The United States Court of Appeals for the District of Columbia held that the U.S. Environmental Protection Agency (EPA) has the authority under the Clean Water Act (CWA) to change, if not revoke, Section 404 “dredge-and-fill” discharge permits that have already been approved and issued by the U.S. Army Corps of Engineers (Corps). Mingo Logan Coal Co. v. USEPA, No. 12-5150 (D.C. Cir. April 23, 2013). The federal court ruled that CWA Section 404(c) grants EPA this power “whenever [it] determines” that the discharge will have an “unacceptable adverse effect” on identified environmental resources. The decision further complicates the already complex process of obtaining authorizations necessary for public works and private development projects. AGC closely watched this case of first impression and filed a friend-of-the-court brief with the appeals court last September, arguing that EPA had exceeded its CWA authority when it revoked much of a Section 404 permit – duly issued by the Corps – for the Spruce No. 1 mountaintop coal mine in West Virginia. The permit allowed Mingo Logan to discharge fill material (rock and dirt) from a surface coal mining project into nearby streams. AGC’s brief laid out the staggering economic, policy and legal implications of putting every Section 404 permit at risk of revocation. Despite these best efforts, the D.C. Circuit reversed and remanded a lower court decision that had scolded EPA for revoking a Section 404 permit that already had been approved by the Corps. Under the D.C. Circuit’s decision, even after a regulated entity lawfully obtains a Section 404 permit from the Corps, EPA can exercise its authority – independent from the Corps – to withdraw some or all of the approved disposal sites from the permit at any time during the life of that permit. As a result of this precedent, the regulated community may face a continued risk to investment in any project requiring a Section 404 discharge permit, even after a permit has been issued, and even where EPA itself was involved in and approved the issuance of the permit in the first place. The Mingo Logan case is important as it is the first time a federal court has determined that EPA may exercise CWA Section 404(c) “veto” authority after a valid Corps permit has been issued in final form. The D.C. Circuit did not rule on the question of whether EPA’s withdrawal was proper (based on the specific facts of this case), but remanded that analysis back to the lower court. That decision may provide more clarity on the precise application of EPA’s Section 404(c) authority, which is limited to certain types of “unacceptable adverse effects,” and the record may or may not support EPA’s findings in the Mingo Logan case (see below for more details). AGC has learned that Mingo Logan is planning to request an “en banc” rehearing of the D.C. Circuit’s decision and is considering a petition for certiorari to the U.S. Supreme Court on the issue of the EPA’s Section 404 authority.
D.C. Circuit’s Decision Section 404(c) of the Clean Water Act provides that:
The Administrator is authorized to prohibit the specification (including the withdrawal of specification) of any defined area as a disposal site, and he is authorized to deny or restrict the use of any defined area for specification (including the withdrawal of specification) as a disposal site, whenever he determines, after notice and opportunity for public hearings, that the discharge of such materials into such area will have an unacceptable adverse effect….
The D.C. Circuit court found that “whenever” imposes no temporal limitation on EPA’s decision-making and concluded Section 404(c) “unambiguously expresses the intent of Congress.” The appellate court’s holding was reinforced by the CWA’s grant of authority to EPA to withdraw (as well as prohibit) specified disposal sites. Since the specifications are generally included in the Corps permit, the court reasoned that withdrawal authority only applies, by its nature, after the permit had been issued. The D.C. Circuit did not decide whether EPA’s withdrawal of certain specified disposal sites from the permit was arbitrary and capricious or otherwise not in accordance with law, and remanded the matter to the district court for further review of that issue.
Implications of the Decision
The D.C. Circuit’s decision creates uncertainties for Section 404 permittees, their lenders, and others in business with them. At a minimum, permit holders must now be aware of the potential for subsequent withdrawals or prohibitions by EPA, which can effectively “amend” their permits. Particularly troubling is the question of whether EPA may now require permittees who have permanently filled in wetlands to face penalties and the possible removal of the fill material. While the specific facts of this case relate to ongoing fill activities, the broadly written language of the decision could have broad implications for many types of public works and private development projects. AGC is also concerned that project opponents may see the D.C. Circuit’s opinion as a new avenue to stop controversial projects by arguing that EPA has acted in an arbitrary and capricious manner whenever it fails to exercise the 404(c) veto. Billions of dollars in economic activity could be adversely affected if EPA’s unprecedented grab for veto authority goes unchecked. The Spruce mine (at issue in the Mingo Logan case) marks the 13th time since 1972 that EPA has used the veto authority, but is also the very first time the agency used that authority to revoke portions or all of a previously approved and finalized 404 permit. Courts have consistently given substantial deference to EPA when its CWA Section 404(c) vetoes have been challenged. 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.
Facts of this Case
With regard to the Mingo Logan Section 404 permit, during the Corps Section 404 permitting process, EPA had expressed concern about certain potential adverse environmental impacts from the proposed activities, but had not formally objected to or prohibited the issuance of the permit. Subsequent to issuance of the 404 permit, EPA asked the Corps to use its discretionary authority (under 33 CFR Part 325.7) to revoke or modify the permit to eliminate discharges to certain waters, asserting there was “new information and circumstances” justifying such action. After the Corps did not accede to EPA’s request, EPA proceeded with a notice and comment action to withdraw certain specified disposal sites from the permit, effectively amending the 404 permit. The permit holder challenged EPA’s action and prevailed in federal district court on its claim that EPA lacked authority to retroactively veto Corps-issued Section 404 permits. EPA appealed that decision to the U.S. Court of Appeals for the D.C. Circuit. AGC joined a coalition of industry groups in filing an amicus brief in the D.C. Circuit in support of the district court decision. The D.C. Circuit restored EPA’s authority to withdraw approval of CWA Section 404 permits.
Section 404 Permit Background
Under the CWA, the Corps has primary authority to issue Section 404 permits to allow dredge and fill material to be placed in waters of the U.S. at specified disposal sites. For example, a developer or a design-build company that wishes to build on a site that includes areas designated as jurisdictional wetlands, must first obtain a CWA Section 404 permit to fill those wetlands with dirt or other material. The penalties for violating this provision are high: up to $37,500 a day in civil penalties for unauthorized discharges. All parties associated with construction projects that impact (discharge dredge or fill into) U.S. waters could be held liable for filling in wetlands subject to federal jurisdiction without first obtaining a Section 404 permit from the Corps. However, CWA Section 404(c) of the Act gives EPA a lead role in determining environmental impacts from proposed Section 404 activities. As stated above, Section 404(c) authorizes EPA to “prohibit the specification (including the withdrawal of specification) of any defined area as a disposal site, and . . . to deny or restrict the use of any defined area for specification (including the withdrawal of specification) as a disposal site whenever [it] determines” that the discharge will have an “unacceptable adverse effect” on identified environmental resources. This power has become known as the 404(c) “veto” authority because it operates to prevent the Corps from issuing a permit to fill within certain areas prohibited by EPA.
Unacceptable Adverse Effects
EPA has adopted regulations setting forth the process for implementing Section 404(c). See 40 CFR Part 231.1 et seq. EPA’s regulations define “unacceptable adverse effect” as an “impact on an aquatic or wetland ecosystem which is likely to result in significant degradation of municipal water supplies (including surface or ground water) or significant loss of or damage to fisheries, shellfishing, or wildlife habitat or recreation areas.” 40 CFR Part 231.2(e). In the preamble to these regulations, EPA stated that “[t]he term ‘unacceptable’ in [its] view refers to the significance of the adverse effect—e.g., is it a large impact and is it one that the aquatic and wetland ecosystem cannot afford.” EPA’s regulations also state that in “evaluating the unacceptability of such impacts, consideration should be given to the relevant portions of the Section 404(b)(1) guidelines (40 CFR Part 230).” (The Guidelines are the substantive criteria the Corps uses in determining a project's environmental impacts on aquatic resources from discharges of dredged or fill material.) EPA has used this language to authorize vetoes based on the availability of practicable alternatives, an interpretation upheld by the courts (e.g., alternatives that would be less damaging to the wildlife habitat).
For more information, please contact Leah Pilconis, Senior Environmental Advisor to AGC, at email@example.com.