January 25, 2017

The Permit Shield Defense: What the Fourth Circuit Did Not Address in Ohio Valley

Holland & Knight Energy and Natural Resources Blog
Deborah E. Barnard | Jessica Ragosta Early | Dianne R. Phillips

The Fourth Circuit recently held that the permit shield defense did not protect a National Pollutant Discharge Elimination System (NPDES) permit holder from enforcement of a general narrative effluent limit prohibiting discharges that cause a state water quality standard (WQS) violation, even though the permit holder disclosed the pollutants in question during the permitting process and the permitting agency decided not to impose specific numeric effluent limits. See Ohio Valley Environmental Coalition v. Fola Coal Co., LLC, No. 16-1024, 2017 WL 35726 (4th Cir. Jan. 4, 2017).

The permit shield defense is derived from 33 U.S.C. § 1342(k). In a prior opinion, Piney Run Preservation Association v. County Commissioners of Carroll County, Maryland, 268 F.3d 255 (4th Cir. 2001), the Fourth Circuit held that the permit shield protects NPDES permit holders from liability for discharging a pollutant not expressly allowed by the permit—even though the discharges caused WQS violations—so long as the permit holder disclosed the pollutant to the permitting agency and otherwise complied with the terms of its NPDES permit. 

In Piney Run, the county disclosed its discharges of heat to the Maryland permitting agency, which decided not to include any express heat limitation in the county's permit. Nevertheless, the District Court rejected the county's permit shield defense and held it liable for all discharges of heat that resulted in a WQS violation. The Fourth Circuit reversed, holding that because the county disclosed its discharges of heat and such discharges were within the reasonable contemplation of the Maryland permitting agency when issuing the permit, the permit shield protected the county from liability for the WQS violations.

In Ohio Valley, Fola disclosed to the West Virginia permitting agency that its discharges would include ions and be highly conductive. Nevertheless, the permitting agency issued Fola a permit without any specific numeric effluent limits for ions or conductivity. The permit, however—like all permits issued in West Virginia, and unlike the county's permit in Piney Run—included a general narrative effluent limit (incorporating West Virginia law) prohibiting Fola's discharges from causing a violation of West Virginia WQS. 

The District Court found Fola was discharging ions in sufficient quantities to cause a WQS violation. It then held that, despite Fola's disclosure of ions and conductivity to the West Virginia permitting agency, the permit shield did not protect Fola because it only applies to discharges in compliance with all permit terms, including the narrative effluent limit prohibiting discharges that cause a WQS violation.

Upholding the District Court, the Fourth Circuit distinguished its decision in Ohio Valley from its decision in Piney Run based on the fact that "Maryland's NPDES permits do not contain a [similar narrative] provision ... Rather, unlike West Virginia, the Maryland permitting agency simply will not issue a permit unless it ‘finds that the discharge meets ... applicable State and federal water quality standards.'" 

In distinguishing Piney Run from Ohio Valley, the Fourth Circuit does not appear to have considered that, by law, no NPDES permit can be issued unless the permitting agency finds the discharge will meet applicable State and federal WQS. In fact, federal law requires that permitting agencies include limitations necessary to meet applicable WQS, including numeric effluent limits for any pollutant that has a reasonable potential to cause a WQS violation.  See 33 U.S.C. § 1311(b)(1)(C); 40 C.F.R. §§ 122.44(d)(1), 122.4(d). 

As the Fourth Circuit recognized, Fola's permit (like permits in prior District Court cases enforcing similar narrative effluent limits) did not include an applicable numeric effluent limit. EPA has made clear that had such numeric effluent limits existed, discharges in compliance with them are protected by the Permit Shield.  See EPA's Revised Policy Statement on Scope of Discharge Authorization and Shield Associated with NPDES Permits (1995) (the permit protects a permit holder for any discharge of "[p]ollutants specifically limited in the permit").    

Nonetheless, even in the absence of a specific numeric effluent limit, the Fourth Circuit's failure to address the federal requirements that all permitting agencies ensure discharges will not violate applicable WQS when issuing a permit leaves a wrinkle in the court's analysis that may need to be ironed out in subsequent rulings to provide better guidance for those holding or applying for NPDES permits. 

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