Opinion ID: 1992142
Heading Depth: 1
Heading Rank: 6

Heading: May the allocation of costs among the thermal dischargers be based upon the extent of their individual discharge?

Text: Since we have concluded that it is not necessary for the Department to determine the individual costs attributable to each licensee, the final issue is whether an allocation of costs within one category  in this case the category of thermal dischargers  may be based upon the extent of individual discharge. [9] Because the factual basis is clearly evident, in reviewing this agency decision our inquiry is focused on the other two prongs of review: whether the agency followed the mandate of the act and whether it made a clear error of judgment in applying the policies of the enabling legislation to the facts in the record. The electric utility group's statutory argument is that a volume-based system is simply not cost-based. The DEP counters that there is a relationship between the size of a permittee's discharge and the regulatory costs associated with that permit. The group responds by referring us to the fact that the DEP is considering a new method that would relate fees to other factors, such as the nature of the receiving waters, the toxic nature of the discharge, and the number and location of discharge points. They contend that DEP's consideration of such a methodology disproves the volume-based rationale of the 1981-1982 fees. But even putting aside the issue of costs as a coefficient of environmental impact, there is ample support for a fee-based regulatory system that relates costs to graduated differences in amounts. Differences in the amounts of regulatory license impositions may be justified on many grounds. Thus, it is not unreasonable to graduate the fee for a building permit according to the estimated cost of the building. The fee is not necessarily exacted for the mere clerical act of issuing the permit. Its amount may well be fixed with reference to the whole labor and expense connected with the matter, including the examination of the plans and specifications before the permit is issued, and the subsequent inspection of the building while in process of erection, and, finally, the issuing of the certificate to the owner after its completion. That this would involve much more labor and expense in the case of a large building or block than in case of a small one is self-evident, and while this labor might not be exactly in proportion to the cost of the structure, yet the cost probably furnishes the best practicable general standard by which to estimate it. [51 Am.Jur. 2d Licenses and Permits § 116 (1970) (footnotes omitted).] Our law has been consistent. Belleville Chamber of Commerce v. Town of Belleville, 51 N.J. 153 (1968). The fact that some fees are graduated on the basis of volume or quantity whereas others are flat fees does not per se establish illegality. Id. at 157; see also Independent Warehouses, Inc. v. Scheele, 134 N.J.L. 133, 142-43 (E. & A. 1946), aff'd, 331 U.S. 70, 67 S.Ct. 1062, 91 L.Ed. 1346 (1947) (warehouse licensee fee graduated according to storage capacity is presumptively reasonable; burden rests on challenger to overcome that presumption); Monmouth Junction Mobile Home Park, Inc. v. South Brunswick, 107 N.J. Super. 18, 26 (App.Div.), certif. den., 55 N.J. 30 (1969) (ordinance for licensing of mobil home parks which imposes fees graduated on square-foot basis of mobil home space not per se illegal); South Coast Fisheries, Inc. v. Department of Fish and Game, 28 Cal. Rptr. 537, 540, 213 Cal. App. 2d 325, 331, appeal dismissed, 375 U.S. 57, 84 S.Ct. 174, 11 L.Ed. 2d 122 (1963) (privilege tax measured by gross product consumed is valid exercise of state's taxing power); cf. McKenney v. Byrne, 82 N.J. 304, 319 (1980) (allocation of gross tax receipt revenues of utilities based on schedule of property in municipality involved broad legislative judgment and is not irrational). This is especially so when we are concerned only with the category of thermal dischargers within which there is no difference in quality of the pollutant but only in quantity. Hence we believe that a volume-based system can have as its purpose recovery of related costs and as such be consistent with the mandate of the act that fees be cost-based, even though individual fees may vary, not on the basis of actual costs, but on the basis of environmental measure. The only remaining question on this point is whether the Department committed clear error in applying the policies of the act to the facts before it. In the exercise of this review, we must avoid substituting appellate judgment for the agency's judgment. What we seek in reviewing agency action is not a different judgment, but a judgment that reasonable people could reasonably make on the basis of the evidence presented. Gloucester County Welfare Bd., supra, 93 N.J. at 391 (quoting Freud v. Davis, 64 N.J. Super. 242, 246 (App.Div. 1960)). In some senses the establishment of these fees partakes of the nature of a quasi-legislative judgment. See Bergen Pines County Hosp. v. New Jersey Dep't of Human Servs., supra, 96 N.J. at 479 (hospital reimbursement under cost-based system is premised upon reasonableness, not actual cost). Given the administrative precedent in the field of licensing, we cannot say that the agency could not reasonably establish a cost-based permit system graduated by volume of the single pollutant within that category of dischargers. In sum, we agree with the thermal dischargers that there may be some want of precision in the fees charged to them. There is an intrinsic logic in the point that monitoring the discharge of heated water does not necessarily generate the same environmental effort as would the discharge of dangerous toxic substances. By the same token, logic suggests that there may be an inherent reasonableness in the conclusion that as the volume of pollution increases, the need for environmental response, and therefore the cost, rises. The Department has recognized these problems and is trying to implement a new cost-accounting system that will enable it to sharpen its estimate of costs. In future fee-setting, the hearing process should provide the opportunity to test the evidential claims of the thermal dischargers. If the record demonstrates that their fees are not cost-based, corrective agency action will have to be taken. All recognize that if there is any slack, it will have to be taken up by the municipal and industrial users. Each member of those groups will want to challenge the factual basis asserted by the thermal dischargers that the thermal category is being overcharged. Within the category of thermal dischargers, the DEP's new methodology related to the nature of the receiving waters and other factors may yield more precision.