In a long awaited ruling, District of Columbia U.S. District Court Judge Reggie Walton ruled yesterday that the Environmental Protection Agency’s Final Guidance, relied upon by EPA to block Clean Water Act permits for virtually all new or expanded surface coal mining in Kentucky and West Virginia, was illegal and that EPA had exceeded its authority under the Clean Water Act and Surface Mining Control and Reclamation Act. Walton also ruled that the Final Guidance infringed upon the authority given by Congress to states to adopt their own water quality standards and police their own state waters.

On April 1, 2010, EPA issued an Interim Guidance which directed its field offices to object to Clean Water Act permits in certain ecoregions of the Appalachian states of Kentucky, West Virginia, Virginia, Pennsylvania, and Ohio that did not contain numerical effluent limitations for specific conductance, or conductivity (the ability of the water to conduct an electrical current). According to EPA, scientific studies were beginning to demonstrate a causal link between surface mine discharges which exceed 500 microsiemens in conductivity and impacts to aquatic life. The Clean Water Act requires state permitting authorities to impose numerical effluent limits in permits when and if, after the state conducts a “reasonable potential analysis” of the mine’s discharge, the state determines that there is a “reasonable potential” for that discharge to exceed state water quality standards. Prior to April 2010, EPA had approved of states conducting their “reasonable potential analysis” for new or expanded surface coal mining facilities – where no discharge existed yet - after permit issuance. Kentucky’s post-permit RPA procedures received written approval from EPA in 2000 and this was never withdrawn. However, in the Interim Guidance, EPA concluded that the scientific studies demonstrated a “reasonable potential” for surface mine discharges above the 500 MS/cm level to exceed the state water quality standards and thus a post-permit RPA in order to utilize site specific data was unnecessary and directed EPA field offices to object to permits that did not contain a pre-permit RPA.

EPA submitted the Interim Guidance for public notice and comment, but rather than complete a formal rulemaking, EPA instead issued a Final Guidance on July 21, 2011. The Final Guidance contained the same directives on pre-permit RPAs and numerical conductivity limits as the Interim Guidance. Given the Science Advisory Board’s admonition that the results of EPA’s scientific testing need to be verified outside of the areas where testing was conducted, it has limited its directives to Eastern Kentucky and West Virginia

While EPA continued to characterize the Interim and then Final Guidance as advisory only, the implementation of the two documents told a different story. Just weeks before the issuance of the Interim Guidance, Kentucky permitting authorities issued 27 Section 402 Clean Water Act permits for surface coal mining facilities without objection by EPA, many of which were for new or expanded surface coal mines in Eastern Kentucky. None of them contained pre-permit RPAs or numerical conductivity limits. However, since the issuance of the Interim Guidance on April 1, 2010, EPA has objected to every Section 402 Clean Water Act permit for a new or expanded Eastern Kentucky surface coal mine unless it contained a pre-permit RPA and received conductivity limits dictated by the guidance. This has also occurred in West Virginia. Since a surface mine cannot operate without a Section 402 Clean Water Act permit, EPA’s stance has literally meant a moratorium on new surface coal mines in Eastern Kentucky or West Virginia since April 2010, which has resulted in a substantial loss of jobs and tax revenues.

On July 20, 2010, the National Mining Association filed suit against the EPA in the District of Columbia District Court, initially challenging the Interim and then Final Guidance as well as EPA’s EC Process for Section 404 valley fill Clean Water Act permits. Both the states of West Virginia and the Commonwealth of Kentucky joined the action, as did the Kentucky Coal Association and the City of Pikeville, Kentucky. A hearing on the Final Guidance was held on July 13, 2012

In his July 31, 2012 ruling, Judge Walton rejected EPA’s contention that the Interim and Final Guidance were not mentioned by name in any permit objection and it was simply relying upon existing regulations (and not the guidance) for its objections. The Court held that predictably, when EPA headquarters explains to its subordinate regional offices that they “should” do something, they likely feel compelled to comply, and that the record before the court reflected EPA field office objections to state Clean Water Act permits based on the directives of the Guidance and objections to permits only being withdrawn if the Final Guidance directives were met. Having determined that that conductivity benchmark in the Final Guidance was treated as binding by EPA field offices in the course of their supervision of and objection to permits, the Court “must again conclude that the Final Guidance impermissibly sets a conductivity criterion for water quality.” States are delegated with the power to set water quality standards, and while EPA could formulate a federal standard, it must go through a formal rulemaking to do so, which was not done here.

The legal lynchpin of EPA’s contention that nearly all Section 402 Clean Water Act permits should contain numerical conductivity limits is 40 CFR § 122.44(d)(1), which requires such limits “when the permitting authority determines….that a discharge causes, has a reasonable potential to cause, or contributes to” an exceedance of a state water quality standard. According to the Court, “by presuming anything with regard to the reasonable potential analysis, EPA has effectively removed that determination from state authority. And there can be no question that a plain reading of the regulation leaves that determination, and the decision as to when it must be made, solely to state permitting authorities.” While the EPA can seek to amend this regulation, its current interpretation of it requiring a pre-permit RPA, a presumption of “reasonable potential” to exceed water quality standards based on science and numerical conductivity limits in all new or expanded surface coal mines is “inconsistent with the regulation itself.”