Environmental Update

Environmental Update
The July 2013 Riker Danzig Environmental Update

NJDEP Policy Statement - Completion of Remedial Investigation by May 2014

Court Finds Carrier Cannot Bring CERCLA Claims

Court Orders Reconsideration of NJDEP’s Denial of an Innocent Party Grant Because Decision Based Upon Insufficient Record

New Jersey Adopts Advisory FEMA Flood Insurance Rate Maps; Final Maps Expected Later This Year

New Jersey Appellate Division Upholds NJDEP "Waiver Rule" But Rejects Guidance

New Jersey Supreme Court Limits Warrantless NJDEP Searches of Residential Property Under the Freshwater Wetlands Protection Act

Regulatory Update

Legislative Update

NJDEP Policy Statement - Completion of Remedial Investigation by May 2014

The Site Remediation Reform Act ("SRRA") of 2009 established May 7, 2014 as the mandatory deadline for completion of the remedial investigation for all sites that triggered remediation requirements prior to May 7, 1999. Failure to meet this deadline will result in direct oversight of the remediation by the New Jersey Department of Environmental Protection ("NJDEP"). To help clarify what this requirement entails, the NJDEP recently published on its website its June 2013 New Jersey Department of Environmental Protection Policy Statement: Interpretation of SRRA Requirement to Complete the Remedial Investigation by May 2014 ("Policy Statement"). This Policy Statement has also accompanied recent compliance assistance alerts that the NJDEP has begun sending to parties it believes are subject to the May 7, 2014 deadline. Specifically, the purpose of this Policy Statement is to clarify what the deadline applies to, define the phrases "entire contaminated site," "complete remedial investigation," and "nature and extent of contamination," and to address the need to attain remediation standards prior to issuance of a Response Action Outcome ("RAO").

The Policy Statement states that the May 7, 2014 deadline for remedial investigation completion applies to all discharges or contaminated areas of concern at a site that were, or should have been (due to obligations to investigate arising under the Industrial Site Recovery Act Rules, Underground Storage of Hazardous Substances Rules, an Administrative or Court Order, Remediation Agreement or Spill Act Directive), identified on or before May 7, 1999.

For purposes of the May 7, 2014 deadline, "entire contaminated site" includes those discharges or contaminated areas of concern identified or that should have been identified on or before May 7, 1999, on-site or migrating off-site, in soil, ground water, surface water, sediment and air, that contain one or more contaminants that exceed any remediation criteria or screening level. Thus, for example, addressing only one media without addressing other affected media or addressing the source but not contaminant migration would not constitute completing the remedial investigation.

For purposes of the May 7, 2014 deadline, "complete remedial investigation" means completion of an SRRA compliant "remedial investigation" resulting in a determination of the on- and off-site nature and extent of the discharge, the impacts and potential impacts of the discharge on receptors, the need for remedial action and collection of information to support evaluation of remedial alternatives. These determinations are to be presented to the NJDEP in the remedial investigation report and updated receptor evaluation. The Policy Statement specifically notes that the professional judgment of the Licensed Site Remediation Professional ("LSRP") governs the requisite determinations.

For purposes of the May 7, 2014 deadline, "nature and extent of contamination" is synonymous with delineation to the applicable standard at the time of submission of the remedial investigation report. The Policy Statement emphasizes that "clean zone" samples are not required to complete the remedial investigation; however, they are required prior to issuance of an RAO. The LSRP may utilize his or her professional judgment, regulations, guidance, data modeling, or other means to determine the nature and extent of the contamination; the lines of evidence used to make the determinations should be documented by the LSRP in the remedial investigation report.

Although this Policy Statement does appear to lessen the potential burden of the May 7, 2014 deadline, it is still imperative that parties take the steps necessary to meet the established criteria to avoid direct oversight of remediation projects.

Court Finds Carrier Cannot Bring CERCLA Claims

In Chubb Custom Insurance Company v. Space Systems/Loral, et al., 710 F.3d 946 (9th Cir. 2013), the Ninth Circuit held that an insurance company cannot seek reimbursement of payments to a policyholder from responsible parties under the Comprehensive Environmental, Response, Compensation and Liability Act ("CERCLA") unless the policyholder first pursues the claim.

Chubb Custom Insurance Company ("Chubb") issued an Environmental Site Liability Policy to Taube-Koret Campus for Jewish Life ("Taube-Koret") covering a site in Palo Alto, California. Taube-Koret remediated contamination found at the site allegedly resulting from the historic operations of Ford Aerospace & Communications Corporation ("Ford Aerospace"), and, subsequently, filed a claim with Chubb. Chubb settled the claim and then filed suit against Space Systems/Loral, Inc., a successor of Ford, and other potentially responsible parties under CERCLA Section 112(c), subrogation, and Section 107(a), cost recovery, for the amount paid to Taube-Koret.

The district court dismissed Chubb’s complaint with prejudice for failure to state a claim. Chubb filed an appeal to the Ninth Circuit and the Circuit Court upheld the dismissal. The Court stated that although Section 112(c) of CERCLA allows a party to assert a subrogation claim after paying compensation to a "claimant," Taube-Koret was not a "claimant." The Court explained that a "claimant" under CERCLA is anyone who presents a claim to the Superfund or to a potentially responsible party for payment. Since Taube-Koret never presented a claim to any potentially responsible party, it was not a "claimant" under CERCLA, negating Chubb’s Section 112 claim.

The consequence of the Ninth Circuit decision is that a carrier, after indemnifying its insured, may not have claims against potentially responsible parties under CERCLA unless the insured asserted such claims prior to indemnification. This decision will most likely result in insurance companies requiring an insured to pursue other potentially responsible parties prior to receiving indemnification under their policy.

Court Orders Reconsideration of NJDEP’s Denial of an Innocent Party Grant Because Decision Based Upon Insufficient Record

Recently, the Appellate Division ordered the NJDEP to reconsider its denial of an application for a Hazardous Discharge Site Remediation Fund Innocent Party Grant that had been filed pursuant to the Brownfield and Contaminated Site Remediation Act ("Brownfield Act"). I/M/O Hazardous Discharge Site Remediation Fund Innocent Party Grant Application Cliflake Associates, LLC., Docket No. A-4685-11T4 (App. Div., May 22, 2013). To be eligible for an innocent party grant the property owner must, among other things, establish that it "acquired the property prior to December 31, 1983." In this case, Cliflake Associates, LP (the "LP") acquired an industrial property in June 1972. In 1999, the partners of the LP formed Cliflake LLC (the "LLC"), which acquired the assets of the LP, including the property, and became members of the LLC. With remediation costs projected to exceed $2 million, the LLC applied for an innocent party grant, which the NJDEP denied on the grounds that the LLC did not own the property prior to December 31, 1983, and had not succeeded to the rights of the prior owner, the LP, who did.

Finding that the Brownfield Act and Industrial Site Recovery Act ("ISRA") were part of a unified legislative strategy to address the remediation of contaminated sites, the Court looked to the "change in ownership" definition in ISRA, which excludes from the definition certain corporate mergers and inter-corporate and other types of transfers when there is a basic continuity of beneficial ownership and when assets to meet remediation responsibilities are not diminished. Thus, the Court found that the Legislature appears to have been more concerned with the substance of ownership and continuity, rather than the technicalities of legal form.

Turning to the legislative history, the Court said the grants were clearly intended to help the owners of contaminated property defray the costs of remediation if they were not responsible for the contamination. Thus, the Court rejected the NJDEP’s argument that a de facto merger per se precludes the resulting entity from obtaining a grant since it only results in acquisition of liabilities, not rights. Because the record was not sufficiently developed to determine if there was a de facto merger of the LP into the LLC, the Court vacated the NJDEP’s denial of the innocent party grant application and remanded the matter for an evidentiary hearing.

This case is another recent example of the courts overruling a decision by the NJDEP based upon an insufficient record or other unsupported findings.

New Jersey Adopts Advisory FEMA Flood Insurance Rate Maps; Final Maps Expected Later This Year

On May 6, 2013, the NJDEP finalized its adoption of the advisory form of the Flood Insurance Rate Maps (“Maps”) issued by the Federal Emergency Management Agency (“FEMA”) in January.  The final rule formalizes an emergency regulation that was signed by Governor Christie on January 24, 2013 to provisionally adopt the Maps.

While New Jersey’s adoption of the Maps is now final, the advisory Maps themselves are still provisional.  FEMA is continuing to revise the Maps and is releasing them, on a county-by-county basis, this summer.  The revised Maps will be subject to a public comment period before FEMA can finalize and adopt them.

The Maps depict flood plain areas that FEMA predicts are at risk of flooding during storm events.  The Maps are used as a basis for floodplain development regulations and for the national flood insurance program rates and requirements.  Of particular importance are the areas designated as a Velocity Zone or “V Zone.”  These are areas that FEMA predicts have a one percent or greater risk in any given year of experiencing flooding and breaking waves that are at least three feet tall. (The one percent per year risk factor is commonly referred to as the “one-hundred-year storm.”)  Pursuant to pre-existing coastal zone regulations in New Jersey, with limited exceptions, residential development is prohibited in V Zones and commercial development is discouraged. Any development that does take place in the V Zone will now be required to be built on pilings.  In addition, existing structures in the V Zone must conform to the new building requirements or face significant increases in flood insurance premiums when rates are reset, which is expected to happen within the next few years.

Governor Christie has said that the State adopted the Maps in their advisory form, rather than waiting for the revised or final Maps, so that residents who wished to rebuild following damage caused by Superstorm Sandy could do so without delay and without concern that the rebuilt structure would fall short of requirements for elevation in a flood zone.  FEMA, however, has advised that areas in the V Zone on the advisory Maps could be moved back to less restrictive zones on the revised Maps – effectively decreasing the elevation requirements -- but that no new areas will be moved into the V Zone.  Indeed, this has been the case on the revised Maps released to date.  For example, virtually the entire Hudson River waterfront area in Hudson County was newly designated as a V Zone on the advisory Maps, but much of the area inland of the immediate waterfront was removed from the V Zone on the revised Maps. Accordingly, owners and developers of land in the V Zone on the advisory Maps may benefit by waiting until the revised Maps are released before rebuilding or starting new construction.  Those owners and developers of land that remains in the V Zone, or any other flood zone, on the revised Maps can urge FEMA to reevaluate the flood zone classification by submitting comments to FEMA during the public comment period before the Maps are finalized and adopted.

New Jersey Appellate Division Upholds NJDEP "Waiver Rule" But Rejects Guidance

On March 21, 2013, the New Jersey Superior Court, Appellate Division upheld the NJDEP's promulgation of the 2012 Waiver Rule, which gave the NJDEP the authority to waive strict compliance with certain of its regulations under particular circumstances. In re N.J.A.C. 7:1B-1.1, et seq.  As discussed in our December 7, 2012 Environmental UPDATE, the Waiver Rule was adopted in furtherance of Governor Christie’s Executive Order No. 2, which espoused to reduce bureaucracy and encourage economic growth through application of “common sense principles.”  While the rule provides relief to parties subject to certain conflicting or unduly burdensome requirements, environmental advocates have admonished the adoption of the Waiver Rule as permission to circumve nt State regulations that are essential to protection of the environment.

Appellants in this case, a collection of environmental and labor organizations, challenged the adoption of the Waiver Rule on three grounds: (1) that it exceeded the NJDEP’s legislative authority; (2) that it lacked appropriate standards to guide the Department’s discretion and implementation; and (3) that the guidance documents posted on the Department’s website constituted de facto rulemaking in contravention of the Administrative Procedures Act (“APA”).  Ultimately, the Appellate Division rejected the Appellants’ first two arguments; first, determining that inherent in the power of an agency to promulgate regulations is the power to suspend or waive those same regulations in well-defined circumstances and, second, that the Waiver Rule contains adequate standards for the Department to decide waiver applications.

The Court agreed with the Appellants’ third argument and invalidated the NJDEP’s requirement that applicants use Waiver Rule guidance documents posted on the Department’s website.  The Court found that these guidance documents “go beyond merely facilitating administrative implementation of the rules as claimed by [the NJDEP] and actually, to some extent, announce new substantive requirements necessitating compliance with the APA.”  The Court determined, however, that invalidating the guidance material does not impact the ability of the Department to apply the Waiver Rule, stating that “even without the guidance documents. . .  the waiver rule provides adequate standards and safeguards to inform the public and guide the Agency as to how de cisions will be made under the new rules.”

This ruling was a significant victory for both the NJDEP and the regulated community because the Waiver Rule provides the Department and Waiver Rule applicants the ability to take a common sense approach to compliance with environmental regulations.  Note, however, that the battle over this issue is not quite settled; opponents of the rule have petitioned the New Jersey Supreme Court to review the Appellate Division’s decision.

An outgrowth of this decision is the potential impact the invalidation of the Department’s guidance documents will have on other NJDEP programs.  In particular, in the Site Remediation Program the Department has published numerous guidance documents that have not been subject to the formal rulemaking and public notice and comment requirements of the APA.  It is our understanding that the Department does not intend to withdraw any of the Site Remediation guidance documents.  Therefore, it is quite possible that a challenge to the use or enforceability of these Site Remediation Program guidance documents may loom on the horizon.

New Jersey Supreme Court Limits Warrantless NJDEP Searches of Residential Property Under the Freshwater Wetlands Protection Act

In a recent decision, NJDEP v. Huber, A-116-10 (April 4, 2013), the New Jersey Supreme Court held that the NJDEP may not conduct warrantless inspections of private property subject to a Freshwater Wetlands Protection Act (the “FWPA”) permit unless the NJDEP follows the FWPA regulatory scheme for gaining access to the property.  The defendants, Robert and Michelle Huber, owned residential property that was subject to an FWPA permit.  After a neighbor complained that the Hubers were placing fill and mowing vegetation in restricted areas of their property, the NJDEP inspected the property a number of times and determined that the Hubers had disturbed protected wetlands areas in violation of the FWPA permit.  The parties disputed whether the Hubers consented to the inspection by the NJDEP.  The Hubers argued that the NJDEP’s warrantless inspection of their property constituted an unreasonable search under the United States and New Jersey Constitutions, and the evidence obtained by the NJDEP during their inspections should be excluded as a result.

In reaching its conclusion, the Court recited the well-settled principle that warrantless searches are per se unreasonable under the Fourth Amendment of the United States Constitution.  The Court then held that the warrantless search exception to the Fourth Amendment, announced in New York v. Burger, 482 U.S. 691 (1987), is confined to administrative searches of commercial properties in closely regulated industries and does not extend to regulatory inspections of residential property.

The Court acknowledged, however, that administrative searches of residential property can be constitutional, despite the lack of a warrant, if the regulatory scheme advances important governmental interests, takes into account the property owner’s reasonable expectations of privacy, and avoids nonconsensual, forcible entry.  The Court found that the FWPA advances important governmental interests because it preserves and protects New Jersey’s wetlands by strictly prohibiting their disturbance without a permit.  With respect to the property owner’s expectation of privacy, the FWPA regulations put the permittee on notice that owning property subject to an FWPA permit means that the NJDEP may enter at reasonable times to inspect the property.  Finally, the Court found that the FWPA regulatory scheme does not authorize forcible, nonconsenual entry into the backyard of a residential property owner because it requires the NJDEP inspector to present credentials and gain consent prior to entering the property.  If consent is denied, the NJDEP can assess a civil penalty for refusing an NJDEP representative’s lawful entry, and the NJDEP Commissioner can issue an order authorizing the entry.  The Commissioner also may bring a civil action to enforce the administrative order.  The Court concluded that the FWPA regulatory scheme is reasonable as applied to residential property owners because it avoids nonconsensual, warrantless entry by requiring that an order be issued to gain entry to inspect the property at a reasonable time if consent to enter is denied.

The Court declined to resolve the factual issue as to whether the Hubers consented to the entry and inspection of their property by the NJDEP.  The Court found that, regardless of whether the Hubers gave consent to the NJDEP, there was other evidence in the record sufficient to sustain the NJDEP’s findings that the Hubers violated their FWPA permit.


Regulatory Update

New Jersey Department of Environmental Protection

Grand Opening of Centenary College Environmental Science Center

On May 9, 2013, the NJDEP announced the opening of the new Centenary College Environmental Science Center (“the Center”) at the NJDEP’s Charles O. Hayford Fish Hatchery in Hackettstown.

The Center’s laboratory and faculty research space will ensure that students are provided with the ability to undertake soil, water and air testing and employ tools for collection and analysis, as well as carry out biodiversity surveys of local plants and animals.

The Center is part of a state-of-the-art fish-raising facility located on the banks of the Musconetcong River, which distributes millions of fish annually.

Further information can be found at www.njfishandwildlife.com/hacktown.htm.


Online Permit Application Launched

On May 9, 2013, the NJDEP announced the expansion of its online services, which will provide the public with access to permit applications as well as the ability to post certain public notifications.

Through http://www.njdeponline.com/, LSRPs can submit forms relating to annual remediation fees, the release and retention of an LSRP and the closure and registration of underground storage tanks.  In addition, the newly expanded online service can be utilized to file applications for an Aquatic Pesticide Permit and a Tidelands License Renewal, as well as General Air Permits.

Further information can be found at www.nj.gov/dep.


United States Environmental Protection Agency

“Battle of the Buildings”  Won by Bloomfield Elementary School

On April 24, 2013,  the EPA announced that, after competing with more than 3,000 buildings, the Demarest Elementary School (“Demarest”) in Bloomfield, New Jersey became the 2012 recipient of the EPA Energy Star National Building Competition, “Battle of the Buildings.”

With a 52% reduction in its use of energy, Demarest saved almost $76,000 in utility costs.  Demarest achieved its huge reduction in energy use by attending to mechanical issues and making adjustments to the operation of its boiler, as well as energy management by staff, such as turning off and unplugging devices not in use.

Participants in the Battle of the Buildings were required to submit to the monitoring of their building’s energy use throughout the entire year of 2012 via EPA’s online energy tracking tool.  The 2012 participants saved an accumulated total of more than $50 million in utility costs.

Further information can be found at http://www.energystar.gov/battleofthebuildings.

Riverside Industrial Park Added to the EPA Superfund List

In response to a spill of oily material on the Passaic River in 2009, the EPA discovered the release of volatile organic compounds (“VOCs”) and polychlorinated biphenyls (“PCBs”) into the Passaic River, which they traced to the Riverside Industrial Park (“the Site”).  The EPA identified and closed off the source of the contamination at the Site.  It also removed several tanks containing hazardous waste from the Site.  The Site was added to the Superfund National Priorities List (“Superfund List”) on May 21, 2013.  A search for the parties responsible for the pollution of the Site is continuing.

Further information can be found at www.epa.gov/02.superfund.

Legislative Update 

Recently Introduced Environmental Bills

A3897 / S2528 Provides exemption for commercial and institutional solid waste generators from source separation requirements of municipal recycling ordinances if recyclable materials are otherwise recycled pursuant to certain conditions and requirements.  Status: A3897 pending in Assembly Environment and Solid Waste Committee;  S2528 pending in the Senate Environment and Energy Committee.

A3921 Changes type of development requiring CAFRA permit from the NJDEP.  Status: Out of Assembly Environment and Solid Waste Committee; pending in Assembly Appropriations Committee.


Updated Status of Previously Reported Environmental Bills

A1312  Requires report and public hearing prior to the NJDEP recommendation of site for inclusion on Superfund list.  Status: Out of Assembly Environment and Solid Waste Committee with Amendments; pending in Assembly Appropriations Committee.

A2852 / S831 Establishes notification requirements for combined sewer overflows.  Status: A2852 out of Assembly Environment and Solid Waste Committee with Amendments, second reading in Assembly; S831 passed by the Senate.

A3128 / S2094 Clarifies that certain types of sewage and sewage sludge do not constitute hazardous substances under the Spill Compensation and Control Act.  Status: A3128 out of Assembly Environment and Solid Waste Committee, second reading in Assembly; S2094 pending in Senate Environment and Energy Committee.

A3262 / S2208 Amends Flood Hazard Area Control Act to require the NJDEP to take certain actions concerning delineations of flood hazard areas and floodways.  Status: A3262 passed in Assembly; S2208 pending in Senate Environment and Energy Committee.

A3849 / S2322 Prohibits contribution action against local unit for cleanup and removal costs or any other damages associated with discharge of hazardous substances.  Status: A3849 pending in Assembly Environment and Solid Waste Committee; S2322 pending in Senate Environment and Energy Committee.

A3103 / S2732  Provides for priority consideration, by the NJDEP, New Jersey Department of Community Affairs, New Jersey Department of Transportation, and local government units of permit applications for green building projects.  Status: A3103 passed by the Assembly.; S2732 pending in the Senate Environment and Energy Committee.