IN RE READOPTION OF N.J.A.C. 14:2Â (NEW JERSEY BOARD OF PUBLIC UTILITIES) ( 2017 )

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APPROVAL OF THE APPELLATE DIVISION
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SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-3913-14T2
IN RE READOPTION OF
N.J.A.C. 14:2.
_________________________________________
Argued January 26, 2017 – Decided August 18, 2017
Before Judges Hoffman and O'Connor.
On appeal from the New Jersey Board of
Public Utilities, Docket No. AX14070647.
James H. Laskey argued the cause for
appellants Association of Environmental
Authorities of New Jersey, New Jersey
Section of the American Water Works
Association, and National Association of
Water Companies, New Jersey Chapter (Norris,
McLaughlin & Marcus, PA, attorneys; Mr.
Laskey, of counsel and on the brief;
Nicholas J. Dimakos, on the brief).
Yao Xiao, Deputy Attorney General, argued
the cause for respondent New Jersey Board of
Public Utilities (Christopher S. Porrino,
Attorney General, attorney; Andrea M.
Silkowitz, Assistant Attorney General, of
counsel; Mr. Xiao, on the brief).
PER CURIAM
Appellants, the Association of Environmental Authorities of
New Jersey, the New Jersey Section of the American Water Works
Association, and the National Association of Water Companies,
New Jersey Chapter, comprise of water and wastewater companies
and authorities. Appellants challenge the validity of N.J.A.C.
14:2-4.2(c)1 (regulation), readopted by respondent Board of
Public Utilities (BPU) on March 16, 2015. Among other things,
appellants contend the BPU exceeded its statutory authority when
it readopted this regulation. We remand for further
proceedings.
I
In 1994, the Legislature enacted the Underground Facility
Protection Act (UFPA or Act), N.J.S.A. 48:2-73 to -91. "[T]he
Legislature enacted the UFPA to protect both the public from the
risk of harm and the utility companies from unnecessary losses."
Jersey Cent. Power & Light Co. v. Melcar Util. Co., 212 N.J.
576, 582 (2013). The Act establishes a "One-Call Damage
Prevention System" (System) to protect underground facilities,
commonly referred to as pipes, mains or lines, because these
facilities are frequently subject to accidental damage from
excavating equipment and explosives. See James Constr. Co. v.
Bd. of Pub. Utils., 298 N.J. Super. 355, 360 (App. Div. 1997).
1
In their brief, appellants do not identify the specific
regulation or regulations in N.J.A.C 14:2 they challenge, but it
is evident from their arguments their attack is limited to the
readoption of N.J.A.C. 14:2-4.2(c).
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Under the Act, underground facilities include those carrying
water and wastewater.
The Act requires that, before performing an excavation, an
excavator must "notify the [One-Call System] . . . of his intent
to engage in excavation or demolition not less than three
business days and not more than [ten] business days prior to the
beginning of the excavation or demolition." N.J.S.A. 48:2-
82(a). Once an excavator notifies the System, the One-Call
center informs the applicable underground facility operators of
the pending excavation. See N.J.A.C. 14:2-4.2. Operators are
then required to mark out the facility within three business
days. N.J.S.A. 48:2-80(a)(2). The Act defines an operator as a
person or entity that owns, operates, or controls the operation
of an underground facility, but does not include a "homeowner
who owns only residential underground facilities, such as an
underground lawn sprinkler system or an underground structure
for a residential low-voltage lighting system." N.J.S.A. 48:2-
75.
The Act designated the BPU as the appropriate State agency
to provide policy oversight to the System and to enforce the
provisions of the Act. N.J.S.A. 48:2-74. In accordance with
this mandate, the BPU adopted regulations to implement the Act.
See N.J.A.C. 14:2-1.1 to -6.10. The regulation at issue in this
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appeal, N.J.A.C. 14:2-4.2(c), initially adopted in 2007, 39
N.J.R. 4435 (Oct. 15, 2007), was readopted on March 16, 2015, 47
N.J.R. 659-61 (Mar. 16, 2015). N.J.A.C. 14:2-4.2(c) is set
forth below; for context we also include N.J.A.C. 14:2-4.2(b):
(b) Within three business days after
receiving information from the One-Call
center regarding a planned excavation or
demolition, an underground facility operator
shall do either of the following:
1. If the underground facility
operator owns, operates or
controls any underground
facilities on the site, the
underground facility operator
shall mark out the site as
required under N.J.A.C. 14:2-5,
except if a facility is exempt
from mark out requirements under
N.J.A.C. 14:2-4.1(b) or (c). If
an underground facility operator
does not own or operate a
facility, but controls it, the
operator is responsible for
compliance with this paragraph; or
2. If the underground facility
operator does not own, operate or
control any underground facilities
on the site, the underground
facility operator shall make a
reasonable effort to notify the
excavator of that fact.
(c) For the purposes of (b) above, an
underground facility operator shall be
deemed to control all portions of an
underground facility carrying metered
service, which are not located on the
customer's side of the meter, regardless of
who owns the property. For example, if a
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residential electric customer owns an
underground electric line, which provides
electricity from the street to the
customer's electric meter in an area served
by overhead electric lines, the electric
utility shall be deemed to control that
underground electric line.
[N.J.A.C. 14:2-4.2(b) and (c) (emphasis
added).]
In accordance with the rule-making procedures of the
Administrative Procedure Act (APA), N.J.S.A. 52:14B-1 to -15,
before the readoption of N.J.A.C. 14:2, the BPU invited comments
from the public. See N.J.S.A. 52:14B-4(a). Appellants provided
comments in opposition to the readoption of the subject
regulation. The BPU provided responses to appellants' comments,
but declined to make any changes to it or any other regulation
in N.J.A.C. 14:2. We address the relevant comments and
responses.
It is not disputed that, unlike electric or gas companies,
appellants' members typically do not own the lines which extend
from their lines under a public right-of-way and the customer's
building or meter. The line from the road or curb to the
customer's building is generally owned by the customer.
Appellants commented the language in N.J.A.C. 14:2-4.2(c) is
unreasonable because it compels a service provider, which merely
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uses a line to carry its commodity, to mark out the line even if
the line is owned, operated, or controlled by another.
The BPU rejected appellants' comment, responding as
follows:
There is a risk to underground facilities,
including water facilities, that the
Legislature has sought to protect through
the Underground Facility Protection Act
(UFPA) and this chapter is designed to
effectuate. Transferring this
responsibility from an operator to a
homeowner would not serve this public
policy. Additionally, Federal standards for
state one-call programs call for the
inclusion of all underground facility
operators.
[47 N.J.R. 659(a) (March 16, 2015).]
Without providing a specific citation, the BPU claimed the
Act provided it with the authority to compel a service provider
to mark out a line it neither owns, operates or controls, as
long as the provider uses the line. The BPU stated:
Under the One-Call statute, if a utility
delivers metered service, it controls the
operation of the utility line up to (and
often including) the meter, regardless of
who owns the line. This is evidenced by the
utility's authority to prosecute any person
who taps into this line to divert utility
service. Since the utility controls the
line, it is the underground facility
operator who is responsible for marking the
facility under the One-Call program. This
is a sensible policy because residential
utility lines on the utility's side of the
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meter generally have more capacity than
customer-controlled utility lines on the
customer's side of the meter. Therefore,
the risk posed by an excavator hitting the
utility controlled line is much greater than
the risk for a smaller, customer-controlled
line behind the meter. This distinction
applies to both residential and non-
residential facilities. If a large
commercial utility customer has installed
underground utility lines on its side of the
meter, the customer is responsible for
locating those lines, not the utility. As
such, the Board of Public Utilities (Board)
declines to adopt the recommended change.
[Ibid. (Emphasis added).]
Appellants also commented that, even if their members are
obliged under the Act to conduct mark-outs, the members do not
have immunity should a property owner assert a claim for
trespassing as a result of a member entering an owner's property
to conduct a mark-out. The BPU responded:
Pursuant to the Board's rules at N.J.A.C.
14:3-3.6 and 3A.1(a)5i, a utility shall have
the right to reasonable access to a
customer's premises and may discontinue
service in appropriate circumstances if
access is refused. Additionally, utility
providers routinely access customer
premises, including in response to
emergencies. As such, the Board declines to
adopt the recommended change.
[Ibid.]
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II
On appeal, appellants contend the BPU's decision to readopt
the regulation without change was arbitrary, capricious, and
unreasonable, as evidenced by its responses to their comments.
Appellants contend the responses do not provide a justification
to readopt the regulation without any changes, and urge we set
the regulation aside. Before we address appellants' arguments,
we briefly summarize the law that governs our review.
Regulations adopted by administrative agencies are accorded
substantial deference, provided they are consistent with the
terms and objective of the governing statute. Nelson v. Bd. of
Educ., 148 N.J. 358, 364-65 (1997). An administrative agency
may not "extend a statute to give it a greater effect than its
language permits." GE Solid State, Inc. v. Dir., Div. of
Taxation, 132 N.J. 298, 306 (1993). Thus, "when the provisions
of the statute are clear and unambiguous, a regulation cannot
amend, alter, enlarge or limit the terms of the legislative
enactment." Flinn v. Amboy Nat'l Bank, 436 N.J. Super. 274, 294
(App. Div. 2014) (quoting L. Feriozzi Concrete Co. v. Casino
Reinvestment Dev. Auth., 342 N.J. Super. 237, 250-51 (App. Div.
2001)). "[A]ny regulation or rule which contravenes a statute
is of no force, and the statute will control." L. Feriozzi,
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supra, 342 N.J. Super. at 251 (quoting Terry v. Harris, 175 N.J.
Super. 482, 496 (Law Div. 1980)).
Courts are required to intervene if an agency's action is
inconsistent with the legislative mandate. See Williams v.
Dep't of Human Servs., 116 N.J. 102, 108 (1989). "[W]e have
invalidated regulations that flout the statutory language and
undermine the intent of the Legislature." In re Adoption of
N.J.A.C. 7:26B, 128 N.J. 442, 450 (1992). Our review is limited
to an examination of whether: (1) the action offends the State
or Federal Constitution; (2) the agency's action violates
express or implied legislative policies; (3) there is an absence
of substantial evidence to support the agency's findings; and
(4) in applying the legislative policy to the facts, the agency
failed to reach a conclusion based on the relevant factors.
George Harms Constr. Co., Inc. v. N.J. Tpk. Auth., 137 N.J. 8,
27 (1994).
Under the APA, an agency "shall consider fully all written
and oral submissions respecting the proposed rule," N.J.S.A.
52:14B-4(a)(3), and prepare for the public a report providing
the agency's response to the comments submitted. N.J.S.A.
52:14B-4(a)(4). Responses must be meaningful, reasoned and
supported. See Animal Prot. League of N.J. v. N.J. Dep't of
Envtl. Prot., 423 N.J. Super. 549, 573-74 (App. Div. 2011)
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("[d]isagreement with a reasoned, supported agency determination
does not give rise to an APA violation"), certif. denied, 210
N.J. 108 (2012). In fact, "[t]he purpose of the APA rulemaking
procedures is 'to give those affected by the proposed rule an
opportunity to participate in the process, both to ensure
fairness and also to inform regulators of consequences which
they may not have anticipated.'" In re Provision of Basic
Generation Serv. for Period Beginning June 1 2008, 205 N.J. 339,
349 (2011) (quoting In re Adoption of 2003 Low Income Hous. Tax
Credit Qualified Allocation Plan, 369 N.J. Super. 2, 43 (App.
Div.), certif. denied, 182 N.J. 141 (2004)).
Appellants argue the Act does not provide and the BPU
cannot justify how a service provider is deemed to control a
line merely because it uses the line to transmit its product.
Appellants also challenge the BPU's conclusion a service
provider controls a water line merely because the provider has
the power to prosecute a party who taps into such a line through
which the provider's water is flowing and unlawfully divert it.
Appellants note it is the water itself that is confiscated when
diverted under unlawful circumstances, not the line itself.
Appellants further attack the BPU's claim large commercial
customers that have installed underground utility lines on their
"side of the meter" are responsible for locating their lines for
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mark outs. Appellants point out meters are commonly located
adjacent or close to a customer's building. Thus, most of a
commercial customer's line is not on the customer's side of the
meter. Therefore, service providers have the task of locating
most of the line between the meter and the road for their
commercial customers, which are generally difficult to locate.
On the question of their members' vulnerability to trespass
claims, appellants dispute the BPU's conclusion N.J.A.C. 14:3-
3.6 and N.J.A.C. 14:3A.1(a)(5)(i) provide immunity. Appellants
note N.J.A.C. 14:3-3.6 provides a utility reasonable access to a
customer's premises, as well as to any property on the premises
furnished by the facility, but only for the purpose of
"inspecting" the premises incident to the rendering of service,
including "reading meters; inspecting, testing, or repairing its
facilities used in connection with supplying the service; or the
removal of its property." Appellants observe this regulation
does not provide utilities access to conduct mark outs.
Appellants further note N.J.A.C. 14:3-3A.1(a)(5)(i) merely
provides the utility shall have the right to suspend, curtail,
or discontinue service if the customer refuses reasonable access
to the customer's premises in accordance with N.J.A.C. 14:3-3.6.
The BPU's response to appellants' arguments includes, in
part, what the BPU provided in response to appellants' comments
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when the readoption of N.J.A.C. 14:2 was pending. The BPU also
provides additional reasons in its brief for readopting the
subject regulation. Although we have considered these
additional reasons, our role is to review the responses the BPU
provided to the comments submitted when the subject regulation
was pending readoption, not the additional justifications an
agency includes in its brief to explain its previous actions.
"The grounds upon which an administrative order must be
judged are those upon which the record discloses that the action
was based[,]" and not upon an after-the-fact explanation of the
administrative agency's decision. In re Petition of
Elizabethtown Water Co., 107 N.J. 440, 460 (1987) (quoting Sec.
and Exch. Comm'n v. Chenery Corp., 318 U.S. 80, 87, 63 S. Ct.
454, 459, 87 L. Ed. 626, 633 (1943)). See also In re N.J.A.C.
7:1B-1.1 Et Seq., 431 N.J. Super. 100, 139 (App. Div. 2013)
(noting the Department of Environmental Protection's attempt to
rehabilitate web postings created after promulgating various
rules by asserting additional explanations in its brief was
inappropriate, stating "[a]n appellate brief is no place for an
agency to try and rehabilitate its actions.").
We question, without deciding, the BPU's claim that: (1)
the Act provides authority for the premise the mere use of a
line to deliver a product is commensurate with operating or
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controlling it; (2) a utility is deemed to control a line if the
utility can prosecute a person who taps into and diverts the
service provided through that line; and (3) N.J.A.C. 14:3-3.6
and N.J.A.C. 3A.1(a)5(i) immunize a service provider from a
claim of trespassing if its agent or employee enters another's
property to mark out a line.
We recognize the Legislature has
determine[d] that it is in the public
interest for the State to require all
operators of underground facilities to
participate in a One-Call Damage Prevention
System and to require all excavators to
notify the One-Call Damage Prevention System
prior to excavation or demolition.
[N.J.S.A. 48:2-74.]
However, as previously addressed, with the exception of
homeowners who own residential underground facilities, an
"operator" is a person or entity that owns, operates, or
controls an underground facility. N.J.S.A. 48:2-75. A
significant issues is whether appellants members are operators
under the Act.
In our view, the responses the BPU provided to appellants'
comments when the subject regulation was pending readoption
neither fully addressed appellants' comments nor explained why
N.J.A.C. 14:2-4.2(c) warranted readoption without any change.
Thus, it is not clear from the agency's responses whether it
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fully considered appellants' comments, as statutorily required
under the APA. N.J.S.A. § 52:14B-4(a)(4). See Animal Prot.
League of N.J., supra, 423 N.J. Super. at 572 ("Public comments
should be "given a meaningful role" in the process of rule
adoption"). The responses provided raises the question whether
appellants' comments were given the consideration required by
the APA, which is significant because, under the APA, any rule
not adopted in substantial compliance with the Act is invalid,
see N.J.S.A. 52:14B-4(d).
That said, it would be premature to set aside N.J.A.C.
14:2-4.2(c) when further exposition of the BPU's reasoning may
well elucidate why it determined no change to this regulation
was warranted. See, e.g., Animal Prot. League of N.J., supra,
423 N.J. Super. at 575 (even if the agency misconstrued or
perhaps exaggerated the comments and support for its actions,
"we cannot say that such response in isolation (or even assuming
a minimal number of other such responses) would support a
finding that respondents violated the APA").
Therefore, we remand this matter to the BPU to enable it to
amplify its responses to appellants' comments and fully explain
its reasons for readopting N.J.A.C. 14:2-4.2(c) without change.
The BPU shall have ninety days to provide its amended responses
to appellants' comments. If it deems appropriate, the BPU is
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not foreclosed from proposing an amendment to N.J.A.C. 14:2-
4.2(c). If it decides to do so, BPU shall be afforded the time
to which it is entitled under the APA.
Remanded for further proceedings consistent with this
opinion. We do not retain jurisdiction.
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