Environmental Alert August 2014

Environmental Alert August 2014

In Magic Petroleum Corporation v. Exxon Mobil Corporation, et al., A-46-12 (N.J. 2014), the Supreme Court of New Jersey held that a responsible party may seek contribution in court for costs incurred to remediate a site without first receiving approval of a cleanup plan from the New Jersey Department of Environmental Protection (“NJDEP”).

In Magic Petroleum, Exxon argued that Magic Petroleum must defer filing its contribution claim for cleanup costs until after the NJDEP had approved the final remediation plan for Magic Petroleum’s site.  Both the trial and appellate courts agreed, finding that the Department had primary jurisdiction to define the contamination and formulate the proper remediation plan, which, according to these decisions, must be approved before liability among responsible parties could be sought.  Last week, the New Jersey Supreme Court rejected the lower courts’ analyses and held that a responsible party does not have to await approval of the Department before it can initiate a contribution action under the Spill Act.

According to the Court, forcing a party to remediate a site, but requiring that it await NJDEP approval of the remediation plan before it can bring a contribution action, creates a disincentive to clean up the site when other parties share responsibility for the contamination.  The Court reasoned there is no need for NJDEP approval prior to asserting a contribution claim because courts are capable of allocating liability percentages based upon equitable factors, regardless of whether the final cleanup costs for the site are known and have been approved.  In fact, the Spill Act directs plaintiffs to seek contribution relief from a court, not the Department.  (It should also be noted that the Court suggested such Spill Act contribution claims are limited to several, rather than joint and several, liability, an issue that has sparked lively commentary for years among the bar.)

The Magic Petroleum opinion also addresses the related question of whether, because of its expertise, the NJDEP, rather than the courts, should have primary jurisdiction over the scope and nature of a party’s liability under the Spill Act.  The Court determined that assigning liability in a contribution action does not require the expertise of the Department.  In fact, the NJDEP itself advised Magic Petroleum that determination of the percentages of liability among the responsible parties is best resolved by the courts.  Moreover, no forum has been created within the NJDEP to handle such claims.

Unfortunately, the Court failed to interpret the Spill Act language that limits recoverable costs to those receiving written approval from the NJDEP in light of the recently-enacted Licensed Site Remediation Professional (“LSRP”) program.  Under this program, a responsible party retains an LSRP to design and conduct remedial work at a site pursuant to the relevant regulations and, when the work is complete, to issue a Remedial Action Outcome (“RAO”).  Now that the NJDEP no longer supervises and approves work at contaminated sites, it is unclear how it will be in a position to provide “written approval” of costs.  While the most sensible approach to this dilemma would be to substitute the judgment of the LSRP for that of the Department – that once an LSRP certifies what remedial work is necessary, costs incurred in conducting such work should be considered “approved” under the Spill Act – the Court remained silent on this point.

The Court in Magic Petroleum answered the question as to when a party may bring a Spill Act contribution claim, but did not address what costs ultimately may be recovered by pursuing such a claim.  The resolution of that issue will await another day.