Mingo Logan Coal Co. challenged an EPA decision that it argued retroactively changed a Clean Water Act permit issued by the U.S. Army Corps of Engineers four years earlier. This change withdrew certain creeks as disposal sites for dredged material, affecting the validity of a permit that EPA had previously reviewed and assented to, and even though the permit holder was in full compliance with it.
The NAM and 11 other business groups filed an amicus brief urging the trial court judge to rule that EPA does not have the authority to modify previously issued permits under Section 404 of the Clean Water Act. The section 404 permitting program authorizes roughly 60,000 permits representing about $220 billion in economic investment every year, and EPA's assertion of authority to revise existing permits creates tremendous investment uncertainty for all permit holders and potential project proponents. Inevitably, that uncertainty will translate into higher risks in borrowing, less investment, lost jobs and slower growth throughout the U.S. economy.
Our brief highlighted the dramatic change that EPA's action represents. Section 404 permits are required for the discharge of fill material into waters of the United States (including wetlands), and affects construction of utility infrastructure, housing and commercial development, renewable energy projects like wind farms or solar arrays, and transportation infrastructure projects such as highways and rail lines. While EPA has occasionally exercised its authority and often uses the threat of such action to obtain concessions during the permitting process, it has never before used Section 404(c) authority to review a previously permitted project.
We also highlighted a study by Dr. David Sunding, a professor at UC Berkeley, showing that the threat that EPA may modify existing permits distorts the cost-benefit ratio of new investment projects. Existing permits are already subject to the Army Corps of Engineers' regulations governing suspension, revocation and modification, and now EPA's interference will delay or deter investment in new projects. For example, a 2% chance that EPA would act adversely decreases a project's cost-benefit ratio by an astounding 30%. Also detailed are effects on bank financing and interest rates, bond ratings, rationed credit, land prices, and other harms throughout the economy.
On Sept. 23, the government moved to strike the Sunding report from consideration, as it was not part of the record considered by EPA. We opposed this motion, arguing that EPA was repackaging their efforts to exclude us from the case, efforts that were rejected by the court in August. We also argued that the report did not add to the administrative record, but provided context for the court to interpret Section 404(c) and to understand the broad consequences that flow from the government's theory of liability.
On March 23, 2012, Judge Amy Berman Jackson ruled that EPA does not have the authority to render a permit invalid once it has been issued by the Army Corps of Engineers. The ruling found that Section 404(c) does not expressly give EPA that power, and even if it did have some power to interpret that section, its interpretation was unreasonable. The Corps is the only permitting agency identified in the statute, and the judge said, "This is a stunning power for an agency to arrogate to itself when there is absolutely no mention of it in the statute." It has the power to block the initial issuance of permits by refusing to allow the Corps to specify certain areas as disposal sites. But even if it had the power to subsequently remove the designation of certain sites, that does not affect the validity of the existing permit, which only the Corps can issue. Mingo Logan need only comply with the terms of the original permit.
The court described as "magical thinking" EPA's position that withdrawing a specification of a disposal site revokes the permit that affects that site. "It posit[ed] a scenario involving the automatic self-destuction of a written permit issued by an entirely separate federal agency after years of study and consideration. Poof!" Thus, even if the agency were accorded some deference under administrative law procedures, the agency's interpretation was unreasonable and could not stand. The judge also cited the NAM's amicus brief to show that eliminating finality from the permitting process would have a significant economic impact on industry, in turn making EPA's assertion of power less reasonable.
EPA appealed this ruling to the D.C. Circuit and won. Click here for details.