In a pithy decision issued on January 26, 2022, in PNW Metal Recycling, Inc. v. Oregon Department of Environmental Quality, the Oregon Court of Appeals determined that the Department of Environmental Quality (DEQ) improperly bypassed agency rulemaking requirements when it announced and enforced a change in policy regarding solid waste permitting requirements for scrap metal recyclers that accept vehicles and non-vehicles at their facilities. The court’s decision highlights the limits and potential power of informal administrative agency actions in Oregon. No. A171317, 317 Or. App. 207, --- P.3d ---, 2022 WL 220969 (Or. Ct. App. 2022).

Until 2018, DEQ did not require facilities with automobile dismantling operations to obtain a solid waste permit pursuant to DEQ’s interpretation of a permitting exemption under a state statute. DEQ applied the exemption even when the facilities “accepted non-vehicular materials in addition to cars.”

Following a fire at an automobile dismantling facility, DEQ sought to close what it saw as a regulatory “gap.” Among the options DEQ considered was applying the “statutory exemption ... to only cover auto dismantling operations – leaving other solid waste activities [at a facility] subject to regulation.” DEQ documented this option in an internal memo. DEQ staff then communicated their intent to apply this new interpretation broadly during a meeting with one of the metal recyclers that later initiated the challenge, under the Oregon Administrative Procedures Act, to DEQ’s policy change.

In its decision, the court observed that both of DEQ’s interpretations of the statutory solid waste permitting exemption – either applied to a whole facility, as reflected in DEQ’s prior policy, or applied only to automobile dismantling operations at a facility, as reflected in DEQ’s new policy – were “plausible.” Accordingly, the court concluded that DEQ’s policy change went beyond explaining “what is necessarily required” by the statute. It was “a new exercise of agency discretion” that “must be promulgated as a rule to be valid.” The court also found that when “an agency makes a generally applicable, policy-based decision, it cannot evade formal rulemaking requirements merely by failing to memorialize it in writing.” The opinion underscores the importance of carefully evaluating the legal basis for informal agency actions that announce new requirements or reflect a change in long-standing agency policy or practice.