Rules that allow the Department of Environmental Protection to waive its own regulations are legal, a state appeals court said Thursday in turning back a challenge by environmental and labor organizations.

The "power to promulgate a regulation implies the incidental authority to suspend or waive its application in certain limited, well-defined circumstances," Appellate Division Judges Anthony Parrillo, Jack Sabatino and Douglas Fasciale held.

They rejected the challengers’ contention that the rules are ultra vires because there is no blanket legislative authority for a broad-based waiver scheme and that they lack the adequate standards needed to guide agency discretion.

The judges cautioned, though, that an exemption cannot circumvent legislative enactment or purpose, or federal law. It also must be consistent with the agency’s statutory objectives, be properly adopted pursuant to the Administrative Procedure Act and set clear standards for the exercise of agency discretion.

And they found the DEP violated the APA by failing to make website documents and forms to inform and assist the waiver process subject to the rulemaking process. Those items did more than implement the rules: They comprise "integral, substantive" components "elaborating upon and clarifying the very standards by which applicants will be held and the outcomes of their applications determined," the court said.

The case, In re N.J.A.C. 7:1B-1.1 et seq., Nos. A-3514-11 and A-4098-11, is the first court test of an agency’s ability to adopt "waiver rules" in response to Executive Order No. 2, issued by Gov. Chris Christie on Jan. 20, 2010, the day after he took office.

Christie said he was establishing "Common Sense Principles" to promote a competitive economy and directed state agencies to adopt rules allowing "waivers from the strict compliance with agency regulations."

Under the DEP rules, adopted March 6, 2012, and effective last Aug. 1, a waiver request requires showing one of four justifications:

• that a formally declared emergency supports waiver;

• that the waiver will achieve a "net environmental benefit";

• that the rule sought to be waived imposes an undue hardship; or

• that a conflict with another rule adversely impacts a project or activity.

Applicants must also show they do not fall within 13 specified prohibitions, such as being inconsistent with federal or multistate programs, air emissions trading rules, health standards or rules designating threatened or endangered species.

A catchall category bars waivers that conflict with the DEP’s "core missions … to maintain, protect, and enhance New Jersey’s natural resources and to protect the public health, safety, and welfare, and the environment."

In addition, there are specific criteria for evaluating applications like the sufficiency of public notice and whether the applicant bears blame for any undue hardship.

The DEP set up a waiver homepage with forms, answers to FAQs, information on submitted waiver requests and other materials. The guidance and forms flesh out the standards in the waiver rules and thus should have been part of the rulemaking, said the court.

The DEP website lists 25 waiver requests. Two have been denied, nine were rejected as incomplete and 14 are under consideration.

DEP spokesman Lawrence Hajna says "the rule was designed to be used in very limited circumstances and using very specific criteria and that is how things are turning out."

Hajna adds that the holding on the forms and documents "is not going to limit our ability to implement the rule" and the department will "see what we can do to remedy that and address the court’s concern."

The DEP’s lawyer was Deputy Attorney General Dean Jablonski.

Edward Lloyd of Columbia University’s Environmental Law Clinic, who represents the 28 organizations that sought to overturn the waiver rule, says he expects they will seek certification.

His clients were especially concerned about the "net environmental benefit" standard. Noting that the court admitted the term defied precise definition, Lloyd asks "how does anybody know what it means?"

He calls the waiver rules, which apply to 91 different statutes, extremely broad.

He points to footnote 13, in which the court said it did not make sense, on a facial challenge to the rules, to address the coalition’s argument that they were contrary to the agency’s "core missions."

It was a question better left for "potential future ‘as applied’ litigation involving discrete agency decisions granting or denying a waiver application," the court said.

That "leaves the door open" to deal with the issue in a specific case, Lloyd says.

He questions how the court could have found adequate standards, given its determination that online documents contained "missing links" in the criteria and process, and says the DEP "should not go forward with any waiver until they propose and adopt a complete waiver rule."

His clients include the American Littoral Society, Association of New Jersey Environmental Commissions, Communications Workers of America, New Jersey Environmental Federation, New Jersey Highlands Coalition, New Jersey State Industrial Union Council and the New Jersey chapter of the Sierra Club.

The business groups arrayed against them as amici welcome the ruling.

Dennis Toft of Wolff & Samson in Roseland, for the American Petroleum Institute, N.J. Chamber of Commerce and NAIOP’s New Jersey state chapter, terms it a victory for the administration’s effort to "bring some rationality to the way rules are implemented."

The attorney for the New Jersey Builders Association, Paul Schneider of Red Bank’s Giordano, Halleran & Ciesla, calls the decision "completely consistent with precedent."

He sees it as "a compete victory for the business community" but not as much for the DEP because it uses guidance and forms not formally adopted as rules in programs other than waiver. Still, he expects most people will continue to use the forms because it is easier and more practical.

Peter Gallagher of Porzio, Bromberg & Newman in Morristown, for the New Jersey Business & Industry Association, referred a request for comment to the group’s Sarah Bluhm, who says the ruling "brings common sense to regulations."