By Taylor Kuykendall

Statement of the U.S. Chamber of Commerce on July 15 regarding hearing on EPA’s expanded interpretation of its Permit Veto Authority under the Clean Water Act.

The coal industry and other business groups are looking to lawmakers to reduce the U.S. EPA's power following the U.S. Supreme Court denial of Arch Coal Inc.'s petition to examine the agency's authority to retroactively veto an approved Clean Water Act permit.

The House Transportation and Infrastructure Committee's Subcommittee on Water Resources and Environment hosted a July 15 hearing titled "EPA's Expanded Interpretation of its Permit Veto Authority Under the Clean Water Act" to examine the issue. Rep. Bob Gibbs, R-Ohio, chairman of the subcommittee, said he considered the EPA's veto of Arch's Spruce permit a "fundamental property rights issue" and called the permit revocation "unsettling" and an "arbitrary and irresponsible way for government to act."

"The issuance of a federal permit should come with certainty that the activity can go forward unencumbered but within the bounds of the permit, particularly those activities on private lands," Gibbs said in his opening statement. "This no longer seems to be the case, and it is going to have a stifling effect on not just mining operations in Appalachia, but on economic development nationwide."

Rep. Donna Edwards, D-Md., rebutted the notion that the EPA has taken unprecedented action under the Obama administration in denying the permit, pointing out that of the more than 60,000 permits issued per year in the last 40 years, the EPA has used its retroactive veto authority just 13 times, and "in 11 of those instances, that was done by a Republican administration," Edwards said.

Arch Coal's long fight to permit the Spruce mine

In 2007, following a 10-year environmental review process, the U.S. Army Corps of Engineers issued a Section 404 permit to Arch unit Mingo Logan Coal Co. for the Spruce No. 1 mine project in West Virginia. In 2009, however, the EPA began taking steps to revoke the permit in light of a new standard adopted to take into account the project's effects on stream conductivity.

The 2,278-acre surface mining permit would have allowed Arch to build one of the largest surface coal mine operations ever constructed in West Virginia. The EPA said the permit would bury 6.6 miles of high-quality headwater streams and eradicate the wildlife in that habitat and have unacceptable effects on wildlife downstream.

A lower court had originally sided with Arch; however, a federal appeals court decision in April 2013 reversed the ruling against the EPA. In March, the Supreme Court denied a petition to hear arguments over EPA veto authority, remanding the case back to the U.S. District Court for the District of Columbia and shifting the case's focus to weighing the merits of the veto.

The denial puts the case back in front of Judge Amy Berman Jackson, who originally sided with Arch regarding the EPA's lack of authority.

Is EPA's permit veto authority 'settled?'

William Kovacs, senior vice president of environment, technology and regulatory affairs for the U.S. Chamber of Commerce, said in testimony to the subcommittee that the federal appeals court decision focuses on the word "whenever" in the Section 404(c) of the Clean Water Act and gives the EPA the authority to act on a permit any time it determines there will be unacceptable adverse effects from a proposed activity. Kovacs said the appropriate time for the EPA to exercise its authority is during the initial permitting process and not after.

"Despite the agency's immense authority to respond to all legitimate threats to health or safety posed by an existing permit, EPA found it necessary to inflict significantly greater uncertainty by transforming a fully authorized permit into a temporary operating certificate, good only as long as it suits the whims of the agency," Kovacs said. "The agency's belief that it can kill a permit 'whenever' it chooses to undeniably turns the permitting process on its head and creates a tremendous amount of uncertainty for the regulated community."

Patrick Parenteau, a professor of law at Vermont Law School, said the title of the hearing itself was based on a "misunderstanding of how EPA" has acted with its 404(c) permitting authority.

"With the Supreme Court's denial of certiorari in Mingo Logan, it is fair to say that the issue of EPA's authority to exercise the 404(c) authority whenever the administrator determines that there will be 'unacceptable adverse effects' on the designated resources is settled law," Parenteau said. "That still leaves important policy questions of whether and how the administrator should exercise this authority but there can no longer be any doubt that EPA has had this authority since the 1972 CWA amendments and has consistently interpreted the statute as granting that authority since the first regulations were written."

'Chilling' investment versus broader protections

National Mining Association President and CEO Hal Quinn said during his testimony that the EPA has "embarked upon previously uncharted waters" as far as creating regulatory uncertainty and chilling business investment. Quinn said the decision to not issue a permit for an activity should have a firm basis and that the EPA should not be able to revisit a permit just because a new administration has taken the helm of the agency.

"Understandably, businesses and investors are less likely to risk their capital if they will not be afforded due process by their government, or if they fear a permit carries a term measured by the next election cycle," Quinn said.

“Pollution does not respect political affiliation.”

 Patrick Parenteau, professor of law, Vermont Law School

According to Parenteau, however, "forcing EPA to make decisions within artificial time constraints" would not allow the agency to consider the unique situations presented by the variety of projects under the permitting process, potentially leading to less informed decisions not serving the public interest or intention of law. Despite the issue frequently being framed as a power grab by the Obama administration, Parenteau said the matter is not a liberal or conservative issue.

"President Ronald Reagan holds the record for the largest number of vetoes at seven, more than all of the other administrations combined," Parenteau said. "Pollution does not respect political affiliation."

Parenteau said the EPA has won every challenge to its 404(c) veto authority, a "remarkable record" in the annals of environmental law. He said the record speaks to the care with which the EPA chooses to rarely exercise its authority, refuting the notion that businesses should be highly concerned that a permit would be retroactively vetoed.

Citing the work of David Sunding, an economics professor at the University of California at Berkeley, Quinn said the EPA's actions cause difficulty in obtaining project financing, create higher interest rates from lenders and bondholders, and spur some additional credit rationing. Quinn said Sunding found that a 1% chance that the EPA would act retroactively decreases the cost-benefit ratio for a project by 17.5% and a 2% chance reduces the cost-benefit ratio by 30%.

While the percentage of projects for which the EPA has invoked veto authority is well under 1%, Quinn said it is "not an unrealistic assumption for a large or controversial project." He was also skeptical that the EPA would use its authority as sparingly in the future.

“One of the most surprising findings is that it has been just as difficult to build a wind farm in the U.S. as it is to build a coal-fired power plant.”

 William Kovacs, senior vice president of environment, technology and regulatory affairs, U.S. Chamber of Commerce

Kovacs said the Chamber could not identify any economic impact studies of the Spruce mine permit veto. However, he said the Chamber has undertaken an initiative to catalog a "broad range of energy projects" that were delayed or halted because of an inability to obtain permits and "endless legal challenges by opponents of development."

"One of the most surprising findings is that it has been just as difficult to build a wind farm in the U.S. as it is to build a coal-fired power plant," Kovacs said. "In fact, over 40 percent of the challenged projects identified in our study were renewable energy projects. Often, many of the same groups urging us to think globally about renewable energy are acting locally to stop the very same renewable energy projects that could create jobs and reduce greenhouse gas emissions."

The Chamber touted two bills to address the EPA's authority to retroactively veto a permit: H.R. 524 from Rep. David McKinley, R-W.Va., and the "Regulatory Certainty Act of 2014" from Gibbs and Rep. Nick Rahall, D-W.Va.

"The Chamber also supports any efforts through the appropriation process to restrict or limit the ability of EPA and the U.S. Army Corps of Engineers to implement or administer any change to the definition of " waters of the U.S.," Kovacs added.