CWA Permit Shield Requires Compliance with Incorporated Quality Standards

A recent Fourth Circuit decision will have wastewater dischargers taking a closer look at their NPDES permits and state water quality standards. The court of appeals held, in Ohio Valley Environmental Coalition v. Fola Coal Co., No. 16-1024, that permit language incorporating state water quality standards required compliance with all such standards, including narrative standards not reflected in the permit’s effluent limits. As a consequence, a source can only be assured that it is shielded from liability under the CWA if its discharges comply with both effluent limits in the NPDES permit and any water quality standards—even narrative standards—that the permit incorporates. The decision raises questions about potential exposure and how to approach permit writers in the future.

Environmental groups sued Fola alleging that discharges from its mine violated two narrative WQS adopted in West Virginia. Fola’s 2009 permit incorporated a West Virginia regulation that prohibited discharges under NPDES permits from “caus[ing] violation of applicable water quality standards” adopted by the state. In a bench trial, the district court held that Fola’s discharges contained sufficient ions and sulfates to boost conductivity of the receiving waters. This increase in conductivity caused the receiving waters to violate two narrative water quality standards. Thus, the lower court held Fola liable even though its discharges did not violate any of the effluent limitations contained in its permit.

The Fourth Circuit rejected on two grounds Fola’s principal argument that discharging in compliance with the effluent limits in its permit entitled Fola to the protection under the permit shield provision of the Clean Water Act, section 402(k). First, the panel disagreed with Fola’s position that the permit language incorporating water quality standards was directed at West Virginia DEP rather than the discharger. The court concluded that the language at issue was intended only to impose an obligation on Fola to comply with all applicable water quality standards.

Second, the court also held that Fola was not shielded from liability because the company had disclosed the sulfate and ion content of its dischargers and complied with the permit’s numeric limits. The panel clarified that the 2001 decision in Piney Run Preservation Association v. County Commissioners, 268 F.3d 255 (4th Cir. 2001), required compliance with all permitting terms, not just effluent limits, in order for a discharger to be shielded from liability. The Fourth Circuit thus joined other courts that have relied on incorporation language in NPDES permits to conclude that water quality standards, where incorporated as permit terms, are enforceable against dischargers. E.g., NRDC v. Metro. Water Reclamation Dist. of Chi., 175 F. Supp. 3d 1041 (N.D. Ill. 2016).

This decision raises important questions for dischargers as they take stock of their compliance obligations and seek permit language that would reduce their potential exposure. Dischargers would be wise to evaluate whether and to what extent their permits incorporate water quality standards. They may find that they need to be aware of how their discharges might impact compliance with a narrative standard. Entities seeking to avoid language like that in Fola’s permit will also have to walk a fine line between removing open-ended incorporation language outright and ensuring that their permits withstand EPA scrutiny.