On appeal from the adoption of N.J.A.C. 7:27-23 by the Commissioner of the Department of Environmental Protection.
Pressler, Long and Lowengrub. The opinion of the court was delivered by Long, J.A.D.
[239 NJSuper Page 408] On August 15, 1988, in response to an order of the United States District Court (American Lung Ass'n of N.J. v. Kean, 670 F. Supp. 1285 (D.N.J. 1987), aff'd 871 F.2d 319 (3rd Cir. 1989)) establishing a schedule for the promulgation and implementation of regulations controlling the emissions of volatile organic substances (VOS) in New Jersey, the Department of Environmental Protection (DEP) proposed N.J.A.C. 7:27-23, a rule entitled "Volatile Organic Substances in Consumer Products."
20 N.J.R. 2002-2007. The rule was intended to be part of New Jersey's regulatory strategy for the control of ozone levels as prescribed in the State Implementation Plan (SIP), which was developed under the Clean Air Act, 42 U.S.C. § 7604 (1982). The rule as proposed had separate elements. The first, not in issue here, addressed architectural coatings and set forth a schedule of allowable VOS content for various categories of such coatings. The second prong of the rule, as proposed, addressed air fresheners and consumer insecticides. The proposal indicated that these products were chosen because they were "determined to be among the largest consumer product sources of VOS emissions." The rule required that the products affected reduce their content of VOS to 50 percent by weight by February 28, 1990; to 25 percent by weight by February 28, 1992, and to 5 percent by weight by February 28, 1994.
In proposing N.J.A.C. 7:27-23, the DEP relied primarily on data compiled in 1986 and 1987 surveys by the Science Applications International Corporation (SAIC). According to the 1986 SAIC study, all consumer products were estimated to result in average VOS emissions of 39,201 tons per year in New Jersey. Of that amount 1310 tons were attributed to air fresheners ("room deodorants and disinfectants") and 1750 tons were attributed to consumer insecticides ("insect sprays", "insect repellants", "animal insecticides"). These amounts were revised by the 1987 SAIC study to 1384 tons and 1988 tons, respectively, thus attributing 3372 tons of annual VOS emissions to air fresheners and consumer insecticides. On the basis of the SAIC surveys, the DEP proposal concluded that:
When the VOS content limits on air fresheners and consumer insecticides are fully implemented, they will prevent approximately 3,300 tons of VOS from being emitted into the atmosphere each year from the use of these household products. This estimated reduction is based on applying the five percent by weight VOS limit to the inventory for New Jersey developed by SAIC. At least 45 percent, or about 1,500 tons, of this reduction will occur by February 28, 1990 when the first phase 50 percent VOS limit is fully implemented. Another 30 percent of the total reduction will be realized by February 28, 1992, when the second phase 25 percent VOS limit is in full effect. The full reduction will be
realized by February 28, 1994, when the implementation of the third and final phase five percent limit is completed.
On September 22, 1988, a public hearing was held on the proposed rule, during which testimony and written comments were accepted. On January 27, 1989, N.J.A.C. 7:27-23 was adopted with technical and substantive changes from the proposal. 21 N.J.R. 462-483. The rule retained the requirement that the VOS content of air fresheners be limited to 50 percent by February 28, 1990. However, DEP deferred adoption of the proposals requiring the reductions to 25 percent and to 5 percent pending further study. In addition, DEP deferred all regulations concerning the VOS content of insecticides for further study and clarified that disinfectant air fresheners were not intended to be governed by the rule.
As a result of these changes, only non-disinfectant air fresheners with more than 50% VOS are subject to the regulation. Only four specific items out of the entire consumer products market are thus affected by the rule. The manufacturer of one of the products is appellant Scott's Liquid Gold, Inc. (Scotts). The product is "Touch of Scent", one of Scotts' two principal product lines. It is an aerosol air freshener "that is placed in a wall-mounted dispenser and activated, when needed, by the touch of a fingertip, releasing a small amount of air freshener to remove unwanted odors." It is classified as approximately 99% VOS. According to Scotts, it has been unable to come up with an alternative method of formulating this product with the same unique properties so as to meet the requirements of the rule. A ban on the sale and manufacture of "Touch of Scent" in New Jersey, a major market and the distribution center for the Northeast region, would cost Scotts $5 million in annual revenue. (Scotts' 1988 revenues amounted to $21.6 million, with a net income of $819,000.) Unlike Scotts, the three other products subject to the rule (Boyle-Midway's Wizard Dry Breezes, Drackett's Renuzit Fresh N Dry and Amway's dry air freshener) are manufactured by large corporations with multiple lines of other products including other air fresheners.
In June 1989, DEP received a petition from retailers of architectural coatings affected by the regulations to allow the continued sale after February 28, 1990 of packages manufactured prior to that date. DEP determined to grant that petition and has proposed an amendment which will apply both to architectural coatings and air fresheners. 21 N.J.R. 3488. As to air fresheners, the proposal provides that as of February 28, 1990, no air fresheners with a VOS content greater than 50% may be manufactured for sale in New Jersey and as of the same date, no air fresheners with a VOS content greater than 50% and manufactured after that date may be sold at retail in New Jersey. 21 N.J.R. 3488. Scotts has received the benefit of this proposed amendment as a result of an agreement with DEP while this action was pending.
Scotts appeals, advancing a series of procedural and substantive challenges to the rule. Among those challenges is the claim that the rule, as adopted, differs so substantially from the rule as proposed that it violates the Administrative Procedure Act (A.P.A.). Because we agree with this contention, we reverse the ...