Environmental & Energy Law Monitor

New Requirements to Address Immediate Environmental Concerns

Dorothy Mello Laguzza — Tue, 02 Mar 2010 10:28:12 -0500

The Site Remediation Reform Act enacted on May 7, 2009, and codified at N.J.S.A 58:10C-1 et seq. (“SRRA”), its implementing regulations, and amendments to the Technical Requirements for Site Remediation include new requirements in addressing environmental issues that the New Jersey Department of Environmental Protection (“NJDEP”) deem to be a public health threat and categorize as an Immediate Environmental Concern (“IEC”). Not only does the SRRA impose sweeping changes to the site investigation and remediation process in New Jersey after November 3, 2009, but it also affects properties that are currently undergoing remediation with state oversight if an IEC is present.

There are three categories of IEC conditions: (1) potable water; (2) vapor intrusion; and (3) direct contact. A potable water IEC exists if (a) there is contamination associated with a discharge of hazardous substances at levels at or above the Class II Ground Water Remediation Standards in potable wells; or (b) if contamination is found in surface waters used for public water supplies above federal and state drinking water standards. A vapor intrusion IEC exists if there is a discharge of a hazardous substance that results in contaminant levels in indoor air above the Indoor Air Screening Levels (dated March 2007) contained within the NJDEP’s Vapor Intrusion Guidance (dated October 2005). The Indoor Air Screening Levels represent triggers for action to address indoor vapor contamination and contain both residential and non-residential exposure levels. A direct contact IEC exists if soil contamination is identified above the acute health effect levels in the upper two feet of the soil column and there is actual or a potential for human contact.

If at any point an IEC is discovered, the responsible party or Licensed Site Remediation Professional (“LSRP”) must immediately report the IEC condition by either phoning an assigned NJDEP case manager, or if one is not available or assigned, call the NJDEP’s Hotline (1-877-WARN DEP) and inform the operator that they are reporting an IEC condition. If the case does not have an existing case manager, the NJDEP will assign an IEC case manager. Even if the case has an assigned LSRP, the NJDEP will maintain direct oversight of the IEC condition until NJDEP approves its remediation.

Further, the new requirements impose mandatory timeframes for abating an IEC condition. Within 5 days from discovery of an IEC, the person responsible must address any receptors impacted by contamination from the site by implementing interim response actions such as providing bottled water to areas where the potable water supply is affected, change indoor ventilation and seal cracks or sumps if there is vapor intrusion, and construct site fencing or restrict access for a direct contact IEC. In addition, within 5 days from IEC discovery the following must be submitted to the NJDEP: (1) an IEC Response Action Form; (2) a completed IEC Information Spreadsheet; (3) a map identifying the location of the site and IEC condition; and (4) all analytical results with a full laboratory deliverable.

Sixty (60) days after discovery of the IEC, the person responsible for conducting the remediation must concurrently delineate its extent and implement an engineered system to remediate the IEC. The person responsible must submit an IEC engineered system response action report with an updated IEC Response Action Form to the NJDEP within 120 days from discovery. Thereafter, within 270 days after identifying the IEC, the person responsible must have completed a focused remedial investigation of the IEC contaminant source, begun source control by reducing the contaminants causing the IEC, and submit to NJDEP an IEC contamination source control report with an updated Response Action Form. The goal of source control is to eliminate the cause of the IEC condition to protect human health. The nature of the tasks for each of these requirements depends on the type of the IEC.

Please note that an IEC must be addressed in specific conformance with the requirements found in the Technical Requirements for Site Remediation at N.J.A.C. 7:26E-1.14 and applicable guidance. The guidance is still in draft form and can be found at http://www.nj.gov/dep/srp/guidance/srra/draft_iec_guidance.pdf. Generally, the regulations identify receptor control and source control as the two key components to abate an IEC condition. In other words, the person responsible must stop the ongoing exposure posing a human health threat and remediate any contamination sources associated with the IEC. Both these measures have specific timeframes for compliance, notification, remedial action, and reporting requirements some of which are outlined above. Failure to follow the requirements may lead to a $20,000 penalty.

It is not clear under the Technical Requirements for Site Remediation and guidance how an IEC will be closed. However, according to NJDEP, if an IEC is part of a case with a Licensed Site Remediation Professional, the IEC will be closed upon issuance of a Response Action Outcome by the LSRP provided that the NJDEP approved the final IEC report. If the IEC is part of an older case with an assigned case manager, the IEC will be closed upon issuance of a No Further Action letter for the site or specific area of concern that was the source of the IEC.

Money May Be Available for Lost Development Potential in the New Jersey Highlands Region

David P. Steinberger — Tue, 02 Feb 2010 11:41:38 -0500

In 2004, the New Jersey Highlands Water Protection and Planning Act (the “Act”) became law. The law created two distinct regions, the Preservation Area and the Planning Area. Development in the Preservation Area was severely restricted under the Act. To address the loss of development rights in the Preservation Area, the Act also authorized a Transfer of Development Rights (“TDR”) program to be administered by the New Jersey Highlands Council (the “Council”).

The TDR program is designed to allow property owners in the Preservation Area to sell their development rights [Highlands Development Credits (“HDCs”)] to developers in the Planning Area. Developers that buy HDCs will be able to use those purchased HDCs to undertake more intensive development than would otherwise be permitted. Planning Area municipalities can voluntarily elect to become “Receiving Zones,” which are areas where HDCs can be used for more intensive development. Because few Planning Area municipalities are opting to become Receiving Zones, there is an amendment to the Act currently pending before the state legislature which would expand the program and allow any municipality in the state to become a receiving Zone for HDCs

The Council further created a Highlands Development Credit Bank (the “Bank”), and has authorized the Bank to purchase HDCs to “jump start” the TDR program and alleviate financial hardships affecting property owners in the Preservation Area. The Bank has been funded with $10 million, and has started the process of purchasing HDCs. The Bank’s purchase of HDCs will be based on a priority ranking undertaken by the Bank. The First Priority will be to buy HDCs for properties where both (a) the owner is experiencing “extenuating financial circumstances” and their equity in the property is “substantial” in relation to their net worth and (b) the owner had all development approvals except certain Department of Environmental Protection approvals when the Act was passed. The Second Priority is to purchase HDCs for properties where the property owner satisfies only (a) above. The Third Priority is to purchase HDCs for properties where the property owner only satisfies (b) above.

At this time, the Bank is only purchasing HDCs for residential-zoned properties. The initial value of one HDC is $16,000. To implement this program, the Council has created an “HDC Estimator Tool” on its website (http://www.highlands.state.nj.us/), which will provide land owners with a range of expected HDCs for properties in the Preservation Area. Thus, if the Council has estimated that a property may be “worth” 12-14 HDCs, the Bank would buy those HDCs for between $192,000 and $224,000.

The first step in the process of redeeming HDCs is to submit an HDC Allocation Application with the Council. Based upon this application, the Council will (a) determine if the applicant meets the “extenuating financial circumstances” criteria and (b) make a formal determination of how many HDCs apply to the property. If the property owner accepts the Council’s HDC allocation, the next step is to submit an HDC Certificate Application to the Bank. These applications will be prioritized by the Bank and the Bank will issue offers to buy those credits. If an offer is accepted, the property owner will record a conservation restriction in the property’s title. This conservation restriction will prevent any future development of that property. At that point, the Bank will make its payment to the property owner.

As of January 7, 2010, the Council has received only eleven applications. For this first round of hardship HDC purchases, the Council is accepting HDC Applications until March 1, 2010 and the Bank is accepting HDC Certificate Applications until April 15, 2010. Therefore, if you are interested in obtaining payment for lost development rights in the Highlands Preservation Area, you should act quickly to explore this option.

Cole Schotz Secures One of the First Response Action Outcomes

David P. Steinberger — Thu, 21 Jan 2010 14:14:59 -0500

On November 4, 2009, the New Jersey Department of Environmental Protection (“DEP”) issued regulations for the new site remediation requirements under the Site Remediation Reform Act. One of the most significant requirements of the new law is that all new cleanup cases are required to be competed through the use of a Licensed Site Remediation Professional (“LSRP”). The LSRP essentially acts in the place of the DEP to ensure that a cleanup meets all applicable remediation requirements. Once the LSRP is satisfied that the cleanup is completed, the LSRP will issue a Response Action Outcome (“RAO”) letter for the cleanup. The RAO is the equivalent of a DEP-issued No Further Action letter – it is the document which formally closes a cleanup case.

Working with its LSRP John Brennan (from Brennan Environmental, Inc.), Cole Schotz was able to obtain one of the first RAOs issued under the new cleanup law. As an ISRA-subject tenant, our Client was obligated to complete the ISRA investigation and cleanup requirements before purchasing the property from its landlord. To allow closing to occur before the ISRA case was completed, Cole Schotz facilitated the filing of a Remediation Certification, which permitted the closing to proceed before the ISRA case was completed. Three weeks later, after working closely with Cole Schotz, Brennan issued his RAO and thereby closed our Client’s ISRA case.

Because the LSRP requirements are new, it is critical that your professionals (attorneys and consultants) work closely together to make sure the cleanup progresses smoothly under the new rules.

NJDEP Steps Up Efforts to Collect Natural Resource Damages in New Jersey

Gerard M. Giordano — Mon, 18 Jan 2010 15:23:36 -0500

In the past couple of years, the New Jersey Department of Environmental Protection (“NJDEP”) filed more than 100 lawsuits against companies seeking compensation for restoration of damages to natural resources caused by the companies’ discharge of chemicals to the environment. NJDEP also sought compensation for the public’s loss of use of those natural resources.

These actions were based on state statute, common law claims such as claims for nuisance and trespass, as well as the public trust doctrine. Under the public trust doctrine, the State, as trustee of the state’s natural resources, is required to manage the State’s natural resources to the benefit of its citizens and to ensure that they are not injured or impaired. Natural resources include all land, air, water, flora and fauna and the activities and services provided by these resources. When companies discharge hazardous substances to the environment causing damage to these natural resources, NJDEP attempts to recover Natural Resource Damages, commonly known as “NRDs,” in addition to requiring the company to clean up the contamination.

While the lawsuits initiated by NJDEP work their way through the courts, recent decisions have clarified several issues that have been the cornerstone of NJDEP’s NRD policy. Specifically, the courts ruled that:

NJDEP can seek compensation for the restoration of NRDs under New Jersey’s Spill Compensation and Control Act, known as the Spill Act, and that parties causing NRDs are strictly liable. The significance of this decision is that a company can be required to compensate NJDEP for NRDs even though the discharge of chemicals that caused the damage to the natural resources was not intentionally caused or in violation of any law at the time the discharge occurred.
The Spill Act allows NJDEP to seek compensation for the loss of use of a natural resource such as the public’s inability to use a stream for recreational purposes because it is contaminated. Under this ruling, NJDEP can seek damages for the time period during which the public was deprived of the ability to use such natural resources. The impact of this decision increases significantly NJDEP’s demand to liable parties for damages and requires that the NRDs be restored as quickly as possible to minimize the damages arising from loss of use of the natural resource.
NJDEP’s formula to calculate a monetary value for the damage done to natural resources was unreliable. The Court held that NJDEP did not follow the required rule making process to establish the reliability of the formula and failed to produce sufficient scientific support to sustain the damages it was seeking. The ruling will make it more difficult for NJDEP to prove its case in future lawsuits involving NRDs.
Liability under the Spill Act for NRDs extends to discharge of hazardous substances that occurred prior to the enactment of the Spill Act. The impact is that discharges that occurred years ago can now be subject to a cost recovery action by NJDEP.
The Public Trust Doctrine, the basis upon which NJDEP seeks to recover NRDs, has been expansively interpreted to include private land such as land upland from the tidal zone on coastal property.

It is expected that a number of other issues impacting NJDEP’s NRD program will be resolved in the upcoming years. If a company is sued for NRDs, it should review its insurance coverage and acquisition documents. These documents may allow the company to seek reimbursement from other responsible parties or its insurer for any damages paid to the NJDEP for NRDs. Similarly, if a company is considering purchasing a business or real property, it must also take into consideration during contract negotiations NRD issues. Only by being proactive will a company be best prepared to address potential NRD claims.

Interim Regulations Passed That Revamp New Jersey's Site Remediation Program

Douglas I. Eilender — Wed, 06 Jan 2010 14:20:03 -0500

The Administrative Requirements For Remediation Of Contaminated Sites (“ARRCS”) were promulgated on November 4, 2009. These interim rules were issued pursuant to the Site Remediation Reform Act (“SRRA”) that was passed on May 7, 2009, which changes the way investigation and cleanups are conducted in New Jersey. These interim regulations include significant modifications to the New Jersey Department of Environmental Protection (“NJDEP”) Oversight Rules (replaced by ARRCS), and the Technical Requirements for Site Remediation (“Tech Regs”) that immediately impact existing and new cases.

These newly minted requirements apply to parties who are conducting environmental cleanups, sellers, buyers, and environmental consultants performing investigations and cleanups. The objective of the new program is to ease the burden of the NJDEP staff and case backlog by creating a Licensed Site Remediation Professional (“LSRP”) program. The LSRPs are environmental consultants with specified education and experience certified by NJDEP to perform investigations and remediation at sites in New Jersey. The new program requires the LSRP to make the decisions concerning the scope of any investigation and remediation of a site, not the NJDEP. Further, any submissions concerning the remediation of a contaminated site must be signed and certified by both the person responsible for conducting the remediation and the LSRP. In lieu of the NJDEP issuing a typical No Further Action Letter (“NFA”), LSRPs will issue a Response Action Outcome (“RAO”) certifying that the investigation and cleanup of the site was completed in accordance with the Tech Regs. However, please note that the NJDEP has a three year period in which it can “audit” the LSRP’s work, if not more, depending on the circumstances.

Contrary to previous indications by NJDEP, Irene Kropp, NJDEP Assistant Commissioner for Site Remediation, recently indicated the NJDEP will approve the vast majority of existing cases if they elect to “opt-in” to the LSRP program. The new program is designed to streamline NJDEP’s review of environmental reports by taking the majority of the work out of its hands and into the hands of the LSRPs.

If a party conducting a cleanup has reported the contamination to the NJDEP prior to November 4, 2009 and have “continuously” conducted the remediation since that notification, they will be deemed to be an existing case. If so, they may wait until May 2012 to utilize an LSRP. However, if a person initiates remediation on or after November 4, 2009, they have no choice but to hire an LSRP to conduct a cleanup of a site without prior NJDEP approval.

Highlights of New LSRP Program:

In addition to NJDEP oversight fees being charged, there are new remediation fees that will be assessed depending on the number of areas of concern identified at a site and the type of media impacted (soil v. groundwater).
There are numerous guidance documents and forms being created by the NJDEP associated with implementation of ARRCS and the modified Tech Regs. Although the majority of these forms have yet to be finalized, NJDEP is actively uploading them to their website (www.nj.gov/dep/srp/srra/).
NJDEP has established mandatory timeframes for the completion of key phases of site remediation.
Restricted use cleanups will be governed by presumptive remedies outlined by NJDEP at residential properties, daycare facilities and schools.
Remedial action permits will be required for all restricted use remedies utilized in site cleanups.
Responsible parties will also be required to establish a remediation funding source for the majority of cases, which would not have otherwise been required to establish such a funding source.

Public Outreach Rule Deadline Approaching

Douglas I. Eilender — Fri, 31 Jul 2009 10:00:38 -0500

The New Jersey Department of Environmental Protection (“NJDEP”) passed its Notification and Public Outreach Rule, N.J.A.C. 7:26E-1.4 et seq., in September of 2008. This regulation requires parties responsible for remediating sites to notify the public of ongoing remedial investigation and remedial action at sites in New Jersey. Although the regulation was adopted on September 2, 2008, the NJDEP provided a one (1) year grace period to parties responsible for cleanups that were ongoing at that time. Therefore, the deadline for compliance is September 2, 2009.

The regulations require that the party responsible for the cleanup identify sensitive populations and resources within 200 feet of the site and notify the public regarding the cleanup. In order to identify sensitive populations and resources, which are defined in the regulations to include residences, schools, day care centers, potable wells and other similar types of facilities, environmental consultants will need to complete a “sensitive populations and resources” checklist. Once the sensitive populations and resources are identified, the consultant must generate a scaled map indicating the location of those sensitive populations and resources on the map. This information must be submitted to both the NJDEP and local agencies as required by the regulation.

As to the public notification requirements, the responsible party has two (2) options: 1) post a sign at the site, or 2) send letters to each owner of real property, as shown on the current tax map, and tenants of those properties located within 200 feet of the site boundary. The letters and sign are designed to alert the public of the ongoing cleanup at the site. The legislative goal is to promote faster cleanups while at the same time furthering the state’s economic well being and development by improving the state’s business climate. The NJDEP justifies this process by stating the public requires complete information in order to properly understand risk and avoid speculation and undue concern and order their activities accordingly.

The notification letters must include the name of the responsible party, address, tax block and lot, NJDEP ID number, brief description of the type of contaminant and actions being taken, contact information and a statement indicating the municipality may request that the person conducting the remediation provide copies of all environmental reports. If a sign is chosen as the notification method, the sign must be 2 feet x 3 feet in size containing the phrase “Environmental Investigation/ Cleanup In Progress at this Site,” contact information and a “posted-on” date. The sign must be readily visible to the public and remain until a No Further Action Letter is issued for the Site. As confirmation of compliance, a photograph of the sign and a letter, similar to the neighbor notification letter, must be sent to the NJDEP, Municipal Clerk and Health Officer.

In the event contamination is migrating off-site, in addition to the notification requirements discussed above, so called “Enhanced Public Outreach” is required. Enhanced Public Outreach entails the preparation of a fact sheet that must be distributed to owners and tenants within 200 feet of the site boundary, as well as published in a local paper. The fact sheet must include a brief industrial history of the site, a complete description of contamination, actions being taken, contact information and the date the fact sheet was prepared.

In reality, these public notification requirements will likely cause more delays and possibly litigation, but we have not yet seen any adverse impact. Regardless of its potential consequences, decisions must be made very quickly as to which type of notification will be made prior to the upcoming September 2, 2009 deadline.

"Cash for Clunkers" Becomes Law

David P. Steinberger — Tue, 30 Jun 2009 09:12:32 -0500

On June 25, 2009, President Obama signed into law the “Cash for Clunkers” program, now dubbed “CARS” (for Cars Allowance Rebate System). As has been advertised in the media, you will be able to turn in your older car or truck and receive a government rebate when you buy or lease a more fuel efficient new car or truck. The program, which is to run from July 1, 2009 until November 1, 2009, was allocated $1 Billion by the federal government. Under CARS, auto dealers registered for the program will provide either a $3,500 or $4,500 credit on a new qualifying purchase or lease, and the dealer will be reimbursed by the government. The federal rebate is in addition to any other purchase/lease incentives, and the amount of the rebate is not to be treated as gross income for tax purposes. The federal government is currently rushing to register dealers for this program because until dealers are registered, the rebates are unavailable.

Of course, there is lots of fine print. The CARS website (www.cars.gov) lists “5 Important Things you Must Know”: (1) the “clunker” must be less than 25 years old; (2) the rebate only applies to new cars; (3) the car to be traded-in must generally get less than a combined 18 miles-per-gallon (“mpg” – combined refers to the average of city and highway mpg); (4) the trade-in vehicle must have been registered and insured continuously to the same owner for the full year prior to the trade-in; and (5) no voucher is required – the dealer applies a credit to the purchase/lease.

There are other limitations in the CARS program. The new car must have an M.S.R.P. of less than $45,000 and the trade-in vehicle must be in drivable condition. Most significantly, the trade-in car must be destroyed (either shredded or crushed). One goal of the law is to get the “clunkers” off the street and have them replaced with more fuel efficient vehicles. Therefore, the CARS rebate in effect become the trade-in value of your existing car or truck.

As for the rebates themselves, the $3,500 rebate is available where the new passenger car gets at least 4 mpg more than the combined mpg of the “clunker.” For a category 1 truck (pickup or SUV) this rebate applies where the new category 1 truck gets 2 mpg more than the trade-in vehicle. Finally, for a category 2 truck (large pickup or van), the rebate applies where the new category 2 truck gets at least a combined 15 mpg and gets 1 mpg more than the “clunker.”

The $4,500 rebate is available where the new passenger car gets at least a combined 10 mpg more than the trade-in car. For a category 1 truck this rebate applies where the new category 1 truck gets 5 mpg more than the trade-in vehicle. Finally, for a category 2 truck, the rebate applies where the new category 2 truck gets at least a combined 15 mpg and 2 mpg more than the “clunker.”

Governor Corzine Signs Site Remediation Reform Act

Douglas I. Eilender — Fri, 08 May 2009 11:31:59 -0500

On May 7, 2009, Governor Jon Corzine signed into law the Site Remediation Reform Act (the “Law”) that will overhaul the way investigations and cleanups are done in New Jersey. The Governor concurrently signed Executive Order #140 that clarifies certain provisions to the Law (http://www.state.nj.us/infobank/circular/eojsc140.htm). The Law addresses the overburdened New Jersey Department of Environmental Protection (“DEP”)’s current staff, budget constraints and case backlog by creating a Licensed Site Remediation Professional (“LSRP”) program. The LSRPs are environmental consultants with specified education and experience who perform investigations and remediation at sites in New Jersey. The legislation, sponsored by Senator Bob Smith, was passed by the New Jersey Senate on March 16, 2009.

The Law identifies who may become LSRPs, establishes their qualifications, licensing procedures, and a code of conduct and defines their role in the remediation process. In addition, the Law establishes a separate Site Remediation Professional Licensing Board (“Board”), tasked with creating standards for education, training and experience that will be required of any person who applies for a license or a license renewal. The Board conducts examinations to certify that an applicant possesses sufficient knowledge of the state regulations, standards and requirements applicable to site remediation and the applicant is qualified to obtain a license or a license renewal.

The Law calls for rules and regulations to be adopted no later than 18 months after enactment to implement the LSRP program. However, since it will take some time for this Law to be fully developed and implemented, the Law calls for an interim licensing program to be established within 90 days of enactment. Those seeking a temporary LSRP license must have the same qualifications as a full LSRP, as well as one of several professional certifications (i.e., certified hazardous materials manager from the Institute of Hazardous Materials Management, a certified groundwater professional from the National Groundwater Association, a licensed professional engineer from the National Council of Examiners for Engineers). Further, an applicant for a temporary LSRP license must show that they have existing current site remediation experience.

Within 180 days of the effective date of the Law, any submissions concerning the remediation of a contaminated site must be signed and certified by both the person responsible for conducting the remediation and the LSRP. The LSRP’s certification will state that the work was performed, that the LSRP managed, supervised or performed the work and that the work and submission conform to the Technical Requirements for Site Remediation, N.J.A.C. 7:26E 1 et seq. Remediation projects that are on-going or that begin within 180 days of enactment of the Law are not required to be conducted by an LSRP. However, all remediation projects will need to be conducted by an LSRP after the third anniversary of enactment of the Law.

The level of coordination between the LSRP and the DEP depends on various factors, such as the history of compliance, the contamination present, natural resources impacted and the ranking of the individual site. The more complex the site, the higher the degree of involvement DEP will have with the LSRP. However, it is unclear as to the timing of DEP’s decision to retain jurisdiction or delegate it to the LSRP. Pursuant to Executive Order #140, by July 6, 2009, DEP shall develop guidelines to address this concern.

The Law is designed to streamline the DEP’s review of environmental reports, so that transactions are not delayed due to the lack of responsiveness from the DEP. We shall see whether New Jersey can join states like Connecticut and Massachusetts, which run effective LSRP programs.

Failure of Notice Deadly to Plaintiff's Claim

Dorothy Mello Laguzza — Wed, 06 May 2009 16:22:42 -0500

The District Court of New Jersey in a case of first impression recently held that a New Jersey resident’s lawsuit under the New Jersey Environmental Rights Act (“ERA”) must be dismissed due to her failure to give the appropriate parties notice. (Scott v. Dupont, 2009 WL 901135 (D.N.J. April 1, 2009). Although the plaintiff later provided the requisite notice, the court held that the notice provision under the ERA is a mandatory condition precedent and plaintiff’s failure to properly file notice is fatal to her claim.

The ERA provides that any person can commence an action in court against any other person alleged to be in violation of any “statute, regulation or ordinance which is designed to minimize pollution, impairment or destruction of the environment.” N.J.S.A. § 2A:35A-4(b). The ERA effectively allows a citizen to step into the shoes of the Department of Environmental Protection (“DEP”) and enforce environmental laws against an alleged violator. However, the ERA requires that prior to commencing such an action the plaintiff must first provide the DEP, other public officials, and the defendant at least 30 days advance written notice of their intention to file the suit. N.J.S.A. § 2A:35-A-11.

In Scott v. Dupont, the plaintiff was one of several in a class action filed against Dupont alleging that the company allowed significant amounts of a Teflon-related material to contaminate the public water supply. Prior to filing her ERA claim, the plaintiff failed to comply with the act’s advance notice provision. The court dismissed her claim despite the plaintiff’s argument that her ERA lawsuit should continue because she notified the DEP and requisite others before Dupont moved for dismissal for failure to provide notice. The court held that the “ERA notice is a mandatory condition precedent to bringing a private cause of action under the ERA,” and therefore, is a defect that cannot later be cured.

This decision may possibly be used by New Jersey courts to dismiss claims under other statutory notice provisions. Therefore, plaintiffs should be aware at the commencement of their lawsuit that if statutory notice is required they risk dismissal of their claim prior to the merits ever being heard if notice is not correctly filed. Although a harsh result, if there is a defect in following an environmental statute’s notice provision, that defect cannot be cured.

Getting Heard: When Are Hearings Before the NJDEP or Courts Available?

David P. Steinberger — Tue, 14 Apr 2009 10:11:21 -0500

Every day, the New Jersey Department of Environmental Protection (“NJDEP”) makes many decisions which disappoint the agency’s varied stakeholders. Individuals are upset with NJDEP land use permitting decisions, either because they prevent planned development or allow development on adjacent properties. Permit applicants are upset with limitations placed upon various wastewater or air emissions discharge permits. The ways by which parties may be unhappy with NJDEP decisions are seemingly endless. If a party is aggrieved by an NJDEP decision, what options are there? Go to Court? Seek a hearing before an administrative law judge? This article will explore some of those possibilities.

Hearings Before an Administrative Law Judge

Under the New Jersey Administrative Procedure Act, N.J.S.A. 52:14B-1 et seq. (the “APA”), whether a hearing before an administrative law judge is available depends upon the status of the aggrieved party. Was the petitioning party directly impacted by the NJDEP’s “permit decision” or is the petitioner a third party only indirectly impacted by the agency action? Procedurally, an aggrieved party submits a hearing request to the NJDEP Commissioner’s office. If the Commissioner determines that the petitioner has standing and the request has merit, then the Commissioner will transfer the matter to the Office of Administrative Law to be handled as a contested case before an administrative law judge. A “permit decision” is defined to mean “a decision by a State agency to grant, deny, modify, suspend or revoke any agency license, permit, certificate, approval, chapter, registration or other form of permission required by law ….” N.J.S.A. 52:14B-3.2. This definition is quite broad and would include most, if not all, public agency decisions, including, for instance, those related to land use permits, air or water emissions permits, site remediation decisions, etc.

Where the party wishing to challenge the NJDEP “permit decision” is the party directly involved in, or impacted by, the permit decision, that party has a right to contest the NJDEP “permit decision” through a contested case hearing before an administrative law judge. N.J.S.A. 52:14B-10(c). The analysis is more complex with respect to the rights of parties other than an applicant to obtain a trial-like administrative hearing.

The APA declares that state agencies may not promulgate rules which allow third parties to appeal from permitting decisions unless such hearings are authorized by federal or state statute. N.J.S.A. 52:14B-3.1d. Third Parties are defined to include “any person other than: [a.] An applicant for any agency license, permit, certificate, approval, chapter, registration or other form of permission required by law; [b.] A State agency; or [c.] A person who has particularized property interest sufficient to require a hearing on constitutional or statutory grounds.” N.J.S.A. 52:14B-3.2.

There are therefore two means by which a third party has a right to an adjudicatory hearing before an agency – either there is specific statutory entitlement to a hearing or Due Process considerations require a hearing. To establish a Due Process right, the party must “demonstrate a particularized property interest of constitutional significance that is directly affected by an agency’s permitting decision.” In re NJPDES Permit No. NJ0025241, 185 N.J. 474, 482 (2006). In NJPDES Permit, the Court noted that “third parties are generally not able to meet the stringent requirements for constitutional standing in respect of an adjudicatory hearing” and that in New Jersey, “there has been legislative recognition of the benefits derived from a rigorous review standard when inquiring into the particularized property interest that generates a third-party hearing right.” Id.

In I/M/O Freshwater Wetlands Statewide General Permits, 185 N.J. 452 (2006), the New Jersey Supreme Court looked at whether adjacent property owners had a right to a hearing to challenge permitting decisions under the Freshwater Wetlands Protection Act. The neighbors asserted that they had standing because the issuance of a wetlands permit could lead to increased flooding on their properties. In ruling that the third parties had no standing, the Court affirmed the lower court’s finding that “the objector’s claim of a particularized constitutional interest in potential worse flooding to their properties was based on pure speculation and added that the local planning board presumably would scrutinize [the developer’s] drainage system to assure that such flooding did not occur. Fear of injury to a property interest … is not a sufficient constitutional basis for an adjudicatory hearing.” I/M/O Freshwater Wetlands 185 N.J. at 461.

In addition to the standing requirements (i.e., a statutory right or a constitutionally recognized property interest), to obtain an administrative hearing a third party must also demonstrate that there are disputed material facts warranting a trial-like administrative hearing. “[A]n evidentiary hearing is mandated only when the proposed administrative action is based upon disputed adjudicatory facts.” Spalt v. New Jersey Dep’t of Envtl. Prot., 237 N.J. Super 206, 212 (App. Div. 1989). As explained in High Horizons Development Company v. Dep’t of Transportation, 120 N.J. 40 (1990), “adjudicative facts have been defined … as facts pertaining to parties and their business and activities. Adjudicative facts usually answer the questions of who did what, where, when, how, why, with what motive or intent; adjudicative facts are roughly the kind of facts that go to a jury in a jury case. In contrast, legislative facts, the determination of which will not normally require a trial-type hearing, do not usually concern the immediate parties, but are the general facts which help the tribunal decide questions of law and policy and discretion.” High Horizons, 120 N.J. at 49-50 (internal quotations omitted).

Disputes Relating to Site Remediation

When disputes arise between the NJDEP and a party conducting a site remediation, there are several options, including a “chain of command” dispute resolution process, an expedited dispute resolution or a proceeding before the Technical Review Panel.

As set forth in the rules governing “Department Oversight of the Remediation of Contaminated Sites,” N.J.A.C. 7:26C-1.1, et seq., and guidance relating to the Technical Review Panel, the process always involves first trying to reach a resolution with the Case Manager. See e.g., N.J.A.C. 7:26C-1.4(b)-(h). In the “chain of command” approach, if discussions with the Case Manager prove unsuccessful, a written request for dispute resolution can be sent to the Case Manager’s Section Chief. If the requester is not satisfied with the Section Chief’s response, then another written request can be submitted to the applicable Bureau Chief. If that fails, the next written request goes to the applicable Assistant Director, and the next letter then goes to the applicable Director. Finally, the last letter goes to the Director, Assistant Commissioner and Commissioner for resolution. The Commissioner-level decision is required within 21 days of the written request. A response to each of the “preliminary” letters is required within 7 days of the written request. That is the long approach. The NJDEP regulations also establish an expedited review option which circumvents the initial steps and allows for the request for dispute resolution to be submitted directly to the Commissioner. See N.J.A.C. 7:26C-1.4(i).

If the “chain of command” or expedited review options prove unsuccessful to the party conducting the remediation, that party must go through the NJDEP’s alternative dispute resolution process before the matter will be deemed a contested case and sent by the Commissioner to the Office of Administrative Law for a hearing. See N.J.A.C. 7:26C-1.4(j)-(k). Finally, both the “chain of command” and expedited review options are significantly limited because they do not apply to, among other things, “[t]echnical issues which arise during Department oversight of remediation” or legal issues. See N.J.A.C. 7:26C-1.4(l)2 and 3.

To address technical disputes, the NJDEP has a established a process whereby the NJDEP will assemble an internal “Technical Review Panel” to review the remediation dispute. To obtain a technical panel review of a technical dispute related to a site remediation, the remediating party must first follow a process set forth in the NJDEP’s guidance. See http://www.nj.gov/dep/srp/guidance/techreview/rev_tech_disputes.htm. The first steps towards resolving the dispute are the same as those set forth above. The aggrieved party must first attempt to reach an agreement with the Case Manager, and then the Case Manager’s immediate supervisor. The process continues up the chain of command until the Case Manager’s Bureau Chief determines the issue. If the Bureau Chief’s response/resolution is still unsatisfactory, then the aggrieved party can seek review by the Technical Review Panel. The request for such review must be in writing and directed to the Assistant Commissioner of the Site Remediation and Waste Management program. The request must include a summary of the issue, the history of the attempted dispute resolution and the identification of any applicable deadlines. The party may also request a meeting before the Technical Review Panel. Finally, no new information may be presented in the request.

The Technical Review Panel will not be convened if the dispute (i) involves an enforcement action, (ii) addresses natural resource damage assessments, (iii) relates to a party’s liability for the cleanup or (iv) involves a matter of policy. If a Technical Review Panel is convened, it will consist of three Assistant Director level employees or their designated manager. A designated manager cannot be the Bureau Chief who previously reviewed the dispute. There is no required deadline for the Technical Review Panel to issue its determination.

A review of published Technical Review Panel decisions on the NJDEP’s website indicates that aggrieved parties either prevailed in their claim or, more often, received some change of the NJDEP’s initial requirements (i.e., the disputed requirements) in 35 % of the published cases (5 of 14 cases). It is an open question whether a denial of the requested relief from the Technical Review Panel would be a final agency action from which an appeal to the Appellate Division could be made. Nevertheless, were such an appeal taken, the likelihood of success would be low due to the courts’ general deference to an agency when the subject matter of the dispute falls within an agency’s particular expertise.

Finally, it is worth noting that the newly passed Licensed Site Professional Bill (see http://www.environmentalandenergylawmonitor.com/tags/licensed-site-professional/), which is expected to be signed into law by Governor Corzine, may change the need for addressing technical disputes regarding site remediation projects.

Going to Court

Access to the courts to challenge agency decisions generally requires that the petitioner first exhaust all of its administrative remedies. New Jersey Court Rule 2:2-3(a)(2) provides that a litigant may not generally seek appellate review of an administrative decision when “there is available a right of review before any administrative agency or officer, unless the interest of justice requires otherwise.” R. 2:2-3(a)(2). Furthermore, in Abbott v. Burke, 100 N.J. 269 (1985), the New Jersey Supreme Court noted that “[in] general, available and appropriate administrative remedies should be fully explored before judicial action is sanctioned.” Id. at 296.

The Court cited three significant policy reasons for requiring exhaustion of administrative remedies: “(1) the rule ensures that claims will be heard, as a preliminary matter, by a body possessing expertise in the area; (2) administrative exhaustion allows the parties to create a factual record necessary for meaningful appellate review; and (3) the agency decision may satisfy the parties and thus obviate resort to the courts.” Id. at 297-98 (citations omitted).

Yet, the Court also indicated that “the preference for exhaustion of administrative remedies is one of convenience, not an indispensable pre-condition.” Id. 100 at 297 (citations omitted). Nevertheless, it is only in limited circumstances that a court will permit a litigant to circumvent the exhaustion requirement. Those situations include “when the administrative remedies would be futile; when irreparable harm would result; when jurisdiction of the agency is doubtful; or when an overriding public interest calls for a prompt judicial decision.” Id. at 298 (citations omitted). Additionally, the exhaustion doctrine is often inapplicable “when only a question of law need be resolved.” Id. “However, even in cases involving only legal questions, jurisdiction should remain with the agency where the agency is in a special position to interpret its enabling legislation, can conclusively resolve the issue . . . and can provide relief for the plaintiff.” Triano v. Div. of State Lottery, 306 N.J. Super. 114, 122 (App. Div. 1997).

Conclusion

As can be seen, there are many considerations which must be made in determining how to respond to an unfavorable NJDEP determination. Given the court’s and administrative law judges’ general deference to agency expertise, there can be significant hurdles to reversing NJDEP determinations.

A version of this article appeared in the November 24, 2008 issue of the New Jersey Law Journal.

Corzine Signs Bundle of Clean Energy Bills

Jillian L. Goorevitch — Tue, 07 Apr 2009 16:19:17 -0500

On March 31, 2009, Governor Corzine signed three clean energy bills in front of a combined heat and power production facility at Rutgers University Busch Campus.

With stated goals of reducing dependence on foreign oil, creating jobs and combating global warming, the first bill requires developers to offer to install solar energy systems on development of certain new home construction. The bill also gives home owner associations, within developments of over 25 units, the right to access the units to repair solar energy systems and collect fees from owners for maintenance costs of such systems.

A second bill permits renewable energy facilities to be located in industrial zones. Renewable energy facilities are facilities that engage in the production of electric energy from solar technologies, photovoltaic technologies or wind energy.

The final bill authorizes the Board of Public Utilities to use revenue from retail margin assessed on certain customer classes to benefit only those customer classes by supporting development of combined heat and power, energy efficiency and demand response projects.

Recent Decision Presents Valuable Case Study In the Legal Considerations Attendant to Shutting Down Business Operations

Carl A. Rizzo & Gerard Giordano — Thu, 26 Mar 2009 16:29:04 -0500

In deciding to continue or cease business operations at a particular location, a business owner needs to be fully informed as to how his actions will impact the company’s rights and obligations under the laws governing his business, such as environmental and real property tax laws. In this way, the business owner can ensure that his decisions are made with the best interests of the company in mind. The recent New Jersey Appellate Division decision, Pan Chemical Corp. v. Hawthorne Borough, provides valuable insight as to some of the critical considerations that must be evaluated.

In Pan Chemical, the plaintiff operated a manufacturing facility in Hawthorne, New Jersey. The property consisted of 7 buildings used in the manufacture of industrial coatings, color dispersions, inks and nail polish. Several underground storage tanks leaked contamination onto the property and the New Jersey Department of Environmental Protection (“NJDEP”) required Pan Chemical Corporation (“Pan Chemical”) to install groundwater monitoring wells to address the contamination.

Subsequently, Pan Chemical acquired a new facility in Carlstadt, New Jersey. Rather than move its entire operations to the Carlstadt facility, Pan Chemical partially closed down operations at the Hawthorne facility. This was done in order to avoid having to comply with New Jersey’s Industrial Site Recovery Act, N.J.S.A. 13:1K-6 et seq. (“ISRA”), which requires businesses that are “industrial establishments” to comply with its requirements whenever there is a cessation of the business operations. ISRA compliance typically requires the performance of an environmental assessment of the property to determine if contamination exists and, if so, the cleanup of the contamination.

By leaving behind more than 10% of its staff and keeping open only certain buildings at the property, Pan Chemical was able to avoid ISRA compliance when it relocated and deferred the cleanup to a later time. Ultimately, Pan Chemical sold the property in 2005 in an “as is” condition and thereby shifted the cost of the cleanup to the purchaser.

Pan Chemical also filed tax appeals against the Borough of Hawthorne for the years 2000 through 2005 with the expectation of realizing significant property tax reductions based upon the "non-operational" status of its facility. The Tax Court found that significant reductions in assessments were in order due to the disrepair of the buildings, the need for substantial environmental remediation and the property’s "closed" condition.

The Borough appealed the Tax Court decision arguing that because the property was still "in use" for ISRA purposes, this fact should be determinative for property tax purposes as well. The Borough contended that its original higher assessment on the Pan Chemical property was appropriate and supported by the marketplace.

On appeal, the Appellate Division disagreed with the Tax Court’s granting of tax relief to Pan Chemical. The Appellate Division recognized that a windfall could result if the taxpayer was able to maintain that operations were continuing for the purposes of ISRA, but argue that the property was no longer "in use,” warranting cleanup cost deductions and negative value adjustments, for real property tax valuation purposes.

In deciding this matter, the Appellate Division relied on the seminal case of Inmar Associates, Inc. v. Carlstadt, 112 N.J. 593 (1988), which involved tax assessment challenges by owners of environmentally contaminated properties. One property, which was still in use during the tax year in question, was operated by GAF Corporation. The other property, where operations had ceased prior to the relevant tax assessment date, was owned by Inmar Associates, Inc.

The Court there granted tax relief for the Inmar property but not for the GAF property. The New Jersey Supreme Court reasoned that the GAF property was still occupied and in use at the time of the assessment date; whereas the Inmar property was not then in use. As a result, the Court concluded that “when the property is in use, normal assessment techniques will remain an appropriate tool in the appraisal process.”

The Appellate Division, recognizing that Pan Chemical could not have it both ways, stated:

[Pan Chemical] wanted their property to be deemed ‘in use’ during the years on appeal for the sole purpose of avoiding the costly cleanup mandated by ISRA. Now, [Pan Chemical] wants the property to be deemed ‘not in use’ over the same period of time in order to claim a reduced tax liability.

The Pan Chemical court concluded that the Borough’s use of the statutory definition of “closed” as used in ISRA was appropriate. Thus, the Appellate Division held that the Borough conducted a “reasonable approximation of fair value” in completing its valuation of the Pan Chemical property. Accordingly, the matter was remanded back to the Tax Court with direction to utilize the recognized standards of valuation for operational facilities.

While there may be a distinct and significant dollar cost advantage to delaying the cessations of operations on the environmental front, such a decision must be weighed in light of its impact upon what would otherwise have been a strong case for tax relief. There is no right or wrong way to approach these issues. Obviously, the individual circumstances and financial considerations controlling at the time will dictate the appropriate action. There are, however, approaches that a business owner can employ to cease operations, manage its environmental cleanup obligations and thereby leave open the prospect that it can also, at the same time, advance a meritorious tax appeal.

For example, the owner/operator could obtain a fixed price contract from an environmental consultant capping the cost of cleanup. By so doing, the owner could limit its cleanup exposure and then better assess the situation. The possibility of closing down operations without delay, thus maximizing the prospect for real tax relief, might then become a viable alternative. Only when the full measure and impact of such decisions are considered may the true merits of a company's comprehensive strategy be properly evaluated.

Environmental and Energy Projects within the American Recovery and Reinvestment Act

David P. Steinberger — Thu, 05 Mar 2009 12:59:07 -0500

On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009, also known as the Stimulus Bill. Among the numerous programs encompassed within the Stimulus Bill are significant proposed expenditures for environmental and energy projects. There are many opportunities for businesses to capitalize on the federal funding and tax incentives provided by the Stimulus Bill. But those businesses need to move swiftly to make sure they do not miss out on these opportunities.

Energy Programs

The Stimulus Bill includes approximately $30 billion for projects relating to the generation, transmission and distribution of renewable energy and approximately $5 billion for energy efficiency projects, including projects to weatherize certain properties. There are many opportunities for companies involved with the various aspects of renewable energy and energy efficiency to capitalize on the available funding within the Stimulus Bill. There may also be funds available for commercial or industrial property owners to help fund investments in energy efficiency technologies which have the potential to significantly reduce the future property operating costs.

Renewable Energy. Allocations in the Stimulus Bill include (a) $6 billion in loan guarantees for renewable energy generation and transmission projects, (b) $11 billion for research, development and pilot programs relating to the so-called “Smart Grid,” which will enable greater development and use of renewable power sources, and (c) $2.5 billion for research related to renewable energy and energy efficiency. Also included in the Stimulus Bill are tax cuts for businesses investing in renewable energy technologies. Here is the link to the US Department of Energy discussion of the Stimulus Bill: http://www.energy.gov/recovery/index.htm
Energy Efficiency. The Stimulus Bill also includes (a) $5.25 billion to make lower income housing more energy efficient, (b) $6.3 billion in grants for state and local government energy efficiency investments and (c) $300 million for consumer rebates for purchasers of energy efficient “Energy Star” appliances. The Stimulus Bill also includes tax cuts for individuals investing in residential energy efficiency improvements.

Environmental Programs

In total, the Stimulus Bill includes approximately $18.8 billion dollars in federal spending for environmental projects relating to site remediation, water infrastructure and flood control and mitigation projects. There may be opportunities to include funding for water infrastructure projects into on-going or planned development or redevelopment projects. Additionally, increased funding to the federal brownfields program may provide sufficient stimulus to continue planned redevelopments.

Property Remediation. $600 million is allocated to the United States Environmental Protection Agency to fund the cleanup of hazardous waste sites listed on the National Priorities List, which is the USEPA’s list of some of the most contaminated sites in the nation. With this increased spending to cleanup Superfund sites, we expect there to be a potential rise in federal cost recovery litigation as the USEPA attempts to recoup those cleanup costs from the responsible parties. An additional $200 million is allocated to cleaning up properties with leaking underground storage tanks, and $100 million is allocated for grants providing for the cleanup and redevelopment of brownfields sites. Here is the link to the USEPA brownfields program: http://www.epa.gov/brownfields/
Clean Water State Revolving Fund. $4 billion is allocated to the states to fund loans administered under the Clean Water State Revolving Fund. This fund is designed to upgrade wastewater treatment systems and address stormwater management, nonpoint source pollution, and watershed and estuary management projects nationwide. Here is the link to the Clean Water State Revolving Fund: http://www.epa.gov/owm/cwfinance/cwsrf/index.htm
Drinking Water State Revolving Fund. $2 billion is allocated to the states to fund loans administered under the Drinking Water State Revolving Fund. This Fund provides loans to support infrastructure investments for both publicly and privately owned community water systems. Here is the link to the Drinking Water State Revolving Fund: http://www.epa.gov/safewater/dwsrf/index.html#facts
Other Water Infrastructure. $4.6 billion is allocated to the US Army Corps of Engineers for projects such as environmental restoration, flood protection and dam projects. An additional $340 million is allocated to the Natural Resources Conservation Service, an entity within the US Department of Agriculture, for watershed improvement projects, including flood protection projects and water quality protection programs. Here is the link to the Natural Resources Conservation Service: http://www.nrcs.usda.gov/

Can I Use Solar Energy To Save Energy Costs For My Business?

Catherine E. Bostock — Thu, 05 Mar 2009 09:27:06 -0500

Businesses and property owners can use solar systems to reduce their annual energy costs and even generate income. The cost of installing these systems is significant. However, there are a number of incentives from the federal and state governments that reduce the upfront costs of solar system installation and generate money for many years after the initial repayment period.

For upfront costs, the Federal Investment Tax Credit (FITC) provides a 30% tax credit for solar energy systems, so that you can take 30% of the cost of the solar system as a credit against taxes you would otherwise have to pay. The tax credit was recently extended for eight years. Front loaded depreciation is another significant tax incentive. In northern New Jersey, PSE&G's solar loan program may provide financing for 40-60% of the cost of installing a solar system which can be repaid in cash or with credits for energy produced.

Government incentives also make the use of solar systems more profitable. New Jersey is transitioning from a system of rebates to encourage solar system installations to a system of “solar renewable energy certificates” (“SRECs”) based on the amount of energy produced by the system, which can be sold, traded and, in some cases, used to repay loans for installation. “Net metering” also creates economic benefit because it allows a solar system owner to earn money for any excess power the system generates and returns to the electrical grid and of course having solar power reduces operating costs by reducing or eliminating the need to buy electricity from the utility.

Businesses can take advantage of these incentives directly or they can lease the solar system from a third party under a power purchase agreement. In that arrangement, the business avoids upfront costs, agrees to buy power at a discounted rate and passes the incentives to the third party. It is advisable for businesses to consult with legal professionals when entering into contracts with installers and power purchase agreements.

*This article originally ran in the February 17, 2009 issue of NorthJersey.com

NJ Proposes A Licensed Site Professional Program

Douglas I. Eilender — Thu, 05 Mar 2009 09:16:31 -0500

On June 5, 2008, new legislation was introduced to address the overburdened New Jersey Department of Environmental Protection (“DEP”)’s current staff and budget constraints by expediting its report review process. Introduction of the Bill, sponsored by Senator Bob Smith, followed hearings before the State Senate Environment Committee and Assembly Environment and Solid Waste Committee at which the DEP recommended many of the proposed reforms set out in the Bill. An updated version of the Bill was issued on January 26, 2009, which was considered by the State Senate Environment Committee on February 2, 2009. The Bill proposes changes to the DEP Site Remediation Program that include the creation of a Licensed Site Professional (“LSP”) program. The LSPs are environmental consultants with specified education and experience who perform investigations and remediation at sites in New Jersey.

The Bill identifies who may become LSPs, establishes their qualifications, licensing procedures, a code of conduct and defines their role in the remediation process. In addition, the Bill establishes a separate Site Remediation Professional Licensing Board (“Board”), which is tasked with creating standards for education, training and experience that will be required of any person who applies for a license or a license renewal. The Board conducts examinations to certify that an applicant possesses sufficient knowledge of the state regulations, standards and requirements applicable to site remediation and the applicant is qualified to obtain a license or a license renewal.

Since it will take some time for this legislation to be fully developed and implemented, after enactment of the Bill, it will provide for temporary licensing of LSPs . The Bill anticipates the applications for temporary LSP licenses will be submitted to the DEP within three (3) months of its effective date. Those seeking a temporary LSP license must have the same qualifications as a full LSP, as well as one of several professional certifications (i.e., certified hazardous materials manager from the Institute of Hazardous Materials Management, a certified groundwater professional from the National Groundwater Association, a licensed professional engineer from the National Council of Examiners for Engineers). Further, an applicant for a temporary LSP license must show that they have existing current site remediation experience.

Within ninety (90) days of the effective date of the Bill, any submissions concerning the remediation of a contaminated site must be signed and certified by an LSP. The LSP certification required under the Bill will state that the work was performed, that the LSP managed, supervised or performed the work and that the work and submission conform to the Technical Requirements for Site Remediation, N.J.A.C. 7:26E-1 et seq.

The level of coordination between the LSP and the DEP depends on the ranking of the individual site. The Bill establishes a 4-tier classification system for remediation sites.

Tier-1: A responsible party has been recalcitrant and has failed to complete the remedial investigation after an extended period of time. DEP would review and approve/disapprove all LSP submissions and select the remedial action. Financial assurance would be required in the form of a trust fund, with DEP to pre-approve any payments out of the trust fund.

Tier-2: High priority sites for economic development; or within brownfield development areas (commercial or industrial sites that are vacant or underutilized and contaminated) or other economic development priority areas; or posing significant detrimental impact on the public or the environment; or effecting sensitive populations such as child care or school facilities; or subject of federal oversight. DEP would review and approve/disapprove all LSP submissions.

Tier-3: Sites that are not Tier-1, Tier-2 or Tier-4 sites. DEP would review screening documents and certifications submitted by the LSP.

Tier-4: Leaking unregulated heating oil tanks provided there are no immediate concerns such as impact on drinking water wells or vapor intrusion risks. DEP would review required checklists and certifications.

As Tier-1, Tier-2 and Tier-3 sites are more complex, they require the involvement of LSPs, while a Tier-4 site could also be managed by a person certified to perform services at a site of an underground storage tank such as a subsurface evaluator. However, any responsible party would be allowed to submit a Preliminary Assessment/Site Investigation for sites where a no further action letter is sought from DEP based on a showing that no contamination above prevailing standards exists.

The proposed Bill is designed to streamline the DEP’s review of environmental reports, so that transactions are not delayed due to the lack of responsiveness from the DEP. We shall see whether New Jersey can join states like Connecticut and Massachusetts, where effective LSP programs are run.

Guaranteed Cleanup Cost Contracts: A Keystone for Contaminated Property Deals

Gordon C. Duus — Thu, 05 Mar 2009 09:08:15 -0500

Often the hardest issue to negotiate in a real estate transaction involving a contaminated property is which of the parties has to pay if the actual environmental cleanup costs are much higher than the estimate used by the parties when they negotiated the deal terms. Many deals used to die over this issue either because neither of the parties to the transaction were comfortable accepting the risk or because the purchaser’s lender was the uncomfortable one. Now Guaranteed Cleanup Cost Contracts – in which the environmental consultant agrees to complete the cleanup for no more than an agreed upon guaranteed cleanup cost – are used to close many of these deals. If the guaranteed cleanup cost is exceeded, the environmental consultant pays the cost overruns to the extent provided by the Guaranteed Cleanup Cost Contract (“GCCC”). Where cost cap environmental insurance is purchased, an environmental insurance company pays the cost overruns to the extent provided in the policy. By laying this risk off on someone who is otherwise not a party to the real estate transaction, it often becomes much easier to get the parties to close. These deals are not easy to close, but much easier than they were before GCCCs.

GCCCs Without Environmental Insurance: GCCCs can be used to help close contaminated property deals regardless of the purchase price or the amount of the guaranteed cleanup cost. For transactions with a lower purchase price or guaranteed cleanup cost, the GCCC may be the only practical way to address the issue so that closing can occur immediately. This is because the parties may be unwilling to pay the cost of environmental insurance or environmental insurance may be unavailable and therefore the only practical way to secure the payment of costs in excess of the guaranteed cleanup cost is to get the consultant to accept the risk.

All of the environmental documents the seller has concerning the contamination on the property are provided to one or more consultants; who review the documents and provide a proposed guaranteed cleanup cost to obtain a regulatory sign-off from the appropriate governmental agency with jurisdiction over the cleanup (e.g. – the New Jersey Department of Environmental Protection). If the amount of information concerning the contamination on the property is not sufficient for the consultant to provide a guaranteed cleanup cost, they are asked to provide a proposal for whatever additional work they would need to do in order to provide a proposed guaranteed cleanup cost – different consultants require different amounts of information depending upon how risk adverse they are. Some consultants require a governmentally approved cleanup plan in place before they will agree to enter a GCCC, while others simply want enough sampling data so that they can somewhat confidently predict what the governmental agency that will one day oversee the cleanup will require.

A consultant is then selected to do the cleanup, usually on some combination of their skill and experience and having a relatively low guaranteed cleanup cost. A GCCC is then negotiated with the consultant selected whereby the consultant agrees to perform the cleanup of the known contamination for no more than the guaranteed cleanup cost. Typically, the consultant entering the GCCC agrees to cleanup only the known contamination, which is broadly defined to include the entire discharge of contamination of which there is any evidence in the existing sampling data, both its source and the full extent of its migration. Newly discovered discharges of contamination not seen by the consultant in the sampling data before the GCCC was entered are not part of the consultant’s remedial obligation, although environmental insurance can be obtained to cover this risk as discussed below.

Some consultants want the guaranteed cleanup cost to be paid in full no matter what the cleanup actually costs them to perform, while others are willing to be paid on a time and materials basis with the understanding that upon completion of the cleanup the consultant will receive some percentage (e.g. – 50 percent) of the unspent portion of the guaranteed cleanup cost as a bonus. These GCCCs cover a wide range of issues, but most importantly they make it clear that the environmental consultant is liable for all costs to clean up the known contamination in excess of the guaranteed cleanup cost. Of course, often the only security for the environmental consultant’s obligations, which may take many years for the consultant to fully perform (e.g. – where there is groundwater contamination), is the financial strength of the environmental consultant. Clearly, that financial strength may change over time and could reduce the security of the property owner for the consultant’s performance, so that it needs to be scrutinized at least before entering a GCCC.

GCCC With Environmental Insurance: Environmental insurance is often used either to provide coverage for the discovery of new discharges of contamination (which are excluded from the consultant’s remedial obligation under the GCCC) or as a better form of security for the consultant’s performance than is provided by the consultant’s assets. Typically, the environmental insurance policy can provide two kinds of coverage: Pollution Legal Liability Coverage and Cost Cap Coverage (the names of coverages vary from insurance company to insurance company).

Pollution Legal Liability Coverage: Pollution Legal Liability Coverage ordinarily covers new discoveries of pre-existing contamination during the policy term. This covers what is ordinarily excluded from the consultant’s remedial obligation under the GCCC. Since the time when pre-existing contamination is most likely to be discovered is in the course of cleaning up the known contamination, we strongly recommend purchasing this coverage as it is usually quite affordable.

Pollution Legal Liability Coverage also covers third party lawsuits (i.e. – lawsuits by anyone other than the seller and purchaser of the property) for property damage or bodily injury arising from any pre-existing contamination, whether known or not when the policy was purchased. So if groundwater contamination on the property migrates off-site and impacts a neighbor’s property, the Pollution Legal Liability Coverage would protect against a lawsuit by the neighbor for property damage or bodily injury. Coverage can be purchased for claims for either new discharges of pollution occurring after the policy is purchased or for business interruption caused by the contamination or its remediation. This coverage is often the key to getting the parties to close, as it covers virtually all of the risks about which a purchaser of contaminated property and its lender are concerned.

Cost Cap Coverage: Cost Cap Coverage generally provides insurance coverage if the cost to cleanup the known contamination exceeds the guaranteed cleanup cost. For as long as the Cost Cap Coverage remains in place, the environmental insurance company is primarily liable for cleanup costs in excess of the guaranteed cleanup cost that must be incurred to obtain the regulatory sign-off from the governmental agency with jurisdiction over the cleanup. There are only a few insurance companies interested in issuing cost cap coverage, as its claims history has often resulted in it being unprofitable.

The guaranteed cleanup cost serves as the deductible that must be exceeded before the insurance company is obligated to provide the Cost Cap Coverage. While this would seem to take the environmental consultant off the risk of such cost overruns, ordinarily the environmental consultant assumes the risk of such overruns once the term of the Cost Cap Coverage has expired and also if the cost of the cleanup exceeds the amount of the Cost Cap Coverage. Since the insurance companies are only willing to provide Cost Cap Coverage for a fairly tight timeframe (e.g.- usually only one year longer than the consultant’s estimated time to conduct the cleanup), this motivates the environmental consultant to finish the cleanup before it assumes the risk of all cost overruns in excess of the guaranteed cleanup cost.

In our experience, using the environmental consultants that we recommend, the insurance companies are willing to provide Cost Cap Coverage even where there is no cleanup plan approved by the governmental agency with jurisdiction over the cleanup. There just needs to be enough investigation done for the consultant to have a good handle on the nature and extent of the contamination. It is the consultant’s job to convince the insurance company that there is a sound basis for its guaranteed cleanup cost to serve as the deductible for the Cost Cap Coverage.

Using one of the options above can make it much easier to close a transaction involving a contaminated property. In fact, by using a GCCC with both Pollution Legal Liability Coverage and Cost Cap Coverage, and adding the lender to the policy as an insured, we have been able to get many of the large institutional lenders to accept the contaminated property as the sole collateral for a purchase money mortgage. Otherwise, they would never accept the contaminated property as the sole collateral for the loan. And when the GCCC and environmental insurance make both the parties and the lender comfortable with the risk, the transaction can close immediately. Only time will tell if, and the extent to which, the recent global economic difficulties for insurance companies and banks will change how GCCCs and related environmental insurance will be used to close transactions involving contaminated property.

This article originally ran in the February 23, 2009 issue of New Jersey Law Journal.

New Rules On Reporting Greenhouse Gases

Catherine E. Bostock — Thu, 05 Mar 2009 09:04:20 -0500

The New Jersey Department of Environmental Protection ("DEP") is expected to adopt new rules governing the reporting of emissions of certain greenhouse gases in the near future. These new rules were proposed recently pursuant to the Global Warming Response Act of 2007, which required the DEP to establish a greenhouse gas emission monitoring and reporting system. Greenhouse gases that are subject to the proposed rules include refrigerants such as hydrofluorocarbons (HFCs) and perfluorocarbons (PFCs), methane, nitrous oxide, sulfur hexafluoride, ethers and halogentated ethers. The aim of the rule amendments is to generate information on major sources of greenhouse gases as part of a strategy to meet future goals to reduce emissions.

The change in emission reporting requirements will affect numerous types of facilities. Among the most likely to be impacted are facilities with large refrigeration systems such as supermarkets, restaurants and cold storage warehouses such as those used to store perishable foods. In addition, various industrial processing facilities. Finally the new rules would likely change requirements for many landfills and wastewater treatment facilities.

The proposed rules would change the requirements for emission statements under the Air Pollution Control Rules by requiring greenhouse gas reporting requirements for more facilities. The rule would also amend the Worker and Community Right to Know Rules by requiring reporting concerning the amount of fossil fuels used by certain facilities subject to the Worker and Community Right to Know Act Rules including prime suppliers of fossil fuels, gas public utilities, and natural gas pipeline operators.

USEPA Cracks Down on Stormwater Violations - Levies Multi-Million Dollar Penalties.

David P. Steinberger — Thu, 05 Mar 2009 09:00:45 -0500

In June 2008, the United States Environmental Protection Agency announced a $4.3 million dollar settlement against four national residential real estate development companies. The government alleged that those companies violated the federal Clean Water Act (“CWA”) requirements addressing the discharge of stormwater (i.e., rainwater/snow melt runoff) from construction sites. Under the CWA, a permit and a stormwater management plan are required for the discharge of stormwater from a construction site. The EPA alleged that the companies had either not obtained a permit before commencing their construction activities or failed to abide by the terms of permits they had obtained. This enforcement action follows several other recent high profile stormwater permit enforcement actions undertaken over the past several years that resulted in $4.4 million dollars in penalties against two national box retail stores.

The CWA generally requires that a developer obtain a stormwater discharge permit before starting construction activities at a property. It allows states to assume the role of the permitting authority for stormwater permits. Delaware, New Jersey, New York and Maryland have been delegated such permitting authority from the EPA. As such, the state environmental agency within a delegated state issues permits for stormwater discharges under the CWA. EPA retains oversight authority over the state stormwater permitting programs – that is why the recent enforcement actions were brought by the EPA.

In New Jersey, a construction project which will disturb more than one acre of land requires a stormwater discharge permit. The state Department of Environmental Protection (“DEP”) has established a general stormwater discharge permit for construction activities, through which the DEP pre-determined that any construction projects meeting the criteria for the general permit will be covered by the general permit. (There are also general stormwater permits for industrial facilities, concrete manufacturers and other business categories, which permits address stormwater runoff from the operation of covered facilities.) To obtain coverage under the construction general permit, the developer must submit a Request for Authorization to the local Soil Conservation District for their approval. This is unlike an individual discharge permit, which requires a detailed state engineering review.

Obtaining the general stormwater permit for construction activities is, however, only the first step towards compliance with the CWA’s stormwater requirements. Once the permit is in place, the permit holder must comply with the terms of that permit. Failing to abide by the terms of the permit is also a violation of law which exposes the developer significant penalties. The most important component of the general stormwater construction permit is the development and certification of a Stormwater Pollution Prevention Plan

The SWPPP consists of a soil erosion and sediment control element and a construction site waste control component. The soil erosion and sediment control element is governed by a soil erosion and sediment control plan and includes controls such as silt fences to minimize soil runoff. The construction site waste control element contains requirements which address materials management to prevent or reduce waste and waste handling, which in turn reduces the potential for such waste materials to flow off-site with stormwater. Examples of construction site waste include waste building material and rubble, chemical waste, litter, sanitary sewage, contaminated soils and concrete truck washout.

By obtaining a permit for stormwater discharges at construction sites, and complying with the terms of the SWPPP, a developer will avoid a potentially costly enforcement action by the state or the EPA. The EPA has sent a very strong signal to the regulated community that it takes stormwater discharges and compliance with the CWA very seriously. A developer must ensure that its professional team, including engineers, construction managers and attorneys, are paying close attention to stormwater permitting requirements to avoid such costly mistakes.

EPA Regulates Home Improvements To Address Risk Of Lead Paint

Gerard M. Giordano — Thu, 05 Mar 2009 08:48:29 -0500

On March 31, 2008, the United States Environmental Protection Agency (“EPA”), under the authority of the federal Toxic Substances Control Act, issued new rules governing home improvement contractors and maintenance companies engaged in the renovation and repair of houses, child‑care facilities and schools constructed before 1978. The purpose of the rule is to protect children from lead paint hazards in places they frequent. EPA’s rules require that by April 2010, contractors and maintenance professionals performing renovation activities be certified and their employees trained by certified renovators. The rules also require that these companies use safe work practices to eliminate airborne lead exposure from the renovation activities.

The rule applies to home improvement contractors, maintenance workers in multi‑family housing, painters and other trades engaged in renovation activities. The covered facilities include residential, public or commercial buildings where children under the age of 6 are present on a regular basis, as well as all rental housing. The rule applies to renovation, repair or repainting activity. The only exceptions are (i) owner‑occupied housing where children under six or a pregnant woman do not reside; (ii) minor maintenance or repair activities affecting six square feet or less of lead based paint in a room or 20 square feet or less of lead based paint on the exterior of a building and (iii) renovations that do not involve the disturbance of lead based paint. Determining whether a project is lead free must be made by a certified renovator using an EPA recognized test kit.

The rule prohibits certain unsafe work practices such as flame burning or torching; and sanding, grinding, or blasting with power tools. It also prohibits the use of equipment not equipped with high efficiency vacuum attachments to minimize or eliminate airborne dust.

A certified renovator must be assigned to each renovation project to direct and train uncertified workers and to insure that all work is performed in accordance with applicable work practices and standards as outlined in the rules. A renovator can become certified by successfully completing an EPA approved accredited training course. To maintain the certification, a person must complete an accredited refresher course every five years.

While these regulations directly impact the companies doing the renovations, property owners must remember that they are ultimately responsible for the safety of their tenants. It is imperative, therefore, that property owners make sure that the contractor intends to comply with the EPA’s regulations and minimize lead hazards during the work. Any contract between the property owner and renovation contractor should, at a minimum, include a provision requiring the contractor to comply with all laws during the performance of the work and an indemnification provision whereby the contractor agrees to defend and indemnify the property owner from lawsuits arising from the contractor’s work. Since an indemnification is only as good as the company’s assets, a property owner is well advised to require the contractor to have insurance naming the property owner as an additional named insured on the policy. As an additional named insured, the property owner will be in a position to make a claim against the contractor’s insurance policy. By taking these precautions, property owners will minimize their exposure to potential liability if the contractor fails to comply with these regulations.

Enforcement Power of NJDEP Increased

Dorothy Mello Laguzza — Thu, 05 Mar 2009 08:41:20 -0500

On January 4, 2008, the New Jersey legislature passed the Environmental Enforcement Enhancement Act. This Act enhances the enforcement authority of the New Jersey Department of Environmental Protection (“DEP”) under ten environmental statutes: Waterfront Development Act, Pesticide Control Act of 1971, Wetlands Act of 1970, Freshwater Protection Act, Coastal Area Facility Review Act, Endangered and Nongame Species Conservation Act, Water Supply Management Act, Safe Dam Act, Safe Drinking Water Act, and the Flood Hazard Area Control Act. The Act also amends the DEP enabling statute by clarifying DEP’s authority to inspect facilities, collect samples and copy documents to determine compliance with environmental laws, regulations, permits, and orders.

The Act strengthens the enforcement provisions of the ten statutes listed above and substantially increases the penalties DEP may seek against violators. The Act greatly broadens the enforcement authority of the DEP by authorizing it to issue an order requiring any person to comply, to bring a civil action, to levy a civil administrative penalty, or to petition the attorney general to bring a criminal action if a violation occurs. The amendments are substantial because many statutes prior to the passage of the Act only contained minimal penalties for violators or did not contain any provisions for assessing administrative penalties. For example, the Waterfront Development Act’s previous maximum penalty was $1,000 with an additional fine of $100 for each day the violation continued. As amended the penalty is increased to $25,000 per violation, per day.

To help ensure compliance with environmental statutes, the Act significantly increases civil and criminal penalties including the following changes: (1) uniformly increases the maximum civil penalty amount to $25,000 per day; (2) authorizes daily penalty assessments for continuing violations; (3) authorizes the recovery of compensatory damages for loss or destruction of natural resources (e.g.-creates authority for DEP to recover natural resource damages, which are money damages from anyone responsible for spills or discharges of hazardous substances); (4) authorizes the DEP to recover reasonable costs incurred by the State in removing or correcting a violation, and to recover all reasonable costs incurred in bringing a civil action, which could be interpreted to mean recovery of attorneys’ fees; and (4) clarifies and in some statutes creates criminal provisions for purposeful, knowing, and reckless violations or falsifications. In addition, the Act broadens the DEP’s authority to compel a property owner to record a deed notice on its property where an alleged violation has occurred, under acts such as the Dam Safety Act or the Flood Hazard Protection Act. Prior to the Act’s passage the DEP only had this authority for a violation of the Freshwater Wetlands Protection Act. In fact, the Act allows DEP to require the recording of such a notice based only upon an allegation prior to adjudication.

With the passage of this Act, DEP has increased its enforcement authority and permits it to seek higher penalties for violations that may have previously been cost effective to commit and new avenues to seek such penalties. Its passage will likely lead to an increase in enforcement actions brought by the DEP.