An Analysis of EPAs 404(c) Veto Authority

Ryan M. Posey

Ryan M. Posey, An Analysis of EPAs 404(c) Veto Authority Table of Contents

Introduction ........................................................................................................................ 2 Guide to EPAs 404(c) Veto Authority ............................................................................... 4 Litigation Addressing EPAs 404(c) Veto Authority ....................................................... 8 The Pre-Mingo Status of the 404(c) Veto Authority ................................................... 12 The Case of the Mingo Logan Coal Company A Monumental Expansion of EPAs 404(c) Veto Authority..................................................................................................... 12 Mingo Logan Coal Company v. US Army Corps of Engineers The Facts..................... 13 Mingo Logan 1 ............................................................................................................... 14 Mingo Logan 2 ............................................................................................................... 17 The Mingo Logan Coal Decision An Evaluation of the Decision and Questions Left Unanswered ..................................................................................................................... 19 Support for the Retroactive Post-Permit 404(c) Veto................................................. 20 Questions Left Unanswered by the Court of Appeals ................................................... 23 Discussion A More Balanced Approach ........................................................................ 27 Amend 404(c) to Recognize the Post-Permit Veto and Establish a Heightened Standard for its Application .......................................................................................... 27 Change the Standard for Judicial Review of the 404(c) Post-Permit Veto ................. 28 Provide Administrative Procedures to Mitigate Economic Hardship Caused by EPAs Use of the 404(c) Post-Permit Veto ............................................................................ 30 Conclusion ........................................................................................................................ 31

Posey 1

Ryan M. Posey, An Analysis of EPAs 404(c) Veto Authority I. Introduction The Clean Water Act (CWA) gives the Environmental Protection Agency (EPA) broad authority to restore the chemical, physical and biological integrity of the waters of the United States.1 Part of this oversight includes the 404 veto authority, which gives the EPA the power to veto permits for the discharge of dredged of fill material issued under 404 by the Army Corps of Engineers (Corps) or by a state.2 How and to what extent the EPA utilizes its 404 authority has become increasingly controversial. Traditionally, the EPA has utilized its 404 veto authority either before or contemporaneously with the Corps issuance of a 404 permit. However in the Mingo Logan Coal cases, the EPA used its 404(c) veto authority retroactively, to effectively revoke a 404(c) permit granted by the Corps years earlier. This action has raised new questions regarding the extent of EPAs authority and the balancing of interests between the purpose of the CWA and the due process considerations of applicants for 404(c) permits. For some time it has been generally accepted in a legal and social context that there are inherent differences in the prospective and retroactive application of the law. There is a prevailing presumption that rules whose applications are prospective in nature are to be favored, while those rules whose applications are retroactive receive

33 U.S.C. 1251(a). The objective (of the CWA) is to restore and maintain the chemical, physical, and biological integrity of the Nations waters. 2 33 U.S.C. 1344(c). Posey 2

Ryan M. Posey, An Analysis of EPAs 404(c) Veto Authority heightened scrutiny.3 Important principles such as fundamental fairness and due process provide sound cause for this distinction, and how these principles are balanced against legitimate governmental interests is a question with which the courts often struggle, in a wide variety of legal fields. Are the benefits of retroactive application ever to outweigh the dubious due process concerns of those against whom the rule is applied? This is the essential question presented by the EPAs use of its retroactive or post-permit 404(c) veto. How is the use of the EPAs veto authority curtailed by the concept of fundamental fairness? Should this authority not receive greater scrutiny than the prospective use of the authority granted by 404(c)? This paper will analyze EPAs CWA 404(c) veto authority and this issue of EPAs retroactive veto authority under 404(c). This papers analysis includes an evaluation of the various interpretations of the EPAs 404(c) veto authority and ultimately proposes an alternative way to address these questions. This paper proposes amendments to section 404(c) that would explicitly grant the EPA both prospective and retroactively veto authority, while subjecting an EPA retroactive veto under a higher standard than that which would apply to a prospective veto. These amendments to the CWA would further the purposes of the CWA while mitigating any potential due process infringements to current 404 permit holders. This revised approach would provide

Tam v. F.D.I.C., 830 F.Supp.2d 850, at 865 (DC CD 2011); citing Bowen v. Georgetown University Hospital, 488 U.S. 204, at 208-209 (1988) (Retroactive application of a rule is disfavored). Posey 3

Ryan M. Posey, An Analysis of EPAs 404(c) Veto Authority more certainty and clarity in the permit process, while allowing the EPA the freedom to act on new information and fulfill the mission delegated to it by the CWA. Part II of this paper provides an overview of the sources of the 404(c) veto authority and provides an understanding of how that authority has been interpreted by the courts, in order to set the stage for an evaluation of the current state of the 404(c) veto authority. Part III explores the circumstances surrounding the landmark Mingo Logan Coal decisions and analyzes the jurisprudence resulting from the EPAs first retroactive use of its 404 veto authority. Part IV evaluates the Mingo Logan Coal decision and the relative strength of the competing arguments for and against the use of EPAs 404 retroactive veto. Finally, Part V proposes an alternative approach to that taken by the Court of Appeals in Mingo Logan Coal, under which EPA would explicitly have both retroactive and prospective veto authority under section 404(c) but would have to meet a stricter standard for a retroactive veto of a section 404 permit.
II.

Guide to EPAs 404(c) Veto Authority The EPA was given broad authority in the Clean Water Act (CWA)4 in order to

restore the chemical, physical and biological integrity of the waters of the United States.5 The CWA is a comprehensive act with provisions covering toxic pollution, effluent limitations, the operation of water treatment plants and many other areas of environmental protection in furtherance of this purpose. The specific issue of note in

4 5

33 U.S.C. 1251-1387. 33 U.S.C. 1251(a). The objective (of the CWA) is to restore and maintain the chemical, physical, and biological integrity of the Nations waters. Posey 4

Ryan M. Posey, An Analysis of EPAs 404(c) Veto Authority this discussion is the CWA provisions regarding the regulation of discharges of dredged or fill material6.7 CWA 301(a) prohibits a point source discharge of pollutants by any person into navigable waters without a 402 or 404 permit, and without compliance with certain specified effluent limitations.8 CWA 404 gives the Corps of Engineers and states with delegated authority the power to issue the permits required by 301(a) for the discharge of dredged or fill material into navigable waters.9 While this authority to issue permits was initially vested with the Corps, Congress also granted the EPA oversight authority over the process.10 1344(c) provides: (c) Denial or restriction of use of defined areas as disposal sites The Administrator [of the EPA] is authorized to prohibit the specification (including the withdrawal of specification) of any defined area as a disposal site, and he is authorized to deny or restrict the use of any defined area for specification (including the withdrawal of specification) as a disposal site, whenever he determines, after notice and opportunity for public hearings, that the discharge of such materials into such area will have an unacceptable adverse effect on municipal water supplies, shellfish beds and fishery areas (including spawning and breeding areas), wildlife, or recreational areas. Before making
6 7

Definition of fill material 33 U.S.C. 1344. 8 33 U.S.C. 1311. 9 33 U.S.C. 1344(a). The Secretary may issue permitsfor the discharge of dredged or fill material into the navigable waters at specified disposal sites. See also 33 U.S.C. 1344(g), providing EPA authority to delegate the authority under 1344(a) to states for discharges in non-navigable water bodies. 10 33 U.S.C. 1344(c). Posey 5

Ryan M. Posey, An Analysis of EPAs 404(c) Veto Authority such determination, the Administrator shall consult with the Secretary. The Administrator shall set forth in writing and make public his findings and his reasons for making any determination under this subsection.11 Although not included in the text of the legislation, this subsection quickly became known as the EPAs veto authority.12 Acting under the authority granted to it by 404(c), the EPA promulgated regulations in the Code of Federal Regulations (CFR) both interpreting the scope of power granted to it by 404(c) and establishing procedures for the execution of that power. EPAs CFR procedures created to implement 404(c) refer to its authority under section 404(c) as a veto authority.13 The EPAs CFR regulations indicate that this authority can be used on both section 404 individual and section 404 general permits.14 However in regards to a general permit the veto is probably limited to each specific site under the general permit which is found to have an unacceptable adverse effect on the environment, and the EPA cannot use its 404(c) authority to veto the entirety of a section 404 general permit.15 In regards to state-issued section 404 permits, the EPA

11 12

Id. See Creppel v. U.S. Army Corps of Engineers, 1988 WL 70103, at 4 (US DC E.D. LA 1988) (Under the statutory framework, EPAs Administrator has the authority to veto a Corps permit); See also S.Conf.Rep. No. 1236, 92nd Cong., 2d Sess. 142 (1972) (conference committee report explaining that 404 grants EPA the power to veto a project that will adversely affect the listed resources). 13 40 C.F.R. 231.1(a). 14 Id., see also 33 U.S.C. 1344(c). 15 Id. EPAs interpretation only includes mention of withdrawing specification of a defined disposal site. Whether the disposal at the particular site was originally authorized by a section 404 individual or part of a broader section 404 general permit is not determinative under the CFR, however there is no express annunciation of the power to veto an entire section 404 general permit on its face. Posey 6

Ryan M. Posey, An Analysis of EPAs 404(c) Veto Authority can effectively utilize its veto authority by withdrawing the approval of any state administered programs and revoking the states authority to grant section 404 permits generally.16 In addition, the CFR regulations interpret section 404 to allow the EPA to prohibit the use of a specific site even before a section 404 permit is applied for or has been issued.17 Although the exact procedures created by the agency to implement 404(c) are not central to this discussion, it is important to note that the EPA interprets 404(c) as granting it both prospective and retroactive veto powers.18 The EPAs use of the 404(c) veto authority is exceedingly rare; EPA only has issued a Final Determination under 404(c) thirteen times since the CWAs inception in 1972)19; however its use (and sometimes non-use) has become the subject of considerable litigation and scholarly debate. The court decisions that are most relevant to the current discussion are discussed below.

16

40 C.F.R. 231.1(a). Under section 404(c), the *EPA+ Administrator may exercise a veto over the specification by the U.S. Army Corps of Engineers or by a state for the discharge of dredged or fill material. See also 33 U.S.C. 1344(i). 17 40 C.F.R. 231.1(a). The *EPA+ Administrator may also prohibit the specification of a site under section 404(c) with regard to any existing or potential disposal site before a permit application has been submitted to or approved by the Corps or a state. 18 40 C.F.R. 231.1(a). The Administrator is authorized to prohibit or otherwise restrict a site whenever he determines that the discharge of dredged or fill material is having or will have an unacceptable adverse effect. 19 L. of Wetlands Reg. 7:1, footnote 3 (2013) (list of previous uses of the EPA 404(c) veto); see also Questions and Answers Spruce Mine Final Determination, U.S. EPA, at 2 http://water.epa.gov/lawsregs/guidance/cwa/dredgdis/upload/FINAL_Spruce_404c_QA _011311.pdf (last visited Apr. 19, 2013) (EPA has only completed 13 Final Determinations in the Agencys 40 year history, emphasizing the careful conside ration EPA gives to its 404(c) responsibilities). Posey 7

Ryan M. Posey, An Analysis of EPAs 404(c) Veto Authority A. Litigation Addressing EPAs 404(c) Veto Authority The first landmark case involving EPAs 404(c) veto authority came in 1992 in the case James City County v. EPA20 (JCC 1), when the EPA elected to use its 404(c) veto to prevent the construction of a dam and reservoir across Ware Creek in James City County, Virginia. The Corps had granted James City County a permit under CWA 404, which would have permitted the construction of a dam and reservoir to meet the James City Countys increasing water demands. However the EPA decided that the project would have an unacceptable adverse effect on the environment and used its 404(c) authority, the rationale for which was based largely upon the existence of practicable alternatives21 for James City County to meet its water needs.22 Ultimately the Fourth Circuit found that EPAs conclusion that there were practicable alternatives was not supported by substantial evidence,23 and remanded to the EPA to consider whether environmental effects alone (independent of practicable alternatives) would alone justify a veto.24 At the conclusion of JCC 1 the EPA again decided on remand to utilize its 404(c) authority, this time citing the unacceptable adverse effect on the environment as its

20 21

James City County, Va. v. EPA, 955 F.3d 254 (4th Cir. 1993). See 40 C.F.R. 230.10(a)(2). An alternative is practicable if it is available and capable of being done after taking into consideration cost, existing technology, and logistics in light of overall project purposes. Id. 22 James City County, Va. v. EPA, 955 F.3d 254, at 257-258 (4th Cir. 1993). 23 Id., at 259. 24 Id., at 260 (Remands are generally appropriate when a court finds that the stated basis for an agencys action is inadequate). Posey 8

Ryan M. Posey, An Analysis of EPAs 404(c) Veto Authority sole justification.25 This action was again challenged in James City County v. EPA26 (JCC 2). The district court in JCC 2 ruled for the County, and found that (1) the EPA lacked the authority to base its 404(c) veto solely on the basis of adverse environmental impacts and (2) the agency must consider the Countys need for water.27 However this decision was reversed by the Fourth Circuit, which held that the EPA had the authority to use its 404(c) veto based solely upon adverse environmental impacts.28 JCC 2 is a significant decision because it validated the EPAs interpretation of its 404(c) authority, which did not require a balancing of environmental benefits against non-environmental costs.29 The Fourth Circuit found that both the statutory language of 404(c) and its legislative history supported this interpretation by EPA.30 As a result of JCC1 and JCC2, EPA under section 404(c) can veto a section 404 permit either because EPA finds that there is a less environmentally harmful practicable alternative or because EPA finds that the permit

25

James City County, Va. v. EPA, 12 F.3d 1330, at 1332 (4th Cir. 1993) (On remand, the EPA considered its administrative record and again vetoed the 404 permit, basing its veto solely on environmental considerations). 26 James City County, Va. v. EPA, 12 F.3d 1330 (4th Cir. 1993). 27 Id., at 1335. 28 Id., at 1336 (in our view, the EPAs only function relating to the quantities of available water is limited to assuring purity in whatever quantities the state and local agencies provide. For these reasons, we think its veto based solely on environmental harms was proper). 29 40 C.F.R. Part 231. 404(c) does not require a balancing of environmental benefits against non-environmental costs such as the benefits of the foregone project. This view is based on the language of 404(c) which refers only to environmental factors. 30 James City County, Va. v. EPA, 12 F.3d 1330, 1336 (4th Cir. 1993) (Ultimately, however, recognizing the EPAs expertise and concentrated concern with environmental matters, Congress gave the final decision whether to permit a project to that agency. Its authority to veto to protect the environment is practically unadorned ). See also 118 Cong.Rec. 33,699 (1972) (Senate debate explaining that under 404 EPA should not issue a permit for a project if the project will adversely affect the listed resources). Posey 9

Ryan M. Posey, An Analysis of EPAs 404(c) Veto Authority will result in unacceptable adverse environmental impacts of the types referred to in section 404(c). The next key 404(c) decision came in the form of a citizen suit in Alliance to Save the Mattaponi v. United States Army Corps of Engineers31 (Alliance 1). In this case various environmental groups brought a citizen suit action against the EPA for its failure to use its 404(c) veto authority to prevent the construction of a reservoir in King William County, Virginia. While the central issue in that case was whether the EPAs 404(c) authority was discretionary or mandatory and thus subject to challenge in a CWA citizen suit,32 (an issue that is not the principal focus of this paper), this decision is important because it established that the arbitrary and capricious standard of review applies to an EPA decision not to exercise its section 404(c) veto authority33 This

31

Alliance to Save the Mattaponi v. United States Army Corps of Engineers, 515 F.Supp.2d 1 (District Ct. DC. 2007). 32 Id., at 4. CWA 505(a)(2) authorizes citizen suits only where the EPA has failed to perform a nondiscretionary duty. The court in denying plaintiffs CWA citizen suit held that EPAs 404(c) authority was discretionary. See also City of Olmsted Falls v. EPA, 266 F. Supp.2d 718, 723 (N.D.Ohio 2003) (observing that the EPA veto power in 404(c) is obviously discretionary). But see National Wildlife Federation v. Hanson, 859 F.2d 313, at 316(4th Cir. 1988) (allowing a CWA citizen suit challenge to EPAs failure to veto under 404(c)); South Carolina Coastal League v. U.S. Army Corps of Engineers, 2008 WL 4280376, at 6 (D.C.S.C. 2008) (applying Hanson, court stated that Congress could not have intended to allow citizens to challenge erroneous wetlands determinations when the EPA administrator makes them but to prohibit such challenges when the Corps makes the determination and the EPA fails to exert its authority over the Corps determination). 33 Id., at 10. The plaintiffs Administrative Procedure Acts claims were held not to be barred, and the court held that under 5 U.S.C. 706(2) the reviewing court shall set aside agency action (or inaction which constitutes action in the case of Alliance 1) found to be arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. See also Preserve Endangered Areas of Cobbs History, Inc., v. United States Corps of Engineers, 87 F.3d 1242 (Eleventh Cir. 1996) (standard of review for EPAs failure to veto the Corps issuance of a 404 permit is the arbitrary and capricious standard). Posey 10

Ryan M. Posey, An Analysis of EPAs 404(c) Veto Authority context and the appropriate standard of review are important to the analysis of the judicial review of EPA 404(c) actions following Alliance 1. While Alliance 1 dismissed the plaintiffs CWA claims, their claims under the Administrative Procedure Act (APA) against the EPA for its failure to use its 404(c) veto authority survived and were addressed by Alliance to Save the Mattaponi v. United States Army Corps of Engineers34 (Alliance 2). In Alliance 2 the court found that the [EPA] Administrators decision not to veto the permit was not based on his determination that the permit would not likely have unacceptable adverse effects, but on a whole range of other reasons completely divorced from the statutory text. 35 The court then held that because the EPA relied on factors which Congress had not intended it to consider in its application of its 404(c) veto authority, its decision not to use that authority was arbitrary and capricious.36 Although the court recognized that 404(c) granted the EPA discretion in the subsections application, the court also decided that this discretion is not a roving license to ignore the statutory text.37 Put simply, the EPA acts arbitrarily and capriciously if it considers factors outside of its statutory scope in deciding to use or not to use its 404(c) veto authority. This decision is important to the current discussion because it takes the concepts annunciated in JCC 2 (EPA does not

34

Alliance to Save the Mattaponi v. United States Army Corps of Engineers, 606 F.Supp.2d 121 (District Ct. DC 2009). In Alliance 1 and Alliance 2, the EPA considered factors such as the cost of the project, lack of practicable alternatives, and anticipated litigation (among other non-environmental factors) in determining whether to use its 404(c) veto authority. 35 Id., at 140. 36 Id., at 141. 37 Id., at 140 citing Her Majesty the Queen in Right of Ontario v. EPA, 912 F.2d 1525, at 1533 (D.C. Cir. 1990). Posey 11

Ryan M. Posey, An Analysis of EPAs 404(c) Veto Authority have to consider non-environmental factors in applying 404(c)) and expands them even further (EPA cannot consider non-environmental factors in applying 404(c)). B. Pre-Mingo Status of the 404(c) Veto Authority Although the four cases discussed above deal with the prospective use of EPAs 404(c) veto authority, it is important to understand the philosophical shift in the courts interpretations of 404(c) from JCC 1 to Alliance 2. These cases evolved an interpretation of section 404(c ) which transition from an interpretation that 1) EPA must consider non-environmental considerations (JCC 2 District Court), to 2) EPA may but does not have to consider non-environmental considerations (JCC 2 Fourth Circuit), to 3) EPA may not consider non-environmental considerations (Alliance 2). This increase in deference to the legislative intent of the CWA to preserve the integrity of waters in the United States and the EPAs role in furtherance of that goal allows us to understand 1) the foundation on which the EPAs first retroactive postpermit veto was based and 2) the context by which the court would uphold that action. III. The Case of the Mingo Logan Coal Company A Monumental Expansion of EPAs 404(c) Veto Authority The Mingo Logan Coal cases represented an issue of first impression for the courts. While the cases discussed above all dealt with the prospective use of EPAs 404(c) veto authority and the scope of that authority, the circumstances surrounding the Spruce No. 1 coal mine culminated in the EPAs first use of the 404(c) veto authority after a section 404 permit had already been issued by the Corps. This

Posey 12

Ryan M. Posey, An Analysis of EPAs 404(c) Veto Authority presented the courts with a landmark opportunity to either significantly broaden or restrict EPAs 404(c) authority, a decision which will have lasting implications for both environmental regulation and the national economy. A. Mingo Logan Coal Company v. US Army Corps of Engineers The Facts On January 22, 2007, the Corps issued a 404 permit to the Mingo Logan Coal Company (Mingo Logan).38 This permit authorized Mingo Logan to discharge fill material resulting from mountaintop mining operations (at the Spruce No. 1 coal mine in Logan County, West Virginia) into nearby streams.39 Although at multiple times during the permit application process the EPA expressed concerns regarding potential adverse impacts of the project to the environment, ultimately the EPA decided not to use its 404(c) veto authority prior to the Corps issuance of the 404 permit.40 On September 3, 2009, the EPA requested that the Corps use its discretionary authority under 33 C.F.R. 325.7 to suspend, revoke or modify the 404 permit it had issued to Mingo Logan for the Spruce No. 1 coal mine.41 The EPA asserted that new information and circumstances had revealed water quality impacts that were not adequately addressed by the original permit.42 After consideration of the EPAs request,

38 39

Mingo Logan Coal Co. Inc., v. EPA, 850 F.Supp.2d 133, at 133 (D. Ct. DC. 2012). Id., at 134. 40 Id., at 135-136. EPA in multiple letters expressed concerns regarding potential adverse impacts, however also recognized the progress Mingo Logan had made in its various Environmental Impact Statements and mitigation plans. 41 Id., at 137. 42 Id. Posey 13

Ryan M. Posey, An Analysis of EPAs 404(c) Veto Authority the Corps declined to do so, finding no grounds to suspend, revoke or modify the 404 permit.43 On January 13, 2011, after publishing a notice of its proposed determination and a recommended determination, the EPA issued its Final Determination to withdraw the specification of multiple sites as disposal sites for dredged or fill material in connection with the construction of the Spruce No. 1 coal mine.44 The withdrawal of specifications made up approximately eighty eight percent of the total discharge area authorized by the 404 permit issued by the Corps.45 The EPA had made the unprecedented decision to utilize its 404(c) veto authority more than two years after the 404 permit was originally issued by the Corps. Mingo Logan challenged EPAs post-permit 404(c) veto, claiming that the EPA exceeded its statutory authority under 404(c) of the CWA. Whether the EPA had this authority would be dispositive of the entire case.46 B. Mingo Logan 1 Mingo Logans challenge was first brought before the United States District Court for the District of Columbia in Mingo Logan Coal Co. Inc., v. EPA47 (Mingo Logan 1).

43 44

Id. Id. 45 Id. 46 Id. 47 Mingo Logan Coal Co. Inc., v. EPA, 850 F.Supp.2d 133, at 133 (D. Ct. DC. 2012). Posey 14

Ryan M. Posey, An Analysis of EPAs 404(c) Veto Authority Analysis of an agencys interpretation of a statute is governed by the Chevron Doctrine48. The court must first determine whether Congress has directly spoken on the question at issue. If the intent of Congress is clear, the agency must give effect to the unambiguously expressed intent of Congress.49 However if the statute is silent or ambiguous, the court must determine whether the agencys determination is reasonable.50 If the agencys interpretation is reasonable, under Chevron a court is required to defer to and to follow the agencys reasonable interpretation of the statute . The court in Mingo Logan 1 ,in analyzing the first prong of the Chevron doctrine, found that EPAs interpretation was inconsistent with the CWA as a whole, and th at EPA did not have post-permit veto power under 404(c).51 The court stated: There is no question that the sole provision relied upon by EPA does not expressly authorize it to exercise the power it purported to exercise here, so the case cannot be resolved in EPAs favor on Chevron grounds. At best, the text is ambiguous.52 The court dismissed assertions by the EPA that the term whenever in 404(c) permits the EPA to withdraw its assent to a disposal site at any time, even if the agency did not exercise its veto authority originally before the Corps issued the section 404

48

See Chevron, USA, Inc., v. Natural Res. Def. Council., Inc., 467 U.S. 837 (1984) (if a statute administered by an agency is ambiguous, the courts will defer to the agencys reasonable interpretation of the statute). 49 Id., at 842-843. 50 Id., at 843. 51 Id., at 139, 148. 52 Id., at 142. Posey 15

Ryan M. Posey, An Analysis of EPAs 404(c) Veto Authority permit.53 The court also found this language troublesome because the EPA under 404(c) does not specify a disposal site and is only empowered under CWA section 404(c )to prohibit or decline to prohibit the Corps from doing so.54 It would make little sense, the court reasoned, to interpret 404(c) to allow the EPA to withdraw a decision that it has not made.55 Although the court expressed considerable doubts regarding whether EPAs interpretation would be deemed lawful under the first step of the Chevron analysis, the court proceeded to review EPAs interpretation under the second step of Chevron.56 The court held that even if EPAs interpretation was not subject to invalidation under step one of Chevron, the interpretation of the statute was not reasonable and could not be upheld under Chevron step two.57 The court reasoned that EPAs interpretation would create an impractical and complicated non-revocation revocation system by which a permit would be automatically revoked by an entirely separate federal agency (than the agency who granted the permit). Further the court held that it would be unreasonable, particularly in light of the lack of explicit statutory

53

Id., at 139 (The interpretation that 404(c) conveys a post-permit veto authority to the EPA is a reading that does not exactly leap off the page.). 54 Id., at 139. 55 Id. 56 Id., at 148 (For all the reasons set forth above, the Court is of the view that EPAs position is inconsistent with the statute as a whole, and that its action could be deemed unlawful at the first step of the Chevron analysis). 57 Id., at 148. Posey 16

Ryan M. Posey, An Analysis of EPAs 404(c) Veto Authority authority,58 to sow a lack of certainty into a system that was expressly intended to provide finality.59 To summarize, the court in Mingo Logan 1 held that the EPA exceeded its authority under 404(c) of the CWA by issuing a post-permit veto and granted summary judgment to Mingo Logan. The EPA subsequently appealed the decision to the United States Court of Appeals. C. Mingo Logan 2 The EPAs appeal was heard before the United States Court of Appeals as Mingo Logan Coal Co., v. EPA60 (Mingo Logan 2). The court reviewed the grant of summary judgment de novo, and applied the same standards as those that governed the district courts determination.61 Although the Court of Appeals applied the same Chevron doctrine as the District Court, the former reached an entirely different conclusion than the latter. Under Chevron step one, the court held that 404(c) unambiguously expressed the intent of Congress.62 The Court of Appeals held that although 404 of the CWA vested the Corps with the authority to issue permits to discharge dredged and fill

58

Id., at 139 (EPAs position is that 404(c) grants it plenary authority to unilaterally modify or revoke a permit that has been duly issued by the Corps the only permitting agency identified in the statute and to do so at any time. This is a stunning power for an agency to arrogate to itself when there is absolutely no mention of it in the statute.) 59 Id., at 152. 60 Mingo Logan Coal Co., Inc. v. EPA, 2013 WL 1729603 (Ct. App. Dc. Cir. April 23, 2013). 61 Id., at 3. 62 Id. Posey 17

Ryan M. Posey, An Analysis of EPAs 404(c) Veto Authority material, Congress granted the EPA broad backstop authority over the Corp in 404(c).63 The court stated: 404 imposes no temporal limit on the Administrators [EPA] authority to withdraw the Corps specification but instead expressly empowers him to prohibit, restrict or withdraw the specification whenever he makes a determination that the statutory unacceptable adverse effect will result.64 The Court of Appeals reasoned that by using the expansive conjunction whenever, Congress manifested a clear intention to grant the EPA the authority to withdraw a specification at any time.65 The court found other textual support for this interpretation in the use of withdrawal in 404(c). The Court of Appeals reasoned that withdrawal is a term of retroactive application, when compared to the other explicit authorities in the statute (prohibit/deny/restrict terms of prospective application), so that the withdraw language is indicative that Congress intended the EPA to possess post-permit veto authority.66 The court largely neglected to address the conclusion by the District Court that the EPAs interpretation would trample on provisions that were intended to give permits certainty and finality, or that public policy considerations of additional certainty and finality in the permit process render EPAs interpretation suspect. The court

63 64

Id. Id., at 4 citing 33 U.S.C. 1344(c). 65 Id., at 4. 66 Id. The text implies that EPAs 404(c) veto power can only be exercised post-permit. If the court did not recognize EPAs post-permit veto authority it would render 404(c)s withdraw language (when compared to prohibit /deny/modify terms of prospective application) superfluous, a result to be avoided. Id. Posey 18

Ryan M. Posey, An Analysis of EPAs 404(c) Veto Authority brushed these concerns aside, merely stating that despite the District Courts concerns , the language of 404(c) clearly indicates that the Administrator retains authority to withdraw a specified disposal site whenever he determines such [unacceptable adverse] effects will result from discharges at the sites.67 The Court of Appeals held that clear statutory language overrides any public policy considerations that the court may identify, and the Court of Appeals therefore deferred to the EPAs interpretation. The court did not engage in step two of Chevron, because its finding of unambiguous intent in step one rendered analysis of step two unnecessary for the disposition of the case; however, it is no stretch to say that the court inherently viewed the EPAs interpretation as reasonable. The Court of Appeals reversed the District Court decision and remanded the case for resolution of Mingo Logans outstanding APA claims.68 IV. The Mingo Logan Coal Decision An Evaluation of the Decision and Questions Left Unanswered The rationale upholding the EPAs interpretation of section 404(c) appears to be the stronger argument, because the U.S. Supreme Court has recently held, in City of Arlington v. F.C.C.,69 that the Chevron doctrine applies to an administrative agencys determination of the agencys authority under a particular statute. However, that approach has left several unanswered questions which have yet to be resolved through

67 68

Id., at 5. Id., at 6. 69 City of Arlington, TX v. FCC, No. 11-1545, at 10 (2013). Posey 19

Ryan M. Posey, An Analysis of EPAs 404(c) Veto Authority jurisprudence. Both the District Court and the Court of Appeals made a compelling case from opposite vantage points on this issue, and by analyzing their arguments perhaps a practical alternative may be found on common ground. A. Support for the Retroactive Post-Permit 404(c) Veto The strongest case for the EPAs interpretation of its authority under section 404(c) is that it is in furtherance of the purpose and legislative intent of the CWA generally and 404(c) specifically. The objective of the CWA is to restore and maintain the chemical, physical, and biological integrity of the Nation s waters.70 As discussed in the Brief History of the EPAs 404(c) Veto Authority, the case law from JCC 1 to Alliance 2 has been trending towards increasing the EPAs discretion and o verall ability to further this objective. Since JCC 1, the courts have increased the deference and discretion given to the EPA in every subsequent 404(c) case. The purpose of section 404(c) of the CWA and Congress intent under that section have become increasingly persuasive to the courts in favor of the EPA. In a way, the jurisprudence on the 404(c) issue has been moving towards the decision in Mingo Logan 2 for some time. The EPAs interpretation, broadening its ability to protect the integrity of the Nations waters and prevent unacceptable adverse impacts to the environment, is unsurprisingly persuasive when viewed in this context. The textual argument in favor of the EPAs interpretation is also a strong one. Although the District Court in Mingo Logan 1 attempted to brush away the explicit term

70

33 U.S.C. 1251(a). Posey 20

Ryan M. Posey, An Analysis of EPAs 404(c) Veto Authority whenever in 404(c) as a reading which does not leap off the page,71 and dismissed the absence of an explicit temporal limit on the EPAs 404(c) authority as inconsistent with the statutory structure as a whole,72 these arguments fall short when considering section 404(c)s statutory language and legislative history. There are two rational conclusions which can be drawn when considering the text of 404(c) alone. The first is that the rationale annunciated by the Court of Appeals in Mingo Logan 2 is correct and the statute unambiguously states its intent in favor of the EPAs interpretation. Under this conclusion, the EPAs interpretation is upheld. The second is that although the text of 404(c) does not unambiguously convey EPA postpermit veto authority; the EPAs interpretation is permissible/reasonable and should be upheld under either Chevron or Skidmore deference.73 While Skidmore may provide sufficient authority for a court to defer to EPAs interpretation of section 404(c) it is important to note that Courts have consistently found Chevron deference to apply to agency determinations regarding the scope of the agencys own statutory authority, which further strengthens the argument of deference to the EPAs 404 interpretation.74 However, either approach results in an affirmation of the EPAs

71 72

Mingo Logan Coal Co. Inc., v. EPA, 850 F.Supp.2d 133, at 139 (D. Ct. DC. 2012). Id., at 142. 73 Jim Rossi, Respecting Deference: Conceptualizing Skidmore Within the Architecture of Chevron, 42 Wm. & Mary L. Rev. 1105, at 1117, 1121(2001) (Skidmore deference [Skidmore v. Swift & Co., 323 U.S. 134 (1944).] is sometimes referred to as weak deference, in contrast to the strong deference that has evolved post -ChevronChevron would advise deference to the agencys reasonable statutory interpretation. By contrast, Skidmore would afford respect, dependent on the persuasive force of the agencys position). 74 City of Arlington, TX v. FCC, No. 11-1545, at 10 (2013). Posey 21

Ryan M. Posey, An Analysis of EPAs 404(c) Veto Authority interpretation of its authority under section 404(c), and is more supportable than the conclusion reached by the District Court in Mingo Logan 1. In further support of the EPAs post-permit veto authority under section 404(c), and a consideration not adequately measured by the courts in the Mingo Logan Coal Co. case, is the impact of new information on existing 404(c) permits.75 Consider the scenario in which a project developer applies for and is granted a 404 permit by the Corps. Prior to the Corps issuance of the permit, the EPA (unaware of the extent of a particular type of potential adverse environmental impact) declines to use its section 404(c )veto power and only later discovers that the project has an unacceptable adverse impact on the environment. It is difficult to deduce how the purpose of the CWA would be served by barring the EPA from acting under section 404(c) to veto the Corps-issued permit on this new information to prevent or mitigate an unacceptable adverse impact on the environment, as it would be under decision in Mingo Logan 1. In addition, the EPA would need retroactive veto authority under 404(c) in order to prohibit the use of a previously-issued general section 404 permit at a particular site, where EPA learns after the issuance of a general permit that a particular activity at a particular site under the general permit causes unacceptable environmental harm.

75

Mingo Logan Coal Co. Inc., v. EPA, 850 F.Supp.2d 133, at 137 (D. Ct. DC. 2012) (The EPA considered and ultimately used its 404(c) post-permit veto authority due to new information regarding the adverse impacts of the project on the environment). Posey 22

Ryan M. Posey, An Analysis of EPAs 404(c) Veto Authority B. Questions Left Unanswered by the Court of Appeals The interpretation of section 404(c) in favor of the EPA is not however without its flaws, and is vulnerable to criticism on a number of counts. First, the refusal of the Court of Appeals in the Mingo Logan 2 decision to sufficiently engage and address the issues of uncertainty and lack of finality presented by an EPA post-permit 404(c) veto is problematic. While it is certainly a legally sufficient argument put forth in Mingo Logan 276, it is unnecessary to hide under its shield. The court in Mingo Logan 2 could have addressed the issue by stating: Although we find that the language of 404(c) clearly and unambiguously confers upon EPA post-permit veto authority, if the statute was found to be ambiguous EPAs interpretation would be upheld. In considering the reasonableness of EPAs interpretation under step 2 of Chevron, although there are significant public policy arguments concerning certainty and finality, the governmental and public interest in preventing unacceptable adverse impacts to the environment outweigh these concerns. The EPAs interpretation is reasonable and in furtherance of the objectives of the CWA, and is entitled to deference under this scenario. The legislative history of the CWA indicates that economic concerns stemming from decreased certainty and finality are insufficient when compared to the interest of
76

The Court of Appeals in Mingo Logan 2 held that because the CWA statute clearly and unambiguously gives EPA post-permit veto authority, further analysis regarding the reasonableness of the interpretation and balancing of public policy interests is unnecessary. Posey 23

Ryan M. Posey, An Analysis of EPAs 404(c) Veto Authority environmental protection.77 This would have addressed the issues raised by the District Court in Mingo Logan 1 in a more direct and conclusive manner. Instead, the Court of Appeals in Mingo Logan 2 evades this issue by using its conclusion in step 1 to justify all other points of disagreement with the District Court in Mingo Logan 1, whereas to have addressed each point directly would have presented a stronger argument. The extremely infrequent use of the 404(c) veto by the EPA would also alleviate some concerns regarding a loss of confidence in permits due to EPAs 404(c) post permit veto authority. Second, an issue not addressed by either court is whether the retroactive postpermit 404(c) may implicate equitable estoppel and due process limitations. Equitable estoppel is a doctrine which a court may invoke to avoid injustice in particular cases. 78 Consider the case of Mingo Logan, where the EPAs 404(c) veto was used over two years after the issuance of the permit by the Corps. It is not difficult to imagine a scenario in which Company X obtains a permit for Project Y and uses significant resources and investments in furtherance of project Y in reliance on the permit that the Corps issued to it. Several years into construction of project Y the EPA uses its 404(c) post-permit veto, effectively ending the project at substantial economic loss to Company X. Would it not be fundamentally unfair for Company X, who relied on the permit issued by the Corps and not vetoed by the EPA, to suffer this loss?

77

Library of Cong., A Legislative History of the Water Control Pollution Act Amendments of 1972, 178 (1973). 78 Mich. Express, Inc. v. US, 374 F.3d 424, at 427 (6th Cir. 2004). Posey 24

Ryan M. Posey, An Analysis of EPAs 404(c) Veto Authority However a party attempting to estop the government, as Company X in the Mingo Logan Coal hypothetical would be, bears a very heavy burden.79 Although the standards and elements of estoppel vary based on jurisdiction and field of law, it appears well accepted that the government may not be estopped on the same terms as any other litigant.80 It would be likely that a plaintiff would need to show some affirmative misconduct, beyond mere negligence that misleads the plaintiff.81 It is unclear whether the EPAs actions in the Mingo Logan Coal case would rise to the requisite level to make estoppel an available remedy for the plaintiffs. However even with the potentially large economic loss at stake for the plaintiffs in Mingo Logan Coal, absent active misrepresentations EPAs actions would probably not meet this element. 82 In regards to due process, retroactive legislation must meet a burden not faced by legislation that has only prospective effect.83 However, to meet that standard the government must only show that the retroactive application is itself justified by a rational purpose.84 Although retroactive application that is particularly harsh and oppressive may violate due process,85 unless the legislation meets the arbitrary and irrational standard it will likely be upheld.86

79 80

Fisher v. Peters, 249 F.3d 433, at 444 (6th Cir. 2001). Heckler v. Cmty. Health Servs. of Crawford County, Inc., 467 U.S. 51, at 60 (1984). 81 Mich. Express, at 427. 82 Romualdo P. Eclavea, 28 Am. Jur. 2d Estoppel and Waiver 29 (2013)(Although the courts may apply the doctrine of equitable estoppel against the State, as a general rule, equitable estoppel will be applied against the State only in rare instances and under exceptional circumstances). 83 Pension Ben. Guar. Corp. v. R.A. Gray & Co., 467 U.S. 717, at 730 (1984). 84 Id. 85 Id., at 732; citing Welch v. Henry, 305 U.S. 134, at 147 (1938). 86 Id. Posey 25

Ryan M. Posey, An Analysis of EPAs 404(c) Veto Authority If overused by EPA, the 404(c) post-permit veto would cause uncertainty and distrust in the CWA permit process, and the increased financial risk associated with projects requiring 404 permits that may be revoked at any time could be crippling to the economy. The retroactive application of any rule is inherently scrutinized, and in the case of CWA section 404(c) vetos, given the economic and due process concerns, an EPA retroactive veto likely should implicate a higher standard of review for EPA action than an EPA prospective 404(c) veto87, even if a retroactive veto may not violate due process or equitable estoppel principles. Third, upholding the EPAs post-permit section 404(c) veto authority may encourage the EPA not to closely scrutinize a section 404 permit during the initial application process.88 This added discretion could lead to abuse of power by EPA and arbitrary application of its post-permit veto based on negotiation, compromise, political elections or outright corruption (and not on the statutory standard of unacceptable adverse environmental impacts). If an agency is granted such unbridled retroactive veto authority, the statute conferring such authority should include strong safeguards to prevent abuse of discretion by the agency in exercising such authority, and limitations on what circumstances justify the EPAs use of a post-permit veto.

87

Currently the standard for the post-permit and prospective 404(c) veto is the same, the EPA may use the veto whenever it determines that unacceptable adverse environmental effects will result. 88 Oxley, Amy: No Longer Mine: An Extensive Look at the EPAs Veto of the 404 Permit Held by the Spruce No. 1 Mine, 36 S. Ill. U. L.J. 139 (2011). Posey 26

Ryan M. Posey, An Analysis of EPAs 404(c) Veto Authority V. Discussion A More Balanced Approach Although the Court of Appeals in Mingo Logan 2 presented a strong argument in support of the EPAs post-permit veto authority, the issues discussed above present challenges to the practical implementation of such authority. A. Recommendation that Congress Amend 404(c) to Recognize the PostPermit Veto and Establish a Heightened Standard for its Application The purpose of the CWA is best served by interpreting 404(c) as providing EPA with both prospective and post-permit veto authority. However, the same substantive standard should not apply to both types of veto. Under the current 404(c), the EPA may veto a 404 permit whenever it determines that an unacceptable adverse impact on the environment would result.89 The 404(c) post-permit veto should not be reviewed under this standard; instead EPA should be required to base a retroactive veto on a certain type of newly acquired information in order to exercise post-permit veto authority under section 404(c ). Heightening the standard which the EPA must meet in order to issue a post-permit veto would mitigate the current due process concerns and uncertainty regarding current permits. For example, the amended statutory language might state: The EPA is authorized to use its 404(c) veto authority retroactively, after the issuance of a 404(b) permit by the Corps, but can do so only in the event that:

89

33 U.S.C. 1344(c). Posey 27

Ryan M. Posey, An Analysis of EPAs 404(c) Veto Authority 1) The EPA, based on newly discovered information, has determined that there is a substantially increased adverse impact on the environment than that which was present at the time the 404(b) permit was issued by the Corps; or 2) The permit holder intentionally concealed or misrepresented to the EPA or the Corps important information concerning an adverse environmental impact; or 3) Any other situation involving newly acquired information which substantially changes the grounds on which the 404(b) permit was originally issued by the Corps. By using a heightened standard such as the substantially increased standard in the above proposal, the statute would limit the EPAs retroactive veto authority while maintaining the agencys ability to use its 404(c) post-permit veto authority under the circumstances necessary to achieve the goals of the CWA. This proposal may provide a solution by which the benefits of retroactive section 404(c) veto authority and the concerns of due process may be balanced. B. Change the Standard for Judicial Review of the 404(c) Post-Permit Veto Currently, the standard for judicial review of EPAs 404(c) veto authority, whether prospective or post-permit in nature, is the arbitrary and capricious standard.90 Under this standard, the court considers whether the agencys decision was based on a

90

James City County, Va. v. EPA, 12 F.3d 1330, at 1337 (4th Cir. 1993) (EPAs actions under 404 to be reviewed under the arbitrary and capricious standard, not the substantial evidence standard of review). Posey 28

Ryan M. Posey, An Analysis of EPAs 404(c) Veto Authority consideration of the relevant factors and whether there was a clear error of judgment. 91 This standard is very deferential to the agency, and unless the agencys action is based on factors it is not authorized to consider under the relevant statute 92 it will be upheld. This standard was applied in JCC 2, and is in sharp contrast to the substantial evidence standard applied by the court in JCC 1 (although erroneously). The substantial evidence standard of review sets aside an agency action if it is unsupported by substantial evidence.93 The substantial evidence standard is defined as reasonableness, or such evidence as a reasonable mind might accept as adequate to support a conclusion.94 Comparatively it is less deferential than the arbitrary and capricious standard, although the substantial evidence standard requires something less than a preponderance of the evidence.95 By subjecting the EPAs use of the 404(c) post-permit veto authority to a heightened standard of review such as the substantial evidence standard, as opposed to the arbitrary and capricious standard, the courts oversight will limit the dangers of EPA overuse and abuse of discretion in the application of its 404(c) post-permit veto authority. This revised standard of judicial review would also provide current permit
91

Motor Vehicle Mfrs. Assn of the United States, Inc. v. State Farm Mut. Auto. Ins. Co., 483 U.S. 29 (1983). 92 Id. Arbitrary and Capricious is defined as including a situation when the agency has relied on factors which Congress had not intended it to consider, entirely failed to consider an important aspect of the problem, offered an explanation for this decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise. Id. 93 5 U.S.C. 706(2)(E). 94 Consolidated Edison Co. of N.Y. v. N.L.R.B., 305 U.S. 197, at 229 (1938). 95 Consolo v. Federal Maritime Commission, 383 U.S. 607, at 620 (1966). Posey 29

Ryan M. Posey, An Analysis of EPAs 404(c) Veto Authority holders with more confidence, as the EPA would be given less deference in its use of the 404(c) post-permit veto than in its use of the 404(c) prospective veto. C. Recommendation that Congress Provide Administrative Procedures to Mitigate Economic Hardship Caused by EPAs Use of the 404(c) PostPermit Veto A principal argument against the EPAs 404(c) post-permit veto is the potential equitable estoppel concerns from permit holders who have invested large amounts of resources in projects requiring a permit. Conceivably, and as was the case in Mingo Logan Coal 1 and Mingo Logan Coal 2, a current permit holder could fall under the EPAs 404(c) post-permit veto power despite being in complete compliance with the section 404 permit earlier issued by the Corps. This risk can be mitigated, by amending CWA 404 to afford current permit holders a buffer should the EPA decided to exercise its 404(c) post-permit veto authority. These amendments could include provisions regarding notice requirements that EPA would be required to follow, mandating that EPA notify the holder of a CWA section 404 permit of its intention to use its 404(c) veto authority or a statutorily mandated amount of time between the date of notice and implementation of a 404(c) veto, during which the permit holder could initiate judicial challenges to EPAs proposed veto to avoid an EPA 404(c) veto from becoming effective. Provisions such as these would give current permit holders increased protection from economic hardships stemming from a potential 404(c) veto.

Posey 30

Ryan M. Posey, An Analysis of EPAs 404(c) Veto Authority VI. Conclusion The present interpretation of 404(c) of the CWA is that it confers upon EPA the authority to veto a 404 permit before, during and after that permit is issued by the Corps. However, this authority of the EPA presents as many challenges as it does benefits. It is inherent in our law and society to treat retroactive rules with more scrutiny than prospective rules, and with good reason. However in this case, the benefits of the 404(c) post-permit veto outweigh the due process and fundamental fairness concerns that challenge it. Still, while it is an admirable legal decision, Mingo Logan 2 does not present a workable long-term solution to these conflicting concerns. Without compromise, the EPAs exercise of 404(c) post-permit veto authority will impair the goals of the CWA and will result in complicated litigation in the courts, requiring courts to weigh application of EPAs post-permit veto authority with the constitutional rights of those it is applied against. While the EPA has rarely used its 404(c) veto authority in the past, the expansion of EPA authority creates the potential for increased use of that authority in the future, and the stakes therefore are high for section 404 permit holders with significant investments now vulnerable to EPA veto action. The best way to move forward is to find common ground, to allow the EPA to have 404(c) post-permit veto authority but to limit the ways and the scope in which it can be applied. By establishing substantive and procedural safeguards to limit the EPAs newfound section 404(c) post-permit authority, the CWA can achieve its purposes while providing increased certainty and protection to current 404 permit holders. Posey 31

Ryan M. Posey, An Analysis of EPAs 404(c) Veto Authority Although retroactive and prospective rules should be treated differently, in the context of the CWA and specifically 404(c) it is preferable to have both types of rule under CWA section 404(c).

Posey 32