July 27, 2020

Alternative Dispute Resolution in EPA and State Permit Appeals

by Lauran M. Sturm and Elizabeth A. Hurst

Alternative dispute resolution (ADR) has for many years played an important role in resolving disputes associated with environmental permits, including both permits issued by the Environmental Protection Agency (EPA) and permits issued by state agencies under the authority delegated to them by EPA. In an effort to streamline the processing and finality of permits under its review, the EPA has proposed several changes to the Environmental Appeals Board’s (EAB) permit review process. EPA’s proposed rule, published in the Federal Register on December 3, 2019, would revise its approach to ADR by imposing a time-limited ADR process as a requirement for judicial review and thereby transform EAB’s current ADR practice from an “opt-in” to an “opt-out” system. Envtl. Prot. Agency, Modernizing the Administrative Exhaustion Requirement for Permitting Decisions and Streamlining Procedures for Permit Appeals, 84 Fed. Reg. 66,084 (Dec. 3, 2019).

In its proposed rule, EPA also recommends other changes to the EAB’s permit review process, including eliminating EAB’s ability to issue sua sponte decisions, accept amicus curiae briefs, and decide whether EPA properly exercised its discretion regarding an “important policy consideration”; imposing a 60-day deadline for the EAB’s issuance of a final decision after final briefing and argument and a 12-year term limit on EAB judges; limiting the EAB’s ability to grant filing extensions; creating a process to identify certain EAB decisions as precedential; and allowing the EPA administrator, through the General Counsel, to issue a binding legal interpretation on matters or issues before the EAB. Id.

EPA’s proposal would affect only the review of certain EPA-issued permits and would not impact EAB’s review of enforcement matters under the various pollution-control statutes. And because most states issue their own permits under federal delegation, the proposal would necessarily affect only a small number of the numerous environmental permits issued each year. State administrative processes regarding state permit review, many of which include their own separate procedures for ADR, would remain unchanged.

This article outlines the EAB’s historical authority over the ADR process and the major recommendations in EPA’s proposal, and provides a sampling of the public comments received by EPA on the proposed rule changes. We also examine the various mechanisms for ADR in state administrative review processes, which provide a variety of different approaches to implementing ADR in the context of disputes involving environmental permits.

EAB History and Purview

Created by regulation in 1992, the EAB is an impartial appellate body housed within EPA. It was itself established in a streamlining effort to help the EPA adapt to “new realities” resulting from increased enforcement efforts—that is, rapidly increasing numbers of appeals that proved difficult for the EPA Administrator and judicial officers to handle. The EAB exists to “allow for a broader range of input and perspective on administrative decisionmaking,” thereby “lending greater authority to [EPA’s] decisions”; to “inspire[] confidence in the fairness of [EPA] adjudications”; and to “confer[] on [EPA] appellate proceedings the stature and dignity that are commensurate with the . . . importance of such proceedings.” 57 Fed. Reg. 5320, 5321–22 (Feb. 13, 1992).

To that end, the EAB operates independently and is comprised of four Environmental Appeals judges who are career service employees, not political appointees. Its goals are to ensure that EPA applies legal requirements consistently and to provide an efficient, cost-effective means for appeal that will expedite environmental compliance and permit finality without the expense and delay of protracted litigation.

The EAB typically hears permit challenges and appeals of administrative civil penalty assessment under the various environmental statutes. However, the EAB also has authority to review petitions for reimbursement of cleanup costs, certain acid rain program appeals, and challenges to pesticide registration and cancellation proceedings, in addition to proposed consent agreements involving administrative enforcement by EPA Headquarters. The EPA’s Environmental Appeals Board at Twenty-Five: An Overview of the Board’s Procedures, Guiding Principles, and Record of Adjudicating Cases 1 [hereinafter EPA’s EAB at Twenty-Five].

In terms of permit appeals, the EAB hears (1) permitting decisions by EPA Regional Administrators under the Clean Air Act, the Clean Water Act, the Safe Drinking Water Act, and the Resource Conservation and Recovery Act (RCRA); (2) Clean Air Act New Source Review (NSR) permits issued by EPA in Indian Country; and (3) terminations of National Pollutant Discharge Elimination System (NPDES), RCRA, and Marine Protection permits.

The Procedures for Decisionmaking, at 40 C.F.R. part 124, provide the mechanism for the EAB’s permit review. Any person who filed comments on a draft permit or participated in the public hearing on the draft may file a petition for review before the EAB. The petitioner must file the petition within 30 days after notice of the permit decision and must identify the specific challenge(s) to the decision and clearly explain why the EAB should review it. The EAB will grant the petition if the permit decision was based on a“ finding of fact or conclusion of law that is clearly erroneous” or an “ exercise of discretion or an important policy consideration that the [EAB] should, in its discretion, review.” 40 C.F.R. § 124.19(a)(4)(i). If the permit applicant did not file the petition, it may file a notice of appearance and respond to the petition, as may interested parties by filing amicus briefs. Id. § 124.19(b)(3)–(4), (e).

EAB’s Current ADR Process

The EAB established a voluntary ADR process in 2010 “to promote faster resolution of issues and more creative, satisfying and enduring solutions: to foster a culture of respect and trust among EPA, its stakeholders, and its employees and to improve working relationships; to promote compliance with environmental laws and regulations; to expand stakeholder support for [EPA] programs; and to promote better environmental outcomes.” 84 Fed. Reg. at 66,086. Because it is voluntary, the current system is an “opt-in” system. Because three members of the EAB typically hear matters as a panel, the fourth member is available to act as a settlement judge if parties wish to attempt to resolve their dispute informally through ADR. This settlement judge and a counsel to the Board serve as neutral mediators and provide a confidential assessment of the strengths and weaknesses of each party’s case. EPA’s EAB at Twenty-Five at 5. As EPA notes in its proposed rule, “[t]he ADR program has been highly successful, and, to date, over 90% of the cases that have gone through the program have been resolved without litigation.” 84 Fed. Reg. at 66,086.

In its current process, parties to an EAB dispute are invited to participate in ADR, and all parties must agree in order to start the process. If the parties agree, a settlement judge is appointed, and the appeal proceedings are stayed for 60 days. The settlement judge will hold a status conference, and then the parties must submit issue summaries within 10 days. At an initial ADR meeting, the parties will begin the case evaluation/mediation process. Id.

ADR may be terminated if the settlement judge determines that mediation is no longer appropriate; the settlement judge determines that there has been insubstantial ADR progress during the stay; or any party decides it no longer wishes to mediate the dispute. The matter will then be returned to the EAB’s docket. Id.

If, on the other hand, the parties reach a resolution during ADR, they will then execute a written agreement resolving all or a portion of the issues in dispute. If they resolve all issues, they must file a joint motion to dismiss the matter. If only some of the issues are resolved, the parties must file a motion to dismiss the resolved issues. The EAB will then issue an order returning the remaining issues to the EAB’s docket. Id.

EPA’s Proposal

EPA’s proposal to change the EAB’s permit review process and purview would affect all EPA-issued NPDES, Underground Injection Control, and RCRA permits, and the following EPA-issued Clean Air Act permits: Outer Continental Shelf, Title V, Acid Rain, Tribal Major Non-Attainment NSR, and Tribal Minor NSR. The proposed revisions would not, however, affect the EAB’s review of enforcement or other matters.

First and foremost, EPA has proposed changing the ADR process for EAB permit reviews to an “opt-out” process, in which ADR would automatically commence upon receipt of a notice of dispute. According to EPA, this procedural proposal is “intended to streamline and modernize part of the Agency’s permitting process.” Id. at 66,084. Under the proposal, the EAB’s receipt of a notice of dispute for the covered areas would trigger the appointment of a settlement judge, who would then have 30 days from the response deadline to convene a meeting of all parties. Each party would be required to submit issue summaries at least 10 days prior to the meeting. At the meeting, each party would meet privately with the settlement judge and receive a confidential, verbal assessment of the strengths and weaknesses of the party’s case. After the meeting, or no later than 30 days after the response deadline, the parties may decide unanimously to either extend the ADR window or proceed with an EAB appeal. A party’s participation in the convening meeting would be a prerequisite for later seeking judicial review. If the parties do not agree to extend the ADR process or proceed with an EAB appeal, the permit would then become final and could be challenged judicially.

EPA has also proposed that only those issues that the parties agree on for further ADR or EAB review should continue through the process. In other words, any remaining issues might be preserved for appeal but could not be challenged through federal court unless the parties exhausted administrative review on those issues. EPA specifically requests comments on whether all issues raised in a notice of dispute should continue through the EAB process, or only those issues on which the parties unanimously agree to either continue with ADR or proceed with an EAB appeal.

Other components of EPA’s proposed rule could affect how EAB currently conducts the ADR process. EPA has proposed narrowing EAB’s scope of review to prevent it from reviewing whether EPA properly exercised its discretion with respect to “an important policy consideration.” Id. at 66,088. According to EPA, EAB’s current authority to review policy consideration has caused confusion “as to whether a petitioner may ask the EAB—standing in the Administrator’s shoes—to address issues that a federal court generally could not review”—i.e., evaluate discretion in the context of policy considerations. Id.

EPA also proposes eliminating EAB’s acceptance of amicus curiae briefs in permit appeals. EPA believes that additional input from amici will not be necessary with the proposed ADR process because it “would be the proper forum for parties to resolve disputes over [EPA] permits.” Id. EPA also believes that disallowing amicus briefs is consistent with purported purposes of streamlining permit appeals: “By eliminating amicus briefs, EPA proposes to hasten the resolution of permit appeals by 15 days, . . . and to simplify the process.” Id. (internal citations omitted). As stated in the proposal, EPA considers public participation in the permit process, rather than submittal of amicus briefs, the proper avenue for members of the public to provide input on disputed permits.

Finally, EPA proposes a mechanism by which the EPA Administrator, through the General Counsel, could issue a dispositive legal interpretation in any matter or issue before the EAB. Such an interpretation could be issued in both permit appeals and enforcement reviews and would be binding on the EAB. According to the EPA, this proposal is intended “to allow the Administrator, in specific cases, to retain authority as it pertains to legal interpretations.” Id. at 66,090.

Public Comments on EPA’s Proposal

As one might expect, industry groups have submitted comments largely supportive of EPA’s streamlining proposal, with environmental nonprofit groups generally opposed. As for the ADR “opt-out” proposal itself, most of the supportive comments focused on the need for minimizing delays in the permit review process. According to one industry commenter, EPA’s proposed changes “would provide permit applicants with greater certainty as to when they can obtain final action on their permits and, if approved, proceed with their projects.” Amer. Petroleum Inst. Comments at 4 (Jan. 2, 2020), regulations.gov/document?D=EPA-HQ-OGC-2019-0406-0020. Others recommended express clarification that construction under a permit, for example, could commence as soon as an EAB notice of dispute was dismissed. Air Permitting Forum Comments at 1 (Jan. 2, 2020), regulations.gov/document?D=EPA-HQ-OGC-2019-0406-0027 [hereinafter Air Permitting Forum Comments]. Opposing comments claimed that the proposal for initial, required ADR participation would violate the plain terms of the Alternative Dispute Resolution Act, “which authorizes agencies to use a ‘dispute resolution proceeding’ only ‘if the parties agree to such proceeding,’” Envtl. Def. Fund Comments at 3 (Jan. 2, 2020), regulations.gov/document?D=EPA-HQ-OGC-2019-0406-0025, and “eliminate the public’s right to EAB administrative appeal, . . . creat[ing] an absolute veto power on the part of permit applicants to foreclose any EAB appeal.” Earthjustice et al. Comments at 5 (Jan. 2, 2020), regulations.gov/document?D=EPA-HQ-OGC-2019-0406-0026.

Most other substantive comments seem to concern the proposals to disallow amicus curiae briefs and to allow the EPA Administrator to issue binding legal interpretations in matters before the EAB. On these points, even the industry groups seem reluctant to accept EPA’s proposal in whole. For instance, the Tennessee Valley Authority (TVA), an electricity provider in the Southeast, supports the proposal to limit amicus participation but suggests that such participation not be disallowed outright. TVA recommends that amici briefing be allowed where participants have exhausted their administrative remedies or where the EAB specifically requests amici briefing on “particularly difficult legal issues that would benefit from other perspectives in reaching resolution.” Tenn. Valley Auth. Comments at 4 (Jan. 2, 2020), regulations.gov/document?D=EPA-HQ-OGC-2019-0406-0019. The Air Permitting Forum, an industry group representing permittees, writes, “one concern is that the approach to issuing the ‘dispositive’ legal interpretation is unclear and the inability of non-parties to participate in the proceeding could lead to precedential decisions being made without notice.” Air Permitting Forum Comments at 2. The Forum therefore suggests that any such dispositive legal interpretation be appealable as a final action by any person.

ADR in State Administrative Proceedings

As noted above, EPA’s proposal would not affect state administrative review of state-issued permits, which account for the majority of environmental permits issued each year. 84 Fed. Reg. 66,086. Most states do provide some sort of ADR process for permit appeals, though the format and scope vary widely. Some states have instituted a formal process for ADR, including detailed rules, while others simply encourage settlement through mediation without any formal process in place. Many of the states specifically assert in statute, rule, or guidance that the ADR process cannot be used as a tool to delay a hearing on a contested matter. States emphasize the advantages of ADR, such as saving litigation costs for the parties and administrative costs for the state and narrowing the time of a resolution, as well as the ability to address issues that cannot be addressed in the civil or administrative process due to jurisdictional constraints, such as aesthetics. Even if the mediation does not result in a final resolution, it may assist in narrowing the issues, which could speed up the final resolution to the contested case. The following is a sampling of how some states’ ADR processes work in various regions of the country.

The Texas Commission on Environmental Quality (TCEQ) has a voluntary settlement procedure that employs the use of mediation. 30 Tex. Admin. Code ch. 40. There are several opportunities for resolving a contested permit through mediation, and all run parallel with the administrative hearing, except when there is an order issued by the presiding administrative judge delaying the hearing. (This occurs only if it appears the matter is likely to settle and the parties do not want to incur any further litigation expenses.) The ADR director for the TCEQ coordinates and oversees the ADR process and makes recommendations to the TCEQ commissioners regarding mediation before a contested matter is referred to State Office of Administrative Hearings (SOAH) by the commissioners. The parties can request mediation, but usually the ADR director is the first to reach out to the parties to determine if ADR could facilitate a resolution. The ADR director usually reaches out to the parties to evaluate whether mediation would assist in resolving the issues once a hearing is requested to challenge the permit and the comment period has closed, but before the commissioners make a decision regarding whether the challengers are eligible parties to request a hearing. Often the ADR director’s evaluation is based on how many challengers have requested a hearing. If there is a very large number of participants, mediation will likely not be effective at this point in the proceedings. The ADR director provides a recommendation to the commissioners if the contested case can be resolved through mediation at the time the commissioners hold a hearing on whether the matter needs to be referred to SOAH for a hearing on the relevant issues.

Once the case is forwarded to SOAH, the parties can also seek mediation. Similar to the TCEQ ADR process, SOAH has its own set of regulations regarding mediation. 1 Tex. Admin. Code § 155.351. Discovery can help focus the issues or provide additional evidence that will assist in making the mediation productive. The TCEQ ADR mediators tend to run the mediations, but SOAH also has mediators, which the participants can utilize. Both TCEQ and SOAH provide mediators at no cost to the parties, though the parties have the option of hiring a private mediator—in this case, the participants pay for their own mediators. 30 Tex. Admin. Code § 40.4; 1 Tex. Admin. Code § 155.31(e). Private mediators are utilized if the participants are concerned about the independence of the TCEQ mediators. Mediations only occur if all the parties consent; however, the SOAH judge does have the authority to compel mediation without the consent of all the parties, though the SOAH judge generally will not exercise this authority. Instead, SOAH may offer the parties a presentation by a SOAH mediator about the mediation process and why it may be useful in narrowing the issues or reaching a complete settlement. This multilayered mediation process for TCEQ-contested cases allows for the possibility of settling the matter through mediation at various stages of the contested case hearing without delaying the proceedings.

The Florida Department of Environmental Protection (Florida DEP) has a process through the Environmental Litigation Reform Act (ELRA) that allows mediation instead of going before the circuit court for a Notice of Violation (NOV) involving certain alleged violations with a proposed penalty of $10,000 or less. Fla. Stat. § 403.121(2). ELRA allows the respondent to elect to go through an administrative hearing to obtain a final order with the additional option of mediation before proceeding to the circuit court. Once the ELRA NOV is issued by the Florida DEP, the respondent can petition for a resolution through an administrative hearing within 20 days or opt out of the ELRA process and go to the circuit court. If an administrative hearing is chosen, the respondent has 10 days from the time of the administrative law judge’s initial order setting a date for the hearing (which is usually no more than 180 days out) to request mediation. The Florida Conflict Resolution Consortium then provides a list of mediators. The respondent must select one within 15 days and then mediation must be completed 15 days prior to the hearing. If the respondent wants to mediate the issues, the Florida DEP cannot opt out for an ELRA NOV. On the other hand, if it is a regular NOV or a contested permit, all parties must agree to the mediation. In addition, for non-ELRA NOVs, if all the parties agree to mediation, the filing of the petition is tolled until the end of mediation. FL DEP Enforcement Manual 82. The cost of the mediation is divided among the parties.

Tennessee’s Uniform Administrative Procedures Act encourages agencies to establish procedures for informal settlement of matters, Tenn. Code Ann. § 4-5-105, but there are no specific rules by the Tennessee Department of Environment and Conservation or the Office of Administrative Hearings for mediation of environmental disputes. In practice, an administrative judge from the Administrative Procedures Division (APD) typically asks parties if they have interest in mediation during the first prehearing conference call regarding a contested case. If the parties want to mediate, APD will appoint a neutral administrative judge to oversee mediation. The contested case will remain on APD’s docket until a resolution is reached.

New York’s Department of Environmental Conservation (DEC) provides mediation services through its Office of Hearings and Mediation Services (OHMS) for permits, orders, or any other matter over which DEC has jurisdiction. The mediation costs are paid for by OHMS. The parties can request mediation during the course of an administrative hearing, but all parties must agree to the mediation. The DEC has proposed to replace the Uniform Hearing Procedures with new rules that add a section on mediation. Proposed N.Y. Codes R. & Reg. tit. 6, § 622.19. The comment period on the proposed rule ended on January 31, 2020. The proposal gives the ALJs authority to mediate enforcement matters and sets forth the ALJ’s powers with respect to the mediation. The proposed mediation rule also provides that “[t]he hearing will not be adjourned, in whole or part, without the permission of the assigned ALJ or the Chief ALJ. . .” due to the mediation. Id. § 622.19(c).

In Arizona, the Office of Administrative Hearings has a list of “Mediation Rules” governing mediations. It is a voluntary process, requiring all parties to participate in order for the mediation to be scheduled. The parties are encouraged to request mediation early on in the hearing process, usually no later than 10 days after receipt of the Notice of Hearing. Unlike many of the states with formal rules or guidance on mediation procedures, Arizona postpones setting a hearing date until after the mediation. If the mediation does not end in a settlement, the mediator, if the parties all agree, can prepare a “mediator’s proposal” of suggested settlement terms and submit those terms in separate meetings with the parties. The Mediation Rules encourage the mediator to provide “Facilitative Mediation,” which focuses on obtaining an agreement for settlement by “asking questions, validating and restating parties’ points of view, identifying interests underlying the positions of the parties, and finding and analyzing options for resolution,” and “Evaluative Mediation,” which focuses on the legal weakness and realities of the parties.

In Washington, the appeals from decisions by the Department of Ecology are heard by the Pollution Control Hearings Board or the Shorelines Hearings Board, depending on the type of case. The Board encourages early settlement, and to that end, it provides mediation services to parties free of charge, utilizing Administrative Appeals judges as mediators. All parties must agree to mediation before a time is set for mediating the dispute. Wash. Admin. Code § 371-08-395. The Board requires that the mediations be conducted early in the process so as to not delay the adjudicative proceeding. Wash. Admin. Code § 10-08-230. The mediations are conducted pursuant to the state’s Uniform Mediation Act. Wash. Rev. Code Ann. ch. 7.07.

The North Carolina Office of Administrative Hearings handles contested case hearings forwarded by the North Carolina Department of Environmental Quality. Within 10 days of the filing of the contested case petition, the chief administrative law judge can require by order that the parties attend a prehearing mediated settlement conference. 26 N.C. Admin. Code 03.0201. The ALJ must give a specific date for completion of the mediation, which shall not be less than 90 days or more than 120 days from the ALJ’s Order. Id. 03.0203(b). The parties must pay for the mediator, and if they cannot agree on a mediator within 21 days after the mediation order is issued, the ALJ will appoint one. Id. The parties can file motions to dispense with mediation if good cause is shown. Id. The rules require that the mediation not delay the proceedings, including discovery and the filing or hearing of motions. Id. 03.0203(e).

EPA’s efforts to streamline EAB permit reviews through required, “opt-out” ADR differ from many of the established state administrative processes and may change in response to public comments from both industry and environmental nonprofit groups. Based on the negative feedback from commenters, it would not be surprising to see, for example, changes to the proposals to eliminate amicus curiae briefs and allow for binding legal interpretations from the EPA Administrator. It is also possible that certain states could reevaluate their own processes for permit challenges and ADR in light of any changes EPA ultimately makes to its own procedures. Either way, permittees likely will benefit from federal and state endeavors to simplify and expedite permit reviews.


Lauran M. Sturm and Elizabeth A. Hurst

Ms. Sturm is an attorney and consultant with the Tennessee Department of Environment and Conservation in Nashville, Tennessee. She may be reached at lms.sturm@gmail.com. Ms. Hurst is a principal at the Law Office of Elizabeth A. Hurst, PLLC in Dallas, Texas. She may be reached at eahurstlaw@gmail.com.