On appeal from adoption of N.J.A.C. 7:20A-1.1 by the Department of Environmental Protection.
The opinion of the court was delivered by: Waugh, J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Rodríguez, Payne and Waugh.
The New Jersey Farm Bureau (Bureau), which describes itself as the largest organization of farmers and farm-related interests in New Jersey, challenges the administrative action of respondent New Jersey Department of Environmental Protection (DEP) in readopting and amending N.J.A.C. 7:20A, regulations that implement and enforce the Water Supply Management Act (Water Act), N.J.S.A. 58:1A-1 to -17. For the reasons set forth below, we uphold the validity of most of the challenged regulations, but find three regulatory amendments, N.J.A.C. 7:20A-1.3, N.J.A.C. 7:20A-2.3(j), and N.J.A.C. 7:20A-2.5(a)(11)(v), invalid because they are ultra vires; and we require the rewriting of N.J.A.C. 7:20A-1.7(c)(1), because it is ultra vires as written.
The Legislature passed the Water Act in 1981 after making the following findings:
[(1)] that the water resources of the State are public assets of the State held in trust for its citizens and are essential to the health, safety, economic welfare, recreational and aesthetic enjoyment, and general welfare;....
[(2)] that because some areas within the State do not have enough water to meet their current needs and provide an adequate margin of safety, the water resources of the State and any water brought into the State must be planned for and managed as a common resource from which the requirements of the several regions and localities in the State shall be met;...
[and (3)] that it is necessary to insure that within each basin there exist adequate water supplies to accommodate present and future needs[.] [N.J.S.A. 58:1A-2.]
The Water Act gives DEP broad responsibility to manage the State's water resources "to ensure an adequate supply and quality of water for citizens of the State, both present and future, and to protect the natural environment of the waterways of the State." N.J.S.A. 58:1A-2. It directs DEP to adopt "a monitoring, inspection and enforcement program, a program to study and manage the State's water resources and plan for emergencies and future water needs, and regulations to manage the waters of the State during water supply and water quality emergencies." N.J.S.A. 58:1A-2.
Specifically, the Water Act gives DEP the powers to adopt and enforce rules and regulations to control, conserve, and manage the water supply of the State and the diversions of that water supply to assure the citizens of the State an adequate supply of water under a variety of conditions and to carry out the intent of this act. These rules and regulations may apply throughout the State or in any region thereof and shall provide for the allocation or the reallocation of the waters of the State in such a manner as to provide an adequate quantity and quality of water for the needs of the citizens of the State in the present and in the future and may include, but shall not be limited to:
a. A permit system to allocate or reallocate any or all of the waters of the State, which system shall provide for the issuance of permits to diverters of more than 100,000 gallons per day of the waters of the State, containing at a minimum the conditions required by this act;
b. Standards and procedures to be followed by diverters to ensure that:
(1) Proper methods are used to divert water;
(2) Only the permitted quantity of water is diverted and that the water is only used for its permitted purpose;
(3) The water quality of the water source is maintained and the water standards for the use of the water are met;
(4) [DEP] is provided with adequate and accurate reports regarding the diversion and use of water;
c. Inspection, monitoring, reporting and enforcement procedures necessary to implement and enforce the provisions of this act;
d. Standards and procedures to be followed to determine the location, extent and quality of the water resources of the State and plan for their future use to meet the needs of the citizens of the State;
e. Standards and procedures to be followed to maintain the minimum water levels and flow necessary to provide adequate water quantity and quality;
f. Standards and procedures governing the maintenance of adequate capacity by, and withdrawal limits for, water purveyors. [N.J.S.A. 58:1A-5.]
The Water Act expressly instructs DEP to establish two separate programs for the authorization of ground and surface water diversions of over 100,000 gallons per day. The first program consists of "a uniform water diversion permit system and fee schedule," as set forth in N.J.S.A. 58:1A-2 and -7(a), and has general application. The second program, which is "in lieu of" the general permit system, applies only to persons diverting 100,000 or more gallons of water per day for agricultural, aquacultural or horticultural purposes.*fn1 N.J.S.A. 8:1A-6(a)(2).
Under the agricultural program, which is the subject of this appeal, "any person diverting 100,000 or more gallons of water per day for agricultural or horticultural purposes" must obtain approval of "a five-year water usage certification program." Ibid. As originally enacted on August 13, 1981,*fn2
N.J.S.A. 58:1A-6(a)(2) provided that the certificates would be approved by DEP, "in consultation with the appropriate county agricultural agent."*fn3 There is a county agricultural agent on staff at the county cooperative extension office in each county. The extension offices are a partnership among the Rutgers Cooperative Extension, the county boards of chosen freeholders, and the United States Department of Agriculture.
However, less than a month after the original statute's effective date of August 13, 1981, N.J.S.A. 58:1A-6(2) was amended by L. 1981, c. 277, to provide that the certification would be obtained with the approval of the "county agricultural agent," rather than DEP, and that such approval would "be based on standards and procedures established" by DEP. The statement to Senate Bill 3346, which was quite brief, stated that the amendment was "intended to address the concerns which residents of the southern portion of this State have expressed over the proposed water supply legislation," which was still pending as a separate bill when the statement was written.
A water usage certification gives the holder the right to construct, repair or reconstruct dams or other structures, the right to divert water for irrigation, frost protection, harvesting and other agriculturally-related purposes, including aquaculture, and the right to measure the amount of water diverted by means of a log or other appropriate record.... [N.J.S.A. 58:1A-6(a)(2).]
Both permits and certifications are renewable "upon the expiration thereof, with any conditions deemed appropriate by [DEP], for the same quantity of water, except that DEP may, after notice and public hearing, limit that quantity to the amount currently diverted, subject to contract, or reasonably required for a demonstrated future need." N.J.S.A. 58:1A-7(b).*fn4
DEP also has the authority to reduce the quantity allowed under existing certifications, after notice and a public hearing, in designated areas of critical water supply concern. Ibid.
DEP adopted its initial regulations in 1983. They were codified as N.J.A.C. 7:20A, and have been readopted, with amendments, from time to time since then. The most recent readoption is at issue in this case.
DEP proposed readopting the regulations with significant amendments on July 17, 2006. 38 N.J.R. 2947(a) (July 17, 2006). The Bureau submitted timely comments and objections during the public comment period. On January 2, 2007, DEP readopted the regulations with amendments, effective immediately. 39 N.J.R. 39(a) (Jan. 2, 2007).
In the 2007 readoption, DEP proposed broad changes to the regulations, having concluded that water diversions for agricultural uses require "a higher level of scrutiny." 38 N.J.R. at 2947. DEP explained its reasons as follows:
Diversions of water to serve agricultural  activities, just as with other diversions regulated under the Water Supply Allocation Permits rules, N.J.A.C. 7:19, may have significant adverse impacts on natural resources and other users of the resource. These impacts can result in diminished stream flows, lowered water levels in wetlands, accelerated saltwater intrusion in ground waters, reduced yields from diversion sources used by other agricultural and non-agricultural interests and the spreading of contamination. Historically, many of these impacts were not fully addressed in the agricultural  water usage certification review process. Due to increased stress on the State's water resources from a growing population and associated development, and the need to conserve and protect valuable natural resources, [DEP] has determined that water diversions for agricultural  uses require a higher level of scrutiny than is currently provided under the existing rules. To address the need to reduce the impacts associated with this water use, [DEP] is proposing both technical and substantive amendments to the rules that include new definitions, requirements for more precise source location information, additional assessment of natural resource impacts, more stringent certification conditions to protect natural resources and other users, requiring that cranberry growing operations provide the method used to determine water usage, and a requirement to submit an agricultural development plan to justify maintaining allocation amounts at the level approved in the certification when water use reports indicate less than that amount is being used. [Ibid.]
According to DEP, there are approximately 1,100 agricultural water usage certifications and registrations*fn5 in effect in New Jersey. 38 N.J.R. at 2957. DEP concluded that, "[w]ithout effective planning and management of the quantity and use of the State's water resources, including water supply emergencies, the State's future development, public health and well-being, and its ability to sustain agriculture  enterprises, could be jeopardized." Ibid.
On appeal, the specific regulations challenged by the Bureau fall into four general categories: (1) DEP's modification of the presumption of public interest for any agricultural use, N.J.A.C. 7:20A-1.2(c); (2) implementation of a remedial requirement arising from diversion-source-interference complaints, N.J.A.C. 7:20A-1.7; (3) changes to the application process, N.J.A.C. 7:20A-2.3, -2.4, and -2.5; and (4) changes in conditions attached to water usage certifications, N.J.A.C. 7:20A-2.6.
Before turning to the Bureau's challenges to specific regulations, we outline the well-established general principles applicable in an appellate court's review of administrative regulations. We also discuss the purposes of the Water Act and its relationship to other statutes involving agriculture relied on by the Bureau in its appellate arguments.
Reviewing courts generally accord substantial deference to the interpretation an agency gives a statute that it is charged with enforcing. N.J. Tpk. Auth. v. Am. Fed'n of State, County & Mun. Employees, Council 73, 150 N.J. 331, 351 (1997). Accord N.J. Soc'y for Prevention of Cruelty to Animals v. N.J. Dep't of Agric., 196 N.J. 366, 385 (2008). In addition, "[i]n reviewing agency action, the fundamental consideration is that a court may not substitute its judgment for the expertise of an agency 'so long as that action is statutorily authorized and not otherwise defective because arbitrary or unreasonable.'" Williams v. Dep't of Human Servs., 116 N.J. 102, 107 (1989) (quoting Dougherty v. Dep't of Human Servs., 91 N.J. 1, 12 (1982)). Accord In re Distrib. of Liquid Assets Upon Dissolution of the Union County Reg'l High Sch. Dist. No. 1, 168 N.J. 1, 10 (2001).
This applies to policymaking, fact-finding and statutory interpretation. Id. at 10-11.
"Thus a regulation can only be set aside if it is proved to be arbitrary or capricious, plainly transgresses the statute it purports to effectuate, or alters the terms of the statute and frustrates the policy embodied in it." In re Adopted Amendments to N.J.A.C. 7:7A-2.4, 365 N.J. Super. 255, 265 (App. Div. 2003). It is well settled that agency regulations are presumed valid and are accorded a presumption of reasonableness. In re N.J. Am. Water Co., 169 N.J. 181, 188 (2001); In re Adoption of N.J.A.C. 11:3-29, _____ N.J. Super. _____, ____ (App. Div. 2009) (slip op. at 19).
Nevertheless, administrative agencies derive their authority from legislation, the terms of which they cannot alter, nor are they permitted to frustrate the legislative purpose. N.J. State Chamber of Commerce v. N.J. Election Law Enforcement Comm'n, 82 N.J. 57, 82 (1980); Rider Ins. Co. v. First Trenton Cos., 354 N.J. Super. 491, 499 (App. Div. 2002); In re Adoption of N.J.A.C. 11:3-29, supra, ___ N.J. Super. at ___ (slip op. at 19). The party contesting the regulation has the burden of proving its invalidity. N.J. State League of Municipalities v. Dep't of Cmty. Affairs, 158 N.J. 211, 222 (1999).
While findings of ultra vires actions are disfavored, New Jersey Guild of Hearing Aid Dispensers v. Long, 75 N.J. 544, 561 (1978), "[o]ur role is to enforce the will of the Legislature" because "[s]tatutes cannot be amended by administrative fiat." TAC Assocs. v. N.J. Dep't of Envtl. Prot., 408 N.J. Super. 117, 124 (App. Div. 2009). Consequently, a "regulation that is plainly at odds with its enabling statutory authority must be set aside." Id. at 122 (citing In re Freshwater Wetlands Prot. Act Rules, 180 N.J. 478, 488-89 (2004)).
In reviewing the validity of the regulations against an assertion that they are ultra vires, we must ascertain the Legislature's intent with respect to its enactment of the statute at issue. We do so in accordance with well-established guidelines.
At the outset, we restate the core principles of statutory construction that must guide our analysis. "The Legislature's intent is the paramount goal when interpreting a statute and, generally, the best indicator of that intent is the statutory language." DiProspero v. Penn, 183 N.J. 477, 492 (2005). A court should "ascribe to the statutory words their ordinary meaning and significance, and read them in context with related provisions so as to give sense to the legislation as a whole." Ibid.; see also Soto v. Scaringelli, 189 N.J. 558, 569 (2007).... Ultimately, a court's role when analyzing a statute is to give effect to the Legislature's intent as evidenced by the "language of [the] statute, the policy behind it, concepts of reasonableness and legislative history." Johnson Mach. Co. v.
Manville Sales Corp., 248 N.J. Super. 285, 303-04 (App. Div. 1991) (citing Monmouth County v. Wissell, 68 N.J. 35 (1975)). [D'Ambrosio v. Dep't of Health & Senior Servs., 403 N.J. Super. 321, 334 (App. Div. 2008).]
In reviewing regulations, we must also be mindful that "[a]dministrative agencies possess the ability to be flexible and responsive to changing conditions." Texter v. Dep't of Human Servs., 88 N.J. 376, 385 (1982). "This flexibility includes the ability to select those procedures most appropriate to enable the agency to implement legislative policy." Ibid.
However, regulatory requirements must also be sufficiently specific to apprise those who are regulated of what the agency is requiring. In New Jersey Ass'n of Health Care Facilities v. Finley, 83 N.J. 67, 82-83, appeal dismissed and cert. denied, 449 U.S. 944, 101 S.Ct. 342, 66 L.Ed. 2d 208 (1980), our Supreme Court declared:
It is fundamental that administrative regulations must... be sufficiently definite to inform those subject to them as to what is required. At the same time, regulations must be flexible enough to accommodate the day-to-day changes in the area regulated. See Trap Rock Industries, Inc. v. Kohl, 59 N.J. 471, 483 (1971)[, cert. denied, 405 U.S. 1065, 92 S.Ct. 1500, 31 L.Ed. 2d 796 (1972)].
See N.J. Soc'y for Prevention of Cruelty to Animals, supra, 196 N.J. at 411 ("We do not fault the Department for its decision not to attempt to create an exhaustive list of what is permitted and the precise circumstances that pertain.").
The Bureau contends that the regulations at issue are inconsistent with legislative policy embodied in the Right to Farm Act (Farm Act), N.J.S.A. 4:1C-1 to -10.4, and the Agriculture Retention and Development Act (ARDA), N.J.S.A. 4:1C-11 to -43.1, both of which were enacted in January 1983, just a few years after the Water Act.
The Bureau contends that DEP ignored those agriculture-friendly mandates by prioritizing general water usage, and its own regulatory power, instead of encouraging the maintenance of agricultural production and business. To support its assertion that DEP has disregarded the State's policy favoring agriculture, the Bureau points to the following responses by DEP during the promulgation process:
[DEP] is required under the [Water Act] to protect the water resources for use by the citizens of New Jersey, and cannot issue a water usage certification for agriculture if it results in adverse impacts to other users or the environment. [DEP] acknowledges the importance of water to the agriculture industry and the need to balance demands against other competing priorities, including potable supply, enhancement of natural ecosystems, and commercial and industrial uses. However, the amount of water available for a particular use and location is dependent on the sustainability of the water resource to meet the withdrawal while still providing protection for other users and the environment. [DEP] makes its decisions on authorizing water withdrawals based on these considerations. Prioritizing water for a particular use is not the purpose of these rules.
In addition, the concept of guaranteeing water for preserved farms is not universally accepted by the agriculture community. Some take the position that if water is reserved solely for use by preserved farms, the viability of other farming operations will suffer and may result in the loss of farms to other forms of development. [DEP] will continue to work diligently within its authority to ensure water is allocated equitably to various user groups in meeting State initiatives, and within the resource constraints in a particular region.
[DEP] believes the adopted amendments do not result in an unreasonable burden on the agriculture industry. The natural resource protections provided by the adopted amendments will ensure that allocations remain sustainable and protective of other users, including those diverting water for agriculture purposes. The amendments are intended to balance the need to protect the State's natural resources and water users as mandated by the [Water Act] with the agriculture industry's need for a streamlined regulatory process. The costs and time requirements for the water usage certification applicant and holder to comply with these rules are reasonable when considered against the potential to cause significant adverse impacts to the State's resources and economy, including the agriculture economy.
The Bureau makes the broad claim that the regulations at issue are invalid because they are overly burdensome to farmers. They also contend that the Farm Act and the ARDA require DEP to grant priority to agricultural water usage without balancing agricultural uses with any other competing water-usage interests. Although we disagree with such a broad assertion, we nevertheless conclude from the language of those statutes and the Water Act itself that there is a legislative mandate to preclude unnecessarily onerous regulation of agricultural activities.
The Legislature set forth the purposes for enactment of the Farm Act in its legislative findings, N.J.S.A. 4:1C-2, as follows:
a. The retention of agricultural activities would serve the best interest of all citizens of this State by insuring the numerous social, economic and environmental benefits which accrue from one of the largest industries in the Garden State;
b. Several factors have combined to create a situation wherein the regulations of various State agencies and the ordinances of individual municipalities may unnecessarily constrain essential farm practices;
c. It is necessary to establish a systematic and continuing effort to examine the effect of governmental ...