Maine Supreme Court Decision In Line With Trend Rejecting Informal Agency Decision-Making

A number of courts around the country have begun to look more carefully at how environmental agencies make decisions and, specifically, whether they are taking informal shortcuts to avoid an often long and contentious rulemaking process. A recent example comes from Maine. In Tenants Harbor General Store, LLC v. Dept. of Environmental Protection (opinion here),[1] the Supreme Judicial Court of Maine ruled that the Maine Department of Environmental Protection could not reject a permit application for failure to provide notice, where the notice requirement was not set out in a statute or regulation, but was merely an informal practice that the agency said any environmental lawyer in Maine should know about.

The Tenants Harbor Decision

The case arose out of a dispute over whether new underground storage tank regulations applied to replacement tanks.[2] The tanks at issue had been installed prior to Maine’s enactment of certain restrictions on siting USTs near public and private water supplies. Although the old tanks would not have met these restrictions, the replacement tanks could be grandfathered in as long the facility was not “abandoned,” defined under the statute as occurring twelve months after the old tanks were removed. The owner informed DEP of its intention to remove (but not replace) the old tanks,[3] and, less than a year later, filed a registration application for the new tanks, with the required fee.

DEP rejected the application, taking the position that since the owner had originally informed DEP in writing of the tank removal, but failed to notify DEP in writing of its intention to replace the tanks, DEP could conclude that the tanks had been abandoned and would now need to meet the new requirements. DEP pointed out that the owner had filed a form titled “Notice of Intent to Abandon (Remove) an Underground Oil Storage Facility,” suggesting abandonment. DEP further argued that the owner should have known that it was DEP’s policy to require written notice of intention to replace the tanks, and “could … have learned of [DEP’s] practice of requiring written notice by seeking advice from an attorney.”[4]

The Court approached the problem under the first step of Maine’s version of Chevron deference: “[w]hen a dispute involves an agency’s interpretation of a statute it administers, the agency’s interpretation, although not conclusive, is entitled to great deference and will be upheld unless that statute plainly compels a contrary result.”[5] Reviewing the applicable law, however, the Court found no deference due. Under the law, the only factor required to remove the tank from the definition of abandonment was that replacements be installed within twelve months, and no law or rule anywhere could be read to require the notice DEP said was necessary. The Court found it notable that the form DEP relied on was “[DEP’s] only form for tank removal, [and] provided no means for the owner to indicate that the facility – far from being abandoned – was going to be upgraded with replacement tanks for continued use by the owner.”[6] Regarding the owner’s ability to learn of the policy through consulting an attorney, the Court wondered how even an attorney would be able to discover this policy without encountering it first at the agency, and concluded that “neither an applicant nor an advocate would have a basis in law to determine that notice was required.”[7] Consequently, the Court remanded to the agency with instructions to accept the previously-rejected tank registration.

Broader Implications

The decision is interesting in that it addresses a situation that is quite common, but often not litigated, and rarely considered at the appellate level. There is no suggestion in the Tenants Harbor decision that DEP could not have passed a rule requiring the notice it desired – DEP was not barred from requiring such notice – it simply had failed to do so. It could not remedy this by adopting and insisting on compliance with informal policies.

The case reflects a broader trend in recent environmental decisions, as courts increasingly confront agency decisions absent rulemaking. For example, the U.S. District Court for the D.C. Circuit held earlier this year that EPA likely violated the Administrative Procedure Act by relying on interpretive guidance rather than promulgated regulations to establish new water quality standards. See R. Prugh, District Court Says EPA Cannot Shortcut Rulemaking Process by Issuing Interpretative Guidance, Marten Law Environmental News (Feb. 3, 2011). Similarly, the Fourth Circuit recently gave less deference to a U.S. Army Corps of Engineers interpretation of the scope of federal jurisdiction under the Clean Water Act where the agency based its decision on guidance, rather than a rule. See J. Kray, Fourth Circuit Backs Developer in Dispute Over Clean Water Act Jurisdiction; Signals Less Deference Given to Agency Guidance, Marten Law Environmental News (Mar. 11, 2011) (beginning text before note 31).

While the Tenants Harbor ruling is limited to Maine and the contexts of the other cases vary, the underlying theme is the same: courts are looking carefully at agency decisions that substantively affect regulated interests, where those decisions are not preceded by the established rulemaking process, and the protections it affords.

For further information, please contact Adam Orford or any member of the firm’s Permitting and Environmental Review or Litigation groups.