## Facts

- James City County, Virginia sought to address an inadequate local water supply by constructing a dam across Ware Creek to create a reservoir serving the County.
- The U.S. Army Corps of Engineers issued the County a Clean Water Act § 404 permit authorizing dredge-and-fill discharges for the dam and reservoir.
- The Environmental Protection Agency exercised its Clean Water Act § 404(c) authority to prohibit the project, finding the discharge would cause “unacceptable adverse environmental effects” and initially asserting practicable alternatives existed.
- The proposed reservoir would inundate roughly 380–400 acres of wetlands and aquatic habitat in a relatively undisturbed watershed with high-quality freshwater wetlands and related ecological functions.
- In earlier litigation, the Fourth Circuit concluded the record did not substantially support EPA’s “practicable alternatives” finding but remanded for EPA to decide whether environmental considerations alone justified a veto.
- On remand, EPA issued a second § 404(c) veto expressly grounded only on environmental effects, concluding mitigation would not replace the lost wetland functions and values.
- The district court again set aside the veto and ordered the Corps to issue the permit; EPA and the Corps appealed.

## Issues

1. Whether EPA may exercise Clean Water Act § 404(c) veto authority based solely on environmental impacts, without balancing those impacts against the County’s water-supply needs.
2. Whether EPA’s “unacceptable adverse effect” determination was supported by the administrative record and valid under Administrative Procedure Act arbitrary-and-capricious review.

## Decision

- The Fourth Circuit reversed the district court’s judgment and upheld EPA’s § 404(c) veto.
- The court held EPA may base a § 404(c) veto solely on environmental considerations; § 404(c) does not require EPA to weigh environmental harm against local water needs.
- Applying APA review, the court held EPA’s finding of “unacceptable adverse effects” was supported by the record and was not arbitrary, capricious, or an abuse of discretion.
- The court concluded the district court erred by reweighing scientific and technical evidence rather than deferring to EPA’s expertise.

## Legal Principles

- Clean Water Act § 404(c) authorizes EPA to prohibit or restrict a Corps-permitted discharge if it will have an “unacceptable adverse effect” on specified resources, and the statutory text does not impose a mandatory cost-benefit or needs-balancing requirement.
- In § 404(c) determinations, EPA’s role is primarily environmental protection; the permissibility of a veto turns on the magnitude and acceptability of environmental impacts identified in the statute and regulations.
- Under APA arbitrary-and-capricious review, courts must uphold agency decisions that consider relevant factors and rationally connect record evidence to the agency’s conclusions, particularly where technical judgments are involved.
- An agency may reasonably discount proposed mitigation where the record supports a conclusion that mitigation will not replace the ecological functions, values, or integrated character of wetlands being lost.

## Conclusion

The Fourth Circuit upheld EPA’s renewed Clean Water Act § 404(c) veto of the Ware Creek reservoir permit, ruling that EPA may bar a project based solely on unacceptable environmental harm and that EPA’s technical findings were adequately supported under deferential APA review.


James City County, Va. v. EPA, 12 F.3d 1330 (4th Cir. 1993)