For the third time in the last 7 years, the U.S. Court of Appeals for the Fourth Circuit, based in Richmond, Virginia, has overturned a decision issued by a federal judge in West Virginia that had threatened to make it next to impossible to obtain the necessary permits to operate coal mines in the state. The opinion, handed down on February 13, 2009, reversed and vacated orders of U.S. District Court Judge Robert C. Chambers issued on March 23, 2007 and June 13, 2007, in Ohio Valley v. Aracoma Coal Co. (Consolidated Appeal No. 07-1355). The effect of the decision is to reinstate certain permits that had been issued to Aracoma Coal Co. and others under section 404 of the federal Clean Water Act (CWA), and to clear the way for issuance of a number of other section 404 permits for which applications have been filed but not yet acted upon pending the Fourth Circuit's ruling.

Though it is often referred to as a case addressing mountaintop removal operations (and those mines, along with their requisite spoil 'valley fills,' were the chief focal point), section 404 permits are required for virtually any type of coal mining in the mountainous areas of Appalachia. For example, the district court orders affected the viability of underground coal mining operations because section 404 permits are required for coal refuse impoundments that are created when deep-mined coal is processed through preparation plants in order to make it marketable.

The February 13, 2009 opinion reversed the lower court on nearly every ruling made during the course of the litigation, including its findings that the U.S. Army Corps of Engineers (the federal agency that issues section 404 permits) had improperly narrowed its scope of review to the stream segments being filled; the district court's conclusion that the Corps' approval of permit applicants' mitigation proposals was faulty because of its failure to conduct an adequate stream function assessment; and its declaration that in-stream sediment ponds below valley fills constitute jurisdictional waters subject to the separate section 402 (National Pollutant Discharge Elimination System) permitting scheme.

The 74-page opinion includes a number of important holdings touching on the review and evaluation of section 404 permit applications; the interplay between the CWA and the federal Surface Mining Control and Reclamation Act of 1977; the deference to be accorded to decisions made by federal and state regulatory agencies charged with administering complex environmental permitting programs; and how the Corps' regulations are to be interpreted in the context of the National Environmental Policy Act. For example, arguments have emerged recently in different settings, suggesting that the environmental effects of burning coal in electric generating units are a proper consideration in evaluating permit applications for coal mining operations. Given the Fourth Circuit's ruling that the Corps' scope of review does not extend to every environmental consequence of a project that would not occur "but for" the issuance of a section 404 permit, these claims ought to garner considerably less attention.

Judge Gregory authored the opinion, in which Judge Shedd joined. Judge Michael of West Virginia, the third member of the panel that decided the case, concurred with parts of the opinion but wrote a lengthy dissent to the key part of the panel's opinion that upheld the Corps' mitigation analysis. The plaintiffs may seek reconsideration, by the same panel or the full Appeals Court, and could also file a petition for discretionary review by the United States Supreme Court. However, should the opinion not be altered in the Fourth Circuit, the more likely response by the environmental groups involved in this matter will be to seek legislative or regulatory relief on the federal level. If such an effort includes fair consideration of all scientific views and recognition of the balancing of interests that is required by the statutes at issue, in the final analysis such a regulatory compromise may be the preferred outcome for all concerned.

"Beauty is in the eye of the beholder," so the old adage goes. Unless it is carefully exercised, the authority of federal courts to entertain challenges to West Virginia coal mining operations has much the same quality -- where the "beholder" is the judge reviewing the case. To understand why, it is important to reflect on how mining is regulated and the major federal statutes at issue.

Environmental Regulation of Coal Mines in West Virginia. Whether one is for it or against it, it can hardly be disputed that the business of mining coal is one of the most pervasively regulated in our State. On the environmental front, no less than six laws apply to coal mining, along with a host of regulations and policies promulgated by the West Virginia Department of Environmental Protection (WVDEP). Nearly all of those programs contain extensive public participation components, including the opportunity to comment on and appeal permits, and the right to bring suit in State court for perceived violations of the rules not addressed by the WVDEP. Superimposed on this extensive State framework are federal environmental programs administered directly or in an oversight capacity by the U.S. Environmental Protection Agency (EPA) and the U.S. Army Corps of Engineers (Corps). As U.S. District Judge John T. Copenhaver, Jr. observed nearly twenty years ago, a company planning to develop a coal mine in West Virginia is "confronted with a maze of administrative rules and requirements emanating from three federal agencies…and two state agencies that [it] must satisfy in order to function." West Virginia Coal Ass'n v. Reilly 728 F.Supp. 1276, 1293 (S.D.W.Va. 1989). Without question, that "maze" has grown in both size and complexity over the intervening years.

Given the comprehensive nature of these environmental programs -- most of which allow the State to be the primary regulatory authority over coal mines -- how is it that so many challenges to new mining projects in West Virginia have become federal cases?

CWA Section 404 Permitting. To begin to answer that question, one has to consider perhaps the most prominent federal program in this area within the last two decades, the so-called "dredge and fill" permit program developed under Section 404 of the federal Clean Water Act (CWA), administered in West Virginia by the Corps. A Section 404 permit is required prior to the placement of fill material into "navigable waters," a phrase that (as illustrated by the joint EPA/Corps Guidance Document released on June 5, 2007) is still in the process of being defined some thirty-five years after passage of the Act. (Though an exploration of that topic would require a far lengthier treatment, here's one tip to understanding the breadth of "streams" subject to the 404 permit requirement: they need be neither navigable-in-fact, nor continuously flowing.) Since most surface mines generate excess spoil (dirt and rock) that cannot be safely deposited back on the top of the mountain, and deep mines generate coal refuse (from their associated cleaning plants) that must be placed in a stable location, nearly all coal mines in West Virginia require a Section 404 permit.

Hundreds of pages of EPA and Corps regulations and policies pertain to the Section 404 permit program, and a typical permit application is of the same length. Indeed, it can fairly be said that there is virtually no area of potential environmental harm that is not addressed as a part of the Section 404 permitting effort for coal mining projects. Moreover, because there are so many issues that must be addressed in such considerable detail, the grounds for possible permit denial and the ways in which a permit might later be challenged are likewise numerous. In short, as Supreme Court Justice Antonin Scalia put it, "[I]n deciding whether to grant or deny a [Section 404] permit, the [Corps] exercises the discretion of an enlightened despot, relying on such factors as "economics," "aesthetics," "recreation," and "in general, the needs and welfare of the people." Rapanos v. United States, 126 S.Ct. 2208, 2214 (2006)(cites to CWA omitted).

So again, given the extensive State permitting processes that apply to all proposed mines, and the broad discretion vested in the Corps under the CWA, how is it that at the end of the day a federal judge may decide the fate of any proposed coal mine in West Virginia? The second part of the answer lies in legal concepts known as the "standard of review" and "scope of review," and how they are applied under two different federal laws that govern challenges to Section 404 permits.

NEPA and the Standards of Review. In addition to the CWA, the Corps' issuance of Section 404 permits is subject to the National Environmental Policy Act (NEPA), a purely procedural law that applies to federal agency permitting programs. NEPA requires that before any federal agency issues a permit authorizing an activity that may "significantly affect the quality of the human environment," that agency must take a "hard look" at the potential environmental consequences of that activity. That "hard look" is accomplished through the preparation of an Environmental Impact Statement ("EIS"), following detailed procedural rules issued by the federal Council on Environmental Quality and the Corps. The question of whether an EIS is required is an important one: based on the most recent coal mine project that followed this course, an EIS could take six years or more to be completed -- before any decision is made on the merits of the Section 404 permit application itself.

In most cases, the result of the Corps' review of a Section 404 permit application will be a finding that the project under review will not have a significant effect on the environment (known as a "Finding of No Significant Impact," or " FONSI"). When a FONSI is issued, this means the permit application can be processed without the necessity of following the expensive and time-consuming steps for preparing an EIS. In order to make the decision to issue a FONSI, the Corps must first prepare a comprehensive Environmental Assessment, based in large part on a lengthy "Environmental Information Document" that summarizes the data and studies submitted by the permit applicant.

Whether an EIS is prepared or not, a Corps decision to issue a Section 404 permit for a coal mine may be challenged in federal court upon payment of a $350 filing fee and submission of an appropriate complaint. If the Corps issued a FONSI, plaintiffs may simply contend that the agency failed to recognize and/or address significant environmental effects of the proposed mine and therefore violated NEPA by declining to prepare an EIS. In the event the Corps prepared an EIS, an opponent might allege that reasonable alternatives to the proposed mine were not evaluated, or that the Corps acted in an arbitrary and capricious manner in evaluating one or more of its probable environmental impacts or in weighing the benefits of the project. In either event, this is where the federal court steps in.

Under NEPA and the federal Administrative Procedure Act (APA) (generally applicable to all administrative agencies), issuance of a Section 404 permit cannot be overturned unless the court finds that the agency's action was "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law." This is widely recognized as a very limited standard of review, which presumes the validity of the agency's action. Since NEPA itself is a procedural statute, the only role for a reviewing court in a NEPA challenge is to determine whether the agency has considered the environmental consequences of the proposed action; the court should not "interject itself within the area of discretion of the executive as to the choice of the action to be taken." Stryker's Bay Neighborhood Council v. Karlen, 444 U.S. 223, 228 (1980). In other words, "if the adverse environmental effects of…proposed actions are adequately identified and evaluated, [agencies are] not constrained by NEPA from deciding that other values outweigh the environmental costs." Hughes River Watershed Conservancy v. Johnson, 81 F.3d 437, 442 (4th Cir. 1996)(addressing a Corps-authorized West Virginia project).

In addition, in applying this very deferential standard of review, a federal court ordinarily must limit the scope of its review to the administrative record created during the agency's permitting process. Permit applications are advertised (in most cases, multiple times) and ordinarily at least one public hearing is held prior to issuance of a Section 404 permit. Any interested party is entitled to submit as much in the way of substantive comments on a proposed project as it may desire, and as a part of its decision-making process the Corps must document its response to all such comments. In limiting challenges to permits to the administrative record created during the application process, the APA recognizes that it is unfair to press new matters as grounds for challenging a permit when the same issues might have been addressed and resolved if appropriately raised during the permitting process.

404 Permit Challenges to Coal Mine Projects. Even from this abbreviated description, it is easy to see that in most cases it is (and should be) quite difficult to succeed in challenging agency actions under NEPA. After all, federal administrative agencies have the in-house expertise (both procedural and substantive) that federal judges do not possess, and in the great majority of cases all major issues have been thoroughly analyzed and addressed in writing prior to any decision on a permit application. Unlike a typical civil action, with regard to federal permitting agencies the "battle of the experts" (if there is one) should take place long before any permit decision is issued -- not in court.

Nevertheless, there is some risk that the sheer size of a proposed coal mine, the rhetoric employed by challengers in emphasizing its potential environmental effects, or some other factor may cause a court to gloss over its limited role under NEPA and delve into the minutiae of such a permitting action. To the extent this occurs, the fundamental division of power between the executive and judicial branches of government is eroded and the State as a whole suffers from the resulting regulatory uncertainty and inevitable attempts to invoke political solutions.

Particularly with respect to proposed mountaintop mining operations, there are (to say the least) sharp differences of opinion on whether such projects should be permitted under any circumstances. Although those in favor of abolishing the practice may wish it was otherwise, Congress expressly contemplated such operations (including the construction of large valley fills in nearby watercourses) when it enacted the Surface Mining Control and Reclamation Act of 1977. In addition, Corps and EPA regulations specifically identify coal mining overburden as a type of fill material that may be permitted under Section 404. It is important that all laws governing Section 404 permitting be strictly followed. It is equally important that any change to those laws come as a result of legislative or authorized executive action rather than judicial fiat. As most West Virginians know by now, taking any other approach leads to a situation that is far from beautiful.