On April 23, 2013, the D.C. Circuit ruled that the Environmental Protection Agency (EPA) has the power under the Clean Water Act (CWA) to retroactively veto a section 404 dredge and fill permit "whenever" it makes a determination about certain adverse effects, even years after the U.S. Army Corps of Engineers (Corps) has granted the permit to an applicant. See Mingo Logan Coal Company v. EPA, No. 12-5150 (D.C. Cir. Apr. 23, 2013).
Section 404 Permit Background
The CWA prohibits unpermitted "discharges" of
dredge or fill material into the navigable waters of the United
States. The statute's definition of "navigable
waters" has been interpreted very broadly, and generally
prohibits anyone from filling in wetlands subject to federal
jurisdiction without first obtaining a "404 permit" from
the Corps. For example, a developer that wishes to build on a
site that includes areas designated as jurisdictional
wetlands, must first obtain a permit under section 404 of the
CWA to fill those wetlands with dirt or other material. The
penalties for violating this provision are high: up to $37,500 a
day in civil penalties for unauthorized discharges, which doubles
to up to $75,000 per day if a person fails to comply with an EPA
compliance order.
Although the CWA empowers the Corps to grant 404 permits, subsection 404(c) authorizes EPA to "prohibit the specification (including the withdrawal of specification) of any defined area as a disposal site, and . . . to deny or restrict the use of any defined area for specification (including the withdrawal of specification) as a disposal site whenever [it] determines" that the discharge will have an "unacceptable adverse effect" on identified environmental resources. This power has become known as the 404(c) "veto" authority, as it operates to prevent the Corps from issuing a permit to fill within certain areas prohibited by EPA. Until this case, EPA has used the veto authority sparingly, vetoing only a handful of permits in the past 40 years. When EPA has exercised this power, it has almost always done so before the Corps actually issued a permit.
District Court Litigation
In 2007, the Corps granted a 404 permit allowing
discharge from Mingo Logan's mining activities into three
streams and tributaries in West Virginia for the following 25
years. At the time, EPA expressed some concerns, but declined to
exercise its 404(c) powers to prohibit the specification of
disposal sites. Four years later, EPA issued a final determination
purporting to prohibit or withdraw the specification of two of the
three streams as disposal sites. EPA's actions effectively
revoked those aspects of the permit. In response, Mingo Logan filed
suit in the federal District Court in the District of Columbia. The
company argued that EPA lacks statutory authority to withdraw site
specification after a permit has issued, and that EPA's
decision to do so was arbitrary and capricious and in
violation of the Administrative Procedure Act (APA). The district
court granted summary judgment to Mingo Logan on the first ground
without reaching the APA claim. The district court characterized
EPA's assertion of authority to withdraw the specification of
certain areas as disposal sites from the permit at any time,
without limitation, "a stunning power for an agency to
arrogate to itself when there is absolutely no mention of it in the
statute," and concluded that it was "unreasonable to sow
a lack of certainty into a system that was expressly intended to
provide finality." EPA appealed, and the D.C. Circuit
reversed.
D.C. Circuit Decision
Writing for a unanimous panel, Judge Henderson explained that
while Congress delegated the authority to issue 404 permits to the
Corps, Congress unambiguously "granted EPA a broad
environmental 'backstop' authority over the [Corp's]
discharge site selection in subsection 404(c)." Contrary to
Mingo Logan's textual and historical arguments why
"Congress intended EPA to act under section 404(c), if at all,
prior to permit issuance," the D.C. Circuit found no temporal
limitation on EPA's power. Instead, the panel concluded that
the CWA expressly empowers the EPA Administrator "to prohibit,
restrict or withdraw the specification 'whenever'
he makes a determination that the statutory 'unacceptable
adverse effect' will result." Judge Henderson's
opinion held that "the unambiguous language of subsection
404(c) manifests the Congress's intent to confer on EPA a broad
veto power extending beyond the permit issuance" — such
that EPA "has, in effect, the final say on the
specified disposal sites 'whenever' [it] makes the
statutorily required [finding]." This was so, the panel
concluded, despite statutory provisions affording permit holders
"certainty and finality," such as the so-called
"permit shield" protecting activities conducted in
compliance with a permit. An EPA Federal Register notice
withdrawing a site specification, the panel explained, "in
effect amend[s]" a permit issued by the Corps, such that
discharges at previously-specified sites are no longer in
"[c]ompliance with" the permit. The panel remanded
the case to the district court to determine whether EPA's
decision to limit the site specifications in Mingo Logan's
permit was arbitrary and capricious under the APA.
Implications of the Decision
The Court's decision creates serious uncertainties for all
section 404 permittees, their lenders, and others in business with
them. At a minimum, permit holders must now monitor subsequent
withdrawals or prohibitions by EPA, which can effectively
"amend" their permits. While the specific facts of
this case relate to ongoing fill activities, the broadly
written language of the decision could have sweeping implications
in other areas. Particularly troubling is the question of whether
EPA may now require permittees who have permanently filled in
wetlands to face penalties and the possible removal of the fill
material. Private parties who have previously engaged in filling
activities — which may include building on the
site — now have no way of knowing if EPA may suddenly
decide to alter the conditions of their permit years, or even
decades, in the future. Following the decision, a permittee's
only recourse may be to challenge EPA's determination to
withdraw or prohibit the site specification under general (and
often deferential) administrative law principles. Project opponents
may also see the opinion as a new avenue to challenge permits by
arguing that EPA has acted in an arbitrary and capricious manner
whenever it fails to exercise the 404(c) veto. Finally, because the
court held that the statute unambiguously vests EPA with indefinite
withdrawal authority under "Step 1" of the traditional
Chevron analysis, the opinion may preclude a future EPA
administration from interpreting its statutory authority more
narrowly, as limited to pre-permit withdrawals or
specifications.
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