Can the NC Division of Water Quality include a production-cap condition in an NPDES permit for a slaughter and processing plant where the operator has a poor compliance history and the cumulative effects of the industry are concerning?

Plain-English summary

The surviving portion of this opinion considers a proposed NPDES permit for Smithfield Packing Company. It answers whether North Carolina's water-quality agency could include a production cap and assesses two proposed restrictions on hog purchases. The stored original begins with numbered question 1 and lacks the opening letter context. Source

The AG said N.C.G.S. § 143-215.1 supplied authority for a production-cap condition like the proposed one, but its use "must be narrowly-tailored" and depended on this permit's unique circumstances. The opinion discusses cumulative effects from expanded hog production, Smithfield and affiliate compliance history as reported to the office, and Smithfield's initial acceptance of the condition. It says the company's consent or later opposition was a factor, not dispositive. Source

The AG assessed the two supplier restrictions separately. For a ban on purchasing from farms with a recent Notice of Violation, it listed several factors needing consideration: agency authority over suppliers, the supplier's relationship to Smithfield, retroactive application, and the definitiveness of "Notice of Violation." It said the provision as written was vulnerable to being struck down. Source

For a ban on purchases from certain new or expanded farms during a swine-farm moratorium, the opinion questioned how the agency could permit a farm under the new-technology exception yet deny that farm this market. It predicted that condition as written would be struck down if challenged. Both supplier provisions also raised concerns about affecting farmers who were not parties to the permit. The opinion does not set out a general two-part test for conditions affecting suppliers. Source

Currency note

This is a 1998 analysis of proposed permit conditions. Its original text lacks the opening context. Check the full opinion, final permit, and current law for a present permitting question.

Background and statutory framework

The opinion quotes § 143-215.1(b)'s directions on cumulative effects and its authority to attach conditions needed to achieve the Article's purposes. It also points to § 143-215.1(b)(4)b.2. for considering the applicant's and affiliates' environmental compliance history. The AG applied these provisions to the facts provided about Smithfield's permit. Source

Common questions

Did the AG say any NPDES permit may include a production cap?

No. The opinion says authority exists for a condition like this one, but stresses narrow tailoring and the particular circumstances of Smithfield's permit. Source

What did the AG say about the two hog-supplier bans?

The first, based on a supplier's Notice of Violation, was "vulnerable to being struck down" as written. The second, involving farms permitted during the moratorium, "would be struck down if challenged" as written. The opinion identifies concerns for each rather than announcing a general checklist for all supplier conditions. Source

Did the opinion establish the final terms of Smithfield's permit?

No. It analyzes proposed conditions and says unresolved issues would be better addressed in consultation with assigned hearing officers. Source

Citations

• N.C.G.S. § 143-215.1 (NC water-pollution permitting authority)
• N.C.G.S. § 143-215.1(b)(2) (cumulative-effects authority)
• N.C.G.S. § 143-215.1(b)(4)b.2. (applicant and affiliate compliance history)

Source

• Landing page: https://ncdoj.gov/opinions/proposed-npdes-permit-for-smithfield-packing-company/

Original opinion text

Best-effort transcription based on the text NCDOJ publishes at the landing URL; the published page omits the salutation block and may not be the full opinion. The linked landing page is authoritative.

1. I am told that the express production limits have never before been put in our NPDES permits, is this true? Does DENR (or the EMC) have authority to place express limits on production, as opposed to on pollutants in NPDES permits? If so, what is the basis of that authority?

The condition you reference is Special Condition A(4), Production Cap Condition. It is my understanding that initially the language for this condition was mutually acceptable to the permittee and DWQ, and that DWQ's interest in its inclusion is triggered primarily by its concern for the "cumulative effects of permit decisions" and by the compliance history of Smithfield.

Various commentators have objected to the production cap condition as outside the authority of DWQ and as having no relationship to the actual effluent discharged from the plant. While I believe these are valid considerations, it is my opinion that there is authority in N.C.G.S. § 143-215.1 for the inclusion of a condition such as this one in NPDES permits. The use of this authority must be narrowly-tailored and is triggered by the unique circumstances of this permit:

(1) Cumulative effects: The collective environmental effects from the increased number of hogs grown in North Carolina in the 1990's, and the overall compliance problems engendered thereby, has been well documented. The growth of this industry since the Smithfield plant was first permitted illustrates the relationship between slaughter capacity and other permitted production interests like the hog farms that serve as raw material suppliers. DWQ may legally draw inferences from such relationships and seek to address the "cumulative effects of its permit decision" with regard to Smithfield. N.C.G.S. § 143-215.1(b)(2).

(2) Compliance history: As you may be aware, the permittee in this instance, Smithfield Packing Company, operates processing plants in a number of states and conducts hog production operations in North Carolina through a subsidiary, Brown's of Carolina, Inc. DWQ has reviewed the environmental compliance record of the company and its various affiliates and subsidiaries and has found the following: the Smithfield plant in Virginia was the subject of a record fine by the Environmental Protection Agency; its Bladen County facility previously has been in non-compliance and currently is the subject of Notices of Violation for making an outlet into waters of the State and for several effluent limit violations of its NPDES permit; and its subsidiary contract grower has also been the subject of multiple enforcement actions. Under N.C.G.S. § 143-215.1(b)(4)b.2., this history is a relevant consideration for DWQ in proposing permit conditions necessary to achieve water quality goals.

(3) Initial acceptance by permittee: According to the information provided our office by DWQ, Smithfield volunteered to accept this permit condition and to not contest its inclusion in the permit. The company has since indicated opposition to the term. The company's participation in the drafting of the condition is a factor to be considered by DWQ, but as a legal matter its consent or withdrawal is not dispositive.

In addition to the specific circumstances enumerated above, it is worth noting that the authority of the Environmental Management Commission ("EMC"), from which DWQ receives its permitting delegation, over permitting is quite comprehensive. A complete inventory of that authority is not necessary, but the following sections of N.C.G.S. § 143-215.1(b) are relevant to your inquiry:

The Commission shall act on all permits so as to prevent, so far as reasonably possible, considering relevant standards under State and federal laws, any significant increase in pollution of the waters of the State from any new or enlarged sources. ….

The Commission shall also act on all permits so as to prevent violation of water quality standards due to the cumulative effects of permit decisions. Cumulative effects are impacts attributable to the collective effects of a number of projects and include the effects of additional projects similar to the requested permit in areas available for development in the vicinity. All permit decisions shall require that the practicable waste treatment and disposal alternative with the least adverse impact on the environment be utilized. ….

4. The Commission shall have the power:

a. To grant a permit with such conditions attached as the Commission believes necessary to achieve the purposes of this Article.

b. To require that an applicant satisfy the Department that the applicant, or any parent, subsidiary, or other affiliate of the applicant or parent: …

2. Has substantially complied with the effluent standards and limitations and waste management treatment practices applicable to any activity in which the applicant has previously engaged, and has been in substantial compliance with other federal and State laws, regulations, and rules for the protection of the environment.

Your request also asks for our views on the legality of two other proposed permit conditions:

(1) a ban on Smithfield purchasing for processing "any swine finished on any farm that is documented by the Division [of Water Quality] as having received a Notice of Violation (NOV) during the immediately preceding twelve-month period" (emphasis added); and

(2) a ban on Smithfield purchasing "[d]uring the period of any legislatively-imposed swine farm moratorium…any swine produced on any new or expanded swine farm which is permitted for operation on or after February 1, 1998."

With regards to (1), the ability of DWQ to independently regulate suppliers (particularly those who are not owned, operated by, or otherwise associated with Smithfield Foods), the nature of the relationship between suppliers and Smithfield, the retroactive application of the terms of this condition, and the need for definitiveness in the phrase "Notice of Violation" are all factors which must be taken into account in order to determine the legality of these conditions. Our office believes that this provision, as written, is vulnerable to being struck down.

As for (2), this condition raises the question of whether DWQ, without compliance matters at issue, can on the one hand permit a farm under the new and innovative technology exception to the current moratorium and at the same time deny these few farmers the ability to bring their product to market in this manner. Again, it is our opinion that this provision, as written, would be struck down if challenged.

Both of these provisions also raise the problem of the State and Smithfield affecting the rights of hog farmers who are not a party to the permitting agreement.

I hope this response has been instructive. These issues are quite significant, and where definitive guidance has not yet been provided, I trust you will agree that the proper forum for that is in consultation with the assigned hearing officers.

signed by:

Daniel C. Oakley
Senior Deputy Attorney General