Real Property & Environmental Law Alert

The Time for Electronic Recording is Now: New Jersey Passes New Law Updating Title Recordation Procedures

Nicole E. Taplin — Fri, 27 Jan 2012 12:47:56 -0500

In our electronic age, New Jersey’s antiquated laws governing document recordation were in serious need of some updates. A new law was recently passed modernizing the New Jersey Statutes by requiring the acceptance of electronic alternatives to paper documents, in addition to paper documents. In addition, provisions of the statute, disbursed over various sections that logically belonged together, have been compiled in a more concise and coherent fashion, and antiquated language and procedures have been removed. The revisions clearly result in a much more reader- friendly version of the law relating to title recordation in New Jersey.

Assembly Bill A-2565 P.L.2011, c.217 revising the New Jersey statutes pertaining to the recording of title documents was signed into law by Governor Christie on January 17, 2012. The New Jersey Law Revision Commission (NJLRC) approved this revision project following the enactment of the federal Electronic Signatures in Global and National Commerce Act (E-sign), and New Jersey’s enactment of the Uniform Electronic Transactions Act (UETA). The legislative statements (Statements) issued by the Senate Community and Urban Affairs Committee (Senate) and Housing and Local Government Committee (Assembly) related to A-2565 note that “while the use of electronic deeds and mortgages is not expected to occur in the near term, both E-sign and UETA encourage the development of systems that will accept electronic documents without disrupting the ongoing process of title recordation.”

Title 46, chapters 15 to 26 of the New Jersey statutes currently govern the recording and indexing of title documents. Most of these statutes were written when recording meant storing and including paper documents in large books. Amendments then allowed recording offices to microfilm documents and later permitted the use of any other method of recording that was “in conformance with rules, standards and procedures promulgated by the Division of Archives and Records Management (Division) in the Department of State (Department) and approved by the State Records Committee pursuant to its authority under section 6 of P.L.1994, c.140 (C.47:1-12) and the “Destruction of Public Records Law.” The recording system is intended to be fluid, preventing its extinction, by allowing for the approval of new methods of recording documents as recording technology advances. However, as the Senate and the Assembly note, with an increase in the use of new recording methods, comes an increase in the need for regulatory authority to assure uniformity.

The new law is a significant revision to Title 46 in many ways including the addition of three new chapters, chapters 26A, 26B, and 26C, replacing and repealing certain sections, and the legislature’s attempt to simplify the statutes by “combining overlapping provisions and deleting unnecessary ones,” simplifying language and reassembling numerous sections. Some of the material, substantive revisions as highlighted in the NJLRC’s comments include (but are not limited to):

TITLE 46, CHAPTER 26A, RECORDING:

Definition added: “Document” includes both: (1) Paper documents, and (2) Electronic documents, documents created, communicated or stored by electronic means.
Definition added: A document is “recorded” if (1) The document or its image has been placed in the permanent records of the recording office, and (2) The document has been indexed as provided by this chapter. Prior to this revision, the statutes did not state directly what is meant by “recording” and the NJLRC notes that cases were not consistent as to when a document is recorded.
Documents that may be recorded: The portions regarding the recording of instruments concerning personal property have been deleted since as the NJLRC notes, “Liens against personalty, other than personalty that is or will be fixtures, are recorded by filing a UCC form with the division of Commercial Recording.”
Prerequisites for recording: The opening language has been changed to facilitate the electronic filing of documents such that the recording office need not receive an original document to record and an image will suffice if certain requirements are met.
Form of documents and maps; cover sheet or electronic synopsis: The section preserves the ability to file paper documents but also allows for acceptance of electronic documents. Authority is given to the Division of Archives and Records Management to establish statewide form requirements for electronic recording. The form requirements for maps are also now included in this section.
Duty to record; recording officer's books, methods: This section states requirements for recording standards and methods including the requirement that the method produces a clear, accurate and permanent image of a document and a method that allows the document to be found by the indexes maintained. References to other books for different kinds of documents required by Title 46 or other law have been deleted, with the NJLRC noting that this revision allows for a single set of books and indexes for newly-recorded documents. The revision also permits unique identifying numbers to be used in addition to book and page numbers. Time limits for recording or rejection of a document by recording officers are also added.
Sequence of recording: This section is new in that it allows the person submitting two or more documents at the same time to determine the order in which they are recorded rather than having the recorder record according to the priority of their dates.
Documents filed as provided by other statutes: This section provides that documents that are now “filed” pursuant to other laws be recorded and indexed with recorded documents using the same methods. The NJLRC notes that this change will not only simplify the recording office processes, it will allow a single search to disclose all county-filed or county-recorded documents that affect real estate.
Notices of settlement: This section clarifies that one notice of settlement can be recorded for a conveyance and a mortgage and the form of the notice has been slightly simplified. The timeframe for effectiveness for the notice is changed from 45 days to 60 days from the date of recording and the effective period may be extended for one period of 60 days by recording an additional notice of settlement before the expiration or discharge of the notice of settlement.
Effect of recording: The revision requires that documents have to actually be recorded to give notice. The new definition of “recording,” as noted above, requires that a document be indexed and placed in the permanent records of the recording office. In addition, the revision does not require that a document be duly acknowledged or proved and certified to have the effect of notice. The section that limits the notice effect to documents on record for six years despite defects in acknowledgement, proof or certificates has been removed. As long as a document is recorded, notice is effective. The revision goes further to state that a deed or other conveyance of an interest in real estate shall be of no effect without notice. The NJLRC notes that the section “embodies one of the basic principles underlying the recording statutes, that an unrecorded document is ineffective against later claimants who have no notice of it…If a party makes a conveyance in a form that does not permit it to be recorded, then a subsequent bona fide purchaser, mortgagee or creditor who could not learn of the conveyance from the land records is not bound by the conveyance absent notice of it at the time he acquired the interest for value or docketed the judgment. This principle is in accord with the statute of frauds, 25:1-11, which makes unwritten conveyances enforceable as conveyances only in some cases where possession is transferred. Transfer of possession frequently is notice to prospective purchasers or mortgagees.

TITLE 46, CHAPTER 26B, MAPS:

The substance of most of the sections pertaining to maps remains unchanged. Some sections have been reworded or rearranged. In the section entitled “Filing and indexing of maps, fee,” references to the way that maps are stored and the format of a map and its copies have been deleted, and, the new law seems to aim to allow for technological advances in map filing.

TITLE 46, CHAPTER 26C, GENERAL AND TRANSITIONAL:

Regulations: This section states that the Division in consultation with the County Clerks and Registers of Deeds shall adopt regulations to establish format and technical requirements for recorded documents to foster state-wide uniformity in title recordation and otherwise to implement the new law. Regulations shall be adopted within 12 months after the effective date of the new law.

Uniform Electronic Transactions Act (UETA) superseded: This section states that to the extent that the new law conflicts with Sections 17 and 18 of the UETA, the new law supersedes. The new law modifies, limits, and supersedes the federal Electronic Signatures in Global and National Commerce Act but does not modify, limit, or supersede Section 101(c) of that act or authorize electronic delivery of any of the notices described in Section 103(b) of that act.

Review of Document Filing and Recording Fees: Within 2 years of the effective date of the new law, the Division and the Department shall adopt rules and regulations requiring county clerks and registers of deeds and mortgages to report the number of documents recorded or filed and all document filing and recording fees that are collected by their offices, categorized by document type, to the Division and to the Department. The goal of the rules and regulations will be to develop and implement a standard form and procedure for county clerks and registers of deeds and mortgages to utilize so as to report on the foregoing in a clear and concise manner. Within 3 years of the effective date of the new law, the Division and the Department will issue an interim report on same and within 4 years, a final report. The report will specify an average state-wide fee for the filing or recording of each type of document and may contain recommendations of the division and the department to the Legislature for the establishment of standard per document filing and recording fees. 5 years after the date of adoption of the new law, the Legislature shall consider the establishment of standard per document filing or recording fees.

In summary, the new law better accommodates the recording of electronic alternatives to paper documents and will guide the development of uniform recording procedures as we progress from a technological standpoint. It will be interesting to watch how the law relating to title recordation in New Jersey evolves in our rapidly changing information age. As many county clerks and lawyers have already discovered, there will come a day when electronic recordings and filings will be mandatory because of the potentially prohibitive expense of maintaining two systems, one for paper and one for electronic alternatives. The current legislation moves our system one step closer to a world in which all of our documents will be filed and recorded electronically. As with all regime changes, advantages and disadvantages will result. For now, Happy E-recording.

Nicole E. Taplin is an Associate in the Gibbons Real Property & Environmental Department.

Jennifer Porter to Speak at New York CLE Program on State Environmental Quality Review Act (SEQRA) Litigation Issues

Gibbons P.C. — Thu, 26 Jan 2012 09:10:43 -0500

Jennifer M. Porter, Esq., a Director in the Gibbons Real Property & Environmental Department, will be a speaker at Lorman’s New York CLE Program SEQRA, on Friday, March 9, 2012 in Latham, New York.

The all-day program will provide a comprehensive overview of New York’s State Environmental Quality Review Act (SEQRA) including specific discussion on regulatory requirements and compliance, the integration of SEQRA with the project review process, cumulative impacts and segmentation and how to use SEQRA to obtain a better project without bankrupting the applicant. Ms. Porter will be part of the afternoon panel and will be discussing SEQRA litigation issues including the statute of limitations, standing to sue, defending or attacking negative declarations and procedural and substantive judicial review.

The program is designed for attorneys, engineers, architects, city and county planners, environmental professionals, presidents, vice presidents, water resource specialists, public works directors, surveyors and project managers. For more information and to register for the program, click here.

The Permit Extension Act May Keep Extending

Jason R. Tuvel — Tue, 24 Jan 2012 09:09:54 -0500

Apparently concerned that the economy may not be recovering rapidly enough, the 215th New Jersey Legislature now convened, introduced a new bill (A337) on January 10, 2012, by Assemblyman Ronald S. Dancer of District 12, to change the definition of the “extension period” under the Permit Extension Act so that it runs through December 31, 2015. Therefore, based on the 6-month tolling provision currently in the Permit Extension Act, approvals received for development applications during the extension period could be extended as far out as June 30, 2016. Bill A337 has been referred to the Assembly Housing and Local Government Committee.

In 2008, as the economy was sliding into recession, the New Jersey Legislature passed the “Permit Extension Act,” which tolled the expiration of all development approvals that were granted during the “extension period” as defined in the statute. The intent was to preserve the benefit of permits until the economy improved. The “extension period” is currently defined as “the period beginning January 1, 2007 and continuing through December 31, 2012.” The definition of “approvals” under the Permit Extension Act covers most permits issued by State rule or regulation, including, preliminary and final approvals for development applications under the New Jersey Municipal Land Use Law.

If signed into law, Bill A337 could provide developers with an opportunity to wait a little longer for the economy to turn around in order to build projects that have received approvals and are considered dormant at the present time.

Jason R. Tuvel is an Associate in the Gibbons Real Property & Environmental Department.

New Jersey Grants Out-of-State Wineries Direct Access to Consumers & Retailers

Brett S. Theisen — Mon, 23 Jan 2012 13:43:49 -0500

On January 17, 2012, Governor Chris Christie signed into law a bill allowing out-of-state winemakers to sell directly to New Jersey consumers and retailers. The bill was in response to the Third Court’s decision in Freeman v. Corzine, which we reviewed on this blog a year ago. The decision invalidated a New Jersey law allowing certain New Jersey farmers and wineries to skip wholesalers and sell directly to retailers and consumers. The Court determined that the law ran afoul of the Constitution’s Dormant Commerce Clause because it imposed restrictions benefiting in-state wineries and farmers at the expense of their out-of-state competitors. This new law is intended to balance the competing rights of in-state and out-of-state wineries.

The Third Circuit ordered the case remanded to the District Court to remedy the constitutional violation. In short, the District Court was being asked to choose between (1) extending the same in-state privileges to out-of-state wineries and farms, or (2) nullifying the privileges enjoyed by in-state wineries and farms. Rather than leaving the matter with the courts, state legislators introduced several competing bills aimed at resolving the violation. On July 25, 2011, at the request of all parties, the District Court ordered the case “administratively terminated” through March 2012 in anticipation of a legislative resolution.

After months of back and forth negotiations, the new law finally garnered enough votes to pass on the final day of the 2010-2011 legislative session. The law is a compromise measure that will resolve the constitutional issues identified in Freeman v. Corzine and protect New Jersey wine growers’ right to sell directly to consumers. As a result, the District Court litigation has been rendered moot.

Specifically, the new law creates a new “Out-of-State winery license,” available to applicants that do not produce more than 250,000 gallons of wine per year and are duly licensed in another state. The new license permits direct sales to New Jersey consumers, including internet sales. Out-of-State licensees will also be permitted to sell directly to consumers at up to 16 tasting-room locations in the State (compared to 15 locations for In-State wineries). Direct sales and distribution to retailers are also permitted for an additional fee. The new law will take effect on May 1, 2012.

Brett S. Theisen is an Associate in the Gibbons Financial Restructuring and Creditor's Rights Department.

EPA Seeks Outside Reviewers for Draft Report That Showed Groundwater Contamination from Fracking

Paul M. Hauge — Thu, 19 Jan 2012 09:19:02 -0500

In December, we reported on the release of a draft report from United States Environmental Protection Agency’s (EPA) Office of Research and Development on a possible link between groundwater contamination in some Wyoming wells and hydraulic fracturing (“fracking”) activity in the area. Now, as promised, EPA is initiating an independent assessment of the report by outside peer reviewers.

The EPA report garnered intense attention from both proponents and opponents of fracking, which extracts natural gas from underground rock formations through the pumping of a pressurized mixture of water, sand, and chemicals that creates cracks, or fractures, in the rock, allowing the trapped gas to escape, flow into the well and up to the surface. Concerns over groundwater contamination could delay or limit fracking in New York, Pennsylvania, and a number of other states.

EPA published a Federal Register notice on January 17, 2012 that seeks nominations for experts to review the draft report as well as all public comments received during a comment period that will close on January 27. An EPA peer review contractor will select five to seven outside reviewers from among those nominated.

The agency is looking for recognized experts in a variety of fields (e.g., petroleum engineering, hydrology, geophysics, and water quality) who have no financial conflicts of interest or whose position would otherwise create an appearance of a lack of impartiality. Nominations (preferably via e-mail) must be submitted by February 17.

Paul M. Hauge is an Associate in the Gibbons Real Property & Environmental Department.

Pennsylvania's Alcohol Sale Privatization Debate: What Does It Mean for Retail Beer and Wine Sellers?

Mark B. Conlan — Wed, 18 Jan 2012 14:02:27 -0500

Pennsylvania’s state-run stores could be on the verge of losing their decades-old monopoly on wine and liquor sales. On December 13, 2011, the Pennsylvania House of Representatives’ Liquor Control Committee voted 15-10 to approve an amended version of Pennsylvania House Bill 11, (“Pa. H.B. 11”), which would allow the state’s 1,200 beer retailers to sell wine to the public, in competition with the Pennsylvania Liquor Control Board’s (“PLCB”) 620 state-run stores. Notably, large supermarket chains within the state stand to gain an enormous benefit from the proposed law, which would allow for the first time in-store wine sales, as well as limited in-store tasting events. The proposed legislation now sits before the full House, awaiting floor debate, additional amendments, and a possible vote. The process could begin as early as this month.

Under the amended proposed law, a license to sell wine, called an “enhanced distributor’s license,” would be available to any “holder of a distributor license” - i.e., an entity currently selling beer in the state - after payment of a “conversion fee” of $50,000. In addition, an enhanced distributor would be required to pay an annual $15,000 renewal fee. The enhanced distributor licenses would be subject to the same population-tied cap as the current distributor licenses. Presently, the number of distribution licenses available for the retail sale of beer is limited to one license for every 3,000 inhabitants in any county, exclusive of licenses granted to certain public venues and other venues specifically identified by the Legislature.

The original version of Pa. H.B. 11 sponsored by House Majority Leader Mike Turzai and supported by Gov. Tom Corbett, would have gone even farther in breaking up the state-run monopoly. The original bill called for the complete privatization of all retail and wholesale wine and liquor sales in the state by closing and selling all state-run stores. A study commissioned by the bill’s proponents indicated that the sales could generate between $1.3 and $1.9 billion up front, with an additional $400 million in annual revenues thereafter. Following the sale of state-run stores, there would be a public auction of 1,250 retail licenses to sell beer, wine, and liquor to the highest bidders. Because the current version of the bill keeps the state-run stores open, the re-employment provisions contained in the first draft of the bill that were designed to assist displaced PLCB employees find new employment have been deleted in the amended bill.

With the Governor and many Republican legislators pushing for full privatization, further amendments or even reintroduction of some original proposals might be likely before a final version of the new law is ready for a vote. In any event, retail licensees large and small should be keeping a close eye as Pa. H.B. 11 moves through the law-making process. Whether legislators ultimately agree to proceed with the current public-private competition plan or something closer to full privatization, Pennsylvania’s retail sellers and its citizens seem poised for big changes.

Mark B. Conlan is a Director in the Gibbons Financial Restructuring & Creditors' Rights Department. Brett S.Theisen, an Associate in the Gibbons Financial Restructuring & Creditors' Rights Department, co-authored this post.

Lease Extension Notices - New York Appellate Division Ignores Lease Text in Name of Equity

Shepard A. Federgreen — Wed, 04 Jan 2012 13:50:33 -0500

New York’s Appellate Division, First Department, in 135 East 57th Street LLC v. Daffy's Inc. was faced with the following facts. A retail chain had occupied high profile space for about 15 years. The tenant had the right to renew by notice to the Landlord to be delivered by January 31, 2010, a year prior to lease expiration. For no reason other than a mistake by the tenant's controller, notice was not timely given. However an email and fax was sent (dated January 30, 2010) on February 4, 2010, purporting to exercise the option. The landlord on February 5, 2010, rejected the notice as being late, and accused the Tenant of back-dating the notice for its own purposes.

The trial court, for reasons which are not set forth in the appellate opinion, determined the tenant was entitled to equitable relief, and determined the notice exercising the renewal period, although not timely, was nonetheless effective.

The Appellate Division, reviewed the existing law of New York on honoring technically defective lease extension notices and summarized same, quoting Vitarelli v. Excel AutomotiveTech. Ctr., Inc.,

Equity will relieve a tenant from a failure to timely exercise an option in a lease to renew or purchase if (1) the tenant in good faith made substantial improvements to the premises and would otherwise suffer a forfeiture, (2) the tenant's delay was the result of an excusable default, and (3) the landlord was not prejudiced by the delay.

The Court addressed these three tests in reverse order as follows:

1) Prejudice to Landlord - The Court seemingly took judicial notice of the fact the landlord was not prejudiced, which in all likelihood was true given the timing, i.e., tenant provided 11 months and 27 days notice rather than one year's notice of the extension, but since there was apparently no evidence on the issue, not necessarily so.

2) Delay in Notice was due to an "excusable default" - The Court, in one sentence and virtually without discussion, equates the tenant's Controller's "honest mistake" with "excusable default". If an honest mistake constitutes an excusable default one is forced to wonder what set of circumstances would not constitute excusable default.

3) Tenant, in good faith, made substantial improvements that would be forfeited - The Court acknowledged the tenant did not do this, i.e., this prong of the test was not met. Instead, the Court interpreted “good will” associated with 15 years at the location to be a valuable asset that would be forfeited in the absence of equitable intervention.

Then, notwithstanding the dubious thought process as to test two and the outright acknowledgment that test three was not met, but after noting the profitability of the store and the large number of employees who would lose their jobs, ruled the notice was effective.

This case seems to be a tremendous expansion of the existing law, and to stand for the proposition that the Court is free to look at all the facts and do whatever it thinks is right, given all the circumstances. Indeed, seemingly highlighting the lack of predictability, the Court quoted the Court of Appeals in JNA Realty, "By its nature, equitable relief must always depend on the facts of the particular case and not on hypotheticals."

Although the power of the court to “do equity” has a certain appeal (for no one is for unjust results), a system which allows a panel of judges, after the fact, and on a case-by-case basis, to impose their personal set of morals in lieu of the agreement reached between the parties is a system that lacks predictability and precision. And it is a system which is only equitable in the eyes of the party to whom relief is granted - I assure you it isn’t viewed as the least bit equitable by the party who sought to do nothing more than enforce the precise terms of the agreement between the parties.

Shepard A. Federgreen is a Director in the Gibbons Real Property & Environmental Department.

US EPA Issues National Standards for Mercury Pollution from Power Plants

Susanne Peticolas — Thu, 22 Dec 2011 09:20:55 -0500

On December 21, 2011, the United State Environmental Protection Agency (EPA) announced that it had issued the first ever national standards for mercury emissions and other air pollutants from power plants. The regulations were mandated by the 1990 Clean Air Act Amendments. EPA estimates that the new standards will make a major contribution to public health by preventing 11,000 premature deaths and 4,700 heart attacks annually, as well as 130,000 cases of childhood asthma symptoms and about 6,300 cases of acute bronchitis among children each year.

EPA Administrator Lisa P. Jackson stated, "The Mercury and Air Toxics Standards will protect millions of families and children from harmful and costly air pollution and provide the American people with health benefits that far outweigh the costs of compliance." According to EPA, the standards rely on widely available pollution controls that are already in use at more than half of the nation’s coal-fired power plants.

Sources will have three years to achieve compliance, with a fourth year available from state permitting authorities for technology installation. In developing the final rules, EPA consulted with State, local, and tribal officials in and also worked with industry groups, unions and other stakeholders. It reviewed over 900,000 comments. Critics of the regulations assert that they will result in job loss because older coal fired plants may be required to close. EPA counters that society as a whole will benefit because prevention of asthma, heart attacks, bronchitis and other illnesses attributable to air toxics will save $37 billion to $90 billion in health care costs each year by 2016.

Susanne Peticolas is a Director in the Gibbons Real Property & Environmental Department.

EPA Report Points to Fracking as Possible Source of Groundwater Contamination

Paul M. Hauge — Wed, 14 Dec 2011 11:23:45 -0500

A draft report from United States Environmental Protection Agency’s (EPA) Office of Research and Development has tentatively pointed a finger at hydraulic fracturing (“fracking”) as a cause of groundwater contamination detected in a number of wells near the town of Pavillion, Wyoming. The report, which has not yet undergone outside peer review, is likely to set off alarm bells among both proponents and opponents of fracking, including those in eastern states like New York, New Jersey, and Pennsylvania.

Fracking involves the pumping of pressurized water, sand, and chemicals into underground rock formation (such as the Marcellus Shale formation in Pennsylvania and New York) that contains natural gas. The high-pressure fluid creates cracks, or fractures, in the rock, allowing the trapped gas to escape, flow into the well and up to the surface. Eastern states have adopted a variety of policies toward fracking, ranging from Pennsylvania’s enthusiastic promotion to New York’s temporary moratorium and ongoing effort to promulgate protective regulations to New Jersey’s attempted legislative prohibition that was vetoed in favor of a temporary ban.

Whether fracking may contaminate groundwater is a critical question facing policy makers across the country. The EPA study, conducted in response to complaints from residents about objectionable taste and odor problems in water drawn from the drinking water wells after fracking in nearby gas production wells, concludes, based upon both data and complex scientific reasoning, that fracking has caused impacts to ground water in the Pavillion area. EPA also noted certain limitations of the study: its purpose was “to determine the presence, not the extent, of ground water contamination in the formation,” and the results are specific to the Pavillion area, where fracking occurs in and below a drinking water aquifer and near drinking water wells, unlike production practices in many other parts of the country.

The EPA report drew sharp criticism from the company that is conducting fracking in the area, and praise from opponents of fracking. It is certain to cause additional controversy in the months ahead. As we noted in a recent post, fracking also raises complex legal issues.

Paul M. Hauge is an Associate in the Gibbons Real Property & Environmental Department.

Nissan Leaf EV Expected to be Available Nationwide in Early 2012

Susanne Peticolas — Tue, 13 Dec 2011 09:10:26 -0500

The all electric Nissan Leaf is now available in seven new states, bringing the total to 30, including New Jersey, where it is sold. The additional states are Delaware, Indiana, Louisiana, Nevada, Ohio, Pennsylvania and Rhode Island. This is good news for Delaware, Pennsylvania and Rhode Island, which are members of the Transportation and Climate Initiative planning for an Electric Vehicle (EV) Network across the Northeast.

The proposed EV Network is intended to enable EV drivers to be able to use their vehicles easily throughout the Northeast from northern New England to Washington, D.C. In addition, it hopes to attract private investment with consistent standards and regulations across the region. The project will develop a plan and guidance documents for the development of a network of charging stations.

On September 22, 2011, the Transportation and Climate Initiative, which includes New Jersey as a member, was awarded a federal grant of nearly $1 million to start planning the EV Network. According to Commissioner Martin, "Improving air quality in New Jersey is a top priority of the Christie Administration. But in addition to helping us reduce auto emissions and improving the health of our residents, this new network will provide an economic boost to the State through the creation of new green jobs in research and production of electric cars and electric vehicle infrastructure."

Nissan expects to make the Leaf available in all 50 states by March of 2012, too late for the federal tax incentive for plug in electric vehicles scheduled to expire at the end of December 2011.

Susanne Peticolas is a Director in the Gibbons Real Property & Environmental Department.

Pennsylvania Appellate Court Injects Uncertainty Into Fracking Industry

Paul M. Hauge — Thu, 08 Dec 2011 09:17:02 -0500

An 1881 deed and an 1882 Supreme Court decision formed the background for a very modern controversy recently addressed by the Pennsylvania Superior Court. The decision, Butler v. Estate of Powers, casts a shadow over ownership rights in natural gas contained in the Marcellus Shale formation, and has left many companies in the “fracking” industry uncertain about what they own.

The deed in question conveyed a 244-acre parcel to the appellees’ alleged predecessors in title, but reserved “one half the minerals and Petroleum Oils” to the grantor. The appellees claimed to own the surface and 100% of the minerals and petroleum -- including, specifically, natural gas contained in the Marcellus Shale formation under the parcel -- based on adverse possession. The appellants, heirs to the estate of the grantor, claimed that the reservation in the deed gave them, and not the appellees, half of the shale gas.

The issue: what legal rule should the court apply? Most observers thought that the Pennsylvania Supreme Court’s 1882 decision in Dunham v. Kirkpatrick, as extended by its 1960 decision in Highland v. Commonwealth controlled. Those cases held that a conveyance of “mineral rights” is presumed not to include the right to extract oil and gas. The Supreme Court later carved out an exception to Dunham in U.S. Steel Corp. v. Hoge, which held that coalbed methane belongs to the owner of the coal. The Hoge rule was thought to apply only to coal and the gas contained within it.

Rather than simply applying the Dunham rule (as the trial court had), under which shale gas would have been excluded from the reservation in the deed and thus conveyed to the grantee, the Superior Court decided that expert testimony was needed before it could make a determination as to exactly what shale gas constituted. Is it a “mineral” under the rule in Dunham and Highland? Is it natural gas under the same rule? Or is it more like coalbed methane, and thus subject to the “whoever owns the rock owns the gas” rule in Hoge? The court thus remanded the case to the trial court, which will hear from the parties’ experts before deciding, for the second time, which rule applies to shale gas. In the meantime, the appellees have appealed to the Pennsylvania Supreme Court.

With the remand and likely appeals, the issues raised by Butler may not be resolved for years. For now, anyone with a stake in the Marcellus Shale or the gas it contains -- or in the Bakken Shale formation in Montana and North Dakota, which also contains natural gas -- should review the relevant documents (deeds, leases, etc.) to determine whether the uncertainty created by Butler affects any of their legal interests.

Paul M. Hauge is an Associate in the Gibbons Real Property & Environmental Department. John H. Klock, a Director in the Gibbons Real Property & Environmental Department, co-authored this post.

Gibbons to Exhibit at ICSC New York National Conference & Deal Making on Monday and Tuesday

Gibbons P.C. — Fri, 02 Dec 2011 12:13:00 -0500

The Gibbons Real Property & Environmental Department will once again exhibit at the International Council of Shopping Centers (ICSC) National Conference & Deal Making Idea Exchange at the Hilton New York on December 5-6.

The Department's booth will be in the same location as prior years, #490 in Americas Hall II. Stop by and meet with some of the Department's seven attorneys who will be attending. Show hours are Monday, December 5, from 9:00 am to 5:30 pm, and Tuesday, December 6, from 8:30 am to 4:00 pm.

We look forward to seeing you there!

Upcoming Changes to ADA May Impact Landlords

Ivette P. Alvarado — Wed, 30 Nov 2011 13:52:17 -0500

For the first time in 20 years, the regulations for accessible design under the Americans with Disabilities Act (ADA) have been revised. Compliance with the new ADA Standards for Accessible Design (ADA Standards) may be required by March 2012. These changes may have significant impact on existing and new leases.

The new regulations were enacted on July 23, 2010, and while businesses had the option to start complying with the new standards beginning in September of 2010, mandatory compliance is not required until March 15, 2012. The revamped rules include non-discrimination provisions that apply only to places of public accommodation, such as stores, restaurants, movie theatres and the like, and standards for accessible design that apply to all facilities. Compliance with the ADA Standards are likely to create the bigger concern for landlords.

Unlike building codes, compliance with the ADA Standards cannot be grandfathered. Although there are “safe harbors” for businesses and property owners of existing facilities, there are also exceptions to the safe harbors. Of particular concern for landlords is the removal of architectural barriers and which standards, 1991 or 2010, need to be met. Leases should be reviewed carefully to determine whether ADA compliance is the responsibility of the tenant or the landlord. There are tax incentives available for small businesses to assist in financing ADA compliance which could impact negotiations between landlord and tenant.

As the compliance deadline approaches, landlords or others undertaking company policy improvements, removal of architectural barriers, new construction or renovations in compliance with the ADA should carefully review their rights and obligations under existing leases and carefully draft provision in new leases to address which standard must be met and which party must meet them. For a more in-depth discussion of these issues, click here to read the article appearing in the New Jersey Law Journal.

Ivette P. Alvarado is an Associate in the Gibbons Real Property & Environmental Department.

Gibbons Real Property & Environmental Department Attains National and Metropolitan Rankings in 2012 Best Lawyers

Gibbons P.C. — Tue, 29 Nov 2011 12:46:11 -0500

Gibbons P.C. is proud to announce that several Real Property & Environmental Department (RPE) practice areas have achieved national and metropolitan rankings in the 2012 edition of Best Law Firms, published by U.S. News and Best Lawyers®. Best Lawyers® is the oldest and most respected peer-review publication in the legal profession. In addition, seven RPE attorneys have been individually selected for inclusion in six different categories.

The firm’s Land Use & Zoning Law practice was nationally ranked in the third tier in its category. In addition, the Department achieved first-tier rankings for the Newark, New Jersey metropolitan region in five categories:

Environmental Law
Land Use & Zoning Law
Litigation – Environmental
Natural Resources Law
Real Estate Law

Because Best Lawyers is based on an exhaustive peer-review survey in which more than 41,000 leading attorneys cast almost 3.9 million votes on the legal abilities of other lawyers in their practice areas, and because lawyers are not required or allowed to pay a fee to be listed, inclusion in Best Lawyers is considered a singular honor. Corporate Counsel has called Best Lawyers “the most respected referral list of attorneys in practice.”

The RPE attorneys who earned individual rankings in the most recent edition of Best Lawyers® rankings are:

Russell B. Bershad (Department Co-Chair)

Real Estate

Peter J. Carton

Real Estate

Shepard A. Federgreen

Real Estate

Irvin M. Freilich

Litigation – Environmental

Douglas J. Janacek (Department Co-Chair)

Land Use & Zoning

John H. Klock

Environmental
Litigation – Environmental

Susanne Peticolas

Environmental
Litigation – Environmental

Either/Or: Third Circuit Reads Rapanos as Establishing Two Alternative Tests for Federal Regulatory Jurisdiction Over Wetlands

John H. Klock — Mon, 07 Nov 2011 11:20:58 -0500

The Clean Water Act regulates the placement of fill into the “waters of the United States.” That term has come to include wetlands -- or at least some wetlands. The Supreme Court’s last attempt, in Rapanos v. United States, to clarify which wetlands fall within the statute’s coverage caused great confusion, as the five Justices who agreed on the judgment (a four-Justice plurality led by Justice Scalia, and Justice Kennedy, who concurred separately) generated two separate tests for jurisdiction. Which test should lower courts apply? In an opinion released on October 31, the Third Circuit said, “both” -- if the wetlands in question satisfy either Justice Scalia’s test or Justice Kennedy’s test, they fall within the statute’s reach.

Justice Scalia’s plurality opinion Rapanos, decided in 2006, took a “wet” view of “waters of the United States,” restricting that term to “relatively permanent” water bodies that formed “geographic features.” Wetlands, under this test, fall within the statute’s scope only if they have “a continuous surface connection” to such bodies of water. By contrast, Justice Kennedy’s “dry” test construed the statute to cover any wetlands that have a “significant nexus” with “waters of the United States, i.e., that the wetlands, alone or in combination with similar lands in the region, significantly affect the chemical, physical, and biological integrity of covered waters.

In United States v. Donovan, the Third Circuit affirmed a district court summary judgment against Delaware landowner David Donovan, who had been fined $250,000 and ordered to remove 0.771 acres of fill that he had placed on his property without obtaining a permit from the Army Corps of Engineers. Donovan argued that the multiple opinions in Rapanos failed to provide a governing legal standard for Clean Water Act jurisdiction, and that therefore pre-Rapanos case law should govern. The Third Circuit disagreed, and, adopting the position taken by the First Circuit and the Eighth Circuit, held that the Corps of Engineers could assert jurisdiction if the wetlands on Donovan’s property met either test set forth in Rapanos. The Court further held that the government’s evidence indisputably showed that Donovan’s wetlands satisfied the “significant nexus” test, and thus did not have to decide whether there was any genuine issue as to whether they satisfied the Rapanos plurality’s test.

Donovan continues an emerging circuit split over how to read Rapanos. Unlike the First, Eighth and (now) Third Circuits, the Seventh Circuit and the Eleventh Circuit have held that Justice Kennedy’s test alone supplies the governing legal standard, applying the Supreme Court’s 1997 decision in United States v. Marks, and concluding that it provides the narrowest grounds for the Supreme Court’s judgment in Rapanos. The Donovan Court and the circuit courts with which it agreed concluded that Marks is inapplicable because either of the two tests in Rapanos could be seen as the narrowest grounds for the judgment -- in some cases, one test would be satisfied but the other would not, and in other cases, the reverse could be true. No circuit court has adopted Justice Scalia’s “wet’ test as the sole governing standard.

John H. Klock is a Director in the Gibbons Real Property & Environmental Department. Paul M. Hauge, an Associate in the Gibbons Real Property & Environmental Department, co-authored this post.

NJDEP to Issue Draft Remedial Priority Scores for Contaminated Sites

Susanne Peticolas — Wed, 02 Nov 2011 18:31:09 -0500

In the next few weeks, responsible parties for some 12,000 known contaminated sites in New Jersey will be receiving a letter with a draft Remedial Priority Score (RPS) for their particular site compliments of the New Jersey Department of Environmental Protection (NJDEP). The NJDEP has not specified how the rankings will be used, although the RPS system has been described by the NJDEP as “a triage tool to sort sites for further consideration.”

Under the Site Remediation Reform Act (SRRA), N.J.S.A. 58:10C-1 et seq., passed in May 2009, the NJDEP is required to establish a ranking system for active remediation sites based on risk to public health, safety and the environment, the length of time the site has been undergoing cleanup, economic impact, and other relevant factors. To that end, NJDEP designed the Remedial Priority Scoring system which uses modeling assumptions on data gathered from a number of databases on the 12,000 known contaminated sites. Certain sites are excluded from the RPS process, including homeowner sites, sites undergoing operations and maintenance monitoring, and unknown source cases.

The computerized process attempts to provide relative rankings of active sites using selected data from the Geographic Information System (GIS) tools, multiple geographic databases and layers, the New Jersey Environmental Management System (NJEMS), the Known Contaminated Sites (KCS) report, and groundwater sampling data. Ongoing development of the model will eventually incorporate contaminated soil data and corresponding pathways. All sites will receive a tiered ranking between one and five, with tier five representing the highest contamination risk.

The RPS system attempts to minimize subjective human interpretations and anecdotal data, and thus, the final score is only as reliable as the data upon which the model is based. Score accuracy thus depends on the quality and quantity of the available data. Responsible parties can take action to improve a score by submitting additional information. For example, “closed” pathways between the source of contamination and receptors, institutional and engineering controls, and the absence of an impact to groundwater all act to reduce the cumulative risk of a site. Responsible parties will have sixty (60) days to challenge the ranking by submitting new information or an explanation of why the proposed ranking is inaccurate or fails to account for certain data.

While it is not clear what use NJDEP will make of these rankings, one can be sure that creative lawyers will be analyzing potential uses for them particularly in the area of toxic torts, environmental cost recovery cases and property transfers. Responsible parties should be on the look out for these draft RPS rank letters and analyze them carefully.

Susanne Peticolas is a Director in the Gibbons Real Property & Environmental Department. Brett S. Theisen, an Associate in the Gibbons Financial Restructuring & Creditors' Rights Department, assisted in the preparation of this post.

NJ Charges Forward with Electric Vehicle Network

Susanne Peticolas — Tue, 25 Oct 2011 08:10:54 -0500

On October 20, 2011, New Jersey Department of Environmental Protection Commissioner Bob Martin announced that New Jersey signed an agreement with other states and the District of Columbia to develop a Northeast Electric Vehicle Network and promote alternative transportation fuels. This announcement comes less than one month after New Jersey, along with the other members of the Transportation and Climate Initiative, received a federal grant of nearly $1 million to start planning a network of charging stations for electric vehicles (EVs). The goal of the Network is to bolster economic growth, maintain the region’s leadership in the clean energy economy and reduce the area’s dependence on oil and its emissions of greenhouse gases and other pollutants.

The Electric Vehicle Network is intended to enable EV drivers to be able to use their vehicles easily throughout the Northeast from northern New England to Washington, D.C. In addition, it hopes to attract private investment with consistent standards and regulations across the region. The project will develop a plan and guidance documents for the development of a network of charging stations. It is anticipated that EVs will reduce emissions from the transportation sector by shifting vehicles from petroleum to cleaner, more efficient electricity produced by renewable resources. In New Jersey, nearly 40% of the state’s greenhouse gas emissions come from the transportation sector.

In announcing New Jersey’s membership in the agreement, Commissioner Martin stated,

The Christie Administration is committed to improving New Jersey's air quality. Diversifying the types of vehicles that people in the Northeast and Mid-Atlantic drive to include more electric, hybrid and alternate-fuel vehicles is a very important part of improving our air quality. The Northeast Electric Vehicle Network will provide the planning needed to develop and spur the construction of infrastructure that will drive market demand for these vehicles. At the same time, this effort will lead to job creation and economic growth.

The Network dovetails with EV activities already underway in New Jersey. Several bills mandating EV charging stations in turnpike service stations and new shopping center developments are currently pending before the New Jersey Legislature. In addition, Avalon unveiled an EV charging station on August 5, 2011, touting it as the first charging station at the Jersey shore.

A recent study by Pike Research forecasts that the New Jersey-New York-Pennsylvania region will be among the top five metropolitan areas for electric vehicle purchases between 2011 and 2017. Consumers will not buy EVs unless they are confident that they can find a charging station away from home as easily as they can find a gas station. The EV Network is intended to meet that concern with the necessary infrastructure. To help future EV drivers find the infrastructure, Google added the locations of EV charging stations to their maps in March of 2011.

Susanne Peticolas is a Director in the Gibbons Real Property & Environmental Department.

Nicole E. Taplin Joins Gibbons Real Property & Environmental Department

Gibbons P.C. — Mon, 03 Oct 2011 15:22:37 -0500

Gibbons is pleased to announce that Nicole E. Taplin, Esq. has joined the firm as an Associate in the Gibbons Real Property & Environmental Department. Nicole concentrates her practice on commercial real estate transactions including acquisitions, dispositions, financings and leasing matters.

Nicole received her J.D. from the University of Miami School of Law and her B.A., in economics and philosophy, from Emory University. Admitted to practice in the States of New Jersey and Florida, she represents clients in various aspects of commercial real estate, including the negotiation, documentation and closing of the sale, purchase and development of vacant land, office buildings, apartment buildings and complex mixed-use projects. She also has significant experience representing owners and developers in the structuring, creation and operation of residential, commercial, mixed-use and hotel condominiums, homeowners’ associations and planned communities.

Prior to joining Gibbons, Nicole worked at Greenberg Traurig, LLP in the Real Estate Department of their Miami office for several years and later operated her own law firm focusing on real estate transactions.

“Beyond exceptional legal skills, Nicole comes to us with several years experience running her own law firm, which we believe will greatly inform her legal practice. Like our clients, she has been a hands-on business owner and operator which will provide highly relevant insight and perspective as she addresses the varied real estate needs of our clients,” states Russell B. Bershad, Co-Chair of the Gibbons Real Property & Environmental Department.

If the Creek Don't Rise -- Montana's Right to Rental for Riverbeds Used by Power Company's Dams Now Before the U.S. Supreme Court - PPL Montana, LLC v. State of Montana

John H. Klock — Fri, 23 Sep 2011 17:15:24 -0500

The U.S. Supreme Court will take up another Montana river case. The case involves a dispute between the State of Montana and a power company that purchased dams on several Montana rivers, which are licensed under the Federal Power Act by the Federal Energy Regulatory Commission. The last time Montana visited the U.S. Supreme Court, it lost to Wyoming in a dispute over water usage under the Yellowstone River Compact. This time Montana stands to gain $41,000,000 as fair market rental for its river beds granted on summary judgment and upheld by the Montana Supreme Court.

The power company, PPL Montana, LLC, is a wholesale electric generator (exempt from public utility regulation) who owns several federally licensed dams on various rivers in Montana. At issue is the ownership of over 500 miles of rivers and 5,600 acres of riverbed under dams and reservoirs associated with two federally licensed hydroelectric facilities on the upper Missouri, Madison and Clark Fork Rivers in Montana. Most of the dams were constructed between 1891 and 1930 and the projects were approved in 1949 and 1956 under the Federal Power Act. According to the Montana Supreme Court, the riverbeds belong to the State of Montana. When the original 13 states became sovereign, they gained absolute right to all navigable rivers and the lands beneath them for public use. All states joining the Union thereafter were put on equal footing with the original thirteen and so acquired the same rights. Thus Montana’s ownership depends upon whether the rivers were navigable when the Montana joined the union, i.e. 1889. Navigability basically means whether a log can float downstream. If so, it is commercially navigable. PPL had argued that under US Supreme Court precedent, the issue of navigability for title purposes required a section by section test where there were relevant non-navigable sections of the river at the time of statehood. The trial court had concluded that a section by section analysis was not necessary and that based on current conditions of recreational usage on parts of the rivers, the entire rivers were navigable in 1889.

By owning the dams, the Montana Supreme Court held that PPL uses the riverbeds both above and below the dam. PPL acquired the dams in l999 and is charged for the usage between 1999 and 2007 at the time of the trial. PPL filed a petition on two grounds: one is the State's determination of navigability was flawed and the other is that a license under the Federal Power Act preempts that State's right to seek compensation. Indeed, PPL noted that it currently pays the federal government over $500,000 in annual charges for the “use, occupancy and enjoyment” of federal lands, which includes the riverbeds held by the Montana Supreme Court to belong to the state.

Although at first glance, the dispute between a hydroelectric power company and a state may seem esoteric, the case could prove to have more extensive ramifications preemption and the interplay between federal and state authority.

John H. Klock is a Director in the Gibbons Real Property & Environmental Department.

Electric Vehicles Get a Jump Start in the Northeast

Susanne Peticolas — Thu, 22 Sep 2011 12:19:25 -0500

Today New Jersey Department of Environmental Protection Commissioner Bob Martin announced that New Jersey, along with the other members of the Transportation and Climate Initiative, have received a federal grant of nearly $1 million to start planning a network of charging stations for electric vehicles. The initiative is expected to spur job creation and the use of electric vehicles (EVs).

The grant was awarded by the U.S. Department of Energy to the Transportation and Climate Initiative which is comprised of 11 states in the Northeast and the District of Columbia. The Initiative was launched in June 2010 with the goal of reducing greenhouse gases in the transportation sector and helping build a clean energy economy. In New Jersey, nearly 40% of the state’s greenhouse gas emissions come from the transportation sector.

The proposed Electric Vehicle Network is intended to enable EV drivers to be able to use their vehicles easily throughout the Northeast from northern New England to Washington, D.C. In addition, it hopes to attract private investment with consistent standards and regulations across the region. The project will develop a plan and guidance documents for the development of a network of charging stations.

According to Commissioner Martin,

Improving air quality in New Jersey is a top priority of the Christie Administration. But in addition to helping us reduce auto emissions and improving the health of our residents, this new network will provide an economic boost to the State through the creation of new green jobs in research and production of electric cars and electric vehicle infrastructure.

The proposed network dovetails with EV activities already underway in New Jersey. Several bills mandating EV charging stations in turnpike service stations and new shopping center developments are currently pending before the New Jersey Legislature. In addition, Avalon unveiled an EV charging station on August 5, 2011, touting it as the first charging station at the Jersey shore.

These are important developments for the EV market. Consumers will not buy EVs unless they are confident that they can find a charging station away from home as easily as they can find a gas station. Anticipating that need, Google added the locations of EV charging stations to their maps in March, 2011.

* Photo courtesy of Paul Martin Eldridge - freedigitalphotos.net.

Susanne Peticolas is a Director in the Gibbons Real Property & Environmental Department.