CHAPTER 13 THE EPA'S EXPANDING INTERPRETATION OF ITS REGULATORY AUTHORITY UNDER SECTION 404 OF THE CLEAN WATER ACT--PRACTICAL IMPLICATIONS FOR THE MINING INDUSTRY

• Jurisdiction: United States

Water-Energy Nexus: Acquisition, Use, and Disposal of Water for Energy and Mineral Development
(Sep 2012)
CHAPTER 13
THE EPA'S EXPANDING INTERPRETATION OF ITS REGULATORY AUTHORITY UNDER SECTION 404 OF THE CLEAN WATER ACT--PRACTICAL IMPLICATIONS FOR THE MINING INDUSTRY
Kathryn Kusske Floyd
Jay C. Johnson
Kristin Stastny
Doresey & Whitney LLP
Washington, DC
Minneapolis, Minnesota
Julia A. Jones
Anadarko Petroleum Corporation
Denver, Colorado

KATHRYN KUSSKE-FLOYD is a partner in the Regulatory Affairs Group at Dorsey & Whitney in the Washington, D.C. office. She has a nationwide practice of environmental and natural resources law, with emphasis in regulatory counseling and litigation under the major federal environmental statutes. Her experience covers the Clean Water Act, the National Environmental Policy Act, the National Historic Preservation Act, and the Endangered Species Act. She is counsel to National Mining Association and other national trade associations in pending litigation against EPA challenging its retroactive veto of a 404 permit. She obtained her JD manga cum laude from American University, Washington College of Law and her BS manga cum laude from Georgetown University.

JULIA JONES is Counsel, Anadarko Petroleum Corporation in Denver. Prior to joining Anadarko, Julia practiced in Washington, D.C. where she worked in both the private sector and the Federal Government. In Washington, D.C, Julia served as a trial attorney for the U.S. Department of Justice's Environment and Natural Resources Division focusing on the defense of suits brought against the U.S. Government to challenge environmental and conservation issues. She also worked for the U.S. Department of Interior, Office of the Secretary, where she worked on natural resources legal and policy matters. In the private sector, Julia has represented clients, including utilities, coal companies, and oil and gas companies in environmental regulatory and compliance matters, permitting, natural resources regulation, and litigation. Julia is a graduate of Indiana University of Law, Bloomington, with a joint degree in Environmental Sciences from Indiana University School of Public and Environmental Affairs. Her specialties are environmental law, energy law, and federal administrative practice.

In recent years, the Environmental Protection Agency (EPA) has employed an increasingly expansive view of its regulatory authority under Section 404 of the Clean Water Act (CWA). In implementing this expansion, however, EPA frequently has avoided notice and comment rulemaking under the Administrative Procedure Act (APA) and has instead attempted to implement new requirements and give itself more power through the adoption of "guidance" and through novel interpretations of existing statutory provisions. These expansions of regulatory authority have the potential to significantly impact natural resources industries by delaying or even halting the permitting process. Even for projects that are not directly impacted by EPA action, the agency's attempts to increase its authority under the CWA without passing new rules under APA procedures are likely to result in increased regulatory uncertainty.

Although federal agencies may permissibly issue guidance that does not effect binding changes in the law without undergoing notice-and-comment procedures required under the APA, binding legislative rules must comply with the notice-and-comment requirements.¹ An agency cannot escape the procedural requirements of notice-and-comment rulemaking by merely labeling a substantive change as "guidance." But it appears that is precisely what EPA is attempting to do in the CWA arena.

This commentary provides four case study examples of recent actions by EPA to expand the scope of its jurisdiction and authority under Section 404 of the CWA in violation of both the provisions of the CWA itself and the provisions of the APA that require that agencies enacting new laws or regulations provide notice to interested parties and allow persons to participate in the process of adopting the new regulation. First, we discuss the EPA's recent attempt to retroactively apply its Section 404(c) veto authority to a permit that had already been approved by the Army Corps of Engineers (Corps) and which was in operation. Second, we analyze EPA's threatened use of a preemptive veto under Section 404(c) of the CWA to prevent the issuance of a hypothetical permit for which no application has even been submitted. Third, we analyze EPA's attempted use of "guidance" for the review of Appalachian surface coal mining operations in order to expand its authority and to impose significant new substantive obligations on permit applicants. Finally, we examine EPA's increasing use of the "Aquatic Resources of National Importance" designation as a means to delay and oppose Section 404 permits. Each of these examples offers lessons for industry in predicting, and when necessary, opposing, EPA's efforts to expand the scope of its CWA powers.

We begin, however, with a brief overview of the CWA, with focus on the history and statutory and regulatory framework of Section 404 permitting under the Act.

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I. THE CLEAN WATER ACT

Congress enacted the Federal Water Pollution Control Act (WPCA) in 1948 in order to "recognize, preserve, and protect the primary responsibilities and rights of the States in controlling water pollution ... and to provide Federal technical services to State and interstate agencies ... in the formulation and execution of their stream pollution abatement programs."² The WPCA was the first major U.S. law to address water pollution. Growing public awareness and concern for controlling water pollution led to sweeping amendments in 1972. As amended in 1972, the law became commonly known as the Clean Water Act (CWA).

The 1972 amendments established the basic structure for regulating pollutant discharges into the waters of the United States; gave EPA the authority to implement pollution control programs such as setting wastewater standards for industry; made it unlawful for any person to discharge any pollutant from a point source into navigable waters, unless a permit was obtained under its provisions; funded the construction of sewage treatment plants under the construction grants program; and recognized the need for planning to address the critical problems posed by nonpoint source pollution.³ The CWA today contains two permitting schemes to address discharges into navigable waters--National Pollutant Discharge Elimination System (NPDES) permits under section 402 of the CWA and Fill Material Permits under Section 404.⁴

Section 301 of the CWA provides that the discharge of any pollutant by any person is unlawful unless the entity is in compliance with a limited number of other sections of the Act.⁵ Section 402 authorizes the issuance of NPDES permits, which are issued either by EPA or by a state authorized to issue such permits.⁶ An NPDES permit is required for discharge of pollutants which are defined as "dredged spoil, solid waste, incinerator residue, sewage, garbage, sewage sludge, munitions, chemical wastes, biological materials, radioactive materials, heat, wrecked or discarded equipment, rock, sand, cellar dirt and industrial, municipal, and agricultural waste discharged into water."⁷

Section 404 of the Clean Water Act requires a permit for the "discharge of dredged or fill material into the navigable waters."⁸ Section 404 authorizes the U.S. Army Corps of Engineers (the Corps) under Section 404(a),⁹ or an approved state under Section 404(h)¹⁰ to issue permits

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for discharges of dredged or fill material at specified sites in waters of the United States. To issue a Section 404 permit, the Corps must ensure that a number of regulatory requirements are met. A dredge or fill action (1) must not "cause or contribute to significant degradation of the waters of the United States,"¹¹ (2) must not cause or contribute to a water quality violation,¹² and (3) must be in the public interest.¹³ Furthermore, in order to issue a permit under section 404, the Corps must first specify a disposal site for the discharges of fill material.¹⁴ These disposal sites are determined by applying guidelines adopted pursuant to Section 404(b)(1) of the CWA.¹⁵ The Corps is also responsible for enforcing compliance with permit terms,¹⁶ and has the authority to modify, suspend, or revoke a permit after issuance.¹⁷ Once the Corps has issued a permit, the permit holder may lawfully discharge the fill material as specified under the permit.

Although the Corps is the lead agency in permitting discharges of dredged or fill material, EPA also has a statutorily defined role in fill permitting under the CWA. The EPA is responsible for promulgating, in coordination with the Corps, the guidelines for the specification of disposal sites under section 404(b)(1).¹⁸ The Corps has sole authority to issue Section 404 permits,¹⁹ but in doing so must apply guidelines that it develops in conjunction with the EPA. As required by the CWA,²⁰ the EPA and the Corps have promulgated 404(b)(1) guidelines, which are codified at 40 C.F.R. Part 230 (2010), to guide the Corps' review of the environmental effects of proposed disposal sites. The 404(b)(1) guidelines provide that "[n]o modifications to the basic application, meaning, or intent of these guidelines will be made without rulemaking by the Administrator [of the EPA] under the Administrative Procedure Act."²¹

The 404(b)(1) guidelines aim to fulfill the goal of the CWA through "control of discharges of dredged or fill material,"²² and apply "to the specification of disposal sites for discharges of dredged or fill material into waters of the United States."²³ These guidelines prohibit "discharge

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of dredged or fill material" where "there is a practicable alternative to the proposed discharge which would have less adverse impact on the...