D.C. Circuit overturns lower court decisions on EPA permitting procedures

Two district court orders declaring the federal Environmental Protection Agency acted illegally when it implemented certain permitting procedures for coal mining operations have been vacated by a federal court of appeals. 

In 2009, EPA and the United States Corps of Engineers adopted, without a notice and comment period, an “Enhanced Coordination Process” (ECP) whereby EPA played a much larger role than it ever had before in the process followed by the Corps to issue “dredge and fill” permits under § 404 of the Clean Water Act for Appalachian coal mining operations. 

In 2011, EPA published, again without a notice and comment period, a detailed “guidance” document for permitting agencies to “consider” when issuing or renewing NPDES (water discharge) permits for coal mining operations in Appalachia. Among other things, this guidance established a “benchmark” conductivity level for Appalachian waters above which EPA believes aquatic life suffers harm. (Conductivity is not a pollutant, but a measurement of how well water conducts electricity. It is considered to be a rough surrogate for the concentration of total dissolved solids present in water.) Neither EPA nor any of the Appalachian states has undertaken the rule-making that would be required to adopt a numeric water quality standard for conductivity.

The National Mining Association, along with the states of Kentucky and West Virginia, commenced lawsuits challenging the ECP and the conductivity guidance. In two detailed opinions, federal district court judge Reggie B. Walton declared both EPA actions illegal. On July 11, 2014, a three-judge panel of the District of Columbia Court of Appeals reversed both of Judge Walton’s decisions.

Judge Walton concluded that the ECP violated the Clean Water Act because the ECP creates a far greater role for the EPA in the § 404 permitting process than provided by Congress, which vested authority for issuing such permits with the Corps. Judge Walton further found that the ECP constituted illegal rulemaking because EPA and the Corps did not follow the notice and comment procedures established under the Administrative Procedures Act before adopting the ECP. The appeals court determined that the increased consultation between the two agencies established by the ECP is not prohibited by the Clean Water Act, but is “commonplace and often desirable.” The appeals court also found that the ECP constituted a “procedural rule,” which did not require a notice and comment permit before adoption.

Based in part on statements by EPA lawyers that state permitting agencies “are free to ignore” the conductivity guidance, the appeals court also ruled that the conductivity guidance did not constitute a “final agency action” that could be challenged in court. Rather, according to the appeals court, the guidance represented a “general statement of policy” that imposes “no legal consequences” if not followed. The opinion does not address the evidence presented to Judge Walton that the guidance was “being implemented as binding and having a practical effect on the permitting process for new Appalachian surface coal mining projects.” The appeals court noted, however, that EPA may not rely on the guidance in denying a permit application or taking enforcement action.

EPA has always played a role in the § 404 permitting process, but this recent decision gives the green light to unfettered EPA involvement in a program that Congress expressly delegated to the Corps to manage. Further emboldened by another recent appeals court decision recognizing EPA’s unfettered authority to effectively revoke a § 404 permit years after it was issued by the Corps, EPA will now have significant influence on the terms of such permits – and whether they are issued at all.

Of course, the appeals court’s conclusion that states are “free to ignore” the conductivity guidance for NPDES permits ignores the practical reality of the permitting process. As Judge Walton observed, EPA clearly communicated to the states and the mining industry that failure to follow the guidance will ultimately result in denial of a permit. This applies not only to permits for new projects, but also renewal of permits for existing mines that expire every five years. If a permit is not renewed, a mine can no longer operate. EPA has the ability to delay the permitting process for years, and ultimately assume the authority to make a decision on a permit application if the states do not adhere to EPA’s “suggestions” growing out of the guidance. (As the appeals court conceded, “[T]o be sure, the Final Guidance may signal likely future permit denials by EPA….”)

After spending years and significant resources in the application process, the ability to administratively appeal EPA’s ultimate denial of a permit, which will take even more years and resources to resolve, is cold comfort to those in the industry who are doing their best just to stay in business. Many will have little choice but to capitulate to EPA’s demands, or more likely decide to invest their talents and money elsewhere when those demands cannot be economically satisfied.

The Appalachian coal industry is already suffocating under the weight of a seemingly endless regulatory onslaught. This decision further increases EPA’s ability to restrict future development of coal resources and stamp out existing operations. Equally, if not more, concerning is the ever increasing power of an unelected, and therefore unaccountable, EPA to effectively control the country’s energy policy, and with it our economy as a whole. Particularly in the area of essentially mandatory conductivity limits, the approval of this type of regulatory behavior should be of great concern to anyone involved in an industrial undertaking that falls within EPA’s increasingly large grasp.