NC Chamber, NFIB back Farm Bureau in legal battle over animal waste rules

Two of North Carolina’s leading business lobbying groups are supporting the NC Farm Bureau in its legal battle against state regulators’ proposed animal waste permit requirements.

The NC Chamber and National Federation of Independent Business filed a joint document Friday with the state Supreme Court. The two groups ask North Carolina’s highest court to consider their arguments in a case pitting the Farm Bureau against the state Department of Environmental Quality.

The state Court of Appeals ruled in favor of the Farm Bureau in November 2023. Appellate judges agreed that three challenged animal waste permit conditions should have been treated as state government rules. Rules must proceed through a formal rulemaking process established by North Carolina’s Administrative Procedure Act.

“NFIB’s and the N.C. Chamber’s members have an interest in ensuring that the government follows the administrative rulemaking process and considers the vital input of those being regulated,” the two business groups’ lawyers wrote. “When agencies neglect to promulgate rules that are binding on the public, this harms businesses, depriving them of the benefit of various levels of review that can improve a rule or stop its promulgation entirely.”

“[T]he issues presented in this case have implications far beyond the interests of the parties in this case,” the court filing continued. “If the Court of Appeals decision is overturned, it is likely that small businesses in every industry within the State of North Carolina will be negatively affected, as such a decision would open the door for every executive branch agency to regulate without having to go through the rulemaking process.”

“The North Carolina Department of Environmental Quality, Division of Water Resources (the Division) seeks to redefine what constitutes a rule, skirting the plain meaning of the North Carolina Administrative Procedure Act (NCAPA), attempting to draw conflicts between otherwise harmonious statutes, and subverting the rulemaking process,” the groups’ lawyers argued.

“If this Court allows unpromulgated rules to operate as if promulgated, it will gut the NCAPA, undermine separation of powers, and harm businesses,” the NC Chamber and NFIB warned. “Under such a ruling, government agencies in North Carolina would be able to regulate without accountability. Such circumvention is a short road to government by executive fiat, in which individuals and businesses are subject to an ever-increasing list of new conditions for doing business, all without procedural safeguards.”

The Farm Bureau filed its own brief in the case on Feb. 21.

“This case presents a foundational question of administrative accountability: whether state agencies may sidestep the safeguards of rulemaking by imposing sweeping regulatory mandates through general permits,” Farm Bureau lawyers wrote in their state Supreme Court brief. “North Carolina Farm Bureau asks this Court to affirm the Court of Appeals’ unanimous decision holding that three onerous conditions in the Division’s animal waste general permits are ‘rules’ under the Administrative Procedure Act.”

“These conditions, which dictate how thousands of farmers manage their operations, carry the force of law, expose farmers to penalties, and function exactly like rules, as defined by the APA,” the court filing continued.

“If imposed, the three conditions will require farmers to: (1) monitor groundwater on farms located within the 100-year flood plain; (2) engage in phosphorous loss assessment testing (‘PLAT’); and (3) file annual reports that the Division may make public on request,” Farm Bureau lawyers wrote. “As a result, Farm Bureau’s farmer members who hold animal waste general permits will be forced to incur additional production and operational costs, comply with unnecessary and burdensome administrative requirements, restrict the use of their property, and endure the likely disclosure to the public of their confidential and other protected commercial business information.”

DEQ has asked the high court to reverse appellate judges.

“For over twenty years, Petitioner Division of Water Resources of the Department of Environmental Quality has periodically issued three general permits — one each for animal waste management systems at certain swine, cattle and liquid-waste poultry farms,” wrote state government lawyers representing DEQ. “Each time it has issued these permits, it has done so under the procedures set forth for issuing general permits, and has not adopted these permits as rules.”

“Dissatisfied with three of the new conditions included in the most recent re-issuance, Respondent N.C. Farm Bureau Federation, Inc. contested the permits in the Office of Administrative Hearings,” the DEQ petition continued. “Instead of challenging the substantive bases for those conditions, the Farm Bureau asserted that these three conditions were rules under the Administrative Procedure Act and should have been adopted through rulemaking.”

An administrative law judge agreed with the Farm Bureau, but a Superior Court judge reversed that decision. Then a three-judge Appeals Court panel reversed the trial court’s decision.

“The Court of Appeals held that a condition in a general permit is a rule if ‘it applies to most situations.’ It then reasoned that, because the General Assembly has stated its intention that ‘most’ animal waste management systems be permitted under a general permit, the conditions at issue in this case are rules that should have been adopted through the rulemaking process,” DEQ’s lawyers wrote.

“The Court of Appeals’ judgment expressly renders only the three challenged conditions unenforceable, but the logic of its holding applies equally to nearly half the conditions in the three Animal Waste General Permits,” the petition continued. “These permits cover the large majority of animal waste operations at swine, cattle, and liquid-waste poultry animal waste management systems in North Carolina. In total, the permits apply to well over two thousand farms.”

“Despite the fact that the General Assembly explicitly directed that these facilities be governed by a permit system, the Court of Appeals said otherwise and mandated that the facilities be regulated by a system of rules,” DEQ’s lawyers argued. “The Court of Appeals’ opinion puts in jeopardy a longstanding permitting program that governs the vast majority of swine farms in the state, which comprise a significant portion of national swine production.”

“The potentially sweeping nature of its logic threatens to upend the jurisprudential landscape on general permitting programs more broadly,” the petition warned. “For these reasons, the Division asks this Court to grant this Petition for Discretionary Review and correct the Court of Appeals’ erroneous restructuring of this major permitting program.”

Appellate judges agreed with the Farm Bureau that three challenged conditions tied to general animal-waste permits adopted in 2019 were state rules. None of the three conditions proceeded through the state’s official rule-making process in the Administrative Procedure Act. All of those conditions are invalid, according to the Appeals Court opinion.

Each of the 2,000 affected hog, cattle, and poultry farms across North Carolina uses a “lagoon-and-spray-field system” to address animal waste.

Each challenged condition had been tied to a settlement agreement DEQ reached with the North Carolina Environmental Justice Network and other groups after a federal civil rights complaint.

“[T]he General Permit conditions are regulations under the NCAPA because they are ‘authoritative rule[s] dealing with details’ of animal-waste management systems,” Judge Jeff Carpenter wrote for the unanimous court.  

“The challenged conditions are invalid until they are adopted through the rulemaking process,” Carpenter concluded.

A split 2-1 Court of Appeals panel issued an order in October 2022 blocking the rules from taking effect.