Environmental UPDATE May 2007

October 30, 2016

The Grace Period Rules: Practical Implications

Victory For Industry Groups As $5 Billion Natural Resource Damages Claim Is Rejected
Third Circuit Finds No Contribution Remedy For Certain Potentially Responsible Parties
Eighth Circuit Interprets AVIALL; Now To Be Decided By U.S. Supreme Court

What's New at EPA & NJDEP

NJDEP

New Legislation

Legislative Action

The Grace Period Rules: Practical Implications

Through its adoption of amendments to Subchapter 10 of the Oversight of the Remediation of Contaminated Sites Rule, N.J.A.C. 7:26C (“Oversight Rule”), NJDEP has established a new penalty scheme for violations under various Departmental remediation programs. These amendments are commonly referred to as “the Grace Period Rules.” See NJDEP SRWM, Grace Period Rule Guidance at http://www.state.nj.us/dep/srp/guidance/graceperiod.

The Grace Period Rules apply to certain requirements of the Underground Storage Tank Rules, N.J.A.C. 7:14B, the Industrial Site Recovery Act Rules, N.J.A.C. 7:26B (“ISRA”), the Oversight Rule, N.J.A.C. 7:26C, and the Technical Requirements for Site Remediation Rules, N.J.A.C. 7:26E (the “Technical Rules”). They classify violations of the above-mentioned rules as either “minor” or “non-minor” in accordance with the Grace Period Law, N.J.S.A. 13:1D-125 et seq. This classification is significant as it governs NJDEP’s required response to the violation. For minor violations, a grace period will apply, giving a party a period of time to come into compliance prior to implementation of a penalty. For non-minor violations, assessment of a penalty is automatic. The regulations include a table at N.J.A.C. 7:26C-10.4(c) setting forth (1) each potential violation by citation to applicable regulation; (2) its minor or non-minor classification; and (3) the applicable penalty amount. One notable exception is that the Grace Period Rules do not apply to cleanups conducted pursuant to a Memorandum of Agreement (“MOA”) under the state’s Voluntary Cleanup Program, but the concept has been borrowed in the MOA termination process through the establishment of a time period for the correction of deficiencies prior to MOA termination consistent with the grace period applicable for non-MOA cases.

Adoption of the Grace Period Rules has led to a number of other policy and procedural changes that is affecting parties responsible for conducting remediations. These changes include: (1) issuance of a Notice of Deficiency (“NOD”) in response to a deficient site remediation-related submittal or activity; (2) change in point of contact from the person designated by the responsible party to the responsible party itself; (3) standardization of timeframes for correction of deficiencies; (4) extension request procedures; (5) elimination of the Rejectable Document Policy; (6) clarification of the role of the Technical Review Panel; (7) adoption of new rules for variance requests; and (8) the elimination of conditional approvals.

With respect to the first change noted above, NJDEP now issues a NOD in lieu of a comment or deficiency letter when the Department finds a submission to be deficient. Submissions that would have been rejected under the Policy on Document Rejection also are now subject to a NOD. Rather than being relayed to a designated agent, consultant, or attorney, the NOD, as well as all other NJDEP correspondence related to a party’s failure to comply with a rule or oversight document is being transmitted directly to the obligated party. The responsible party then has the opportunity to correct the deficiency prior to imposition of a penalty.

Extension requests must be received at least seven (7) days prior to the expiration of the compliance date in the NOD or approved applicable schedule. Such requests must be in writing and must specify the corrective action to which the request applies, the amount of additional time needed and the reason for the extension. An extension to a deadline in an NOD must comply with specific procedures identified in N.J.A.C. 7:26C-10.3(d)4, and only one extension, up to 90 days, is permissible.

Failure to address all of the deficiencies in the NOD will result in the issuance of a Notice of Violation (“NOV”), or Notice of Intent to Terminate (“NOIT”) in the case of an MOA. Failure to comply with the NOV or NOIT will result in a penalty or MOA termination. Since the violations associated with the Grace Period Rules carry significant penalties, adherence to NJDEP regulations now is more important than ever. While it appears that case managers have some flexibility with respect to compliance during the NOD stage, how this judgment will be exercised is not yet clear and may vary based upon the case manager.

To note, the Technical Review Panel is not available to review issues subject to an enforcement action, thus, it may not review issues included in a NOV. Issues included in a NOD may be reviewed, but only if the request for review is received by the Department prior to the compliance date. In addition to the adoption of the Grace Period Rules and amendments to the regulations governing MOAs, NJDEP adopted amendments to the following laws for the purpose of consistency and conformity with the Grace Period Law and Rules:

• The Standard ISRA Remediation Agreement at N.J.S.A. 7:26B, Appendix A;

• The Standard Administrative Consent Order at N.J.A.C. 7:26C, Appendix A;

• The Underground Storage Tank Rules at N.J.A.C. 7:14B-1.8 and 12.1; and

• The ISRA rules at N.J.A.C. 7:26B-1 et seq.

In the Courts

Victory For Industry Groups As $5 Billion Natural Resource Damages Claim Is Rejected

The Tenth Circuit Court of Appeals held in New Mexico v. General Electric (Nos. CIV-99-1118, 1254) (10th Cir., Oct. 31, 2006) that the State of New Mexico could not seek unrestricted monetary damages for injuries to natural resources under state law beyond than restoration of a contaminated resource. This case involved groundwater contamination at the South Valley Superfund Site in Albuquerque, New Mexico. In 1999, the New Mexico Attorney General filed natural resource damage (NRD) lawsuits in federal and state courts seeking $5 billion in damages. The State alleged claims for money damages under CERCLA as well as various statutory and common law claims for NRD, including trespass, public nuisance and negligence. The state lawsuit subsequently was removed to federal court and consolidated with the other federal case.

The federal court rejected New Mexico’s claim it was entitled to interim damages for the loss of the right to appropriate groundwater for beneficial use from the time of release until restoration. The State failed to prove that groundwater would have been available for appropriation in the absence of contamination, or that beneficial use of the groundwater was lost due to the contamination. The court also rejected the State’s market value replacement cost and loss-of-use damage theories in favor of a “cost of restoration” theory. Its reasoning was consistent with CERCLA’s remedial objectives to repair and restore contaminated natural resources.

The court also ruled on several other issues. For example, the court held that the State could not maintain a trespass claim, which typically is reserved for private landowners; the public’s interest in groundwater use does not qualify as an interest that would suggest a trespass allegation. The court also held that the State could pursue a claim of nuisance and negligence for punitive relief and damages, respectively.

This case is noteworthy because loss-of-use is an NRD issue on appeal in the New Jersey State court system, as discussed in the September 2006 issue of Environmental Update. See New Jersey Department of Environmental Protection and Administrator, Spill Compensation Fund v. Exxon Mobil Corporation, Docket No. UNN-L-3026-04 (May 26, 2006).

Third Circuit Finds No Contribution Remedy For Certain Potentially Responsible Parties

In E.I. DuPont De Nemours and Co. v. United States, No. 04-2096, 2006 WL 2474339 (3rd Cir., August 29, 2006), the Third Circuit Court of Appeals affirmed a district court's decision that Section 107 of CERCLA does not provide a cause of action for a responsible party wishing to obtain contribution from other potentially responsible parties (“PRP”). This decision contrasts with the Eight Circuit’s decision of Atlantic Research Corp. v. United States, No. 05-3152 (9th Cir., Aug. 11, 2006), discussed elsewhere in this issue of Environmental Update.

DuPont brought an action for contribution against the United States in 1997 after having voluntarily remediated certain sites. DuPont did not undertake its cleanup pursuant to a preexisting CERCLA Section 106 or 107 action or a Section 113(f)(3) settlement, however. The federal district court ruled that since DuPont engaged in a voluntary clean up instead of being required to cleanup pursuant to a Section 106 or 107 action or a Section 113(f)(3) settlement, the company could not seek contribution from the United States. The case was appealed.

The Third Circuit engaged in a rather protracted discussion of CERCLA's legislative history, statutory purpose and public policy, and made a valiant effort to reconcile its case precedent with the more recent U.S. Supreme Court ruling in Cooper Industries, Inc. v. Aviall Services Inc., 543 U.S. 157 (2004) that Section 113 does not authorize a contribution action unless it is brought "during or following" a Section 106 or 107(a) civil action. The court noted that although in its earlier cases it allowed for the possibility of a contribution action under Section 113(f)(1) without a preexisting civil action or settlement (see Matter of Reading Co., 115 F.3d 1111 (3d Cir. 1997) and New Castle County v. Halliburton NUS Corp.Cooper such an action cannot stand when a PRP voluntary cleans up a site. In other words, a PRP must act pursuant to a consent order or other government directive, or pursuant to a pending civil action. Following the decision in Cooper, the court held that no contribution action can be maintained by a PRP unless one of these factors is present.

The court justified its position by asserting that although CERCLA is "comprehensive" and was created to facilitate rapid cleanup of contaminated sites, the statute's real meaning was to have PRPs follow some type of directive rather than clean up sites themselves. The court stated that there is a lot of room for error when clean up is performed without the sanction and direction of the EPA (in essence, that actions by private parties taken outside of consent orders may be misleading to the public in that EPA cannot assure the public that the voluntary actions are appropriate, adequate, consistent with the NCP, and are being fully implemented). The court also noted that CERCLA was really focused on facilitating settlement(s) among the parties, and that clean ups would be completed quicker if settlements could be accomplished in an efficient and equitable manner.

Significantly, the court also held that Section 107(a) does not offer PRPs a contribution remedy. According to the court, the 1986 SARA amendments to CERCLA make it clear that Section 107(a) is reserved for the government, private parties, or Indian tribes. Essentially, Section 113 was reserved for PRPs to seek contribution, not 107(a). Hence, a PRP cannot avail itself of any right for contribution under Section 107(a).

This latter issue is being argued before the United States Supreme Court in April in United States v. Atlantic Research Corp., No. 06-562.

Eighth Circuit Interprets AVIALL; Now To Be Decided By U.S. Supreme Court

As discussed in the September 2005 issue of Environmental Update, the United States Supreme Court opinion of Cooper Industries, Inc. v. Aviall Services, Inc., 125 S.Ct. 577 (2004) (“Aviall”) significantly limited the circumstances under which a private party may sue for contribution under the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”). In short, Aviall’s holding provides that a private party may obtain contribution from other responsible parties under Section 113 of CERCLA only where that private party has settled its liability with the government under Sections 106 or 107(a) of CERCLA. Thus, generally speaking, if the government has not brought an action under CERCLA Sections 106 or 107 against a responsible private party, that private party cannot bring a contribution claim under Section 113. The Court refrained, however, from deciding whether a party could bring a claim for contribution pursuant to Section 107 if the party had not settled liability with the government.

The Eighth Circuit addressed this question in Atlantic Research Corp. v. United States, 459 F.3d 827 (9th Cir., Aug. 11, 2006). The court ruled that a complete cost recovery action or an implied right of contribution under Section 107 is available to a private party that voluntarily undertakes a cleanup of hazardous substances where it has neither been sued nor settled under Sections 106 or 107.

In the Atlantic Research opinion, the Eighth Circuit overturned precedent that an action brought pursuant to Section 113 was the exclusive method to obtain contribution from other parties. Based on Aviall, the court concluded that Sections 107 and 113 of CERCLA granted distinct rights of contribution. A right of contribution under Section 113 is available where the government has brought an action under Sections 106 or 107. In the absence of government enforcement, a right of contribution under Section 107 nonetheless is available. Moreover, the court concluded that Section 107 allows a party to obtain 100% cost recovery. Thus, the Eighth Circuit has articulated a fairly broad rule for contribution actions on the heels of Aviall. The Third Circuit has held the opposite position in E.I. DuPont de Nemours and Co. v. United States, 2006 WL 2474339 (3rd Cir., Aug. 29, 2006), which is controlling in New Jersey. See the article contained in this issue regarding the DuPont case.

The United States Supreme Court recently granted certiorari and will hear the appeal of the Eight Circuit’s decision in April 2007. The government petitioned for certiorari, and supports the view that Section 107 does not afford PRPs a contribution remedy.

What's New at EPA

EPA added five sites nationwide to the National Priority List (“NPL”) in Fall 2006 and is proposing to add another six, bringing the total number of NPL sites to 1,246. One of the five sites added was the Ringwood Mines/Landfill site in Ringwood, New Jersey. The site was added to the NPL on September 1, 1983 and was deleted on November 2, 1994. New contamination, however, continues to be discovered and, therefore, the site was restored to the NPL.
EPA has finalized plans for the cleanup of six Superfund sites in New Jersey. The site include Iceland Coin Laundry in Cumberland County, Pohatcong Valley Groundwater Contamination in Warren County, Rockaway Borough Wellfield in Morris County, U.S. Radium in Essex County, Puchack Well Field in Camden County, and Monitor Devices/Intercircuits in Monmouth County.
EPA awarded $2.1 million in grants to New Jersey in Fall 2006 for efforts relating to the reduction of diesel engine emissions. According to NJDEP Commissioner Lisa Jackson, “[d]iesel pollution is a serious threat to public health affecting children and adults.” Four programs to be funded with the grant include (1) Truckers’ Challenge: On-board Idle Reduction Devises; (2) Idle-Free Corridor: NJ Turnpike Truck Stop Electrification Project; (3) Diesel Risk Reduction Project: Analysis of In-Cabin School Bus Emissions; and (4) Idling Minimization Outreach Project. The first two programs are aimed at reducing idling from the trucking industry and saving on fuel costs through the purchase of auxiliary power units or bunk heaters and electrifying parking spaces at Turnpike rest stops. The third analyzes the effectiveness of school bus retrofits for fine particle emissions. The fourth focuses on idling transit buses and personal cars.