The United States Court of Appeals for the District of Columbia Circuit issued an opinion on April 23 in Mingo Logan Coal Co. v. United States Environmental Protection Agency upholding the Environmental Protection Agency’s (“EPA”) invalidation of a discharge permit issued four years prior by the United States Army Corps of Engineers (“USACE”).  The decision effectively creates uncertainty for permittees under Section 404 of the Clean Water Act (“CWA”), which provides for the discharge of dredged or fill material into waters of the United States.  Under the D.C. Circuit’s precedent, a permtitee will have to recognize a continued risk to investment in any project requiring a Section 404 discharge permit even after a permit has issued, even where EPA itself was involved in and approved issuance of the permit in the first instance.

The Mingo Logan Coal Co. dispute involved a Section 404 permit issued by USACE to cover the discharge of waste generated in conjunction with mountaintop coal mining in West Virginia into three separate streams.  Section 404 of the CWA prohibits the discharge of dredged or fill material into waters of the United States without a permit issued by the USACE.  In reviewing and issuing a permit, USACE will review a proposed project and alternatives to the proposal, determining whether a permittee has taken steps to avoid wetland impacts, minimized potential wetland impacts, and provided compensation for unavoidable impacts. While USACE administers the day-to-day Section 404 program, EPA develops and interprets the policy and criteria employed by USACE in its evaluation of permit applications and retains the authority to prohibit, deny, or restrict the use of any defined area as a disposal site. 33 U.S.C. § 1344(b) & (c).

EPA’s authority to prohibit or deny a permit, overriding USACE’s permitting authority, arises under Section 404(c) of the CWA and is generally referred to as EPA’s “veto authority.”  EPA may initiate the 404(c) veto process if it determines that the impact of a permit presents “unacceptable adverse effects.”  40 C.F.R. § 231.2(e).  EPA may exercise its Section 404(c) authority before a permit is applied for, while an application is pending, or after a permit has been issued. 40 C.F.R. § 231.1(c).  EPA’s use of its veto authority is rare, with only 13 examples despite USACE’s processing approximately 80,000 permits per year.  See EPA, “Clean Water Act, Section 404(c) ‘Veto Authority.’”

In Mingo Logan Coal Co., Mingo Logan’s predecessor applied to USACE for a Section 404 permit.  EPA expressed concerns at the time regarding the environmental impacts of the proposed  mountaintop mining, but declined to veto issuance of the permit.  USACE issued a discharge permit in 2007, effective through 2031.  In 2009, EPA wrote to USACE and requested that USACE exercise its discretion to revoke the permit based on “new information and circumstances” and the project’s “potential to degrade downstream water quality.”  USACE declined to do so, after which EPA initiated the public process required to exercise its veto authority.  EPA issued its final determination to veto Mingo Logan’s permit in 2011, leading to Mingo Logan’s immediate challenge to EPA’s authority in the courts.

On summary judgment, the District Court for the District of Columbia held that invalidating an existing permit exceeded EPA’s authority under the CWA.  On appeal, Mingo Logan argued in support of the lower court that the statutory language of the CWA required EPA to issue its veto pre-permit, that allowing a veto to an existing permit conflicted with the CWA as a whole and undercut statutory permit shields designed to create certainty and finality, and that the legislative history of the CWA showed that Congress intended EPA to act under Section 404(c) prior to permit issuance.  The D.C. Circuit rejected these arguments, relying in large part on the plain text of the CWA, which allows EPA to prohibit, restrict, or withdraw a specification “whenever” EPA finds unacceptable adverse effects.  33 U.S.C. § 1344(c).

The case was ultimately remanded to the district court for further consideration as to whether EPA’s post-permit decision to veto was arbitrary and capricious under the Administrative Procedure Act.