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
NC's Division of Water Quality (DWQ) was renewing or reissuing an NPDES permit for Smithfield Packing Company's Bladen County hog-processing facility in 1998. The proposed permit included three unusual conditions:
- Special Condition A(4), a "Production Cap Condition" capping slaughter production.
- A ban on Smithfield buying hogs from any farm with a recent Notice of Violation from DWQ.
- A ban on Smithfield buying hogs from new or expanded farms permitted during any legislative swine-farm moratorium.
DWQ asked the AG whether these conditions were within the agency's authority. Industry commenters had argued that production caps and supplier restrictions were beyond DWQ's NPDES powers, which traditionally focus on effluent at the discharge point.
On the production cap (Special Condition A(4)). The AG concluded the Environmental Management Commission, from which DWQ gets its delegated permitting authority, has comprehensive authority under N.C.G.S. § 143-215.1. The relevant statutory authorities:
- § 143-215.1(b)(2) requires the EMC to act on 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 multiple projects.
- § 143-215.1(b)(4)b.2. lets the EMC require an applicant to show substantial compliance by the applicant and "any parent, subsidiary, or other affiliate" with effluent standards, waste treatment practices, and other environmental laws.
The AG identified three case-specific facts that supported using these authorities here:
- Cumulative effects of the swine industry. The 1990s explosion of hog production in NC, and the compliance problems that came with it, was well-documented. DWQ could reasonably link slaughter capacity to upstream hog farm production and address the cumulative pollution risks.
- Smithfield's compliance record. The Virginia plant had a record EPA fine. The Bladen County plant had been in non-compliance and was the subject of Notices of Violation for an unauthorized outlet and effluent limit violations. Brown's of Carolina, Smithfield's subsidiary hog producer, had multiple enforcement actions. Section 143-215.1(b)(4)b.2. made all of this fair game.
- Smithfield's initial acceptance. Smithfield had volunteered to accept the production-cap condition at first, then changed its mind. The AG said the company's consent or withdrawal was a factor but not dispositive.
The AG's authority on the production cap was narrowly tailored to these facts. The AG cautioned that the use of this authority "must be narrowly-tailored and is triggered by the unique circumstances of this permit."
On the two supplier-related conditions. The AG was more skeptical. The first ban (don't buy from any farm with a recent NOV) raised four problems: DWQ's ability to independently regulate third-party suppliers who are not affiliated with Smithfield, the unclear nature of the supplier-Smithfield relationship, retroactive application of the condition (NOVs already issued before the permit was effective would trigger it), and the imprecision of the term "Notice of Violation." The AG said the condition "as written, is vulnerable to being struck down."
The second ban (don't buy from any farm permitted under the new-technology exception during a legislative swine-farm moratorium) raised a structural problem: DWQ would be permitting a farm under the moratorium exception with one hand and denying that farm market access with the other. The AG said the condition "as written, would be struck down if challenged."
Both supplier conditions also raised the issue of affecting the rights of hog farmers who were not parties to the Smithfield permit, a basic due-process concern.
The bottom line. The production cap was sustainable. The supplier bans needed work. The AG suggested the hearing officers were the right forum for working out the specifics.
Currency note
This opinion was issued in 1998. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.
NC's swine industry has continued to be heavily regulated since 1998. The General Assembly imposed a swine-farm moratorium, then made it permanent in 2007 (S.L. 2007-523). The state also moved toward third-party-verified animal-waste management plans. NPDES permitting practice has evolved with new federal CAFO rules and the 2008 federal regulations. Anyone working on a current NPDES condition for a NC processing facility should look at the current versions of § 143-215.1, federal CAFO rules, and any post-1998 NC court decisions on the production-cap question.
Common questions
Q: What is an NPDES permit?
A: The National Pollutant Discharge Elimination System permit, required under federal Clean Water Act § 402 for any point-source discharge to navigable waters. In delegated states like NC, the state agency issues the permit subject to federal minimum standards.
Q: Why is a production cap unusual?
A: NPDES permits traditionally limit pollutants leaving the discharge pipe, not how much the facility produces. A production cap reaches further upstream into business decisions. The legal theory here was that cumulative effects in the broader watershed and on the upstream supply chain justified the unusual scope.
Q: What are "cumulative effects" in NC permitting?
A: Defined in § 143-215.1(b)(2): impacts attributable to the collective effects of a number of projects, including additional similar projects in the area. The EMC must "act on all permits so as to prevent" water-quality violations from cumulative effects.
Q: Why did the AG worry about regulating Smithfield's suppliers?
A: NPDES permits regulate the permittee. Telling Smithfield it cannot buy from non-affiliated hog farmers with NOVs effectively regulates those farmers without giving them notice or a permit-condition challenge process. The AG saw retroactivity (using past NOVs to disqualify suppliers) and imprecision (what counts as an "NOV" and for how long) as additional problems.
Q: What was the "swine farm moratorium"?
A: NC enacted moratoria on new and expanding hog operations during the 1990s in response to environmental concerns about lagoon-and-spray-field waste management. The proposed permit condition would have layered a private-market restriction on top of the legislative moratorium, denying market access to farms permitted under a moratorium exception.
Q: Did the production cap survive?
A: This opinion just answered the legal authority question. Whether the cap survived the permit process and any subsequent litigation is a separate question of NC environmental administrative history.
Q: What does "narrowly tailored" mean here?
A: The AG was signaling that the analysis depended on the specific facts of Smithfield, particularly the compliance history and cumulative effects in the swine industry. The opinion is not a green light to put production caps in every NPDES permit. The agency has to show why this permittee, in this watershed, with this compliance record, justifies the unusual condition.
Background and statutory framework
The 1990s NC hog boom transformed eastern North Carolina. The Bladen County Smithfield slaughter plant was the largest of its kind in the world, processing tens of thousands of hogs per day. Upstream, hog farms multiplied, with lagoon-and-spray-field waste systems creating well-documented water-quality and air-quality problems. Hurricane Floyd in 1999 (after this opinion) would soon dramatize the risks by breaching lagoons across the watershed.
N.C.G.S. § 143-215.1 is NC's basic water-pollution-permitting statute. Subsection (b) gives the EMC sweeping authority to write permit conditions necessary to achieve water-quality goals, including conditions addressing cumulative effects and applicant compliance history. The AG read the cumulative-effects authority as broad enough to support a production cap tied to upstream supply-chain pollution, on the narrow facts presented here.
Smithfield's compliance record was particularly bad: a record EPA fine in Virginia, NOVs at the Bladen County plant, and multiple enforcement actions against its contract grower subsidiary. The AG treated this history as a "relevant consideration for DWQ in proposing permit conditions necessary to achieve water quality goals" under § 143-215.1(b)(4)b.2.
The supplier-ban conditions were the AG's biggest concern. They reached beyond the permittee to regulate non-party hog farmers. Permit conditions that affect third parties traditionally need to either (a) regulate the permittee's purchasing as a business decision they control, with adequate scope and clarity, or (b) come paired with an independent regulatory action against the third parties. The AG read both proposed bans as falling short on those tests.
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
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.
- 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. ….
- 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: …
- 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