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E-M:/ Mich Peat is Beat

Enviro-Mich message from "Alex J. Sagady & Associates" <ajs@sagady.com>

Eastern District of Michigan dismisses CWA declaratory judgement action
            against EPA and Region 5, Michigan Peat v. U.S. EPA

            IMPACT: On January 12, 2001, Judge Avern Cohn of the federal 
district court for the
            Eastern District of Michigan issued a final Judgment for EPA 
and Region 5 in a
            declaratory judgment action filed by the Michigan Peat Company 
during 1997. The
            Judgment was issued following the filing of summary judgment 
motions and
            supplementary briefs by both defendant and plaintiff. Judge 
Cohn held that no portion
            of the wetland acreage upon which Michigan Peat had 
historically performed its peat
            mining operations (back to the 1960s) was "grandfathered" from 
regulation under the
            CWA, despite a statement regarding the "grandfathering" of 749 
acres under State law
            which Michigan DEQ had made in a draft section 404 permit it 
proffered to Michigan
            Peat during 1995. Judge Cohn further held that the draft 
section 404 permit never
            became a final permit (because Michigan Peat chose not to sign 
it). For that reason,
            EPAís actions in agreeing to the 1995 draft permitís terms, and 
in withdrawing its
            objections to Michigan Peatís permit application on the 
condition that any final permit
            issued not differ materially from the 1995 draft permit, did 
not bind EPA to any term or
            position stated by MDEQ in that 1995 draft permit (such as the 
statement on
            "grandfathering"). Therefore, EPA has not waived its authority 
to take enforcement
            action against Michigan Peat for violations of CWA section 404.

            Not only does the January 12, 2001, Order dismiss the 
declaratory judgment action,
            but it also directly bears on EPAís pending CWA enforcement 
action against Michigan
            Peatís parent, Bay-Houston Towing Company. The Courtís findings 
that Michigan Peat
            does not have a final section 404 permit and that none of 
Michigan Peatís acreage is
            "grandfathered" from regulation under the CWA also will be 
applied by the Court in the
            enforcement action, clearing the way for EPA to press all of 
its claims of section 404

            BACKGROUND: Since the 1960s Michigan Peat (and its parent 
Bay-Houston Towing
            Company) has extracted peat from one-third of its 2800Ėacre 
property in the Minden
            Bog, which is located in the thumb of Michigan. In the course 
of mining peat Michigan
            Peat discharges dredged material and fill material by 
sidecasting soils while
            maintaining its ditch drainage system, by spreading and piling 
excavated peat on the
            surface of the bog, and by building and maintaining roads. 
Michigan Peat also
            channels and discharges water that drains from the bog and 
flows off the surface of the
            bog from precipitation events; these water discharges contain 
measurable levels of
            metals which EPA contends are "pollutants" under the CWA.

            In 1991 Bay-Houston first applied for a section 404 permit; 
Bay-Houston applied to the
            State of Michigan, which since 1984 has been authorized to 
operate a section 404
            permitting program. In 1995 Michigan offered Bay-Houston a 
section 404 permit that
            was limited in area and contained various conditions; one 
condition was that wetlands
            reclamation be performed on all mined acreage, even acreage 
MDEQ identified as
            "grandfathered" under State law. This 1995 draft permit was 
responsive to objections
            which EPA had made to Bay-Houstonís permit application, and for 
that reason EPA
            withdrew its objections with the express condition that the 
final permit not differ
            materially from the draft permit. Bay-Houston refused to sign 
the 1995 draft permit,
            administratively appealed the draft permit conditions, 
commenced a takings action
            against the State, and continued mining peat. In June 1997 the 
State issued
            Bay-Houston another "dredge and fill" permit but stated on the 
permitís face that it
            was not issued under CWA section 404. In EPAís view, the 
Stateís issuance of the
            1997 "State-only permit" caused section 404 permitting 
authority over Bay-Houstonís
            Minden operations to transfer to the Corps, and EPA informed 
Bay-Houston of that

            Bay-Houston filed a declaratory judgment action against EPA in 
May 1997 that
            essentially sought to bar EPA from involvement in the section 
404 permit process for
            Bay-Houstonís Minden operations and to establish that a final 
section 404 permit had
            been issued by MDEQ in 1995. Bay-Houston argued, among other 
things, that EPAís
            delegation of the CWA section 404 program to the State of 
Michigan eliminated EPAís
            role in section 404 permitting and enforcement. During 1998, 
the federal district court
            dismissed Bay-Houstonís complaint on pre-enforcement grounds. 
In April 1999, the
            case dismissal was reversed by the Sixth Circuit, which found 
federal subject matter
            jurisdiction to exist in the declaratory judgment action. The 
Sixth Circuit stated in its
            opinion that when EPA withdrew its comments on the draft 1995 
State-issued section
            404 permit, EPA performed a final agency action. In its court 
briefs leading up to the
            current Judgment, Michigan Peat argued that the Sixth Circuitís 
decision supported
            the companyís view that the draft 1995 permit constituted a 
final section 404 permit. In
            his January 12, 2001, Judgment, Judge Cohn rejected that 
position and found that
            Michigan Peat does not have a final section 404 permit.

            During June 1998 EPA filed a civil enforcement action against 
Bay-Houston for
            violations of CWA section 402 (between 1972 and 1997) and 
section 404 (between
            1977 and the present). The complaint also alleges that 
Bay-Houston violated CWA
            section 309 by failing to comply with a section 309 compliance 
order issued by EPA
            during February 1998; that section 309 compliance order 
directed Bay-Houston,
            among other things, to cease its unpermitted section 402 and 
section 404 discharges;
            while Bay-Houston partially complied with the section 309 order 
during 1998 by not
            mining peat, it did mine peat during 1999 and 2000. In the 
enforcement action, Judge
            Cohn previously has ruled in EPAís favor on a number of 
liability issues.

            A trial in the enforcement action is scheduled to begin on 
March 12, 2001. The primary
            issue at trial likely will be the nature of the injunctive 
relief to be granted, as EPA
            seeks to have Bay-Houston perform peatland restoration at its 
Minden Bog property
            due to the unique environmental value of the bog. Bay-Houston 
contends that peatland
            restoration will be experimental, likely to fail due to 
site-specific conditions, and too
            costly; it seeks instead to reclaim the area as scrub-shrub 
emergent wetland

            Another CWA enforcement action is pending against Bay-Houston 
regarding its similar
            peat mining operations in bog wetlands located in Sandusky, 

            Case Contact: Jacqueline Kline, Multi-Media Branch II, (312) 

Alex J. Sagady & Associates        Email:  ajs@sagady.com

Environmental Enforcement, Permits/Technical Review, Public Policy and
Communications on Air, Water and Waste Issues
and Community Environmental Protection

PO Box 39  East Lansing, MI  48826-0039
(517) 332-6971 (voice); (517) 332-8987 (fax)

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