On appeal from New Jersey Department of Environmental Protection and Energy.
Michels, Bilder and Baime. The opinion of the court was delivered by Baime, J.A.D.
Sections 301 and 502 of the Federal Water Pollution Control Act (33 U.S.C. § 1251 through 1376), more commonly known as the Clean Water Act, prohibit the discharge of dredged or fill materials into navigable waters without first having obtained a permit from the United States Army Corps of Engineers (Corps). (33 U.S.C. §§ 1311, 1362). Under the Coastal Zone Management Act (16 U.S.C. §§ 1451 through 1464) (CZMA), an applicant for a Section 404 permit (33 U.S.C. § 1344) must obtain concurrence from the affected state that the proposed activity complies with the requirements of its federally-approved coastal zone plan. 16 U.S.C. § 1456(c)(3)(A). In the event the state finds the proposed activity inconsistent with its coastal plan, the applicant may appeal to the Secretary of Commerce who is authorized to grant the permit if the project comports with the objectives of the CZMA or is otherwise necessary in the interest of national security. Ibid. The Secretary does not review the state's finding of inconsistency, but instead focuses upon whether the project furthers paramount federal policies. 15 C.F.R. § 930.121.
Appellants Stoeco Development, Ltd. and Stainton-Burrell Development, Ltd. (Stoeco) submitted an application for a Section 404 permit to the Corps. The New Jersey Department of Environmental Protection and Energy (NJDEPE) issued a certification of inconsistency, finding that Stoeco's proposed activity conflicted with the State's Coastal Zone Management Program. The Corps denied Stoeco's application based upon the NJDEPE's certification of inconsistency. The Corps' denial was without prejudice and permitted Stoeco to reapply if and
when the requisite consistency certification from the NJDEPE was obtained. Stoeco filed this appeal from the NJDEPE's consistency objection.
We hold that Stoeco was not required to exhaust its federal administrative remedies before resorting to judicial action. We also conclude that Stoeco's exemption from the permit requirements of the Coastal Area Facility Review Act (N.J.S.A. 13:19-1 through -21) (CAFRA) does not render its project consistent with the State's Coastal Zone Management Program. Finally, we are satisfied that parallel federal litigation will resolve the factual issues presented and thus no State adjudicatory hearing is required.
The facts and procedural history are unfortunately somewhat convoluted. Stoeco is the owner and developer of two tracts of land in Ocean City, a barrier island separating the Atlantic Ocean from the tidal estuary which lies between it and the mainland of Cape May County. Stoeco purchased the land in 1951 and immediately commenced filling operations. Following many years of on-site construction, Stoeco requested an exemption from the requirements of CAFRA, which became effective in 1972. Although Stoeco's request was initially denied, the exemption was ultimately granted on March 27, 1980. See N.J.A.C. 7D-2.1.*fn1
Development of the Stoeco property proceeded uneventfully between 1951 and 1987. During this period, approximately 550 single family residences were constructed and sold. All construction came to a halt on June 16, 1987, when the Corps served a cease and desist order on Stoeco. According to the Corps, the periodic disposal of dredged material on the site ultimately eliminated direct tidal access, altering the property
to the extent that it now displayed the characteristics of a brackish freshwater wetland. Stoeco disputed the Corps' delineation of the site as wetlands, see 33 C.F.R. § 328.3(a)(3), and instituted an action in the United States district court in which it sought to vacate the Corps' restraining order. The Corps then filed an enforcement action which was consolidated with Stoeco's suit. On November 2, 1988, the district court granted the Corps' motion for summary judgment. Stoeco Dev. v. Dept. of the Army Corps of Engin., 701 F. Supp. 1075 (D.N.J. 1988), app. dismissed, 879 F. 2d 860, 861 (3d Cir.1989). Although the court's opinion is susceptible to varying interpretations, its precise holding was that the Corps' delineation of Stoeco's property as protected wetlands was not arbitrary or capricious. Id. at 1083. The court directed Stoeco to seek an "after-the-fact" Section 404 permit. Id. at 1084.
However, the order granting the Corps' motion for summary judgment did not conclude the matter. In subsequent federal litigation, another district court Judge refused to enforce the Corps' cease and desist order. He concluded that in an enforcement proceeding, the Corps was obliged to prove the existence of wetlands by a preponderance of the evidence. Stoeco Dev. v. Dept. of the Army Corps of Engin., 792 F. Supp. 339, 344 (D.N.J.1992). The Judge determined that the prior summary judgment resolved only whether the Corps' cease and desist order was arbitrary and capricious. Id. at 341. It did not "relieve the Corps of [its] obligation to prove the existence of wetlands" in an enforcement action. Id. at 344. The Judge ordered that a plenary trial be conducted on that issue. Id. at 345.
While challenging the Corps' cease and desist order in the federal courts, Stoeco simultaneously applied for an "after-the-fact" Section 404 permit. Stoeco also applied to the NJDEPE for an exemption from the New Jersey Freshwater Wetlands Protection Act (N.J.S.A. 13:9B-1 through -30) or alternatively for a freshwater wetlands permit and water quality certificate under the Water Quality Planning Act (N.J.S.A. 58:11A-1
through -16).*fn2 As we noted at the outset of our opinion, a general prerequisite to obtaining a Section 404 permit is authorization from the relevant state's environmental protection agency that the proposed activity conforms with its coastal zone management requirements. 16 U.S.C. § 1456 (c)(3)(A). The Corps requested such authorization in September 1990.
In December 1990, the NJDEPE concluded that Stoeco's proposal was inconsistent with the federally-approved New Jersey Coastal Zone Management Program. In a detailed seven-page opinion, the Director of the Division of Coastal Resources found that the proposed project was inconsistent with regulations governing wetlands, N.J.A.C. 7:7E-3.27, mitigation, N.J.A.C. 7:7E-3.27(h), development intensity, N.J.A.C. 7:7E-5.6, secondary impacts, N.J.A.C. 7:7E-6.3, stormwater runoff, N.J.A.C. 7:7E-8.7, and vegetation, N.J.A.C. 7:7E-8.8. The key to the Director's Conclusion was that Stoeco's property constituted wetlands. The Director explained that New Jersey's coastal plan prohibited development of wetlands unless the project satisfied four conditions which were codified in the above-cited regulations. He concluded that Stoeco's project fulfilled none of the "referenced" ...