Coal and Transportation Companies Challenge Ninth Circuit Decision Limiting CWA Permit Shield Defense

On March 3, 2015, Aurora Energy Services, LLC and the Alaska Railroad Corp. filed a petition for writ of certiorari asking the United States Supreme Court to resolve a circuit split regarding the scope of the Clean Water Act’s Section 402(k) permit shield defense. Under Section 402(k), “[c]ompliance with a permit issued pursuant to this section [is] deemed compliance” with CWA provisions addressing effluent limitations and their enforcement. 33 U.S.C. § 1342(k). This important provision provides some measure of certainty to CWA permittees by limiting the scope of activities that may subject them to CWA liability.

In September 2014, the Ninth Circuit reversed a district court decision and found the petitioners liable for violating the Clean Water Act (CWA) based on coal dust falling from a shore-to-ship conveyor belt at a coastal coal loading facility in Alaska. Alaska Cmty. Action on Toxics v. Aurora Energy Servs., LLC (ACAT), 765 F.3d 1169 (9th Cir. 2014). The district court had held that the CWA’s Section 402(k) permit shield protected the petitioners from liability because the coal dust discharges were properly disclosed to the permitting authority and were not strictly prohibited by the Multi-Sector General Permit for industrial stormwater (MSGP) under which the coal loading facility operated. 940 F. Supp. 2d 1005 (D. Alaska 2013). 

The Ninth Circuit reversed that decision and held that the MSGP did not “shield” the defendants from CWA liability because the falling coal dust was not an authorized “non-stormwater” discharge according to the terms of the permit. While the Ninth Circuit’s 8-page opinion focuses on the particular language of U.S. Environmental Protection Agency’s (EPA) 2008 MSGP, similar language appears in most other states’ stormwater general permits (as well as EPA’s new 2013 MSGP). The court’s holding represents a departure from the permit shield doctrine developed by all other circuit courts and has the potential to affect all stormwater permittees. Consequently, the petitioners have asked the Supreme Court to reverse the Ninth Circuit’s decision.


In practice, courts have interpreted the CWA permit shield to protect permittees from enforcement actions based on discharges of substances not listed in their permit, provided the permittee made “adequate disclosures during the application process” of pollutants within the “reasonable contemplation” of the permitting authority. 

In Piney Run Pres. Ass’n v. Cnty. Comm’rs, 268 F.3d 255 (4th Cir. 2001), the Fourth Circuit established a two-part test for applying the permit shield: “the permit holder complies with the express terms of the permit and with the CWA’s disclosure requirements and 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.”

The Sixth Circuit recently extended the CWA’s permit shield defense to general permit holders finding that the EAB’s reasoning in Ketchikan applies “with even more force when dealing with general permits” where, were the rule otherwise, “the permitting authority would not only need to identify the many pollutants that a single polluter could discharge, but all of the pollutants and combinations of pollutants that could be discharged by all polluters that may later fall under the general permit.” Sierra Club v. ICG Hazard, LLC, No. 13-5086, 2015 U.S. App. LEXIS 1283, *15 (6th Cir. Jan. 27, 2015); see also S. Sarno, The Sixth Circuit Extends the Clean Water Act’s Permit Shield Defense to General Permit Holders, B&D Envtl. Law Portal (Feb. 9, 2015). The Ninth Circuit’s decision in ACAT effectively makes the rule “otherwise,” compromising the integrity of the permit shield doctrine.

The Challenge to the Ninth Circuit’s Ruling in ACAT

It is important to note that in ACAT, the Ninth Circuit did not apply permit shield analysis and chose instead to treat the matter as simply a question of compliance with the MSGP’s specific terms. The operative MSGP states that the permittee “must eliminate non-stormwater discharges not authorized by [a CWA] permit.” The MSGP then lists “the non-stormwater discharges authorized under this [MSGP] permit.” The MSGP includes a few addenda specific to certain industry sectors, but nowhere does it list coal dust from over-water conveyor belts as an “authorized non-stormwater discharge.” According to the Ninth Circuit, this list is “exclusive” and consequently, the defendants’ discharges were “plainly prohibited” by the MSGP and therefore violated the CWA. 

Although the court did not explicitly apply the permit shield test, it concluded that it “would have reached the same result” had it applied the permit shield test because the threshold requirement under that test mandates compliance with the “permit’s express terms,” which the Ninth Circuit concluded was absent. In stark contrast to the detailed reasoning in the Sixth Circuit’s ICG Hazard opinion, the Ninth Circuit simply concluded, with little analysis, that compliance with the MSGP was a prerequisite to applying the permit shield rather than considering first whether the permit shield should apply and then determining whether the discharge in question constituted a violation or a “permitted discharge.”

Invoking ICG Hazard, the petitioners assert that the Ninth Circuit’s skeletal analysis “inverts” the permit shield test by “hold[ing] permittees liable for all discharges not affirmatively discussed in the permit, regardless of the agency’s contemplation at the time the permit was issued” instead of “placing responsibility on the permitting authority to specifically call out and restrict those disclosed discharges that require permit limits.” Writ Pet. at 20. The petitioners emphasize that federal and state regulators have frequently inspected the loading terminal, observed and discussed the falling coal dust, and concluded that the defendants were in compliance with the MSGP. The EPA was aware of the conveyor belt and its related coal dustings, yet approved the facility’s coverage under the MSGP and affirmatively granted special permission to the facility to be categorized as Sector AD (the “catch-all” provision for facilities not covered by any of the specific industry categories listed in the MSGP). Id. at 8-9. 

Petitioners assert that the Ninth Circuit’s decision ignores the agencies’ previous determinations and looks only at the express terms of the MSGP, treating the list of authorized non-stormwater discharges as exclusive. By treating the MSGP list of authorized non-stormwater discharges as exclusive, the Ninth Circuit implicitly requires the permitting agency to affirmatively list every possible discharge that is within its reasonable contemplation, a duty that defeats one of the key benefits of general permits: administrative efficiency. Such a burden would render the general permit process quite onerous for the agency and, as the defendants assert in their Writ Petition, “exposes all facilities covered by general permits to liability for discharges not listed in the permit” which would likely result in an increased demand for facility-specific, exhaustively proscriptive, individual permits in order to ensure permit shield protection. Id. at 28. 

The distinction between discharges explicitly allowed and explicitly prohibited is a critical one. In practice, the Ninth Circuit’s conclusion that all permitted discharges must be explicitly listed in a general permit cannot be reconciled with the fact that agencies issue general permits before any permittees seek coverage under them and therefore cannot be proscriptively exhaustive. Thus, interpreting the MSGP list of authorized non-stormwater discharges as exclusive renders the permit shield categorically unavailable to many general permit holders as “an authority cannot reasonably contemplate each specific facility’s discharges when it first issues the general permit because the agency cannot know which specific facilities will seek coverage under the general permit.” ICG Hazard, 2015 U.S. App. LEXIS 1283, *12. The clear conflict between the Sixth Circuit’s reasoning in ICG Hazard and Ninth Circuit’s in ACAT suggests that the Supreme Court should grant the petition in order to ensure coherence of the permit shield doctrine.