SOUTHERN APPALACHIAN MOUNTAIN STEWARDS v. A & G COAL, CORP., NO. 13-2050

Decided: July 11, 2014

The Fourth Circuit affirmed the district court, and held that the “permit shield” defense for discharges of selenium was unavailable to a corporation that failed to disclose the presence of the pollutant during the permit application process.

A & G Coal Corporation (“A&G”) owned and operated the Kelly Branch Surface Mine (“Kelly Branch”) in Virginia. In 2010, A&G applied for a National Pollutant Discharge Elimination System permit from the Virginia Department of Mines, Minerals, and Energy. In its application, A&G provided information regarding the discharges from more than two-dozen existing and proposed discharge points, including two artificial ponds. However, the application failed to indicate whether or not A&G would be discharging selenium, an element that can be harmful in high doses, and is categorized as a toxic pollutant under the Clean Water Act (“CWA”). The permit does not restrict or authorize the discharge of selenium from the plant.

Appellee environmental groups (“SAMS”) tested water in the two ponds and found that they contained selenium. SAMS brought this action against A&G seeking declaratory and injunctive relief, as well as civil penalties, claiming A&G violated the CWA by discharging selenium without authorization. A&G contended that it properly complied with its legal obligations by disclosing those pollutants it knew, or had reason to know, were present at the site, which selenium was not among. Thus, A&G claimed it was protected by the “permit shield” provision of the CWA. The district court rejected this defense, and held that the defense was unavailable to A&G because of its failure to disclose selenium in its permit application.

The permit scheme requires individuals wishing to discharge one or more pollutants to apply for an individual permit from the appropriate state authority. Federal regulations require permit applications to include substantial detail about the nature and composition of expected discharges. For discharge points that discharge “process wastewater,” like some of the discharge points at Kelly Branch, applicants must report data on a large number of pollutants, including selenium. If the discharge is not “process wastewater,” applicants must still “indicate whether it knows or has reason to believe that any of the pollutants in table II or table III of appendix D to this part [including selenium] . . . for which quantitative data are not otherwise required . . . [is] discharged from each outfall.” 40 C.F.R. § 122.21(g)(7)(vi)(B). Additionally, the Environmental Protection Agency (“EPA”) requires that applicants mark whether each listed element, one of which is selenium, is “believed present” or “believed absent.” Thus, the disclosure process requires applicants to acknowledge either the presence or absence of a pollutant, like selenium. Virginia has adopted these same requirements under its state statutory permit scheme.

The CWA contains a “permit shield” provision, which provides that “[c]ompliance with a permit issued pursuant to this section shall be deemed compliance” with other sections of the CWA that detail effluent limitations and their enforcement. 33 U.S.C. § 1342(k). “By rendering permits final, the shield allows permit holders to conduct their operations without concern that an unexpected discharge might lead to substantial liability.” However, to be protected by the “permit shield,” applicants must fully comply with federal and state reporting requirements. The Fourth Circuit has adopted a two-part test to determine whether the “permit shield” defense protects a permit holder from liability:

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.

Piney Run Pres. Ass’n v. Cnty. Comm’rs, 268 F.3d 255, 259 (4th Cir. 2001).

Under the first prong, A&G argued that it had no obligation to disclose selenium unless it knew or had reason to know it would be present, which it did not. The Court rejected this argument, noting that the discharges in A&G’s application met the regulatory definition of “process wastewater.” Thus, A&G was required to test for selenium, and other pollutants, and submit this information with its application, which it failed to do. Even if the discharge was not “process wastewater,” the Court noted that A&G still failed to comply with reporting requirements. The application required data about selenium, which A&G did not submit. Furthermore, at a minimum, A&G was required to acknowledge whether selenium was “believed to be present,” or “believed to be absent,” which it also did not do. Thus, the Court held that A&G failed to comply with its disclosure obligation as required by the first prong of the Piney test. Because A&G failed to meet the first prong of the test, the Court declined to address A&G’s claim that it was able to satisfy the second prong of the Piney test.

In sum, the Court found that “A&G was required by its DMME permit application instructions to test for the presence of selenium and by federal and state regulations to, at minimum, report whether it believed selenium to be present or absent.” A&G failed to fulfill these disclosure obligations, and therefore, could not assert a “permit shield” defense.

Full Opinion

Jennifer Jokerst

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