"Permit Shield" Held no Defense Against Alleged Violation of Generic Narrative Prohibitions

4th Circuit Decision Increases Risk for Permit Holders Who Accept "Boilerplate" Permit Provisions

January 10, 2017
Legal Update

To streamline the permitting process, state environmental agencies across the country have developed templates for many common permits, including NPDES permits for wastewater and stormwater discharges and for emissions of air pollutants. In the permits, numeric limits and monitoring conditions specific to the industry or local government are set forth in the first sections, followed by the “boilerplate,” i.e., a series of pages of additional narrative terms and conditions, often cast in tiny print. The boilerplate typically contains definitions and procedures for sampling, monitoring and reporting of data, spills, upsets or malfunctions of equipment, and the like.

In most states, the boilerplate also includes generic narrative prohibitions. In water and air permits, the prohibition is usually against the discharge or emission of a pollutant that violates any water quality or air emission standard or creates a nuisance condition. These prohibitions are written in broad terms, and often refer to vague standards and nuisance rules that provide no objective criteria for guidance.

Compliance with an air or water permit creates a statutory defense under the Clean Air and Water Acts, referred to as the “permit shield.” The defense applies against allegations that, for example, the permittee’s operation is creating a nuisance, or is discharging or emitting pollutants disclosed to the agency but not regulated in the permit. The defense has its origin in the common-law principle that an activity the “sovereign” has authorized cannot be the subject of a claim for damages.

The Fourth Circuit’s decision in Ohio Valley Environmental Coalition v. FOLA Coal Company, Appeal No. 16-1024, January 4, 2017, substantially negates the permit shield defense when the permit contains boilerplate with narrative prohibitions. In that case, FOLA Coal’s application to renew the NPDES permit for its West Virginia mining operation disclosed that the discharge contained ions and sulfates that contribute to increased levels of conductivity in rivers and streams. But West Virginia DEP chose not to include numeric limits on these pollutants, nor on the level of conductivity measured in the discharge. However, the permit did include boilerplate provisions, including a narrative prohibition against any discharge that would “…cause violation of applicable water quality standards….” Among the standards incorporated by reference under this broad language were prohibitions against discharges toxic to aquatic life or that adversely impact the biology of an aquatic ecosystem.

Environmental groups sued FOLA Coal for discharging pollutants that increased conductivity in the stream and allegedly caused the biological scores for aquatic insects to decline below impairment levels. The Company’s assertion of a permit shield defense was rejected by the trial and appellate courts, despite the Company’s disclosure of the presence of ions and sulfates to the agency in the renewal application, and despite the decision of the DEP not to impose numeric limits on the pollutants or on conductivity. In the courts’ view, the generic narrative prohibition set forth in the permit’s boilerplate constituted an enforceable condition of the permit, the alleged violation of which negated the ability of the Company to assert the permit shield defense.

The decision in FOLA Coal sends an ominous warning signal to permittees that pay little or no attention to the “boilerplate” set forth in their permits. Full disclosure to a state agency, and its decision not to impose specific limits, may not shield the permittee against allegations by the state agency, U.S. EPA, or environmental groups that the discharge or emission violates broad, vague, and often standardless, narrative prohibitions “hidden” in the boilerplate. Prudent permittees will strive to limit, or better yet remove, these terms from their permits. In some instances, agreeing to specific numeric limits in return for removal of vague prohibitions may provide greater protection. Otherwise, permits containing such broad, narrative prohibitions create a false sense of security when reporting to management that a facility is in full compliance, and a potential risk of being on the losing end of an expensive enforcement action.

Messrs. Haughey and Samuels are Members of Frost Brown Todd’s Environmental Practice Group (EPG), and long-time representatives of industry and local governments in environmental permitting. For more information about the decision, please contact Mr. Haughey or Mr. Samuels, or consult another attorney in the EPG.

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