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Kor-Ko Ltd. v. Maryland Department of Environment

Court of Appeals of Maryland

January 25, 2017

KOR-KO LTD. AND JOHN E. ROTHAMEL
v.
MARYLAND DEPARTMENT OF THE ENVIRONMENT

          Argued: November 4, 2016

         Circuit Court for Anne Arundel County Case No. 02-C-13-180980

          Barbera, C.J. Greene McDonald Watts Hotten Getty Harrell, Glenn T., Jr., (Senior Judge, Specially Assigned), JJ.

          OPINION

          Harrell, J.

         Dust in the wind;

         All we are is dust in the wind.

         Opening lyrics of "Dust in the Wind" on Kansas's "Point of Know Return" album (1977).

         Would Kansas's song have made it to No. 6 on the "Billboard Hot 100" and achieved Gold Record sales status in 1978 had listeners understood that the dust in the wind may have contained arsenic, hexavalent chromium, hydrogen chloride, dioxins, and mercury, as we learn from the controversy before us, a case involving the emissions to the air from the operation of a crematorium? Kor-Ko, Ltd. (Kor-Ko), the principal Petitioner in the present case, [1] seeks to overturn the Maryland Department of the Environment's (MDE) grant of a construction permit to Maryland Crematory, LLC (MC), to operate a crematorium in the same commercial/industrial park building in Millersville, Maryland, containing Kor-Ko's business operations.

         FACTUAL AND PROCEDURAL BACKGROUND

         MC submitted in 2011 a permit application to the MDE for the construction of a human remains crematory incinerator at 408 Headquarters Drive, Suite 10, Millersville, Maryland 21108. The air emissions from the incineration of human remains may produce a panoply of toxic pollutants, including, among other contaminants, arsenic, chromium, dioxins, and mercury. On 27 October 2011, the MDE notified MC that its original application submission failed to quantify the crematory's future toxic output or show that the emissions "will not unreasonably endanger public health, " pursuant to Code of Maryland Regulations (COMAR) 26.11.15.04 and 26.11.15.06. The MDE allowed MC 90 days to supplement its application.

         MC submitted a Toxic Air Pollutant Analysis on 7 December 2011, but the MDE found the supplemented application deficient, as memorialized in a letter to MC dated 27 December 2011. MC re-supplemented its application in January and February of 2012 with additional information, but, again, the MDE notified MC that its application remained lacking. On 21 March 2012, however, the MDE pivoted somewhat. In a letter to MC, the MDE concluded that MC "provided an overall sufficient toxics analysis within the 90 day requirement.[2] The 90 day clock is stopped[, ]" but that some details of the application "still need[ed] to be addressed[.]" In a follow-up document, the MDE explained that, despite MC's application remaining "inadequate with regards to dioxin and furan emissions, " the MDE "was ultimately able to resolve this . . . inadequacy of the compliance demonstration" by performing its own calculations as to the quantitative and qualitative models for these toxins.

         The MDE reached and published a Tentative Determination, on 9 August 2012, to issue the permit because the agency expected the crematory would meet the relevant air quality requirements. Following an advertised legislative-style public hearing held by the MDE on 6 September 2012, opponents of the proposed issuance of the permit (including Petitioners) submitted, on 13 November 2012, supplemental written comments.[3]

         Combining hypothetical toxin dispersion and concentration data with information from an EPA database about the specific contaminants emitted by human remains incinerators, the MDE compared (in a modeling exercise) the maximum concentrations of MC's anticipated pollutants with screening levels determined safe for human exposure. The MDE's screening process found that the predicted pollutant concentrations, modeled at ground level at the boundary of the commercial park in which MC proposed to locate its business, would not endanger unreasonably human health. URS Corp., a consultant hired by opponents of the proposed permit action, calculated independently that the anticipated pollutants' dispersal and concentration levels, measured at the rooftop air handlers height of MC's building (in which Kor-Ko was an existing tenant) within the commercial park, several pollutants, particularly arsenic and mercury, would reach concentrations that exceed the MDE's threshold levels for safety for human health.

         Effective 24 July 2013, the MDE issued the construction permit, together with its Final Determination and responses to some of the previously received public comments, including the URS report.[4] On 16 August 2013, Kor-Ko and other parties to the agency proceedings sought judicial review in the Circuit Court for Anne Arundel County of the MDE's Final Determination to issue the permit. In an order entered on 26 September 2014, the court remanded the matter to the MDE to analyze specifically MC's potential emissions' toxicity to people in adjacent buildings in the office park that use rooftop air handlers. On the MDE's direct appeal, the Court of Special Appeals reversed, in an unreported opinion, remanding the case to the circuit court with instructions to affirm the MDE's issuance of the permit. Kor-Ko filed electronically, on 21 April 2016, its petition for writ of certiorari.[5] On 23 June 2016, we granted Kor-Ko's petition to consider potentially the following questions, as formulated by Kor-Ko:

The overriding question presented in this action for judicial review is whether MDE erred by issuing a permit to a facility that will unreasonably endanger human health. See COMAR § 26.11.15.06. That question has three subparts that are presented for review:
1. Did MDE err by interpreting the definition of "premises" to mean the entire commercial park?
2. Did MDE err by concluding that its "air toxics regulations do not apply" anywhere within the entire commercial park?
3. Did MDE, having reached an erroneous conclusion on those two questions, err by not evaluating whether emissions of toxic air pollutants will unreasonably endanger the health of the neighboring tenants, including Petitioners?

         STANDARD OF REVIEW

         "When this or any appellate court reviews the final decision of an administrative agency . . ., the court looks through the circuit court's and intermediate appellate court's decisions, although applying the same standards of review, and evaluates the decision of the agency." People's Counsel for Baltimore Cnty. v. Surina, 400 Md. 662, 681, 929 A.2d 899, 910 (2007) (citing Mastandrea v. North, 361 Md. 107, 133, 760 A.2d 677, 691 (2000)). Our analysis, therefore, focuses squarely on the MDE's decision to issue the contested construction permit. Our review is limited generally to the administrative record. Md. Code, Environment Art. (EN), § 1-601(d) (2013 Repl. Vol.).

         The applicable level of judicial scrutiny depends often on the nature of the agency's process and/or action, e.g., quasi-judicial or quasi-legislative. On one hand, this Court described agency processes or actions as quasi-judicial when:

"(1) the act or decision is reached on individual, as opposed to general, grounds, and scrutinizes a single property . . . and (2) there is a deliberative fact-finding process with testimony and the weighing of evidence." Normally, that requires a contested case hearing, so that evidence (as opposed to informal statements of general beliefs) may be presented, challenged, and analyzed, in order that reasonable credibility determinations can be made.

Md. Bd. of Pub. Works v. K. Hovnanian's Four Seasons at Kent Island, LLC, 425 Md. 482, 515, 42 A.3d 40, 59 (2012) (quoting Md. Overpak Corp. v. Mayor and City Council of Baltimore, 395 Md. 16, 33, 909 A.2d 235, 245 (2006)). On the other hand, an agency process or action is seen as quasi-legislative when "'the [action] is one making a new law-an enactment of general application prescribing a new plan or policy[, as opposed to] one which merely looks to or facilitates the administration, execution, or implementation of a law already in force and effect.'" Hovnanian's Four Seasons, 425 Md. at 514, 42 A.3d at 59 (quoting City of Bowie v. Cnty. Comm'rs for Prince George's Cnty., 258 Md. 454, 463, 267 A.2d 172, 177 (1970)).

         The MDE's issuance of the construction permit to MC appears facially to fall in-between our recognized indicia distinguishing adjudicative from legislative agency processes or actions. By issuing the permit, the MDE affected directly the rights and responsibilities of the applicant, MC, not crematorium operators at-large. The State environmental statute, however, forbids contested hearings in this kind of permit application process, [6] although the MDE's procedures did involve, for example, fact-intensive consideration of scientific information-the computer modeling of the dispersion and concentration of toxins from the crematory, the assumptions and conclusions of which could be, and were, contested via the submission of opposing public comments.

         In 2016, this Court applied the standards of appellate review for quasi-judicial decisions to a permit decision by the MDE in a scenario governed by the same permitting statute involved in the present case:[7] "[a]lthough this statute does not set forth a standard of review, the substantial evidence and arbitrary and capricious standards apply where an 'organic statute' authorizes judicial review without a contested case hearing and does not set forth a standard of review." Md. Dep't of Env't v. Anacostia Riverkeeper, 447 Md. 88, 118, 134 A.3d 892, 910 (2016), reconsideration denied (May 20, 2016) (citing Supervisor of Assessments of Carroll Cnty. v. Peter & John Radio Fellowship, Inc., 274 Md. 353, 355, 335 A.2d 93, 94 (1975) and Med. Waste Assocs., Inc. v. Md. Waste Coal., Inc., 327 Md. 596, 621, 612 A.2d 241, 253 (1992)).[8]

         We shall review, therefore, the MDE's Final Determination to issue the permit to MC as follows:

Whether by statute or by common law, courts look for three things when reviewing a quasi-judicial decision: (1) were the findings of fact made by the agency supported by substantial evidence in the record made before the agency; (2) did the agency commit any substantial error of procedural or substantive law in the proceeding or in formulating its decision; and (3) did the agency act arbitrarily or capriciously in applying the law to the facts- in essence, whether a reasoning mind could reasonably reach the conclusion reached by the agency from the facts in the record. With respect to the findings of fact, judicial review is highly deferential. With respect to determining legal error, it is much less so.

Hovnanian's Four Seasons, 425 Md. at 514, 42 A.3d at 58 n.15 (citations omitted).[9]

         This standard requires our review to be "narrow and highly deferential" with respect to administrative fact-finding. Trinity Assembly of God of Baltimore City, Inc. v. People's Counsel for Baltimore Cnty., 407 Md. 53, 78, 962 A.2d 404, 418 (2008). "An agency decision based on regulatory and statutory interpretation is a conclusion of law. Even when reviewing an agency's legal conclusions, an appellate court must respect the agency's expertise in its field. When an agency interprets its own regulations or the statute the agency was created to administer, we are especially mindful of that agency's expertise in its field." Carven v. State Ret. & Pension Sys. of Md., 416 Md. 389, 406, 7 A.3d 38, 49 (2010) (citations and quotation marks omitted). Compared with a question of statutory interpretation, "[w]hen the construction of an administrative regulation rather than a statute is in issue, deference is even more clearly in order." Md. Transp. Auth. v. King, 369 Md. 274, 288, 799 A.2d 1246, 1254 (2002) (citations and quotation marks omitted). We grant such deference to an agency's interpretation of its regulations because

agency rules are designed to serve the specific needs of the agency, are promulgated by the agency, and are utilized on a day-to-day basis by the agency. A question concerning the interpretation of an agency's rule is as central to its operation as an interpretation of the agency's governing statute. Because an agency is best able to discern its intent in promulgating a regulation, the agency's expertise is more pertinent to the interpretation of an agency's rule than to the interpretation of its governing statute.

King, 369 Md. at 289, 799 A.2d at 1254 (citations and quotation marks omitted). Put another way, the courts do not play the role of an über administrative agency in reviewing the actions of state or local administrative bodies, but, rather we exercise discipline in our review so as not to cross the separation of powers boundary.

         DISCUSSION

         Prior to building a human remains incinerator or other similarly-regulated source of air pollution, an applicant must obtain a construction permit from the MDE. COMAR 26.11.02.02B. Pursuant to COMAR 26.11.15 and 26.11.16, the MDE regulates Toxic Air Pollutants (TAPs) and provides related procedural requirements to prevent unreasonable danger to human health, among other objectives. COMAR 26.11.15.06, Ambient Impact Requirement, subsection A(1), reads as follows:

A. Requirements for New Installations, Sources, or Premises.
(1) Except as provided in ┬žA(2) of this regulation, a person may not construct, modify, or operate, or cause to be constructed, modified, or operated, any new installation or source without first demonstrating to the satisfaction of the Department using procedures established in this chapter that total allowable emissions from the premises of each toxic air ...

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