Challenge to EPA Approval of 2013 Kentucky Water Quality Standards

SETTLEMENT AGREEMENT

Kentucky Waterways Alliance, Sierra Club, Appalachian Voices, Kentuckians for the Commonwealth, Center for Biological Diversity, and Defenders of Wildlife ("Plaintiffs"); the United States Environmental Protection Agency, Gina McCarthy, Administrator of the United States Environmental Protection Agency; and Heather McTeer Toney, Regional Administrator of the United States Environmental Protection Agency Region IV (collectively, "EPA"); and The Commonwealth of Kentucky ("Kentucky") along with Kentucky Chamber of Commerce and Kentucky Coal Association ("Industry-Intervenors") hereby enter into this Settlement Agreement with respect to an action originally filed by Plaintiffs on December 13, 2013. Plaintiffs, EPA, Kentucky, and Industry-Intervenors are hereafter collectively referred to as the "Parties."

The Parties hereby state:

WHEREAS, Plaintiffs filed the above-referenced law suit on December 13, 2013, a First Amended Complaint on February 28, 2014, and a Second Amended Complaint on August 13, 2014 (W.D. Ky. Case 3:13-CV-1207-GNS-DW);

WHEREAS, Plaintiffs' Second Amended Complaint asserts that the EPA's approval under 33 U.S.C. ? 1313(c) on November 15, 2013, of changes to Kentucky's water quality standards regarding selenium, eutrophication, and nutrients contained in Kentucky Administrative Regulations 401 KAR 10:001 Section 1 (30) and 401 KAR 10:031 Section 6 was inconsistent with the federal water quality standards regulations and the Clean Water Act (CWA), was arbitrary, capricious and otherwise contrary to law, and was made without the requisite consultations under Section 7 of the Endangered Species Act (ESA);

WHEREAS, on October 2, 2014, the Parties entered into court-ordered mediation;

WHEREAS, on October 17, 2014, Plaintiffs moved for summary judgment in this matter;

WHEREAS, on April 29, 2015, EPA sent a revised biological evaluation to the United States Fish and Wildlife Service ("FWS") requesting initiation of formal consultation on EPA's approval of Kentucky's revised narrative nutrient criterion and revised definition of eutrophication (401 KAR 10:001 Section 1 (30), 10:031 Section 6);

WHEREAS, on June 23, 2015, EPA sent a revised biological evaluation to the FWS requesting initiation of formal consultation on EPA's approval of Kentucky's amendments to the Commonwealth's water quality standards regulations adopting revised chronic water quality criteria for selenium of 8.6 μg/g dry weight of whole fish tissue (401 KAR 10:031 Section 6);

WHEREAS, state and authorized tribal standards adopted on or after May 30, 2000 do not become the "applicable" standards for CWA purposes until they are approved by EPA, standards adopted by states and authorized tribes on or after May 30, 2000 must be approved by EPA before they are the basis for action under the CWA, and once a standard becomes an applicable water quality standard for CWA purposes, it remains such until EPA approves a change;

WHEREAS, EPA has stated, in its 2014 and 2015 draft aquatic life selenium criterion documents, that fish tissue criterion elements should override water column criterion elements when both fish tissue and water concentrations are measured, that states and tribes should express a multi- part criterion in a manner that explicitly affirms the primacy of fish tissue criterion elements over water column criterion elements, that inclusion of water column elements ensures protection when fish tissue measurements are not available, and that external scientific peer review affirms these assertions;

WHEREAS, Kentucky's interpretation and implementation of its current selenium criterion elements for protection of aquatic life affirm the primacy of fish tissue criterion elements over water column criterion elements;

WHEREAS, Kentucky, at least through the period of remand established by this Settlement Agreement ("Agreement"), intends to interpret and implement the current selenium criterion elements for protection of aquatic life (which were previously approved by EPA) as affirming the primacy of fish tissue criterion elements over water column criterion elements;

WHEREAS, at least through the period of remand established by this Agreement, EPA supports Kentucky's implementation of the current selenium criterion elements for protection of aquatic life (which were previously approved by EPA) affirming the primacy of fish tissue criterion elements over water column criterion elements;

WHEREAS, EPA anticipates that Kentucky will adopt new or revised water quality standards to explicitly clarify the relationship between any fish tissue chronic criteria for selenium and any water column chronic criteria for selenium and EPA intends to take action on these new or revised water quality standards pursuant to CWA Section 303(c);

WHEREAS, the Parties have agreed to a settlement of all counts contained in the Second Amended Complaint in the above-captioned case without any admission of fact or law, which they consider to be just, fair, adequate and equitable resolution of the claims raised in the Complaint;

WHEREAS, the Parties and their respective counsel consent and enter into this Agreement without trial, adjudication, or admission of any issue of fact or law with respect to Plaintiffs' claims or allegations and without admission of any fact, allegations, or legal argument contained in Plaintiffs' sixty (60) day notice, Complaint, Amended Complaint, or Second Amended Complaint in this action;

WHEREAS, it is in the interest of the public, the Parties, and judicial economy to resolve the above-referenced action without protracted litigation.

NOW, THEREFORE, IT IS HEREBY AGREED that:

I. Parties

1. The Parties to this Settlement Agreement are Plaintiffs, EPA, Kentucky, and Industry-Intervenors. The Parties understand that (a) Gina McCarthy and Heather McTeer Toney are sued in their official capacities as Administrator of the United States Environmental Protection Agency and Regional Administrator of United States EPA, Region 4, respectively and (b) the obligations arising under this Agreement are to be performed by EPA and not by Gina McCarthy or Heather McTeer Toney (or their successors and assigns) in their individual capacities.

2. This Settlement Agreement shall apply to, and be binding upon, the Parties, and upon the successors and assigns of the Parties.

II. EPA Actions

3. Within 7 days of the effective date of this settlement agreement, the Parties will file a motion requesting a stay of Kentucky Waterways Alliance, et al. v. McCarthy, No. 3:13-cv-1207-GNS-DW (W.D.Ky.) and requesting that the court remand without vacating via a proposed Agreed Order (attached as Exhibit ---) to be filed with the motion for stay (hereafter referred to as "the Agreed Order) the following parts of EPA's November 15, 2013 decision pursuant to CWA Section 303(c):

a. Approving amendments to Kentucky's water quality standards regulations adopting a revised definition of eutrophication and revised narrative nutrient criterion (401 KAR 10:001 Section 1 (30), 10:031 Section 6); and

b. Approving amendments to Kentucky's water quality standards regulations that 1)removed Kentucky's water column chronic criterion for selenium of 5.0 [tg/L, and 2) adopted revised chronic water quality criteria for selenium of 8.6 fig/g dry weight of whole fish tissue or 19.3 μgig dry weight of fish egg/ovary tissue (401 KAR 10:031 Section 6).

4. The Agreed Order will provide that in the event that EPA does not disapprove Kentucky's removal of the water column criterion within 90 days of the court's entry of the Agreed Order remanding EPA's November 15, 2013 approval of the removal of Kentucky's water column chronic criterion of 5.0 1.tg/L, that approval will be vacated. If EPA's approval of the removal of the selenium water column chronic criterion is vacated and the water column criterion becomes an applicable element of Kentucky's selenium criterion, the Parties acknowledge that Kentucky's action adopting fish tissue criterion elements, and EPA's approval of those fish tissue criterion elements, recognizes the primacy of fish tissue criterion elements over water column criterion elements.

5. EPA will complete ESA Section 7 consultation before affirming any portion of the November 15, 2013 approval decision pursuant to CWA Section 303(c).

6. Upon entry of the Agreed Order, EPA will take the following actions:

a. Within 120 days of EPA receiving a final Biological Opinion from the FWS or the FWS's concurrence with EPA's "Not Likely to Adversely Affect" ("NLAA") determination on the eutrophication definition and revised narrative nutrient criteria (401 KAR 10:001 Section 1 (30), 10:031 Section 1, respectively), EPA will take action pursuant to CWA Section 303(c) either to affirm the Agency's November 15, 2013 approval decision or to disapprove the definition and criteria (401 KAR 10:001 Section 1 (30), 10:031 Section 1, respectively).

b. Within 120 days of EPA receiving a final Biological Opinion from the FWS or the FWS's concurrence with EPA's NLAA determination on the whole fish tissue chronic criterion for selenium, EPA will take action pursuant to CWA Section 303(c) either to affirm the Agency's
November 15, 2013 approval decision or to disapprove that criterion;

c. EPA will reconsider the Agency's November 15, 2013 decision approving the removal of Kentucky's selenium water column chronic criterion. Upon reconsideration, if EPA disapproves the removal of Kentucky's selenium water column chronic criterion, EPA will issue that decision within 90 days of entry of the Agreed Order. If EPA disapproves Kentucky's removal of the selenium water column chronic criterion and that criterion becomes an applicable element of Kentucky's selenium criterion, the Parties acknowledge that Kentucky's action adopting fish tissue criterion elements, and EPA's approval of those fish tissue criterion elements, recognizes the primacy of fish tissue criterion elements over water column criterion elements. If EPA does not disapprove the removal of the selenium water column chronic criterion within 90 days of entry of the Agreed order, EPA will complete an effects determination and revised biological evaluation on the removal of Kentucky's selenium water column chronic criterion and, as appropriate, send a request to again initiate consultation under the ESA to the FWS within 120 days of entry of the Agreed Order. Within 120 days of EPA receiving a final Biological Opinion from the FWS or the FWS's concurrence with EPA's NLAA determination on removal of the water column chronic criterion, EPA will take action pursuant to CWA Section 303(c) to either affirm the Agency's November 15, 2013 approval decision or to disapprove the removal of the water column criterion;

d. EPA will reconsider the Agency's November 15, 2013 decision approving Kentucky's selenium criterion for warm water aquatic habitat of 19.3 ttg/g dry weight of fish egg/ovary tissue (401 KAR 10:031 Section 6). Upon reconsideration, if EPA disapproves Kentucky's selenium criterion for warm water aquatic habitat of 19.3 μg/g dry weight of fish egg/ovary tissue (401 KAR 10:031 Section 6), EPA will issue that decision within 90 days of entry of the Agreed Order. If EPA does not disapprove within 90 days of entry of the Agreed Order, EPA will complete an effects determination and revised biological evaluation and, as appropriate, send a request to again initiate consultation under the ESA with the FWS within 120 days of entry of the Agreed Order. Within 120 days of EPA receiving a final Biological Opinion from the FWS or the FWS's concurrence with EPA's NLAA determination on the fish egg/ovary tissue criterion, EPA will take action pursuant to CWA Section 303(c) either to affirm the Agency's November 15, 2013 approval decision or to disapprove that criterion.

7. Within 10 days of the completion of the decisions detailed in Paragraph 6, the Parties shall file a stipulated dismissal of this case with prejudice (except for claims for attorneys' fees as covered in paragraph 9).

III. Stay of Litigation and Covenant Not to Sue

8. This Settlement does not impair any right Plaintiffs, Kentucky, or Industry-Intervenors may have to bring a subsequent action challenging EPA's decision in connection with EPA's approval or disapproval of any State-submitted water quality standard. The Parties agree that any challenge to EPA's future decisions in approving or disapproving any State-submitted water quality standard must be brought in an action for review under the Administrative Procedure Act or under the citizen suit provision of the ESA, and be based on the certified administrative records, if appropriate, for such decisions. EPA preserves all its defenses to any such challenges.

IV. Fees and Costs

9. EPA agrees that Plaintiffs are both eligible and entitled to recover from the United States their costs of litigation, including reasonable attorneys' fees, incurred in connection with this action. At the time Plaintiffs submit the motion to dismiss the claims with prejudice referenced in Section II, EPA and Plaintiffs shall jointly request that the Court extend by 90 days the deadline for filing a motion for costs of litigation, including reasonable attorneys' fees. During this period, EPA and Plaintiffs shall seek to resolve informally any claim for costs of litigation, including reasonable attorneys' fees. Nothing in this paragraph shall diminish EPA's right to object to the amount of the costs of litigation, including reasonable attorneys fees, claimed by Plaintiffs, including the hourly rates claimed by Plaintiffs in connection with such claim.

V. Effect of Settlement

10. This Agreement was negotiated between the Parties in good faith and was jointly drafted by the Parties. Accordingly, the Parties hereby agree that any and all rules of construction to the effect that ambiguity is construed against the drafting party shall be inapplicable in any dispute concerning the terms, meaning, or interpretation of this Agreement. This Agreement shall not constitute or be construed as an admission or adjudication by the United States or EPA of any question of fact or law with respect to any of the claims raised in the this matter. Nor is it an admission of violation of any law, rule, regulation, or policy by the United States or EPA. This Settlement Agreement shall not be admitted for any purpose in any proceeding without prior notice to and the express consent of EPA and Kentucky.

VI. Dispute Resolution

11. In the event of a disagreement between the Parties concerning the interpretation or completion of any aspect of this Agreement, the dissatisfied party shall provide the other party with written notice of the dispute and a request for negotiations. The Parties shall meet and confer in order to attempt to resolve the dispute within 30 business days of the written notice, or such time thereafter as is mutually agreed. If the Parties are unable to resolve the dispute within 45 days of such meeting, Plaintiffs' sole remedy is to file a motion to lift the stay and re-assert the claims of the Second Amended Complaint. The Parties agree that contempt of court is not an available remedy under this Settlement Agreement.

VII. Modification

12. This Agreement may be modified by written agreement of the signatories to the Agreement without notice to the court. If a subsequent change in law alters or relieves EPA of its obligations
concerning matters addressed in this Agreement, then the Agreement shall be amended to conform to such changes. Any dispute regarding invocation of this provision shall be resolved in accordance with the dispute resolution provisions of Section VI.

VIII. Notice

13. Any notice required or made with respect to this Agreement shall be in writing and shall be effective upon receipt. For any matter relating to this Agreement, the contact persons are:
For Plaintiffs:

Benjamin A. Luckett
Appalachian Mountain Associates
P.O. Box 507
Lewisburg, West Virginia 24901
(304) 645-0125 (telephone)
(304) 645-9008 (facsimile)
bluckett@appalmad.org

For the United States, on behalf of EPA:
JAMES A. MAYSONETT
United States Department of Justice
RFK 2633
P.O. Box 7415
Washington, D.C. 20044

CAROL F. BASCHON
U.S. Environmental Protection Agency
Region 4
61 Forsyth Street SW
Atlanta, GA 30303

ALEXIS WADE
U.S. Environmental Protection Agency
Office of General Counsel
Mail Code 2355A
1200 Pennsylvania Avenue, N.W.
Washington, DC 20460

For Kentucky

CHRISTOPHER R. FITZPATRICK
Office of General Counsel
Energy and Environment Cabinet
200 Fair Oaks Lane, 1 St Floor
Frankfort, KY 40601

For Industry-Intervenors:

JOHN C. BENDER
RICHARD CLAYTON LARKIN
Dinsmore & Shohl, LLP
250 West Main Street, Suite 1400
Lexington, KY 40507

Upon written notice to the other Parties, any party may designate a successor contact person for any matter relating to this Settlement Agreement.

IX. Compliance With Other Laws

14. No provision of this Agreement shall be interpreted as or constitute a commitment or requirement that EPA obligate or pay funds in contravention of the Anti-Deficiency Act, 31 U.S.C. § 1341, or take actions in contravention of the Administrative Procedure Act, 5 U.S.C. §§ 551-559, 701-706, the CWA, the ESA, or any other law or regulation, either substantive or procedural.

X. Agency Discretion

15. Nothing in this Agreement shall be construed to limit or modify the discretion accorded EPA by the CWA, 33 U.S.C. §§1251 et seq., or by general principles of administrative law.

XI. Force Majeure

16. The possibility exists that circumstances outside the reasonable control of EPA could delay compliance with this Agreement. Such situations include, but are not limited to, a government shutdown as occurred in 1995, 1996, and 2013, a natural disaster, or catastrophic environmental events requiring an immediate and/or time consuming response by EPA. EPA will provide Plaintiffs with reasonable notice in the event that EPA invokes this term of the Settlement Agreement.

XII. Representative Authority

17. The individuals signing this Agreement on behalf of the Parties hereby certify that they are authorized to bind their respective parties to this Agreement.

XIII. Choice of Law

18. This Agreement shall be governed and construed under the laws of the United States.

XIV. Termination

19. Upon the fulfillment of EPA's and Plaintiffs' obligations under Paragraphs 3-7 and 9 of this Agreement, this Agreement shall be terminated.
XV. Final Agreement

20. This Agreement constitutes the final, complete and exclusive agreement and understanding between the Parties with respect to the matters addressed in this Agreement. There are no representations, agreements or understandings relating to this settlement other than those expressly contained in this Agreement.

XVI. Effective Date of Settlement Agreement

21. The Effective Date of this Agreement shall be the date of the last signatory to the Agreement. The Agreement may be executed in counterparts with signatures transmitted by facsimile or scanned electronically and transmitted by electronic mail.

WHEREFORE, after reviewing the terms and conditions of this Agreement, the Parties hereby consent and agree to the terms and conditions of this Agreement.

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