Diffendal v. Department of Natural Resources

REPORTED
IN THE COURT OF SPECIAL APPEALS
OF MARYLAND
No. 512
September Term, 2014
MICHAEL DIFFENDAL, ET AL.
v.
DEPARTMENT OF
NATURAL RESOURCES, ET AL.
Eyler, Deborah S.,
Meredith,
Rodowsky, Lawrence F.
(Retired, Specially Assigned),
JJ.
Opinion by Eyler, Deborah S., J.
Filed: April 6, 2015
This appeal arises from the final decision of the Maryland Department of Natural
Resources (“DNR”) to deny an application for an aquaculture lease for three areas in the
Chincoteague Bay in Worcester County. The DNR’s decision was reversed on judicial
review in the Circuit Court for Anne Arundel County.
The appellants are 18 individuals (and one joint trust established by two of these
individuals) who are nearby residents, property owners, and commercial watermen, and who
filed petitions of protest with the DNR and participated in the proceedings below.1 The
appellees are Donald Marsh, Jr., the applicant for the lease, and the DNR.
In three briefs,2 the appellants present ten overlapping questions, which we have
combined, condensed, and rephrased as two:
I. Was the DNR’s decision that the lease application was for a
“submerged land lease,” not a “water column lease,” legally correct and
supported by substantial evidence in the record?
II. Was the DNR’s decision that the public trust doctrine required it to
consider the impact of the proposed lease on navigation and fishing in
the area legally correct, and, if so, was the finding that negative effects
on navigation and fishing justified denial of the lease supported by
substantial evidence in the record?
For the following reasons, we shall affirm the judgment of the circuit court.
1
The appellants are: The Michael Thomas Diffendal and Ellen Louise Diffendal Joint
Irrevocable Trust; Michael Diffendal; Ellen Diffendal; Gunnar Zorn; Pamela Zorn; Peter
Zerhusen; Cecilia Zerhusen; Frank Lang; Carol Lang; Gerald Bobeczko; Mary Jo
Bobeckzco; Francis Harvey; Kristyn Harvey; John Harrison; Karen Harrison; Kirk Stewart;
Jason Mumford; Sylvia Tunis; and Alexander Shandrowsky.
2
Tunis and Shandrowsky each filed a separate brief on appeal. The remaining sixteen
individual appellants and the trust filed a joint brief. We shall refer to the latter group of
appellants collectively as Diffendal.
FACTS AND PROCEEDINGS
A. Aquaculture Leases in Maryland
Title 4 of the Natural Resources Article (“NR”) governs “Fish and fisheries.” Subtitle
11A pertains to “Aquaculture,” which is “the commercial rearing of fish or aquatic plants for
sale, trade, barter, or shipment.” Md. Code (1973, 2012 Repl. Vol.), § 4-11A-01(b) of the
NR Article. In enacting subtitle 11A, the General Assembly intended to “promote the
development of an aquaculture industry in [Maryland]” and to streamline the procedure for
applying for aquaculture leases. See NR § 4-11A-03(b) & (c) (addressing legislative intent).
Since July of 2011, the DNR has been the agency charged with reviewing and deciding
whether to grant all aquaculture lease applications.3
The DNR issues two types of aquaculture leases: water column leases and submerged
land leases. NR § 4-11A-01(d). A water column lease is “a lease of the column of water on
or under the surface of the water and above the surface of the submerged land.” NR § 4-
11A-01(p). A submerged land lease is a lease of “any land lying beneath the waters of the
State . . . for cultivating oysters and other shellfish for commercial purposes.” NR § 4-11A-
01(n).
3
Before July of 2011, the DNR and the Maryland Department of Environment
(“MDE”) shared this responsibility, with the DNR reviewing submerged land lease
applications and the MDE reviewing water column lease applications. See 2011 Md. Laws,
ch. 411 (making the DNR the agency in charge of reviewing all aquaculture lease
applications).
2
A person or entity seeking an aquaculture lease must file an application with the DNR
and pay a non-refundable fee. NR § 4-11A-09(a). The DNR, in conjunction with the MDE,
other internal agencies, and the United States Army Corps of Engineers (“USACE”),
conducts an extensive review to determine if the relevant statutory criteria are satisfied. Most
of the statutory criteria for water column and submerged land leases are identical. For both,
the DNR may issue a lease in waters that have been classified by the MDE as “approved,
conditionally approved, or restricted for harvest.” NR §§ 4-11A-07(b)(1) (submerged land
lease); 4-11A-08(b)(1) (water column lease). The DNR may not issue either such lease if the
areas proposed to be leased are:
(i) Within a minimum of 50 feet of shoreline or any pier without the written
permission of the riparian owner at the time of initial application for the lease;
(ii) Within 150 feet of the public shellfish fishery or a registered pound net
site;
(iii) Within 150 feet of any oyster reserve or a Yates Bar located in an oyster
sanctuary;[4]
(iv) Within 150 feet of a federal navigational channel;
(v) Subject to paragraph (2) of this subsection, in any creek, cove, bay, or inlet
less than 300 feet wide at its mouth at mean low tide;
(vi) In an SAV Protection Zone;[5] or
(vii) In a setback or buffer from the Assateague Island National Seashore
established by the [DNR].
4
A “Yates Bar” is “any submerged oyster bar, reef, rock, or area represented as an
oyster bar on the charts of the Oyster Survey of 1906 to 1912, not including any
amendments.” NR § 4-11A-01(q).
5
An “SAV Protection Zone” is “an area of submerged aquatic vegetation as mapped
in aerial surveys by the Virginia Institute of Marine Sciences in 1 or more of the 5 years
preceding the designation of an Aquaculture Enterprise Zone or an application for a lease
under this subtitle. NR § 4-11A-01(m).
3
NR §§ 4-11A-07(c) (submerged land lease); 4-11A-08(c) (water column lease).
For submerged land leases in any of the coastal bay areas, the DNR may “establish
submerged land areas . . . that . . . [a]re preapproved for leasing; . . . [that m]ay not be leased;
[or that m]ay be approved for leasing only on specific application and review by the [DNR].”
NR § 4-11A-08(e)(1). Before preapproving areas for leasing or prohibiting leasing in a given
area, the DNR “shall consider potential conflicts presented by other uses of the proposed
area, including navigation, recreation, and commercial fishing.” NR. § 4-11A-08(e)(2).
For both water column leases and submerged land leases, if the DNR determines that
all the statutory criteria are met and the proposed lease is not within an area preapproved for
leasing, the proposed lease area must be staked and notice of the proposed lease must be
advertised. NR § 4-11A-09(g). At that time, interested persons may file to protest the
issuance of the lease. A protestant may request a contested case hearing. Id. If no protest
is filed or if a final decision is issued dismissing the protest, the DNR shall issue the lease,
with or without conditions, unless it finds the lease application should be denied “for
reasonable cause” in order to protect “the public health, safety, or welfare.” NR § 4-11A-
09(d)(4). Once a lease is issued, it may be terminated by the DNR at any time for a violation
of the subtitle.
A submerged land leaseholder “may cultivate shellfish on the submerged land, in
temporary protective enclosures approved by the [DNR] on the surface of the submerged
land, or in any other manner authorized by the [DNR].” NR § 4-11A-08(d). A water column
4
leaseholder may cultivate shellfish “[s]ubject to approval by the [USACE], on or under the
surface of the water in a floating structure; or . . . [i]n any other manner authorized by the
[DNR].” NR § 4-11A-08(d). A leaseholder may not exclude others from leased areas during
the term of the lease, but non-leaseholders are prohibited from removing and/or destroying
shellfish or equipment from the leased areas. See NR § 4-11A-16(b).
B. Marsh’s Lease Application
On March 30, 2009, Marsh filed his application for a shellfish aquaculture lease with
the MDE. The application was transferred to the DNR following the change in the law noted
above. Marsh sought to lease three 16-acre areas of the water column in Chincoteague Bay
for the purpose of raising oysters in cages. He also sought to lease the submerged land below
the water column in those same areas for raising clams in the substrate. Marsh amended his
application to withdraw the request to lease the submerged land for clam cultivation and his
application was treated as a water column lease application from that point forward.
Marsh’s proposal for the water column lease was as follows. He planned to raise the
oysters “from seed in cages made of plastic-coated wire mesh.” Each cage would be 2 feet
wide, 4 feet long, and about 6 inches deep. The cages would rest on between 2-inch to 6-
inch “semi-cylindrical feet” sitting on the bottom of the bay. “Helical anchor bolts” would
be drilled into the substrate to a depth of about 3 feet and the cages would be tethered to the
anchors with nylon rope. The oysters would be inside bags inside the cages until they
5
reached a certain size, when they would be removed from the bags. Marsh planned to begin
operations with 500 cages and then expand if his business was successful.
All three proposed lease areas were located about one mile south of South Point,
which is the southernmost point of a peninsula that juts into the coastal bays south of Ocean
City and to the west of Assateague Island. To the east of the peninsula is Sinepuxent Bay,
to the west is Newport Bay, and to the south is Chincoteague Bay. All three are classified
as “Atlantic Coastal Bays.” NR § 4-11A-01(e). A few miles south of South Point are the
South Point Shoals, a natural sandbar that extends several miles south. Between South Point
and the shoals the water ranges in depth from 2 feet to 6 feet. A federal navigational channel
maintained by the USACE runs in a generally north-south direction to the east of the
peninsula and to the west of Assateague Island.
South Point also is the name of a residential community on the peninsula comprised
of about 400 homes. Most of the waterfront homes in the community had docks and piers
until Superstorm Sandy damaged and destroyed them in October 2012. The residents use the
coastal bay area for recreation, including sailing, kayaking, and motor-boating.
Commercial fishermen also frequent the area in the spring and summer. As many as
15 to 20 commercial boats may be in the area at any given time during the height of the
season. Fishermen navigating from the federal navigational channel to the east of South
Point to Newport Bay to the west use an east-west channel of deeper water between South
Point and the South Point Shoals. They refer to this channel as “the drain.”
6
The review of Marsh’s application took more than three years. It was reviewed by the
DNR, MDE, the USACE, and various internal agencies. During the course of the review,
Marsh made additional amendments to his application, to address concerns related to
navigation in the area. In each amendment he reduced the size of the proposed lease areas
and moved them farther from the shore of South Point. A public hearing was advertised and
held following each amendment to the lease application.
In January of 2012, at the request of the DNR, USACE conducted a bathymetric
survey6 to identify and chart a 60-foot wide east-west “best water route” south of South Point
and north of the proposed lease areas.7 This route, which the DNR calls the “fairway,”
ranged in depth from six feet to four and one-half feet. As a result of these findings, Marsh
amended his application once again, to ensure that none of the lease areas would infringe on
the fairway. As revised, the proposed lease areas were at least 120 feet south of the fairway.8
The three proposed areas were, from east to west, 10.23 acres, 3.41 acres, and 5.13 acres,
respectively. The water depth in these areas was approximately 4 feet. A final public
hearing on Marsh’s revised lease application was held on July 10, 2012.
6
A bathymetric survey is a measurement of water depths in a given area using
SONAR.
7
The survey was requested in response to concerns raised at the public hearings by
residents of South Point and by commercial fishermen.
8
The easternmost lease area was 844 feet west of the federal navigational channel.
7
Thereafter, the lease sites were marked and the DNR conducted its standard internal
review. It found that the easternmost (and largest) lease site was more than 1,300 feet from
the shore at its closest point; that the middle (and smallest) lease site was more than 2,300
feet from shore; and that the westernmost lease site was about 1,700 feet from shore. There
was 846 feet between the westernmost and middle sites and 1,091 feet between the middle
and the easternmost sites. The DNR also determined that the proposed lease locations all
were in areas classified as approved by the MDE for shellfish cultivation and that they
satisfied all seven criteria in NR section 4-11A-08(c). Finally, the DNR determined that
there was no reasonable cause to deny the lease to protect the public health, safety, or
welfare.
On August 9 and 16, 2012, the DNR published a notice of the proposed lease on its
website and in the Worcester County Times. On August 20, 2012, it mailed notices to
property owners with homes within a certain distance of the lease areas and to other
interested persons. Between September 14 and September 24, 2012, the DNR received 50
protests from 98 individuals and the trust. Several protestants requested a contested case
hearing. The DNR forwarded all the protests to the Office of Administrative Hearings
(“OAH”) and delegated to it the authority to make the final agency decision.
C. The Contested Case Hearing
8
An Administrative Law Judge (“ALJ”) with the OAH presided over the contested case
hearing, which began on October 1, 2012, and lasted three days. Thirty protestants, including
all of the appellants, participated and/or were represented by counsel at the hearing.
The DNR called one witness: Karl Roscher, the director of its Aquaculture Division
and its Aquaculture Coordinator. Roscher testified generally about the application process
for aquaculture leases and specifically about the review of Marsh’s application. He
explained that Marsh’s application was for a water column lease because he was proposing
to raise oysters above the submerged land. He stated that the lease application met all the
statutory criteria and that the DNR did not perceive any concerns that would justify its denial.
Rather, the DNR concluded that the leases would have “minimal impact on the other uses of
the area.”
Marsh testified on his own behalf. He explained the nature of his lease application,
as discussed above. He further testified that he had measured the water depth in the proposed
lease areas himself and those measurements showed that the clearance between the tops of
the cages and the surface of the water would be at least 3 feet at low tide.
Seven residents of South Point, one former resident and current property owner, and
three commercial fishermen testified in opposition to the proposed lease. Two of the
commercial fishermen were accepted by the ALJ as experts in navigation and navigability.
The commercial fishermen testified about their experiences using the east-west
fairway south of South Point and north of the proposed lease areas. They referred to the
9
fairway as “the channel” or “the drain.” Jason Mumford, who was accepted as an expert in
navigation, testified that Superstorm Sandy had caused the sand on the bottom of the
Chincoteague Bay to move and, as a result, the depth measurements taken by the USACE no
longer were accurate. He opined, moreover, that navigating a large commercial fishing boat
through a 60-foot channel is difficult to impossible in rough water. He explained that, if he
attempted to navigate over the lease areas, he would risk catching his motor on the cages and
causing damage to his boat and to Marsh’s gear.
Another commercial fisherman, Kirk Stewart, testified that the width of the deeper
channel as represented on the USACE’s bathymetric chart was incorrect and that the deeper
part of the channel was much narrower. He further testified that he would have difficulty
navigating through the channel if the lease were granted.
Nearby residents and property owners testified about their use of the waters south of
South Point for recreational boating and other watercraft. They complained that navigating
between South Point and the South Point Shoals was difficult because of shallow water and
because there were hundreds of crab pots on the bottom. The crab pots generally extended
about 20 inches from the bottom. Residents testified that they had run aground on many
occasions and that they had hit crab pots. The residents all expressed the belief that
navigating over the lease areas would be unsafe and that navigating around them would be
extremely difficult, if not impossible.
D. The Agency Decision
10
On February 20, 2013, the ALJ filed his decision on behalf of the OAH, which
became the final agency decision. The ALJ made 59 detailed findings of fact about South
Point, the coastal bay near South Point, the nature of Marsh’s lease application, and the use
of the waters near the proposed lease areas. Most of these facts were undisputed. As
relevant here, the ALJ found:
9. The water to the south and southwest of South Point is shallow, but varies
in depth. Directly off shore is a shallow area (approximately two feet deep)
that extends out for several hundred yards. Beyond this is a narrow deeper
(meaning four to five feet) section that is sometimes called a drain or channel.
Beyond this deeper water is South Point Shoals, where the water again
becomes shallow. This shallow area extends south in Chincoteague Bay for
a mile or more.
10. The federal navigation channel runs through South Point Shoals, but is not
well-maintained in that area.
* * *
12. During low tide, brisk north (including northwest and northeast) winds can
push the water south out of these shallow areas and expose the bottom. This
phenomenon also has the effect of making the deeper areas temporarily much
shallower.
* * *
15. Hurricane Sandy struck the South Point area with high winds on October
29, 2012, . . . changing the contours of the bottom of the coastal bays.
* * *
25. The [USACE] identified a sixty-foot wide “best water route,” essentially
an area of deeper water, which ran through all of the proposed lease areas,
roughly in an east-west direction. . . . .
11
26. In response to the [USACE]’s findings, . . . [Marsh] . . . revised [his]
application . . . .
* * *
29. [As revised,] [a]ll three [proposed lease] areas lie south of [the USACE]’s
best water route; the western and middle areas are about ninety feet south and
the eastern area is about 100 feet south at its closest point.
(Footnote omitted.)
In the “Discussion” section of his decision, the ALJ stated that the first issue was what
“type of lease [was] being considered.” The DNR’s position was that Marsh’s application
was for a water column lease; the protestants’ position was that the application was for a
submerged land lease. The ALJ took note of Roscher’s testimony that Marsh’s application
was “‘absolutely’ a water column lease” because it was the DNR’s policy to treat a lease to
raise shellfish in enclosures above the surface of the submerged land as a water column lease,
but rejected it, reasoning that it was “contradicted by the words of the statutes.” He pointed
out that NR section 4-11A-08(d) provides that a water column leaseholder is permitted to
cultivate shellfish “on or under the surface of the water in a floating structure,” whereas NR
section 4-11A-07(d) provides that a submerged land leaseholder is permitted to “cultivate
shellfish on the submerged land, in temporary protective enclosures approved by the [DNR]
on the surface of the submerged land, or in any other manner authorized by the [DNR].” The
ALJ found that Marsh did not plan to use floating structures; rather, he planned to cultivate
oysters in enclosures resting on the submerged land. On these bases, the ALJ determined that
Marsh’s application was for a submerged land lease.
12
The ALJ next turned to the question whether this “distinction cause[d] additional
strictures for the DNR in considering whether the lease should be approved.” He explained
that the protestants were taking the position that pursuant to subtitle 11A the DNR was
required to “take into account other uses of the area, including navigation, recreation, and
fishing,” before approving a submerged land lease. The ALJ disagreed, concluding that the
subsection of the statute requiring the DNR to take these considerations into account only
applies when it is deciding to preapprove areas for submerged land leases or to prohibit
leasing in certain areas. See NR § 4-11A-07(e) (“In establishing areas that are preapproved
for leasing or that may not be leased under paragraph (1) of this subsection, the [DNR] shall
consider potential conflicts presented by other uses of the proposed area, including
navigation, recreation, and commercial fishing.”).9
Having concluded that in this case the statutory criteria for approval of water column
leases and of submerged land leases are the same, the ALJ turned to the location criteria set
forth in NR section 4-11A-07(c). He found that, although there was testimony that
submerged aquatic vegetation is present in the proposed lease areas, the evidence was “clear”
that these areas are not in an SAV protection zone. He further found that the proposed lease
areas are within 150 feet of the fairway charted by the USACE, but the fairway is not a
federal navigation channel, and therefore the proposed lease areas all are more than 150 feet
9
Applications for leases in areas that the DNR has preapproved for leasing go through
a streamlined review process and need not be advertised prior to issuance of a lease. See NR
§ 4-11A-09(f).
13
from the closest such channel. He also found that the other five location criteria for a
submerged land lease were met. As already mentioned, these same criteria apply to water
column leases.
The ALJ concluded, however, that even though the statutory criteria were satisfied,
for the DNR to issue the requested lease it had to apply the common law public trust doctrine
to determine the “impact of the lease on the public’s ability to carry on navigation, trade, and
fishing in the proposed lease area.” The ALJ explained that the public trust doctrine
“establishes the principle that the State owns the navigable waters and submerged land
beneath those waters in trust for the benefit of its citizens,” and that the principle “puts some
limits” on the legislature’s authority to regulate the use of the navigable waters and
submerged lands. He reasoned that because the legislature had delegated authority to the
DNR to review aquaculture leases, the DNR should “consider input from the legislature,
local governing bodies and commissions, and the people in making [the decision whether to
issue a lease].”
The ALJ found that the DNR had not taken the public trust doctrine into account in
approving Marsh’s application, and therefore he (the ALJ) would “undertake an analysis [of
those considerations] based upon the evidence presented at the hearing.” The ALJ found the
evidence clear that a “commercial fishery for crabs and finfish exists in the area of the
proposed lease.” He stated that there was credible testimony that, if Marsh’s lease
application were approved, crabbing in the area would be disturbed because crabbers would
14
not be able to tell whether their crab pots were sitting on the bottom of the coastal bay or on
top of the oyster enclosures.
The ALJ further found that the evidence was “inconclusive” and “insufficient” to
permit a finding as to whether the fairway identified in the USACE bathymetric survey had
remained in the same location and at the same depth to accommodate the needs of
commercial fishermen navigating between South Point and the lease areas. He noted that
Mumford and Stewart, both of whom he had accepted as experts in navigation, had opined
that the fairway identified by the USACE is narrow and difficult to navigate with a
commercial fishing boat. They had described “bouncing” off both sides of the channel as
they passed through the area, and had stated that the “channel” had “shifted and become
shallower” following Superstorm Sandy. All three commercial fishermen testified that they
would be unable or unwilling to use the fairway if the lease were approved for fear that they
would unintentionally hit the oyster cages. The ALJ emphasized that numerous residents of
South Point had testified that they used the waters near the lease areas for watercraft and that
this too was a type of navigation the DNR was required to consider, under the public trust
doctrine, in deciding whether to grant a lease application.
The ALJ opined:
The overall picture that emerges, based on the evidence presented at the
hearing, is one of a generally shallow area of two to four feet of water
extending south from South Point and through South Point Shoals. An east-
west channel or drain with a depth of four or five feet cuts through the
shallows in an east-west direction. This channel is the only safe passage for
larger boats in the area, and the three sections of the proposed lease are in or
15
close to the channel. The [USACE]’s survey locates the lease areas in 4.1 to
5.3 feet of water, not much different from the depths it identified as the best
water route.
(Emphasis added.) The ALJ found that the “shallow depth[s]” already “significantly
constrain[ed] navigation in the area” and that leasing the three areas of submerged land near
the only safe passage through the shallow waters would interfere with commercial navigation
by fishermen and recreational navigation by residents. The ALJ concluded that, under the
public trust doctrine, the DNR was “not permit[ted] . . . to close off this area for the benefit
of [Marsh],” because the right of the public to navigate and fish in the area “outweighed” the
State’s interest in promoting aquaculture and Marsh’s interest in the aquaculture lease. For
these reasons, the ALJ’s final decision on behalf of the DNR was that Marsh’s lease
application would be denied.
E. Judicial Review in the Circuit Court
Marsh and the DNR filed timely petitions for judicial review in the circuit court.10
They argued that the ALJ had erred as a matter of law in ruling that the application was for
a submerged land lease, rather than for a water column lease, and in denying the application
under the public trust doctrine when all the applicable statutory criteria had been satisfied.
They argued, moreover, that there was not substantial evidence in the record to support the
ALJ’s findings that the proposed lease would interfere with fishing and navigation.
10
Pursuant to section 10-222 of the State Government Article, an agency that delegated
the final administrative agency decision in a contested case to the OAH may seek judicial
review of that decision so long as the agency was a party before the OAH.
16
The circuit court held a hearing and, on April 30, 2014, filed an opinion reversing the
ALJ’s decision. The court found that the ALJ’s “decision that the disputed lease constituted
a submerged land lease, and not a water column lease,” was not supported by substantial
evidence in the record. The court concluded, however, that that finding had “played no role”
in the ALJ’s ultimate decision to deny the lease application. The court then turned to the
public trust doctrine. It agreed that the public trust doctrine is recognized in Maryland but
found that the legislature had “knowingly incorporated the public trust doctrine into specific
statutory sections of the Aquaculture Subtitle,” such as by requiring the DNR to take
navigation, recreation, and fishing interests into account before preapproving an area for
submerged land leasing; and that it is plain that, by including those considerations in some,
but not all, of the provisions regulating aquaculture leasing, the legislature intended to
modify the common law doctrine to “establish a streamlined and more efficient process of
granting aquaculture leases and encouraging aquaculture.” On that basis, the court ruled that
the public trust doctrine did not apply and that the ALJ had erred by denying the lease
application based on his weighing of the competing interests under that doctrine.
The appellants noted this timely appeal. We shall include additional facts in our
discussion of the issues.
STANDARD OF REVIEW
In the instant case, the final agency decision was the decision of the ALJ. In an appeal
from a judgment entered on judicial review of a final agency decision, we look “through” the
17
decision of the circuit court to review the agency decision itself. People’s Counsel v.
Country Ridge Shopping Center, Inc., 144 Md. App. 580, 591 (2002). Our role “in reviewing
[the final] administrative agency adjudicatory decision is narrow.’” Bd. of Physician Quality
Assurance v. Banks, 354 Md. 59, 67 (1999) (citing United Parcel v. People’s Counsel, 336
Md. 569, 576 (1994)). It is limited to determining whether “there is substantial evidence in
the record as a whole to support the agency’s findings and conclusions, and to determine if
the administrative decision is premised upon an erroneous conclusion of law.” Id. at 67-68
(quoting United Parcel, 336 Md. at 577). “An agency’s fact-finding is based on substantial
evidence if ‘supported by such evidence as a reasonable mind might accept as adequate to
support a conclusion.’” Kim v. Md. State Bd. of Physicians, 196 Md. App. 362, 370 (2010)
(quoting People’s Counsel v. Surina, 400 Md. 662, 681 (2007). “The agency’s decision must
be reviewed in the light most favorable to it; because it is the agency’s province to resolve
conflicting evidence and draw inferences from that evidence, its decision carries a
presumption of correctness and validity.” State Bd. of Physicians v. Bernstein, 167 Md. App.
714, 751 (2006).
With respect to legal conclusions, although we may “give weight to an agency’s
experience in interpretation of a statute that it administers, . . . it is always within our
prerogative to determine whether an agency’s conclusions of law are correct.” Schwartz v.
Md. Dep’t of Natural Res., 385 Md. 534, 554 (2005). “Our review is limited to the
conclusions of law actually made by the agency, [however], and we will affirm the agency’s
18
decision only if it is sustainable on the grounds given.” Ak’s Daks Communications, Inc. v.
Md. Securities Div., 138 Md. App. 314, 326 (2001).
DISCUSSION
I.
The appellants contend the ALJ correctly determined that Marsh’s application was for
a submerged land lease, not a water column lease, and that the circuit court erred in reversing
the ALJ’s determination on this point. They assert that because Marsh testified that he
planned to use temporary enclosures resting on the bottom of the bay to cultivate oysters and
to anchor those enclosures into the substrate, his lease fell within the statutory language
describing shellfish cultivation on the submerged land. See NR § 4-11A-07(d).
The DNR and Marsh point out that Roscher testified that the DNR and the USACE
both treated Marsh’s application as one for a water column lease; and that it was the DNR’s
policy to treat any proposed shellfish cultivation above the surface of the submerged land as
a water column lease. They argue that the DNR’s policy in this regard is entitled to
deference. They also argue that the plain language of the statute does not support the ALJ’s
conclusion.
The first level facts on this issue are undisputed. Marsh’s application (as amended)
called for the cultivation of oysters in small mesh cages resting on cylindrical feet that, in
turn, would rest on the land at the bottom of Chincoteague Bay. He was not going to use
floating structures; the mesh cages would be anchored to the substrate. Roscher testified that
19
“[b]ecause [Marsh] intend[ed] to use cages that rest on the bottom,” he was applying for a
water column lease. He explained that the DNR does not permit submerged land
leaseholders to use “gear or cage equipment that extends above the bottom.” Rather, the
cultivation carried out via a submerged land lease takes place within the submerged land, not
above it.
As noted, the ALJ rejected Roscher’s testimony on this point, concluding that it was
contrary to the statutory language. We agree with the DNR and Marsh that this was legal
error. The definition of a “water column lease” in NR section 4-11A-01(p) is a lease of “the
column of water on or under the surface of the water and above the surface of the
submerged land.” (Emphasis added.) In contrast, the definition of a “submerged land lease”
in NR section 4-11A-01(n) is a lease of “any land lying beneath the waters of the State.”
(Emphasis added.) These definitions make plain that oysters cultivated in cages located
above the surface of the submerged land are being cultivated in a water column and not in
submerged land. Thus, Marsh’s application was for a water column lease. The DNR’s
reading of the statutory definitions, as expressed by Roscher, was correct.11
11
Ordinarily, we accord deference to an agency’s interpretation of the statute it
administers. See, e.g., Marzullo v. Kahl, 366 Md. 158, 172 (2001) (“an administrative
agency’s interpretation and application of the statute which the agency administers should
ordinarily be given considerable weight”); Lussier v. Md. Racing Comm’n, 343 Md. 681,
696-97 (1996). Roscher’s testimony was that the DNR always treats lease applications to
cultivate shellfish in any enclosure above the surface of the submerged land as a water
column lease. The DNR’s long-standing interpretation of the statute was entitled to
deference.
20
The ALJ did not examine the pertinent statutory definitions. Instead, he relied on
other language in subtitle 11A that grants the DNR discretion to permit a submerged land
leaseholder to cultivate shellfish “in temporary protective enclosures approved by the [DNR]
on the surface of the submerged land, or in any other manner” it approved. NR. § 4-11A-
07(d). That the DNR has such discretion does not alter the statutory definitions of the two
types of aquaculture leases; nor does it mean that the DNR must treat every application to
cultivate shellfish in cages on the surface of the submerged land as a submerged land lease.
Similarly, the language in NR section 4-11A-08(d) permitting a water column leaseholder
to cultivate shellfish “on or under the surface of the water in a floating structure” if approved
by USACE or “[i]n any other manner authorized by the [DNR]” plainly does not require that
water column cultivation occur only in a floating structure or prohibit cultivation from taking
place in cages resting on the submerged land, so long as the cultivation itself occurs in the
water column, not under the ground.
Accordingly, the ALJ erred as a matter of law in determining that Marsh’s application
was for a submerged land lease, not for a water column lease.
II.
As the DNR points out, the ALJ’s erroneous finding that Marsh applied for a
submerged land lease, not a water column lease, did not alter his disposition in this case.
Before the ALJ, the protestants had argued that an application for a submerged land lease is
subject to stricter scrutiny by the DNR than an application for a water column lease. The
21
ALJ rejected this argument, concluding that the same seven location criteria apply to both
types of aquaculture leases and that those criteria all were met. The finding that the seven
location criteria were satisfied was supported by substantial evidence in the record.
As recounted above, even though all seven location criteria for granting an application
for an aquaculture lease were met, the ALJ denied Marsh’s application, based on the
common law public trust doctrine. He reasoned that, under that doctrine, before granting an
application for an aquaculture lease, the DNR must weigh the interests of the applicant in
leasing an area of the water column (or, in the ALJ’s view, an area of submerged land) and
the DNR’s interest in promoting aquaculture against the interests of nearby residents and
commercial fisherman to navigate and fish in the area. The ALJ engaged in that weighing
process himself and found that the proposed lease would interfere significantly with the
interests of the residents and fishermen and that those interests outweighed Marsh’s interest
in raising oysters.
Appellant Diffendal argues that the ALJ correctly ruled that the public trust doctrine
applies and that it requires the DNR to consider conflicts with navigation, recreation, and
commercial fishing before granting an aquaculture lease. He maintains that the evidence was
“overwhelming” and “uncontroverted” that the Marsh aquaculture lease would interfere with
commercial fishing in the area. He argues, moreover, that the lease application was subject
to being denied pursuant to NR section 4-11A-09(d)(4) because it raised “serious, legitimate,
and immediate public safety issues.” Appellant Tunis argues that the public trust doctrine is
22
an “independent equitable consideration” and that its “elements are embodied in the [NR
section] 4-11A-07 [pertaining to submerged land leases] and [NR section] 4-11A-09
[pertaining to the process for applying for a lease].” Specifically, she points to the language
permitting the DNR to deny a lease application “for reasonable cause” or with “conditions”
“as it considers necessary to protect the public health, safety, and welfare.” NR § 4-11A-
09(d)(4). Finally, appellant Shandrowsky argues that the court erred by concluding that the
legislature intended by the enactment of subtitle 11A to abrogate the common law public
trust doctrine.
The DNR responds that the common law public trust doctrine does not apply so as to
require it to engage in an “extra-statutory analysis” of the impact an aquaculture lease will
have on navigation, recreation, or commercial fishing in deciding whether to grant it. Rather,
the public trust doctrine was incorporated in the statutory criteria, which reflect the
legislature’s intent to “manage the uses of [Maryland’s waterways] in a way that is in the best
interest of the entire public.” Marsh makes the related argument that in enacting subtitle 11A
the legislature exercised its authority under the public trust doctrine to regulate aquaculture
in the Chesapeake Bay and the coastal bay areas in the best interest of all the citizens of the
State. Thus, with respect to aquaculture leases, the common law doctrine has been
superseded by subtitle 11A. It follows that the public trust doctrine is not an independent
restriction on the DNR’s authority to issue such leases.
23
“The navigable waterways within Maryland’s boundaries and the lands beneath them
generally are ‘held’ by the State for the benefit of the inhabitants of Maryland.” Anne
Arundel Cnty. v. City of Annapolis, 352 Md. 117, 132 (1998); see also Clickner v. Magothy
River Ass’n, Inc., 424 Md. 253, 267 (2012). Under the public trust doctrine, therefore, the
State acts as a “‘quasi trustee for the public benefit and to support the rights of navigation
and fishery to which the entire public are entitled therein.’” City of Annapolis, 352 Md. at
133 (quoting Mayor of Baltimore v. Baltimore & Philadelphia Steamboat Co., 104 Md. 485,
494 (1906)).
In its role as “quasi trustee” over the navigable waters, the State has the authority to
regulate the use of those waters. See Harbor Island Marina v. Bd. of Cnty. Comm’rs., 286
Md. 303, 314 (1979) (“As proprietor of [waters held in public trust], the State holds all
powers of regulation and control over these ‘lands,’ subject to the paramount power of the
United States to regulate navigation”); see also, generally Title 4 of the NR Article
(regulating fishing, crabbing, and shellfish harvesting); NR § 8-701 et seq. (regulating
boating on State waterways). The General Assembly was exercising its regulatory power as
quasi-trustee for the benefit of all the citizenry when it enacted subtitle 11A. In doing so, it
expressly stated that a thriving aquaculture industry would benefit the State. The location
criteria for aquaculture leases require that those areas be set back from shorelines, public
shellfish fishery areas, registered pound net sites, and federal navigation channels. See NR
§§ 4-11A-07(c) & 4-11A-08(c). These restrictions are tailored to accommodate the public’s
24
interest in the use of the waters for recreation and navigation and to protect the right of the
public to fish, while advancing the State’s interest in promoting commercial fishery. If the
statutory criteria are met, the only basis on which a lease application may be denied is “for
reasonable cause” to protect “the public health, safety, and welfare.” NR § 4-11A-09(d)(4).
Thus, the DNR is not bound to inquire into the impact of each lease application on navigation
and fishing interests.12
The appellants have not cited, and our research has not revealed, any Maryland case
holding that when the legislature has exercised the power of the State under the public trust
doctrine to regulate the use of navigable waters, the public trust doctrine nevertheless
continues to apply to require a balancing of interests above and beyond the statutory criteria
set by the legislature. We conclude that the ALJ erred as a matter of law in holding that the
public trust doctrine imposed additional, extra-statutory restrictions on the grant of an
aquaculture lease and in denying Marsh’s application on that basis.
Because the ALJ found as a fact that the statutory location criteria had been met, the
lease application had to be granted absent a finding that “reasonable cause” existed to deny
the application to “protect the public health, safety, and welfare.” NR § 4-11A-09(d)(4).
12
We agree with the DNR, moreover, that the interests of nearby property owners and
commercial fishermen who frequent the waterway in question may not be equated to the
interest of the public generally. The State holds the lands in trust for all of the citizens, not
just those with administrative standing to protest a lease application. Thus, a contested case
hearing never would be the appropriate forum to adjudicate the public’s rights under the
public trust doctrine. This is appropriately a legislative inquiry. See, e.g., NR § 1-501 et
seq., Environmental Standing Act.
25
Appellants Diffendal and Tunis contend that because the ALJ found that the grant of the
lease application would create “unsafe” conditions, we can and should affirm the final
agency decision to deny the lease on the basis of reasonable cause under that subsection. We
disagree. The ALJ made abundantly clear that he was denying the lease application pursuant
to the common law public trust doctrine, not pursuant to NR section 4-11A-09(d)(4). Aside
from a passing reference to the testimony of residents of South Point and the commercial
fishermen that the placement of oyster cages on the bottom of the bay could create “unsafe”
conditions, the focus of his decision was on interference with navigation and recreation. The
ALJ did not make any finding under NR section 4-11A-09(d)(4).
We need not remand this matter for the ALJ to make a finding under that statutory
subsection, however, because the record of the contested case hearing is devoid of competent
evidence that would support a finding that the “public health, safety, and welfare” would be
at risk if Marsh’s lease application were granted. The testimony and evidence before the ALJ
showed, at most, that the grant of the lease application might inconvenience commercial
fisherman attempting to navigate along the east-west fairway, particularly at low tide or in
very windy conditions. The three fishermen who testified all stated they would continue to
fish and crab in the area, however. Moreover, the testimony of the fishermen and the
residents generally was that navigation between and around the coastal bays around South
Point always was difficult because of the shallow depths.
26
We agree with DNR and Marsh, moreover, that the testimony by residents that the
grant of the lease application presented serious safety concerns was speculative. These
witnesses stated that they routinely navigated on jet skis, sailboats, and motorboats around
“forest[s]” of crab pots extending 20 inches above the substrate and through shallow areas
where they frequently ran aground. This testimony could not be reconciled with their
testimony that the presence of wire mesh cages anchored to the bottom of the bay and
extending no more than 12 inches above the surface in an area with water depth between 4
and 5 feet would pose a hazard to them or their children. There was no evidence that
similarly placed oyster cages ever had presented a safety hazard or that the hazard was
different in character than the hazard posed by the use of commercial crabbing pots. In sum,
none of the evidence presented by protestants before the ALJ rose to the level of a threat to
the public health, safety, or welfare sufficient to justify a denial of the lease application for
reasonable cause under NR section 4-11A-09(d)(4).
JUDGMENT OF THE CIRCUIT COURT
FOR ANNE ARUNDEL COUNTY
AFFIRMED. COSTS TO BE PAID BY THE
APPELLANTS.
27