August 6, 2009
IN THE MATTER OF NJDEP ADMINISTRATIVE ORDER NO. 2007-01 AND ADMINISTRATIVE ORDER NO. 2008-02.
On appeal from a Final Decision of the New Jersey Department of Environmental Protection.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued: December 17, 2008
Before Judges Cuff, Fisher and Baxter.
In this appeal, we must determine whether written guidance regarding application of stormwater management rules, particularly the rules governing encroachment into a 300-foot buffer adjacent to Category One waters, is a rule or a technical manual. If the former, the New Jersey Department of Environmental Protection (NJDEP) failed to observe the rule-making requirements of the Administrative Procedure Act (APA), N.J.S.A. 52:14B-1 to -15. If the latter, it is exempt from APA rule-making requirements.
The Stormwater Management Rules, N.J.A.C. 7:8-1.1 to -6.3, establish design and performance standards regulating the quantity and quality of stormwater runoff. See In re Stormwater Mgmt. Rules, 384 N.J. Super. 451, 454-60 (App. Div.), certif. denied, 188 N.J. 489 (2006). Stormwater is water from precipitation that runs on the land's surface. As it flows, stormwater runoff picks up pollutants from the land surface and affects the quality and quantity of water in New Jersey. Id. at 454. N.J.A.C. 7:8-5.5(h) requires increased safeguards for sensitive water bodies classified by NJDEP as "Category One" (C1). C1 waters are waters to which the State gives greater protection due to their exceptional ecological significance, exceptional recreational significance, exceptional water supply significance, or exceptional fisheries resources. N.J.A.C. 7:9B-1.4. Under NJDEP's Surface Water Quality Standards, C1 waters are to be protected from any measurable changes to water quality. N.J.A.C. 7:9B-1.5(d)6iii.
The Stormwater Management Rules establish special water resource protection areas (SWRPA) along C1 waters pursuant to N.J.A.C. 7:8-5.5(h) to protect them from measurable changes. The SWRPA is a best management practice designed to maintain existing water quality by filtering stormwater runoff prior to its introduction to C1 waters. These Rules only apply to "major development," which is development that would disturb one or more acres, or would add one-quarter acre or more of impervious surface. N.J.A.C. 7:8-1.2.
Under the Rules, projects designed near C1 waters and their tributaries must have a 300-foot SWRPA on each side of the waterway "consisting of existing vegetation or vegetation allowed to follow natural succession . . . ." N.J.A.C. 7:8-5.5(h)1i. The Stormwater Management Rules allow the 300-foot buffer to be reduced to 150 feet on both sides of the waterway in limited circumstances. Specifically, the Rules provide:
Encroachment within the designated [SWRPA] under (h)1i above shall only be allowed where previous development or disturbance has occurred (for example, active agricultural use, parking area or maintained lawn area). The encroachment shall only be allowed where applicant demonstrates that the functional value and overall condition of the [SWRPA] will be maintained to the maximum extent practicable. In no case shall the remaining [SWRPA] be reduced to less than 150 feet as measured perpendicular to the top of bank of the waterway or centerline of the waterway where the bank is undefined. All encroachments proposed under this subparagraph shall be subject to review and approval by [NJDEP]. [N.J.A.C. 7:8-5.5(h)1ii (emphasis added).]
The Stormwater Management Rules do not define how an applicant can demonstrate that the "functional value and overall condition of the [SWRPA] will be maintained to the maximum extent practicable." However, in its Response to Comments 824 -827 on the proposed rule, NJDEP explained that:
The purpose and need for the [SWRPA] is to ensure that [C1] waters are protected from degradation and the characteristics that led to their designation as [C1] waters are protected. The [SWRPA] is selected as an additional best management practice, with an appropriate margin of safety for reduced pollutant removal efficiency over time, to assure that this objective is achieved. Alternative best management practices were reviewed. Based on available literature, none of these alternatives were determined to adequately control all nonpoint source pollution including, but not limited to, sedimentation, erosion, total suspended solids, total dissolved solids, temperature, nutrients, and pathogens.
In addition, [C1] waters are designated because of their clarity, color, scenic setting, other characteristics of aesthetic value, exceptional ecological significance, exceptional recreational significance, exceptional water supply significance or exceptional fisheries resources. The [SWRPA] is intended to protect these attributes and the designated uses of the [C1] water.
Riparian functional values are the ecological values or benefits provided by the buffer. These benefits can be physical, biological, chemical, or any combination thereof. Riparian areas are important because they: ". . . regulate riparian microclimate and provide shading for in-stream growth and reproduction of aquatic life; stabilize stream banks and prevent channel erosion; provide organic litter (for example, leaf litter) and woody debris important for fish and aquatic invertebrate communities; remove or regulate sediment, nutrients, or other contaminants (for example, pesticides, herbicides) from runoff; provide flood attenuation and storage to decrease damage to property; and provide wildlife habitat." (Environmental Law Institute, 2003).
No two riparian areas are exactly alike; each is affected differently given unique dynamics that act upon it within its immediate surroundings. Each riparian buffer is influenced by its geology, topography, geographic location, micro- and macroclimates, vegetation, hydrology, stream dynamics and land use. Many riparian functions are considered critical or important by society. For example, inundation of riparian buffers in one area can prevent flood damage elsewhere; denitrification can improve water quality, riparian habitat can help maintain waterfowl populations, and conditions in the buffer can influence the development of unique plant communities that contribute to the conservation of biodiversity. A determination of functional value will require a site-specific analysis of such factors.
All encroachments into the 300-foot [SWRPA] are subject to review and approval by [NJDEP]. This requirement is intended to lend predictability and consistency to the review of these encroachments. Therefore, individual interpretations by 566 municipalities, as suggested by one commenter, will not occur under the rule.
[36 N.J.R. 756 (Feb. 2, 2004).]
In implementing N.J.A.C. 7:8-5.5(h), NJDEP found that it "rarely received an in depth, scientifically valid, functional value assessment as an accompaniment to an application requesting approval for a SWRPA encroachment." NJDEP determined that it needed to provide more explicit guidance on N.J.A.C. 7:8-5.5(h)1ii. Therefore, on January 3, 2007, NJDEP issued Administrative Order 2007-01. Administrative Order 2007-01 directed that:
[E]ffective immediately, [NJDEP] shall not approve any encroachment, into a [SWRPA] under N.J.A.C. 7:8-5.5(h)1ii or N.J.A.C. 7:8-5.5(h)3 unless the applicant demonstrates that the functional value and overall condition of the [SWRPA] will be maintained to the maximum extent practicable in accordance with the attached functional value assessment guidance as required by the Stormwater Management rule, titled "[SWRPA] Functional Value Analysis" dated January 2, 2007, and that in the absence of such a demonstration, encroachment into the SWRPA shall be denied.
The January 2, 2007 "[SWRPA] Functional Value Analysis" guidance document (2007 Guidance Document) referenced in the Administrative Order required an assessment of the impacts of encroachments into the outer 150 feet of the buffer in terms of their effect on four categories of riparian functional values: wildlife habitat, nonpoint source pollution load, temperature moderation, and channel integrity. Under the 2007 Guidance Document, encroachments were to be evaluated to see if they would result in a loss of any functional value in any portion of the 150-foot buffer. An encroachment would not be allowed unless the applicant was able to demonstrate that the loss was unavoidable through project redesign, including a reduction in the scope of development.
Appellant, Hovtown, Inc. (Hovtown), filed a notice of appeal of Administrative Order 2007-01 and the 2007 Guidance Document. After Hovtown filed its brief, this court granted NJDEP's motion for a temporary remand to complete rulemaking or proposed amendments to its Flood Hazard Area Control Act (FHACA) Rules, N.J.A.C. 7:13-1.1 to -19.2, which implicate areas regulated by the Stormwater Management Rules, N.J.A.C. 7:8-5.5(h)1ii. On November 5, 2007, NJDEP adopted amendments to the FHACA Rules, and on January 24, 2008, NJDEP issued Administrative Order 2008-02, which rescinded Administrative Order 2007-01. NJDEP also issued a revised and updated "[SWRPA] Functional Value Analysis" guidance document (2008 Guidance Document). We denied NJDEP's motion to dismiss the appeal but permitted Hovtown to file an amended notice of appeal regarding the 2008 Guidance Document. On April 11, 2008, NJDEP issued a public notice and published its 2008 Guidance Document as a technical manual pursuant to N.J.S.A. 13:1D-111. We consider Hovtown's appeal of Administrative Order 2007-01 and the appended 2007 Guidance Document moot.*fn1
The 2008 Guidance Document is similar but not identical to the 2007 Guidance Document. The 2008 Guidance Document sets forth an assessment methodology that establishes a two-step process to determine maintenance, to the maximum extent practicable, of the functional value and overall condition of a SWRPA. The first step includes an assessment of the four key functions of a SWRPA based on existing and proposed conditions: habitat, nonpoint source pollutant reduction, temperature modification, and channel integrity.
Standards are provided to measure loss. For example, the 2008 Guidance Document provides that:
A loss in non point source pollutant reduction functional value will occur if, as the result of the proposed land use conversions, the load of any pollutant increases from the overall buffer on the project site.
If the analysis indicates that encroachment will not lead to a loss of functional value in the four assessed areas, encroachment may occur. If the analysis indicates that a loss of functional value will occur in any area assessed, then the second step of the process is invoked. This step focuses on "whether the functional value and overall condition of the SWRPA are 'maintained to the maximum extent practicable.'"
The 2008 Guidance Document also differs from the 2007 Guidance Document in at least three areas. First, the 2008 Guidance Document recognizes that there may be other assessment methodologies an applicant may use; it states: "[NJDEP] will also accept other [NJDEP] approved, scientifically valid functional value assessment methodologies." Second, the NJDEP method gives credit for activities that would enhance the overall functional value of the SWRPA.
Third, the 2008 Guidance Document specifically references permitting options under the new FHACA Rules, particularly hardship waivers, and explains how these options may be integrated into the stormwater management approvals. The 2008 Guidance Document provides:
This demonstration*fn2 may be satisfied through the issuance of a stream encroachment permit under the [FHACA] Rules, N.J.A.C. 7:13, where such permit review included an alternatives analysis that demonstrates that the encroachment is unavoidable and that the loss of functional value has been minimized.
However, where the Stormwater Management Rules include more stringent limitations concerning encroachments into the SWRPA than the [FHACA] Rules, for example the prohibition of stormwater outfall structures within 150-feet of a protected waterway, or the prohibition of encroachment into undisturbed portions of the SWRPA, the more stringent requirements of the Stormwater Management Rule shall apply. Encroachments into these areas may only be approved under the criteria for a Hardship Exception for an Individual Permit found at N.J.A.C. 7:13-9.8. For major development projects that do not require a permit from the Division of Land Use Regulation, and that require a Department approval of an encroachment into the 300-foot SWRPA, the Division of Watershed Management shall conduct that review and apply the Hardship Exception for an Individual Permit at N.J.A.C. 7:13-9.8 where a loss of functional value is predicted in determining whether the overall condition of the SWRPA are maintained to the maximum extent practicable.
Hovtown argues that the 2008 Guidance Document was issued without notice of an opportunity to comment on it. It contends that the 2008 Guidance Document does not provide guidance or illuminate or illustrate the existing rule. It insists that the 2008 Guidance Document "significantly modifies and supplements" the rule. As such, it argues that the 2008 Guidance Document effectively amends rules previously reviewed by this court, In re Stormwater Management Rules, supra, 384 N.J. Super. 451, without resorting to the rulemaking procedures of the APA. NJDEP responds that the 2008 Guidance Document is a technical manual. As such, NJDEP argues it is exempt from the rulemaking process.
In exercising discretion when discharging its statutory duty, an agency may choose between formal action, such as rulemaking or adjudication, or informal action, provided the choice complies with due process requirements and the APA. Nw. Covenant Med. Ctr. v. Fishman, 167 N.J. 123, 135 (2001) (citing In re Request for Solid Waste Util. Customer Lists, 106 N.J. 508, 518 (1987)). Informal agency action constitutes the bulk of the activity of most administrative agencies, and it is defined as any determination that is taken without a trial-type hearing, including investigating, publicizing, planning, negotiating, settling, contracting, advising, and supervising a regulated industry. Nw. Covenant, supra, 167 N.J. at 136-37; In re Solid Waste Customer Lists, supra, 106 N.J. at 519. The question of whether the agency action is rulemaking, adjudication, or informal action is a close one, and the various kinds of action can overlap. Nw. Covenant, supra, 167 N.J. at 137; In re Solid Waste Customer Lists, supra, 106 N.J. at 518.
NJDEP has been specifically authorized to enact comprehensive stormwater management rules, and empowered to enforce those rules. N.J.S.A. 13:1D-9n; In re Stormwater Mgmt. Rules, supra, 384 N.J. Super. at 462-63. In addition, as stormwater reviews are required as part of a number of NJDEP permit reviews, the Legislature authorized NJDEP to engage in other informal agency action by developing and publishing technical manuals for categories of permits to "clarify department policies and interpretations of any laws, rules and regulations relating to the filing and review of the application." N.J.S.A. 13:1D-111.
If an agency action constitutes a rule, it must comply with the APA requirements. The APA defines a rule as follows:
"Administrative rule" or "rule", when not otherwise modified, means each agency statement of general applicability and continuing effect that implements or interprets law or policy, or describes the organization, procedure or practice requirements of any agency. The term includes the amendment or repeal of any rule, but does not include: (1) statements concerning the internal management or discipline of any agency; (2) intraagency and interagency statements; and (3) agency decisions and findings in contested cases.
[N.J.S.A. 52:14B-2(e) (emphasis added).]
The Supreme Court decision in Metromedia, Inc. v. Director, Division of Taxation, 97 N.J. 313 (1984), provides standards for determining whether rulemaking requirements apply to or govern any agency decision or particular action.
An agency's informal action may constitute de facto rulemaking, despite the label the agency gives to it. The Court identified six circumstances that will render an agency determination an administrative rule:
[A]n agency determination must be considered an administrative rule . . . if it appears that the agency determination, in many or most of the following circumstances, (1) is intended to have wide coverage encompassing a large segment of the regulated or general public, rather than an individual or a narrow select group; (2) is intended to be applied generally and uniformly to all similarly situated persons; (3) is designed to operate only in future cases, that is, prospectively; (4) prescribes a legal standard or directive that is not otherwise expressly provided by or clearly and obviously inferable from the enabling statutory authorization; (5) reflects an administrative policy that (i) was not previously expressed in any official and explicit agency determination, adjudication or rule, or (ii) constitutes a material and significant change from a clear, past agency position on the identical subject matter; and (6) reflects a decision on administrative regulatory policy in the nature of the interpretation of law or general policy. [Id. at 331-32.]
Each factor need not be present to find an agency action is really a de facto rule. "These relevant factors can, either singly or in combination, determine in a given case whether the essential agency action must be rendered through rule-making or adjudication." Id. at 332. A de facto rule will be held invalid unless the agency complied with the rulemaking requirements of the APA. Id. at 328.
The 2008 Guidance Document does not meet the Metromedia criteria for a rule. While, as guidance it is intended to have wide coverage, the 2008 Guidance Document cannot be applied uniformly to the regulated community. As stated in the 2008 Guidance Document, members of the regulated community are not required to follow it and may develop alternative methodologies. Consequently, the 2008 Guidance Document does not meet the second Metromedia factor. See Coal. for Quality Health Care v. N.J. Dep't of Banking & Ins., 348 N.J. Super. 272, 297 (App. Div.) (sample insurance policy distributed by the Department's commissioner did not require rigid adherence by all insurers, and therefore, was not intended to apply generally and uniformly to all similarly situated persons), certif. denied, 174 N.J. 194 (2002); Am. Cyanamid Co. v. State, Dep't of Evntl. Prot., 231 N.J. Super. 292, 307-08 (App. Div.) (second Metromedia factor not satisfied as model used for delineating flood plains not uniformly applied), certif. denied, 117 N.J. 89 (1989).
In addition, the fourth factor is not implicated because the 2008 Guidance Document does not prescribe a "legal standard or directive that is not otherwise expressly provided by or clearly and obviously inferable from the enabling statutory authority." Coal. for Quality Health Care, supra, 348 N.J. Super. at 297-98 (fourth Metromedia factor not satisfied where sample insurance policy described by agency served as a non-binding example, promulgated to assist, not prescribe, the preparation of insurance policies). The legal standard at issue in this case is set forth at N.J.A.C. 7:8-5.5(h)1ii. The 2008 Guidance Document is limited to guidance regarding how to demonstrate that the regulatory standard is met in a particular case. It identifies the functional values of a riparian corridor, and how they should be evaluated and mitigated, but it does not establish a new or separate standard. State v. Garthe, 145 N.J. 1, 7 (1996) (agency procedures to test breathalyzer machines do not create a legal standard that shapes the conduct of the public, and the standard was inferable from enabling statutes and prior court opinion, that machines be "in proper working order").
Similarly, factor five, whether the action reflects a policy not previously expressed in an agency determination, adjudication, or rule, or is a material change in administrative policy, is not satisfied. Metromedia, supra, 97 N.J. at 331. The policy at issue in this case is, as noted in the discussion of the fourth factor above, established in the underlying rules, not in the 2008 Guidance Document. The purpose of the 2008 Guidance Document is to provide guidance concerning how to determine when the functional value and overall condition of a riparian corridor are maintained to the maximum extent practicable. See Coal. for Quality Health Care, supra, 348 N.J. Super. at 298-99 (fifth Metromedia factor not satisfied where agency action was consistent with prior positions and enabling statute). Here, NJDEP's guidance, as set forth in the 2008 Guidance Document, is consistent with prior guidance NJDEP gave the regulated community when it adopted the rule at issue. See 36 N.J.R. 738-56 (Feb. 2, 2004) (NJDEP's responses to Comments 693 through 831).
The 2008 Guidance Document establishes a method for evaluating the functional values of a riparian buffer, and a process for determining if these values have been maintained to the maximum extent practicable consistent with NJDEP's prior guidance. NJDEP's method provides predictability and consistency to the review of these encroachments, coordinates with other statutory programs, particularly the FHACA statutory mandate and rules, and furthers the goals of the chapter. It is a logical outcome of N.J.A.C. 7:8-5.5(h)1ii. See SJC Builders, LLC v. State, Dep't of Envtl. Prot., 378 N.J. Super. 50, 56-58 (App. Div. 2005) (NJDEP's working definition of "property" does not trigger rulemaking as it is a logical outcome of existing rules).
The sixth Metromedia factor is also not implicated in the 2008 Guidance Document. The 2008 Guidance Document is technical guidance. It provides detailed guidance regarding how a party can demonstrate if the functional value and overall condition of a SWRPA is being maintained to the maximum extent practicable pursuant to N.J.A.C. 7:8-5.5(h)1ii. It does not alter the operative legal standard or NJDEP policy. In re Solid Waste Customer Lists, supra, 106 N.J. at 518.
However, even if an agency action satisfies all of the Metromedia criteria, it is not necessary for the agency to conduct formal rulemaking if the action qualifies as a technical manual pursuant to N.J.S.A. 13:1D-111(d). In the area of environmental permitting, for example, the Legislature created an exemption to formal rulemaking under the APA, directing NJDEP to develop technical manuals for various categories of permits.
The technical manuals are exempt from the rulemaking requirements of the APA. N.J.S.A. 13:1d-111. These manuals: shall define the procedural and substantive requirements for the completion of an application for a class or category of permit and the review thereof, and shall clarify department policies and interpretations of any laws, rules and regulations relating to the filing and review of the application. Each technical manual shall also:
(a) Provide a detailed summary and explanation of any policy considerations not otherwise identified by law, rule, or regulation that are used in the department's review and consideration of the permit application;
(b) Detail and clarify the department's interpretation of any standards or other requirements that do not have a fixed meaning or are not defined by law, rule, or regulation, including, but not limited to, identification or stipulation of state-ofthe-art control technologies and best management practices; and
(c) Include any other general information about department policies that would facilitate the preparation by an applicant, and the review by the department, of an application. [N.J.S.A. 13:1D-111(a)-(c)(emphasis added).]
N.J.S.A. 13:1D-111(d) specifically states that "[a]doption of a technical manual, or of revisions thereto, shall not be subject to the notice and publication requirements of the [APA]." (Emphasis added).
In directing NJDEP to develop technical manuals that would be exempt from the rulemaking requirements of the APA, the Legislature recognized that a technical manual adopted pursuant to N.J.S.A. 13:1D-111 has elements that are similar to a rule. Both "rule" and "technical manual," for example, are defined as interpreting law or policy. Compare N.J.S.A. 52:14B-2(e) with N.J.S.A. 13:1D-111. Nonetheless, in the discrete area of environmental permitting, the Legislature recognized that in order to be an efficient regulatory agency, NJDEP must be able to be flexible and responsive to changing conditions, new methodologies, and developing science. Thus, the Legislature authorized the development and use of technical manuals to assist in the permit review process, to aid in agency efficiency, and to advise permittees and their consultants of NJDEP's specific requirements.
N.J.S.A. 13:1D-111 to -113 were enacted in 1992 along with eleven other bills designed to make the NJDEP more efficient. The technical manuals were not intended to supplant statutes or regulations. Rather, the manuals were intended to assist permit applicants by defining the procedural and substantive requirements pertaining to permit applications and clarifying departmental policies and interpretations of laws, rules, and regulations.
The 2008 Guidance Document fits squarely within the technical manual exemption at N.J.S.A. 13:1D-111. The Stormwater Management Rules and the need for a functional value assessment under N.J.A.C. 7:8-5.5(h)1ii may be triggered when an applicant applies for a freshwater wetlands permit, stream encroachment permit, or coastal permit and seeks to disturb the SWRPA. These permits are issued pursuant to the Freshwater Wetlands Protections Act, N.J.S.A. 13:9B-1 to -30; FHACA, N.J.S.A. 58:16A-50 to -101; the Coastal Area Facility Review Act, N.J.S.A. 13:19-1 to -21; the Waterfront Development Act, N.J.S.A. 12:5-1 to -11; or the Wetlands Act of 1970, N.J.S.A. 13:9A-1 to -10. Permits issued pursuant to these statutes fit within the definition of "permit" found in N.J.S.A. 13:1D-111. See N.J.S.A. 13:1D-101. To obtain permits under those statutes, applicants must also comply with the Stormwater Management Rules. N.J.A.C. 7:8-1.1(b).
The 2008 Guidance Document is designed to help clarify NJDEP policies and interpretations of N.J.A.C. 7:8-5.5(h)1ii "relating to the filing and review" of a permit application under one of the aforementioned statutes. Ibid. The 2008 Guidance Document further explains policy considerations not otherwise identified in the Stormwater Management Rules as it details and clarifies NJDEP's interpretation of how "functional value and overall condition of the SWRPA are maintained to the maximum extent practicable" at N.J.A.C. 7:8-5.5(h)1ii. N.J.S.A. 13:1D-111(a). We hold, therefore, that the 2008 Guidance Document is a technical manual and exempt from APA rulemaking requirements.