EPA’s Retroactive Veto of CWA Permit Upheld by DC Circuit

July 29, 2016

On July 19, 2016, the DC Circuit issued a decision upholding EPA’s retroactive veto of Mingo Logan Coal’s Clean Water Act Section 404 permit. 

By way of background, this decision is part of the protracted litigation stemming from EPA’s decision to revoke Mingo Logan Coal Company’s 404 permit for the Spruce 1 Coal Mine in West Virginia.  The litigation began in 2011 when EPA withdrew Mingo Logan’s permit four years after it was originally issued by the Corps.  Mingo Logan brought suit claiming that the EPA did not have authority under CWA §404(c) to withdraw the permit after it had been issued, and alternatively that EPA’s action was in violation of the Administrative Procedure Act (APA).  In 2013, the DC Circuit Court held that EPA has post-permit withdrawal authority under §404(c) and remanded to the DC District Court to resolve the APA claim.  The Supreme Court denied certiorari on the authority issue.  In 2014, the DC District Court issued an order on remand upholding the EPA’s exercise of its §404(c) authority to revoke the permit.  Mingo Logan appealed the order to the DC Circuit.

Mingo Logan asserted that EPA failed to take into account the millions of dollars Mingo Logan invested in reliance on the permit as well as its history of full compliance with the permit.  Mingo Logan stressed that the permit had been issued after years of study from federal agencies and Mingo Logan’s agreement to undertake mitigation measures.  Mingo Logan claimed that EPA’s decision to curtail authorized operations at the mine by 88% effectively nullified the permit and rendered its investments worthless. 

The oral argument was held in April 2016 before Judges Kavanaugh and Srinivasan.  Judge Henderson was also on the panel but was not present at the argument.

In the opinion issued July 19, Judges Henderson and Srinivasan concluded that “the EPA did not violate the APA in withdrawing specification of certain disposal areas from the permit; rather, it considered the relevant factors and adequately explained its decision.  The EPA’s ex post withdrawal is a product of its broad veto authority under the CWA, not a procedural defect.”  Notably, the court found that Mingo Logan forfeited its reliance claims by failing to present them to EPA or the district court.  In his dissent, Judge Kavanaugh argued that Mingo should not be penalized for failing to pursue this argument because EPA had clearly stated in the administrative proceeding that reliance costs were irrelevant.  Judge Kavanaugh’s dissent also argued that EPA’s failure to consider costs was arbitrary and capricious. 

As we’ve noted in our April 2016 and October 2015 updates, this case could have broad implications.  Section 404 permits are required for any project that impacts waters of the United States, including wetlands.  The permit program therefore cuts across a wide swath of industries, from energy and infrastructure development to agricultural operations.  Although EPA has used its Section 404(c) veto authority only sparingly in the past, the decision in Mingo to retroactively nullify a Corps permit several years after it was issued represents a significant expansion of that authority.  The threat of retroactive EPA vetoes of final permit decisions will undermine the finality and certainty of the CWA Section 404 permit process.  The DC Circuit seemed to recognize the implications of the decision:  “we note that post-permit withdrawal under section 404(c) is a mighty power and its exercise will perhaps inevitably leave a permittee feeling as if the rug has been pulled out from under it.”

We will continue to monitor this case and any further activity under EPA’s CWA 404(c) authority.