The opinion of the court was delivered by: Judge Leavitt
Argued: September 10, 2008
BEFORE: HONORABLE BONNIE BRIGANCE LEADBETTER, President Judge, HONORABLE BERNARD L. McGINLEY, Judge, HONORABLE ROCHELLE S. FRIEDMAN, Judge,*fn1 HONORABLE RENÉE COHN JUBELIRER, Judge, HONORABLE ROBERT SIMPSON, Judge, HONORABLE MARY HANNAH LEAVITT, Judge, HONORABLE JOHNNY J. BUTLER, Judge.
The Borough of Bedford, et al. (collectively, Bedford Group) seeks relief from an enforcement policy of the Pennsylvania Department of Environmental Protection (DEP) undertaken to improve the quality of water in the Chesapeake Bay. The Bedford Group asserts that DEP's policy is actually a regulation that is void and unenforceable because it was not promulgated in accordance with the statutory procedures that must be satisfied before an administrative agency's regulation can take effect. Concluding that there exist outstanding factual questions that must be resolved before this central legal question can be resolved, we deny DEP's request for summary relief.
This lawsuit owes its origin to federal and state governmental efforts to improve the quality of water in the Chesapeake Bay. These efforts have been detailed in the Bedford Group's petition for review, which provides the source of this background.
The Federal Clean Water Act*fn2 identifies the Chesapeake Bay as "impaired" by poor water quality, caused, in part, by excess nutrients in the Bay's tributary streams. More than half of Pennsylvania lies within the Chesapeake Bay watershed, and the Susquehanna River contributes approximately half of the fresh water that flows into the Bay. For many years, Pennsylvania has been involved in joint state and federal efforts to improve the ecology of the Bay. In 2000, Pennsylvania's Governor, along with the Governors of Maryland and Virginia, the Mayor of the District of Columbia, the United States Environmental Protection Agency (EPA) and the Chesapeake Bay Commission signed the Chesapeake 2000 Agreement. DEP Application for Summary Relief, Exhibit 4. (DEP Exhibit ____). The Agreement identified the steps that had to be undertaken by the signing parties in order to improve the Bay's ecosystem, including the reduction of sediment, nitrogen and phosphorus levels in waters entering the Bay. Pennsylvania agreed to reduce Total Nitrogen discharged into its waters by 37 million pounds per year and to reduce Total Phosphorus by 1.1 million pounds per year. Accordingly, in 2005, DEP issued its "Pennsylvania's Chesapeake Bay Tributary Strategy" (Strategy) outlining its plan for reducing the nutrient and sediment loads in all Pennsylvania waters that reach the Bay.
The Bedford Group consists of a group of municipalities and authorities that operate wastewater and sewage treatment plants, which are known as "point sources" of pollution; pollutants generated by agriculture and land development are known as "non-point sources." In order to operate their plants, each member of the Bedford Group must obtain a National Pollution Discharge Elimination System (NPDES) permit from DEP.*fn3 These permits establish the amount of pollutants that each point source may discharge into Pennsylvania waters in the course of operating its plant.*fn4 The Strategy announced that DEP will develop a NPDES permit that includes a new condition in the form of specific limits on the amount of nitrogen and phosphorus each permittee may discharge. The Strategy did not impose these limits on non-point sources because they are not required to obtain NPDES permits to operate.
In April 2007, DEP issued its "Chesapeake Bay Tributary Strategy Implementation Plan for NPDES Permitting" (Implementation Plan), announcing new guidelines for NPDES permits. The Implementation Plan stated that gradually, over a period of time, all existing NPDES permits would be revoked and reissued with a new permit condition: cap load limits for nitrogen and phosphorus. The Implementation Plan also explained the methodology by which new cap loads would be calculated. Members of the Bedford Group were notified of these changes by a letter from DEP and were instructed to prepare a plan and schedule for complying with the new cap loads.
In response to DEP's Implementation Plan, the Bedford Group filed a petition for review addressed to this Court's original jurisdiction. The Bedford Group alleges that the Strategy is an unlawful regulation that will cause its members to suffer substantial, direct and immediate harm, estimating that it will cost them one billion dollars or more to comply with the new nutrient cap loads. The Bedford Group argues that DEP's proposed cap loads are meaningless to the improvement of water quality in the Bay because point sources contribute only 11 percent of the nitrogen levels and 18 percent of the phosphorus levels found in Pennsylvania's waters. The major source of nutrients entering the Bay come from non-point sources, but the Strategy simply ignores this fact. An NPDES permit appeal by each member of the Bedford Group will result in protracted and piecemeal litigation before the Environmental Hearing Board that will yield potentially divergent results. The Bedford Group asserts that it has pled the elements necessary to pre-enforcement review of a regulation.*fn5
The Bedford Group seeks to have the Strategy nullified under several legal theories set forth in eight separate counts. They are as follows:
Count 1: Violation of Administrative Code of 1929. Because only the Environmental Quality Board has the power to promulgate rules and regulations, DEP lacked authority to promulgate a regulation such as the Strategy.
Count 2: Violation of Commonwealth Documents Law. The Strategy is unlawful because it was not published in accordance with the public notice and comment procedures required in the Commonwealth Documents Law.
Count 3: Violation of Administrative Agency Law. To the extent the Strategy constitutes an adjudication of DEP, it is unlawful because there was no notice or an opportunity to be heard.
Count 4: Violation of Regulatory Review Act. The Strategy is unlawful because it was promulgated without review by the appropriate committees of the General Assembly's Senate and House of Representatives or review and approval by the Independent Regulatory Review Commission.
Count 5: Violation of Commonwealth Attorneys Act. The Strategy is unlawful because it was promulgated without review by either the Attorney General or General Counsel.
Count 6: Violation of the Pennsylvania Clean Streams Law. The Strategy is unlawful because it does not conform to the Clean Streams Law, the only Pennsylvania statute that would authorize the adoption of a regulation such as that set forth in the Strategy.
Count 7: Constitutional Violations. By promulgating the Strategy in an unlawful manner, DEP has taken the property of Petitioners in violation of the Pennsylvania and United States Constitutions; has denied Petitioners their property without due process of law; has made or enforced a law that abridges the privileges and immunities of Petitioners; has enacted laws impairing Petitioners' obligation of contracts; and has violated the principles of equal protection and due process.
Count 8: Violation of Other State and Federal Laws and Regulations. The cap load limits are not standards authorized by the Clean Water Act and 25 Pa. Code §92.2c(b); the cap load limits are not best professional judgment-based limits authorized by the Clean Water Act; the cap load limits are not based on existing water quality standards set forth in duly-promulgated regulations; DEP has not made a finding that the cap load limits are necessary, which finding is required by 40 CFR §122.44(d)(1); DEP did not prepare a wasteload allocation, as required by 25 Pa. Code §92.59; and DEP did not prepare a fact sheet setting forth the legal and factual basis for the requirements of the Strategy, including the calculations required by 40 CFR §§124.8 and 124.56.
Based on the foregoing, the Bedford Group has requested this Court to declare the Strategy null and void and to enjoin its implementation or enforcement.
In response to the Bedford Group's petition for review, DEP filed an answer and new matter with affirmative defenses. Thereafter, DEP filed an application for summary relief together with supporting exhibits.*fn6 Asserting that there are no material facts in dispute, DEP requested a judgment that its plan to impose specific nutrient limits on point source permittees is a statement of policy, or guideline, and not a regulation with the force and effect of a law.*fn7
As an initial matter, DEP argues that its announcement of plans for controlling nutrient pollution in the Chesapeake Bay watershed is not limited to the Strategy. Rather, these announcements consist of the 2005 Strategy; DEP's December 2006 revisions to the 2005 Strategy; and DEP's April 2007 Implementation Plan notice to sewage and wastewater treatment plants covered by the NPDES permit program. DEP Exhibits 1-3. Therefore, to decide the Bedford Group's claim, this Court must consider all these documents, known as the "Compliance Plan," and not just one component, the Strategy.*fn8 DEP then argues that the Compliance Plan constitutes a statement of policy, not a regulation, which merely provides guidance to DEP staff and to those regulated by the Clean Water Act. As a statement of policy, the Compliance Plan was not required to be promulgated in accordance with the statutory procedures established for regulations.
The crux of the Bedford Group's action is that the Compliance Plan is an invalid regulation that was not properly promulgated. All of the Bedford Group's additional legal grounds for objecting to the Compliance Plan follow from the premise that the Compliance Plan is a regulation. The question of whether the Compliance Plan constitutes a regulation, as opposed to a statement of policy, cannot be decided exclusively on the evidence provided by DEP because that evidence is incomplete on how the Compliance Plan will function. Accordingly, we will deny DEP's request for a summary judgment that the Compliance Plan is a statement of policy. We do not address the other legal theories advanced by Bedford Group, or DEP's responses thereto. Likewise, we neither address nor decide the wisdom of DEP's standards for NPDES permits or their validity under the Clean Water Act, the Clean Streams Law or any applicable regulation.
Promulgation of a Regulation
We begin with a review of what an agency must do to promulgate a regulation. This requires an examination of what constitutes a regulation and how it differs from a statement of policy, under the applicable statutes as well as case law precedent.
The act commonly referred to as the Commonwealth Documents Law*fn9 addresses agency rule-making. A regulation is defined in Section 102(12) as any rule or regulation, or order in the nature of a rule or regulation, promulgated by an agency under statutory authority in the administration of any statute administered by or relating to the agency, or prescribing the practice or procedure before such agency.
45 P.S. §1102(12). Section 102(13) defines a "statement of policy" as any document, except an adjudication or a regulation, promulgated by an agency which sets forth substantive or procedural personal or property rights, privileges, immunities, duties, liabilities or obligations of the public or any part thereof, and includes, without limiting the generality of the foregoing, any document interpreting or implementing any act of Assembly enforced or administered by such agency.
45 P.S. §1102(13) (emphasis added). These definitions do little to separate a statement of policy from a regulation.*fn10
Case law has established that a regulation has the force and effect of law. City of Pittsburgh, Department of Personnel and Civil Service Commission v. Pennsylvania Human Relations Commission, 630 A.2d 919, 921 n.4 (Pa. Cmwlth. 1993). The same is not true of a statement of policy, which expresses, at most, an agency's interpretation of law, as that law is expressed in a statute or a regulation. Accordingly, a person may be charged with a violation of a statute or regulation, but not with a violation of a statement of policy. It is always the agency's burden to convince the tribunal that its interpretation of the statute or regulation it seeks to enforce is correct, whether or not that interpretation has ever been promulgated in a statement of policy.
Although a regulation and statement of policy are each "promulgated" by an agency, the method of promulgation differs. An agency's promulgation of a regulation is subject to the procedural requirements of the Commonwealth Documents Law, and other statutes, but there are no such requirements for a statement of policy. Eastwood Nursing and Rehabilitation Center v. Department of Public Welfare, 910 A.2d 134, 141-142 (Pa. Cmwlth. 2006). The value of a statement of policy is that it communicates, in advance of a discrete agency action, how the agency interprets a law and intends to give it effect. A statement of policy can be published in the Pennsylvania Code, but publication is not required; by contrast, a regulation must be published in the Pennsylvania Code. Department of Corrections and Department of Public Welfare v. Pennsylvania State Corrections Officers Association, 932 A.2d 359, 365 n.9 (Pa. Cmwlth. 2007).
The basic procedures by which an agency promulgates a regulation are set forth in the Commonwealth Documents Law. In essence, these procedures require an agency to give notice to the public of its proposed rule-making and an opportunity for the public to comment.*fn11 See Eastwood Nursing, 910 A.2d at 141 n.13. However, this is only the beginning. The agency must also obtain the approval of the Attorney General and the General Counsel of a proposed regulation's form and legality.
Sections 204(b) and 301(10) of the Commonwealth Attorneys Act, Act of October 15, 1980, P.L. 950, 71 P.S. §§732-204(b) and 732-301(10). Finally, an agency's regulation must also undergo legislative scrutiny in accordance with the Regulatory Review Act.*fn12
For environmental program regulations, there is one more step. DEP lacks authority to promulgate regulations that relate to the programs it administers and enforces. Such regulations are promulgated by the Environmental Quality Board after public comment and hearings. Section 1920-A of the Administrative Code of 1929, Act of April 9, 1929, P.L. 177, as amended, 71 P.S. §510-20*fn13 ; Department of Environmental Protection v. North American Refractories Company, 791 A.2d 461, 462 (Pa. Cmwlth. 2002).
The effect of an agency's failure to promulgate a regulation in accordance with these various statutory requirements is to have the regulation declared a nullity. Automobile Service Councils of Pennsylvania, et al. v. Larson, 474 A.2d 404, 405 (Pa. Cmwlth. 1984). It is little wonder that agencies take the statement of policy route, which is free of the burdens imposed upon an agency's promulgation of a regulation. However, if a statement of policy is actually an unpublished regulation in disguise, it will be nullified due to the agency's failure to obey the processes applicable to a regulation. Thus, courts must distinguish between the two types of agency promulgations.
If an agency simply calls its promulgation a regulation, this ends the inquiry. More difficult is discerning whether a pronouncement calling itself a "statement of policy" is, in truth, a regulation. Department of Environmental Resources v. Rushton Mining Company, 591 A.2d 1168, 1171 (Pa. Cmwlth. 1991).
Our Supreme Court has explained that a regulation has the effect of a "binding norm" and a statement of policy does not. In Pennsylvania Human Relations Commission v. Norristown Area School District, 473 Pa. 334, 374 A.2d 671 (1977), the Supreme Court explained:
An agency may establish binding policy through rulemaking procedures by which it promulgates substantive rules, or through adjudications which constitute binding precedents. A general statement of policy is the outcome of neither a rulemaking nor an adjudication; it is neither a rule nor a precedent but is merely an announcement to the public of the policy which the agency hopes to implement in future rulemakings or adjudications. A general statement of policy, like a press release, presages an upcoming rulemaking or announces the course which the agency intends to follow in future adjudications.
The critical distinction between a substantive rule and a general statement of policy is the different practical effect that these two types of pronouncements have in subsequent administrative proceedings.. A properly adopted substantive rule ...