Federal Appeals Courts Reject Clean Water Act “Permit Shield” Defense

sboxermanFeatured Expert Column – Environmental Law and Policy

by Samuel B. Boxerman, Sidley Austin LLP with Katharine Falahee Newman, Sidley Austin LLP

In the past two months, two federal circuit courts examined the extent of the Clean Water Act’s (“CWA”) “permit shield” defense and reached similar conclusions—the defense cannot be used by a party that does not completely fulfil certain National Pollution Discharge Elimination System (NPDES) permit, or permit application, obligations. Permit holders and applicants should be wary of the risk presented by this emerging case law, as the decisions could open the door to increased enforcement, unless an applicant has provided to the permitting authority a wide range of data regarding its discharge during the application process.

Generally, the CWA shields a permit holder from liability if the party possesses or has applied for an NPDES permit through the appropriate federal and state regulatory framework. The permit shield states that “compliance with a permit issued pursuant to this section shall be deemed compliance,” see 33 U.S.C. § 1342(k). The shield protects permit holders from challenges that their permits are not sufficiently stringent as well as actions to compel the permit holder to change its operations following changes to CWA regulations.

In a decision issued earlier this summer, the U.S. Court of Appeals for the Fourth Circuit considered whether a coal company could rely on the permit shield for discharges of selenium when it had not disclosed the pollutant during the permit application process. Southern Appalachian Mountain Stewards v. A&G Coal Corp., 13-2050, (4th Cir. July 11, 2014). A&G Coal argued that because it disclosed all of the pollutants it knew or had reason to believe were present at its mine in its permit application, it fulfilled its legal obligations and could rely on the defense. The court disagreed, finding that A&G Coal failed to satisfy the permit shield test first articulated in Piney Run Pres. Ass’n v. Cnty. Comm’rs, 268 F.3d 255 (4th Cir. 2001). The test requires (1) that the permit holder comply with all of the express terms of a permit and the Clean Water Act’s disclosure requirements, and (2) that the discharged pollutant be within the reasonable contemplation of the permitting authority. Under Piney Run, a party must meet both prongs to successfully use the permit shield.

The Commonwealth of Virginia (the permitting authority in Southern Appalachian) instructs companies applying for an NPDES permit to test for and report the presence of selenium. Additionally, the federal regulations direct companies to report whether a list of pollutants, including selenium, is either present or absent. Because A&G Coal’s application did not reference selenium, the court found A&G was not in full compliance with the CWA, and thus had failed prong one of the Piney Run test. The Fourth Circuit held that based on its lack of compliance, A&G could not rely on the permit shield defense.

Similarly, in Alaska Community Action on Toxics, et al v. Aurora Energy Services, LLC, et al., No. 13-35709 ((9th Cir. Sept. 3, 2014), the Ninth Circuit considered whether a facility’s coal discharges into Alaska’s Resurrection Bay were non-stormwater discharges excluded from the applicable CWA general permit. The court concluded that the plain language of the permit prohibited the coal discharge and overturned the district court decision. According to the Ninth Circuit, the analysis was clear. The general permit requires that a facility eliminate all unauthorized non-stormwater discharges and includes a list of eleven categories of authorized non-stormwater discharges. Because coal is not included in the enumerated categories, the court found the discharges to be unauthorized under the terms of the permit. The Ninth Circuit was also asked to consider whether the permit shield was a defense to alleged violations of general NPDES permits.   The court declined to reach the issue stating that although it did not rely on the Piney Run permit shield analysis to reach its conclusion, it would have reached the same result even if it had—because the express terms of the General Permit prohibit non-stormwater coal discharges, the defendants would fail prong one of the Piney Run test and lose the protection of the permit shield.

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