The Clean Water Act (“CWA”) generally forbids discharging contaminated effluent into waters of the United States unless the discharger holds a National Pollution Discharge Elimination System (“NPDES”) permit. Once a discharger holds a permit, they are shielded from discharge related liability- unless, as the Fourth Circuit observed in the recent case of Ohio Valley Environmental Coalition v. Fola Coal Company, LLC, No. 161024 (4th Cir., 1/04/2017), the permit holder is noncompliant.

West Virginia’s NPDES program includes regulations specifically governing NPDES permits for coal mining. Fola Coal Company, LLC (“Fola Coal”) first obtained its permit under West Virginia’s coal mining NPDES program in 1996 in order to discharge into receiving waterways, and then renewed it in 2009.  In the case at issue, several environmental groups, including Ohio Valley Environmental Coalition, West Virginia Highlands Conservancy, and the Sierra Club, brought suit against Fola Coal under the CWA’s citizen suit provision. The environmental groups alleged that Fola Coal violated a specific section within Fola Coal’s permit, section 5.1.f, which provided:

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.

Va. Code R. § 47-30-5.1.f (2009). The environmental groups claimed Fola Coal violated this specific provision by discharging ionic pollution that resulted in increased conductivity in the relevant receiving waterways.

Fola Coal countered in part by stating that it had disclosed the nature of its ion discharges, and their potential to increase conductivity in water, to the West Virginia Department of Environmental Protection (“WVDEP”) during its 2009 permit renewal application, and that despite the disclosure WVDEP placed no specific limitations within the language of the permit. This, Fola Coal maintained, resulted in an affirmative decision by WVDEP not to impose restrictions on water conductivity, which in turn shielded Fola Coal from complying with the state water standards, as otherwise made applicable by 5.1.f.  Fola Coal argued that because it complied with all the express effluent limits set out in the permit, it was effectively shielded from all liabilities under the CWA.

Fola Coal also argued that changes in the law exempted it from compliance.  Specifically, in 2012, the West Virginia legislature enacted 2012 W. Va. SB 615 which stated that “notwithstanding any rule or permit condition to the contrary, … compliance with a permit issued pursuant to this article shall be deemed compliance for purposes” of the CWA. WVDEP subsequently clarified the newly enacted law by stating that its language is consistent with the Department’s stance that a permit holder need only disclose its discharges of effluents to WVDEP and comply with the effluent limits in the permit. Furthermore, according to WVDEP, if the permit holder did this the permit would shield the permit holder from all liability under the Clean Water Act. Fola Coal pointed to these regulatory and legislative developments as in order to bolster its contention that the permit shield applied to their discharge of ions.

Subsequently, in 2015 WVDEP fruitlessly attempted to remove the section 5.1.f language at issue in this case, but EPA did not approve any such changes as, in its view, the proposed elimination would result in weakening the state’s NPDES program. In the same year, the state of West Virginia enacted a law explicitly prohibiting the enforcement of water quality standard violations against permit holders. Fola Coal further relied on these legislative developments as well as WVDEP’s interpretation of SB 615 to support its stance that it should not be held liable for the resulting increased conductivity from its discharges.

The District Court disagreed with Fola’s arguments. Evidence showed that Fola Coal’s discharges were negatively affecting nearby stream conditions, to the point where they became effectively impaired under EPA standards. The District Court found that these effects were in violation of West Virginia water quality standards incorporated in Fola Coal’s permit, regardless of whether Fola Coal was compliant with its numeric effluent limitations. The District Court characterized section 5.1.f as a narrative requirement apart from the numeric limits, and ultimately held for the environmental groups.

On appeal, the Fourth Circuit reviewed de novo and ultimately affirmed the District Court’s findings. In its appeal, Fola Coal asserted that (1) the language in 5.1.f is ambiguous, and argued that it is best interpreted as if actually controlling the conduct of the permitting authority rather than the permittee, (2) the district court did not examine extrinsic evidence showing that 5.1.f clearly imposed no obligation on the permittee, and a newly introduced argument (3) that the Court’s holding in Piney Run requires that 5.1.f imposes obligations only on the permitting authority. Piney Run Pres. Ass’n v. Cty. Comm’rs, , 268 F.3d 255 (4th Cir. 2001).

As to Fola Coal’s first assertion, the Fourth Circuit Court found that the language of 5.1.f was “straightforward and unambiguous.” Since the language focused on the discharges themselves, it was evident that it would apply to permit holders rather than regulators. The Court also looked at other provisions surrounding section 5.1.f to determine that they clearly provided restrictions for permit holders, and it would follow that section 5.1.f would as well.

The Fourth Circuit further concluded there were two distinct obligations in Fola Coal’s permit: the numeric discharge limits and the separate narrative obligations contained in section 5.1.f. Thus, in order to be compliant the company must satisfy both obligations.

As to Fola Coal’s evidence showing the legislative and regulatory developments discussed above, the Fourth Circuit Court followed the District Court’s holding below. The Fourth Circuit Court concluded that even with the noted intent in 2013 of both the Legislature and WVDEP to provide a liability shield for NPDES permit holders, such intent did not extend to apply retroactively to Fola Coal’s 2009 permit. Therefore, the Court concluded, Fola Coal was subjected to compliance with the requirements of section 5.1.f.

Fola also raised a newly introduced argument, asserting that the Fourth Circuit’s decision in Piney Run Pres. Ass’n v. Cty. Comm’rs further shields it from CWA liability. Fola Coal contended that the Court’s Piney Run decision “held that permit holders who disclose their pollutants to the permitting agency and thereafter comply with the effluent limits in their NPDES permits are shielded from liability under the CWA.” Id. Fola argued that because it disclosed the presence of conductivity in its discharges to the WVDEP, and has complied with the permit’s established effluent limits, it is shielded from the CWA, regardless of whether it violates state water quality standards concerning conductivity. Id.

This argument the Court also rejected, based on the language in Piney Run that permit holders comply with the express terms of the permit, which the Fourth Circuit opined included the requirements within section 5.1.f.

Finally, the Court upheld the District Court’s rulings below on the remedies ordered. A special master was appointed to oversee implementation of Fola Coal’s proposed solution to focus on water management practices relevant to the local water landscape.

In sum, the Fourth Circuit solidified in its analysis that only those NPDES permit holders which comply with every aspect of the permit, not limited to only numerical standards, will be afforded the liability shield under the Clean Water Act.

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