The Ohio Environmental Appeal Review Commission (ERAC) recently decided a case that affects Clean Water Act (CWA) section 404/401 wetlands and stream impact permits and water quality (WQ) certifications/permits in Ohio. The decision includes favorable rulings for regulated entities that need to obtain section 404/401 permits and WQ certifications (e.g., Ohio EPA cannot apply un-adopted stream designations/classifications to establish the existing use and conditions).

The case is Oxford Mining Company v. Nally, ERAC Case No. 12-256581 (September 18, 2013). ERAC ordered the WQ certification be returned to Ohio EPA for further consideration, and both parties have appealed the decision to the 10th District Court of Appeals. It will take some time for the appeallate court to consider this case, and for a modified WQ certification to be issued by Ohio EPA. The ERAC decision will affect Ohio EPA wetland and stream impact permits throughout Ohio, including permits and WQ certifications for proposed oil and gas wells and related sites when Clean Water Act (CWA) section 404/401 WQ permits/certifications are required.

Background

The case involves the proposed Otsego #1 Coal Mine site, which covers 1,120 acres in Guernsey and Muskingum Counties. Because the proposed coal mining activities would result in “dredge or fill material” being placed into certain water bodies like wetlands and small streams (e.g., to construct stream/wet area crossings), the Company applied for a CWA section 404 permit from the U.S. Army Corps of Engineers in February 2011. Before the Corps can issue a section 404 permit, a certification from Ohio EPA is required that the proposed activities will comply with state water quality requirements/standards. The Company submitted an application to Ohio EPA requesting the WQ certification, and at the same time, applied for a coal mining and reclamation permit from the Ohio Department of Natural Resources (ODNR).

The WQ certification application requested authorization to impact under 6 acres of existing wetlands, create about 12 acres of new equal quality wetlands, and to restore all impacted stream segments (except ephemeral streams) to their existing condition using natural stream reconstruction techniques. Ohio EPA determined the application was incomplete twice, and requested additional information, and in November 2011, Ohio EPA deemed the application to be “complete”. A month earlier, in September 2011, ODNR issued a coal mining and reclamation permit to the Company that authorized the use of a high wall miner machine to mine the coal seams, thus decreasing the amount of overburden needed to be removed and managed as backfill, and increasing the cost effectiveness of recovering the coal.

Ohio EPA Performs their Own Field Work

Even though the WQ certification application included detailed technical field assessments performed by the Company’s consultants, Ohio EPA performed some of their own wetland assessments and collected biological and water samples at the site. During a site visit, Ohio EPA collected one specimen of an insect that is on the state endangered species list (a type of mayfly) and one insect that is rare, but is not on an endangered list (a type of stonefly). Ohio EPA’s field work resulted in a reclassification of a few of the wetlands from the classifications in the certification application, and a few wetlands were reclassified to the highest quality (Category 3) level, which required that no lowering of water quality be allowed unless certain findings are demonstrated, including that there be no practical alternative which would have less adverse impact and the proposed activity is necessary to meet a demonstrated public need.

Ohio EPA Applied Primary Head Water Habitat (PHWH) Proposed Existing Use Classification to Waters On Site

In addition, Ohio EPA applied a proposed existing use designation/classification for primary head water habitat (PHWH) to streams/water bodies on the site. This PHWH designation/classification was not “officially” adopted through the required Ohio rulemaking procedures. Ohio EPA had in the past, proposed the adoption of the PHWH use designations as part of a package of revised water quality standards, but the rules were withdrawn and never formally adopted. Ohio EPA’s field assessment manual continued to use the PHWH Class I, II or III, as possible existing use designations for a stream. Some streams on the proposed mining site were then reclassified to the highest quality level of “PHWH Class III”. Under the Ohio Antidegradation Rule, an existing water body use is required to be maintained and protected, as well as the level of water quality to support the existing water body use. Ohio EPA concluded that the Company’s proposed Stream Mitigation Plan using natural restoration techniques to mitigate or restore impacted streams back to the existing Class III PHWH use designation was insufficient. A WQ certification (permit) was issued, but it significantly reduced the available acreage that could be used for mining in order to avoid impacts to, or the elimination of, PHWH Class III streams and Category 3 Wetlands.

 Appeal to ERAC

The Company disagreed with Ohio EPA’s conclusions and restrictions, particularly the changes to the wetlands classification and stream designations that resulted in restrictions and reduced the amount of land that could be mined. The Company argued that higher costs would be incurred because of the restrictions to remove the coal due to inefficient stripping and handling of the overburden. Negotiations were held, but they were not successful, and the WQ Certification was issued in final form with restrictions and conditions. The Company appealed the WQ Certification to ERAC in March 2012. The three member Ohio ERAC hears appeals of Ohio EPA Director final actions, like WQ Certifications and permits. After motions were argued and decided, a ten day hearing was held by ERAC in late November/early December 2012.

ERAC Decision

ERAC considered the conflicting evidence and testimony, and then issued a lengthy decision on September 18, 2013, over ten months after the hearing. The decision addresses a lot of legal and factual issues. ERAC made four key rulings in their decision:

  1. Ohio EPA cannot apply un-adopted stream designations/classifications to establish the existing use and conditions, or to determine whether stream restoration/mitigation will be successful (e.g., the proposed and unadopted PHWH water body existing use designation);
  2. Ohio EPA cannot include a condition in a WQ certification where Ohio EPA has no legal authority to regulate the subject matter (e.g., a wildlife protection plan for snakes and mussels which are within the regulatory jurisdiction of the ODNR);
  3. It is unreasonable for Ohio EPA to require the coal company to demonstrate that on-site streams will continue to support a state endangered insect species as a way to maintain and protect the proposed and unadopted PHWH existing use designation; and
  4. Ohio EPA cannot conditionally issue a WQ certification upon future “to be determined” existing use designations for on-site streams.

ERAC did hold in Ohio EPA’s favor that the Agency does not have to issue formal written findings to show that they considered all of the 13 factors under the Ohio Antidegradation Rule before issuing a WQ certification. The two factors primarily at issue were, whether the non-degradation and mitigative alternatives to the Company’s preferred alternative are cost effective or technically feasible, and whether there is a public need for the project (i.e., energy production), both of which need to be addressed to “justify” the proposed degradation/lowering of water quality. ERAC found, even though there were no specific written findings on these two factors, that the Agency had considered the factors based on testimony from Agency permitting staff, and that the Agency is not required by law to prepare written findings on these factors.

In addition, ERAC found that the Ohio EPA PHWH Field Manual (which still lists PHWH as a potential existing designated use for a stream) is not per se unlawful when used to perform habitat, insect or fish evaluations to classify water bodies under one of the existing classifications, such as cold water habitat for native cold water fish, which has already been adopted under the Ohio water quality rules.

Wetlands/Stream Impact Permitting Remains a Lengthy and Uncertain Process

This was an unusually complicated case, involving a large site with hundreds of wetland areas and stream segments that would be impacted. However, the time from permit application submittal (February 2011) to Ohio EPA issuance of final certification (February 2012) to ERAC decision (September 2013), was still a very long process. The time frame, including the first level appeal at ERAC, continued for over 2 ½ years, and is still not final. This case underscores how complicated, time consuming and uncertain wetlands and stream impact permitting can be.