The Fourth Circuit ruled on Friday (7/11/14) that the Clean Water Act’s (“CWA”) permit shield defense was unavailable to a permit holder who failed to comply with the permitting authority’s applicable disclosure requirements. See SAMS v. A&G Coal, No. 13-2050, available at http://www.ca4.uscourts.gov/Opinions/Published/132050.P.pdf. The Court framed the question as being whether A & G Coal Corporation (“A&G”) could assert a “permit shield” defense for discharges of selenium “when it failed to disclose the presence of this pollutant during the permit application process.” Under the limited set of facts before it, the Court held that the shield was unavailable. For additional discussion of the facts of the case, the lower court’s ruling, and the CWA “permit shield,” see http://eem.jacksonkelly.com/2014/06/fourth-circuit-considers-scope-of-cwa-permit-shield.html.
A&G operates a coal mine in Virginia that discharges selenium into a nearby stream. A&G applied for and received a National Pollution Discharge Elimination System (“NPDES”) permit from Virginia Department of Mines, Minerals, and Energy (“DMME”). The NPDES permit application requested water sampling for 15 specific constituents, including selenium. The application also asked whether the applicant knew of or had reason to believe its discharges would contain a number of specified pollutants, including selenium. A&G did not submit testing and left blank the portion of the application requesting whether selenium was present or absent. A&G’s NPDES permit, issued in 2010, did not limit or authorize the discharge of selenium.
Subsequent to permit issuance, Southern Appalachian Mountain Stewards (“Plaintiffs”) discovered selenium in A&G’s discharge. Shortly thereafter, Plaintiffs filed suit, alleging that A&G’s discharge of selenium constituted an unpermitted discharge in violation of Section 301 of the CWA. A&G raised the CWA’s “permit shield,” found at 33 U.S.C. §1342(k), as a defense. That section provides that discharges made in “compliance with a[n] [NPDES] permit” “shall be deemed compliance” with Section 301 for the purposes of the citizen suit provision of the Act. A&G argued that because the permitting agency chose not to include effluent limits for the discharge of selenium in its NPDES permit, compliance with the plain language of its permit protected it from liability for selenium discharges.
The Court rejected A&G’s permit shield defense based on its inadequate disclosures. The Court recited the two-part test for determining the shield’s applicability first articulated in Piney Run Pres. Ass’n v. Cnty. Commr’s of Carroll Cnty., Md., 268 F.3d 255 (4th Cir. 2001):
We therefore view the NPDES permit as shielding its holder from liability under the Clean Water Act as long as (1) the permit holder complies with the express terms of the permit and with the Clean Water Act's disclosure requirements and (2) the permit holder does not make a discharge of pollutants that was not within the reasonable contemplation of the permitting authority at the time the permit was issued.
Op. at p.12 citing Piney Run, 268 F.3d at 259.
The Court found that A&G failed to comply with the applicable disclosure requirements in two respects. First, the DMME’s NPDES application instructions “unequivocally” required submission selenium sampling as a part of the permit application. Second, the application asked whether A&G believed selenium was present or absent. A&G did not submit selenium sampling and did not check either the “present” or “absent” box. Accordingly, the Court could not find that A&G met the first prong of the Piney Run test.
Despite the deficiencies in its application, A&G argued that it satisfied the first prong of the Piney Run test. First, it argued that the application only required disclosure of selenium if the applicant knew or had reason to believe its effluent contained selenium. A&G argued that it did not have affirmative knowledge regarding the presence or absence of selenium; thus, it was proper to leave that portion of the application blank. The Court rejected this argument, finding that allowing such a defense would encourage a “willful blindness” from permit applicants. Moreover, the CWA places the burden of disclosure on the permit applicant.
Next, A&G attempted to rely upon EPA’s 1995 Revised Policy Statement on Scope of Discharge Authorization and Shield Associated with NPDES Permits. In its 1995 guidance, EPA stated that NPDES permits provided authorization for (1) pollutants specifically limited in the permit; (2) pollutants identified during the permitting process; and (3) “[p]ollutants not identified as present but which are constituents of wastestreams, operation or processes that were clearly identified in writing during the permit application process and contained in the administrative record….” According to A&G, its discharge of selenium fell under cover the permit shield because it disclosed to DMME the waste stream containing selenium, and DMME understood the general nature of its waste streams. The Court made short work of this argument, noting that “the [1995 guidance document] states very clearly that ‘[t]he availability of the section 402(k) permit shield is predicated upon the issuance of an NPDES permit and a permittee’s full compliance with all applicable application requirements, any additional informational requests made by the permit authority and any applicable notification requirements.’” Op. at p. 19, citing 1995 EPA Policy Statement at 2.
Due to A&G’s failure to satisfy the first prong the Piney Run test, the Court declined to address whether the discharge of selenium was within DMME’s reasonable contemplation. Ultimately, the Court’s decision should not have any impact upon the coal industry, as the Court did not erode the scope of the permit shield. Importantly, although it affirmed the lower court’s judgment, the Court did not endorse the lower court’s holding “that a permittee must have actually disclosed a pollutant in its permit application in order to avail itself of the permit shield as to that pollutant.” See Southern Appalachian Mountain Stewards v. A & G Coal Corp. WL 3814340, *16 (W.D.Va. 2013). This is critical, because adopting the lower court’s holding could have required permit applicants to sample for a countless number of known constituents that the CWA characterizes as pollutants in order to avail themselves of the shield. The Court declined to address this “slippery slope” scenario, noting that “[s]elenium is not just some obscure pollutant that might happen to show up in a discharger’s wastestream.” Op. at 18. Rather, selenium was one of fifteen pollutants for which the DMME’s NPDES application specifically required disclosure. Given the narrow focus of the Court’s opinion, the scope of Section 402(k)’s protections remains unchanged for permit holders who comply with the requisite disclosure requirements.