The North Carolina Supreme Court upheld Friday a lower court’s decision favoring the North Carolina Farm Bureau in a legal battle with state environmental regulators.
The high court split, 5-2, in determining that three provisions in the state’s general animal-waste permits should have been subjected to the state’s rulemaking process.
“With certain exceptions, the North Carolina Administrative Procedure Act (APA) mandates that administrative agencies provide the public with notice and an opportunity to comment on proposed rules,” Justice Trey Allen wrote for the court’s majority. “The APA’s rulemaking process is not a pointless bureaucratic exercise. It represents an important check on the regulatory power of administrative agencies. The public notice and comment requirements of the APA discourage the arbitrary use of regulatory power by exposing agency rulemaking to public scrutiny.”
“In this case, the question is whether the North Carolina Department of Environmental Quality (DEQ) unlawfully circumvented the APA by adding three conditions to its general permits for animal waste management systems without formally adopting those conditions through the APA’s rulemaking process,” Allen added.
The court’s Republican justices agreed “that the conditions qualify as ‘rules’ and that substantial compliance with the APA’s rulemaking requirements was necessary before the DEQ imposed the conditions on farmers,” the majority opinion explained.
Justice Anita Earls wrote for the court’s two dissenting Democrats.
“Fundamentally, the Farm Bureau asked this Court to expand what qualifies as a ‘rule’ under the Administrative Procedure Act (APA), so that rulemaking would be required whenever an agency ‘control[s]’ how farmers do business,” Earls wrote. “It argued that the proper way to interpret the APA is to look to dictionary definitions of technical words — in its view, all agency actions that could conceivably fit those broad definitions require notice-and-comment rulemaking.”
“This is not how administrative law works,” she added. “But the majority accepts the Farm Bureau’s unsound reasoning. It uses ordinary dictionaries to define the APA’s technical terms and sets out to classify agency actions using those broad definitions, seemingly irrespective of what the legislature instructed the agency to do or the actual form the agency action takes.”
“It does not explain what distinguishes the three challenged conditions from any of the other eighty-some conditions in the general permit — nor does it explain why the conditions in this general permit are different from the twenty-something other general industrial permits which apply ‘most’ of the time,” Earls warned. “The majority opinion seems to cast entire permitting regimes designed to protect public health into uncertainty.”
The Supreme Court head oral arguments in April in the case NC Department of Environmental Quality v. NC Farm Bureau Federation.
The Farm Bureau challenged conditions DEQ added in 2019 to permits used by 2,000 farms across North Carolina. Each affected hog, cattle, and poultry farm uses a “lagoon-and-spray-field system” to address animal waste. The three disputed permit conditions involved groundwater monitoring, phosphorus loss assessment tool analysis, and the filing of annual reports.
A unanimous state Court of Appeals panel ruled in favor of the Farm Bureau in November 2023.
“This was error,” argued state Assistant Attorney General Taylor Crabtree, representing the environmental regulators. “For at least 20 years, the General Assembly has known that these permits were being issued as permits — not adopted as rules. And despite interacting with the program on multiple occasions and directly intervening to refine the division’s process for issuing these permits, it has never required that these permits be adopted as rules.”
The Farm Bureau countered that state regulators with DEQ’s Division of Water Resources inserted the challenged provisions into animal waste permits without following the proper procedure. North Carolina’s APA dictates the rulemaking process.
“This case presents this court with an opportunity to make clear that the division cannot operate outside of the APA’s uniform system of rulemaking unless an exception applies,” argued Jake Parker, the Farm Bureau’s secretary and general counsel.
Justice Richard Dietz questioned DEQ’s approach to the dispute. “If the permits themselves, when we look at them, … are providing a general rule that’s going to apply to everyone unless the agency gives someone an exception, that sounds like rulemaking,” he said.
“The ability for the agency to … just in its discretion decide what other criteria it wants to stick on a permit is allowing it to start regulating without any oversight from the General Assembly,” Dietz added.
Earls questioned whether this case could have an impact on other state government agency permits.
“DEQ administers 21 different general industrial permits,” Earls said. “If we were to say that the conditions for the permitting process here have to go through rulemaking, does that mean that for every kind of industrial permit that has conditions, those would also have to go through rulemaking? And would this extend beyond DEQ to all of the state government operations?”
“It would place the activities that are authorized currently under those general permits in some doubt,” Crabtree responded. “So it would really work a great deal of uncertainty into the system.”
“I’m struggling to find limiting principles for all this,” Allen said.
“It’s difficult for me to believe that the General Assembly’s intent in enacting the permitting process was to enable the department to essentially avoid having to engage in rulemaking,” Allen added.
“I agree with you, your honor, that that’s not what the General Assembly intended,” Parker responded.
Parker also downplayed the potential impact on other state government permits. “I don’t think it’s going to blow up the permitting system or anything to that extent,” he said. “I do think it puts an extra check in the process for the agency.”
“Farm Bureau engages in the rulemaking process all the time,” Parker added. “It does take time, but again, it’s a process by which everybody gets heard. The rules are out in front where everybody can see them. … That’s the balance the APA reached.”
An administrative law judge initially agreed with the Farm Bureau in the dispute, but a Superior Court judge reversed that decision. Then a three-judge Appeals Court panel overturned the trial court’s ruling in 2023.
Appellate judges agreed with the Farm Bureau that the three challenged conditions should have been treated as state rules.
Each challenged condition had been tied to a settlement agreement DEQ reached with the North Carolina Environmental Justice Network and other groups after a federal civil rights complaint.
“[T]he General Permit conditions are regulations under the NCAPA because they are ‘authoritative rule[s] dealing with details’ of animal-waste management systems,” Judge Jeff Carpenter wrote for the unanimous Appeals Court panel.
“The challenged conditions are invalid until they are adopted through the rulemaking process,” Carpenter concluded.
A split 2-1 Court of Appeals panel issued an order in October 2022 blocking the rules from taking effect.
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