Environmental UPDATE May 2007
|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 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).
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).
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
NJDEP announced the readoption of rules to protect the designated Preservation Area of the Highlands region. Of the numerous environmental protections created by the rules, the main priority is to protect the drinking water resources that supply water to sixty-four percent of New Jersey’s residents. The readopted rules were published and became effective on December 4, 2006.
- NJDEP issued its Priorities and Action Plan in January 2007 setting forth the policy objectives of the agency for this year. Notable initiatives include improving air quality by reducing ozone precursors and fine particulates while further developing programs such as the Regional Greenhouse Gas Initiative, and addressing the State’s waters by completing the statewide Water Supply Master Plan and improving surface and groundwater quality.
Municipalities in the Pinelands area now can utilize a Model Stormwater Control Ordinance in order to reconcile the stormwater requirements of the Pinelands Commission with those of NJDEP. The Model Ordinance is designed to assist municipalities in developing municipal stormwater control ordinances and incorporating design and performance standards of the Stormwater Management rules into municipal stormwater management plans. It is a relatively complete Model Ordinance, with requirements for site development stormwater plans, performance standards, and methodologies for runoff and recharge calculations. Two versions of the Model Ordinance can be accessed from the NJDEP website at (http://www.state.nj.us/dep/stormwater/pinelands.htm).
NJDEP is considering dramatic reform proposals for NJDEP’s Site Remediation Program. The urge to reform arises from several high-profile incidents in 2006 involving site remediation projects, continuing resource constraints and the backlog of cases at the agency. As well, it arises from the view held by some at the Department and in the environmental community that the 1993 Brownfields Act shifted too much control of remedial decisions to responsible parties and site owners.
Proposed reforms include: (1) development of a new ranking and tracking system for contaminated sites; (2) more aggressive enforcement of site remediation requirements through the Grace Period Rules; (3) enhanced public notice and participation in site remediation cases; (4) allowing NJDEP to select the remedy at contaminated sites under certain circumstances; (5) development of acute soil remediation standards; (6) expanded use of remediation funding sources for engineering and institutional controls and/or by volunteers; (7) and a third-party licensed site professional program modeled after a similar program in Massachusetts to remediate lower-risk sites. Legislation, regulation and guidance also have been proposed to require closer assessment of sites where child care centers and schools are located.
Certain of these reforms already are underway, including more aggressive enforcement and use of the grace period rules and enhanced public notification to municipalities on remediation projects. The reforms under discussion reflect a dramatic rethinking of the way that sites are remediated in New Jersey and, in several respects, roll back some of the advances in site remediation arising from the Brownfields Act. Opportunities to participate and provide input to the Department before these proposals become policy likely will be provided through public workshops, legislative hearings, and interested party review and public comments to new rule proposals and guidance issued by NJDEP.
NJDEP recently adopted new standards for surface water quality, now set forth at N.J.A.C. 7:9B. The newly adopted rules establish more stringent standards for more than one hundred pollutants, designed by NJDEP to protect human health and a broad range of aquatic species. The agency also designated five new streams as Category 1 (“C1”) based on their trout production status. C1 water bodies are given more stringent protection, thereby limiting development along these water bodies and discharges that give rise to measurable deterioration in existing water quality. Additional standards were adopted for temperature, dissolved oxygen, ammonia and total suspended solids, as well as new requirements for the monitoring of mercury and polychlorinated biphenyls (PCBs). Permits issued pursuant to the New Jersey Pollutant Discharge Elimination System program (NJPDES) will be revised to ensure compliance with the new standards.
Discovery of mercury contamination at a New Jersey child care center last summer has given rise to new environmental requirements for applicants for new child care licenses, as well as for those that are renewing their licenses. Applicants now must certify that prior uses of the facility do not give rise to an environmental concern. If the child care center building or property has a history of environmental concerns or contamination, the applicant must certify that the building now meets requirements for soil and indoor air quality. In all cases, applicants must certify that the facility provides safe drinking water and is in compliance with regulations regarding lead, radon, and asbestos.
Effective January 1, 2007, the new rule prevents the Office of Licenses from issuing initial or renewal licenses for day care facilities located in the same building as a dry cleaner or nail salon unless air quality sampling demonstrates no impact. By June 1, 2007, a “No Further Action” letter is required from NJDEP in order to obtain or renew a day care license.
The new federal All Appropriate Inquiry (“AAI”) Rule at 40 C.F.R. 312 became effective on November 1, 2006, setting forth new requirements for satisfying innocent landowner and bona fide purchaser protections under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"). This federal rule has been supplemented by the ASTM E1527-05 standard, developed to aid environmental professionals in conducting due diligence in accordance with the new rules.
1) Professional qualifications/opinions. There are stricter qualifications for "environmental professionals," defined as persons possessing sufficient specific education, training, and experience necessary to exercise professional judgment to develop opinions and conclusions regarding conditions indicative of releases or threatened releases on, at, in, or to a property. The environmental professional must have a state or tribal issued certification or license and three years of relevant full-time work experience, or a Baccalaureate degree or higher in science or engineering and five years of relevant full-time work experience, ten years of relevant full-time work experience in order to perform due diligence work. In addition, these professionals are required to formally certify, in writing, that "all appropriate inquiries" were performed.
2) Interview criteria. The AAI Rule requires more rigorous interviews with both past and present owners and operators, including persons who are/were most likely to have handled or have been responsible for the treatment, handling, and disposal of hazardous substances. In addition, neighboring property owners and occupants must be interviewed if the property is abandoned.
3) Data gaps. There are strict disclosure duties for any identified gaps in information. This means that consultants will be required to identify data gaps in their final report that relate to unknown conditions on the property that cannot be easily ascertained. The gaps need to be analyzed and their significance discussed in detail.
4) Review of historical sources. A historical investigation is be performed on the property, including the review of local, state, federal or even tribal records/documents/information pertaining to prior uses of the property.
5) Searches for environmental cleanup liens. Reasonably ascertainable recorded land title records and lien records that are filed under federal, tribal, state or local law are to be reviewed to identify possible environmental liens affecting the property.
6) Review of government records. This includes a requirement to review, if applicable, the following: CERCLA NFRAP (No Further Remedial Action Planned) sites up to a 1/2 mile, institutional control property registries, and state and tribal brownfields and/or voluntary cleanup databases up to 1/2 mile.
7) Visual inspection of facility/adjoining properties. This is required to the extent that current uses of adjoining properties are visually and/or physically observable on the site. Environmental professionals also are required to visually inspect neighboring properties from the adjoining property boundary and accessible rights of way.
8) Specialized knowledge. The rule requires that a due diligence inquiry take into account several subjective components of a prospective purchaser's knowledge, including knowledge about the property, knowledge about adjoining properties or the knowledge of any disparities between the value of the property and the purchase price.