Diffendal v. Department of Natural Resources

DEBORAH S. EYLER, J. This appeal arises from the final decision of the Maryland Department of Natural Resources (“DNR”) to deny an application for an aquaculture lease for three areas in the Chineo-teague Bay in Worcester County. The DNR’s decision was reversed on judicial review in the Circuit Court for Anne Arundel County. The appellants are 18 individuals (and one joint trust established by two of these individuals) who are nearby residents, property owners, and commercial watermen, and who filed petitions of protest with the DNR and participated in the proceedings below. 1 The appellees are Donald Marsh, Jr., the applicant for the lease, and the DNR. In three briefs, 2 the appellants present ten overlapping questions, which we have combined, condensed, and rephrased as two: I. Was the DNR’s decision that the lease application was for a “submerged land lease,” not • a “water column ³⁹¹ lease,” legally correct and supported by substantial evidence in the record?

II

Was the DNR’s decision that the public trust doctrine required it to consider the impact of the proposed lease on navigation and fishing in the area legally correct, and, if so, was the finding that negative effects on navigation and fishing justified denial of the lease supported by substantial evidence in the record? For the following reasons, we shall affirm the judgment of the circuit court. FACTS AND PROCEEDINGS A. Aquaculture Leases in Maryland Title 4 of the Natural Resources Article (“NR”) governs “Fish and fisheries.” Subtitle 11A pertains to “Aquaculture,” which is “the commercial rearing of fish or aquatic plants for sale, trade, barter, or shipment.” Md. Code (1973, 2012 Repl. Vol.), § 4-llA-01(b) of the NR Article.

In enacting subtitle 11 A, the General Assembly intended to “promote the development of an aquaculture industry in [Maryland]” and to streamline the procedure for applying for aquaculture leases. See NR § 4-llA-03(b) & (c) (addressing legislative intent). Since July of 2011, the DNR has been the agency charged with reviewing and deciding whether to grant all aquaculture lease applications. 3 The DNR issues two types of aquaculture leases: water column leases and submerged land leases. NR § 4-11A-01(d).

A water column lease is “a lease of the column of water on or under the surface of the water and above the surface of the submerged land.” NR § 4-llA~01(p). A submerged land lease is a lease of “any land lying beneath the waters of the ³⁹² State ... for cultivating oysters and other shellfish for commercial purposes.” NR § 4-llA-01(n). A person or entity seeking an aquaculture lease must file an application with the DNR and pay a non-refundable fee. NR § 4-llA-09(a).

The DNR, in conjunction with the MDE, other internal agencies, and the United States Army Corps of Engineers (“USACE”), conducts an extensive review to determine if the relevant statutory criteria are satisfied. Most of the statutory criteria for water column and submerged land leases are identical. For both, the DNR may issue a lease in waters that have been classified by the MDE as “approved, conditionally approved, or restricted for harvest.” NR §§ 4— 11 A — 07(b)(1) (submerged land lease); 4-llA-08(b)(l) (water column lease). The DNR may not issue either such lease if the areas proposed to be leased are: (i) Within a minimum of 50 feet of shoreline or any pier without the written permission of the riparian owner at the time of initial application for the lease; (ii) Within 150 feet of the public shellfish fishery or a registered pound net site; (iii) Within 150 feet of any oyster reserve or a Yates Bar located in an oyster sanctuary;[ 4 ] (iv) Within 150 feet of a federal navigational channel; (v) Subject to paragraph (2) of this subsection, in any creek, cove, bay, or inlet less than 300 feet wide at its mouth at mean low tide; (vi) In an SAV Protection Zone;[ 5 ] or (vii) In a setback or buffer from the Assateague Island National Seashore established by the [DNR]. ³⁹³ NR §§ 4-llA-07(c) (submerged land lease); 4--llA-08(e) (water column lease).

For submerged land leases in any of the coastal bay areas, the DNR may “establish submerged land areas ... that ... [a]re preapproved for leasing; ... [that m]ay not be leased; [or that m]ay be approved for leasing only on specific application and review by the [DNR].” NR § 4-llA-08(e)(l). Before preapproving areas for leasing or prohibiting leasing in a given area, the DNR “shall consider potential conflicts presented by other uses of the proposed area, including navigation, recreation, and commercial fishing.” NR § 4-11A-08(e)(2). For both water column leases and submerged land leases, if the DNR determines that all the statutory criteria are met and the proposed lease is not within an area preapproved for leasing, the proposed lease area must be staked and notice of the proposed lease must be advertised. NR § 4-llA-09(g).

At that time, interested persons may file to protest the issuance of the lease. A protestant may request a contested case hearing. Id. If no protest is filed or if a final decision is issued dismissing the protest, the DNR shall issue the lease, with or without conditions, unless it finds the lease application should be denied “for reasonable cause” in order to protect “the public health, safety, or welfare.” NR § 4-llA-09(d)(4).

Once a lease is issued, it may be terminated by the DNR at any time for a violation of the subtitle. A submerged land leaseholder “may cultivate shellfish on the submerged land, in temporary protective enclosures approved by the [DNR] on the surface of the submerged land, or in any other manner authorized by the [DNR].” NR § 4-11A-08(d). A water column leaseholder may cultivate shellfish “[s]ub,ject to approval by the [USACE], on or under the surface of the water in a floating structure; or ... [i]n any other manner authorized by the [DNR].” NR § 4-llA-08(d). A leaseholder may not exclude others from leased areas during the term of the lease, but non-leaseholders are prohib ³⁹⁴ ited from removing and/or destroying shellfish or equipment from the leased areas.

See NR § 4-llA-16(b). B. Marsh’s Lease Application On March 30, 2009, Marsh filed his application for a shellfish aquaculture lease with the MDE. The application was transferred to the DNR following the change in the law noted above. Marsh sought to lease three 16-acre areas of the water column in Chincoteague Bay for the purpose of raising oysters in cages.

He also sought to lease the submerged land below the water column in those same areas for raising clams in the substrate. Marsh amended his application to withdraw the request to lease the submerged land for clam cultivation and his application was treated as a water column lease application from that point forward. Marsh’s proposal for the water column lease was as follows. He planned to raise the oysters “from seed in cages made of plastic-coated wire mesh.” Each cage would be 2 feet wide, 4 feet long, and about 6 inches deep.

The cages would rest on between 2-inch to 6-inch “semi-cylindrical feet” sitting on the bottom of the bay. “Helical anchor bolts” would be drilled into the substrate to a depth of about 3 feet and the cages would be tethered to the anchors with nylon rope. The oysters would be inside bags inside the cages until they reached a certain size, when they would be removed from the bags. Marsh planned to begin operations with 500 cages and then expand if his business was successful. All three proposed lease areas were located about one mile south of South Point, which is the southernmost point of a peninsula that juts into the coastal bays south of Ocean City and to the west of Assateague Island.

To the east of the peninsula is Sinepuxent Bay, to the west is Newport Bay, and to the south is Chincoteague Bay. All three are classified as “Atlantic Coastal Bays.” NR § 4-llA-01(e). A few miles south of South Point are the South Point Shoals, a natural sandbar that extends several miles south. Between South Point and the shoals the water ranges in depth from 2 feet to ³⁹⁵ 6 feet.

A federal navigational channel maintained by the USACE runs in a generally north-south direction to the east of the peninsula and to the west of Assateague Island. South Point also is the name of a residential community on the peninsula comprised of about 400 homes. Most of the waterfront homes in the community had docks and piers until Superstorm Sandy damaged and destroyed them in October 2012. The residents use the coastal bay area for recreation, including sailing, kayaking, and motor-boating.

Commercial fishermen also frequent the area in the spring and summer. As many as 15 to 20 commercial boats may be in the area at any given time during the height of the season. Fishermen navigating from the federal navigational channel to the east of South Point to Newport Bay to the west use an east-west channel of deeper water between South Point and the South Point Shoals. They refer to this channel as “the drain.” The review of Marsh’s application took more than three years.

It was reviewed by the DNR, MDE, the USACE, and various internal agencies. During the course of the review, Marsh made additional amendments to his application, to address concerns related to navigation in the area. In each amendment he reduced the size of the proposed lease areas and moved them farther from the shore of South Point. A public hearing was advertised and held following each amendment to the lease application.

In January of 2012, at the request of the DNR, USACE conducted a bathymetric survey 6 to identify and chart a 60-foot wide east-west “best water route” south of South Point and north of the proposed lease areas. 7 This route, which the DNR calls the “fairway,” ranged in depth from six feet to four and one-half feet. As a result of these findings, Marsh amend ³⁹⁶ ed his application once again, to ensure that none of the lease areas would infringe on the fairway. As revised, the proposed lease areas were at least 120 feet south of the fairway. 8 The three proposed areas were, from east to west, 10.23 acres, 3.41 acres, and 5.13 acres, respectively. The water depth in these areas was approximately 4 feet.

A final public hearing on Marsh’s revised lease application was held on July 10, 2012. Thereafter, the lease sites were marked and the DNR conducted its standard internal review. It found that the easternmost (and largest) lease site was more than 1,300 feet from the shore at its closest point; that the middle (and smallest) lease site was more than 2,300 feet from shore; and that the westernmost lease site was about 1,700 feet from shore. There was 846 feet between the westernmost and middle sites and 1,091 feet between the middle and the easternmost sites.

The DNR also determined that the proposed lease locations all were in areas classified as approved by the MDE for shellfish cultivation and that they satisfied all seven criteria in NR section 4-llA-08(c). Finally, the DNR determined that there was no reasonable cause to deny the lease to protect the public health, safety, or welfare. On August 9 and 16, 2012, the DNR published a notice of the proposed lease on its website and in the Worcester County Times. On August 20, 2012, it mailed notices to property owners with homes within a certain distance of the lease areas and to other interested persons.

Between September 14 and September 24, 2012, the DNR received 50 protests from 98 individuals and the trust. Several protestants requested a contested case hearing. The DNR forwarded all the protests to the Office of Administrative Hearings (“OAH”) and delegated to it the authority to make the final agency decision. C. The Contested Case Hearing An Administrative Law Judge (“ALJ”) with the OAH presided over the contested case hearing, which began on October ³⁹⁷ 1, 2012, and lasted three days.

Thirty protestants, including all of the appellants, participated and/or were represented by counsel at the hearing. The DNR called one witness: Karl Roscher, the director of its Aquaculture Division and its Aquaculture Coordinator. Roscher testified generally about the application process for aquaculture leases and specifically about the review of Marsh’s application. He explained that Marsh’s application was for a water column lease because he was proposing to raise oysters above the submerged land.

He stated that the lease application met all the statutory criteria and that the DNR did not perceive any concerns that would justify its denial. Rather, the DNR concluded that the leases would have “minimal impact on the other uses of the area.” Marsh testified on his own behalf. He explained the nature of his lease application, as discussed above. He further testified that he had measured the water depth in the proposed lease areas himself and those measurements showed that the clearance between the tops of the cages and the surface of the water would be at least 3 feet at low tide.

Seven residents of South Point, one former resident and current property owner, and three commercial fishermen testified in opposition to the proposed lease. Two of the commercial fishermen were accepted by the AL J as experts in navigation and navigability. The commercial fishermen testified about their experiences using the east-west fairway south of South Point and north of the proposed lease areas. They referred to the fairway as “the channel” or “the drain.” Jason Mumford, who was accepted as an expert in navigation, testified that Superstorm Sandy had caused the'sand on the bottom of the Chincoteague Bay to move and, as a result, the depth measurements taken by the USACE no longer were accurate.

He opined, moreover, that navigating a large commercial fishing boat through a 60-foot channel is difficult to impossible in rough water. He explained that, if he attempted to navigate over the lease ³⁹⁸ areas, he would risk catching his motor on the cages and causing damage to his boat and to Marsh’s gear. Another commercial fisherman, Kirk Stewart, testified that the width of the deeper channel as represented on the USACE’s bathymetric chart was incorrect and that the deeper part of the channel was much narrower. He further testified that he would have difficulty navigating through the channel if the lease were granted.

Nearby residents and property owners testified about their use of the waters south of South Point for recreational boating and other watercraft. They complained that navigating between South Point and the South Point Shoals was difficult because of shallow water and because there were hundreds of crab pots on the bottom. The crab pots generally extended about 20 inches from the bottom. Residents testified that they had run aground on many occasions and that they had hit crab pots.

The residents all expressed the belief that navigating over the lease areas would be unsafe and that navigating around them would be extremely difficult, if not impossible. D. The Agency Decision On February 20, 2013, the ALJ filed his decision on behalf of the OAH, which became the final agency decision. The ALJ made 59 detailed findings of fact about South Point, the coastal bay near South Point, the nature of Marsh’s lease application, and the use of the waters near the proposed lease areas. Most of these facts were undisputed.

As relevant here, the ALJ found: 9. The water to the south and southwest of South Point is shallow, but varies in depth. Directly off shore is a shallow area (approximately two feet deep) that extends out for several hundred yards. Beyond this is a narrow deeper (meaning four to five feet) section that is sometimes called a drain or channel.

Beyond this deeper water is South Point Shoals, where the water again becomes shallow. This shallow area extends south in Chincoteague Bay for a mile or more. ³⁹⁹ 10. The federal navigation channel runs through South Point Shoals, but is not well-maintained in that area. 12. During low tide, brisk north (including northwest and northeast) winds can push the water south out of these shallow areas and expose the bottom.

This phenomenon also has the effect of making the deeper areas temporarily much shallower. 15. Hurricane Sandy struck the South Point area with high winds on October 29, 2012, ... changing the contours of the bottom of the coastal bays. 25. The [USACE] identified a sixty-foot wide “best water route,” essentially an area of deeper water, which ran through all of the proposed lease areas, roughly in an east-west direction..... 26. In response to the [USACEJ’s findings, ... [Marsh] ... revised [his] application.... 29. [As revised,] [a]ll three [proposed lease] areas lie south of [the USACE]’s best water route; the western and middle areas are about ninety feet south and the eastern area is about 100 feet south at its closest point.

(Footnote omitted.) In the “Discussion” section of his decision, the ALJ stated that the first issue was what “type of lease [was] being considered.” The DNR’s position was that Marsh’s application was for a water column lease; the protestants’ position was that the application was for a submerged land lease. The ALJ took note of Roscher’s testimony that Marsh’s application was “ ‘absolutely’ a water column lease” because it was the DNR’s policy to treat a lease to raise shellfish in enclosures above the surface of the submerged land as a water column lease, but rejected it, reasoning that it was “contradicted by the words of the statutes.” He pointed out that NR section 4-llA-08(d) ⁴⁰⁰ provides that a water column leaseholder is permitted to cultivate shellfish “on or under the surface of the water in a floating structure,” whereas NR section 4-llA-07(d) provides that a submerged land leaseholder is permitted to “cultivate shellfish on the submerged land, in temporary protective enclosures approved by the [DNR] on the surface of the submerged land, or in any other manner authorized by the [DNR].” The ALJ found that Marsh did not plan to use floating structures; rather, he planned to cultivate oysters in enclosures resting on the submerged land. On these bases, the ALJ determined that Marsh’s application was for a submerged land lease. The ALJ next turned to the question whether this “distinction cause[d] additional strictures for the DNR in considering whether the lease should be approved.” He explained that the protestants were taking the position that pursuant to subtitle 11A the DNR was required to “take into account other uses of the area, including navigation, recreation, and fishing,” before approving a submerged land lease.

The ALJ disagreed, concluding that the subsection of the statute requiring the DNR to take these considerations into account only applies when it is deciding to preapprove areas for submerged land leases or to prohibit leasing in certain areas. See NR § 4-llA-07(e) (“In establishing areas that are preapproved for leasing or that may not be leased under paragraph (1) of this subsection, the [DNR] shall consider potential conflicts presented by other uses of the proposed area, including navigation, recreation, and commercial fishing.”). 9 Having concluded that in this case the statutory criteria for approval of water column leases and of submerged land leases are the same, the ALJ turned to the location criteria set forth in NR section 4-llA-07(c). He found that, although there was testimony that submerged aquatic vegetation is present in the proposed lease areas, the evidence was “clear” that these ⁴⁰¹ areas are not in an SAV protection zone. He further found that the proposed lease areas are within 150 feet of the fairway charted by the USACE, but the fairway is not a federal navigation channel, and therefore the proposed lease areas all are more than 150 feet from the closest such channel.

He also found that the other five location criteria for a submerged land lease were met. As already mentioned, these same criteria apply to water column leases. The ALJ concluded, however, that even though the statutory criteria were satisfied, for the DNR to issue the requested lease it had to apply the common law public trust doctrine to determine the “impact of the lease on the public’s ability to carry on navigation, trade, and fishing in the proposed lease area.” The ALJ explained that the public trust doctrine “establishes the principle that the State owns the navigable waters and submerged land beneath those waters in trust for the benefit of its citizens,” and that the principle “puts some limits” on the legislature’s authority to regulate the use of the navigable waters and submerged lands. He reasoned that because the legislature had delegated authority to the DNR to review aquaculture leases, the DNR should “consider input from the legislature, local governing bodies and commissions, and the people in making [the decision whether to issue a lease].” The ALJ found that the DNR had not taken the public trust doctrine into account in approving Marsh’s application, and therefore he (the ALJ) would “undertake an analysis [of those considerations] based upon the evidence presented at the hearing.” The ALJ found the evidence clear that a “commercial fishery for crabs and finfish exists in the area of the proposed lease.” He stated that there was credible testimony that, if Marsh’s lease application were approved, crabbing in the area would be disturbed because crabbers would not be able to tell whether their crab pots were sitting on the bottom of the coastal bay or on top of the oyster enclosures.

The ALJ further found that the evidence was “inconclusive” and “insufficient” to permit a finding as to whether the ⁴⁰² fairway identified in the USACE bathymetric survey had remained in the same location and at the same depth to accommodate the needs of commercial fishermen navigating between South Point and the lease areas. He noted that Mumford and Stewart, both of whom he had accepted as experts in navigation, had opined that the fairway identified by the USACE is narrow and difficult to navigate with a commercial fishing boat. They had described “bouncing” off both sides of the channel as they passed through the area, and had stated that the “channel” had “shifted and become shallower” following Superstorm Sandy. All three commercial fishermen testified that they would be unable or unwilling to use the fairway if the lease were approved for fear that they would unintentionally hit the oyster cages.

The ALJ emphasized that numerous residents of South Point had testified that they used the waters near the lease areas for watercraft and that this too was a type of navigation the DNR was required to consider, under the public trust doctrine, in deciding whether to grant a lease