Free-Flow Packaging International, Inc. v. Secretary of the Department of Natural Resources & Environmental Control

861 A.2d 1233, 34 Envtl. L. Rep. (Envtl. Law Inst.) 20, 2004 Del. LEXIS 507
CourtSupreme Court of Delaware
DecidedNovember 12, 2004
DocketNo. 1,2004
StatusPublished
Cited by4 cases

This text of 861 A.2d 1233 (Free-Flow Packaging International, Inc. v. Secretary of the Department of Natural Resources & Environmental Control) is published on Counsel Stack Legal Research, covering Supreme Court of Delaware primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Free-Flow Packaging International, Inc. v. Secretary of the Department of Natural Resources & Environmental Control, 861 A.2d 1233, 34 Envtl. L. Rep. (Envtl. Law Inst.) 20, 2004 Del. LEXIS 507 (Del. 2004).

Opinion

BERGER, Justice:

In this appeal, we consider whether the Department of Natural Resources and Environmental Control (“DNREC”) lawfully determined the base fee to be paid by a company that emits air contaminants. Free-Flow Packaging International, Inc. contends that DNREC’s assessment was invalid either because it was the result of a process that should have been codified in a regulation, or because it was an arbitrary and capricious case decision. We agree with the Superior Court’s conclusion that the assessment was neither a regulation nor a case decision. Rather, DNREC implemented a statutory directive by categorizing all air polluters based on the estimated hours DNREC spent performing stated types of activities. Since the record supports DNREC’s determination that Free-Flow is a “complex” polluter, we affirm.

Factual and Procedural Background

The 1990 amendments to the federal Clean Air Act require sources of certain air pollutants to obtain a Title V operating permit.2 Each state is responsible for administering the permit process, and Delaware’s Title V Operating Permit Program is codified at 7 Del.C. § 6095 et seq .. Before 1999, the permit fees were based solely on the source business’s level of emissions, as recorded in a 1990 point source emission inventory. Because Free-Flow emitted 76-100 tons of regulated air pollutants, it was classified as a “small” source and paid a $7,000 per year permit fee. In 1999, the General Assembly changed the fee structure to provide for a “user fee” and a “base fee.” The user fee, like the original permit fee, is based on the source business’s level of emissions. The base fee relates to a range of services that DNREC must provide for all sources of pollutants. In December 1999, DNREC billed Free-Flow $20,000 for its permit fee. The user fee portion of the bill was $2,000, based on a point source emission inventory that showed Free-Flow emitted between 26 and 100 tons of regulated pol[1235]*1235lutants. The $18,000 base fee was founded on DNREC’s determination that Free-Flow is a “complex” source requiring 401-625 hours of services.

Free-Flow disputed the fee, and paid only $9,500, representing the $2,000 user fee and the $7,500 “routine” source base fee that it believes is appropriate. DNREC issued a Notice of Violation charging Free-Flow with violating a condition of its operating permit by failing to pay the full amount of the permit fee. Free-Flow appealed the Notice of Violation to the Environmental Appeals Board (“Board”). After a hearing, the Board upheld DNREC’s finding of a violation. On appeal, the Superior Court affirmed the Board’s decision. This appeal followed.

Discussion

The statute governing the base fee provides, in relevant part:

(d) The base fee relates to services that are common to all sources subject to the Program. These services include activities such as permit issuance and renewals; stationary source regulation development; ambient monitoring; emission inventory; control strategy development; and development, administration and implementation of 2 additional programs: the SBTCP and a portion of the accidental release prevention program. The Department will place each subject source into 1 of the following 4 categories, either as a voluntarily requested synthetic minor or as determined from estimated hours spent performing services:
(1) Synthetic minor: $3,000;
(2) Routine, up to 400 hours spent: $7,500;
(3) Complex, from 401 to 625 hours spent: $18,000; and
(4) Very complex, over 625 hours spent; $39,500.
Beginning January 1, 2000, the Department will track the actual hours spent processing Title V permits and performing other related services under the Title V Program. This information may be used in evaluation of the Title V Program associated with the expiration of this statute.... 3

Free-Flow contends that DNREC could not lawfully determine each source’s base fee category without adopting a regulation or other written guideline specifying its methodology. The company argues that, as in Butler v. Insurance Com’r;4 DNREC’s “discretionary powers must be accompanied by safeguards to protect against capricious or whimsical policy-making” and to assure that DNREC applied uniform standards to all sources. Since DNREC did not reduce its methodology to writing and did not adopt a regulation in compliance with the Administrative Procedures Act (APA),5 Free-Flow says that the base fee assessment must be invalidated.

The trial court concluded that Butler is inapposite, and we agree. In Butler, the Insurance Commissioner required a suspended insurance agent to complete three ethics courses as a condition to reinstatement. Although the Insurance Department had been imposing this course work requirement for several years, it was not “a written policy, law, rule, order or regulation ....”6 This Court held that, “where the Department cannot refer to a written regulation as policy adhered to uniformly throughout the Department, the Depart[1236]*1236ment cannot subject individual applicants to such a policy, especially when, as in this case, noncompliance is followed by the severe result of license revocation.”7

DNREC did not adopt any unwritten policy. The governing statute instructed DNREC to place each polluting source into one of four specified categories. That determination was to be made from DNREC’s estimation of the number of hours spent performing services, such as permit issuance, ambient monitoring, and emission inventory.8 In addition, the statute required DNREC to publish its results in the Delaware Register of Regulations.9 Thus, Free-Flow could read the statute to learn about the fee structure, and read the Register to learn how all similarly situated polluters were categorized. Given these legislative directions, Butler’s concern about whimsical policy-making is not an issue in this case.

Alternatively, Free-Flow argues that DNREC’s determination of sources’ base fee categories is a regulation that was not properly promulgated. The APA defines “agency action” as “either an agency’s regulation or case decision... ,”10 A case decision is “any agency ... determination that a named party ... is or is not in violation of a law or regulation, or is or is not in compliance with any existing requirement for obtaining a license or other right or benefit.”11 A regulation is “any statement of law, procedure, policy, right, requirement or prohibition formulated and promulgated by an agency as a rule or standard, or as a guide for the decision of cases thereafter....”12 Free-Flow contends that the process by which DNREC assigned polluting sources to one of the base fee categories was a regulation because: (i) it was a statement of procedure, formulated by an agency, to be used as a standard; and (ii) it had to be either a regulation or a case decision and it did not fit the definition of a case decision.

We disagree with the premise that all of what an agency does must culminate in a regulation or a case decision.

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861 A.2d 1233, 34 Envtl. L. Rep. (Envtl. Law Inst.) 20, 2004 Del. LEXIS 507, Counsel Stack Legal Research, https://law.counselstack.com/opinion/free-flow-packaging-international-inc-v-secretary-of-the-department-of-del-2004.