Arch Coal (NYSE: ACI) specifically, and the coal industry more broadly, lost an April 23 decision out of the U.S. Court of Appeals for the D.C. Circuit in a dispute over whether the U.S. Environmental Protection Agency can veto a Section 404 Clean Water Act permit issued by the U.S. Army Corps of Engineers.
The particular Section 404 “dredge and fill” permit in question had been issued to Arch Coal’s Mingo Logan Coal unit in January 2007 for the 2,278-acre Spruce No. 1 strip mine in Logan County, W.Va. That permit had gone through years of changes to reduce environmental impacts before it was issued. But then EPA vetoed the permit in January 2011, anyway, even though it had signed off on the January 2007 issuance, citing continued adverse environmental impacts in the local watershed. Notable is that in that span of time the George W. Bush Administration EPA became the Barack Obama Administration EPA.
Mingo Logan Coal won an initial decision from a U.S. District Court, which said EPA, which has advisory authority during the permit application stage, had no express authority to veto a permit once it was issued by the Corps. But the appeals court on April 23 said that, while EPA’s post-permit authority is somewhat vague, the agency does have that authority. It remanded the case to the lower court for further proceedings on that basis.
Mingo Logan had argued that EPA lacks statutory authority to withdraw site specification after a permit has issued and that EPA’s decision to do so in this case was arbitrary and capricious in violation of the Administrative Procedure Act (APA). The U.S. District Court for the District of Columbia granted summary judgment to Mingo Logan on the first ground without reaching the second. “We reverse the district court concluding that EPA has post-permit withdrawal authority, and remand for further proceedings,” wrote the appeal court.
The appeals court said in part that under the statute, the fact that EPA should review the preliminary specifications pre-permit to determine whether discharges will have the required “unacceptable adverse effect”—as EPA in fact did here—does not mean it is foreclosed from doing so post-permit as well—as it also did here.
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, the three-judge appeals court panel noted. This construction is further buttressed by subsection 404(c)’s authorization of a “withdrawal” which, as EPA noted, is “a term of retrospective application,” the appeals court said.
This decision a loss for the entire coal industry
The coal industry, particularly in Central Appalachia, has a major interest in this case since it might open up a whole new avenue for EPA, which has been very active under the Obama White House in Section 404 pre-permitting, to come after already-permitted mine sites other than Spruce No. 1. From here, the appeal options are to go for a hearing before the full appeals court (called en banc), or a direct appeal to the U.S. Supreme Court, which takes up only a few of the cases lodged with it.
Said Arch about this case in its March 1 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. 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.”
The Form 10-K added: “Pursuant to a scheduling order for summary disposition of the case, motions and cross-motions for summary judgment by both parties were filed. On November 30, 2011, the court heard arguments from the parties limited only to the threshold issue of whether the EPA had the authority under Section 404(c) of the Clean Water Act to withdraw the specification of the disposal site after the Corps had already issued a permit under Section 404(a). The court deferred consideration of the remaining issue (i.e. whether the EPA’s ‘Final Determination’ is otherwise lawful) until after consideration of the threshold issue. On March 23, 2012, the court entered an Order and a Memorandum Opinion granting Mingo Logan’s motion for summary judgment, denying the EPA’s cross-motion for summary judgment, vacating the Final Determination and ordering that Mingo Logan’s Section 404 permit remains valid and in full force.”