An opinion has been requested concerning whether a Water Management Specialist in the Soil Conservation Administration (Department of Agriculture, DAGR) may have a private business composting and selling organic materials, a business that would be registered with and subject to the authority of the State Chemist, also in DAGR. We advise the Requestor based on the description of his proposed private business and our understanding of the operation of his State program, that an exception can be allowed to permit this private business.
This request is presented by an employee of the Soil Conservation Administration whose job involves providing assistance to and coordinating the activities of local drainage organizations in the State. Drainage associations are authorized to be established by local county governing boards for the purpose of establishing or straightening ditches, drains, canals or watercourses in order to control soil erosion and protect against non-point source water pollution. They function as political subdivisions of the State, have the power to tax or assess property owners, and may issue and sell bonds and notes. Funds may also be available from the general funds of the county. Each association is managed by an elected Board of Managers, which in turn works with a county appointed Board of Viewers and also with the local Soil Conservation District.
The State Department of Agriculture is responsible to promote and encourage drainage of agricultural lands in the State and to correlate the activities of the local drainage organizations in the State. It promulgates, in coordination with the Departments of Natural Resources and Environment, criteria for the design, construction, operation and maintenance of agricultural drainage projects, reviews and approves plans, and with the other State Departments involved in this program may issue and enforce corrective orders. The Requestor's primary responsibility in the program is to manage the Administration's maintenance cost-share program pursuant to §8-602 of the Agriculture Article, which provides that the "Secretary may provide up to 50 percent of the costs necessary to maintain drainage outlet systems constructed" pursuant to the drainage law. These funds are available at the current time, but after August 1, 1991 will not be available unless the association has a fully approved and operational maintenance plan that is consistent with the State criteria. The Requestor works in the Eastern Shore Soil Conservation District Office, and is responsible for the program Statewide. He says that he administers the formula for distributing funds available under this program (about $190,000 in FY89) in accordance with eligibility criteria and a specific formula.
The awards are made in accordance with an established formula under which an association's share reflects its proportionate share of the total number of drainage ditch miles in the State. Though application of the formula is more or less mechanical, the Requestor's duties in connection with this process involve him in interaction with the Boards of Managers of the associations. Also, his official position description indicates that he develops and recommends criteria relating to agricultural drainage projects, monitors and coordinates inspections, visits farm sites, and assists in securing permits, funds and other assistance in connection with the activities of public drainage associations. He supervises two field personnel whose job is to provide technical help to associations and farmer landowners in interpreting the regulatory criteria, and in things such as walking the channel to formulate reports. He is also the holder of the official State records in this program, and reviews and coordinates approval or maintenance plans submitted by an association.
The Requestor works in the Soil Conservation Administration, a unit supervised by the Assistant Secretary for Plant Industries and Resources. His request arises from an interest he has in establishing a private business that would commercially compost organic material (such as leaves and grass) and sell the by-product. This activity would be subject to regulation by the State Chemist's Office, a unit that is within the jurisdiction of the same DAGR Assistant Secretary. Requestor indicates that he developed an interest in this process through an awareness of recent legislation requiring recycling of these types of materials, and attended, while on annual leave and at his own expense, a conference regarding composting activities. He met officials of a private company in Pennsylvania, a national operation that is currently involved primarily in the activity of processing sewage sludge for use as a fertilizer, and is interested in pursuing markets in the area of composting of other organic waste. Based on the contacts made at the conference, the Requestor began to pursue the possibility of a cooperative venture with the company in Maryland.
Apparently following up on the recent recycling legislation, the proposed business would be a regional operation in Anne Arundel, Queen Anne's and Talbot Counties. Municipal jurisdictions involved in leaf collection would bring the material to the company's facility for a fee. The material would then be processed through use of a tiller type of machine that constantly agitates it for a period of 6090 days until it is a peat moss consistency. The material would be marketed, probably in bulk, as a product that could be put on soil to enrich it. The Requestor says that it would not be advertised as a fertilizer or represented as having any particular chemical or plant enhancement capabilities.
Despite this absence of any fertilizer claims, the product that the business would sell would be a soil conditioner subject to regulation by the State Chemist under the State's Commercial Fertilizer Law (Agriculture Article, §6-201 et seq., Annotated Code of Maryland). The Director of the State Chemist's Office indicates that pursuant to the law's definition of soil conditioner the Office has determined that persons involved in any way in the distribution of composted materials must be registered under the law's requirements relating to soil conditioners. This process involves payment of a registration fee ($10 where distribution is in quantities of over 10 pounds per package), submission of a label, invoice or sample sign (where sale is in bulk) describing the product, and submission of a twice per year tonnage report and fee of $.05 per ton sold. The Director indicates that the program is primarily a truth in labeling program, revolving around the registration and the validity of any claims made as to the contents or efficacy of a product. Monitoring and enforcement in this area is less stringent than with fertilizers and the enforcement process is described as marketplace testing. The Office also responds to complaints submitted by members of the public. Where there is a problem with a product, the Office may issue a stop sale order, and may enforce this in court or initiate condemnation proceedings.
The Director indicates that there are about 18,000 registered products, but about 9,000 of these are pesticides (the Office also has a role in the registration of pesticides under the federal pesticide statute). It issues about 250 to 300 stop sale orders in a year. The Office does regulate the processing and sale of sewage sludge as a fertilizer under the commercial fertilizer provisions of the law. It also does some testing for sewage plants, either under a contract with the Department of Environment (as to Blue Plains) or on a fee for service basis. Apparently, however, the entity with which the Requestor would be affiliating on an investment basis does not have any products registered with the Office.
This request presents issues under the outside employment and interest provisions of §3-103(a) of the Public Ethics Law (Article 40A, §3-103(a), Annotated Code of Maryland, the Ethics Law), and particularly the exception regulations that we have issued pursuant to this provision. This section of the Law prohibits an employee from being employed by or having an interest in an entity that is subject to the authority of his agency. Though the Requestor's plans are very tentative at this point, he would in our view have a business in which he would have an interest and to which he would provide services that would result in an employment relationship. As this business would be subject to his agency's regulatory authority, this ownership of and employment relationship with the company would therefore be within the § 3-103(a) prohibition unless an exception could be allowed under our regulatory exception criteria.
The exception language in §3-103(a) of the Law provides that the prohibition applies except where, pursuant to Commission regulations, the employment or interest does not present a conflict of interest or the appearance of a conflict. The purpose is to permit private employment or interests even where there is an authority relationship, where the relationships between the outside affiliation and the official duties or agency program are sufficiently remote that a conflict or appearance of conflict is unlikely. The regulatory criteria (COMAR 19A.02.01 and 19A.02.02) consider the employee's duties and location in the agency and the possible impact on the private entity, and also evaluate the nature of the private activities and how they relate to the agency program. In particular, they consider whether the individual would be responsible in the private capacity for ensuring compliance with agency regulations. Also, where interests are involved, public disclosure is required.
Given the nature of the Requestor's job responsibilities and the absence of any involvement in his State job with the private activity, there would not appear to be a possibility for direct impact on his privately registered business. He would, however, be responsible in his private capacity for ensuring the business' compliance with the labeling, registration and other requirements of the State Chemist's Office. In addition to the initial registration, he would have continuing dealings with the agency in submission of reports and regular fees, and would be subject to the Office's enforcement activities.
The exception regulations, however, recognize that there may be circumstances where even these dealings are so remote and insubstantial that the activity would not impair the credibility of the agency's program. We have in prior Opinions dealing with persons involved in a variety of social services programs permitted persons to have private relationships with entities whose activities were remote from their agency responsibilities and where the agency advised that the private affiliation would not impair the agency's program. Also, in a recent situation very like this one we applied the exception provision to allow an administrator in the Department of Licensing and Regulation to have a painting contractor's business that would be licensed by the agency's Home Improvement Commission. In that request the employee's private business was to be a small one, where the likelihood of significant interaction with the administrative and other aspects of the licensing program was very limited. We permitted the activity under those circumstances (No. 88-12).
In this situation the agency licensing program is one that involves primarily a truth in labeling and registration fee system, with little active enforcement or interaction with entities such as that contemplated by the Requestor. Also, the Requestor advises that he would be marketing only to landscapers and nurseries and would not in any way be approaching farmers with whom he deals in his work for the Soil Conservation Administration. Under these circumstances, the agency advises that it does not believe that allowing the Requestor to pursue this endeavor would impair the credibility of its program or otherwise present a conflict of interest or appearance of conflict.
Under all of these circumstances, it is our view that this situation is like the one we addressed in Opinion No. 88-12. We therefore advise the Requestor and the agency that an exception can be applied to permit this activity, provided that in practice it does not lead to any substantive regulatory issues between the employee and the agency licensing office, and provided that proper public disclosure is made pursuant to the regulatory requirements. We also advise the Requestor to be aware of the activities in Maryland of any private company with which he enters into an investment agreement. Should the private entity come into Maryland and be involved in sewage sludge or other activities subject to the Department's authority, then this advice will need to be further reviewed.
M. Peter Moser, Chairman
William J. Evans
Barbara M. Steckel
Date: January 24, 1989