May 2, 2012
IN RE: EXEMPTION FROM TRANSITION AREA REQUIREMENTS FOR FRESHWATER WETLANDS PROTECTION ACT FOR JF BUILDERS.
On appeal from the Commissioner, New Jersey Department of Environmental Protection.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued February 28, 2012
Before Judges Payne, Reisner and Accurso.
Appellants challenge a final decision of the Department of Environmental Protection (DEP) granting respondent J.F. Builders, Inc. (J.F.)*fn1 an exemption from the transition area requirements of the Freshwater Wetlands Protection Act (FWPA). Because the DEP's decision is supported by substantial credible evidence and is consistent with the FWPA and the agency's implementing regulations, we affirm. See R. 2:11-3(e)(1)(D).
The dispute focuses on a building lot in Sea Isle City. The lot was created by subdividing a larger piece of property, after J.F.'s predecessor in title sought and obtained preliminary and final subdivision approval from the Sea Isle City Planning Board in 1981. J.F. bought the lot in 1988 and, in 2009, applied to the DEP for a Transition Area Waiver to permit construction of a duplex on the lot. Construction of a duplex residential building was consistent with the local zoning ordinance, which permitted two-family structures in the zone. By letter dated July 15, 2010, the DEP granted the application, pursuant to N.J.A.C. 7:7A-2.8(f). The approval was later publicly memorialized in the August 4, 2010 DEP Bulletin.
Appellants, a group of neighbors living near the building lot, applied for a hearing to challenge the waiver and sought a stay of construction. In a written decision issued March 16, 2011, the DEP Commissioner denied both applications.*fn2 Quoting N.J.S.A. 13:9B-2, the Commissioner's decision observed that in adopting the FWPA, the Legislature both recognized "'the importance of wetlands'" in protecting "'the public health, safety, and welfare,'" including water quality, and acknowledged that the rights of landowners "'must be fairly recognized and balanced with environmental interests.'" The Commissioner reasoned that "when the Legislature enacted the FWPA, it exempted from its jurisdiction those projects which had received municipal land use approval under the [Municipal Land Use Law]. N.J.S.A. 13:9B-4d."
Absent federal requirements not relevant here, the FWPA provides in pertinent part:
The following are exempt from the requirement of a freshwater wetlands permit and transition area requirements . . .
d. Projects for which (1) preliminary site plan or subdivision applications have received preliminary approvals from the local authorities pursuant to the "Municipal Land Use Law," P.L. 1975, c. 291 (C. 40:55D-1 et seq.) prior to the effective date of this act.
Tracing the origins of this provision, which was adopted in 1987, L. 1987, c. 156, § 4, the Commissioner explained that in order to assume responsibility for the federal freshwater wetland protection program, as permitted by the Clean Water Act (CWA), 33 U.S.C.A. §§ 1251 to 1387, the State needed to adopt a program "as stringent as the federal program" but could also adopt more stringent regulations. See 33 U.S.C.A. § 1344 (g), (h). The State chose to adopt more extensive wetland protections than the CWA required, by not only regulating development in wetlands themselves but also in buffer areas around wetlands, called "transition areas." See MCG Assocs. v. Dep't of Envtl. Prot., 278 N.J. Super. 108, 112-13 (App. Div. 1994). However, in reconciling environmental interests with the rights of landowners, the Legislature chose to grandfather projects for which municipal land use approvals had already been granted at the time the FWPA was adopted.*fn3
The Commissioner next construed the agency's regulations. In pertinent part, the regulations define the transition area exemption the way N.J.S.A. 13:9B-4 does, as applying to "[a] project for which a preliminary site plan or subdivision application received formal preliminary approvals from local authorities pursuant to the Municipal Land Use Law, N.J.S.A. 40:55D-1 et seq., prior to July 1, 1989." N.J.A.C. 7:7A-2.8(f)1 (emphasis added). In his decision, the Commissioner addressed the section of the regulations, N.J.A.C. 7:7A-1.4, that defines the term "project."
The regulations define "project" as follows:
2. For the purpose of a transition area exemption under N.J.A.C. 7:7A-2.8(f) based on the application for or the grant of a preliminary subdivision approval:
i. Where subdivision approval is the last stage of municipal review before the owner/applicant may apply for a building permit to begin construction, the "project" is the development of the subdivision consistent with the lot coverage, use, and density restrictions of the zoning ordinance in effect at the time of the subdivision approval.
In his decision, the Commissioner construed the term "project," and therefore, the transition area exemption, as encompassing J.F.'s construction of a duplex on the subdivided lot, consistent with the local zoning ordinance. He ruled that under subsection 1.4(2)i:
For projects where the subdivision approval is the last stage of municipal review before the owner/applicant may apply for a building permit to start construction, the "project" is the development of the subdivision consistent with lot coverage, use and density. Thus, if the applicant does not need to secure an additional approval from the planning board, the project is exempt. In such fashion, DEP protected the degree of investment and planning that the Legislature intended to exempt from the new statute. JF Builders falls under this regulation as the Municipal Zoning Officer/Construction Official has confirmed that the exempt project does not need any further land use approval.
In denying appellants' stay application, the Commissioner observed that the agency's decision in issuing the exemption "squarely follows the holding in MCG Associates, supra, regarding the limits of assumption of the Federal Clean Water Act, and DEP's own governing regulations. N.J.A.C. 7:7A-1.4." Although he did not explicitly discuss the argument, the Commissioner implicitly rejected appellants' contention that a separate subsection of the regulations, N.J.A.C. 7:7A-1.4(2)ii, precluded the issuance of any transition area waiver unless the applicant had made a "substantial investment . . . in planning or development," i.e., something beyond simply obtaining subdivision approval. Ibid.
On this appeal, the appellants raise the same arguments they presented to the Commissioner. We conclude that the arguments are premised on a misreading of the agency's regulations and are inconsistent with the clear language of the FWPA.
The regulatory definition of "project" first addresses transition area exemptions based on preliminary site plan approvals, a situation not relevant here. N.J.A.C. 7:7A-1.4(1). The regulation next addresses exemptions "based on the application for or the grant of a preliminary subdivision approval." N.J.A.C. 7:7A-1.4(2). Section 2 is divided into three subsections. The first subsection addresses "garden variety" subdivision applications. The second subsection addresses large projects that also require site plan approval. The third section provides examples of how the regulations would apply to various situations.
To put appellants' first argument in context, it is necessary to quote section 2 at length:
2. For the purpose of a transition area exemption under N.J.A.C. 7:7A-2.8(f) based on the application for or the grant of a preliminary subdivision approval:
i. Where subdivision approval is the last stage of municipal review before the owner/applicant may apply for a building permit to begin construction, the "project" is the development of the subdivision consistent with the lot coverage, use, and density restrictions of the zoning ordinance in effect at the time of the subdivision approval; or
ii. Where site plan approval is required prior to construction, "project" means the proposed economic development, whether commercial, industrial or residential, intended to be constructed on that portion of a tract of land that is the focus of the qualifying approval. Although "project" is not limited to specific structures shown on the subdivision plans, it is limited to development on those portions of a tract of land that were the focus of the qualifying subdivision application or approval. Development on other lands, such as development on the remainder of a larger tract or on a contiguous property in common ownership, are not included within a "project."
In order to determine if an applicant qualifies for an exemption under this definition, the Department will determine the existence of a proposed economic development at the time of the subdivision application. Because the purpose of the exemption is to protect that degree of investment in planning and development that the preliminary site plan or subdivision application normally represents, where the subdivision is merely a division of land and no substantial investment was made in planning or development, there can be no exempted project. Therefore, an application for the subdivision of lands simply for future development, yet to be planned, or simply for resale shall not qualify for an exemption. To determine the existence of a proposed economic development and to determine which portion of a tract was the focus of subdivision approval or application, the Department will examine the resolution granting approval and any documentation submitted with the application, including, but not limited to, drainage, engineering, traffic, utility, landscaping, soil and environmental plans and reports as well as the subdivision plan.
In cases where the above information is unclear, the Department may consider money spent or obligated on engineering and design in the preparation of the subdivision application to determine if a substantial investment has been made in an economic development. Money spent or obligated for the initial purchase, carrying costs, or legal services will not be considered in determining the existence of a proposed economic development.
iii. The following are examples of how the Department will determine the "project" exempted on the basis of the application for or grant of preliminary subdivision approval. . . .
[N.J.A.C. 7:7A-1.4(2)(i) to (iii) (emphasis added).]
Appellants first rely on a sentence concerning future development ("[t]herefore, an application for the subdivision of lands simply for future development . . . shall not qualify for an exemption"), contending there is no proof that the original owner had any specific development plans when he obtained the subdivision approval. However, respondents argue, and we agree, that the paragraph in which this sentence appears is part of subsection 2ii, which concerns projects that require site plan approval. Looking at the regulation as a whole, it is clear to us that subsection 2i consists of one paragraph, while subsection 2ii consists of two paragraphs, followed by a separate subsection 2iii. If DEP intended the paragraph containing the quoted language to apply to all of subsection 2, it would have placed that paragraph at the very end of the subsection, or in a separate paragraph iv, rather than including it as the second paragraph of ii, followed by an entirely separate paragraph iii. Moreover, the agency made it clear that the requirements of 2i are separate from those of 2ii by separating the two sections with the word "or."
Appellants' argument that J.F. cannot obtain a waiver because its "plan does not include a site plan approval" is equally unconvincing. Subsection 2ii addresses projects that need site plan approval before construction can commence. An exemption based on subsection 2i does not require site plan approval. N.J.A.C. 7:7A-1.4(2)i, ii.
Appellants' reliance on subsection (2)iii(4), concerning land subdivided solely for estate planning purposes, is misplaced. The section reads as follow:
(4) Where land is divided for the sole purpose of bequeathing it sometime in the future to one's children to be developed as they wish, no economic development was contemplated when the application was made or approval granted. After the land passes to the children and one of them decides to build, that development is not exempt. The purpose of the exemption is to protect that degree of investment in planning and development that the preliminary site plan or subdivision application normally represents. Where the subdivision is merely a division of land and no investment was made in the planning or development, there can be no exempted project.
[N.J.A.C. 7:7A-1.4(2)iii(4)(emphasis added).]
That provision has no application here. Moreover, any attempt to read into subsection 2i a "significant financial investment" requirement, over and above the financial investment required to obtain the subdivision approval, would be inconsistent with the plain language of the FWPA, N.J.S.A. 13:9B-4, which contains no such requirement. See Morich v. New Jersey Dep't Envtl. Prot., 269 N.J. Super. 240, 244-45 (App. Div. 1992), certif. denied, 133 N.J. 428 (1992); MCG, supra, 278 N.J. Super. at 123.
Our courts have rejected various efforts by DEP to narrow the statutory exemptions in N.J.S.A. 13:9B-4d, by setting a five-year time limit on the exemptions, Matter of Freshwater Wetlands Rules, 238 N.J. Super. 516, 527-30 (App. Div. 1989); excluding minor subdivisions from exemption, Morich v. New Jersey Dep't Envtl. Prot., supra, 269 N.J. Super. at 244-45; or voiding exemptions upon the State's assumption of the federal clean water program. MCG, supra, 278 N.J. Super. at 110-11. In MCG, Judge King cogently described the legislative compromise that led to the adoption of the FWPA, and the breadth of the transition waiver provision:
The Act reflects a delicate compromise between environmentalists and developers. The political compromise is reflected in that portion of the Act which declares that "in order to advance the public interest in a just manner the rights of persons who own or possess real property affected by this act must be fairly recognized and balanced with environmental interests." N.J.S.A. 13:9B-2. The statute seeks to achieve the two goals of (1) enabling the State to assume jurisdiction over the Federal 404 Program, N.J.S.A. 13:9B-27, and (2) sparing developers who earlier had gone through the time, trouble and expense of obtaining subdivision or site plan approval from now complying with the Act's permit and transition area requirements. N.J.S.A. 13:9B-4. The Legislature provided a mechanism for reconciling the conflict between those two goals, should one arise: State exemptions for developers would have to yield to the extent that such exemptions would preclude the State from assuming jurisdiction over the Federal 404 Program because if the exemptions remained the State program would not be as stringent as the federal program. But if the federal government would have allowed the State to assume jurisdiction notwithstanding the exemptions, they should remain in place.
[Id. at 122-23 (citations omitted).]
In Morich, we explicitly held that the statutory exemption in N.J.S.A. 13:9B-4 extends to minor subdivision approvals, and cannot be limited to situations in which a landowner has expended "substantial time, effort and resources in perfecting a major subdivision application." Morich, supra, 269 N.J. Super. at 244. We rejected the argument that "the Legislature had no concern for the rights of property owners with minor subdivisions and intended to deny them any protection whatsoever from the strictures of the FWPA," finding "no basis in the legislation itself for such a literal position." Ibid.
Furthermore, to adopt respondent's position is to attribute to the Legislature the intent to achieve by indirection what could have been more plainly and easily achieved in a direct manner. The Legislature knows the difference between minor and major subdivisions. It cited the Municipal Land Use Law, N.J.S.A. 40:55D-1 et seq., in the very provision at issue here. It would have been simpler and more direct to specify major subdivisions in the exemption if that limitation were intended.
It is far more logical to view the language at issue as evincing an intention to exempt all property owners who had reached a specified point in their plans for subdivision, the point of preliminary approval, at the time the FWPA became effective.
[Id. at 245.]
In this case, the agency's construction of its regulation, N.J.A.C. 7:7A-1.4(2)i, is entirely consistent with Morich, MCG, and the plain language of the FWPA. We find no basis to depart from our usual rule that we will defer to an agency's reasonable construction of its enabling legislation and its implementing regulations. See In re Freshwater Wetlands Prot. Act Rules, 180 N.J. 478, 488-89 (2004).*fn4