Environmental UPDATE April 2008

Title:
Environmental UPDATE April 2008
Publication:
The April 2008 Riker Danzig Environmental UPDATE
Attorneys:
Practice:
DEP to Propose Major Reforms to Site Remediation Program in 2008

Tell Me More, Tell Me More: Proposed Public Notice Requirements

New Case Strikes at Use of Natural Resource Damages

Major Electric Utility Enters into Consent Decree to Reduce Air Emissions

Contract Language Determines Ability to Terminate Real Estate Contract Upon Discovery of Environmental Contamination

DEP Issues Fine For Delivery of Hazardous Substances to Unregistered Tank, Regardless of Ownership of Tank

Legislative Update

 

DEP to Propose Major Reforms to Site Remediation Program in 2008

The New Jersey Department of Environmental Protection (DEP) has embarked upon a process to significantly reform its Site Remediation Program in response to years of criticism by the regulated and environmental communities, an overwhelming backlog of open cases (now 20,000), and recent high-profile incidents, such as “Kiddie Kollege” where young children were exposed to mercury at a day care center located within a former manufacturing facility. What remains to be seen is whether DEP can effectively reform the program to provide better cleanups, without squelching brownfields redevelopment that is so important to the state. 2008 is likely to be a busy year for legislators, regulators, lobbyists and other interested parties.

In October 2007, DEP Commissioner Lisa Jackson responded to much of the criticism of the program during testimony before the Senate Environment Committee and proposed areas for reform that DEP would consider, including those requiring legislative, regulatory and policy changes. Senator Robert Smith, Chairman of the state Senate Environment Committee, asked DEP to convene a “Stakeholder” group to develop specific recommendations. DEP Assistant Commissioner, Irene Kropp, chaired the Stakeholder group, which includes representatives of business and industry, real estate developers, environmental and community groups, trade unions, municipalities and environmental professionals. From the discussion during a series of Stakeholder meetings, DEP drafted white papers on a variety of site remediation topics, which can be found at http://www.nj.gov/dep/srp/stakeholders/whitepapers/.

DEP’s goals for the Stakeholder review process recognized that the Site Remediation Program must be strengthened, but in a manner to avoid changes that would disrupt redevelopment of brownfields and to balance environmental protection and public health concerns with economic growth. According to Assistant Commissioner Kropp, DEP is now considering more than 50 different reform proposals, including:

At the time of this writing, the proposals are under review by Commissioner Jackson, with a further meeting of the Stakeholders and legislative hearings planned for this spring. Soil remediation standards proposed by DEP in 2007 will be adopted and published in June. Impact to groundwater standards for soil also proposed in the rule will not be adopted, but will be issued as guidance. Rules requiring greater notice of site remediation activities to the public also will be adopted soon.

These changes are likely to have a significant affect on the cleanup of contaminated sites and processing of these cases by DEP. Many of the issues addressed by DEP and the Stakeholders will find their way into proposed legislation, regulations and agency policy, as continuing pressure is applied to reform the state program. What is important is that reasonable voices prevail in the urge to reform, so that DEP program can ensure that the public is better protected from contaminated sites, without adopting needlessly stringent requirements, such as many proposed during implementation of the 1983 Environmental Cleanup Responsibility Act (ECRA). ECRA was reformed in 1993 precisely because the cleanup and redevelopment of formerly industrial “brownfields” was squelched by overly conservative cleanup standards and procedures.

Riker Danzig will continue to monitor these developments as they occur. Those involved with site remediation in New Jersey also would do well to stay informed and to offer comment to the Legislature and DEP as new proposals are unveiled. Steven Senior, Counsel in Riker Danzig’s Environmental Department, is a member of the Stakeholder group in his role as co-chairperson of the Technical Regulations Advisory Coalition (TRAC).

Tell Me More, Tell Me More: Proposed Public Notice Requirements

With the end of the public comment period behind it, the proposed amendments to the Oversight Rules and to the Technical Requirements for Site Remediation, specifically to N.J.A.C. 7:26C-10.4 and 7:26E-1.4, 1.11, 3.7, 4.1, 5.1, and 5.2, move New Jersey one step closer to a more elaborate system of public notice requirements. The existence of ambiguities in these proposed amendments should be cause for concern despite an acknowledgement of their existence in the announcement of the proposed amendments. This article will endeavor not to provide a detailed explanation of the proposed amendments themselves but rather to highlight some of the challenges they pose to the regulated community.

Summary of Proposed Rules

In response to the recommendations of the Public Participation Task Force and recent Amendments to the Brownfield and Contaminated Site Remediation Act at N.J.S.A. 58:10B-24.1 through 24.5, DEP has proposed a number of revisions to the Oversight Rules and the Technical Requirements for Site Remediation. Of particular interest are the revisions to N.J.A.C. 7:26E-1.4 regarding public notice. The purpose of these amendments is to increase dialogue between the public and persons responsible for conducting remediation, while balancing the competing parties’ desire for control over the remediation process.

The proposed amendments require the remediating party to notify the public at least two weeks prior to beginning field activities associated with a remedial investigation of a multi-phase remediation or beginning a single phase remediation. For sites where the remedial investigation or single phase remediation began prior to the effective date of the amendments, the responsible party must comply with the notice requirements within one year of the effective date of the amendments. For purposes of these amendments, the public includes (1) each owner of real property, as shown on the tax duplicate, and the tenants thereof, within 200 feet of the site boundary, (2) administrator of each school and child care facility within 200 feet of the site boundary, (3) the case manager, (4) DEP’s Office of Community Relations, (5) the municipal clerk of each municipality in which the site is located, and (6) the designated local health official. For sites for which a case manager has not yet been assigned, this information should be included in the remedial investigation report or remedial action report. Additional and/or different requirements exist for contamination that has migrated offsite.

There are two general forms of notice, signage and periodic notice letters. Each contains specific requirements for distribution, placement, verbiage and language choice. These requirements are ambiguous at best. If the contamination has migrated offsite, additional notice requirements must be complied with. These requirements continue in effect until the completion of the remediation at the site, as defined by the issuance of a No Further Action and Covenant Not to Sue letter.

Also included in these public notice amendments are requirements for identifying sensitive populations and resources.

Challenges and Obstacles

The proposed amended regulations pose many, often unnecessary, obstacles and challenges to the regulated community, each with its own associated cost.

The Proposed Rules, such as proposed new N.J.A.C. 7:26E-1.4(i)(3)(i) and -1.4(j)(1)(i), require notification to be provided to each owner of real property within 200 feet of the site boundary and to tenants of those properties. See 39 N.J.R. 2687 (August 6, 2007). The term site, however, is undefined. Further, in recognition of the difficulty in providing notice to such parties in high density housing areas, the preamble to the Proposed Rules suggest that notifications may be mailed to “Current Occupant.” 39 N.J.R. 2691.

In many high-density areas, property owners and managers and homeowners associations are in the best position to provide notice to tenants and other occupants. These parties already have established relationships and reliable means of communication. Requiring the remediating party to assemble tenant lists in these circumstances and to mail notification to each tenant or occupant is very burdensome. How are these parties to determine to whom to give notice in multi-tenanted residential apartment buildings? Although municipalities will provide a list of property owners within 200 feet of a property, they do not typically have tenant information. Requiring a mailing to all tenants or to “occupants” will give rise to significant amounts of undeliverable mail, and likely give rise to many instances of inadvertent non-compliance.

Many remedies involving natural remediation and use of engineering and institutional controls require no active remediation that would give rise to exposure to contaminants or any other impact to the public. These may include natural remediation of groundwater pursuant to a Classification Exception Area (“CEA”) or capping of site contaminants beneath existing buildings, parking lots or concrete pavement. The DEP is always responsible to review and ensure that these remedies are protective of public health and the environment. In many cases, these remediation techniques have no impact and give rise to no potential exposure to surrounding property owners and tenants. Where natural remediation and use of existing structures as engineering controls is approved, and contamination is not present beneath off-site businesses and residences, notification to off-site property owners and tenants should not be necessary.

For sites remediated naturally or through other passive means, notification is not necessary every two years while the remediation is on-going (irrespective of whether DEP has issued a No Further Action letter). For example, proposed new N.J.A.C. 7:26E-1.4(i)(2) requires additional notification letters be sent every two years, reflecting the current condition and progress of the remediation until a no further action letter and covenant not to sue are issued. See, e.g., 39 N.J.R. 2699. Where natural remediation, existing structures as engineering controls, or other passive remedies are employed, a requirement for additional notification to property owners and tenants every two years is unnecessary. Information regarding the monitoring and maintenance of these engineering and institutional controls is provided by DEP biennial certification process, which also includes notification to the municipality.

At many large sites that will be subject to the new rules, contamination has been delineated and is not located within 200 feet of the site boundary. Under these circumstances, off-site property owners and tenants are not affected by the contamination or remediation, and public notification to off-site property owners and tenants is not necessary.

Other aspects of the proposed regulations are simply too vague to implement properly. DEP does not provide a guidance for how to make a determination as to the need for non-English notification letters and/or signs. It is currently unclear how to go about determining the existence of a non-English speaking population. It is equally unclear how large a presence is necessary in any given additional language to require the separate notices.

Nor does DEP state what the person responsible for conducting the remediation’s responsibility is if a determination is made that the site is located in a municipality where an Environmental Justice Petition neighborhood has been designated. It is currently unclear if this must be designated on the sensitive populations and resources map or merely noted in the checklist.

While DEP addresses contaminated material brought on-site in amounts in excess of those needed to complete the remediation, the proposed amendments are silent on contaminated material in amounts necessary to satisfy the remediation obligation. This silence seems to imply that if the use of contaminated fill is approved by DEP, as long as the remediating party only brings onsite necessary quantities no notification is required. Confirmation of this point could help avoid later penalties.

Finally, the sequencing in the sensitive receptor section requires clarification. The timeframes established seem to require simultaneous actions that would be more practically accomplished in sequence.

New Case Strikes at Use of Natural Resource Damages

“Natural resource damages” (or “NRD”) are damages sought by the State or federal government for the value of natural resources, such as air or water, injured due to environmental contamination. In New Jersey, the purpose is to compensate the citizens of the State for the injury to natural resources and the inability to use the damaged resources. It typically is a large component of damages sought in environmental enforcement actions.

With groundwater contamination, NRD ostensibly has been calculated on the basis of four elements: the size of the area affected, the volume of water recharged in the area, the value of the resource damaged, and the duration of the damage. Though, in truth, the actual methodology used by the State has been somewhat unclear to the regulated community.

This system is increasingly being challenged by defendants assessed with NRD, and New Jersey courts have started examining the NRD assessment process. On August 24, 2007, the Superior Court of New Jersey issued an important decision relating to NRD associated with alleged petroleum groundwater contamination in Ewing Township. New Jersey Department of Environmental Protection v. ExxonMobil Corporation, Docket No. MER-L-2933-02 (N.J. Super. Ct. Law Div. Aug. 24, 2007). The case is a critical, if short term, revision to the State’s NRD process.

In this case, DEP brought an NRD claim. The Court granted summary judgment against DEP’s NRD claim on the basis that DEP failed to provide sufficient expert support to uphold the assumptions in the formula it used to calculate groundwater NRD because DEP had not provided adequate scientific support for the NRD formula as applied to the defendants. The court ruled that DEP had to present expert proof to support each element of the formula in order to sustain its case, either in a court case or as part of issuing a formal rule.

The Court concluded that while DEP had some discretion in establishing assumptions for administrative convenience, it could not use the formula without relying on scientific evidence in this case. It is important to understand, however, that the court did not determine that DEP’s NRD formula could never be used. Rather, it held that DEP did not provide adequate scientific support for the assumptions used in the formula given the absence of formal rule-making.

Although a long term solution would be for DEP to establish a NRD formula through the formal rule-making process to replace the informal formula that it previously relied on, early evidence suggests it will instead utilize stronger expert support during adjudications to bolster the informal formula. If so, NRD defendants may consider this case as a blueprint in litigation against DEP’s application of the NRD formula, although its precedential value of the decision has not yet been established.

Major Electric Utility Enters into Consent Decree to Reduce Air Emissions

On October 9, 2007, Ohio-based American Electric Power Service Corporation (AEP) entered into a record-breaking settlement with the U.S. Environmental Protection Agency in a Clean Air Act lawsuit brought by the federal government, eight northeastern states, including New Jersey, and several environmental advocacy groups. As part of the settlement, AEP has agreed to cut 813,000 tons of air pollutants annually from sixteen power plants in five states at an estimated cost of more than $4.6 billion, pay a $15 million penalty, and spend $60 million on environmental mitigation projects.

The settlement in United States v. Am. Elec. Power Serv. Corp., No. 05-0360 (N.D. Ohio, October 9, 2007) follows years of litigation concerning whether AEP violated the Clean Air Act New Source Review (NSR) Rules (42 U.S.C. §§ 7470-7492, 7501-7515) and certain states’ air implementation plans by failing to obtain necessary air permits for alleged major modifications made to certain AEP plants. The Clean Air Act and many state analogs require existing major stationary sources to obtain NSR permits when the sources are modified in a manner that causes increased yearly emissions rates. Failure to obtain NSR permits can result in substantial civil penalties. Many electric utilities have been subjected to NSR lawsuits brought by the federal government since 1999, including AEP.

Although the case was brought by the United States in 1999, the states of New York, New Jersey, Massachusetts, Vermont, Connecticut, New Hampshire, Maryland, and Rhode Island intervened shortly thereafter and filed their own complaints. Environmental groups such as Natural Resources Defense Council and United States Public Interest Research Group also intervened.

The October 9th Consent Decree requires, among other things, costly reductions of Sulfur Dioxide (SO2), Oxides of Nitrogen (NOx), and particulate matter (PM) well into the next decade, specifying control technologies and compliance deadlines for each emission unit at each subject power plant. These pollutants are wide-spread, especially in the Midwest and Northeast; SO2 contributes to acid rain while NOx and PM are precursors of smog and haze. Long-term exposure to all three pollutants in concentrations above established safe levels also increases the risks for respiratory and other health problems. New Jersey has taken an aggressive role in pursuing out-of-state upwind sources that reportedly contribute to compromised air quality in New Jersey. In-state sources, of course, also are subject to the state’s strict air policies and will face enforcement if the State, in its view, considers operations to be out of compliance with the Clean Air Act Rules.

Contract Language Determines Ability to Terminate Real Estate Contract Upon Discovery of Environmental Contamination

In two recent decisions, the Appellate Division has considered whether contracts to purchase land were properly terminated by the buyers due to environmental contamination issues. Clifton Savings Bank, S.L.A. v. Source 1 Capital Corp., Docket No. A-0757-06T3 (App. Div. November 2, 2007) and Kruh v. Ehrman, Docket No. A-0316-06T3 (App. Div. November 28, 2007).

In both cases, the Court looked closely at the language of the contract to determine whether the buyers’ refusal to close was appropriate. Where explicit that the contract provided an ability to terminate based upon environmental issues, the Court found in favor of the buyer. Where the contract language was not as clear, the Court found that it needed more facts to determine whether the failure to close was proper.

The Clifton Savings Bank case involved the purchase of commercial property for the location of a banking branch. The agreement of sale provided the purchaser the right to use its best efforts to conduct an environmental assessment within sixty days, and it permitted the purchaser to cancel the deal within one year if the property contained environmental contamination. A timely environmental assessment discovered contamination associated with the presence of underground storage tanks. As a result, purchaser cancelled the contract seven months after it had been signed. Seller refused to return the deposit and refuted purchaser’s cancellation since purchaser did not cancel within 60 days. The Court reviewed the explicit language of the contract and found for purchaser since it cancelled within one year. The Kruh case involved the sale of residential property and the discovery that the private potable well contained perchlorate, a contaminant for which there is currently no adopted formal state standard for acceptable levels, at levels that were below federal guidance. The agreement of sale in that transaction included a representation and warranty from the seller that there was no currently existing environmental condition that affects the property. While seller provided two rounds of well sampling results, purchaser did not terminate the contract until right before closing — citing the perchlorate contamination. Each party sued the other for a declaration of rights under the contract. The Court’s analysis focused on whether there was a material breach by seller of its representation and warranty that there was no existing environmental condition affecting the property. The Court found that the standard of materiality is imprecise and flexible and is to be applied based upon the particular facts in issue. Accordingly, since there was no explicit language in the contract allowing termination for environmental conditions, the Court found it could not determine whether there was a material breach of Seller’s representation without a trial.

DEP Issues Fine For Delivery of Hazardous Substances to Unregistered Tank, Regardless of Ownership of Tank

A recent Appellate Division case upheld a $10,000 fine and violation assessed against two parties for supplying and delivering fuel to a regulated underground storage tank (“UST”) whose registration had expired, even though they did not own the tank or know about the expiration of its registration. N.J. Dep’t of Envtl. Prot. v. R.A. Reiff, Inc., No. A-4262-06T3, 2007 WL 3051426 (October 22, 2007).

The R.A. Reiff case was based upon an inspection in 2004 of a retail gasoline station by DEP. During the inspection, DEP discovered that gasoline had been delivered to the station earlier that week. DEP thereafter assessed a fine against the parties that supplied the gasoline for violating N.J.A.C. 7:14B-5.9(b), which authorizes fines against any party that introduces hazardous substances into a regulated UST that is not registered with DEP.

The Office of Administrative Law upheld the violation. The Appellate Division affirmed this decision, holding that both parties are subject to the regulation even though they did not own or operate the tanks because: (a) the regulation expressly applies to all parties, not just tank owners and operators; and (b) the regulatory history showed that DEP “did not want others to be supplying owners and operators of unregistered underground storage tanks with hazardous substances.”

Companies that supply or deliver petroleum products or other hazardous substances to regulated USTs risk monetary penalties of up to $20,000 (for a first violation) if the tanks are not properly registered with DEP. Registration status can be verified by calling DEP’s Bureau of Underground Storage Tanks’ Tank Registration Department, at (609) 633-1464, or by checking the Active Facilities with Compliant Tanks Report, on DEP’s website: http://datamine2.state.nj.us/DEP_OPRA/OpraMain/categories?category=Underground+S torage+Tanks

Legislative Update

Signed into Law

The Governor also signed legislation related to funding sources and allocation for environmental projects.

Introduced in the Assembly

 

Introduced in the Senate