Consolidated Papers v. Department of Natural Resources

• Decision Date: 24 July 1986
• Parties: NOTICE: UNPUBLISHED OPINION. RULE 809.23(3), RULES OF CIVIL PROCEDURE, PROVIDE THAT UNPUBLISHED OPINIONS ARE OF NO PRECEDENTIAL VALUE AND MAY NOT BE CITED EXCEPT IN LIMITED INSTANCES. CONSOLIDATED PAPERS, INC., Petitioner-Appellant, v. STATE OF WISCONSIN, DEPARTMENT OF NATURAL RESOURCES, Respondent. 84-1527.
• Court: Wisconsin Court of Appeals

Page 847

392 N.W.2d 847

132 Wis.2d 477

NOTICE: UNPUBLISHED OPINION. RULE 809.23(3), RULES OF CIVIL PROCEDURE, PROVIDE THAT UNPUBLISHED OPINIONS ARE OF NO PRECEDENTIAL VALUE AND MAY NOT BE CITED EXCEPT IN LIMITED INSTANCES.

CONSOLIDATED PAPERS, INC., Petitioner-Appellant, v. STATE OF WISCONSIN, DEPARTMENT OF NATURAL RESOURCES, Respondent.

84-1527.

Court of Appeals of Wisconsin.

July 24, 1986.

Circuit Court, Wood County

Affirmed

Appeal from an order of the circuit court for Wood county: Fred A. Fink, Judge.

Before GARTZKE, P.J., DYKMAN, J., and EICH, J.

PER CURIAM.

Consolidated Papers, Inc., requested the Department of Natural Resources to credit and bank air pollution emission reductions for Consolidated's closing of a manufacturing plant. The DNR refused to do so. Consolidated appealed that decision to the circuit court for Wood county. The circuit court affirmed the department's order. Consolidated appealed that order to the court of appeals.

The judges of the Court of Appeals, District IV, are deadlocked. Their separate opinions are attached. Gartzke, P.J., would reverse and direct the circuit court to remand the matter to the department to vacate its decision, with no further instructions. Dykman, J., would reverse and direct the circuit court to order the department to grant Consolidated's request. Eich, J., would affirm. Because a majority cannot agree upon a disposition of the appeal, the order of the trial court must be affirmed. Compare State v. Gustafson, 121 Wis.2d 459, 359 N.W.2d 920 (1985) (conviction affirmed because majority failed to agree on common ground for reversal).

By the Court.--Order affirmed. No costs to either party.

Inclusion in the official reports is not recommended.

SEPARATE OPINION OF GARTZKE, P.J.

GARTZKE, Presiding Judge.

Consolidated Papers, Inc., appeals from an order by the circuit court for Wood county affirming Department of Natural Resources' refusal to credit and bank air pollutant emission reductions for Consolidated's closing of a manufacturing plant. Consolidated argues that DNR's refusal is contrary to an agency rule or policy and therefore arbitrary and capricious or is an irrational departure from prior agency practice. Amici curiae argue that DNR's refusal is a part of an emission reduction credit program which DNR has not but should have promulgated by a ch. 227, Stats., rulemaking procedure. ¹

I agree with the latter contention. I conclude that DNR engaged in improper rulemaking when it reversed an ad hoc practice of banking emission reductions in certain attainment areas. I would reverse the order and remand to the trial court with directions to remand to DNR to vacate its decision, with no further instructions to DNR.

I. FACTUAL BACKGROUND

Consolidated operated a pulp manufacturing plant in Outagamie county. The parties agree that Outagamie county is an attainment area. Under the federal Clean Air Act, 42 U.S.C. sec. 7401 et seq., an 'attainment area' is an area which has air quality better than that required by national standards or which cannot be classified. ² 42 U.S.C. secs. 7471 and 7407(d)(1)(D) and (E). Operations at Consolidated's plant emitted several air pollutants. In 1982 Consolidated closed the plant and emissions ceased. Consolidated requested DNR to credit and bank the emission reductions for Consolidated's future use in offsetting other emissions or sale to other plants for their use. Consolidated asked to bank 3,866.57 tons per year of sulfur dioxide reductions, 66.88 tons per year of hydrocarbon reductions, 80.92 tons per year of carbon monoxide reductions and 97.72 tons per year of nitrogen oxide reductions. Before Consolidated's request, DNR had granted at least nine requests by other companies to credit and bank emission reductions obtained in attainment areas.

Notwithstanding its previous grants, DNR denied Consolidated's request. DNR stated in its denial letter of November 8, 1983 that it traditionally granted credits to allow for industrial expansion in nonattainment areas. ³ It said that the size of Consolidated's request prompted DNR's first examination of the implications of emission reduction credits in attainment areas. DNR concluded that Consolidated could not use banked reduction credits even if they were granted, and that DNR should not grant emission reduction credits in attainment areas for the purpose of reserving a portion of the available air resource.

Consolidated sought judicial review of DNR's decision pursuant to secs. 227.15 and 227.16, Stats. ⁴ The circuit court affirmed DNR's action, and Consolidated appeals.

Our review of DNR's action is identical to that of the trial court and is de novo. City of La Crosse v. DNR, 120 Wis.2d 168, 179, 353 N.W.2d 68, 73 (Ct.App. 1984). We need not defer to the trial court's resolution of the issues.

II. REGULATORY BACKGROUND

A. Absence of 'Banking' Regulations

Emission reduction credits, emission credit banking and emission credit trading are concepts the federal Environmental Protection Agency has developed in air pollution policy statements implementing the Clean Air Act. 47 Fed. Reg. 15076 (1982); 48 Fed. Reg. 39580 (1983). These concepts provide incentives for industry to curtail air pollution. Broadly speaking, an industrial plant that reduces pollutant emissions may be able to 'bank' credits resulting from those reductions for use against future pollution by it or by another plant to which it sells the credits. A banking procedure has not, however, been created by federal statute or regulation.

Wisconsin has its own clean air law, ch. 144, subch. III, Stats., entitled 'Air Pollution,' which includes an 'emission reduction option.' Sec. 144.30(12). Under this option, arrangements for emission reductions, tradeoffs, credits or offsets may be implemented by rule of the Department of Natural Resources. Secs. 144.30(12)(c) and 144.373(2). No published DNR rule has been called to our attention, however, concerning 'crediting' and 'banking' of air pollutant emission reductions in attainment areas, even though EPA has 'authorized states to establish banking rules.' ⁵ 47 Fed. Reg. at 15077 col. 1 (1982).

So far as is material to this case, crediting and banking of attainment area emission reductions remains at the federal policy statement level.

B. EPA Policy Statement

EPA is authorized to prescribe regulations and policies to carry out its functions under the Clean Air Act. 42 U.S.C. sec. 7601(a). In 1982 EPA published its policy statement on emissions trading for meeting the goals of the act more quickly and inexpensively. 47 Fed. Reg. 15076 (1982). Consolidated treats the policy statement as authority for the use of emission reduction credits in attainment areas and as authority for banking such credits. ⁶ Consolidated asserts that DNR acted inconsistently with EPA's 'regulations' governing the emission reduction program. It discusses the 'rules' contained in EPA's policy statement.

Consolidated overstates the impact of EPA's 1982 policy statement. While the distinction between a federal administrative regulation and a policy statement 'is enshrouded in considerable smog,' Noel v. Chapman, 508 F.2d 1023, 1029-30 (2d Cir. 1975), a policy statement published by a federal agency is not a regulation. Ryder Trucking, Inc. v. United States, 716 F.2d 1369, 1377 (11th Cir. 1983). Unlike a regulation, a policy statement does not establish a binding norm. Pacific Gas & Electric Co. v. FPC, 506 F.2d 33, 38 (D.C. Cir. 1974). 'The agency cannot apply or rely upon a general statement of policy as law because a general statement of policy only announces what the agency seeks to establish as policy. A policy statement announces the agency's tentative intentions for the future.' Pacific Gas & Electric, 506 F.2d at 38. A policy statement leaves the agency free to exercise its discretion. American Bus Ass'n v. United States, 627 F.2d 525, 529 (D.C. Cir. 1980).

Moreover, whatever the weight that must be given to a federal policy statement, EPA's 1982 statement is only 'proposed.' 47 Fed. Reg. at 15076 col. 1. EPA issued its policy statement as a proposal because 'emissions trading, particularly banking, raise issues which have not yet been subject to public comment.' Id. at 15077 col. 2. In 1983 EPA requested additional public comment on its proposal. 48 Fed. Reg. 39580 (1983). A final statement was scheduled for December 1983, 48 Fed. Reg. 47864, 47924 (1983), but was not released because disagreement persisted within EPA on emissions trading. 16 Environmental Review (BNA) 863 (Sept. 13, 1985). EPA missed another release date in February 1986, and recently set an August 1986 release date. 50 Fed. Reg. 44644, 44706 (1985); 51 Fed. Reg. 14526, 14589 (1986). ⁷

Consequently, no procedure exists for emission reduction credit banking in Wisconsin, whether by state statute or formally adopted administrative rule or by virtue a federal statute or formally adopted administrative rule or final policy statement.

III. DE FACTO DNR RULE AND PAST PRACTICE

Consolidated argues that DNR's past practice of crediting emission reductions to companies which have reduced or eliminated pollution emissions has resulted in a de facto rule or an official policy on the banking and use of emission reductions. Consolidated therefore insists that DNR's decision be reversed. Even if no de facto rule or official DNR policy exists, Consolidated argues that the DNR's decision irrationally departs from prior agency practice and that the decision therefore must be reversed by virtue of sec. 227.20(8), Stats., which provides:

[t]he court shall reverse or remand the case to the agency if it finds that the agency's exercise of discretion . . . is inconsistent with an agency rule, an officially stated agency policy or a prior agency practice, if deviation therefrom is not explained to the satisfaction of the court by the agency . . ..

Amici curiae argue that the DNR's decision to discontinue reserving...