Transfer Texas Air Control Board and Texas Water Commission Hearings to the Office of Administrative Hearings

The perceived fairness of the Texas Air Control Board and Texas Water Commission hearings process could be improved by transferring hearings examiner functions to the Office of Administrative Hearings.


Background
Both the Texas Air Control Board (TACB) and the Texas Water Commission (TWC) conduct hearings using hearing examiners employed by their respective agencies.

Hearings examiners should hold no preconceptions about a case and have no personal connections or interests with any party to the dispute, or any financial interest that could be affected by the proceeding s outcome. Examiners should have enough expertise to weigh any technical evidence presented in hearings, a thorough understanding of administrative law and some knowledge of the complexities involved in complying with va rious pollution control requirements. In addition, an examiner must understand internal agency policies, because an agency s board or commission legitimately may change the examiner s recommendations based on agency policy.

The simple fact that a hearing s examiner is employed by the agency holding the hearing can create apparent conflicts of interest, because the examiner is paid by the agency. The hearings examiner is expected to be objective in findings of fact and conclusions of law. Nevertheless, sin ce hearings examiners report to the board and are agency employees, they may experience conflict if it becomes necessary to recommend actions that are contrary to the agency s original actions or recommendations. In such a situation, examiners may well believe that their salaries and career prospects are tied to their decisions.

Whenever investigatory, prosecutorial and judicial functions are combined in one agency, persons regulated by the agency and the public may believe they are being denied their right to a hearing before an impartial body. While such procedures do not viola te state administrative law, potential conflicts arise when these three functions are combined. Permit applicants and others involved in agency hearings seek a decision that will establish certain rights. The agency s board can deny those rights. When faced with the loss of a perceived right, persons have a due process right to an impartial hearing.

In 1991, the Legislature addressed similar considerations in other agencies by establishing an Office of Administrative Hearings (OAH) to hold impartial hearings for agencies that lacked their own hearings examiners, such as the Texas Department of Transpo rtation and the Texas Department of Parks and Wildlife. TACB and TWC were not affected by this change.

While hearings make up an important part of these agencies operations, training and managing hearings examiners is not an activity closely linked to the agencies main missions. In fact, managing examiners should never be an agency mission, as the examiners independence would be compromised. By contrast, OAH has a separate administrative division that oversees the uniform statewide training, evaluation, discipline and promotion of examiners.

The Texas Performance Revi ew (TPR) has determined that a number of other states with central hearings agencies provide examiners to conduct hearings for their environmental agencies. These states include North Carolina, Florida, Idaho, Minnesota, New Jersey, Vermont and Wisconsin.

Critics of the centralized hearings agency concept question examiners ability to understand the policies and politics of an agency for which they do not work. TPR has concluded that steps could be taken to alleviate this concern. Current law already requires that agencies using OAH examiners provide OAH with written statements of any applicable rules or policies. OAH examiners, if they are assigned to conduct hearings for the agency and allowed to follow the agency s activities on a regular basis, will become sufficiently familiar with its policies. In the event that an OAH examiner s recommendation fails to take into account an unwritten agency policy, the agency management has clear authority to reject or modify the findings. On the other hand, agencies that reject or modify an OAH examiner s conclusions are required to state in writing their reasons for doing so. This policy ensures that decisions will not be based on unstated policies known only to the agency.

TPR s survey of central hearings agencies in other states indicated that such bodies have ample ability to learn the policies of the agencies for which they conduct hearings. Typically, agencies are required to communicate their policy decisions in the re cord of any contested case hearing. Some states require agencies to place all policies of general application into the state s administrative code. One state reported that information concerning regulatory policy, like any other information, is presented in open hearing. Opposing parti es may be heard concerning such policy. The hearings examiner then makes a decision after having heard both views.

While some have made the argument that independent hearings agencies cannot be aware of policy movements within agencies, the central heari ngs agencies surveyed by TPR stated that they have never experienced problems of this type. In sum, TPR believes that adequate safeguards exist to ensure that contested cases can be legitimately resolved; indeed, under this approach, checks and balances a ctually are enhanced.


Recommendation
State law should provide that, effective September 1, 1994, Texas Air Control Board (TACB) and Texas Water Commission (TWC) hearings examiners should be transferred to the Office of Administrative Hearings (OAH) to en hance the perceived fairness of the agencies hearings process.

The statute should require the agencies to enter into an interagency contract with OAH to purchase the services of OAH s hearings examiners. To be effective, OAH examiners involved in TACB and TWC cases should develop specialized expertise. This could be accomplished in all of the ways that examiners currently gain their expertise in such cases. In addition, the examiners would benefit from specialized training that OAH may offer.

The statute should direct OAH to ensure that its examiners have the necessary expertise to conduct hearings. This training should provide opportunities for examiners to become familiar with the agency s policies. The statute should provide that each agency com municate any policy decisions in the contested case record, as is the current practice. OAH should be required to enter into a Memorandum of Understanding with each agency that establishes the manner in which the governing bodies will provide examiners wi th appropriate information on the agency s policies and procedures, and the manner in which OAH will ensure that its examiners have the training and expertise deemed necessary to hear cases.


Implications
This separation of examiners from the agency they serve would enhance administrative proceedings by giving the examiner a certain amount of independence.

The recommended interagency agreement should help ensure that the bases for examiners decisions are sufficiently sound to withstand the scrutiny o f the applicable agency. By the same token, the proposed law should emphasize the necessity for clear, written statements of policy to protect agencies when they wish to change an examiner s decision.


Fiscal Impact
There should be no significant fiscal implications stemming from this recommendation. Funds appropriated for the salaries of the agencies hearings examiners would simply be appropriated to OAH. OAH would be paid through an interagency contract with each agency for its services. These servi ces would be billed at a level sufficient to recover the costs of employing and training examiners and any other administrative costs associated with TACB or TWC business. The agencies should purchase these services using fee revenue received from regulat ed companies.

The U.S. Environmental Protection Agency s clearance would be necessary before TACB could use Title V permit fees to purchase OAH examiner services; however, TACB does not anticipate any problems in receiving such permission.