Arch Coal wins major victory over EPA in Spruce No. 1 battle

In a major but only incremental victory for the coal industry, a federal judge on March 23 reversed the U.S. Environmental Protection Agency’s January 2011 ruling that revoked Mingo Logan Coal‘s Spruce No. 1 Section 404 Clean Water Act permit in Logan County, W.Va.

Ruling in favor of Mingo Logan on March 23, U.S. District Judge Amy Berman Jackson concluded that the EPA did not have the authority to invalidate an existing permit, and that the EPA had exceeded its authority under the Clean Water Act.

The permit was issued by the U.S. Army Corps of Engineers in 2007 after the company worked 10 years to address environmental concerns in part expressed by the EPA. The Spruce No. 1 project, at that point the largest surface coal mine permit permitted by the West Virginia Department of Environmental Protection at over 3,113 acres, had been the target of a late 1990s federal lawsuit filed by environmental groups.

To settle the suit, the U.S. Army Corps of Engineers agreed to put the Spruce No. 1 Section 404 permitting through an unprecedented environmental review process. That process in 2007, under President George W. Bush, eventually resulted in a much slimmed down permit, with the acres reduced to 2,278 and the lower seams removed from the mine plan to minimize the amount of rock and dirt going into valley fills that cover streams. But EPA, under pressure from the environmental groups and with a certain amount of cooperating agency authority in the Corps permitting process, in January 2011 vetoed the permit as not being stringent enough. Mingo Logan Coal, a unit of Arch Coal (NYSE:ACI), then sued to get its permit back at the U.S. District Court for the District of Columbia.

An Arch spokesperson said March 26 that the company is still looking at where to proceed from here at the Spruce No. 1 site and that the company had not heard yet whether EPA would appeal the March 23 court decision.

States and state mining associations, fearing EPA’s new assertion of veto authority over issued Section 404 permits, had joined the suit as intervenors on the side of Mingo Logan Coal. Coal-fired power generators have also been nervously looking on as this case unwound, since EPA’s newly-asserted authority poses a threat to the production of coal, particularly coal out of Central Appalachia where Spruce No. 1 is located.

“This is a huge victory for West Virginia and our coal miners,” said West Virginia Gov. Earl Ray Tomblin in a March 23 statement. “I want to thank Judge Jackson for recognizing that the EPA and the federal government were completely wrong in revoking this permit. I now call upon Lisa Jackson and the EPA to admit that they have gone too far – enough is enough.  Issue our permits so that we can put our people back to work and provide the resources that will power America.”

Spruce No. 1 is the most heavily studied and scrutinized surface mining operation in the history of West Virginia. At full production, the mine is expected to employ 235 miners and create about 300 indirect and induced additional jobs. West Virginia had submitted a “friend of the court” brief in support of Mingo Logan’s challenge to the EPA’s actions in D.C. federal court, arguing that the EPA should not be allowed to revoke the Spruce No. 1 permit after the fact.

The court concluded that nothing in the text or legislative history of the Clean Water Act provides the EPA the power to render a permit invalid once it had been issued by the Corps. The court vacated EPA’s action in its entirety, and ordered that Mingo Logan’s Section 404 permit issued by the Corps remains valid and in full force.

“The court concludes that EPA exceeded its authority under section 404(c) of the Clean Water Act when it attempted to invalidate an existing permit by withdrawing the specification of certain areas as disposal sites after a permit had been issued by the Corps under section 404(a),” said the court decision. “Based upon a consideration of the provision in question, the language and structure of the entire statutory scheme, and the legislative history, the court concludes that the statute does not give EPA the power to render a permit invalid once it has been issued by the Corps. EPA’s view of its authority is inconsistent with clear provisions in the statute, which deem compliance with a permit to be compliance with the Act, and with the legislative history of section 404. Indeed, it is the court’s view that it could deem EPA’s action to be unlawful without venturing beyond the first step of the analysis called for by Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837 (1984).”

Judge Jackson added: “But it is undeniable that the provision in question is awkwardly written and extremely unclear. So, the court will go on to rule as well that even if the absence of a clear grant of authority to EPA to invalidate a permit is seen as a gap or ambiguity in the statute, and even if the court accords the agency some deference, EPA’s interpretation of the statute to confer this power on itself is not reasonable. Neither the statute nor the Memorandum of Agreement between EPA and the Corps makes any provision for a post-permit veto, and the agency was completely unable to articulate what the practical consequence of its action would be. Therefore, the court will grant plaintiff Mingo Logan’s motion for summary judgment and deny defendant’s cross-motion.”

Mine has been producing coal in limited permit area

Arch Coal has had a contractor, Eagle Creek Mining LLC, working certain limited areas of the Spruce No. 1 site while the battle over the Section 404 permit was carried out. The West Virginia DEP website shows that as of a March 3 site inspection, 329 acres of the 2,278-acre permit area had been disturbed up to that point, and 37 acres reclaimed. The DEP shows the site as “active, moving coal.” The U.S. Mine Safety and Health Administration database shows that Eagle Creek Mining, controlled by John and Thomas Potter, produced out of this “active” mine 819,831 tons in 2011 and 591,076 tons in 2010.

Arch Coal described this case in its Feb. 29 annual Form 10-K report. “By letter of September 3, 2009, the EPA asked the Corps of Engineers to suspend, revoke or modify the existing permit it issued in January 2007 to Mingo Logan under Section 404 of the Clean Water Act, claiming that ‘new information and circumstances have arisen which justify reconsideration of the permit.’ By letter of September 30, 2009, the Corps of Engineers advised the EPA that it would not reconsider its decision to issue the permit. By letter of October 16, 2009, the EPA advised the Corps that it has ‘reason to believe’ that the Mingo Logan mine will have ‘unacceptable adverse impacts to fish and wildlife resources’ and that it intends to issue a public notice of a proposed determination to restrict or prohibit discharges of fill material that already are approved by the Corps’ permit. By federal register publication dated April 2, 2010, the EPA issued its ‘Proposed Determination to Prohibit, Restrict or Deny the Specification, or the Use for Specification of an Area as a Disposal Site: Spruce No. 1 Surface Mine, Logan County, WV’ pursuant to Section 404(c) of the Clean Water Act, the EPA accepted written comments on its proposed action (sometimes known as a ‘veto proceeding’), through June 4, 2010 and conducted a public hearing, as well, on May 18, 2010. We submitted comments on the action during this period. On September 24, 2010, the EPA Region 3 issued a ‘Recommended Determination’ to the EPA Administrator recommending that the EPA prohibit the placement of fill material in two of the three watersheds for which filling is approved under the current Section 404 permit. Mingo Logan, along with the Corps, West Virginia DEP and the mineral owner, engaged in a consultation with the EPA as required by the regulations, to discuss ‘corrective action’ to address the ‘unacceptable adverse effects’ identified.’

The Form 10-K added: “On January 13, 2011, the EPA issued its ‘Final Determination’ pursuant to Section 404(c) of the Clean Water Act to withdraw the specification of two of the three watersheds approved in the current Section 404 permit as a disposal site for dredged or fill material. By separate action, Mingo Logan sued the EPA on April 2, 2010 in federal court in Washington, D.C. seeking a ruling that the EPA has no authority under the Clean Water Act to veto a previously issued permit (Mingo Logan Coal Company, Inc. v. USEPA, No. 1:10-cv-00541(D.D.C.)). The EPA moved to dismiss that action, and we responded to that motion.”

EPA is, in the meantime, adding new levels of environmental review to the Section 404 permitting process, having released recently a new, tougher version of the Nationwide Permit 21 system for coal mining projects. That new version has the effect of forcing more permit actions out of the relatively easy Nationwide Permit 21 process, into the more intensive and more protracted Individual Permit system under Section 404. EPA is also continuing with an “enhanced” review process begun in the early days of the Obama Administration for dozens of IP applications, with only a handful of much more stringent permits handed down out of that process so far.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.