In the contentious context of mountaintop removal mining, a federal appeals court recently held, in Mingo Logan Coal Co. v. EPA, No. 12-5150 (D.C. Cir. Apr. 23, 2013), that the Environmental Protection Agency (EPA) may withdraw portions of a Section 404 Clean Water Act (CWA) permit regarding disposal site selection for the discharge of dredged or fill material at any time, even years after the United States Army Corps of Engineers (Corps) issued the permit.

Before Mingo, parties could be confident that, once a permit was obtained, they could conduct dredge and fill activities as long as they remained in compliance. As explained below, the court’s decision removes that element of certainty.

THE CLEAN WATER ACT GRANTS AUTHORITY FOR PERMITTING TO THE CORPS AND ULTIMATE DISPOSAL SITE SELECTION TO EPA

Section 404 authorizes the Corps to issue a permit to discharge dredge or fill material into navigable waters “at specified disposal sites.” However, Section 404(c) empowers EPA to prohibit the use of a particular disposal site if discharging will have an “unacceptable adverse effect” on municipal water supplies, shellfish beds and fishery areas, wildlife, or recreational areas.

Although EPA has previously invoked this authority to block projects, it has always acted before the Corps issued the permit.

MINGO OBTAINED A VALID SECTION 404 PERMIT FROM THE CORPS

Mountaintop removal mining is a type of surface mining that removes coal from the tops of mountains using mechanized methods and explosives. The rock, dirt, and other materials resulting from the mining activities are re-deposited into the adjoining valleys, oftentimes burying or altering streams.

Energy companies view this surface mining method as a cost-effective way to mine coal reserves and a safer alternative to underground operations. States such as West Virginia, which sits on billions of tons of coal reserves, consider it essential to the local economy, but many people are increasingly weary of its environmental impact. For example, the practice has come under regulatory and public scrutiny for its link to increased hazardous substances in nearby streams. The Section 404 permitting program is a mechanism to temper the impact of mountaintop removal mining on water quality.

In 2007, the Corps issued Mingo a Section 404 permit to discharge materials from their mining activities into three streams and tributaries in West Virginia. Although EPA had expressed concerns that the impacts of mountaintop mining had not been adequately addressed in the draft Environmental Impact Statement, particularly with regard to the Little Coal River watershed, it did not prohibit the selection of these disposal sites before the permit was issued. Instead, EPA expressed a willingness to work with the Corps to address any lingering issues.

Two years later, EPA asked the Corps to suspend, revoke, or modify the permit based on the mining activity’s potential to degrade downstream water quality. The Corps refused. EPA formally withdrew its permission to use two of the three streams as specified disposal sites in January 2011, thus modifying Mingo’s permit.

THE DISTRICT COURT FOUND THAT EPA OVERSTEPPED ITS AUTHORITY

Mingo challenged EPA’s determination in federal district court, asserting that the decision was arbitrary and capricious, and that the agency acted beyond its authority. The district court granted summary judgment to the coal company, finding that EPA had exceeded its authority under Section 404(c) because the agency withdrew the specification of disposal sites after the permit had been issued. Mingo Logan Coal Co. v. EPA, 850 F. Supp. 2d 133 (D.D.C. 2012).

THE COURT OF APPEALS REVERSED THE DISTRICT COURT’S FINDING THAT EPA’S AUTHORITY WAS TEMPORALLY LIMITED

The court examined the language of Section 404(c) under the so-called Chevron Step 1 approach, the deferential standard applied by the U.S. Supreme Court to an agency’s determination involving the interpretation of a statute entrusted to its administration. The court found that the “unambiguous language” of Section 404(c) demonstrated Congress’ intent to provide EPA with broad authority to act without concern for temporal limitations. Specifically, the court stated that EPA was a “broad environmental backstop” to the Corps’ discharge site selection authority.

Accordingly, the court rejected Mingo’s arguments that the statutory language and legislative history of Section 404 revealed that Congress intended to prohibit post-permit withdrawal of disposal sites. Further, the court was not persuaded that EPA’s interpretation conflicted with other subsections of Section 404.

The court remanded Mingo’s challenge that EPA’s decision was arbitrary and capricious under the Administrative Procedures Act because the district court had not addressed the merits of this argument.

THE DECISION MAY HAVE BROADER IMPLICATIONS FOR ACTIVITIES POTENTIALLY AFFECTING THE “WATERS OF THE UNITED STATES”

While this decision directly affects mountaintop mining, it also may impact other dredge and fill activities affecting the “waters of the United States” that require Section 404 permits, such as surface mining, agriculture, and construction and development.

Now, permitted parties face an additional risk beyond complying with their permit: will EPA later modify their Section 404 permit? A modification could create additional unexpected compliance costs, loss of capital investment, or even force a permittee to cease the activity altogether. Facing such uncertainty and risk, some parties may forgo pursuing permits, especially for environmentally sensitive activities which may attract EPA’s attention.

To obtain some comfort, Section 404 permit applicants should stay attuned to EPA’s concerns and work with the agency to address those concerns early in the permit review process. Working with EPA and the Corps during the permit drafting process may help prevent a costly permit modification down the road.