U.S. Supreme Court Rules That EPA Cannot Issue “NPDES” For Discharges Requiring a Section 404 Dredge and Fill Permit From the Corps of Engineers

June 2009

On June 22, 2009, the United States Supreme Court delivered its opinion in Coeur Alaska, Inc. v. Southeast Alaska Conservation Council, Case No. 07-984 (“Coeur Alaska”). Written by Justice Anthony Kennedy, the opinion reverses a 9th Circuit Court of Appeals decision which had held that the discharge of mining slurry into an Alaskan lake required an NPDES permit, in addition to its a 404 permit.

The Couer Alaska company proposed to revive the old Kensington gold mine by using a “froth flotation” technique that would fill a natural lake with mine tailings, or slurry. The company obtained a NPDES permit from the Environmental Protection Agency (EPA) under section 402 of the Clean Water Act (CWA), but only for water leaving the lake and entering a downstream creek. For its initial discharge of mining slurry into the lake, the company obtained a “dredge and fill” permit, under section 404 of the CWA, from the U.S. Army Corps of Engineers (“Corps”). The section 404 permit was appropriate, argued the company and the federal government, because the discharge included crushed rock that would raise the bottom of the lake by 50 feet, which met the definition of “fill material” and triggered the Corps’ authority to issue a 404 permit. NPDES permit coverage for this discharge of fill was not required. Environmental groups sued, challenging the decision not to impose NPDES requirements, and asserting that new source performance standards also prohibited the discharge.

NPDES Effluent Limitations Do Not Apply to Dredge and Fill Activities
The Supreme Court concluded that because section 402 of the CWA grants EPA authority to issue permits for the discharge of pollutants “except as provided in” section 404, the two permitting schemes are mutually exclusive. Because the mining company’s discharge clearly fell within the regulatory definition of “fill material” (40 CFR § 232.2), the activity was within the Corps’ jurisdiction and EPA had no authority to require a section 402 discharge permit. The Court interpreted both the language of the CWA and federal regulations as prohibiting EPA from issuing permits for discharges regulated under section 404.

The EPA/Corps definition of “fill material” is the key determinant for whether section 402 or section 404 applies to a discharge that involves suspended solids. Federal regulations define fill to mean any material that “has the effect of . . . changing the bottom elevation” of a water body, and it specifically includes mine slurries while excluding other materials like garbage. Earlier agency statements analyzed by the Court conclude that the gradual raising of the bottom elevation of a water body over time does not qualify as “fill material,” but discharges that have a more immediate effect do qualify.

Industry-specific New Source Performance Standards Also Not Applicable to Dredge and Fill Activities
The second issue in the case was whether the company’s section 404 permit improperly failed to restrict discharge of the slurry under “new source performance standards” for the froth-flotation mining industry under another section of the CWA, section 306. These technology-based standards allow for “no discharge of process wastewater” from mines using froth-flotation techniques. The Court concluded that because Congress made reference to section 306 in section 402, but not in section 404, it must not have intended the Corps to consider section 306 standards when deciding whether to issue a 404 permit. The Court did not have before it the question of whether the NPDES permit for the creek discharge adequately addressed any section 306 requirements.

The Court gave “a measure of deference” to the practice and policy of the federal agencies, relying primarily on an internal memorandum that interpreted the CWA and federal regulations as not requiring section 306 compliance when issuing section 404 permits. The memorandum, in the Court’s opinion, presented a reasonable interpretation of the regulatory regime, whereas the environmental plaintiffs’ interpretation would present “numerous difficulties for the regulated industry.” The Court was careful to point out that the government’s position appeared reasonable due to several factors. These factors included that the non-application of new source performance standards was limited to discharges into “closed bodies of water” and that here the discharge from the lake into the creek would have to comply with the standards, that the slurry clearly fell within the definition of “fill material,” that the Corps decided it was in the public interest to fill the lake with tailings rather than pile them onto a nearby wetland, and, finally, that the interpretation did not apply to toxic pollutants regulated by another section of the CWA.

The Supreme Court pointed out that even though a two-permit regime is contrary to the CWA, the EPA does play other roles in order to regulate discharges under section 404. First, EPA must write guidelines for the Corps to follow in determining whether to permit a discharge of fill material. Second, the CWA gives EPA a statutory veto over any permit issued by the Corps if the activity will have “an unacceptable adverse effect” on municipal water supplies, fish and wildlife, or recreation areas. In this case, the EPA had not vetoed the company’s discharge into the lake.

The Coeur Alaska decision draws a bright line through a sometimes confusing interplay of federal permitting schemes. However, it does not eliminate water quality protections from projects with 404 permits. Section 404 permits remain subject to CWA section 401, which requires the state to certify that an activity does not violate state water quality standards. Especially in states like California, the section 401 certifications typically impose strict additional conditions on the project. The decision does not override the CWA’s discharge standards for toxic pollutants. Projects often also are subject to further restrictions arising from the environmental review process (NEPA, and in California, CEQA), state water quality laws, and fish and wildlife protection laws. Taken together with EPA’s veto power in section 404 permitting and the 404 permit requirements themselves, powerful mandates and discretionary authorities remain in place to regulate water quality impacts.

Justices Ginsburg, Souter, and Stevens dissented from the opinion.