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New Cracks Form in the Clean Water Act Permit Shield

September 2014

Some shields lose protection over time.  That is the lesson of two recent federal appeals court decisions about the scope of the “permit shield” defense to Clean Water Act violations.  In the more recent of the cases, the Ninth Circuit held in early September that an Alaskan coal-loading facility was not authorized to discharge nonstormwater coal under a general, multi-sector permit.  This decision came on the heels of a Fourth Circuit decision in July that holders of individual permits are only shielded from liability for subsequent discharges if they adequately disclose all chemical-substance discharges during the application process.

Both of these decisions have important implications for companies applying for new discharge permits and those facing EPA enforcement actions for violation of discharge permits.  Mining operations, industrial facilities, and concentrated animal feeding operations (CAFOs) requiring discharge permits should monitor the ebb of liability protection, as should those entities under regulatory pressure to apply for a permit for the first time.

Liability Protection Under the Permit Shield

As a general rule, the Clean Water Act prohibits the discharge from any point source of any pollutant into the waters of the United States.1  A point source includes “any discernible, confined, and discrete conveyance” from which a pollutant is discharged, such as pipes, ditches, containers, channels, and concentrated animal feeding operations (CAFOs).2  Nonpoint-source discharges—such as discharges associated with land runoff and precipitation, especially from agricultural, urban, and construction areas—are not prohibited by the Clean Water Act, although states separately may regulate these discharges.3

One of the most-litigated exceptions to this general rule was at issue in the two recent federal appeals court decisions.  This exception allows an entity to discharge pollutants when authorized by a National Pollutant Discharge Effluent System (NPDES) permit.4  If operating under a valid permit, a facility can discharge in accordance with the permit without liability, even if EPA subsequently has promulgated harsher regulations.  This protection from liability is known as the “permit shield” defense.5  To rely on the permit shield, a permit holder must prove, under the so-called Piney Run test:

  1. Compliance with the express terms of the permit and with the Clean Water Act's disclosure requirements, and
  2. That the permitting agency contemplated the discharge at the time of permit issuance.6

Not all types of permits are equally entitled to the protections of the permit shield.  Specifically, EPA and state permitting agencies grant two types of permits—general and individual—with differing attributes.

An individual permit authorizes a specific entity to discharge pollutants.  To issue individual permits, EPA or a state permitting agency need only follow informal adjudication procedures.  In subsequent judicial review under the Administrative Procedure Act (APA), this less-formal process typically means that EPA need not comply with formal notice-and-comment procedures before granting an individual permit, and that courts are more deferential to EPA when reviewing the terms of these permits.7

In contrast, general permits are issued after notice and comment.  General permits encompass a group of entities and are issued when the group discharges the same types of wastes, requiring the same effluent limitations and the same or similar monitoring.8  Individual entities seeking to operate under a general permit file a Notice of Intent to so operate.  Absent denial of the Notice, the individual entity is then automatically authorized under the same terms in the general permit.9  By consequence of the more formal procedures required for a general permit, courts interpret general permits (and authorization to discharge under them) similar to other agency regulations adopted through notice-and-comment rulemaking.

The permit-shield defense was first recognized and applied in the context of individual permits.10  The logic behind the defense is straightforward in the context of individual permits.  In short, a typical entity discharges thousands of chemicals and substances, and requiring a permit to list each potential substance would be onerous and administratively expensive (both for applicants and the state permitting agencies).  Instead of mandating a comprehensive list of pollutants in the final permit, the Clean Water Act mandates disclosure of the most harmful substances, as well as a facility's wastestreams, operations, and processes as part of the application for a new permit.  If pollutants are disclosed (and, at least in some cases, even if pollutants are not disclosed but the wastestreams in which they are present are disclosed), a permit holder is shielded from liability even if the substance is not listed in the final permit.

EPA has stated that the permit shield also applies to entities operating under general permits.11  Although these permit holders may not participate in the notice-and-comment process, EPA envisioned that they could gain the protection of the permit shield by disclosing discharges in the Notice of Intent to operate under a general permit.12  Although EPA at one time primarily issued individual permits, early court decisions led EPA to increasingly prefer general permits as a way to conserve Agency resources.13  Application of the “permit shield” to general permit holders thus benefits the Agency and the permittee; general permits reduce the administrative burden to EPA and the permit holder does not lose protection from liability when switching from an individual permit to a general permit.

Recent Federal Appeals Court Decisions

Two recent cases have upended EPA's early interpretation of the permit shield.  The first, Southern Appalachian Mountain Stewards v. A & G Coal Corporation,14 limits the ability of entities to avoid liability by disclosing wastestreams rather than specific pollutants.  And the second, Alaska Community Action v. Aurora Energy Services,15 seems to compel the conclusion that the permit shield defense is inapplicable for entities operating under general permits.

Southern Appalachian Mountain Stewards v. A & G Coal Corporation

In Southern Appalachian, an environmental group dedicated to stopping surface coal mining in western Virginia initiated a citizen suit against A & G Coal Corporation.  The group argued that an A & G-operated mine discharged selenium into the waters of the United States in violation of an NPDES permit.

The mine claimed that the permit shield provision protected it from liability for its selenium discharge, in part because it had disclosed the wastestreams that included selenium.  The Fourth Circuit disagreed, and found that nondisclosure of at least some chemical substances was a violation of the CWA's disclosure requirements even if an entity had disclosed the wastestreams containing the substances.

Under the first prong of the Piney Run permit-shield test, the court found that the mine had not adequately disclosed the selenium discharge.  First, the court rejected A & G's argument that it had adequately disclosed all discharges that it “knew or had reason to believe” would occur.  It made clear that the standard under the CWA is not about an applicant's knowledge at the time of an application, but rather about gathering and disclosing all of the requisite information to the permitting agency.  The mine had never conducted an analysis of selenium levels, and thus had not performed the tests that it should have then disclosed to the state permitting agency.  The court noted that its standard of disclosure places a high burden on permit applicants who want to rely on the permit shield, requiring them to perform tests and disclose the presence of at least 125 pollutants.

Second, the court rejected the argument that disclosure of wastestreams, operations, and processes was sufficient to invoke the permit shield for chemical substances within those wastestreams.  A 1995 EPA policy memorandum had suggested the opposite:  it had stated that disclosure of wastestreams was adequate disclosure of constituent chemicals in those streams.  But the court found that an entity invoking the permit shield defense must show that it complied with all application instructions, and that the application instructions clearly went beyond the 1995 memorandum in requiring disclosure of at least some constituent chemicals, despite the resultant cost burden on applicants.

The court relatedly suggested that, for a discharge to be within the contemplation of a permitting agency, a permit applicant must disclose its presence in the specific facility.  It will seldom be sufficient to disclose pollutants endemic to a region or type of facility.

Alaska Community Action v. Aurora Energy Services

In contrast, the Ninth Circuit interpreted a general permit, and its decision limited (if not eliminated altogether) the applicability of the permit shield to general permits.  At issue in the litigation was whether nonstormwater discharges from a coal-loading facility into Resurrection Bay in Alaska were authorized by a general permit.  The facility argued that the permit shield exception protected it from liability for nonstormwater coal discharges.

Indeed, the District Court had earlier accepted the facility's argument, despite a general prohibition of all discharges in the general permit.  The District Court found (by interpreting other provisions of the general permit), that the general prohibition and a list of enumerated exceptions was not an exhaustive list of allowable discharges under the first prong of Piney Run.  Thus, the District Court applied the second prong of Piney Run to decide whether the state permitting agency was informed at the time of the application of these discharges.  Based on evidence that the permitting agency was informed of the discharges, the court found that the coal-loading facility was shielded from liability.

The Ninth Circuit did not rely on the permit-shield argument.  Instead, because the facility operated under a general permit, the court began (and ended) by interpreting the general permit as it would any other agency regulation.  Because agency regulations are interpreted according to their plain meaning, and the coal discharge was not plainly authorized by the final permit, it was irrelevant whether the agency was informed of the discharge during the application.  Rather, because the specific discharge was not listed as an exception, the coal discharge fell under the general prohibition in the permit.  The coal discharge thus violated the general permit.  Game, set, match, before any inquiry into the information exchanged during the application process.

Contrary to suggestions in Alaska Community, it markedly departs from previous cases interpreting the permit shield.  Almost every permit (including multiple examples where permit shields have been upheld) includes a general prohibition on discharges with limited exceptions.  In the main, previous cases have presumed that a general prohibition clause does not expressly prohibit specific discharges nowhere mentioned in the permit.  Previously, EPA's position was that authorized discharges are broader than those explicitly mentioned.  It expressed this position in an administrative proceeding and a policy memorandum, entitling the position to Auer deference even if not the most reasonable interpretation of a general permit16 and supporting the presumption that those discharges not explicitly mentioned were authorized if an applicant informed EPA in a Notice of Intent.  But the Alaska Community case reverses that presumption.

At bottom, Alaska Community Action means that the permit shield is never (or very rarely) applicable to general permits.  If a general permit is interpreted like a regulation, it should be interpreted, as Alaska Community Action did, by the plain meaning in the permit, supported by the public record during notice and comment.  In contrast, the permit shield begins from the assumption that an individual entity can be protected from liability by informing a permitting agency of discharges that are not in the plain terms of the permit.  Interpreting a general permit like any other agency regulation logically invalidates EPA's 1995 position that a Notice of Intent (submitted to an agency and automatically approved without notice and comment) can alter the plain terms of a General Permit. 

Implications for Permit Holders

These decisions have important implications for industry.  As an initial matter, they shift two legal realities for a large number of permit holders.  First, it is now clear that individual permit holders cannot rely solely on a state agency's awareness of a discharge—or wastestreams of which a discharge is a constituent element—unless the permit holder can show that it adequately investigated and tested the specific chemical levels and disclosed these test results to the permitting agency.  Second, general permit holders are unlikely to successfully invoke the protections of the permit shield, even if they expressly disclosed the presence of chemical substances in their Notices of Intent.  Beyond these straightforward applications, the application of these decisions in two other contexts merits consideration:

CAFOs.  EPA estimates that as many as 65% of CAFOs have never applied for NPDES permits.  Some of these CAFOs, though certainly not all, already may be protected from liability absent proof of actual discharge.17  For the others, now may be a particularly good time to apply for a first-time permit.  Many CAFOs still obtain individual permits; general permits currently are promulgated for only limited regions of the country.  Disclosing any discharges in individual permits, before promulgation of stricter EPA rules on CAFOs and an expanded definition of “Waters of the United States” (both of which are likely in the foreseeable future) could guard against higher liability risks after new rules are adopted.  And depending on the final scope of the new “Waters of the United States” rulemaking,18 many more CAFOs, especially in rural areas, may need to obtain permits for the first time and will need to understand the disclosure requirements for individual permits.  For many other CAFOs that previously obtained individual permits on the assumption that disclosure of wastestreams provided liability protection, now might be a good time to work with state agencies to renew or update NPDES permits.  Many state permitting agencies in the past have issued pro forma permits with little discussion of specific chemical substances.  Placing more detailed documentation and testing of these substances in the public record will protect against risk from aggressive EPA enforcement and inspections that could lead to costly penalties.

“Formalized” individual permits.  Alaska Community, in interpreting a general permit through the lens of the agency regulation, shows that the permit shield offers little protection after extensive notice-and-comment rulemaking.  The same likely applies to an increasing number of individual permits where EPA employs formal procedures, for a variety of reasons:  possible Endangered Species Act concerns, heightened public interest in controversial projects, or possible impacts on critical or impaired water bodies.  Long-standing permit-shield precedents are now a shaky reed to defend against liability if a pollutant is not listed on the final-issued permit in this context.  Thus, individual-permit applicants in more formal proceedings should be wary of overreliance on the permit shield and should ensure that possible discharges are exhaustively listed in the final permit.   


1 33 U.S.C. §§ 1311(a), 1342.

2 40 C.F.R. § 122.2.

3 See, e.g., EPA Office of Water, Nonpoint Source Guidance 3 (1987).

4 33 U.S.C. § 1342.  EPA has initial authority to issue NPDES permits, unless and until it delegates this task to state permitting agencies to issue State Pollutant Discharge Elimination System (SPDES) permits.  See id.  

5 33 U.S.C. § 1342(k); Atlantic States Legal Foundation, Inc. v. Eastman Kodak Co., 12 F.3d 353, 357 (2d Cir. 1993).

6 See Piney Run Preservation Ass'n v. County Comm'rs of Carroll Cnty., 268 F.3d 255, 259 (4th Cir. 2001).

7 See, e.g., Natural Res. Def. Council v. EPA, 279 F.3d 1180, 1183 (9th Cir. 2002).

8 See 40 C.F.R. § 122.28.

9 See Texas Indep. Producers & Royalty Owners Ass'n v. EPA, 410 F.3d 964, 968 (7th Cir. 2005).

10 Eastman Kodak, 12. F.3d 353 at 357; In re Ketchikan Pulp Co., 7 E.A.D. 605, 1998 WL 284964, at *12-13 (EPA 1998).

11 See EPA, Revised Policy Statement on Scope of Discharge Authorization and Shield Associated with NPDES Permits (Apr. 1995).

12 Id.

13 Specifically, EPA could not effectively manage its workload to permit the large number of entities discharging commingled stormwater without issuing more general permits.  See National Pollutant Discharge Elimination System General Permits and Reporting Requirements for Storm Water Discharges Associated with Industrial Activity, 56 Fed. Reg. 40948, 40949-50
(Aug. 16, 1991).

14 No. 13-2050, 2014 WL 3377687 (4th Cir. July 11, 2014).

15 No. 13-35709, 2014 WL 4339239 (9th Cir. Sept. 3, 2014). 

16 See Decker v. Nw. Envtl. Def. Ctr., 133 S. Ct. 1326 (2013).

17 Nat'l Pork Producers Council v. EPA, 635 F.3d 738 (5th Cir. 2011); Alt v. EPA, 979 F. Supp. 2d 701 (N.D.W. Va. 2013).

18 Definition of “Waters of the United States” Under the Clean Water Act, 79 Fed. Reg. 22,187 (Apr. 21, 2014).