Appellate Court Upholds NJDEP “Waiver Rule”

In a decision that gives the green light to an important component of the Christie Administration’s “Common Sense Principles” approach to regulation, the Appellate Division has upheld the New Jersey Department of Environmental Protection’s (NJDEP) “waiver rule,” which permits the department to waive strict compliance with many of its regulations in defined circumstances. Full implementation of the rule will have to wait, however, as the Appellate Court invalidated a variety of forms and guidance documents that NJDEP had posted on its website without going through the normal rulemaking process required by the Administrative Procedure Act (APA).

As we reported last year, NJDEP formally promulgated the waiver rule in April 2012, after a contentious, year-long rulemaking process that saw over 500 members of the public submit many hundreds of comments. The proposal grew out of an executive order from Governor Christie that directed all agencies to establish “Common Sense Principles” for regulations and to apply those principles in a variety of ways, including the adoption of rules that provided for waivers of conflicting or unduly burdensome rules.

The rule, which is set forth on NJDEP’s website, allows NJDEP to waive strict compliance with its rules in limited circumstances, in a manner that is consistent with the agency’s environmental mission. But there are significant limitations on that authority. A waiver may be granted only when at least one of the following criteria are satisfied: (1) the applicant is subject to conflicting rules, (2) strict compliance would be unduly burdensome, (3) the waiver would result in a net environmental benefit, or (4) the waiver is justified by a public emergency. The waiver rule does not apply to a number of categories of requirements, including requirements imposed by statute or by federal regulations; numeric or narrative standards that protect human health; and requirements concerning remediation funding sources and other financial matters.

Soon after its promulgation, and as we also reported, a coalition of environmental and labor organizations challenged the waiver rule in court. They argued that the rule was ultra vires – beyond the authority granted NJDEP by the Legislature – and that it lacked sufficiently clear standards to guide NJDEP in applying it to particular circumstances. The appellants also pointed to the Legislature’s inclusion of waiver provisions in a number of specific statutes as evidence that it did not give NJDEP any authority to grant waivers in any other situations.

In a decision released on March 21 and captioned In re N.J.A.C. 7:1B-1.1 et seq., the Appellate Division rejected these arguments, and upheld the waiver rule as a valid exercise of authority granted by the Legislature. Writing for the three-judge panel, Judge Parrillo pointed to the broad authority the Legislature has given NJDEP, and to NJDEP’s frequent practice of adopting wide-ranging regulatory programs that apply to several different programs and are based on a number of different statutes. The absence of an explicit legislative grant to NJDEP of a “general” power to waive its regulations was not dispositive, wrote Judge Parrillo, for such a power is implicit in the delegation of broad authority to make rules.

“Simply stated,” he concluded on this point, “the power to promulgate a regulation implies the incidental authority to suspend or waive its application in certain limited, well-defined circumstances provided such exemption does not circumvent any legislative enactment or purpose, or federal law, is consistent with the agency’s statutory core mission and objectives, is accomplished through a properly adopted regulation pursuant to the APA, and establishes appropriate and clear standards for the exercise of agency discretion.”

The Court also rejected the appellants’ contention that the rule lacked adequate standards to guide NJDEP’s exercise of its discretion. It is enough, said the Court, if regulations are “sufficiently definite to inform those subject to them as to what is required.” The standards in the waiver rule were definite enough to satisfy this flexible standard.

It was not, however, a complete victory for NJDEP. The Appellate Division held that NJDEP had acted illegally in posting guidance documents, FAQs, and other information on its website without going through the APA-required rulemaking process. Applying the six-factor test set forth in the Supreme Court’s 1984 decision in Metromedia, Inc. v. Director, Division of Taxation, the Court found that, contrary to NJDEP’s protestations, the postings “do more than implement the waiver rule; they establish the rules of the game.” In creating and posting the documents, the Court held, NJDEP had engaged in de facto rulemaking without following the notice-and-comment procedure prescribed by the APA. Accordingly, the Court invalidated the websites documents to the extent that they went beyond the terms of the waiver rule itself.

The decision represents a major victory for the Christie Administration in its ongoing effort to provide relief from what it sees as unnecessary and overly restrictive regulation, especially at NJDEP. For the first time, the broadly worded waiver rule gives NJDEP sweeping authority to grant waivers from regulatory requirements. The practical effect of the waiver rule may be a different story: according the department’s website, as of March 25, 2013, since it began accepting waiver applications on August 1 2012, NJDEP had received just twenty-five requests for a waiver, had denied or rejected as incomplete eleven of those requests, and had yet to grant a waiver pursuant to the waiver rule.

Paul M. Hauge is an Associate in the Gibbons Real Property & Environmental Department.
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