Public Service Elec. and Gas Co. v. New Jersey Dept. of Environmental Protection

• Court: United States State Supreme Court (New Jersey)
• Writing for the Court: O'HERN
• Citation: 101 N.J. 95,501 A.2d 125
• Parties: , 23 ERC 1677 PUBLIC SERVICE ELECTRIC AND GAS COMPANY, a Corporation of the State of New Jersey, Jersey Central Power & Light Company, a Corporation of the State of New Jersey, and Atlantic City Electric Company, a Corporation of the State of New Jersey, Appellants and Cross-Respondents, v. The NEW JERSEY DEPARTMENT OF ENVIRONMENTAL PROTECTION and the State of New Jersey, Respondents and Cross-Appellants. ROLLINS ENVIRONMENTAL SERVICES (N.J.), INC., Respondent, v. The NEW JERSEY DEPARTMENT OF ENVIRONMENTAL PROTECTION, Appellant. MAGNESIUM ELEKTRON, INC., a New Jersey Corporation, Respondent, v. The NEW JERSEY DEPARTMENT OF ENVIRONMENTAL PROTECTION and the State of New Jersey, Appellants.
• Decision Date: 25 November 1985

Page 95

101 N.J. 95 501 A.2d 125, 23 ERC 1677 PUBLIC SERVICE ELECTRIC AND GAS COMPANY, a Corporation of
the State of New Jersey, Jersey Central Power & Light
Company, a Corporation of the State of New Jersey, and
Atlantic City Electric Company, a Corporation of the State
of New Jersey, Appellants and Cross-Respondents,
v.
The NEW JERSEY DEPARTMENT OF ENVIRONMENTAL PROTECTION and
the State of New Jersey, Respondents and Cross-Appellants.
ROLLINS ENVIRONMENTAL SERVICES (N.J.), INC., Respondent,
v.
The NEW JERSEY DEPARTMENT OF ENVIRONMENTAL PROTECTION, Appellant.
MAGNESIUM ELEKTRON, INC., a New Jersey Corporation, Respondent,
v.
The NEW JERSEY DEPARTMENT OF ENVIRONMENTAL PROTECTION and
the State of New Jersey, Appellants. Supreme Court of New Jersey. Argued Sept. 9, 1985.
Decided Nov. 25, 1985.

[501 A.2d 126]

Page 97

Roger M. Nelson, Newark, and Scott M. DuBoff, Washington, D.C., a member of the District of Columbia bar, for appellants and cross-respondents (Roger M. Nelson, Newark, attorney; Scott M. DeBoff, Washington, D.C., Robert O. Brokaw, Morristown, Carl L. Sulzberger, Newark, and James E. Franklin, Pleasantville, of counsel).

Paul H. Schneider, Deputy Atty. Gen., for respondents and cross-appellants (Irwin I. Kimmelman, Atty. Gen., attorney; James J. Ciancia, Asst. Atty. Gen., and Deborah T. Poritz, Deputy Atty. Gen., of counsel).

Alvin E. Granite, Woodbury Heights, for respondent Rollins Environmental Services (NJ), Inc. (Granite & Heim, Woodbury Heights, attorneys; Alvin E. Granite and Craig H. Klayman, Woodbury Heights, of counsel and on the brief).

Richard M. Conley, Flemington, argued the cause for respondent Magnesium Elektron, Inc., etc. (Schaff, Mahon, Motiuk, Gladstone & Conley, Flemington, attorneys; Richard M. Conley and I. Leo Motiuk, Flemington, of counsel; I. Leo Motiuk, Flemington, on the brief).

The opinion of the Court was delivered by

O'HERN, J.

The central issue in this appeal is whether the Department of Environmental Protection has correctly established permit fees for dischargers of heated effluent into the State's waterways. The statutory scheme prescribes that such permit fees "shall be based upon * * * the estimated cost of processing, monitoring and administering the * * * permits." N.J.S.A. 58:10A-9. In deciding that issue we must determine whether the agency has fairly allocated its costs among all categories of permit holders and whether within the category of thermal dischargers it may base the individual permit costs on the volume of the heated effluent discharged. We also address the issue of whether the Appellate Division's partial invalidation of the permit fees charged to industrial dischargers should be prospective.

We hold that (1) the volume-based fees for thermal dischargers are within the general authority granted to the Department [501 A.2d 127] by the Legislature, and (2) the decision with respect to industrial dischargers should be applied retroactively only to the parties who are before the Court challenging the fee schedule.

I

The Federal Water Pollution Control Act Amendments of 1972 (Clean Water Act), 33 U.S.C.A. §§ 1251 to 1376 (1978),

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established a comprehensive new program to clean up the nation's waters. ¹ Key to the act is the National Pollutant Discharge Elimination System (NPDES), which makes it illegal for anyone to discharge pollution into the nation's waters without a permit. 33 U.S.C.A. §§ 1311, 1342. In the interests of federalism, Congress provided that the NPDES program could be administered by states through a system of program delegation under which a state may issue NPDES permits for discharges into navigable waters within its jurisdiction, "but only upon EPA approval of the State's proposal to administer its own program." EPA v. State Water Resources Control Bd., 426 U.S. 200, 208, 96 S.Ct. 2022, 2026, 48 L.Ed. 2d 578, 585 (1976). The laudable goal of the Clean Water Act was to rid the nation's waters of pollution by 1985. 33 U.S.C.A. § 1251(a)(1), (2).

New Jersey's Water Pollution Control Act acknowledged this delegation. L. 1977, c. 74, § 2 (codified at N.J.S.A. 58:10A-1 to -20). Recognizing that pollution of our water continually endangers the health of our citizens, the Legislature noted

that the Federal Water Pollution Control Act Amendments of 1972 (P.L. 92-500; 33 U.S.C. 1251 et seq.) establishes a permit system to regulate discharges of

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pollutants and provides that permits for this purpose will be issued by the Federal Government or by states with adequate authority and programs to implement the regulatory provisions of that act. It is in the interest of the people of this State to minimize direct regulation by the Federal Government of wastewater dischargers by enacting legislation which will continue and extend the powers and responsibilities of the Department of Environmental Protection for administering the State's water pollution control program, so that the State may be enabled to implement the permit system required by the Federal Act. [ N.J.S.A. 58:10A-2.]

The New Jersey Water Pollution Control Act, like the Federal Act, established a comprehensive program, including provisions for a permit program:

It shall be unlawful for any person to discharge any pollutant, except in conformity with a valid New Jersey Pollutant Discharge Elimination System permit that has been issued by the commissioner pursuant to this act or a valid National Pollution Discharge Elimination System permit issued by the administrator pursuant to the Federal Act, as the case may be. [ N.J.S.A. 58:10A-6(a) (footnote omitted).]

"Pollutant" includes "thermal waste ... discharged into the waters of the State." N.J.S.A. 58:10A-3(n).

501 A.2d 128] II

N.J.S.A. 58:10A-9 governs the application for the necessary permits. It provides:

Applications for permits shall be submitted within such times, on such forms, and with such signatures as may be prescribed by the commissioner and shall contain such information as he may require. The commissioner shall, in accordance with a fee schedule adopted by regulation, establish and charge reasonable annual administrative fees, which fees shall be based upon, and shall not exceed, the estimated cost of processing, monitoring and administering the NJPDES permits. [ N.J.S.A. 58:10A-9 (emphasis added).

This case concerns the fee schedule adopted by the DEP on December 23, 1982, for the 1982-1983 fiscal year. In October 1980, the DEP proposed regulations to implement the New Jersey Pollutant Discharge Elimination System (NJPDES) program, including proposed administrative fees under N.J.S.A. 58:10A-9 for 1981-1982. The parties agree on how the fees were structured. The fees were based on a three-step process. First, the Department estimated its overall costs for the NJPDES surface-water program. Next, it allocated these costs among the three surface-water discharge categories: industrial,

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municipal, and thermal. ² Finally, it applied volume-based formulas to yield individual fees for permittees within these three basic categories. Though volume-based, the fee methodology varied depending on the category. For thermal dischargers, the fee was based on the permittee's "heat loading," N.J.A.C. 7:14-1.8(c)(3)(iv), or total volume of heat discharged into the receiving waters; it reflected a single pollutant and was measured in BTUs (British Thermal Units), N.J.A.C. 7:14A-1.8(e)(3). With respect to industrial dischargers, each of which may discharge as many as seventeen pollutants, the total discharge was determined by chemical oxygen demand (COD) so that the actual fee was based upon the single pollutant present in the largest volume in the particular discharge. N.J.A.C. 7:14A-1.8(c)(3)(ii) and (e)(2). As for municipal dischargers, the quantity of BOD sub5 (biological oxygen demand) was chosen as the single parameter upon which the fee was computed. N.J.A.C. 7:14A-1.8(c)(3)(i).

These regulations were adopted on March 6, 1981. A group of electric utilities, including these utility plaintiffs (hereinafter referred to as "electric utility group" or "group"), appealed the 1981-1982 permit fees but settled the matter on February 23, 1982, by a stipulation whereby the DEP agreed to provide financial data to support future NJPDES fees, including identification of the various categories of expenses and the corresponding expenditures underlying each of the three discharge categories.

In July 1982, DEP formally proposed its 1982-1983 NJPDES fee regulation reflecting an overall budget of $2,561,825 for

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industrial, municipal and thermal dischargers. ³ The electric utility group and other NJPDES permittees appealed the fee regulation after the January 1983 publication of its adoption. The various appeals were consolidated for disposition in the Appellate Division. That court set aside the industrial fees. Public Serv. Elec. and Gas v. [501 A.2d 129] New Jersey Dep't of Envtl. Protection, 193 N.J.Super. 676, 475 A.2d 665 (1984). ⁴

With respect to the thermal fees, the majority of the Appellate Division concluded that a volume-based fee schedule for thermal discharges was appropriate with one pollutant of equal environmental injury. Id. at 685, 475 A.2d 665. The dissenting judge concluded that the statute should not be read to refer to the estimated costs of the program "in the aggregate"; rather, the more equitable and reasonable interpretation of the statute--the one that should be followed--would be to base fees upon the cost of processing, monitoring, and administering each individual permit. Id. at 686, 475 A.2d 665 (Joelson, J.A.D., dissenting).

Following a rehearing concerning the refund requirement for industrial fees, the Appellate Division reaffirmed its determination that refunds should be made based on the difference

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between the invalidated fees and a reasonable fee for the past periods to be determined on remand. The court made it clear that no cash...