                                             COURT OF APPEALS OF VIRGINIA


              Present: Judges O’Brien, AtLee and Senior Judge Frank
UNPUBLISHED


              Argued at Norfolk, Virginia


              HAMPTON ROADS SANITATION DISTRICT
                                                                            MEMORANDUM OPINION* BY
              v.     Record No. 0979-16-1                                  JUDGE RICHARD Y. ATLEE, JR.
                                                                                   JUNE 6, 2017
              VIRGINIA DEPARTMENT OF
               ENVIRONMENTAL QUALITY


                            FROM THE CIRCUIT COURT OF THE CITY OF VIRGINIA BEACH
                                             Glenn R. Croshaw, Judge

                               Richard H. Sedgley (Lisa M. Ochsenhirt; William A. Cox, III;
                               AquaLaw PLC; Kellam, Pickrell, Cox & Anderson, PC, on
                               briefs), for appellant.

                               Kelci A. Block, Assistant Attorney General (Mark R. Herring,
                               Attorney General; John W. Daniel, II, Deputy Attorney General;
                               Donald D. Anderson, Senior Assistant Attorney General and
                               Section Chief; David C. Grandis, Assistant Attorney General, on
                               brief), for appellee.


                     The Hampton Roads Sanitation District (“HRSD”) appeals a decision of the Circuit Court

              of the City of Virginia Beach (“the circuit court”) upholding the Department of Environmental

              Quality’s (“DEQ’s”) denial of HRSD’s proposal to use biosolids ash on a farm in Virginia

              Beach. HRSD assigns the following errors:

                               1. The circuit court erred in failing to hold that DEQ’s case
                                  decision denying HRSD the right to use the exemption at 9
                                  VAC [§] 20-81-95(C)(5)(a) of the Solid Waste Management
                                  Regulations constituted error of law.
                               2. The circuit court erred in failing to hold that DEQ’s purported
                                  use of the “Beneficial Use Determination” procedure of 9 VAC
                                  [§] 20-81-97 constituted an error of law.


                     *
                         Pursuant to Code § 17.1-413, this opinion is not designated for publication.
               3. Notwithstanding the above, the circuit court erred in failing to
                  hold that no substantial evidence supports the substantive
                  concerns expressed by DEQ as its basis for its case decision.
               4. Further notwithstanding the above, the circuit court erred in
                  failing to hold that DEQ’s use of its guidance document
                  “Management and Use of Contaminated Media” to impose
                  binding requirements violated the agency rulemaking
                  requirements of the Virginia Administrative Process Act.

For the following reasons, we affirm.

                                          I. BACKGROUND

                                    A. HRSD’s Proposed Use

        HRSD, in managing regional wastewater treatment facilities, produces “biosolids ash” as

a byproduct of incinerating solid waste (otherwise known as sewage) derived from wastewater.

The ash is a “porous, lightweight material, with a grit-like texture similar to sand.” Rather than

sending all of the biosolids ash byproduct to a landfill, HRSD uses it in a number of ways, such

as mixing it into cement and using it as a replacement for building material. In 2008, HRSD

began using the ash to raise the ground level of flood-prone agricultural fields on Freeman Farm

in Virginia Beach. This process entailed:

   1. Removing approximately eighteen inches of topsoil from the field.
   2. Collecting soil samples and testing for pH.
   3. Applying agricultural lime to raise pH.
   4. Filling the field with approximately 3 feet of biosolids ash.
   5. Compacting and grading the biosolids ash to provide proper drainage.
   6. Covering the biosolids ash with approximately twelve to eighteen inches of original
      topsoil.
   7. Returning the field to agricultural productions.

This use of the ash helped prevent the field from flooding. In so doing, it substantially improved

crop yields, which included corn, wheat, and soybeans. This use was also favorable because it

allowed HRSD to sell the ash, rather than having to put it into a landfill.




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                              B. DEQ’s Involvement and Evaluation

       DEQ learned of HRSD’s use of the ash on Freeman Farm in 2012 after receiving a

neighbor’s complaint about dust. DEQ investigated and found that approximately 14,000 pounds

of the biosolids ash had been applied to one-and-a-half acres on the farm. HRSD planned to

apply the ash to a total of eleven acres. HRSD had not notified DEQ of this use or sought

approval for it, believing it was using the ash as an “effective substitute for a natural resource”

and thus was exempt from solid waste regulation under 9 VAC § 20-81-95(C)(5)(a).1 HRSD

maintains this position on appeal. HRSD’s belief was in part founded on a 1993 decision from

DEQ, finding that this exception applied to HRSD’s use of the ash as “flowable fill” and to

manufacture erosion control structures. Notably, both uses involved mixing the ash with cement.

       DEQ was concerned about the use of the ash on Freeman Farm because the incineration

process by which the ash is generated concentrates the levels of metals in it, and because this was

the first use that did not involve first mixing the ash with another material before placing it in

contact with soil. Together, this raised concerns that the ash may leach hazardous materials into

the groundwater, or negatively affect crops or wildlife. Accordingly, DEQ offered two

suggestions. First, HRSD could submit a Beneficial Use Determination (“BUD”) request for this

use as provided for in 9 VAC § 20-81-97.2 If approved, this would exempt the ash’s use on the

farm from regulation as solid waste. See 9 VAC § 20-81-95(C)(6). Alternatively, HRSD could


       1
         9 VAC § 20-81-95, “Identification of Solid Waste,” includes a list of materials that are
exempt from solid waste regulation. As pertinent to this appeal, this includes materials that are
“[u]sed or reused, or prepared for use or reuse, as an ingredient in an industrial process to make a
product, or as effective substitutes for commercial products or natural resources . . . .”
       2
         9 VAC § 20-81-97 states that DEQ “may consider other waste materials and uses to be
beneficial” and that “[t]he generator or proposed user of such materials may request that the
department make a case-specific determination that the solid waste may be beneficially used in a
manufacturing process to make a product or as an effective substitute for a commercial product.”
The section goes on to describe the BUD procedure.

                                                -3-
submit documentation from the Virginia Department of Agriculture and Consumer Services that

would exempt the ash from regulation as a solid waste if it were deemed a “fertilizer, soil

amendment, soil conditioner, or horticultural growing medium” under Code § 3.2-3600, or if its

“intended purpose is to neutralize soil acidity,” Code § 3.2-3700. Despite maintaining that the

ash was being used as a substitute for soil, HRSD pursued only the first option.

       As part of the BUD process, HRSD commissioned a study from Virginia Tech to

determine whether the ash posed a risk of leaching hazardous materials into either groundwater

or crops. That study determined that “initial leachate concentrations for several elements

exceeded DEQ groundwater protection or [U.S. Environmental Protection Agency] drinking

water criteria, but few remained near those standards beyond the first several leaching events.”

The study also noted that “saturated soil conditions within the ash layer should be avoided”

given the observed leaching.

       In addition to determining whether the proposed use was “beneficial,” DEQ used the

study’s data and conclusions to assess whether the use of the ash constituted an “effective

substitute” for soil. DEQ examined the study results and determined that levels of certain

elements, such as arsenic, cadmium, copper, iron, manganese, selenium, and zinc, were near or

exceeded the levels set forth in the groundwater standards. DEQ also found the farm was a

“sensitive environment,” in that it either serves a “critical ecological function” (the farm is next

to a wildlife management area) or overlies groundwater currently, or potentially, used as a

potable source. This designation governed the acceptable levels of elements that could be

present in or leached from the ash. Based on the study, there were also concerns that certain

crops with deeper roots could root down past the topsoil into the ash layer. Most importantly,

DEQ noted that HRSD applied the ash in a flood-prone area (and, in fact, specifically used the

ash because of this), although the study advised against exposing the ash to saturated soil

                                                -4-
conditions. This was an important problem because existing and potential homes near the

property, one as close as five-hundred feet from it, relied on groundwater as the sole source of

potable water. As a result of these concerns, DEQ ultimately concluded that the ash was not an

effective substitute for a natural resource under 9 VAC § 20-81-95(C)(5)(a) and that this use of

the ash on the farm was not a “beneficial use” under 9 VAC § 20-81-97.

                                           II. ANALYSIS

                     A. DEQ’s Authority and Standards of Appellate Review

       The General Assembly has entrusted DEQ with broad authority to supervise, control, and

promulgate regulations involving waste management activities. Code § 10.1-1402; see also 9

VAC § 20-81-50 (granting DEQ’s Waste Management Board the ability to enforce regulations

governing solid waste management); Code § 10.1-1186 (establishing DEQ’s general powers). In

this role, it must enforce those regulations “necessary to protect the public health, public safety,

the environment, and natural resources.” 9 VAC § 20-81-30; see also Code § 10.1-1183

(defining DEQ’s policy and purposes to include “promot[ing] the health and well-being of the

Commonwealth’s citizens” and “protecting its atmosphere, land and waters from pollution”).

       With this in mind, we view factual determinations made by an agency in its regulatory

role with great deference. We must sustain DEQ’s factual findings if the record contains

substantial evidence to support those findings. Code § 2.2-4027. “The phrase ‘substantial

evidence’ refers to ‘such relevant evidence as a reasonable mind might accept as adequate to

support a conclusion.’” Hedleston v. Va. Retirement Sys., 62 Va. App. 592, 599, 751 S.E.2d 1, 4

(2013) (quoting Va. Real Estate Comm’n v. Bias, 226 Va. 264, 269, 308 S.E.2d 123, 125

(1983)). To put it another way, we “may reject the agency’s findings of fact only if, considering

the record as a whole, a reasonable mind would necessarily come to a different conclusion.”

Johnston-Willis, Ltd. v. Kenley, 6 Va. App. 231, 242, 369 S.E.2d 1, 7 (1988).

                                                -5-
       When reviewing an agency’s legal conclusions, “[i]f the decision under review involves

an interpretation within the specialized knowledge of the agency and if the General Assembly

has vested the agency with broad discretion to interpret and apply the relevant regulations,” we

reverse “only for arbitrary or capricious action that constitutes a clear abuse of the agency’s

delegated discretion.” Frederick Cty. Bus. Park, LLC v. Va. Dep’t of Envtl. Quality, 278 Va.

207, 211, 677 S.E.2d 42, 45 (2009).

                B. Exemption as an “Effective Substitute for a Natural Resource”

       HRSD first argues that the circuit court erred in upholding DEQ’s determination that the

ash use on Freeman Farm was not an “effective substitute for a natural resource,” and thus

exempt from regulation as a solid waste. Neither party disputes that the ash was serving as a

substitute for soil, a natural resource; thus, the only question is whether it was “effective.” No

binding case law exists construing the meaning of “effective” in this context. HRSD would have

this Court define effectiveness in a limited sense — namely, how well it improved conditions on

the farm, emphasizing facts such as increased crop yields and reduced flooding. DEQ argues

that efficacy must include consideration of possible harmful effects on environmental and human

health. We agree with DEQ. In light of the agency’s mandate, and the purpose of the solid

waste management regulatory scheme, we cannot say that DEQ acted arbitrarily or capriciously,

or abused its delegated discretion, by taking into account the risks of harm to the groundwater,

neighbors of the farm, and nearby wildlife.

       A key complaint present throughout HRSD’s argument is that DEQ used data collected

during the BUD process, a separate exemption to the definition of solid waste with a distinct

review procedure, to evaluate whether the ash was an effective soil substitute. The

disagreement, in part, stems from the fact that the effective substitute exemption is

“self-implementing,” in that use of a material as an effective substitute for a natural resource is

                                                -6-
automatically exempt from solid waste regulation, requiring no prior approval from DEQ. Under

HRSD’s interpretation, DEQ has no administrative power to review a use to determine whether

it, in fact, falls within the exemption, and suggests that it has no recourse but to file suit if it

learns of the use and believes the exemption does not apply. This interpretation would lead to

illogical results. First, the fact that the exemption is self-implementing does not make a waste

management facility, such as HRSD, the final and only arbiter of whether the use falls within the

exception — to say so would improperly usurp DEQ’s authority to regulate and enforce waste

management activities within the Commonwealth. DEQ, via authority conferred by the Virginia

Waste Management Act, is charged with the duty to “[s]upervise and control waste management

activities in the Commonwealth.” Code § 10.1-1402. Inherent in this authority is the

requirement and ability of DEQ to determine which activities are permissible under the Waste

Management Regulations. For these reasons, we cannot say DEQ acted arbitrarily or

capriciously in concluding the biosolids ash was not being used as an effective substitute for soil,

and thus was not exempt from regulation as a solid waste.

           C. Exemption as a “Beneficial Use,” and Applicability of the BUD Process

        Materials that DEQ deems “beneficial” are exempt from regulation as solid waste. 9

VAC § 20-81-97(C)(6); 9 VAC § 20-81-97. HRSD argues that DEQ ought not have suggested

that HRSD submit a BUD request, as the ash was neither used in a manufacturing process nor as

a substitute for a commercial product. While we may agree, agreement here is of little moment.

Even though the Virginia Tech study was undertaken as part of the BUD process, and the study

data were used in part to determine that the soil was not an “effective substitute” for soil, DEQ

could have requested such information under other authority. Namely: “Every person [DEQ]

has reason to believe is generating, storing, transporting, disposing of, or treating waste shall, on

request of [DEQ], furnish such plans, specifications, and information as the Department may

                                                  -7-
require in the discharge of its duties under this chapter.” Code § 10.1-1458. DEQ’s duties

include “promot[ing] the health and well-being of the Commonwealth’s citizens” and “protecting

its atmosphere, land and waters from pollution.” Code § 10.1-1183. Accordingly, DEQ had the

power and responsibility to determine if the biosolids ash use on Freeman Farm posed any risks

to human health or the environment. We cannot say that this constitutes an arbitrary or

capricious action, or was a clear abuse of DEQ’s delegated discretion.

               D. Was DEQ’s Determination Supported by Substantial Evidence?

       Closely intertwined with HRSD’s other assignments of error, it argues that “no

substantial evidence supports the substantive concerns expressed by DEQ as its basis for its case

decision.” We disagree. DEQ issued numerous express findings of fact from which it drew

conclusions about the safety and efficacy of HRSD’s proposed use of the biosolids ash. It

considered the results and recommendations of the Virginia Tech study, as well as other

guidance, to determine that this use of the ash on Freeman Farm posed potential risks to human

health and the environment. The study specifically recommended that “initial leachate

concentrations for several elements exceeded DEQ groundwater protection or [U.S.

Environmental Protection Agency] drinking water criteria” and that “saturated soil conditions

within the ash layer should be avoided” given the observed leaching. HRSD’s own witness

noted the “wet, saturated, horrible conditions” on the property. Although the ash raised the

ground level and helped prevent the surface of the fields from flooding, this effectively resulted

in a saturated ash layer, rather than saturated surface soil. Based upon our review of DEQ’s

decision, we do not find that “a reasonable mind would necessarily come to a different

conclusion.” Johnston-Willis, Ltd., 6 Va. App. at 242, 369 S.E.2d at 7. Therefore the circuit

court did not err in upholding DEQ’s decision.




                                                 -8-
                                  E. DEQ’s Use of Guidance Document

       Finally, HRSD argues that the trial court erred in upholding DEQ’s use of a guidance

document, “Management and Use of Contaminated Media,” in evaluating the acceptable levels

of metals that would potentially leach into groundwater, and in designating the farm as a

“sensitive environment.” The guidance document contains tables of standard contaminant levels

and provides “basic criteria for comparing the level of contamination in media to concentrations

that have been determined to be acceptable for human health and the environment.” There is a

separate table for when an area is deemed a “sensitive environment,” defined in part as “an area

that serves a critical ecological function or that overlies groundwater that is currently used or is

reasonably anticipated to be used as a potable source.” Here, because of the nearby homes that

rely on groundwater potentially affected by the ash’s use at Freeman Farm, and because the farm

is “adjacent” to a local wildlife management area, DEQ determined that the farm was a sensitive

area and applied these more stringent standards for acceptable levels of elements present in soil.

Comparing the Virginia Tech study results to the guidance document’s standards, DEQ

determined that the elements present within and which leached from the ash exceeded the

acceptable ecological screening levels for a number of elements.

       We see no error in DEQ’s use of the guidance document. A guidance document is

produced by an agency as part of its effort to “interpret or implement” statutes, rules, or

regulations within its administrative responsibility. Code § 2.2-4001. Here, DEQ did not use the

document as a source of regulatory authority, but as a resource in carrying out its regulatory

duties. In other words, DEQ used it as intended — as guidance. Although it is possible to

cherry-pick phrases from the guidance document to make it sound inapplicable to HRSD’s use of

the ash on the farm, on a fundamental level, the use of the sewage sludge ash is of the same

nature that the guidance document addresses, which is use of a material in place of soil. Here,

                                                 -9-
DEQ used it to help determine whether the ash served as an “effective substitute” for soil and

what, if any, risks this use of the ash might pose to human health or the environment. Given that

determining safe levels of metals that may be leached into groundwater is plainly within the

“specialized knowledge” of DEQ, we cannot say that its use of the guidance document, or the

conclusions DEQ drew based upon such use, were arbitrary or capricious or an abuse of DEQ’s

delegated discretion.

                                        III. CONCLUSION

       For the foregoing reasons, we find no error in the circuit court’s decision to uphold

DEQ’s denial of HRSD’s proposed use of the biosolids ash, and we affirm.

                                                                                         Affirmed.




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