COMMONWEALTH ENERGY AND ENVIROMENT CABINET v. SHARP LLC

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Court of Appeals of Kentucky.

COMMONWEALTH of Kentucky, ENERGY AND ENVIROMENT CABINET, Appellant v. Barry SHARP; Shirley Sharp; Jenny Varden; Bill Fenwick; Gene Nettles; Nancy Nettles; Larry Lewis; Mary Jo Lewis; Paul Beck; Katie Beck; Max Wilson; Lucy Bondurant Wilson; Smith & Hancock Farms, LLC.; Ralph Wayne Adams; James Phillip Amberg; Charles Cannon; Marsh Hunt; Keith Kimbell; Mike Hancock; Caleb De Weese; Matt Moss; and Jim Moss, Appellees

Barry Sharp; Shirley Sharp; Jenny Varden; Bill Fenwick; Gene Nettles; Nancy Nettles; Larry Lewis; Mary Jo Lewis; Paul Beck; Katie Beck; Max Wilson; and Lucy Bondurant Wilson, Cross–Appellants v. Commonwealth of Kentucky, Energy and Enviroment Cabinet; Smith & Hancock Farms, LLC.; Ralph Wayne Adams; James Phillip Amberg; Charles Cannon; Marsh Hunt; Keith Kimbell; Mike Hancock; Caleb De Weese; Matt Moss; and Jim Moss, Cross–Appellees.

Nos. 2009–CA–002283–MR, 2009–CA–002326–MR.

Decided: May 25, 2012

Before TAYLOR, Chief Judge; CAPERTON and CLAYTON, Judges. Randal Strobo, Midway, KY, for appellants/cross-appellees. Hank Graddy, IV, Midway, KY, for Appellees/Cross–Appellants. John West, Frankfort, KY, for the Energy and Enviroment Cabinet. Mindy G. Barfield, Lexington, KY, for Amicus Curiae. David A. Owen, Carolyn M. Brown, Kelly D. Bartley, Lexington, KY, for Appellees/Cross–Appellants.

OPINION

The Appellant/Cross–Appellee, the Commonwealth of Kentucky, Energy and Environment Cabinet (formerly known as the Environmental and Public Protection Cabinet)(hereinafter, the “Cabinet”) Division of Water (hereinafter “Division”) appeals the decision of the Franklin Circuit Court involving Kentucky No–Discharge Operational Permits1 (KNDOP)(hereinafter “No–Discharge permits”) issued to nine farmers, Ralph Wayne Adams, J.P. Amberg, Charles Canon, Caleb Deweese, Mike Hancock, Marsh Hunt, Keith Kimbell, Matt Moss and Jim Moss, and Smith and Hancock Farms, LLC (hereinafter, “Farmers”),2 residing in Western Kentucky for the purpose of operating farms with hog barns and for the beneficial use of the manure as a soil supplement and fertilizer. Having reviewed the record, the arguments of the parties, and the applicable law, we affirm in part, reverse in part, and remand to the Franklin Circuit Court.

This matter involves challenges by Citizen Petitioners (hereinafter “Petitioners”)3 to the Cabinet's issuance of construction and No–Discharge permits to Farmers for the construction and operation of hog barns, including land application of manure.

The Farmers are lifelong residents of Fulton, Hickman, and Carlisle Counties, Kentucky, who, before deciding to engage in large-scale hog farming, were full-time farmers who derived a significant portion of their family income from their row crop and other farming operations, including the raising of livestock. Farmers entered into agreements4 with Tosh Farms to raise hogs owned and supplied by Tosh Farms in exchange for monthly compensation. Farmers raised the hogs primarily for the purpose of obtaining their manure, and used the manure as fertilizer for their row crops, enabling them to use less commercial fertilizer. According to the Farmers, the manure has significant value as fertilizer, and is considered to be waste only to the extent not so used.

To house the hogs supplied by Tosh Farms, Farmers proposed to build two “deep pit”5 barns to house 2,480 hogs each. The manure storage pits constitute “agricultural waste handling systems,” which are subject to permitting requirements implemented by the Cabinet. Agricultural waste handling systems are required to obtain a construction permit and either a Kentucky No–Discharge permit, pursuant to 401 Kentucky Administrative Regulations (KAR) 5:005 Section 25, or a Kentucky Pollution Discharge Elimination System (“KPDES”) operating permit pursuant to 401 KAR 5:050 through 401 KAR 5:080.

Between the months of August and September 2005, Farmers initially submitted applications to the Division seeking Kentucky Pollution Discharge Elimination System (hereinafter “KPDES”)6 permits for the storage pits.7 With the applications, Farmers submitted Comprehensive Nutrient Management Plans (hereinafter “CNMPs”) as developed by the United States Department of Agriculture, Natural Resources Conservation Service (hereinafter “NRCS”) for land application of the manure from the proposed facilities8 as fertilizer for their row crop operations. Following the issuance of draft permits and the receipt of public comments on the drafts,9 the Cabinet issued a Notice of Deficiency for mathematical errors shown in the CNMPs. The Cabinet requested that a revised CNMP be submitted within thirty days.

In response, on March 15, 2006, Farmers withdrew their KPDES permit applications and submitted applications for No–Discharge permits on the grounds that their operations would not result in discharges of pollutants to waters of the Commonwealth, and thus did not require KPDES permits. They also submitted revised CNMPs10 and other information requested by the Division, including an updated construction permit application.

On April 21, 2006, the Cabinet issued draft No–Discharge permits to Farmers. Although not required for a No–Discharge permit, the Cabinet issued a public notice and accepted public comment on the drafts. Thereafter, on July 7, 2006, the Cabinet issued a written response to the public comments received, and issued final No–Discharge permits to Farmers.

On August 7, 2006, individuals who own land near the Farmers' proposed operations filed Petitions for Hearing pursuant to Kentucky Revised statutes (KRS) 224.10–420, challenging the Cabinet's issuance of No–Discharge permits to Farmers on various grounds. Shortly thereafter, on August 10, 2006, the Farmers filed a petition for an administrative hearing contesting the setbacks imposed by the Cabinet. The Farmers contended that they were injured and aggrieved because the setbacks were not rationally related to the law and exposed the Farmers to unfair enforcement. On September 12, 2006, the cases were consolidated by agreement.11

Following extensive pretrial discovery and motion practice, a fourteen-day evidentiary hearing regarding the Petitioner's claims was held during January and February 2007, before a Hearing Officer with the Cabinet Office of Administrative Hearings. The evidentiary hearing produced a voluminous record consisting of the testimony of nineteen witnesses, and numerous exhibits. On May 4, 2007, the Hearing Officer issued a 224–page report and recommendation which affirmed the construction permits, but vacated and remanded the operational permits and applications to the Cabinet for further review.

The Hearing Officer made the following recommendations: (1) that the number of animals does not per se dictate whether or not an Animal Feeding Operation (hereinafter “AFO”) is a Concentrated Animal Feeding Operation (hereinafter “CAFO”) pursuant to 401 KAR 5:002 Section 1(23); (2) that the Petitioners' request for co-liability or co-permitting for the animal owners be denied; (3) that No–Discharge permits were appropriate because it could not be assumed that an unpermitted discharge would occur; (4) that there was insufficient proof that there would be a discharge of pollutants from the deep pits; (5) that the CNMPs be remanded to eliminate current “inconsistencies and anomalies” contained therein; (6) that the permits include an express reopener clause to allow the Cabinet to require revisions, as needed, to comply with the requirements of KRS Chapter 224; (7) that the Cabinet do a substantive review of the revised plans to determine their sufficiency to meet the No–Discharge requirement; (8) that the results of the daily inspections, the daily and weekly measurements, and the annual analysis be kept in a log maintained at the facility and be made available to representatives of the Division of Water upon request; (9) that the Cabinet's use of its Best Professional Judgment concerning permit conditions such as setbacks pursuant to 401 KAR 5:005 Section 24(4)(a) was appropriate; (10) that because the permits at issue are No–Discharge permits, the Petitioners did not meet their burden concerning the allegation of insufficient pathogen controls; (11) that an express condition should be imposed on the operational permits, that the Farmers comply with their already existing obligations under 401 KAR 63:020, and that the Department of Environmental Protection evaluate these types of facilities as to whether the controls at these facilities are adequate; and (12) that because these are No–Discharge facilities, there is no need for baseline monitoring or a performance bond. The Hearing Officer went on to recommend that the Farmers were allowed to continue to operate based upon the construction plan. All parties filed exceptions to the order of the Hearing Officer.

On July 17, 2007, the Petitioners filed a complaint in Franklin Circuit Court. In an order issued August 7, 2007, the Franklin Circuit Court stayed the motion for a temporary injunction until August 16, 2007, the date on which the Secretary's final order was due pursuant to KRS 224.10–440.

On August 16, 2007, the Cabinet Secretary issued a final order rejecting in part and granting in part the Petitioner's claims. The Secretary adopted the Hearing Officer's report and recommendation with the exception of the following: (1) the Secretary found that there was no need to vacate and remand the No–Discharge permits because the CNMPs could and should be corrected, and that the CNMPs are by their nature inherently dynamic plans that are subject to regular revisions;12 (2) the Secretary also recognized that the EPA has entered into a consent decree with AFOs for a monitoring study that will lead to the development of methodologies for estimating emissions from AFOs and will help AFOs and DEP to determine and comply with their regulatory responsibilities under the Clean Air Act; (3) the Secretary also recognized that reliable methodologies to quantify emissions from AFOs are still being developed by the EPA; (4) the Secretary found that the reopener clause was unnecessary; and (5) the Secretary found that the Cabinet shall conduct a substantive review of the amended plans for completeness and accuracy and that record keeping shall be mandatory in accordance with the permits.

On September 5, 2007, Petitioners appealed the Secretary's Final Order to the Franklin Circuit Court, and sought a temporary injunction and stay of any construction of the hog barns as part of the appeal. Following a three-day hearing13 on October 15, 16, and 18, 2007, the circuit court entered an opinion and order on November 13, 2007.14 Therein, Judge Thomas Wingate of the Franklin Circuit Court denied the Petitioner's motion for a stay or temporary injunction.15

Subsequently, after briefing, oral argument,16 and additional submissions by counsel, Judge Phillip Shepherd entered an opinion and order17 on November 16, 2009, which reversed in part and affirmed in part the Secretary's order, and remanded the case to the Cabinet for further action consistent with its holding. On four of the issues, the circuit court reversed the ruling of the Secretary, finding that the Cabinet erred: (1) in failing to require Farmers to obtain KPDES permits rather than No–Discharge permits; (2) in failing to require Tosh Farms to sign Farmers' permit applications as co-permittee; (3) in failing to exercise discretionary “special condition” authority to perform an air emissions risk assessment and/or impose conditions relating to air emissions in connection with Farmers' permits; and (4) in failing to exercise discretionary “special condition” authority to impose effluent or other limitations relating to pathogens in the permits. On the remaining issue raised by Petitioners, which was a challenge to the propriety of the permitted setback distances, the circuit court affirmed the Secretary's ruling.

Both Farmers and the Cabinet have appealed the circuit court's four holdings reversing the Secretary. As noted, Petitioners have filed cross-appeals in both matters with regard to the circuit court's ruling affirming the permit setback distances.18 We review the arguments of the parties in turn.

As its first basis for appeal, the Cabinet argues that the circuit court applied the incorrect standard of review in this matter. The Cabinet asserts that the circuit court's review should have been limited to a determination of whether the Secretary's decision was arbitrary, that is, whether the Secretary's findings of fact were based on substantial evidence in the record, and whether the law was applied correctly. The Cabinet argues that the circuit court failed to stay within these confines of its judicial review, and that the appropriate deference was not given to the Secretary's decision.

In response, Petitioners argue that the circuit court did apply the correct standards for review of the Secretary's final order. The Petitioners assert that the Secretary's determinations did not meet the substantial evidence test because the Secretary rejected, in “sweeping fashion,” the findings of fact made by the Hearing Officer, and failed to provide alternative findings. The Petitioners assert that the Secretary failed to make findings of basic evidentiary facts to support the ultimate conclusions in the opinion.

Although the parties isolate this as a separate issue, we believe it best addressed in the context of the individual issues raised on appeal because one portion of the Secretary's holding may have been supported by substantial evidence, while another may not. In so noting, we remind the parties that we have repeatedly held that only the Hearing Officer and the Board are empowered to make findings of fact. See Board of Trustees, Kentucky Retirement Systems v. Grant, 257 S.W.3d 591 at 595 (Ky.App.2008). Further, KRS 13B.150 clearly provides that when reviewing an administrative agency's decision, “the court shall not substitute its judgment for that of the agency as to the weight of the evidence on questions of fact.” Thus, the judicial standard of review of an agency's decision is largely deferential, and as long as there is substantial evidence in the record to support the agency's decision, the court must defer to the agency, even if there is conflicting evidence. 500 Associates, Inc. v. Natural Resources and Environmental Protection Cabinet, 204 S.W.3d 121, 131–132 (Ky.App.2006). Agencies are entitled to great deference in interpreting their own statutes and regulations, at least where those interpretations do not contravene the law. Hagan v. Farris, 807 S.W.2d 488, 490 (Ky.1991).

If the agency's decision is supported by substantial evidence, the reviewing court is limited to determining whether the agency applied the correct rule of law. Burch v. Taylor Drug Store, Inc., 965 S.W.2d 830, 834 (Ky.App.1998). Evidence is substantial if, when taken alone or in light of all the evidence, it has sufficient probative value to induce conviction in the minds of reasonable men. Kentucky Racing Comm'n v. Fuller, 481 S.W.2d 298, 308 (Ky.1972). Indeed, an administrative agency's interpretation of its own regulations is entitled to substantial deference. Commonwealth v. Family Home Health Care, Inc., 98 S.W.3d 524, 527 (Ky.App.2003).19 As always, questions of law are reviewed de novo. Rogers v. Fiscal Court of Jefferson County, 48 S.W.3d 28, 31 (Ky.App.2001). We will apply these standards to the issues raised by the parties in turn.

As its second basis for appeal, the Cabinet argues that the “potential to discharge” cannot be used to require an NPDES permit, nor its counterpart, a KPDES permit.

Below, the Petitioners claimed that Farmers were required to obtain KPDES permits, rather than No–Discharge permits for their proposed hog-farming operations. Their claim was based on the allegation that the Farmers' operations constituted a CAFO as that term was defined at the time under Kentucky law.20 This claim was rejected by the Secretary, who found that the Farmers' animal feeding operations did not meet the definition of a CAFO as that term is defined by Kentucky law,21 because the operations would not result in a discharge22 of pollutants to the waters of the Commonwealth. Accordingly, the Secretary concluded that the operations were not subject to KPDES permitting requirements.

The Secretary found that this construction of the regulation was proper, reasonable, and otherwise required on the grounds that: (1) it was supported by the regulatory history of the definition; (2) it was supported by federal case law holding that the federal National Pollutant Discharge Elimination System (NPDES) permit program (which the KPDES permit program implements), extends only to CAFOs that actually in fact discharge or propose to discharge pollutants associated with their operation as well as a then-proposed EPA regulation determining same; and (3) to hold otherwise would be inconsistent with the Clean Water Act and the EPA's interpretation of same and, thus, arguably, run afoul of Kentucky law prohibiting the implementation of the KPDES permit program in a manner more stringent than federal law.

In issuing its opinion on this matter, the circuit court found that the, “[H]earing Officer reached a conclusion in favor of the Cabinet's position,” and “[E]xpressly found that both parties' interpretations are reasonable and possible given the express language of the regulation.” The circuit court nevertheless reversed the Secretary, holding that it was error for the Secretary to interpret the KPDES permit program to only apply to animal farming operations that resulted in discharges of pollutants to waters of the Commonwealth. Relying on KRS 224.70–110, a general Kentucky statute prohibiting water pollution,23 the circuit court held that the KPDES permit program was “far broader” than its federal NPDES counterpart, and applied to both “direct” and “indirect” discharges that cause or contribute to the pollution of the waters of the Commonwealth. While it did not disturb the Secretary's factual finding that the permitted facilities would not discharge pollutants into the waters of the Commonwealth, the circuit court nevertheless found that the Secretary should have construed the Kentucky definition of “CAFO” such that it did not include a discharge requirement.

On that basis, the circuit court found that the federal law interpreting the scope of the federal NPDES permit program had “no application” to the issue of whether Farmers were required to obtain KPDES permits, and that as a result, it was error for the Secretary to rely on federal case law under the NPDES permit program to support its interpretation of the KPDES program. The circuit court held that because the Secretary ultimately found that the Farmers' operations would produce large volumes of manure, and would result “in a considerable potential for water pollution,” the operations should have been deemed CAFOs per se, thereby requiring KPDES permits. In so finding, the circuit court stated as follows:

The Court finds that it was erroneous as a matter of state law for the Cabinet to change its legal interpretation in response to the Waterkeeper decision's interpretation of federal law. The Cabinet's adoption of the Waterkeeper decision on the issue of how to interpret the regulatory definition of CAFOs was erroneous, because the statutory authority under state law significantly differs from the federal act interpreted in the Waterkeeper case. The Cabinet's decision to reinterpret the regulatory definition of CAFO and exempt CAFOs from KPDES permits is clearly erroneous because Kentucky's water pollution statute is broader than the federal Clean Water Act on the crucial issue of whether a direct discharge into water is required to trigger the permit requirement.

The Kentucky statute, unlike the federal Clean Water Act, prohibits both “directly and indirectly” any discharges that “cause or contribute to the pollution of the waters of the Commonwealth.” KRS 224.70–110. As the Waterkeeper Court noted, the federal act provides that ‘[e]xcept as in compliance [with all applicable effluent limitations and permit restrictions], the discharge of any pollutant by any person shall be unlawful.’ 33 U.S.C. § 1311(a).

In arguing on appeal that the circuit court erred in requiring an NPDES permit instead of a No–Discharge permit, the Cabinet notes that in Waterkeeper Alliance v. EPA, 399 F.3d 486 (2d Cir.2005), the United States Court of Appeals for the Second Circuit held that the EPA's CAFO regulations violated the Clean Water Act (CWA)24 because they authorized NPDES permits for discharges from CAFO land application areas without requiring that those permits incorporate (subject to EPA approval and public participation) restrictions on the land application of waste. However, the Cabinet notes that the Waterkeeper court went on to vacate the regulations at issue to the extent that they required CAFO operators to seek NPDES permit coverage for “potential” discharges. The Cabinet argues that the fallacy with the circuit court's position is that the “potential to discharge” cannot be presumed, and that Kentucky's authority to prevent direct and indirect discharges does not give it the authority to presume that there is a “potential to discharge,” even if that discharge is an indirect discharge.

Further, the Cabinet takes exception to the allegation that it changed its legal interpretation of the applicable law in response to the Waterkeeper decision. The Cabinet states that the interpretation urged by the circuit court is contrary to the language of KRS 224.16–050(4), which provides that:

The cabinet shall not impose under any permit issued pursuant to this section any effluent limitation, monitoring requirement, or other condition which is more stringent than the effluent limitation, monitoring requirement, or other condition which would have been applicable under federal regulation if the permit were issued by the federal government.

The Cabinet asserts that issuing a KPDES permit for that which is not permissible under the counterpart federal NPDES program would clearly be in violation of KRS 224. Further, the Cabinet asserts that there is nothing, in either statutory or case law, that prevents it from issuing a No–Discharge permit, and again relies upon the holding of the Second Circuit in Waterkeeper, in finding that the EPA lacked the authority to require operators to seek NPDES permit coverage based upon a “potential” to discharge, specifically holding that:

The Clean Water Act authorizes the EPA to regulate, through the NPDES permitting system, only the discharge of pollutants․ Thus, in the absence of an actual addition of any pollutant to navigable waters from any point, there is no point source discharge, no statutory violation, no statutory obligation of point sources to comply with EPA regulations for point source discharges, and no statutory obligation of point sources to seek or obtain an NPDES permit in the first instance.

Waterkeeper, 399 F.3d at 504, 505. The Cabinet argues that whether that “potential to discharge” is a direct discharge or an indirect discharge is irrelevant.

The Cabinet also asserts that to the extent policy considerations warrant a statutory scheme to address a No–Discharge facility, the KPDES “No Discharge Certification,” or a No–Discharge permit is the appropriate mechanism. Further, the Cabinet argues that compliance with the CNMPs25 will help assure that the facility remains a No–Discharge facility. While acknowledging that there is no federal counterpart to Kentucky's No–Discharge (KNDOP) program, it notes that there is a federal “No Discharge Certification” option under the final rule found in 40 CFR § 122.

In response to the Cabinet's arguments on this issue, the Petitioners assert that the circuit court correctly held that the hog farms must obtain a KPDES permit.26 Petitioners assert that the Secretary reduced the scope of the KPDES permit program, without there being any actual changes to Kentucky law or administrative regulations. Petitioners assert that the Secretary erred in relying on Waterkeeper, and in doing so, reversed a longstanding interpretation of a state regulation, and argue that the circuit court did not make new law, but instead, correctly applied the law and regulations to the facts. In support of that argument, the Petitioners assert that: (1) the 25–year rain event exclusion does not apply to large CAFOs; (2) that even if the 25–year rain event exclusion applies to large CAFOs, the Farmers have not fulfilled its requirement and are, therefore, large CAFOs, required to obtain discharge permits; and (3) that Waterkeeper, supra, does not dictate a different result.

First, the Petitioners assert that the 25–year rain event exclusion does not apply to large CAFOs. They assert that the rain-event exclusion applies only to exclude small and medium-sized CAFOs from discharge permit requirements. They argue that the Kentucky exclusion mirrors one which was eliminated from the federal Clean Water Act regulations in 2003, and that, accordingly, the Farmers' facilities are CAFOs under the federal definition of the term. Thus, the Petitioners argue that the exclusion should have also been deleted from the Kentucky regulations in 2004, to help insure that Kentucky would implement the Clean Water Act in a manner consistent with the federal requirements.27 The Petitioners note, as the circuit court did,28 that previously, the Cabinet had not applied this exclusion to large CAFOs, and that the change of interpretation on the part of the Secretary in this case was unreasonable and not in accord with Kentucky law. They assert that the decision in Waterkeeper, supra, has no application to Kentucky law on this issue, as it is based on a much different and narrower federal statute. The Petitioners argue that AFOs meeting the thresholds set forth in 401 KAR 5:002 are CAFOs per se and are, accordingly, subject to the full permitting process required for issuance of a KPDES permit.29

In their reply brief, the Cabinet disagrees with this argument, stating that at the time of the Secretary's decision in this matter, the Secretary followed the law as it was written, and that the circuit court deviated from the law as it was written. The Cabinet argues that the reasons why the circuit court failed to follow the law as written are not relevant because the judicial system is arguably in place to implement the law and not make it.

Secondly, the Petitioners argue that even if the 25–year rain event did apply to large CAFOs, the Farmers did not fulfill its requirements, and hence, are large CAFOs and are required to obtain discharge permits. Petitioners argue that even if a CAFO's production area discharges only during a 25–year rain event, the conditions of the exclusion can be violated by discharges from the land application area, which they assert would be the case for the Farmers after the manure is spread. The Petitioners assert that the Hearing Officer's findings clearly indicated that there would be a discharge from the land application area if the farms were operated as designed and approved,30 and that the Farmers' assertion that “The Secretary found that the Farmers' operations, as designed and approved, would not result in discharges of pollutants to the waters of the Commonwealth,” was misleading. The Petitioners assert that the Secretary's cited finding31 comes at the end of a section headed, “Facts Relating to the Deep Pits Discharge Issue/Adequacy of Submittals,” and clearly pertains only to the production area, and does not take into account the discharge from the land application area.

Below, the Farmers argued that they met the exclusion despite the application from the land application area because the runoff would itself be exempt under another exclusion, the Agriculture Storm Water Runoff (ASWR) exclusion, which is referenced, but not defined in 401 KAR 5:002 Section 1(111). The federal regulations, at 40 CFR 122 .23(e), establish that runoff from a CAFO's land application is excluded as ASWR only if the facility is operating under approved CNMP, which insures that all the nutrients in the manure are taken up by the plants.

While the Hearing Officer did in fact agree with Petitioners that there would be runoff from the land application area, it accepted the Farmers' argument that the land application runoff would itself be exempt under the ASWR exclusion. The Petitioners argue that this finding was in error because federal law (there being no Kentucky definition of ASWR) clearly establishes that runoff from a CAFO is excluded as ASWR only if the facility is operating under an approved CNMP, which insures that all the nutrients in the manure are taken up by the plants. To this end, the Petitioners note that the Hearing Officer's conclusion, which was adopted by the Secretary, unequivocally stated: “The CNMPs, as approved, do not meet the minimum requirements to qualify the Farmers' operations for the agriculture storm water run-off exemption․”32 The Petitioners thus argue that as the permits themselves showed that there would be a prohibited discharge, the Farmers should have been denied No–Discharge permits at that point.33 The Petitioners argue that failing to require the Farmers to obtain discharge permits goes against Kentucky law, which has very specific provisions concerning land application of manure.34

In its reply brief to this Court, the Cabinet acknowledges that while a CAFO may be more than a barn and a pit beneath the barn, the law is clear that a discharge cannot be assumed, and that Waterkeeper clearly stated as much. See Waterkeeper, 399 F.3d 486, at 505–510. The Cabinet argues that the circuit court erred in assuming a discharge would occur, and that the permits issued to the Farmers in this matter did not indicate that there would be a prohibited discharge.35 The Cabinet asserts that as long as the land application of the manure is done correctly, there was no reason why a discharge should be automatically assumed, and no reason why, in accordance with Waterkeeper, the Farmers should not have applied for No–Discharge permits.

In making a determination on the various arguments raised by the parties on this issue, we note that upon review of the record and applicable law, the circuit court is correct in its description of KRS 224.70–110 as being broader in scope than its counterpart of the Clean Water Act. It is, nevertheless, important to note that this statute, while broad, is also very general. Indeed, it is the opinion of this Court that this statute is prohibitive and not regulatory in nature—that is, it serves only to generally prohibit activities which are in violation of other specific statutory or regulatory requirements. Thus, we simply cannot agree with the court's accompanying conclusion that the requirements of KRS 224.70–110 can only be satisfied by the issuance of KPDES permits. In truth, KRS 224.70–110 does not in any way address the manner in which the Cabinet is to impose regulatory requirements on activities, such as those proposed by the Farmers sub judice, that are subject to its jurisdiction.

And, while KRS 224.70–110 is very general in nature, KRS 224.16–050(4) is unquestionably specific in its mandate, providing that no KPDES permit shall impose limitations, requirements or other conditions more stringent than would have been imposed under a federally issued NPDES permit. The KPDES program is, in fact, expressly constrained by the federal NPDES permit program and, thus, cannot be implemented in a manner that is more stringent than federal law. Accordingly, we cannot agree with the circuit court's determination that Waterkeeper is inapplicable to the issues presented herein. To the contrary, it is directly on point. Waterkeeper clearly provides that an operation only needs a NPDES permit if that operation is a point source discharge. It seems axiomatic that, where no federal NPDES permit would be required, any KPDES permit would necessarily be more stringent, and thus in conflict with KRS 224.16–050(4). Indeed, we note that 401 KAR 5:055 Section 4 specifically provides that:

Section 4: Exclusions: An exclusion from the requirement to obtain a KPDES permit shall be ․

(4)A discharge that is not regulated by the U.S. EPA under the Clean Water Act Section 402, 33 U.S.C. 1342.

In its order, the circuit court did not address either KRS 224.16–050(4) nor 401 KAR 5:055 Section 4. We find these provisions to be directly applicable to the issues before us. The NPDES permit program extends only to CAFOs that actually in fact discharge, or propose to discharge, pollutants associated with their operations. Stated simply, no effluent limitations, monitoring requirements, or other conditions would be imposed upon the Farmers' operations under the federal NPDES program, a fact acknowledged by both Petitioners and the circuit court. It thus seems clear that any discharge condition imposed upon these operations pursuant to the KPDES permit program would be more stringent than that required under federal law. The KPDES permit program implements federal law and, therefore, by Kentucky statute, is confined to the scope of its federal counterpart. Thus, the federal regulatory definition of a CAFO is controlling.

Clearly, the federal definition provides that regardless of the number and/or weight of animals housed, an operation is only considered a CAFO for permitting purposes if it is a point source discharger. Below, neither the Petitioners nor the circuit court disputed the Secretary's finding of fact that the Farmers' operations would not directly discharge into state waters. Having so stated, we nevertheless address the issue in contention between the parties as to whether or not the Farmers' operations should be deemed “CAFOs per se,” under the state definition of CAFOs, codified at 401 KAR 5:002 Section 1(23).

We are in agreement with the circuit court that resolution of this issue turns upon whether 401 KAR 5:002 Section 1(23)(c) applies to prevent the Farmers' operations from being considered CAFOs per se based on the number and weight of the animals alone, and without their operations also having to have an actual discharge. While finding that the interpretations asserted by both parties were reasonable, the Hearing Officer ultimately made a determination in favor of the Farmers, finding that section (c) applied to modify both subsections (a) and (b), and that, accordingly, there is a discharge requirement for AFOs that otherwise meet the numeric and weight thresholds in subsection (a) before they are defined as CAFOs. As noted, the circuit court disagreed, finding that subsection (c) applied only to modify subsection (b), and that the Farmers' operations were large CAFOs per se, based solely on the weight and number of the animals. We cannot agree with the circuit court's opinion in this regard.

As we have previously stated herein, the opinion of the Secretary, if supported by substantial evidence, is entitled to great deference from this Court. As the circuit court itself stated, the Hearing Officer found that either interpretation of the statute as it concerned this issue was reasonable. As our courts have repeatedly held, in most cases, an agency's interpretation of its own regulations is entitled to substantial deference, and it is usually the practice to conform to an agency's construction when that agency was responsible for a regulation's adoption. See Hagan v. Farris, 807 S.W.2d 88, 490 (Ky.1991). Sub judice, the circuit court substituting its own preferred interpretation of the statute over that of the Secretary, despite the fact that the agency's interpretation was both reasonable and supported by substantial evidence.

Having so found, we turn to Petitioners' contention that even if the 25–year rain event did apply to large CAFOs, the Farmers did not fulfill the statutory requirements for the exclusions, and hence, are required to obtain discharge permits. As noted, Petitioners argue that even if a CAFO's production area discharges only during a 25–year rain event, the conditions of the exclusion can be violated by discharges from the land application area, which they assert would be the case for the Farmers after the manure is spread. A review of the permits issued to Farmers reveals that runoff such as that referenced by Petitioners herein is specifically prohibited. Accordingly, if and when such run-off does occur, Petitioners can, at their choosing, address same through the appropriate judicial channels.

Accordingly, for the foregoing reasons, we reverse this portion of the circuit court's order finding that KPDES permits were necessary for Farmers' operations, and direct that the Secretary's order as it concerns this issue be reinstated.

As its third basis for appeal, the Cabinet argues that the Secretary properly determined that neither Jimmy Tosh36 nor Tosh Farms were required to sign the Farmers' permit applications as a co-permittee, and that the circuit court erred in reversing the Secretary on this issue. Below, Petitioners alleged that Jimmy Tosh and/or Tosh Farms should have been signatories on the Farmers' permits. In making this argument, the Petitioners relied upon 401 KAR 5:005 Section 2(2)(a), which, at the time of the Secretary's decision, required that the application for a No–Discharge permit be signed by “the person having primary responsibility for the overall operation of the facility.”37

The Secretary rejected Petitioners' claim, determining that based upon the preponderance of the evidence presented at the hearing, Farmers, rather than Jimmy Tosh or Tosh Farms, had primary responsibility for the overall operation of the waste handling system associated with the farming facilities, and that accordingly, neither Jimmy Tosh nor Tosh Farms was required to sign the permit application or otherwise be listed as a co-permittee on the permits.38 The circuit court reversed the Secretary, finding that the record was “replete with facts that establish that Tosh has overriding authority on virtually all issues that are important to environmental compliance, and that Tosh retains the right ‘at his sole discretion’ to take over each operation and charge all costs to the farmers.”

The Cabinet now argues that there is no statutory authority for integrator liability, and notes that an attempt in the past by the Cabinet to impose such liability has been rejected both by the court and the General Assembly.39 The Cabinet argues that the statutory authority of the Cabinet to impose integrator liability pursuant to 401 KAR 5:072 expired with the adjournment of the General Assembly on March 23, 2001, and notes that there is no provision in the CWA, or in Kentucky's KPDES regulations which specifically provides for integrator liability. Accordingly, the Cabinet asserts that the circuit court was compelled to affirm, and erred in not doing so. Moreover, the Cabinet argues that in any event, it disagrees with the circuit court's conclusion that Tosh has primary responsibility over the manure because it is the application of the manure which is the primary issue herein. Further, the Cabinet argues that the circuit court should have upheld the Secretary's finding that Tosh was not a required party to the permit based upon the “substantial evidence” standard. The Cabinet thus argues that the Secretary's decision not to impose integrator liability is entitled to great deference and cannot be considered arbitrary.

In response, the Petitioners continue to argue that the circuit court was correct in concluding that Tosh Farms and/or Jimmy Tosh was the person with “primary responsibility for the overall operation of the facility” under 401 KAR 5:005 Section 2(2)(a), and thus should have been signatory to the permit. In support of that assertion, Petitioners argue that: (a) the circuit court applied the appropriate de novo standard of review in finding that as a matter of law applied to undisputed facts, Tosh Farms was the entity with primary responsibility for the overall operation of the facility; and (b) the circuit court correctly determined that the Secretary and Hearing Officer erred in justifying the Cabinet's failure to require Tosh Farms to be a signatory in these cases, based on failed attempts to impose a per se requirement that all integrators be permit signatories.

First, the Petitioners assert that the circuit court applied the appropriate de novo standard of review in finding that, as a matter of law, Tosh Farms was the entity with primary responsibility for the facility. Petitioners argue that the circuit court was entitled to review this issue de novo because the Secretary's ruling merely reflected an “application of undisputed facts to the law.” Petitioners argue that the Cabinet, at the time of review and issuance of the permits in question, undertook no inquiry into whether the signatories on the applications were the individuals with “primary responsibility,” and that this was an abdication of the agency's regulatory duty to ensure compliance with its own rules. The Petitioners assert that the circuit court's determination that Tosh and/or Tosh Farms was in fact that individual with “primary responsibility” for the farms was supported by substantial evidence, and was correct as a matter of law.40 The Petitioners argue that the Farmers are only the day-to-day contract agents of a principal who controls all significant decisions with respect to the composition and disposition of the wastes. The Petitioners assert that the contractual relationship between Tosh and the Farmers should not be allowed to shield Tosh from accountability for the degree of control and authority he wields over the farms at issue.

In response to this argument, the Cabinet disputes Petitioners' assertion that the “no inquiry” was made into whether the signatories on the applications were the individuals with primary responsibility. It states that the day-to-day authority over the wastewater handling systems is performed by the Farmers, and not Tosh, and asserts that this is what is required by 401 KAR 5:002 Section 1(117), as amended.41 The Cabinet asserts that it was the Farmers who had the authority to conduct the procedures and practices necessary to ensure that the wastewater system and any portion thereof is operated in accordance with accepted practices, laws, and administrative regulations of the Commonwealth.

As their second basis for arguing that Tosh should have been a signatory on the permits, the Petitioners argue that the circuit court correctly determined that the Secretary and Hearing Officer erred in justifying the Cabinet's failure to require Tosh Farms to be a signatory in these cases, based on failed attempts to impose a per se requirement that all integrators be permit signatories. Below, in the course of addressing past efforts on the part of the Cabinet to impose a categorical requirement that all integrators sign permit applications (an effort which was rejected by both the courts and the General Assembly), the Cabinet asserted that it lacked the power to require Tosh Farms to sign an application. As did the circuit court in its opinion, Petitioners take issue with this conclusion, asserting that the validity of legislative action or inaction on past Cabinet regulations is not at issue in this proceeding, and that the issue is governed only by construction and application of the law as it currently stands.

In response to Petitioner's arguments in this regard, the Cabinet states simply that without the regulatory authority to impose integrator liability, the Cabinet is not in a position to do so. The Cabinet again asserts that the General Assembly has made it clear by their rejection of 401 KAR 5:072 and further inaction to address integrator liability that no authority exists for same.

Having reviewed the record and the regulation at issue, we are of the opinion that the Secretary's finding that the Farmers, and not Tosh or Tosh Farms, were the individuals with primary responsibility for the day-to-day operations of the farms was supported by substantial evidence. As noted, Petitioners assert that the circuit court was entitled to review this issue de novo, arguing that a decision consisted solely of applying the law to a set of undisputed facts. To the contrary, our review of the record reveals that there was much factual dispute below, and a great deal of evidence presented, concerning which persons or entities had control over the day-to-day operations of the farms, and to what degree. Accordingly, it was the duty of the circuit court to determine whether or not the opinion of the Secretary was supported by substantial evidence, and we disagree with the circuit court's finding that, “as a matter of law,” Tosh Farms exercised primary responsibility over the Farmers' facilities.

The Secretary, in rejecting Petitioner's claim below, determined that by a preponderance of the evidence, the Farmers, rather than Tosh or Tosh Farms, had primary responsibility for the overall operation of the waste handling system associated with the farming facilities. The circuit court, in reversing, substituted its judgment for that of the Hearing Officer as to the weight and credibility of the evidence, finding that, based on other evidence in the record, the Secretary could have found that Tosh was primarily responsible, and not the Farmers. Further, the court stated that, “The law in this Commonwealth clearly provides that the judicial standard of review of an agency's decision is largely deferential, and as long as there is substantial evidence in the record to support the agency's decision, the court must defer to the agency, even if there is conflicting evidence,” 500 Associates, Inc. v. Natural Resources and Environmental Protection Cabinet, 204 S.W.3d 121, 131–132 (Ky.App.2006), and then rendered an opinion which we believe is contrary to that standard Having reviewed the record, we believe the Secretary's decision to have been supported by substantial evidence.

Such being the case, reversal would only have been appropriate had the Secretary incorrectly applied the law to the facts. We do not believe such was the case. Sub judice, the Secretary properly held that this issue was governed by the definition of primary responsibility as set forth in 401 KAR 5:002. We find that the Secretary's interpretation of the Cabinet's own regulation was reasonable, and was therefore required to be afforded deference by the circuit court. See Commonwealth v. Family Home Health Care, Inc., 98 S.W.3d 524, 527 (Ky.App.2003). Our review of the circuit court's order reveals that it imposed its own interpretation of the law, rather than deferring to the Cabinet's interpretation regarding who is the proper entity responsible for permit compliance. Accordingly, we believe reversal of the circuit court is appropriate.

In so finding, we briefly address the Cabinet's argument concerning its past failed attempts to impose categorical integrator liability, attempts which were dismissed by the courts and the legislature. On this point, we are in agreement with the Petitioners and the circuit court that reliance on this history in an attempt to support the Secretary's ruling is erroneous. Indeed, this Court is of the opinion that resolution of this issue turns solely on the construction and application of 401 KAR 5:005 Section 2(2)(a) to the facts of this matter. The mere fact that the legislature declined to adopt administrative regulations imposing per se integrator liability cannot in and of itself be interpreted to mean that an individual who is primarily responsible, as that term is defined by Kentucky law, cannot be required to sign as a co-permittee, if in fact such a finding is supported by substantial evidence.

As its fourth basis for appeal, the Cabinet argues that the Secretary properly determined that the Cabinet was not required to exercise its discretionary, “special condition” authority to require analysis or permit conditions relating to hazardous or toxic air emissions, and that the circuit court erred in reversing the Secretary on this issue.42 Below, Petitioners alleged that in issuing No–Discharge permits to the Farmers, the Cabinet failed to properly apply 401 KAR 63:020, a Kentucky regulation relating to “potentially hazardous,” or “toxic” air emissions. Specifically, the Petitioners alleged that prior to issuing the No–Discharge permits to the Farmers, the Cabinet was required to make an evaluation or assessment of the farms' potential emissions of air pollutants covered by 401 KAR 63:020, and to impose conditions in the Farmers' water permits relating to compliance with that regulation.

The Hearing Officer's initial report contained approximately twelve pages43 of factual findings on this issue, supporting two recommendations that the permits be remanded for failure of the Cabinet and the Farmers to comply with 401 KAR 63.020.44 The Secretary declined to adopt the recommendations of the Hearing Officer, and rejected Petitioners' claim, determining that a special permit condition implementing or restating the requirements of 401 KAR 63:020 and/or a formal evaluation or assessment under that regulation was not required. The Secretary relied on evidence presented at the hearing demonstrating that there is currently inadequate data regarding the level of, and effects of, air emissions from agricultural feeding operations as the basis for finding that it was reasonable for the Division to decline to apply 401 KAR 63:020 to Farmers' operations.45

The circuit court reversed the Secretary's determination, finding that the Secretary improperly relied on the Cabinet's planned repeal of the regulation as justification for not enforcing it;46 that “the Secretary failed to articulate any valid reason” for the holding, and that the Cabinet should have exercised its “special condition” discretionary authority under 401 KAR 5:005 and required an “individualized evaluation” of the potential air emissions from the farms.

In response to the ruling of the circuit court, the Cabinet stresses that the permits at issue are water quality permits, and not air quality permits. While acknowledging that an odor standard was placed into the permits, it notes that the odor standard and the secondary ambient air quality standard for hydrogen sulfide are established under 401 KAR 53:010. The Cabinet asserts that the specific intent of the regulation at issue, 401 KAR 63:020, is to control metals, including, but not limited to “antimony, arsenic, bismuth, lead, silica, tin, and compounds of such materials.” Further, while conceding that in general, the consent agreement between the EPA and participating AFOs allows the EPA to monitor the air quality of producers of all sizes,47 it notes that the EPA has yet to determine if AFOs, “emit potentially hazardous matter or toxic substances in such quantities or duration as to be harmful to the health and welfare of humans, animals, and plants” as required under 401 KAR 63:020. The Cabinet asserts that the application of this regulation is made on an individual basis when there is evidence of a violation, and states that it has never known an agricultural operation to be in violation of 401 KAR 63:020.48 Moreover, the Cabinet asserts that the Secretary was correct in stating that reliable methodologies for quantifying emissions from AFOs do not exist at present, and are currently being developed by the EPA. The Cabinet argues that no other state or federal permits require anything more with respect to air contaminates than what is set forth in the permits herein, and that there is no precedent for issuing air permits to CAFO operations.

The Cabinet also argues that allowing the circuit court decision to stand would create ambiguity and uncertainty about where to draw the line between permitting programs, and that implementation of 401 KAR 63:020 is a question appropriately decided through the air permitting, and not the water permitting, process. It asserts that excluding 403 KAR 63:020 from a water permit will not mean that the regulation does not apply, nor that an air permit is not required, but will prevent a blurring of lines between the two.

In response to the arguments made by the Cabinet, the Petitioners argue that the circuit court properly found that the Cabinet failed to fully enforce its own regulatory requirements regarding protection of the public from air toxins. They assert that (1) the Cabinet cannot excuse, without acting in an arbitrary manner, the failure to have conducted an individualized review of the potential of the Farmers' facilities to generate air toxins on the basis that it is a “water permit” because it already utilized another air quality regulation to address and regulate odors from the storage of animal waste at these same facilities; (2) Farmers are incorrect in their assertion that because the EPA has yet to determine if animal feeding operations emit potentially hazardous matter or toxic substances as required under 401 KAR 63:020, then it was not necessary for the Cabinet to require implementation of the statute pursuant to its special condition authority; and that it is the responsibility of the Cabinet, and not the EPA, to implement 401 KAR 63:020.

First, Petitioners argue that 401 KAR 63:020 is a regulation promulgated pursuant to KRS Chapter 224, and that it is thus within the ambit of the regulations to be applied under 401 KAR 5:005 Sections 24 and 25.49 They thus assert that the argument that the facility is permitted under a “water permit” is flawed because the Cabinet clearly utilized an air quality regulation to address and regulate odors from the facilities' storage of animal wastes. They argue that the Cabinet clearly had an obligation to conduct an individualized review of the adequacy of controls and/or procedures implemented by the Farmers to control emissions at their particular facilities, and that it failed to do so.50 Petitioners assert that 401 KAR 63:020 clearly requires that the Cabinet make an individual evaluation where a facility “may emit” potentially hazardous material or toxic substances, and that in the face of admitted knowledge of emissions of ammonia and hydrogen sulfide, they are required to do so.

Petitioners also dispute any arguments premised upon the fact that the EPA has yet to determine if animal feeding operations emit potentially hazardous matter or toxic substances as required under 401 KAR 63:020. They assert that it is not the EPA's responsibility to implement 401 KAR 63:020, but the responsibility of the Cabinet. Petitioners also argue that in any event, the EPA is not trying to determine whether or not the emissions themselves are harmful,51 but is instead merely attempting to find a reliable method to develop standardized emissions factors that would lessen the cost of monitoring.52 Petitioners assert that it is obvious that the emissions are harmful, and note that the EPA has in fact engaged certain CAFOs in voluntary consent orders as part of the development of updated emissions factors for CAFOs. Consequently, they argue that the circuit court was correct in holding that the Cabinet's decision to decline to impose a special permit condition was arbitrary, and that the circuit court was correct in reversing same.

Having reviewed the record and the arguments of the parties on this issue, it appears that both parties agree that the Cabinet was required to impose a special permit condition only when, in the Cabinet's “best professional judgment,” a “special” permit condition was “necessary” to implement 401 KAR 63:020. The Cabinet's authority in this regard is highly discretionary, and, thus, entitled to great deference. The Petitioners were required to show, by a preponderance of the evidence, that the Cabinet was required to exercise its discretionary authority to impose a “special” condition in Farmers' permit relating to toxic air emissions. Upon review of the record, we do not believe that burden was met in this instance.

Further, and we believe, importantly, Petitioners do not dispute that the Cabinet can, at any time, enforce the provisions of 401 KAR 63:020, whether or not its provisions are specifically restated and implemented in an individual permit. Upon review of 401 KAR 63:020, we are in agreement with Farmers and the Secretary that it is, ultimately, an administrative regulation administered by the Cabinet's Division for Air Quality, and one which is self-implementing. We disagree with the circuit court's conclusion that 401 KAR 5:005 requires an “individualized evaluation” of each operation's potential for discharges of air pollutants. Certainly, at any time and whether or not specifically stated in the individual permits, the Cabinet can compel compliance with its air quality regulations.53 Accordingly, we disagree with the circuit court's determination that each permit was required to include an individualized evaluation of potential for emission of air pollutants.

Finally, we note that the permits at issue in this matter were issued by the Cabinet's Division of Water as an exercise of its authority to control water pollution. These permits do not, and should not, in the opinion of this Court, represent an exercise of the Cabinet's separate authority to prevent air pollution. Indeed, the order issued by the circuit court has the effect of forcing the Division of Water to act outside of its specific area of technical expertise. It is the opinion of this Court that allowing the circuit court decision to stand would create ambiguity and uncertainty about where to draw the line between permitting programs, and that implementation of 401 KAR 63:020 is a question appropriately decided through the air permitting, and not the water permitting, process. Accordingly, we reverse.

As its final basis for appeal, the Cabinet argues that the Secretary properly determined that the Cabinet was not required to exercise its discretionary “special condition” authority to require additional pathogen controls in the Farmers' permits, and that the circuit court erred in reversing the Secretary's determination on this issue. Below, Petitioners contended that the Cabinet was required to impose specific conditions in the Farmers' permits for the control of discharges containing pathogens as a constituent of animal waste. As with Petitioners claim relating to 401 KAR 63:020, the “special conditions” provision of 401 KAR 5:005 Section 25 governed the resolution of this claim. The Farmers argued that none of the mandatory conditions required to be included in a No–Discharge permit relate to effluent limits for or other limitations respecting pathogens and, thus, they argued that any such permit condition is proper for inclusion in the Farmers' permit only as a discretionary “special condition” that the Cabinet may impose in its “best professional judgment.” The Secretary determined that special permit conditions setting forth effluent limitations or other requirements relating to pathogens should not, in the discretion of the agency, be required for the permits at issue. The circuit court reversed, finding the Farmers' permits ran afoul of KRS 224.10–100(5) and (19),54 and that the Cabinet failed to include limits, control technologies, or monitoring requirements regarding pathogens in the Farmers' permits.55

The Cabinet now argues that according to the CNMPs submitted by the Farmers, the manure will be applied through injection six inches into the ground, which it asserts will create a hostile environment for pathogens,56 because of aggressive soil microbes. The Cabinet asserts that in its best professional judgment, the discharge of pathogens is controlled because the manure is stored in deep pits below the barns where it does not come into contact with precipitation and, thus, is not subject to discharge during precipitation events. The Cabinet again asserts that because the permits at issue are No–Discharge permits and not KPDES permits, a discharge cannot be assumed. The Cabinet also notes that setbacks are imposed to prevent runoff of manure and to control pathogens, and that in its best professional judgment, the discharge of pathogens is controlled.

In response, the Petitioners argue that the circuit court was correct in remanding the permits because the Cabinet had failed to evaluate the pathogen risk despite being put on notice of its dangers. In response to the Cabinet's arguments that the pathogens are adequately controlled through the CNMPs and setbacks, the Petitioners argue that the Cabinet cannot know the extent of the problem without first investigating it, and that, in any event, the CNMPs have been found to be deficient by the Hearing Officer, the Secretary, and the circuit court. The Petitioners also argue that setbacks alone cannot prevent pathogen contamination. The Petitioners argue that based upon EPA recognition of the seriousness of the problem of potential disease-inducing pathogens in animal manure, as well as comments submitted to the Cabinet before the permits were issued, and the Cabinet's failure to respond to the problem, the Cabinet's action on the permits must be found to not be “best professional judgment” as that term is used in 401 KAR 5:005 Sections 24 and 25. The Petitioners thus assert that this Court should affirm the circuit court's decision to remand the permits to address the pathogen issue, and that the Secretary's failure to impose special conditions to monitor and control pathogens should be found to be arbitrary, and not supported by substantial evidence.

Upon review of the applicable law and arguments of the parties, we note that this issue also turns upon the Cabinet's exercise of its special condition authority pursuant to 401 KAR 5:005. As previously explained herein, we believe this authority to be almost entirely discretionary and, thus, not appropriately disturbed absent an action on the part of the Cabinet that is clearly arbitrary. A review of the record reveals that such was not the case sub judice . The record indicates that the Farmers' permits in fact contain numerous conditions designed to prevent runoff of manure and otherwise control pathogens. These conditions include requirements that the Farmers: (a) prepare and implement CNMP; (b) inject the manure produced at their facilities four to six inches into the soil; (c) apply the manure in accordance with the setbacks included in their operating permits; and (d) maintain buffer strips around manure retention structures, animal holding areas, and land application areas to prevent soil erosion and runoff of manure. Further, we note that expert testimony submitted on behalf of the Farmers indicates that injection of the manure into the soil, as opposed to a surface application, will create a hostile environment for pathogens because of aggressive soil microbes.

Moreover, and importantly, we note that since the permits issued to the Farmers in this matter were No–Discharge permits and not KPDES permits, a discharge cannot be assumed. Based upon the evidence submitted, we believe that the Secretary's ruling on this issue was supported by substantial evidence in the record, and was otherwise proper. Further, we simply cannot agree with the circuit court's conclusion that the statutes at issue require permit conditions relating to pathogens. Any authority to impose pathogen controls or limitations in the Farmers' permits is derived solely from the Cabinet's “special condition” authority. The Cabinet, in its best professional judgment, and based upon the evidence of record, decided not to exercise that authority in this instance, and we see no reason to disturb that determination. Accordingly, we reverse.

As their first and only basis for cross-appeal, the Petitioners allege that the circuit court erred in concluding that the Cabinet reasonably exercised its “best professional judgment” in establishing setback requirements for the challenged permits. Under its discretionary “special” condition authority, the Cabinet imposed two types of minimum “setback” distances in the No–Discharge permits issued to the Farmers. One type of setback was imposed to protect environmentally sensitive receptors such as lakes, streams, springs, wells, or sinkholes, from water pollution concerns. The second was imposed to protect aesthetic or cultural features, such as residences or businesses, from odor concerns. During the course of the administrative proceeding below, both Petitioners and Farmers challenged the setback conditions. Farmers asserted that the setbacks were unnecessarily restrictive, considering the fact that their operations were “No–Discharge.” Conversely, Petitioners claimed that the cultural setbacks should have been greater in order to adequately protect against odor and other concerns. The Secretary adopted the Hearing Officer's recommended findings to reject both claims, and found that the Cabinet reasonably exercised its best professional judgment in establishing setback distances in the permits. The circuit court affirmed.

Below, Petitioners argued to the circuit court, as they now argue to this Court, that the Cabinet failed to exercise “best professional judgment” by failing to impose conditions sufficient to comply with KRS 224.20–110(1).57 In addressing this issue, the circuit court found the:

Hearing Officer's conclusion regarding this issue to be reasonable and subject to judicial deference. The Cabinet reasonably exercised its best professional judgment in establishing the setbacks and the Court upholds the Secretary's final order to the extent that it found that the Cabinet properly exercised its authority under 401 KAR 5:005 Section 25.

Circuit Court Opinion and Order at 28.

Petitioners now argue that the circuit court erred as a matter of law in making this conclusion, and that the record reflects that the Cabinet did not apply “best professional judgment” as that term is defined in 401 KAR Chapter 5, and failed to impose conditions sufficient to prevent unreasonable interference with the “comfortable enjoyment of life or property” of the Petitioners. Petitioners acknowledge that “best professional judgment” is not defined in 401 KAR Chapter 5, but urge this Court to assume that the term was intended to be construed and applied in the context of No–Discharge permits in the same manner that it is applied in the context of discharge permits. To that end, Petitioners note that the Clean Water Act58 utilizes the term “best professional judgment” to describe the process by which the water discharge permit writer will set discharge limits and other permit conditions on a case-by-case basis where categorical standards have not been developed, and that 33 U.S.C. § 1314(b) sets forth various factors for a “best professional judgment” determination, including the total cost of the application of technology in relation to the effluent reduction benefits to be achieved from such application. They assert that the same type of assessment of various technologies for control of pollution should be utilized in the context of 401 KAR 5:005. Petitioners argue that the setbacks at issue were imposed to address a secondary ambient odor standard, and are no assurance that the prohibition established in KRS 224.20–110(1) will be met.

Petitioners also take issue with the Cabinet's setbacks failed to fully protect the utilization of adjoining lands, and also lessened the protections for rural residents as compared to their urban neighbors.59 Below, Petitioners argued that the approach used to establish the setbacks was arbitrary. And, second, the setbacks established by the agency, which began at the hog facilities and continued to existing off-site structures on adjoining lands, created a negative zoning or easement, which burdened the lands of others and foreclosed the comfortable enjoyment of those adjoining lands. Petitioners assert that their properties were essentially utilized by the Cabinet as waste management “technologies.” They assert that when they moved their dwellings closer to their own property boundaries, the agency took the anomalous action of reducing the setbacks for two of the facilities in order to continue to accommodate the hog farming operations and land application of wastes. Petitioners argue that the punitive nature of the lowering of those setbacks by the agency underscores the questionable nature of setbacks based only on protection of current land uses, and highlights the inconsistency with the statutory mandate of fully protecting the enjoyment of adjoining lands.

We disagree with this assertion, and note that there is no statutory or regulatory requirement to even establish a setback in the first place, much less a requirement regarding the point from which the setback must be measured. Further, and regardless of the setback, compliance with the Kentucky odor standard is required at the boundary of the permitted facility. Accordingly, we decline to address this argument further herein.

Petitioners also argue that without basis in regulation or statute, the Cabinet reframed the standard of “best professional judgment” as being merely the “reasonable accommodation for the attenuation of odors for the surrounding neighbors.” Accordingly, Petitioners request that the circuit court decision be reversed on this point, and that this Court remand the permits with directions to conduct an appropriate “best professional judgment” review of available control technologies and the feasibility of those technologies, to address and prevent pollution from the Farmers' operations, and that the setbacks be implemented as mandated by KRS 224.20–110 and KRS 224.01–010(3).

In response, the Cabinet argues that the Hearing Officer, the Secretary, and the circuit court found that the Cabinet appropriately exercised its best professional judgment in determining the appropriate setbacks. The Cabinet argues that the setbacks are rationally related to the permit operations and the use of liquid manure as a fertilizer or soil conditioner. The Cabinet disputes Petitioners' contention that the setbacks were imposed in lieu of the Cabinet's best professional judgment, and states that it spent a great deal of time reviewing information, comments, and historic setbacks prior to making its decision on this issue.

In deciding this issue, we again note that the Cabinet's special condition authority is entirely discretionary. Having reviewed the record, we are in agreement with the circuit court that the Cabinet's authority was exercised properly in this instance, and that the Secretary's decision was supported by substantial evidence. The record reveals that experts were consulted on this issue, that various technologies were assessed and reviewed. The setbacks established by the Cabinet are rationally related to the permit operations and the use of liquid manure as a fertilizer or soil conditioner, and were made according to the Cabinet's best professional judgment. In so finding, we disagree with Petitioner's argument that we should assume that the term “best professional judgment” was intended to be construed and applied in the context of No–Discharge permits in the same manner that it is applied in the context of discharge permits. We believe it is clear that Kentucky's No–Discharge permit program is not related to federal law requirements for setting case-by-case technology-based discharge effluent limitations in NPDES permits, and that, given neither KPDES nor NPDES permit discharge limitation requirements are applicable to Kentucky's No–Discharge permit program, we see no reason to find otherwise. Accordingly, we affirm the circuit court on this issue.

Wherefore, for the foregoing reasons, we hereby affirm in part, reverse in part, and remand this matter to the Franklin Circuit Court for additional proceedings not inconsistent with this opinion.

CAPERTON, Judge.

CLAYTON, Judge Concurs. TAYLOR, Chief Judge, Concurs in Result Only.