United States Steel Corporation, Relator v. Minnesota Pollution Control Agency

• Court: Court of Appeals of Minnesota
• Decided: July 27, 2015
• Docket: A14-1789
• Status: Unpublished

Opinion

This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2014).

STATE OF MINNESOTA IN COURT OF APPEALS A14-1789

United States Steel Corporation, Relator,

vs.

Minnesota Pollution Control Agency, Respondent.

Filed July 27, 2015 Reversed and remanded Stauber, Judge

Minnesota Pollution Control Agency

Peder A. Larson, Connor T. McNellis, Larkin Hoffman Daly & Lindgren, Ltd., Minneapolis, Minnesota (for relator)

Lori Swanson, Attorney General, Adam Kujawa, Assistant Attorney General, St. Paul, Minnesota (for respondent)

Considered and decided by Bjorkman, Presiding Judge; Schellhas, Judge; and

Stauber, Judge.

UNPUBLISHED OPINION

STAUBER, Judge

In this certiorari appeal, relator United States Steel Corporation (U.S. Steel) seeks

review of an amended air-emissions permit issued by respondent Minnesota Pollution

Control Agency (MPCA), arguing that certain conditions included in the permit

constitute an invalid unpromulgated rule. We agree and, therefore, reverse and remand. FACTS

In 2009, U.S. Steel applied to the MPCA for an air-emissions permit to increase

capacity at its Keetac iron-ore mine and taconite-processing facility in Keewatin,

Minnesota. Because the Keetac facility was shut down for more than a year, the permit

was not issued until December 6, 2011. Construction under the permit had to commence

within 18 months, but it was delayed for various reasons until the 2011 permit was no

longer valid.

U.S. Steel applied for amendments to the 2011 permit in May 2012 and March

2013 to reflect the changed construction schedule and to request separate air-emissions

limits for pre-expansion and post-expansion operations because the 2011 permit set air-

emissions limits based on the assumption that the expanded facility was fully operational.

The MPCA issued an amended air-emissions permit on September 17, 2014 (the 2014

permit), which included new air-emissions-dispersion remodeling requirements. These

requirements reflected new standards that the MPCA was developing to create a less

restrictive means of monitoring whether minor modifications made at regulated facilities

would result in “equivalent or better dispersion (EBD)” of emissions.

The MPCA is responsible for enforcing the federal Clean Air Act, 42 U.S.C.

§ 7401 et seq. (2012), under rules enacted by the federal Environmental Protection

Agency (EPA), which govern state air-emission permit programs. See 40 C.F.R. §§ 70.1-

.12 (2014). Each state has “primary responsibility for assuring air quality” within its

borders by implementing an air-emission plan. 42 U.S.C. §§ 7407(a), 7410. The MPCA

2 has done this through its air-quality rules, which are found at Minn. R. 7007.0050-.5000

(2013).

These rules govern “the issuance of permits to construct, modify, reconstruct, or

operate” and “the revocation, reissuance, or amendment” of permits for any facilities that

emit air pollutants. Minn. R. 7007.0050. The types of notice and other requirements for

amended permits vary: for most “insignificant modifications,” no permit amendment is

necessary; for certain minor modifications, a party can apply for an “administrative

amendment”; for minor and moderate permit amendments, there are more stringent notice

requirements; and finally, for “major permit amendments,” which include any significant

change, a party must comply with the same permitting process as a new application.

Minn. R. 7007.1150-.1500. The rules governing amendment of permits are detailed and

were enacted pursuant to the MPCA’s rulemaking authority. See Minn. Stat. § 116.07,

subd. 4 (2014).

The MPCA is also responsible for administering the “Prevention of Significant

Deterioration” (PSD) rules. Minn. R. 7007.3000. The PSD rules are intended to prevent

significant deterioration in air quality by ensuring that regulated facilities do not evade

the spirit of the law by increasing emissions to a point just below the maximum levels set

forth in the Clean Air Act. If a regulated party makes a significant modification in a

stationary source or changes a method of operation that results in increased emissions, the

regulated party must apply for an amended permit. 40 C.F.R. § 52.21(b)(2) (2014).

Under the federal rules, the MPCA determines what type of ambient monitoring a

permittee must perform to demonstrate the effect that a modification has on air emissions.

3 40 C.F.R. § 52.21(m)(2) (2014). The MPCA requires a permittee to perform “modeling”

or “remodeling” to show the modification results in equivalent or better dispersion of

emissions.

In the years preceding U.S. Steel’s 2014 amended permit, the MPCA developed a

new policy for remodeling requirements. The MPCA created a tiered system based on

how close a facility was to the permissible-emissions limits at the time of its previous

modeling. A facility where emissions were not close to the limits was placed in tier one;

a facility that was very close to the limits was placed in tier four. The modeling or

remodeling requirements varied by the tier to which a facility was assigned. After

issuing some preliminary materials to explain the policy to the regulated community, the

MPCA issued a written guidance to air-dispersion modeling using the new EBD

standards in 2014. These standards were intended to “protect ambient standards while

simultaneously avoiding full refined modeling for minor changes at a facility.”

The new EBD standards were incorporated into U.S. Steel’s September 17, 2014

amended permit. The 2014 permit stated separate requirements for pre- and post-

expansion conditions; the MPCA based these on air-dispersion modeling that U.S. Steel

had done during the application process. These models showed that the Keetac plant was

close to maximum emissions in some areas and therefore the amended permit included

remodeling conditions. Before the final permit was issued on September 17, 2014, the

MPCA amended the permit after U.S. Steel objected so that a decrease in emissions

would not trigger remodeling, but the amended permit still used the EBD standards to

determine what type of modeling was required.

4 U.S. Steel filed a certiorari appeal under Minn. Stat. § 115.05, subd. 11 (2014),

contesting the amended permit’s new remodeling requirements. U.S. Steel objects to the

EBD standards and tier method as unlawful rulemaking. The MPCA argues that the

“tiered re-modeling approach is implemented through permit conditions and is not a

rule.”

DECISION

Under the Minnesota Administrative Procedures Act (MAPA), Minn. Stat.

§§ 14.001-.69 (2014), we may affirm, remand, reverse, or modify an agency decision if a

party’s substantial rights have been prejudiced because the agency decision was made in

excess of the agency’s statutory authority or upon unlawful procedure, affected by an

error of law, unsupported by substantial evidence, or arbitrary or capricious. Minn. Stat.

§ 14.69. Agency decisions are presumed to be correct; the party seeking review of an

agency decision has the burden of establishing that the decision violates provisions of

section 14.69. In re Molnar, 720 N.W.2d 604, 610 (Minn. App. 2006). An agency

decision must be supported by substantial evidence, but courts generally defer to an

agency’s expertise and special knowledge. Reserve Mining Co. v. Herbst, 256 N.W.2d

808, 824-25 (Minn. 1977).

U.S. Steel argues that the MPCA acted upon unlawful procedure by implementing

the EBD procedures as an unpromulgated rule. Under Minnesota law, a “rule” is “every

agency statement of general applicability and future effect, including amendments,

suspensions, and repeals of rules, adopted to implement or make specific the law

enforced or administered by that agency or to govern its organization or procedure.”

5 Minn. Stat. § 14.02, subd. 4 (2014). This is an “expansive definition.” In re PERA, 820

N.W.2d 563, 570 (Minn. App. 2012). Thus, if an agency statement (1) has general

applicability; (2) has future effect; and (3) is intended to interpret or create law, policy, or

procedure, it is a rule. 21 William J. Keppel, Minnesota Practice § 5.01 (2nd ed. 2007).

“Where important questions of social and political policy are involved, the rulemaking

process must be followed. . . . If the legislature has placed the issue in the hands of an

administrative official that official’s decision ought to be based on a careful expression of

all interested viewpoints.” In re Application of Crown CoCo, Inc., 458 N.W.2d 132, 138

(Minn. App. 1990) (quotation and citations omitted), review withdrawn (Minn. Sept .14,

1990).

Administrative rules can be either legislative or interpretive. In re PERA, 820

N.W.2d at 570. Legislative rules are statements of substantive law made pursuant to

authority delegated to an agency; interpretive rules interpret or make specific the law

administered by the agency. Id. Under Minnesota law, an agency is required to follow

formal rulemaking procedures when enunciating either type of rule, subject to certain

exceptions. Id. An agency may develop a policy through contested case proceedings, for

example; adjudicated case decisions “generally provide a guide to action that the agency

may be expected to take in future cases.” Eagle Lake of Becker Cnty. Lake Ass’n v.

Becker Cnty. Bd. of Comm’rs, 738 N.W.2d 788, 794 (Minn. App. 2007). But

“[i]mportant questions of social or political policy are more appropriately promulgated as

rules, while the application of specific facts to specific parties is more appropriate within

an adjudicatory-type setting.” In re Investigation into Intra-LATA Equal Access &

6 Presubscription, 532 N.W.2d 583, 590 (Minn. App. 1995), review denied (Minn. Aug.

30, 1995). Failure to follow statutory procedures for rulemaking “‘results in invalidity of

the rule.’” Coalition of Greater Minn. Cities v. Minn. Pollution Control Agency, 765

N.W.2d 159, 168 (Minn. App. 2009) (quoting White Bear Lake Care Ctr., Inc. v. Minn.

Dep’t of Pub. Welfare, 319 N.W.2d 7, 9 (Minn. 1982)), review denied (Minn. Aug. 11,

2009). But “[a]n unpromulgated interpretive rule is still valid if the agency’s

interpretation of a statute corresponds with its plain meaning, or if the statute is

ambiguous and the agency interpretation is a longstanding one.” Minn. Transitions

Charter Sch. v. Comm’r of Minn. Dep’t of Educ., 844 N.W.2d 223, 233 (Minn. App.

2014) (quotations omitted), review denied (Minn. May 28, 2014). The label given a

policy by an agency does not control whether it is a rule: “[r]ules are sometimes referred

to as regulations, standards, directives, codes, and policies. They may also reflect the

contents of manuals, bulletins, guidance documents, [and] even press releases.” 21

Minnesota Practice § 5.01.

The MPCA argues that its tiered EBD policy is not a rule in application because

“the [policy] is too closely imbedded in the particular facts to be stated in a general rule”

and is “so specialized and varying in nature as to be impossible to capture within the

boundaries of a general rule.” See Intra-LATA, 532 N.W.2d at 590 (quotation omitted).

The MPCA asserts that its “permitting staff decides the appropriate re-modeling language

for a particular permit on a case-by-case basis, based on particular facts (i.e. prior

modeling results).” Because of this, the MPCA contends that it has established a policy,

rather than a rule; in doing so, it relies on Minn. Chamber of Commerce v. Minn.

7 Pollution Control Agency, 469 N.W.2d 100, 105 (Minn. App. 1991), review denied

(Minn. July 24, 1991), in which this court held that site-specific standards applied on a

case-by-case basis did not create rules because they are “not an agency statement of

general applicability and future effect.” Id.

The MPCA’s use of its tiered approach to determine when a permit applicant must

engage in remodeling differs from the factual situation in Minn. Chamber of Commerce.

Although the EBD criteria are applied to the factual circumstances of each applicant, the

MPCA’s explanations of the policy set forth “statement[s] of general applicability and

future effect.” Each applicant for an air-emissions permit will receive a unique permit

with requirements tailored to where their emissions fall in the EBD tiered scales, but

these standards will apply generally to all applicants as certain criteria are met.

The MPCA must ensure that changes to a facility do not result in noncompliance

with air emissions standards. See Minn. R. 7007.800; .1000 (setting forth agency duties

to ensure compliance through permitting standards). This policy does not specify the

exact manner in which the MPCA must act in order to ensure compliance. In this sense,

the EBD policy could be an interpretation of the plain meaning of a statute, which would

not be a rule. See Elim Homes, Inc. v. Minn. Dep’t of Human Servs., 575 N.W.2d 845,

848 (Minn. App. 1998) (stating that “lack of a definition . . . does not lead to an

undeniable conclusion that the commissioner improperly promulgated a rule by

interpreting the statute and finding a workable solution within the language he was given

. . . [in light of] his expertise and knowledge”). And in Minnesota Chamber of

Commerce, this court determined that, as long as the standards are applied on a site-

8 specific, case-by-case basis, an agency has not made an unpromulgated rule. 469 N.W.2d

at 105. But Elim Homes involved a fairly simple interpretation of the phrase “total

operating costs” as it applied in a comparison of nursing and non-nursing facilities. 575

N.W.2d at 848. And in Minn. Chamber of Commerce, the MPCA held hearings at

several locations around the state and responded to public comments before establishing

“methodology for deriving site-by-site criteria to determine water quality standards for

toxic substances not assigned numerical standards” that did not have general applicability

or future effect. 469 N.W.2d at 102, 105.

The various statements made by the MPCA regarding the EBD policy suggest that

it is generally applicable in the future to permit applicants meeting certain criteria and

that the EBD approach is meant to create a policy “to offer a more flexible means of

demonstrating ongoing compliance with the applicable” national air quality standards.

Although U.S. Steel’s 2014 permit applies the EBD standards to U.S. Steel according to

its history and circumstances, the standards nevertheless create a framework that is

generally applicable in the future to all members of the regulated community.

MAPA rulemaking procedures were enacted for the purpose of “ensur[ing] that we

have a government of law and not of men. . . . [A]dministrative officials are not permitted

to act on mere whim, nor their own impulse, however well-intention[ed] they might be,

but must follow due process in their official acts and in the promulgation of rules

defining their operations.” In re Appeal of Jongquist, 460 N.W.2d 915, 917 (Minn. App.

1990) (quotation omitted). Rulemaking guidelines ensure that those affected by a rule

have notice and the ability to comment so that an agency can understand all the important

9 implications of a rule. See Coalition of Greater Minn. Cities, 765 N.W.2d at 168 (“The

purpose of the [rulemaking] hearing is to ensure that the agency does not deprive the

public of fair notice of the agency’s intentions”); see also Intra-LATA, 532 N.W.2d at

590 (suggesting that an agency may forego formal rulemaking if the “notice and

comment procedure alone will be inadequate to permit the agency to understand all the

important implications of a rule”).1

The MPCA’s broad policy statements explain that the EBD standards would apply

to all permit applicants who met certain criteria and that the approach is an attempt “to

protect ambient standards while simultaneously avoiding full remodeling for minor

changes at a facility” and “to reduce the administrative review and response time of the

MPCA remodeling review for projects with minor dispersion changes.” We conclude

that the EBD tiered language is an unpromulgated rule: an “agency statement of general

applicability and future effect” that is intended “to implement or make specific the law

enforced or administered by that agency.” Minn. Stat. § 14.02, subd. 4. We therefore

reverse and remand this matter to the MPCA to issue a permit without the tiered

language: “the failure to comply with necessary procedures results in the invalidity of the

rule.” White Bear Lake Care Ctr., Inc., 319 N.W.2d at 9. U.S. Steel’s objections to the

2014 permit must be sustained on this basis.

Reversed and remanded.

1 Here, for example, the MPCA issued revisions to U.S. Steel regarding whether the EBD policy applied to modifications that reduced omissions; formal rulemaking procedures would have led to clarification of this issue before the policy was implemented. This suggests that a broader airing of the policy through formal rulemaking would ultimately be helpful.