The Alaska Department of Environmental Conservation billed Alyeska Pipeline Service Co. for costs the department incurred defending against Alyeska's administrative challenge of an air quality control permit. Although federal law requires the department to recover all permit-related costs from industry, Alyeska argues that state law and due process do not allow the department to recover these costs directly from the appealing permit holder. Because we interpret former AS 46.14.240 as allowing the fee assessment, and because Alyeska has failed to demonstrate that its due process rights were violated, we affirm the decision of the superior court that affirmed the ruling of the department's deputy commissioner.
The federal Clean Air Act (the Act) requires states to issue air quality control permits to major stationary sources of air pollution.
The current dispute concerns the department's attempt to recoup from Alyeska the costs the department incurred defending the two permits during Alyeska's administrative appeals.
On April 30, 2004 Alyeska requested department review of these fees under the department's fee review procedure. Alyeska argued that neither Alaska law nor due process authorized the department to recover the department's defense costs directly from an appellant. The director of the department's Air Quality Division denied Alyeska's appeals on June 8, 2004. On Alyeska's motion for reconsideration, the department's deputy commissioner again denied the fee appeal. Alyeska appealed the decision to the superior court. On July 7, 2005 Superior Court Judge Joel H. Bolger upheld the decision of the deputy commissioner.
Through March 2005 Alyeska had contested a total of $34,556.39 in permit administration fees invoiced to it by the department in connection with Alyeska's appeals of the two air quality permits. Alyeska also anticipates being billed an additional $63,500 in fees and $2,151.27 in costs for work performed by the Department of Law on the permit appeals. The appeal now before us, however, concerns only the initial $8,073 invoice. As far as we can tell from the record, the department had not yet ruled on the propriety of the remaining invoices when this appeal was commenced. Furthermore, Alyeska could not have challenged the Department of Law's costs and fees because it had not yet been invoiced for them. Our decision today is not
When reviewing an agency decision that raises questions of statutory interpretation involving legislative intent, we review the questions independently, applying the substitution-of-judgment standard.
Whether an agency action is a "regulation" requiring rulemaking under the Alaska Administrative Procedure Act is a question of law that does not involve agency expertise and that we therefore review applying our independent judgment.
Alyeska argues that the permitting system in place when it appealed the air quality permits did not authorize the department to recover its appeal costs directly from Alyeska.
The Clean Air Act sets national standards for the reduction of air pollution but allows states to largely control the process by which those standards are met.
The Act requires that industry, not state government, bear the costs of the permitting program.
Alaska has created a permitting program under the Act.
In its regulations in force at the time of the controversy, the department set the permit administration fee rate at $78 per hour of staff time.
All stationary emissions sources must also pay "emission fees," which former AS 46.14.250(h) defined as
Alyeska argues that under the version of AS 46.14.240(c) that applies in this case the department was not authorized to recover the costs of defending an administrative appeal through permit administration fees. It suggests that the department could have more appropriately recovered these costs through emission fees.
In interpreting a statute we "consider its language, its purpose, and its legislative history, in an attempt to give effect to the legislature's intent, with due regard for the meaning the statutory language conveys to others."
To prevail, Alyeska must explain why the plain text of the statute should not govern the outcome of this case. Former AS 46.14.240(c)(3) specifically allowed the department to recoup, through permit administration fees, the costs of "reviewing . . . permits." An administrative appeal of permit terms would seem to fall squarely within the ambit of "reviewing" the permit.
Alyeska advances several arguments against this plain reading of the statute. It first contends that the term "reviewing," read in the overall context of "receiving, reviewing, preparing, processing, and issuing" permits, cannot include adjudication of a permit because "reviewing" is listed before "issuing."
It is not obvious that the terms are in chronological order. Although it is true, for example, that "receiving" a permit application must precede "issuing" the permit, it is less clear that "preparing" must precede "processing" or must follow "reviewing." But even assuming that the terms are listed in the order in which the agency generally starts a particular stage of the permitting process, it does not follow that the legislature intended to specify a rigid sequence that prevented one activity from beginning before a previous one ended. "[R]eviewing," "preparing," and "processing" are all functions that one would expect might continue throughout the permitting process. Nothing in the statute suggests that these functions necessarily end upon "issuing" the permit. Thus, "reviewing" is best interpreted as referring to not only the department's initial review when it first receives a permit application, but also its review at each point when it reviews or is asked to review its work; this logically includes administrative hearings.
Alyeska next argues that an administrative appeal cannot be considered "reviewing" by the department because once the appeal process is initiated, the department becomes an adverse party and is therefore defending rather than reviewing its work. But as we have noted, the purpose of an administrative review process is to allow an agency "to correct its own errors so as to moot judicial controversies."
In its 1993 act creating Alaska's permitting program, the legislature identified one of the act's purposes as "retain[ing] federal approval of the state's air quality control program in order to ensure the continued receipt of federal highway and air pollution control money."
Alyeska suggests that an interpretation of former AS 46.14.240(c) that excludes appeal costs need not violate federal law because the department could recoup those costs via emission fees. As noted above, emission fees cover costs that are "generally not associated with service provided to a specific facility," such as "rent, utilities, permit program management, administrative and accounting services, and other costs as identified by the department in regulations."
We are not convinced that the statutory definition of emission fees is properly understood as including appeal costs. Unlike the department's rent or utilities costs, the administrative
We also note that the legislative history of former AS 46.14.240(c) indicates a desire to require individual permit holders to internalize the costs of their own permits. The statute was drafted by a legislative working committee comprised of representatives from various stakeholders in the federal Clean Air Act, including the oil and gas industry.
Because the legislature created no other fee provision that can reasonably be interpreted as allowing the recovery of appeal costs, an interpretation of subsection .240(c) that excluded such costs would seem to require a conclusion that the legislature did not intend to comply with the Act's mandate to recoup appeal costs. We are unwilling to draw such a conclusion without evidence suggesting that the drafters intended such a result.
We therefore conclude that former AS 46.14.240(c) allowed the department to recover the costs of administrative appeals through permit administration fees.
Alyeska also argues that the department's interpretation of former AS 46.14.240(c) violated Alyeska's due process rights. It contends that the department's interpretation impermissibly impeded the ability of permit holders to seek review of flaws in their permits by forcing them to bear the department's defense costs even if their complaints were valid. It also argues that its due process rights were violated because it was not given proper notice that it would have to pay the department's appeal costs and because the department's adjudication process was biased against Alyeska.
Alyeska's first argument is that the department's interpretation of the fee administration provision unjustifiably impedes its access to justice, and therefore fails the balancing test set out in Mathews v. Eldridge
The parties disagree regarding all three factors. But even if we assume that the first and third factors favor Alyeska, its due process claim nevertheless fails because Alyeska has not shown that the fees created any risk of an erroneous deprivation in this case.
Alyeska contends that shifting the department's appeal costs onto the permit holder creates a risk of erroneous deprivation because it gives the department an "unfair advantage" by forcing "Alyeska and other permit holders to consider forgoing, limiting, or abandoning legitimate claims." Alyeska also suggests that the department's cost-shifting "removes the normal incentives and constraints that influence assessment of the strengths and weaknesses of [the department's] case, such as whether to press on and defend a provision with little legal basis and minimal environmental return."
Alyeska cannot claim that its due process rights were violated merely because it was forced to "consider" forgoing some or all of its claims. In Varilek v. City of Houston we held in a zoning dispute that a landowner's due process right of access to the courts would be violated by a mandatory administrative appeal fee of $200 only if the landowner could demonstrate that he was unable to pay the fee.
In this case, Alyeska pursued its claims vigorously and admits that it reached settlement with the department on contested elements of the permits. It identifies no specific harm that it suffered during that litigation. It does not suggest, for example, that the department coerced it into an unfavorable settlement under threat of exorbitant permit administration fees. Rather, it speculates about the incentives created by the provision. Because Alyeska has not demonstrated that it was in any way denied access to agency or judicial review, its due process argument fails.
Alyeska argues that Malvo v. J.C. Penney Co. requires a contrary result. In that case we held that the superior court abused its discretion by awarding full attorney's fees to the prevailing party.
Malvo was not decided on due process grounds and therefore its discussion of the due process implications of automatic fee shifting is dictum. Furthermore, unlike Malvo, Alyeska was not required to pay the full amount of the department's fees regardless of whether those fees were reasonable. The applicable regulations give permit holders the right to dispute a "fee or computation" through an administrative appeal.
Neither former AS 46.14.240 nor the implementing regulations in force at the time specifically identified appeal costs as recoverable through permit administration fees.
In Amerada Hess Pipeline Corp. v. Alaska Public Utilities Commission, the Alaska Public Utilities Commission (APUC) charged pipeline owners nearly two million dollars in costs and attorney's fees for a tariff investigation.
Like the owners in Amerada Hess, Alyeska began receiving fee invoices and was given an opportunity to contest them relatively soon after it initiated its appeals. Generally speaking, the notice requirement in due process is associated with the requirement that there be a meaningful opportunity to be heard. As we have explained: "[t]he crux of
It is true that, unlike the owners in Amerada Hess, Alyeska initiated the cost-producing action. If it had been aware of the department's policy, Alyeska could have exercised control over the costs by limiting or forgoing its appeals. This fact distinguishes this case somewhat from Amerada Hess, in which "lack of notice of the APUC's policy could not have harmed the owners" because they did not have any control over the investigation.
In addition, Alyeska should have realized that the department might recoup its appeal costs. Alyeska argues that this case is distinguishable from Amerada Hess because the owners there had some notice of the possibility of a fee assessment while Alyeska had no notice at all. Alyeska points out that AS 46.14.240(c) does not directly state that the department may recover the costs of administrative appeals. But for the reasons discussed in Part III.B above, a careful reading of AS 46.14.240(c) — particularly in light of the Clean Air Act's cost-recovery requirements — should have alerted Alyeska to the possibility that it would have to pay the department's costs if Alyeska appealed, just as it has been required to pay all other costs related to its permits. Thus, Alyeska's position at the beginning of this case was little different than that of the pipeline owners in Amerada Hess. Both had at least constructive notice of the possibility that they would be forced to pay the state's costs.
Alyeska asserts that the regulations establishing the procedure for reviewing fees are constitutionally flawed because they create impermissible conflicts of interest. Under 18 AAC 15.190, the director of the department's Air Quality Division decides fee disputes.
Alyeska's argument that the director has a conflict of interest because he is charged with ensuring compliance with federal law and meeting state budget requirements is unpersuasive. Officials employed by administrative agencies may decide administrative appeals without violating due process so long as adequate procedural safeguards exist to protect the rights of the appellant. As we noted in Amerada Hess, "[m]ost courts . . . accept that the merger of investigative and executive responsibilities with adjudication does not violate federal due process if institutional safeguards exist against the abuse of unchecked administrative discretion."
Alyeska's argument that the appeal process violates due process because the director is the principal generator of the fees he is called upon to adjudicate also fails. As the department points out, Alyeska is challenging not the reasonableness of the department's fees but its statutory and constitutional authority to charge them at all. There is no reason to think that the director would be unable to consider this argument impartially. Similarly, Alyeska's contention that superior court review is insufficient because of the director's ability to shape the record is unpersuasive because there are no factual issues in dispute in this appeal.
Alyeska argues that the Alaska Administrative Procedure Act prohibited the department from billing Alyeska for appeal costs because the department had not adopted a regulation allowing recovery of such costs.
The Alaska Administrative Procedure Act defines a "regulation" as:
Regulations as defined by this provision must be adopted pursuant to the notice and public comment requirements of the act.
We have held that the term "regulation" should be understood "expansive[ly]."
Although the definition of "regulation" is broad, it does not encompass every routine, predictable interpretation of a statute by an agency. Nearly every agency action is based, implicitly or explicitly, on an interpretation of a statute or regulation authorizing it to act. A requirement that each such interpretation be preceded by rulemaking would result in complete ossification of the regulatory state. We recognized as much in Alaska Center for the Environment v. State, in which we faced the question whether an agency's interpretation of a regulation defining "major energy facility" itself constituted a "regulation" subject to the requirements of the Administrative Procedure Act.
The department's interpretation of former AS 46.14.240(c) was such a commonsense interpretation and was therefore not subject to the Administrative Procedure Act's notice and comment requirements. The department was therefore not required to issue regulations before assessing Alyeska for the fees.
We consequently AFFIRM the decision of the superior court affirming the ruling of the department's deputy commissioner.
The department concedes that it cannot collect the fees unless it is authorized to do so by former AS 46.14.240(c)(1)-(8) and does not argue that any subsection other than (3) might be applicable.