Ohio Valley Environmental Coalition et al. v. Fola Coal Company

In a unanimous decision  issued Wednesday, January 4, 2017, the United States Court of Appeals for the Fourth Circuit held that narrative water quality standards incorporated by reference into a National Pollution Discharge Elimination System (NPDES) permit are substantive permit terms, and that permittees must comply with these terms to receive the benefit of the Clean Water Act (CWA) permit shield under section 402(k). The decision threatens to severely erode the protection afforded by the permit shield and provides a clear path for environmental groups and courts to translate narrative water quality standards into enforceable permit terms.

The appeal arose from a ruling  in which the U.S. District Court for the Southern District of West Virginia held that a NPDES permit provision prohibiting discharges from causing or materially contributing to violations of water quality standards (Permit Part C) created an independently enforceable effluent limitation, compliance with which is a prerequisite for protection under Clean Water Act (CWA) §402(k).  Section 402(k) establishes that compliance with a NPDES permit is compliance with the CWA and provides a shield from citizen suits (the permit shield).

Because the court agreed with the plaintiffs in Fola that the permittee’s discharges caused or materially contributed to a significant adverse impact to the chemical and biological components of the stream's aquatic ecosystem, the court concluded that the permittee violated the permit and was properly subject to citizen suit enforcement.

The district court judge effectively ruled that the “cause or materially contribute” provision could be used to convert the state’s narrative water quality criteria into enforceable effluent limits in the permit, even though the West Virginia Department of Environmental Protection (WVDEP) did not include a specific numeric limit. While states can impose water quality criteria as end-of-pipe limits, they must expressly take action to do so; it is NACWA’s position that water quality standards cannot, by themselves, be considered effluent standards or limitations and, therefore, should not be independently or directly enforced or implemented.

The district court judge rejected defendant’s “permit shield” defense even though there was no dispute that the pollutants at issue had been disclosed in the permit application to be present, and the Fourth Circuit affirmed this ruling.

Background
Like NPDES permits in many jurisdictions, the permit at issue included the following statement:
The discharge or discharges covered by a WV/NPDES permit are to be of such quality so as not to cause violation of applicable water quality standards adopted by the Department of Environmental Protection, Title 47, Series 2.

West Virginia water quality standards are violated if wastes “cause ... or materially contribute to” 1) “[m]aterials in concentrations which are harmful, hazardous or toxic to man, animal or aquatic life” or 2) “[a]ny other condition ... which adversely alters the integrity of the waters of the State.” WV CSR § 47–2–3.2.e, –3.2.i.  Additionally, “no significant adverse impact to the chemical, physical, hydrologic, or biological components of aquatic ecosystems shall be allowed.” WV CSR§ 47–2–3.2.i.

Environmental groups filed a citizen suit against Fola Coal Company in August 2013 asserting NPDES permit violations for conductivity relying on the state regulation prohibiting discharges from causing or materially contributing to a significant adverse impact to the chemical and biological components of the stream's aquatic ecosystem. Plaintiffs in the case failed to raise concerns during the permitting period and waited until several years later to file a citizen suit collaterally attacking the permit.  EPA likewise did not object to the permit.

District Court Decision
On January 27, 2015, Judge Chambers for the US District Court for Southern District of West Virginia determined that despite absence of a specific effluent limit in the NPDES permit for conductivity or salinity, the discharge caused or materially contributed to a significant adverse impact in violation of the narrative water quality criteria incorporated into those permits. Judge Chambers held that with the state’s numeric and narrative water quality criteria incorporated by reference into defendant’s NPDES permit, those criteria constituted independently enforceable permit conditions.

In determining what the “applicable” narrative criteria require, the court made no effort to determine how the permitting authority interpreted the narrative criteria at the time of permit issuance. Instead, based on its independent, after-the-fact interpretation of the narrative criteria, the court read Permit Condition C as unambiguously requiring the permittee to control sulfates and conductivity to levels set by the court post hoc. The court ignored the fact that both the state permitting authority and EPA were obligated to determine at the time of permit renewal whether the level of conductivity and sulfates – the pollutants at issue - disclosed by the permittee would cause or materially contribute to a violation of the applicable narrative criteria, and to include ensure limits on those pollutants that they deemed necessary to ensure that the discharge would not cause exceedance of the criteria.

Fourth Circuit Decision
The Fourth Circuit affirmed Judge Chambers’ decision, explaining that “because the company did not comply with the conditions of its permit, the permit does not shield it from liability under the Clean Water Act, and the district court properly ordered appropriate remedial measures.”  In its analysis, the court rejected the idea that the reference to water quality standards reflected the obligation of the state to develop permit terms that are protective of water quality standards, finding instead that the prohibition on discharges violating water quality standards is an affirmative, independently enforceable obligation on the permittee. 

The court also clarified that its holding in Piney Run Pres. Ass’n v. Cnty. Comm’rs of Carroll Cnty  does not excuse permittees from complying with catch-all provisions within the permit, regardless of whether the permit contains an effluent limit for the pollutant at issue.  Specifically, the court reiterated the importance of compliance with the entire permit, restating its Piney Run holding with emphasis: “We expressly held that a permit shields its holder from liability …as long as … the permit holder complies with the express terms of the permit and with the Clean Water Act’s disclosure requirements.”  Indeed, the court explained that it “did not hold that numerical limitations on specific pollutant discharges constituted the only proper subject of regulation under the Clean Water Act,” but that water quality standards remained an appropriate target for permittees despite the “shift in focus of environmental regulation towards the discharge of pollutants.”  Notably, the court pointed out that the permit at issue in Piney Run did not contain a prohibition on violating water quality standards, and therefore such a provision was not part of its analysis in that case.

The court also rejected the defendant’s assertion that it did not have fair notice that the water quality standards were enforceable limits of the permit, noting that throughout the history of the permit, Fola had numerous individual opportunities to be put on notice.  In doing so, the court ignored the larger picture of what constitutes fair notice in the context of the permitting process, and overlooked the fact that a blanket prohibition on violating water quality standards does not provide clear guidance on what a permittee must do to comply nor what targets it must meet to avoid enforcement. 

Implications for NACWA members
While the provision at issue in this case is contained in a coal mining facility permit, many NPDES permits contain a catch-all provision prohibiting discharges from causing or contributing to violations of water quality standards.  Thus, the court’s decision could have far reaching impacts on all NPDES permittees – including municipal wastewater and stormwater permittees.

The Fourth Circuit’s decision essentially upends the NPDES permitting process, usurps the State’s authority to set and interpret water quality standards, undermines the public’s right to comment on such standards before they are implemented and enforced, and deprives NPDES permittees of fair notice, creating serious Due Process concerns.

Moreover, the decision eviscerates the essence of the permit shield defense by allowing citizens who disagree with the terms and conditions of an issued NPDES permit to challenge the permit after issuance and provides an opportunity for courts to retroactively change the limits of a permit.

In the past, CWA permittees have been able to rely on compliance with their permit as a shield against enforcement and citizen suit litigation. CWA § 402(k) provides that “[c]ompliance with a [NPDES] permit” is considered “compliance, for purposes of sections 309 and 505 [enforcement, including citizen suits], with sections 301, 302, 306, 307, and 403 [discharge prohibitions and effluent limits], except any standard imposed under section 307 for a toxic pollutant injurious to human health.” Courts and regulatory agencies have interpreted this language to mean that entities who complied with the substantive terms of their NPDES permits were shielded from enforcement and citizen suit litigation for the permitted discharges.

The Fourth Circuit had also previously held in Piney Run Pres. Ass’n v. Cnty. Comm’rs of Carroll Cnty , that the permit shield extended not only to pollutants specifically listed in the permit, but also to those disclosed in the permit application and therefore reasonably contemplated by the permitting authority in conducting a reasonable potential analysis and issuing the permit. This framework provided an element of certainty to regulated entities—permits serve as a mechanism by which the permitting agency determines what pollutant levels are protective of water quality and provides clear and final notice of a permittee’s compliance obligations.

The Fourth Circuit’s Fola decision undermines this certainty and ties compliance, and eligibility for the permit shield, to targets that are often undefined and difficult to quantify. 

NACWA Advocacy in Defense of the Permit Shield
NACWA is participating in this case to help preserve the permit shield as a strong defense for NPDES permit holders against enforcement actions. NACWA’s participation is part of a broad coalition of diverse groups, including industrial and agricultural point source dischargers, who share a common interest in preserving the permit shield defense.

Rulings/Pleadings (All in  format)

US District Court, S.D. West Virginia (Case No. 2:13-5006)

• Judge Chambers Opinion and Order, 82 F.Supp.3d 673, 01/27/2015

US Court of Appeals, Fourth Circuit (Case No. 16-1024)

• Briefing Order, 02/01/2016
• Opening Brief, FOLA, 04/13/2016
• NACWA/Industry Group Motion for Leave to File as Amici Curiae, 04/20/2016
• NACWA/Industry Group Amici Curiae Brief, 04/20/2016
• West Virginia Brief, 10/6/2016
• EPA Brief, 10/6/2016
• Fourth Circuit Decision, 01/04/2017