GMOV v. Agency of Natural Resources

Decision Date27 August 1999
Docket NumberNo. 98-417.,98-417.
PartiesGASOLINE MARKETERS OF VERMONT, INC., et al. v. AGENCY OF NATURAL RESOURCES.
CourtVermont Supreme Court

R. Bradford Fawley, Robert A. Miller, and Timothy E. Copeland of Downs Rachlin & Martin, PLLC, Brattleboro, for Plaintiffs-Appellants.

William H. Sorrell, Attorney General, and Ron Shems, Leslie Jones and Elizabeth Lord, Assistant Attorneys General, Montpelier, for Defendants-Appellees.

Present: AMESTOY, C.J., MORSE, JOHNSON and SKOGLUND, JJ., and ZIMMERMAN, District Judge, Specially Assigned.

JOHNSON, J.

The question presented by this case is whether the Agency of Natural Resources (ANR) adequately considered the economic effect on small businesses when it promulgated regulations to control vapor emissions at gasoline pumps. Appellant Gasoline Marketers of Vermont, Inc. (GMOV) contends that the regulations are invalid under the Vermont Administrative Procedure Act (VAPA), 3 V.S.A. §§ 801-849, because ANR defined a "small business" as a business that sells less than 400,000 gallons of gas per year, rather than as a business with twenty or fewer full-time employees, the definition provided by VAPA. See 3 V.S.A. § 801(b)(12). We conclude that ANR's definition is better calibrated to assess the economic impact of the regulation at issue and that the agency has, therefore, demonstrated compliance with the statute. We affirm.

GMOV, a consortium of gasoline marketers, appeals from a decision in favor of ANR on cross-motions for summary judgment. The parties concede there are no contested issues of fact; therefore, the only question is whether ANR is entitled to judgment as a matter of law, which we review de novo. See Bacon v. Lascelles, 165 Vt. 214, 218, 678 A.2d 902, 905 (1996) (summary judgment appropriate where there are no disputed issues of material fact and movant is entitled to judgment as matter of law).

The regulations challenged in this case are known as "Stage II" regulations, which refers to a method of vapor recovery at a gasoline pump. Stage II regulations implement the requirements of the Clean Air Act, 42 U.S.C. §§ 7401-7671q, and the Northeast Ozone Transport Region, 42 U.S.C. § 7511c(a). Under 10 V.S.A. § 558, the Secretary of ANR has the authority to "establish such emission control requirements, by rule, as in [her] judgment may be necessary to prevent, abate, or control air pollution." The regulations require gasoline stations with a throughput of 400,000 gallons or more of gasoline per year to install vapor recovery systems on their pumps. Stations selling less than 400,000 gallons per year are exempt. The effect of the 400,000 gallon regulatory threshold is to exempt approximately 70% of gasoline stations state-wide while capturing over 70% of total gasoline station emissions.

The proposed Stage II regulations were published on January 19, 1996. A public hearing on the regulations was held on March 6, 1996, and public comments were accepted through May 6, 1996. The final rule, which was altered significantly from the original proposed rule, was filed with the Secretary of State on June 17, 1996. It provided, inter alia, that: (1) gasoline stations with a throughput of 400,000 gallons or less would be exempt from the regulation (increased from the 240,000 gallon regulatory threshold of the original proposed rule); (2) of the stations with throughput of 400,000 gallons or more, those with lower throughput would be permitted more time to comply with the regulations;1 (3) regulated stations would visually inspect the vapor recovery equipment once a week; (4) initial compliance would be retested at least every five years; and (5) station owners would verify the initial compliance and maintain records of any maintenance, repair or replacement of the system. The economic impact statement attached to the final rule estimated the costs of compliance based on throughput as well as a variety of other factors.

GMOV sought a declaratory judgment that the Stage II regulations promulgated by ANR were invalid because ANR had failed to consider the impact of the regulations on small businesses as required by 3 V.S.A. §§ 832a and 838(c)(2).2 In its order granting summary judgment to ANR, the trial court concluded that GMOV was seeking to impose a "hyper-technical" reading of the statute on ANR by emphasizing the definition of "small business" as a business with twenty or fewer full-time employees to the exclusion of other elements of the statutory scheme. The trial court pointed to the fact that; in assessing the impact on small businesses, the agency is only required to look to information readily available to it and that ANR may not significantly reduce the effectiveness of its regulations in order to accommodate small businesses. Furthermore, the trial court determined that the agency had adopted a number of measures specifically designed to ease the impact on small businesses, including the 400,000 gallon regulatory threshold, the phase-in compliance schedule, and minimal reporting and testing requirements. This appeal followed. On appeal, GMOV argues that ANR has failed to comply with VAPA because it did not make a sufficient demonstration of compliance with VAPA's requirement that an agency consider the impact of a regulation on small businesses. In particular, GMOV emphasizes that ANR did not employ the statutory definition of "small business" as a business employing twenty or fewer full-time employees. See 3 V.S.A. § 801(b)(12). GMOV contends, inter alia, that ANR failed to identify which gas stations were small businesses, determine how many gas stations were small businesses, calculate what volume of gas they sold, and analyze the cost of compliance for them. GMOV further alleges that the information necessary to complete this analysis was readily available to ANR. GMOV argues that "Defendant's presumption that throughput is an accurate indicator of the number of employees of a business is wrong."3

As an initial matter, we clarify the standard of review. While it is true that, absent a clear and convincing showing to the contrary, decisions made within the expertise of administrative agencies are presumed to be correct, valid, and reasonable, see In re Professional Nurses Serv., Inc., 164 Vt. 529, 532, 671 A.2d 1289, 1291 (1996), the requirements of VAPA are not within the substantive expertise of an agency, and therefore the question of whether an agency has complied with these requirements is not accorded similar deference. See In re Diel, 158 Vt. 549, 551, 614 A.2d 1223, 1225 (1992).

Under Vermont law, ANR was obligated to consider the impact of its regulation on small businesses. 3 V.S.A. § 832a(a)-(b) provides:

(a) Where a rule provides for the regulation of a small business, an agency shall consider ways by which a small business can reduce the cost and burden of compliance by specifying less numerous, detailed or frequent reporting requirements, or alternative methods of compliance.
(b) An agency shall also consider creative, innovative, or flexible methods of compliance with the rule when the agency finds, in writing, such action would not:
(1) significantly reduce the effectiveness of the rule in achieving the objectives or purposes of the statutes being implemented or interpreted; or
(2) be inconsistent with the language or purpose of statutes that are implemented or interpreted by the rule; or
(3) increase the risk to the health, safety, or welfare of the public or to the beneficiaries of the regulation, or compromise the environmental standards of the state.

Section 838(a)(2) requires that an agency filing a proposed rule include an economic impact statement, while § 838(c) provides that the economic impact statement analyze the anticipated costs and benefits to be expected from adoption of the rule, and include a flexibility statement that "compare[s] the burden on small businesses by compliance with the rule to the burden which would be imposed by alternatives considered under section 832a of this title." Additionally, "[o]nly employees of the agency and information either already available to the agency or available at reasonable cost shall be used in preparing economic impact statements."

Thus, § 838(c) obligates ANR to consider the impact of a regulation on small businesses, and to consider either less burdensome reporting requirements or alternative methods of compliance. Under § 832a(b), ANR should consider flexible compliance for small businesses only when it concludes that such an approach will not significantly reduce the effectiveness of the regulation, contradict the regulatory goals, or increase health or safety risks. The statute does not in any way prevent ANR from ultimately deciding to impose the same regulatory requirements on small businesses as on all other regulated businesses if it concludes that imposing different regulatory requirements would compromise the efficacy of the regulation. The only obligation is to consider...

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