In a June 22, 2009 decision, Coeur Alaska, Inc. v. Southeast Alaska Conservation Council, No. 07-984, the U.S. Supreme Court affirmed a federal Clean Water Act Section 404 permit issued by the U.S. Army Corps of Engineers for an Alaska gold mine project to place crushed rock tailings slurry as "fill material" in a settling pond impoundment constructed in a small natural lake. Any water discharged from the impoundment downstream is regulated under a Section 402 "NPDES" permit issued by the Environmental Protection Agency (EPA).
In its 6-3 decision, the Court concluded that the Corps and the EPA reasonably interpreted ambiguous provisions of the Clean Water Act and the agencies' own regulations in applying strict Section 402 NPDES effluent limits at the outlet of the impoundment pond, rather than to the placement of the slurry into the impounded waters of the lake. The slurry met the regulatory definition of "fill material" in regulations jointly issued by the agencies in 2002 because of its fill effect. The slurry, which is 30% solid by volume, will dramatically raise the bottom elevation of the lake when placed in its impounded waters.
The Court confirmed that the Sections 402 and 404 permitting programs are mutually exclusive. The Section 404 permitting program applies to discharge of dredge and fill material pollutants, and is administered by the Corps with EPA oversight; the Section 402 NPDES program is administered by the EPA for all other pollutant discharges. If a discharge into navigable "waters of the U.S." is "fill material" falling within the Section 404 permitting regime, a Section 402 permit is not also required for the same discharge.
The Court further deferred to and affirmed the EPA determination in an unpublished 2004 memorandum that new source performance standards and other effluent limits, promulgated under Sections 301 and 306 of the Clean Water Act and applied by EPA to Section 402 permitting, do not apply to tailings slurry or other discharges that qualify as "fill material" under the regulations. Instead, Section 404(b)(1) criteria administered by the Corps and EPA's Section 404(c) veto power over Corps issuance of a Section 404 permit apply to permitting the discharge.
This Supreme Court decision is being strongly criticized by environmental groups as weakening the Clean Water Act. However, the decision defers to what the Court recognized as the established practice and policy of the Corps and EPA in regulating mine tailings impoundments and administering the Sections 404 and 402 programs in a workable, complementary fashion. The decision emphasizes limits and safeguards for protection of water quality and water bodies incorporated in the regulatory approach that the Court affirmed.
The decision clarifies the existing Clean Water Act regulatory regime for mining enterprises and other dischargers subject to both Sections 402 and 404 permitting standards. It may prove to be of broader precedent and interest regarding court deference to informal as well as formal federal agency interpretation and application of technical, often ambiguous statutes and regulations that the agency administers.
Perkins Coie attorneys participated in the defense of Coeur Alaska's Section 404 permit through all phases of this litigation.
Background
The Coeur Alaska, Inc. Kensington Gold Mine Project is located in a historically mined district in mountainous, rainy country near Juneau, Alaska. The area is dominated by steep slopes and numerous small lakes, streams and wetlands. In 2005, after years of environmental studies and agency and public reviews, Coeur Alaska received a U.S. Army Corps of Engineers' permit, issued under Section 404 of the Clean Water Act, to place the crushed rock "tailings" left over after extraction of gold and other metals from the mine mill "froth flotation" process into an impoundment constructed in a nearby relatively inaccessible and unvisited 23-acre lake known as Lower Slate Lake. The permit authorizes a total of several million tons of solid tailings mixed with a large volume of water to be delivered in a slurry via pipeline to the impounded lake over the 10- to15-year operation of the mine. The lake is considered navigable "waters of the U.S." for purposes of Clean Water Act jurisdiction.
The Corps issued the Section 404 permit under "fill rule" regulations jointly finalized by the EPA and the Corps in 2002. These regulations clarified that "fill material" discharges regulated by the Corps of Engineers under Section 404 include any material (except for trash and garbage) having the effect of changing the bottom elevation of a body of water, and particularly slurry, tailings and other mining-related materials. 33 C.F.R. § 323.2 (Corps regulations); 40 C.F.R. § 232.2 (EPA regulations). Employing the Section 404(b)(1) criteria applicable to issuing fill material permits, the Corps determined that disposing of the tailings in the lake impoundment was environmentally preferable to the only other alternative identified as practicable–dewatering and piling the tailings into a large "dry stack" that would destroy wetlands and be clearly visible from coastal waters frequented by cruise ships and other tourist and fishing boats. Although the Corps determined that the deposit of fill into the lake would likely eliminate the existing limited population of small fish, at the end of mine operations, the enlarged, shallower lake would be restocked with native fish and provide as good or better fish habitat than in its natural state. The froth flotation milling process does not employ any arsenic, cyanide or similar chemicals, and the Corps determined that no discharge of toxic pollutants prohibited under Section 307 of the Clean Water Act would occur.
The EPA declined to exercise its power under Section 404(c) to veto the permit. The EPA issued a Section 402 NPDES permit that incorporated "new source performance standard" effluent limits applicable to froth flotation mine mills under EPA regulations promulgated in 1982 and Sections 301 and 306 of the statute. These effluent limits incorporate a "zero discharge" standard for "process wastewater," requiring the volume of water mixed with solid tailings in the slurry to be recycled back to the mill from the impoundment. The permit required any water flowing downstream from the impoundment outlet to be treated to assure it meets strict effluent limits for suspended solids and other pollutants. The State of Alaska certified the issuance of the Sections 404 and 402 permits to meet applicable state water quality standards, in accordance with Section 401 of the statute.
Environmental groups filed suit in Alaska federal district court, asserting that the Section 404 permit violated the Section 306 "zero discharge" new source performance standard and the interpretation of the 2002 "fill rule" regulation required for the regulation to conform to the statute and new source performance standard. The district court rejected these arguments and affirmed the permit. However, the U.S. Court of Appeals for the Ninth Circuit reversed the district court. The State of Alaska as well as Coeur Alaska sought certiorari review, which the Supreme Court granted, ultimately reversing the Ninth Circuit Court judgment.
Significance/Application
The Supreme Court majority opinion found complexity and ambiguity in the language and interaction of Sections 306, 402, and 404 of the Clean Water Act. The Court also found ambiguity in the EPA and Corps regulations. The 1982 new source performance standard prohibits discharge of process wastewater from froth flotation mills into navigable waters, but does not specify whether it applies to discharges of fill material regulated under Section 404. The 2002 fill rule regulation expressly includes tailings slurry with the effect of changing the bottom elevation of a body of water as a discharge of fill material regulated under Section 404 and the Section 404(b)(1) guidelines. The 2002 fill rule text does not include any exception for material subject to new source performance standards or other EPA promulgated effluent limits that apply to Section 402 permitting.
In this context, the Court ultimately concluded that the agency's interpretation and application of these provisions to the Kensington Mine situation, explained in an unpublished EPA memorandum issued in 2004, was a reasonable reconciliation of the regulatory framework. The Court concluded that the agencies' actions were consistent with prior practice of the agencies in issuing Section 404 permits for other tailings impoundments in Alaska occupying navigable waters, as well as the text of the statute and regulations. Citing Chevron U.S.A. v. Natural Resources Defense Council, Auer v. Robbins, and other precedent for deference to reasonable agency interpretations of statutes and regulations that they administer, the Court concluded that the EPA memo and its application in issuing the Kensington Mine Section 404 permit was lawful and entitled to deference.
The Coeur Alaska Supreme Court decision should provide mining and other industries more certainty as to which discharges into navigable waters will be subject to Section 404 fill material permitting and Section 404(b)(1) criteria rather than Section 402 permitting and effluent limits. The existing regulatory framework for authorizing tailings impoundments and other settling ponds in jurisdictional wetlands or other waters, when that is the environmentally preferable practicable alternative, has been clarified and upheld.
On a broader basis, this decision provides additional precedent for federal courts to defer to an agency's relatively informal, as well as formal, interpretation and application of its own regulations for implementing technical environmental and other statutes in the frequent situations where there is conflict or other ambiguity in the regulatory scheme set out by Congress and promulgated as regulations by the agency. The decision reaffirms that the agency must act and explain its actions reasonably to be entitled to such deference.
Conclusion
The Coeur Alaska Supreme Court decision will be of particular interest to the mining industry and of broader interest to many other enterprises regulated under the federal Clean Water Act and other technical statutory and regulatory schemes administered by federal agencies.
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