June 19, 2017.  Last week, the N.C. Senate retitled  House Bill 374, a  labor law technical corrections bill,  as  the “Business Freedom Act” and (among other things) added a provision making it significantly more difficult for a citizen, community or environmental organization to challenge an environmental permit. The provisions in Section 12 of H 374 would affect appeals of any environmental permit, certification, or other approval issued by the Department of Environmental Quality or the Environmental Management Commission. Those approvals include permits for  wastewater discharges, wetland/stream impacts, and new air pollution sources;  inter-basin transfers;  coastal development permits;  and many other activities with environmental consequences.

WHAT THE PROVISION DOES 

H 374  limits the ability of a person to challenge an environmental permit in three ways:

1.  Only a person who submitted a comment before the permit was issued could appeal the permit. Even a person actually harmed by the permitted activity, making them  a “person aggrieved” who would otherwise have appeal rights under the state’s Administrative Procedures Act,  would be barred from appealing unless they commented during the permit review. That means individuals or organizations appealing environmental permits will face a  hurdle not required for appeal of other state actions. The provision puts citizens appealing environmental permits  at a significant practical disadvantage since a comment period may range from as few as 15 days to  60 days and the notice of opportunity to comment may not reach everyone directly affected by the permit decision.
2.  An issue could not be raised in the appeal unless it had been  specifically identified in a comment to the agency before issuance of the permit. Comments are submitted in response to either a permit application or a draft permit – not the final permit decision. Limiting the appeal to issues raised in a comment means there may be no opportunity to challenge permitting errors that only  become clear when the final permit has been issued. The limited exception in the bill for circumstances where the person “could not have raised a particular basis prior to the decision” would simply  start a new round of argument over whether an issue could or could not have been raised prior to the permit decision.
3. The administrative hearing would be limited to  evidence in the record of the permit decision (such as the permit application,  permit agency documents, and public comments). Permit appeals are heard by an administrative law judge (ALJ) who conducts a hearing and issues a decision in the case. The  ALJ’s decision can then be appealed in  the state courts. H 374  would not allow the ALJ to consider new evidence in an environmental permitting case; the decision could only be based on materials in the permit record. (The  bill has a narrow exception for information unavailable when the permit decision was made.) The provision seems to  exclude even testimony necessary to explain documents in the permit file. Most of the material in the permit record will be information provided by the applicant or generated by the permitting agency. Other parties to an appeal would rarely be able to gather all possible supporting evidence for an appeal within a 15-60 day comment period.    Under  current  law (which would continue to apply to other types of administrative hearings) ,  a party can introduce any evidence relevant to the issues in the hearing. 

THE PROBLEMS

Fairness.  I can’t say whether these restrictions rise to the level of creating a constitutional due process or equal protection problem.  But the provision clearly treats a citizen harmed by an environmental permit differently than a citizen harmed by any other kind of state action.  The obstacles presented by H 374 affect every stage of the administrative appeal. A person granted an administrative appeal hearing may then find it impossible to raise issues and introduce evidence critical to the appeal. The cumulative restrictions in H 374 could greatly restrict access to the courts on environmental permitting controversies by  making  it more difficult to get a hearing and then limiting the evidence that could go into the hearing record for review by the courts. 

Violation of federal rules for environmental permitting programs delegated to the states. The new restrictions on environmental permit appeals – particularly limits on standing to appeal — seem to violate the terms under which  federal permitting programs have been delegated to the state. N.C. has delegations under all of the major federal environmental permitting laws including the Clean Water Act, Clean Air Act and Safe Drinking Water Act. Under those delegations, the Department of Environmental Quality issues federal permits that would otherwise be issued by the U.S. Environmental Protection Agency. Federal rules require states with delegated permitting programs to  provide an opportunity for judicial review of the final permit decision that is comparable to review available under federal law.

For example, Clean Water Act delegation rules require the state program to provide an opportunity for judicial review that is “the same as that available to obtain judicial review in federal court of a federally-issued [wastewater discharge]  permit”. The rule expressly says “[a] State will not meet this standard if it narrowly restricts the class of persons who may challenge the approval or denial of permits”. (40 CFR §123.30.) Similar provisions appear in rules for delegation of other federal environmental permitting programs. (An earlier post about a different permit appeal controversy also  cites the federal rule on judicial review of Clean Air Act permits.)

Under federal law, any person “suffering legal wrong because of agency action or adversely affected or aggrieved by agency action… is entitled to judicial review” of an environmental permitting decision. 5 U.S.C. § Section 702. An administrative appeal is the first and necessary step for judicial review under state law. By imposing new conditions on a citizen’s ability to  file an administrative appeal,   House Bill 374 could prevent a person  harmed by a permitting decision from obtaining  judicial review they would be entitled to under federal law.  That appears to violate federal rules for delegated environmental permitting programs.

The  limits in H 374  on issues and evidence introduced at hearing also mean state judicial review will be much narrower than  federal judicial review of an environmental permit. Appeal of an EPA-issued Clean Water Act permit goes through a federal administrative hearing where new evidence can be introduced. The record of the federal administrative hearing — including testimony and new evidence — can then be considered by a court. Under H 374, appeal of a state-issued Clean Water Act permit would be based  solely on the original permitting materials, limiting the evidence a court could consider on judicial review.  As a result, the scope of judicial review under H 374 would be narrower than review available under federal law.

The Senate changes to House Bill 374, including the environmental appeal provision, go back to the House for approval. House agreement to the Senate changes would send the revised bill to the Governor.  If the House fails to agree to the Senate changes, a conference committee of Senators and House members would be appointed to work out the differences between the two.