The Appellate Division’s March 21 decision in In re N.J.A.C. 7:1B-1.1 et seq., constitutes the most recent chapter in the long-running saga concerning the Department of Environmental Protection’s (DEP) authority to waive strict compliance from its regulatory requirements. 2013 N.J. Super. LEXIS 43. For a discussion of the prior events, see L. Goldshore, "DEP’s Long-Awaited Waiver Rule," 207 N.J.L.J. 831 (Mar. 19, 2012), and "DEP’s Waiver Rule Takes Effect," 209 N.J.L.J. 631 (Aug. 20, 2012).

The appeals court was unequivocal in finding that DEP had the authority to adopt the waiver rules and affirming them as written. But it sent the agency back to the drawing board on a secondary and independent issue — the validity of a guidance document, frequently asked questions (FAQs) and submission forms posted on the department’s website.

The appellants, a coalition of 28 environmental and labor organizations, were disappointed with the decision and announced that they were not about to let the matter rest. They will be seeking further review by the court and the legislature. (See N.J. Const. art. V, § 4, ¶ 6, authorizing the legislature to invalidate agency rules that are inconsistent with legislative intent.) As for DEP, it may simply amend the rules to include the informational documents within the body of rules, or it may seek further clarification from the court regarding the extent of the Administrative Procedure Act’s reach. N.J.S.A. 52:14B-1 et seq.

Background

The regulated community had for several years urged that DEP adopt a process for granting waivers from its rules that was somewhat analogous to the variance process in the local land-use setting. See N.J.S.A. 40:55D-70. But that suggestion did not receive favorable consideration until Jan. 20, 2010, Gov. Chris Christie’s first full day in office, when it was officially recognized in Executive Order No. 2. That pronouncement directed state agencies to follow common-sense principles, one of which was to adopt procedures for waivers from strict compliance with conflicting or unduly burdensome rules in a manner that was consistent with the agency’s core missions.

It took more than two-and-a-half years before DEP was able to fully implement the governor’s directive. The rules proposed on Mar. 7, 2011, were not adopted until Mar. 8, 2012. The effective date was then suspended until Aug. 1, 2012, so that the agency would have sufficient time to set up an electronic system for waiver requests and post related information on its website.

From the outset, the environmental groups strenuously objected to the proposal and claimed that it would result in environmental protections being swept away. They promptly challenged the rules.

Following adoption, the waiver applications started to trickle in. During the past seven months, only 26 applications have been filed. Of these, nine were found to be incomplete, two have been denied and none have been approved — hardly the groundswell or the environmental calamity anticipated by the objectors.

Appellate Court’s Analysis

The appellants challenged both the rules and the informational documents posted on DEP’s website. The familiar arguments regarding the rules were that they exceeded the delegated legislative authority, and that they were facially invalid due to the absence of adequate standards to guide the agency.

Due to the growing popularity of the Internet, governmental agencies have relied increasingly on the Web to assist in disseminating information concerning their programs and assure uniformity in response to frequently asked questions. The appellants contended that DEP’s use of this informational technique violated the Administrative Procedure Act’s (APA) notice and comment requirements, to the extent they went beyond the terms of the adopted waiver rules. N.J.S.A. 52:14B-1 et seq.

In considering the lack of express authority claim, the panel observed that the appeal raised an issue of first impression — whether an agency could adopt a uniform waiver rule that applied to most of its regulations. Based on the application of the well-established standards for reviewing the validity of agency regulations, the appeals court concluded that:

DEP did not act ultra vires in promulgating its comprehensive set of general waiver rules, …. This promulgation constituted a valid exercise of DEP’s implied authority incidental to the extensive and expressly broad powers vested in the agency by the Legislature. Simply stated, the power to promulgate a regulation implies the incidental authority to suspend or waive its application in certain limited, well-defined circumstances provided such exemption does not circumvent any legislative enactment or purpose, or federal law, is consistent with the agency’s statutory core mission and objectives, is accomplished through a properly adopted regulation pursuant to the APA …

The panel next considered the objectors’ argument that three of the four bases for a waiver request were impermissibly vague and ill-defined. In concluding that the standards contained in the rules were adequate to guide DEP in deciding waiver applications, the court reasoned:

<%21%5bCDATA%5b2013 N.J. Super. LEXIS 43%5d%5d><%2fcite>&_butType=4&_butStat=0&_butNum=304&_butInline=1&_butinfo=NJAC 7%3a1B-2.1%28B%29&_fmtstr=FULL&docnum=1&_startdoc=1&wchp=dGLzVzk-zSkAz&_md5=df49aae21115e68bbb068a73b2e9567b">N.J.A.C. 7:1B-2.1(b) lists those agency regulations that cannot be waived under the waiver rules. Thus, weighing the consistency of an activity that would be authorized by a waiver with the purposes and objectives of statutory requirements is rendered unnecessary by the prohibition … against the issuance of a waiver under these rules of any requirement or duty imposed by federal statute or regulation or by State statute unless the statute or regulation specifically provides for a waiver. Furthermore, as noted, DEP must consider … whether the waiver would be consistent with DEP’s "core missions" to maintain, protect, and enhance the State’s natural resources and to protect public health, safety, and welfare, and the environment.

Following its adoption of the waiver rules, DEP posted guidance documents, FAQs and forms on its website. These postings, to the extent they went beyond the terms of the rules, were invalidated due to the agency’s failure to conform with the APA’s requirements.

As the court noted:

[T]hese postings [the guidance documents and the FAQs] do more than implement the waiver rule; they establish rules of the game. By elaborating upon and clarifying the very standards by which applicants will be held and the outcomes of their applications determined, these newly posted measures will have a substantial impact on the regulated community as well as the public in general. As such, they form integral, substantive components of the waiver rules, subject to rulemaking in accordance with the APA.

While the informational documents were found to be invalid, the court emphasized that this did not fatally flaw the entire waiver regulatory scheme. The rules themselves were held to contain sufficient substantive standards for applicants to submit, and for DEP to evaluate, waiver applications.

Reactions

Never one for a measured comment, Jeff Tittel, executive director of the New Jersey Sierra Club, asserted: "[t]his rule is the worst environmental rule ever proposed. We believe it’s vague and goes beyond legislative authority." (nj.com, Mar. 21, 2013.) He vowed to continue the fight to have the waiver rule invalidated.

Tittel’s assessment was countered in the same story by DEP spokesman, Larry Hajna who noted: "Certain environmental advocates claimed the sky was falling when we adopted the rule. The sky did not fall, and the court agreed." Hajna also emphasized that "this rule was designed to be used in very limited circumstances and under specific criteria, and that’s how things are turning out." (NJBIZ.com, Mar. 21, 2013.)

Not surprisingly, the controversy also has political implications, especially in light of the approaching gubernatorial election. Sen. Barbara Buono, the presumptive Democratic candidate for governor, described the waiver rules in the nj.com story as "invest[ing] unelected political appointees with unbridled discretion to decide who the rules apply to." She indicated that she was "deeply disappoint[ed]" by the court’s decision and that she would renew her efforts for the adoption of SCR59, which would invalidate the rule in accordance with the constitutional procedure. While these views may resonate with environmentalists, it remains to be seen whether they will be noticed or accorded much weight by the large majority of voters who tend to focus on other issues. ¢

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