Court Ruling on EPA’s Veto Authority Weakens Regulatory Certainty

May 10, 2013

On April 23, the U.S. Court of Appeals for the D.C. Circuit overturned the United States District Court for the District of Columbia’s ruling in the case of Mingo Logan Coal Company v. United States Environmental Protection Agency. The lower court had ruled that EPA’s action of withdrawing the Corps specification of a disposal area that was set forth in Mingo Logan Coal Company’s Section 404 wetlands permit was valid even though the withdrawal action occurred three years after the permit was issued. The appeals court remanded the decision to the lower court to determine whether the action was arbitrary and capricious. The result is that any controversial project, or any project that becomes controversial after it is permitted, is potentially subject to an EPA action withdrawing the project site from being able to receive fill material.

The Corps had issued Mingo Logan’s predecessor in interest a Section 404 permit on Jan. 22, 2007, for valley fills associated with the company’s Spence Creek mine. During the permitting process EPA had raised concerns about the impacts of the project, but had expressly stated in a letter in 2006 that it had “no intention of taking their concerns any further from a Section 404 standpoint.” On Jan. 13, 2011, EPA published a final determination to withdraw the fill areas that were specified in Mingo Logan’s wetlands permits.

The court essentially agreed with EPA’s position that the plain statutory language of the Clean Water Act, 1344 USC 404(c), that created EPA’s “backstop” or “veto” power, stated that the EPA administrator could exercise the disposal area withdrawal power “whenever he determines after notice and opportunity for public hearings, that such discharge of such materials … will have an unacceptable adverse effect ….” The court found that the use of the word “whenever” meant there was no statutory time limit.

EPA has only rarely used this authority. In the approximately 13 other times it has done so, it did it during the permitting process, not several years after a permit was issued. The lower court may set standards along the lines of laches or estoppel that factor into the determination of when it would be arbitrary and capricious for EPA to take such an action. But even if that is the case, unless the court makes a fairly strong statement that the withdrawal must be done in a short window, then Corps permits, which already have no set period in which they must be appealed, will have a Damoclean sword above them.

The projects most likely to be affected are large-scale multiyear construction projects (for example, infrastructure projects); phased projects and ongoing projects such as those that require periodic maintenance dredging (for example, many power plants with water intakes); and project-financed facilities that require opinions as to the finality of all necessary permits and approvals.