Relating to Real Estate

In Kor-Ko Ltd. et al. v. Maryland Department of the Environment, No. 23, September Term, 2016 (Md. Jan. 25, 2017), the Court of Appeals had to decide whether the term “premises,” as used in a particular environmental regulation, meant a single building or encompassed an entire commercial park.

The facts are simple if a bit unusual.  Kor-Ko, Ltd. (“Kor-Ko”) sought to avoid exposure to what the Court of Appeals referred to as “Dust in the Wind.”  For those less musically inclined, the “Dust” references Kerry Livgren’s lyrics from Kansas’ 1977 “Point of No Return” album: “All we are is dust in the wind.”

Kor-Ko objected to the construction of a crematorium based on an argument that the emissions, the “Dust in the Wind,” would not merely be unsavory but, in fact, hazardous to health.  Human remains can contain a number of contaminates such as arsenic, chromium, dioxins and mercury.

The regulations of the Maryland Department of the Environment (MDE), like those of all states and the EPA, do not forbid all emissions but, instead, require that concentrations of contaminates fall below certain health thresholds.  The concentrations, of course, decline as the contaminates travel further from the discharge source.  Therefore, the regulations must establish a geographic point at which the concentrations are modeled.

Maryland regulations provide that a new source must demonstrate that the emissions of each toxic air pollutant “from the premises” would not unreasonably endanger human health.  COMAR 26.11.15.06(A)(1).  MDE interpreted this to mean that the model-predicted levels must be below the health thresholds at ground level on the borders of the commercial park where the proposed facility would be built.  In other words, MDE interpreted “premises” to mean the entire commercial park.  The proposed crematorium would gain the benefit of dispersion between the discharge point and the park boundaries.

Kor-Ko, which was located in the same commercial park as the crematorium, argued that the “premises” were the specific building or lot where the crematorium would be located.  If measured only at the park boundaries, Kor-Ko’s location may be exposed to “dust” which exceeded the health thresholds.

The term “premises” is not defined in the regulations.  The Court first looked to the dictionary definition: “A tract of land with the buildings thereon, and a building or part of a building usually with its appurtenances (as grounds).” Merriam-Webster, Premise.  The Court noted that all of the buildings within the commercial park had a single owner and there were “no internal lot lines depicting separate ownership within a common development” and concluded that a commercial park fit within the dictionary definition.  Kor-Ko, slip op. at 15. 

The Court then noted that other MDE regulations used “the property line” as a point for determining compliance.  For example, COMAR 26.11.06.09 forbids the discharge of gases that create a nuisance “beyond the property line.” 

Lastly, and, according to the Court, “of greatest potency,” was the fact that MDE believed the regulations provided adequate protection even for workers within the same commercial park.  MDE pointed out that the health thresholds established are extremely conservative.  For example, for carcinogenic effects, the levels are designed to assure that continuous exposure for 70 years would not increase the cancer risk by more than one in 100,000.  Kor-Ko, slip op. at 17.

Given these facts, the Court deferred to MDE’s interpretation of the regulations.

Interestingly, the Court did not stop at that point.  Although the Court recognized that “we need not resolve” a separate interpretation issue, the Court decided to comment on difficulties in reviewing that issue if it did come before it.  As the Court said:

To guide perhaps future similar administrative proceedings, instances of their judicial review, and ideally the Legislature … we choose to comment on the portentous challenge inherent in the review of the sort of nebulous agency procedure as we have here, which prohibits contested hearings and fails to require more formal and comprehensive explication of the reasoning of the agency for its Final Determination in these types of environmental permitting cases (beyond the “brief explanation” contained in the Tentative Determination, “fact sheet or sheets,” and the selective instances of agency responses prompted by some of the public comments).

Kor-Ko, slip op. at 18-19.

The difficulty that the Court referred to is that the permit was not subject to contested case proceedings.  Therefore the record consisted of the Department’s explanation of its original “Tentative Determination,” responses to public comments, and the final explanation supporting the “Final Determination.” In reviewing that record, the Court found what it thought were inconsistencies between MDE’s positions.  In response to an early public comment, MDE rejected reliance on a similar EPA definition but in the Final Determination, MDE “embraces the EPA’s definition….”

The Court complained that this apparent inconsistency was made worse because “…the Legislature did not require [MDE] to express its reasoning in written, detailed findings of fact and conclusions of law, but rather fostered a somewhat looser and elusive decisional process.”  Kor-Ko, slip op. at 22.

Despite what the Court itself described as “our venting,” the Court concluded that it could apply the substantial evidence standard to adequately review the record before it.  However, the reader is left with the impression that the Court is troubled by the Department’s failure to carefully spell out the basis for its reasoning and this could have an impact on future cases.

Three judges, in a dissent written by Judge Shirley Watts, disagreed with the majority opinion, which was written by Senior Judge Glenn T. Harrell, Jr. (who was specially assigned), about the meaning of “premises.”  The dissent would have followed the definition of “premises” in COMAR 26.11.15.06(A)(1) as the “space or unit from where emissions are coming.”  This interpretation would not make a demarcation between owners and renters, and it would better safeguard human health, the dissent argued.

For questions, please contact Michael Powell (410) 576-4175.