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NJDEP "Waiver Rule" Upheld by Appellate Court

On March 21, 2013, an Appellate Division panel upheld the controversial “waiver rule” adopted by the New Jersey Department of Environmental Protection (NJDEP) last March. The rule has been promulgated at N.J.A.C. 7:1B-1.1, et seq. An outgrowth of Governor Chris Christie’s effort to reduce bureaucracy and encourage economic growth through application “common sense principles,” the waiver rule was intended to give the NJDEP authority to forgo strict compliance with certain environmental regulations under four discrete circumstances:

• Where conflicting rules are at issue

• When strict compliance with a rule would be unduly burdensome

• Where waiver of strict compliance would result in a net environmental benefit

• Where a public emergency requires waiver of strict compliance

In addition, an applicant must demonstrate thirteen categorical exceptions to the waiver rule that do not preclude its waiver request. The rule also requires applicants to satisfy various evaluation criteria including, but not limited to: public notice, sufficiency of data to support the request, the applicant’s role in contributing to any hardship associated with strict compliance, and the environmental benefit of waiver. When NJDEP rolled out the waiver rule it also prepared web-based guidance documents and forms meant to instruct applicants on the rule’s applicability and processing of waiver requests. (See our previous post on NJDEP’s roll out of the rule .)

Several environmental advocacy groups and other entities challenged NJDEP’s authority to promulgate the waiver rule, arguing that it was “ultra vires,” meaning that the Department acted beyond its legislatively delegated powers by enacting the rule. The related guidance documents were also challenged as an improper rulemaking action in violation of the Administrative Procedures Act (APA). Opponents of the rule argued that the rule was tantamount to a “blanket” waiver that was inconsistent with how the Legislature has authorized waiver by statute in discrete programmatic areas.

In its decision (In Re N.J.A.C. 7:1B-1.1, et seq. ), the Superior Court Appellate Division ultimately held the waiver rule, but invalidated the guidance documents as requiring formal rulemaking pursuant to the APA. The Court began by discussing the “presumption of validity and reasonableness” that is usually afforded to agency regulations—in part due to the “experience and specialized knowledge” that a state agency brings to “its task of administering and regulating a legislative enactment within its field of expertise.” The Court went on to find that while the Legislature has not explicitly granted NJDEP the general power to waive its own regulations, “that authority [i]s otherwise implicit in the Legislature’s delegation of broad rulemaking power to the agency.” In doing so, the Court rejected the opponents’ argument that the inclusion of waiver authority in some environmental regulatory schemes signaled intent to exclude waiver in other schemes. The Court also rejected the opponents’ argument that the rule as enacted lacked adequate regulatory standards to permit NJDEP to actually apply the rule. For example, the Court reasoned that although the rule does not articulate a method for calculating a “net environmental benefit,” “[t]here are some concepts which, by their nature defy precise definition.”

The Court did, however, agree with the opponents insofar as the waiver rule guidance materials were concerned. The Court found that these materials “go beyond merely facilitating administrative implementation of the rules as claimed by DEP and actually, to some extent, announce new substantive requirements necessitating compliance with the APA.” While NJDEP must engage in rulemaking if it wishes to utilize the guidance materials it has thus far relied upon to process and review waiver rules, such rulemaking is not expressly necessary. The Court concluded that “even without the guidance documents . . . the waiver rules provide adequate standards and safeguards to inform the public and guide the agency as to how decisions will be made under the new rules.”

In short, this ruling was a success for the Christie Administration as well as the regulated community, who both laude this step by the Department to remove some of the barriers to project development and see it as an opportunity to advance fledgling economic recovery in the State of New Jersey. Opponents of the rule have vowed to take the issue to the State’s Supreme Court. It is possible that the high court would consider the issue. As the Appellate Division noted, before this decision, “[n]o court . . . has yet to directly address the scope of an agency’s power to waive its regulations, more particularly, to adopt a uniform waiver rule applicable to most of its regulations. Thus, while this round goes to the regulated community, the fight may not yet be over.

In the meantime, organizations and individuals with a project or activity that may benefit from a waiver of strict compliance should seek consultation with attorneys knowledgeable about the applicability of the Waiver Rule amidst this changing landscape. The environmental law , land use , and redevelopment team at Lieberman & Blecher would be happy to help.

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