On March 21, 2013, the Appellate Division of the New Jersey State Superior Court upheld a New Jersey Department of Environmental Protection (“NJDEP”) regulation that waives a party’s obligation to comply strictly with New Jersey environmental regulations in certain, limited circumstances. N.J.A.C. 7:1B-1.1 to -2.4. While the overall impact of the so-called Waiver Rule remains to be seen, its validation by the Appellate Division indicates that the rule, while limited in its application, could be a useful tool for members of the regulated community seeking flexibility while navigating compliance with overly burdensome or conflicting environmental regulations.

The Waiver Rule

NJDEP adopted the Waiver Rule in March 2012, in response to the Christie Administration’s Executive Order No. 2, which mandated that state agencies adopt rules for “waivers” from strict compliance with agency regulations as part of an effort to relieve the regulatory burdens often associated with doing business in New Jersey. In issuing the Waiver Rule, NJDEP made clear its goal to: 

set forth the limited circumstances in which the Department may, in its discretion, waive the strict compliance with any of its rules in a manner consistent with the core missions of the Department to maintain, protect, and enhance New Jersey’s natural resources and to protect the public health, safety, and welfare, and the environment. N.J.A.C. 7:1B-1.1.

In furtherance of that purpose, the Waiver Rule sets forth several requirements that an applicant must satisfy before its waiver application is granted. First, the application must be based upon one of the following four threshold categories:

  • Conflicting rules – the existence of a conflict between two applicable NJDEP rules, or between a NJDEP rule and one promulgated by another state or federal agency, which renders compliance impossible or impracticable;
  • Strict compliance with the rule would be unduly burdensome – resulting in either (a) an “actual, exceptional hardship” for a particular project, activity, or property, or (b) “excessive cost” where an alternative measure of compliance achieves benefits to public health and safety or the environment that are comparable or greater;
  • Net Environmental Benefit – where the benefit to the environment resulting from the waiver would “substantially outweigh” any detriment; or
  • Public Emergency – a situation where a duly authorized official has declared a public emergency.

An applicant must then establish that its situation does not fall within one of the 13 categories of rules that cannot be waived. This list includes, for example: (1) requirements imposed by federal or state statutes or federal regulation; (2) rules providing for a numeric or narrative standard protective of human health; (3) a rule providing for a remediation funding source, claim or other reimbursement, grant, loan, or other financial assistance; (4) a rule providing for public participation or notice; and (5) a rule providing for a fee, oversight cost, or other NJDEP cost.

Finally, the Waiver Rule provides that a waiver will not be granted where it would conflict with NJDEP’s core missions “to maintain, protect, and enhance New Jersey’s natural resources and to protect the public health, safety, and welfare, and the environment.”

In addition to the above, NJDEP evaluates each application against an established set of criteria, including, for example, whether the public had sufficient notice of the application and whether NJDEP received information necessary to support granting a waiver.

Appellate Court Upholds the Waiver Rule

Soon after its adoption, many environmental and labor organizations challenged the Waiver Rule on the grounds that (1) it exceeded NJDEP’s legislative authority; and (2) the enacted regulations were inadequate and guidance improperly adopted. Underlying these arguments were concerns from environmental groups that the rule would lead to a large-scale rollback of numerous environmental regulations.

The Appellate Division upheld the Waiver Rule, recognizing NJDEP’s implicit authority to adopt rules of general application to deal with the many overlapping programs it administers, and finding further that such authority and flexibility is necessary for NJDEP to adapt to changing and unexpected conditions.

The court also sided with NJDEP with respect to the adequacy of the regulations. In particular, the court found that the standards and criteria set forth in the regulations with respect to defining and implementing such threshold criteria terms as “net environmental benefit,” “conflicting rules,” and “unduly burdensome” were sufficient to guide the NJDEP in the exercise of its discretion in deciding Waiver Rule applications.

The court did, however, take issue with the agency’s use of “guidance” and “frequently asked questions” documents posted on its Web site to guide implementation of the Waiver Rule, describing such documents as “integral, substantive components” of the Waiver Rule. The court held that the use of these documents amounted to “de facto” rulemaking in violation of the Administrative Procedures Act. The court emphasized, however, that the absence of adequate internal review policies was not fatal to the rule itself. This pronouncement may lead NJDEP to revisit its internal review process for considering waiver applications through a formal rulemaking.

See In re N.J.A.C. 7:1B-1.1 et seq., Nos. A-3514-11T2, A-4098-11T2, at 24, 31-33, 36-42, 50-54 (N.J. Super. App. Div. March 21, 2013).
 

Conclusion

The eventual overall impact of the Waiver Rule is still unclear, as are its potential scope and practical application. Of the 25 waiver applications filed with NJDEP to date, none have been granted. Two applications were denied and nine were returned as incomplete (three of which were resubmitted and are under review). The balance remain under NJDEP review. The majority of these waiver applications deal with state coastal land use rules under the Coastal Area Facilities Review Act (N.J.S.A. 13:19-1 et seq.,) or similar statutes, while a few assert conflicts between site remediation and flood hazard rules. The NJDEP found that the two applications it denied lacked the information or data needed to support granting a waiver. These denials offer little guidance regarding NJDEP’s evaluation of applications on the merits.

Notwithstanding this uncertainty, the Appellate Division’s affirmation of the Waiver Rule may lead to an increase in both the number of applications and decisions made by a now-validated NJDEP. As a result, members of the regulated community should consider the Waiver Rule as a potential tool to increase flexibility while navigating New Jersey’s complex environmental regulatory schemes.