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D.C. District Court Overturns EPA’s Final Guidance on Coal Mine Permitting in Appalachian States

EPA exceeded its statutory authority when it issued its July 21, 2011, Final Guidance Memorandum on coal mine permitting in six Appalachian states (Kentucky, Ohio, Pennsylvania, Tennessee, Virginia, and West Virginia) according to a July 31, 2012, ruling by Judge Reggie Walton of the federal district court for the District of Columbia. EPA’s Final “Guidance” The Final Guidance document instructed EPA regional offices to object to wastewater discharge permits (known as “NPDES” permits, or, in Kentucky, KPDES permits) issued by state regulators to surface coal mining operations that did not conform to the Guidance. Specifically, the Final Guidance indicated that if discharges from a mine were expected to exceed EPA’s conductivity benchmarks, EPA should prevent states from issuing the permits due to expected adverse impacts on certain aquatic organisms. The benchmark conductivity level was widely criticized by the mining industry as unattainable, and the industry argued that it established a de facto state water quality standard in violation of the Clean Water Act (CWA). In following the Final Guidance, EPA regional offices objected to nearly every proposed individual KPDES permit for surface coal mines in Kentucky for more than two years. Challenging the Final Guidance As previously reported in Bingham Greenebaum Doll’s Environmental Letter, the National Mining Association, Kentucky Coal Association, and the states of Kentucky and West Virginia, challenged the Final Guidance in federal court. They argued that the Final Guidance exceeded EPA’s authority under the Surface Mining Control and Reclamation Act (SMCRA) and the Clean Water Act (CWA). The district court agreed with the states and the mining industry, finding that the Final Guidance was beyond EPA’s statutory authority. The court first held that to the extent the Final Guidance allowed EPA to insist on certain requirements with respect to mine planning and construction, it exceeded EPA’s authority under SMCRA, which gives exclusive authority with respect to such decisions to state regulators and the U.S. Department of the Interior. The court also found that EPA’s conductivity benchmark effectively established a water quality standard in the six states subject to the Final Guidance. Under the CWA, the states, and not EPA, have exclusive authority to establish water quality standards in most instances. EPA admitted that it had not followed the procedures for establishing a water quality standard in the affected states.   Timing of reasonable potential analysis Finally, the court found that EPA exceeded its authority under the CWA by requiring that KPDES permits contain a pre-discharge “reasonable potential analysis.” Under the CWA, discharge permits must impose limits on discharges of pollutants that have a “reasonable potential” to cause a violation of state water quality standards. In its objections to permits proposed in Kentucky, EPA argued that the state must conduct a reasonable potential analysis before the discharges occurred. The D.C. court held that this position was inconsistent with EPA’s own regulations, which authorize states to conduct the reasonable potential analysis either before or after the permit is issued and the discharges occur. By requiring the reasonable potential analysis before the permits could be issued, the court reasoned, EPA was acting in violation of its own regulations. This final aspect of the ruling could also affect other facilities in other industries where EPA has, through other guidance, required states to conduct pre-discharge reasonable potential analyses. For its defense, EPA argued that the Final Guidance was not truly a “regulation” subject to review by the court, but rather a recommendation that states and EPA were encouraged to follow. The court rejected this argument, and found that for all practical purposes, EPA was treating the Final Guidance as a binding regulation, and that the regulation exceeded EPA’s legal authority.   Impact on the coal industry The D.C. court’s ruling is a major victory for state permitting authorities and the mining industry, both of whom have struggled with increased oversight and control over permitting decisions by EPA in recent years. The ruling is also another in a string of defeats for EPA in cases involving its authority to limit surface mining activities using its authority under the CWA. EPA is likely to appeal this most recent decision. In the meantime, the coal industry is awaiting decisions on numerous discharge permits that have been held up as a result of EPA’s objections under the Final Guidance. We will continue to monitor the status of discharge permitting issues related to the coal mining industry as this case and others progress.  For more information, contact a member of the Environmental and Natural Resources Group at Bingham Greenebaum Doll LLP.

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