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F I S C A L I M P A C T R E P O R T

SPONSOR Altamirano

ORIGINAL DATE

LAST UPDATED

2/13/2006

HB

SHORT TITLE Regulatory Reform Task Force

SB SJM65/aSRC

ANALYST McSherry

ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT (dollars in thousands)

FY06

FY07

FY08 3 Year

Total Cost

Recurring

or Non-Rec

Fund

Affected

Total

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Administrative Office of the Courts (AOC)

New Mexico Environment Department (NMED)

Energy Minerals and Natural Resources Department (EMNRD)

SUMMARY

Synopsis of SRC Amendment

The Senate Rules Committee amendments to Senate Joint Memorial 65, “

Regulatory Reform Task

Force” make technical changes and specify that the joint memorial should be transmitted to the secretaries

of the Environment, and Energy Natural Resources Departments and heads of other state agencies that

have regulatory responsibility, in addition to the superintendent of regulation and licensing.

Synopsis of Original Bill

Senate Joint Memorial 65, “

Regulatory Reform Task Force”

states that a regulatory environment

that enhances confidence and accountability and allows for reasonable expectations and planning

would better serve businesses.

The Memorial requests that RLD establish a task force to study regulatory reform. The task

force would consist of equal numbers of members from regulatory agencies, regulated licensees

and permittees. The task force would study:

1.

Permitting and licensing review time frames

2.

Enforcement of time limits

Senate Joint Memorial 65/aSRC – Page

2

3.

Rules and procedures for publication enhancement

4.

Creating uniform inspection procedures

5.

Administrative Procedures Act applications to all rulemaking

6.

Whether hearing officers and administrative law judges should be pooled within an

agency or employed by an independent executive agency.

The Memorial requests the task force to make recommendations, including identifying possible

legislation, in a report to the Legislative Finance Committee by October 15, 2006.

FISCAL IMPLICATIONS

According to the Energy Minerals and Natural Resources Department, a significant amount of

resources would be required to participate in the task force. The Department asserts that further

legislation resulting from SJM 65 could have a large fiscal impact.

There is no funding provided or proposed in the Memorial to conduct the additional tasks re-

quested.

The New Mexico Environmental Department cites the following additional concerns:

•

The Environment Department issues air quality, water quality, hazardous waste, and solid

waste permits and utility operator certification licenses. License issuance timeframes are

dependent on the applicant’s completions of training, testing requirements and are out of

the control of the agency. Permit issuance can take between 180 days and several years

depending on the scope of the permit, the amount of technical information that is required

to demonstrate that the facility will be protective of public health and the environment,

and the forthrightness of the applicant in providing necessary information. Examples of

complicated and lengthy permit processes include site-wide hazardous waste permits for

Department of Energy facilities such as Los Alamos National Laboratory, and site-wide

closure permits for large mining facilities.

•

An incomplete technical review of environmental protection permit applications can lead

to long-term environmental problems such as air pollution, water quality contamination

and threats to public health. Taking the time to ensure that permits are protective of the

state’s air, water and land resources can prevent costly and lengthy cleanups that can re-

sult from inadequate or rushed permitting.

•

The proposed structure of the task force does not include citizen stakeholders, yet the is-

sues to be addressed are of interest to citizens and relate to how citizens are able to be in-

volved in permitting actions. Failure to include citizen participation would be counter to

open and transparent government. The Environment Department is accountable not only

to regulated and permitted entities, but also to the general public whose environment we

protect. Members of the public have a legitimate interest in our rulemaking and permit-

ting actions and procedures, and have consistently made clear to us the need for their

meaningful involvement in these decisions and procedures. SJM65 would exclude mem-

bers of the general public from the task force, and thereby establishes a process that is not

fully accountable and transparent to the public.

•

The number of regulatory agencies, regulated licensees and permitees necessary to com-

prise a task force applicable to all state agencies and activities would be unwieldy. Using

one type of NMED permitee as an example, NMED issues permits for protection of

ground water quality pursuant to New Mexico Water Quality Control Commission Regu-

lations. NMED has approximately 900 active ground water discharge permits. There are

Senate Joint Memorial 65/aSRC – Page

3

approximately 23 types of permitees representing these 900 discharge permits including,

Municipal Wastewater Treatment Facilities; Dairies; Cheese Producers; Milk Processors;

Chile Processors; Meat Processors; Industrial Facilities; Mining Operators; Energy Utili-

ties; Responsible Parties for Ground Water Remediation Projects; Car Wash Facilities;

Bulk Fuel Facilities; Ethanol Producers; Landfarms for Remediation of Hydrocarbon-

Contaminated Soils; Sludge Disposal Facilities; Septage Disposal Facilities; and Domes-

tic Waste Dischargers (those with discharge volumes greater than 2,000 gallons per day)

at Lodging Facilities, Mobile Home Parks, Residential Subdivisions, RV Parks, Amuse-

ment and Recreational Facilities, Schools, Churches, Correctional Facilities, Office Fa-

cilities and Retail Facilities. This is only one type of permitting activity conducted by the

NMED. When considering all permitting and licensing activities of NMED, the number

of regulated licensees and permitees necessary to comprise the task force would be un-

workable. This also does not account for the regulated licensees and permitees of other

state agencies.

•

The Environment Department’s Radiation Control Bureau is required, under an Agree-

ment with the US Nuclear Regulatory Commission (NRC), to maintain program com-

patibility with NRC. This includes timeframes for regulatory actions such as licensing

and responding to violations identified during an inspection. If in aligning our regulatory

practices with other state programs, we are found to no longer be compatible with the

NRC program, our agreement status could be jeopardized. Ultimately this could result in

the federal government assuming responsibility for the radiation control program in New

Mexico, loss of state jobs, and an increased cost to the regulated community (NRC fees

are overall significantly higher than the State's).

•

The Administrative Procedures Act is a little used and now historically outdated proce-

dural act that most governmental agencies in New Mexico do not use because one size

does not fit all licensing and permitting actions. Additionally, the Administrative Proce-

dures Act requires the agency to promulgate specific rules anyway, which is inefficient.

•

The Environment Department’s regulatory area is very scientific and specific. It requires

an administrative law judge have expertise in the area being regulated.

SIGNIFICANT ISSUES

EMNRD reports that several divisions within the Department regulate including the Mining and

Minerals Division, the Oil Conservation Division, the Forestry Division, the Parks Division and

the Energy, Conservation and Management Division. EMNRD asserts that participation in the

task force would divert essential resources already spread thin in terms of regulatory administra-

tion. The Department points out

•

SJM 65 does not identify which regulatory agencies in New Mexico should be reviewed.

The task force could include dozens of regulatory agencies with such disparate authority

that the reviews would be extremely time consuming and inefficient for agencies in-

volved. This could result in further delays in permitting and licensing by reallocating

limited resources to a task force. This would be counter productive to the intent of the

Memorial.

•

Some regulatory agencies in New Mexico have federal mandates to follow certain proce-

dures that cannot be changed without federal sanctions or rescission of state authority.

For example, within EMNRD, the Coal Regulatory Program operates under a specific

delegation of authority (primacy) from the Office of Surface Mining pursuant to the Sur-

face Mine Control and Reclamation Act (SMCRA) and cannot be less stringent than the

Senate Joint Memorial 65/aSRC – Page

4

federal act. Reducing permit timeframes could result in permitting procedures that are

less stringent than federal requirements, which could jeopardize state primacy agree-

ments.

•

SJM 65 is not clear on how the committee would come to resolution on disagreements

over recommendations. Though the Memorial is not clear on this point, it is presumed

that the RLD would lead the task force and finalize recommendations that are sent to the

legislative finance committee. RLD does not have knowledge or expertise about many

regulatory agencies and recommendations made by RLD could negatively impact agen-

cies.

•

An incomplete technical review of permit applications can lead to long-term environ-

mental problems such as surface and ground water contamination and other threats to

public health. Taking time to ensure that permits are protective of the state’s air, water

and land resources can prevent costly and lengthy cleanups that can result from inade-

quate or rushed permitting. Amending permits to include items that may be missed will

result in costly delays and expose the environment and the public to hazards in the in-

terim period.

•

The Administrative Procedures Act is little used and now a historically outdated proce-

dural act that most governmental agencies in New Mexico do not use because one size

does not fit all licensing and permitting actions. Additionally, the Administrative Proce-

dures Act requires the agency to promulgate specific rules anyway, which is inefficient.

According to the Administrative Office of the Courts,

1)

“adjudicatory proceeding” is defined within the Administrative Procedures Act as

…a proceeding before an agency, including but not limited to ratemaking

and licensing, in which legal rights, duties or privileges of a party are re-

quired by law to be determined by an agency after an opportunity for a

trial-type hearing;…

Section 12-8-2 NMSA 1978.

2)

Section 12-8-16 NMSA 1978 allows a party who has exhausted all administrative

remedies available within an agency and who is adversely affected by a final order or

decision in an adjudicatory proceeding to appeal pursuant to the provisions of Section

39-3-1.1 NMSA 1978, allowing for appeal to the district court unless standing is fur-

ther limited by a specific statute.

3)

Section 39-3-1.1 NMSA 1978 provides the following

E. A party to the appeal to district court may seek review of the district

court decision by filing a petition for writ of certiorari with the court of

appeals, which may exercise its discretion whether to grant review. A

party may seek further review by filing a petition for writ of certiorari with

the supreme court.

F. The district court may certify to the court of appeals a final decision

appealed to the district court, but undecided by that court, if the appeal in-

volves an issue of substantial public interest that should be decided by the

court of appeals. The appeal shall then be decided by the court of appeals.

Senate Joint Memorial 65/aSRC – Page

5

PERFORMANCE IMPLICATIONS

The additional task of participation in the proposed task force may cause agency performance in

other tasks to diminish.

ADMINISTRATIVE IMPLICATIONS

Increased administrative workload would be realized by RLD, EMNRD, NMED and other regu-

latory and licensing agencies.

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

SJM 65 duplicates some of the 2005 House Bill 869, the Small Business Regulatory Relief Act.

The SBRRA establishes a Commission that provides state agencies with comments regarding

proposed rules that may adversely affect small businesses. The Commission also considers re-

quests from small business owners to review rules an agency adopts to determine whether the

rule places an unnecessary burden on small businesses and make recommendations to the

agency.

OTHER SUBSTANTIVE ISSUES

There are many regulatory agencies in New Mexico. EMNRD asserts that items on the list for

the task force to review may not be relevant or pertinent to some agencies. The Department

points out that the memorial does not differentiate which agencies would look at what issues, and

contends that may result inefficiencies and unnecessary use of time many agencies.

EMNRD points out that:

•

In situations where a permit applicant does not provide information necessary for the

agency to evaluate the proposed activity, and issue a permit that is protective of public

health and the environment, permit denial is generally the remedy. However, the De-

partment contends that permit denial is not an acceptable solution in all situations.

•

Shortening permit issuance timeframes negatively impacts the public’s ability to partici-

pate in the permitting process and conflicts with other state initiatives. Environmental

justice initiatives expand the public’s opportunities to review permit applications and get

involved in permits for activities in their neighborhood.

•

Many permittees benefit from the agency’s ability to work through application deficien-

cies rather than taking action to deny the permit. When a permit is denied, the applicant

must resubmit its application, which can be costly and time consuming for both the

agency and the applicant.

•

Many applicants need significant agency assistance in developing permit applications and

technical data to support permit approval, which can slow down the permit issuance

process.

NMED cites the following Departmental concerns:

•

Some permittees regulated by the Environment Department are not forthcoming

in providing technical data and other required information to support applications

for new or expanded activities. These businesses should not be rewarded

through legislation mandating permit timeframes. Rather, incentives should be

Senate Joint Memorial 65/aSRC – Page

6

provided to encourage technically complete applications in support of proposed

activities.

•

In situations where a permit applicant does not provide the information necessary

for the agency to evaluate the proposed activity and issue a permit that is protec-

tive of public health and the environment, permit denial is generally the remedy.

However, permit denial is not an acceptable solution in all situations.

•

Some permit applications are submitted after the regulated activity has begun. In

these situations, the most appropriate solution is to ensure the ongoing activity

comes into compliance with permit requirements. Permit denial only extends the

time that the activity is out of compliance with existing laws and rules.

•

Some activities cannot be stopped, even if a permit is denied. For example, a

mobile home that has an unpermitted wastewater system serving various families

cannot be shut down without displacing residents, even if the owner is not forth-

coming during the permitting process.

•

Shortening permit issuance timeframes negatively impacts the public’s ability to

participate in the permitting process and conflicts with other state initiatives.

o

Environmental justice initiatives expand the public’s opportunities to re-

view permit applications and get involved in permits for activities in their

neighborhood.

o

2005 legislation expanded up-front public participation procedures in order

to reduce the time spent on appeals and court proceedings that occur af-

ter a permit has been issued.

•

Federal permit processing requirements must be complied with in situations

where a federal program has been delegated to the state.

•

Reducing permit timeframes could result in permitting procedures that are less

stringent than federal requirements, which could jeopardize state primacy

agreements.

•

Many permittees benefit from the agency’s ability to work through application de-

ficiencies rather than taking action to deny the permit.

•

When a permit is denied, the applicant must resubmit its application, which can

be costly and time consuming for both the agency and the applicant.

•

Many applicants need significant agency assistance in developing permit applica-

tions and technical data to support permit approval, which can slow down the

permit issuance process.

NMED contends that timeframes for permitting or licensing of regulated activities vary necessar-

ily because there are different levels of complexity attendant with the review of the disparate ap-

plications. For example, a food permit application can be reviewed and issued in a much shorter

timeframe than a hazardous waste permit or radioactive materials license application.

ALTERNATIVES

NMED suggests the following amendments to the Memorial:

1.

Insert two new paragraphs on page 1, line 21:

“WHEREAS, permitting procedures should provide incentives for businesses to provide

technically complete applications to support their proposed activities;”

“WHEREAS, adequate opportunities for public participation in permitting processes are

necessary and beneficial, and must not be compromised;”

Senate Joint Memorial 65/aSRC – Page

7

2.

Insert on page 1, line 24, after the word “reform”, the phrase: “except environmental

regulatory reform,”

3.

Insert after the word “agencies” on page 1, line 25 -- “, public representatives including

public advocacy groups, tribes and local governments,”

4.

Page 2, line 24, strike “2006” and insert “2007”

AOC suggests that the Attorney General’s office may be better suited to review whether admin-

istrative law judges and hearing officers should or could be pooled within an existing agency or

whether the Administrative Procedures Act should apply to all rulemaking and adjudicatory pro-

ceedings.

AOC further suggests limiting the number of agencies covered by this memorial.

EMNRD suggests the following amendments:

1.

Page 1, line 24, insert after the word...reform, “except environmental regulatory

agencies”. OR

2.

Page 1, line 24 insert after the word…reform, “for those agencies subject to the

Uniform Licensing Act”.

3.

Page 2, line 20 after the semi-colon, add the following before the word…and, “G.

ensuring that the public is provided a significant opportunity to participate in

rulemaking and adjudicatory proceedings”.

EM/mt