EPA, Arch Coal battle over West Virginia mine permit rages on

The U.S. Environmental Protection Agency on Oct. 9 filed its latest brief in a federal court in a long-running case that has bounced back and forth between courts over a 2011 decision by the U.S. Army Corps of Engineers, at the behest of EPA, to revoke a Section 404 Clean Water Act permit for a West Virginia mine of Arch Coal (NYSE: ACI).

The Spruce No. 1 mine, located in Logan County and controlled by Arch Coal’s Mingo Logan Coal subsidiary, is one of the largest surface mines ever permitted in Central Appalachia, making it a target from the beginning in the late 1990s from environmental groups and eventually by the EPA under the Obama Administration.

The Oct. 9 EPA brief from EPA was filed at the U.S. Court of Appeals for the D.C. Circuit and concerns a September 2014 decision from District Court Judge Amy Berman Jackson to grant summary judgment to EPA on all outstanding claims. Mingo Logan filed its brief in this appeal on June 12.

EPA argued that it can act whenever it determines  that the discharge of materials into a stream will have an unacceptable adverse effect on municipal water supplies, shellfish beds and fishery areas, wildlife, or recreational areas. In this case, the EPA withdrew the specifications of some (but not all) disposal sites designated in a Corps permit issued to Mingo Logan. In 2013, this appeals court confirmed the EPA’s authority to take that step, and on remand, the district court rejected the company’s other claims.

EPA said that Mingo Logan now raises three issues. Affirmance on the first issue will obviate the need to address the second issue, and vice versa. This court should not entertain the third issue because Mingo Logan forfeited it, EPA said. The claims are:

  • Can the EPA base a Section 404(c) decision on an unacceptable adverse effect downstream of the disposal site?
  • Did the EPA adequately explain its factual conclusion that the fill material proposed for discharge would have an unacceptable adverse effect on wildlife in the 6.6-mile footprint of the fill?
  • Did the EPA have to address Mingo Logan’s compliance record or the company’s unsupported allegation that it made substantial post-permit investments in reliance on the ability to discharge fill material into disposal sites withdrawn under Section 404(c)?

Mingo Logan’s Section 404 permit authorized it to place fill material from operations associated with the Spruce No. 1 coal mine into 7.5 miles of West Virginia streams. The permit specified 37 disposal sites within Seng Camp Creek, Pigeonroost Branch, Oldhouse Branch, and their tributaries.

In January 2011, the EPA finalized a Section 404(c) decision (called a “Final Determination”) withdrawing and restricting use of the disposal sites specified by the Spruce Permit in Pigeonroost Branch, Oldhouse Branch, and their tributaries. The EPA left the remaining specifications in place because some of those discharges had already occurred.

Said EPA: “The Final Determination can be upheld solely on the basis of the EPA’s factual finding that discharging Mingo Logan’s fill material into these specific disposal sites would have an unacceptable adverse effect on wildlife downstream. The company does not dispute the substance of that finding or the causal link between the discharge of fill material and the unacceptable adverse effect. Rather, Mingo Logan interprets the Act to preclude the EPA from considering downstream effects under Section 404 because such effects are the exclusive province of NPDES permits and water quality standards developed by the States under Section 303 of the Act.

“Mingo Logan’s convoluted reading of the Act conflicts with its text, structure, and purpose, as well as the EPA’s regulatory interpretation, which is entitled to Chevron deference. Section 404(c) does not preclude the EPA from considering any downstream effects, whether or not those effects are also pertinent to an NPDES permit for the discharge of non-fill pollutants. Nor does the State’s issuance of water quality standards impliedly bar the EPA from preventing unacceptable adverse effects on wildlife that would occur due to shifts in downstream water chemistry.”

Arch Coal says EPA should have taken into account its lost investment

In its June 12 brief, which is what EPA was responding to, Mingo Logan Coal said: “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 Fox, nor did the District Court subject the agency’s 180-degree pivot to anything but the most cursory judicial scrutiny…. 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.”

Mine is producing minimal coal on only a part of the coal reserve

The Spruce No. 1 mine is operated for Mingo Logan Coal by contractor Eagle Creek Mining LLC, controlled by coal operators John Potter and Thomas Potter. U.S. Mine Safety and Health Administration data shows that the mine produced 191,641 tons in the first half of this year, and 685,989 tons in all of 2014 and 675,216 tons in 2013.

West Virginia Department of Environmental Protection permit data shows that the mine was first permitted at that agency in 1998 at 3,113 acres, which was reduced over time to a current 2,265 acres as Arch Coal tried to work with regulators. As of a Sept. 18 site inspection, DEP records show that about 393 acres of the permit area had been disturbed by mining, which is not much progress for a mine of this age. The revocation of the Section 404 permit in 2011 essentially prevented mining on much of this reserve.

The June 12 Mingo Logan brief addressed that point this way about how it reacted to regulatory input over the Section 404 permit: “Over the course of the ensuing decade-long administrative review, it agreed to a series of mitigation measures that both dramatically increased its costs of extracting coal from the Spruce mine and limited it to recovering only 75% of the site’s total coal reserves.”

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.