.e., “waters of the United States”).
EPA Overstepped Authority, Infringed on States’ Roles
The decision also reaffirms the important role of states in permitting and sets clear limits on EPA’s role under the CWA and related statutes. NMA argued that several sections of the guidance document prohibited actions relating to mine design and other upland activities that are outside the scope of EPA’s authority and that are effectively dealt with under the Surface Mining Control and Reclamation Act (SMCRA). The court agreed, expressly stating that “once the EPA has given its assent to approve a state SMCRA permitting program, SMCRA affords it no further authority in the oversight or administration of the SMCRA regime. [NMA] is therefore correct that ‘nothing in SMCRA expressly-or even implicitly- contemplates that EPA will work with SMCRA permitting authorities to incorporate [Best Management Practices] or otherwise influence permit terms.’”
EPA also tried to justify its incursion into the SMCRA permitting scheme by relying on its authority under the CWA. However, the district court found that EPA’s authority under the CWA did not reach to certain activities that were being controlled by the guidance.
De Facto Water Quality Standards
NMA and the states also argued that the guidance impermissibly set a de facto region-wide water quality criterion for conductivity, thereby infringing upon the role of the states under CWA Section 303. The district court agreed, holding that EPA’s regional offices were treating the conductivity guidelines contained in the guidance as binding and that the guidance therefore established a water quality standard that should have been properly promulgated by the states under CWA Section 303. Similarly, the district court held that by mandating that states conduct a reasonable potential analysis (RPA) to determine whether a discharge might cause or contribute to an excursion from state water quality standards before issuing a permit, EPA unlawfully infringed upon the states’ role under CWA Section 402.
Next Steps
The order of the district court expressly sets aside the guidance as “unlawful agency action.” Therefore, EPA can no longer implement the guidance document. EPA has until the end of September (60 days) to appeal the decision.
Given that the reach of the federal government under the Clean Water Act “is notoriously unclear” – and the fact that “any piece of land that is wet at least part of the year is in danger of being classified by federal employees as wetlands covered by the Act” and subject to federal control and permitting – it’s good that the Administrative Procedures Act provides the regulated community with some undeniable rights. See Justice Samuel Alito concurring opinion in Sackett v. EPA. The basic purposes of the APA are: (1) to require agencies to keep the public informed of their organization, procedures and rules; (2) to provide for public participation in the rulemaking process; (3) to establish uniform standards for the conduct of formal rulemaking and adjudication; (4) to define the scope of judicial review.
For more information, contact AGC’s Senior Environmental Advisor Leah Pilconis at pilconisl@agc.org.