Arch Coal files latest arguments in Mingo Logan permit case

The Mingo Logan Coal unit of Arch Coal (NYSE: ACI) on June 12 filed its latest arguments in a long-running legal dispute over whether the U.S. Environmental Protection Agency has the right to veto a Section 404 Clean Water Act permit issued by the U.S. Army Corps of Engineers for the Spruce No. 1 surface mine in southern West Virginia.

Mingo Logan Coal is asking the U.S. Circuit Court of Appeals for the D.C. Circuit to review an order issued by Judge Amy Berman Jackson out of the U.S. District Court for the District of Columbia on Sept. 30, 2014.  This matter previously was before this appeals court in Mingo Logan Coal Co. v. EPA.

Said Mingo Logan’s June 12 brief: “Two years ago, this Court held that the Environmental Protection Agency (EPA) has the statutory authority under section 404(c) of the Clean Water Act (CWA)—which authorizes it to “prohibit” the ‘specification’ of disposal sites for discharge permits issued by the Army Corps of Engineers (Corps)—to effectively revoke existing CWA permits previously issued by the Corps. But the Court did not specifically address how EPA may exercise this controversial and expectation-defying power, and it certainly did not suggest that any post hoc veto by EPA, even one that ignored reliance interests, would pass muster. To the contrary, the Court suggested that many of the concerns raised by those who doubted that Congress conveyed this extraordinary power to EPA could be ameliorated by the limits imposed by the Administrative Procedure Act (APA). The Court thus remanded for consideration of Mingo Logan’s claim that EPA’s nullification of its section 404 permit for the Spruce No. 1 coal mine in West Virginia, which the Corps had issued only four years earlier with EPA’s explicit consent, was arbitrary and capricious.

“Having initially decided that EPA’s asserted nullification authority was inconsistent with permit holders’ legitimate reliance interests and the Corps’ primacy in the statutory scheme, the District Court swung the pendulum too far in the opposite direction by (mis)reading this Court’s remand order as a direction to rubber stamp EPA’s revocation decision under the APA. In reality, bedrock APA principles require far more before EPA can simply nullify a validly-issued permit, reverse the prior decisions of both EPA and the Corps which led to the issuance of the permit, and eviscerate the reliance interests engendered by the permit. Measured by familiar APA standards, EPA’s revocation of Mingo Logan’s permit has all the hallmarks of arbitrary and capricious agency action.

“The statutory and regulatory schemes reinforce basic APA principles in rendering EPA’s actions arbitrary and capricious. Any agency decision must confront reasonable reliance interests undermined by a regulatory decision that has the effect of revoking a permit. But in recognition of the enormous reliance interests intentionally induced when a section 404 permit is issued, the Corps—the lead player in the permitting process—has promulgated regulations requiring the consideration of a broad spectrum of factors that bear on any decision to modify an existing permit, such as the reliance interests the permit is designed to engender and the permit holder’s compliance history. Although those regulations do not apply directly to EPA, the APA does. And any regulatory decision that has the same effect as a permit modification or revocation by the Corps should, under the APA, reasonably consider comparable factors. Not so here. EPA gave literally no consideration to the millions of dollars that Mingo Logan has invested in legitimate reliance on its permit—investments that have now been rendered essentially worthless—or to the company’s history of faithfully and fully complying with the strict conditions in its permit.

“In the same way, EPA was obliged to offer a reasoned explanation for abandoning its decision, just four years earlier, to allow the Corps to issue Mingo Logan’s permit—especially since an agency has a heightened duty to justify an about-face when, as here, its prior decision induced detrimental reliance or when, again as here, its new position is based on contradictory factual findings. Yet EPA made no effort to provide the more detailed justification mandated by [in a prior case], nor did the District Court subject the agency’s 180-degree pivot to anything but the most cursory judicial scrutiny—and certainly not the nondeferential review that Fox entails. The fact that EPA’s earlier actions were subsumed within a permit issued by a different agency (i.e., the Corps) makes the statutory scheme unusual, but it cannot possibly free EPA from the obligation to acknowledge and explain deviations in its position.

“Finally, the problems here are not limited to what EPA failed to consider; they extend to what EPA did consider. In deciding to revoke Mingo Logan’s permit the agency could not validly rely on factors that Congress never intended it to address—namely, downstream water quality. CWA sections 303, 401, and 402 reflect Congress’ judgment that the States, not EPA, are responsible for adopting water quality standards within their own borders and administering the National Pollutant Discharge Elimination System (‘NPDES’) permitting program to meet those standards. Not only does EPA’s creation of its own ad hoc standards flout Congress’ express instructions, it also raises serious federalism concerns by invading West Virginia’s prerogatives. In short, EPA has achieved a rare and impressive trifecta. It has ‘entirely failed to consider an important aspect of the problem,’ supplied no ‘reasoned analysis’ for ‘changing its course,’ and ‘relied on factors which Congress has not intended it to consider.’ The decision below should be reversed.”

Arch Coal’s April 30 quarterly Form 10-Q report said about this latest chapter of this long-running legal saga: “On November 13, 2013, Mingo Logan filed a Petition for Writ of Certiorari with the Supreme Court of the United States seeking review of the DC Circuit’s decision. On March 24, 2014, the Supreme Court denied Mingo Logan’s Petition for Writ of Certiorari and remanded the matter to the federal district court for the District of Columbia for further consideration on the merits of the Final Determination. On September 30, 2014, the court entered an opinion and order denying Mingo Logan’s motion for summary judgment and granting the government’s motion for summary judgment. The court upheld the Final Determination finding that EPA’s decision to withdraw the specifications for filling in Oldhouse Branch and Pigeonroost Branch under Mingo Logan’s Section 404 permit was not arbitrary and capricious.  On November 11, 2014, Mingo Logan filed a notice of appeal to the United States Court of Appeals for the District of Columbia Circuit Court where it is currently pending.”

This mine is listed with the U.S. Mine Safety and Health Administration under contractor Eagle Creek Mining LLC, with MSHA data showing that the mine produced only 53,873 tons in the first quarter of this year, coming off 685,989 tons of output in all of 2014. Arch Coal has been able to produce limited amounts of coal in recent years on areas of the coal reserve not covered by the vetoed Section 404 permit.

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.