Environmental Update November 2013

Environmental Update November 2013
The November 2013 Riker Danzig Environmental Update

Permit Compliance Is Not Enough to Avoid Common Law Actions for Property Damage

Supreme Court Finds Taking May Exist if Landowner is Required to Surrender Land or Money to Obtain Permit

"Automatic Variance" Law Eases Height Restrictions, Helping Pre-Sandy Structures to Meet New Elevation Requirements

Supreme Court Holds Policyholders Are Not Responsible For Covering The Shares of Insolvent Carriers

Third Circuit Reaffirms EPA's Ability to Regulate Interstate Air Pollution

Statute of Limitations Applies to New Jersey Spill Act Contribution Claims

Regulatory Update

Legislative Update


Permit Compliance Is Not Enough to Avoid Common Law Actions for Property Damage

In a recent United States Appeals Court decision, the court allowed plaintiffs’ action to proceed based upon common law theories including trespass and nuisance, despite the existence of a federal statute that governed the claim and a controlling discharge permit.

In Bell v. Cheswick Generating Station, 2013 WL 4418637, --- F.3d ---- (2013), filed August 20, 2013, the United States Court of Appeals for the Third Circuit endeavored to address, on an appeal from the United States District Court for the Western District of Pennsylvania, the question of:

whether the Clean Air Act preempts state law tort claims brought  by private property owners against a source of pollution located within the state.

On this matter of first impression, the Court held that the federal Clean Air Act does not preempt “such source state common law actions,” even where the facility is in compliance with its air permit.   The Court based its decision on the language of the Clean Air Act – specifically the “savings clauses” in the citizen suit and states’ rights provisions at 42 U.S.C. § 7604(e) and 42 U.S.C. § 7416 – and an existing Supreme Court Clean Water Act decision, International Paper Co. v. Ouellette, 479 U.S. 481 (1987), which it found controlling.

In this class action suit, Plaintiffs sued the Cheswick Generating Station, GenOn Power Midwest, L.P., for damages under state common law tort theories – trespass, nuisance and negligence and recklessness – for ash and contaminants that settle on their properties.   The Plaintiffs claimed that the facility was emitting hazardous substances into their neighborhood, causing property damage and negatively affecting the use and enjoyment of their homes.  They further argued that the facility was not properly constructed and intentionally failed to use best available technology or air pollution control equipment.  GenOn argued that its facility was regulated and permitted under the Clean Air Act and, therefore, not subject to the tort claims made by Plaintiffs because the Clean Air Act preempted the claims.  The District Court agreed, dismissing the case. It explained that the Clean Air Act set forth a comprehensive regulatory scheme that preempted the tort claims.  The District Court found that allowing common law claims would be inconsistent with the Clean Air Act and that the “savings clause” did not change this result. The Court of Appeals disagreed and reversed.

The Court of Appeals reasoned that, like the Clean Water Act as explained in Ouellette, the terms of the Clean Air Act savings clauses preserve at least some state law tort causes of action available under the laws of the source state.  The savings clause in the citizen suit provision of the Clean Air Act specifically states that rights under common law are not restricted, whereas the savings clause in the states’ rights provision specifically allows states or their subdivisions to adopt and enforce stricter requirements than those in the Clean Air Act; these clauses are almost identical to those under the Clean Water Act.   The Court of Appeals found that so long as the tort theories applied were those of the source state, the state which regulates the facility, then the goals of the Clean Air Act would not be undermined by the state common law action.  While th e Court recognized that states are delegated responsibility for enforcing compliance with national ambient air quality standards (“NAAQS”) developed by the federal Environmental Protection Agency (“EPA”) pursuant to the Clean Air Act through State Implementation Plans (“SIPs”) that are used to regulate individual sources of emissions, as well as with implementing and administering required permit programs, it did not find the common law causes of action preempted by the Clean Air Act.  It further found that if preemption was intended by Congress, it would be clearly established within the Clean Air Act itself.

By allowing tort claims to proceed against facilities notwithstanding their permit compliance, this decision has signaled to the regulated community that the Clean Air Act and related state programs are no longer the sole source of emission standards and controls.  This decision may embolden environmental groups and other parties with advocacy or private agendas to pursue causes of action against permitted facilities.  Permittees can no longer assume they are protected from suit simply by virtue of their permit compliance. Pursuant to Bell, common law relief may be made available even without a statutory or permit violation, thus raising the question as to whether the common law will be used to impose stricter standards on targeted permittees.

The decision also may encourage plaintiffs in actions, extending beyond those against permitted facilities, to utilize the common law causes of action of trespass and nuisance, long thought obsolete in New Jersey, to pursue damages, e.g., in contamination cost-recovery cases.  Indeed, a significant body of federal and state case law in New Jersey states that in such environmental cases, common law theories such as trespass and nuisance should be disallowed when the damages sought are duplicative of those available under strict or absolute liability theories, statutory or otherwise.  See, e.g., Preferred Real Estate v. Edgewood Properties, Inc., 2007 WL 81881, *5; Borough of Rockaway v. Klockner & Klockner, 811 F.Supp.1039, 1053 (D.N.J. 1993); and cases cited therein.  The Bell decision may provide a basis to revive the use of these common law actions.  Further judicial decisions will be necessary to understand the full ramifications of the Court’s holding.

Supreme Court Finds Taking May Exist if Landowner is Required to Surrender Land or Money to Obtain Permit

In Koontz v. St. John’s River Water Management District, 133 S.Ct. 2586 (2013), the United States Supreme Court refused to allow the government to force a landowner to surrender land or money in order to obtain a land use permit when such permit conditions were not tied to the impact of the proposed land use.

In Koontz, the St. John’s Water Management District (“District”) conditioned the approval of a land use permit on a requirement that the landowner either reduce the size of his development and deed a portion of his property to the District or keep the project at the proposed size and fund an offsite wetlands mitigation project.  The landowner, believing these requirements were excessive given the development proposed, sued the District claiming its actions were an unconstitutional taking without just compensation.  The trial court agreed with the landowner.  The District Court of Appeal affirmed, but the Florida Supreme Court reversed.  Certiorari was granted and the United States Supreme Court reversed and remanded the case.

In reaching its decision in Koontz, the Court examined Nollan v. California Coastal Comm’n, 107 S. Ct. 3141 (1987) and Dolan v. City of Tigard, 114 S. Ct. 2309 (1994), two decisions where the Court employed a “special application” of the takings doctrine.  In both Nollan and Dolan, the Court found that the government could not condition approval of a land use permit on the owner relinquishing a portion of his property unless there existed a nexus and rough proportionality between the demand and the effect of the proposed land use.  In Koontz, the District argued that although it required the landowner to agree to certain actions in order to obtain a permit, the District denied the permit rather than approve it with conditions and, as a result, no taking occurred.  The Court disagreed and found that the District was attempting to circumvent Nollan and Dolan by classifying the process as a denial and not as an approval with conditions. Refusing to attach significance to the distinction between a condition precedent and a condition subsequent, the Court found that a taking could occur when a landowner must give up his property in order to avoid a permit denial.

The Court also addressed the issue of whether a demand to fund a mitigation project can give rise to a takings claim under Nollan and Dolan.  To avoid a taking, the Court found that monetary exactions must also satisfy the nexus and rough proportionality requirements of Nollan and Dolan; that is, government-imposed financial obligations are a taking if they allocate public burdens to a landowner without just compensation when the proposed project does not warrant such an allocation.

The Court remanded the case to the Florida Supreme Court for a determination as to whether compelling Koontz to give up land or money in order to obtain his permit satisfied the requirements of Nollan and Dolan.  Given the decision in Koontz, landowners in New Jersey should consider the nexus and rough proportionality analysis under Nollan and Dolan the next time the government attempts to require them to give up property or pay money in order to secure a land use permit.

"Automatic Variance" Law Eases Height Restrictions, Helping Pre-Sandy Structures to Meet New Elevation Requirements

On August 7, 2013 Governor Christie signed the “Automatic Variance” law, N.J.S.A 58:16A-103, (“AVL”), which is designed to make it easier for property owners to elevate their structures to meet new flood elevation standards.  The AVL provides an “automatic variance” by exempting property owners from any local and state development regulations – including the requirement to obtain a variance – that would be violated as a result of raising a structure to the highest applicable flood elevation.  The AVL also provides an exemption for the construction of staircases or other attendant structures necessary in conjunction with the elevation of the main structure.  

The “highest applicable flood elevation standard” is defined by the AVL to mean the new FEMA base flood elevation plus an additional three feet, or any applicable flood elevation standard requisite by the New Jersey Flood Control Act Regulations, whichever is higher.

The exemption created by the AVL applies to structures that existed on October 28, 2012, including those that were damaged or destroyed by Hurricane Sandy and are undergoing lawful repairs or reconstruction.  The exemption applies only to the minimum extent necessary to meet the appropriate elevation with adequate means of ingress and egress.  Structures that have been altered after October 28, 2013 do not qualify for the exemption if, had the alteration not been made, the structure could have been elevated without the exemption or with an exemption of a lesser degree than is needed with the alteration.  Similarly, the exemption is not available to structures undergoing a repair or reconstruction plan that would alter the dimensions of the structure as they existed on October 28, 2013, if without such alteration no exemption or a lesser exemption would be needed.

The AVL provides an exemption only for height-related restrictions. Other development regulations, such as set-backs, floor area ratios, and use restrictions are not exempted by the AVL and will still require a variance as required by land use laws.

The AVL, which was approved unanimously by the New Jersey Senate and General Assembly, went into effect immediately upon being signed by the Governor.

Supreme Court Holds Policyholders Are Not Responsible For Covering The Shares of Insolvent Carriers

The New Jersey Supreme Court recently provided policyholders with a significant victory when it confirmed that policyholders with environmental, toxic tort and other long-tail liability claims are not responsible for covering the shares of insolvent insurers.  Farmers Mut. Fire Ins. Co. of Salem v. N.J. Property-Liability Ins. Guar. Ass’n, (N.J. September 24, 2013).

In this case, two carriers issued homeowner’s insurance covering property damage, including environmental contamination.  One carrier paid all the remediation costs for fuel oil leaks from underground storage tanks at two residences and then sought reimbursement from the New Jersey Property-Liability Insurance Guaranty Association (“PLIGA”) for the share that should have been paid by the other insurance company, which had been declared insolvent.  The solvent carrier argued that PLIGA should assume the share allocated to the insolvent carrier under the New Jersey Supreme Court methodology, set forth in its decision in Owens-Illinois, for allocating insurance liability among multiple carriers and policyholders from the time the property is exposed to contamination until manifestation of the injury. The Owens-Illinois methodology allocates losses am ong insurers on a pro-rata basis taking into account the time each carrier was on the risk and the amount of coverage provided.  The Court in Owens-Illinois held further that the policyholder would be responsible for any periods where it chose to go uninsured.  Since Owens-Illinois, whether a policyholder is responsible for periods where it purchased insurance and that insurance is no longer available because the carrier became insolvent has not been squarely addressed; however, in dicta, the Court has made reference in prior decisions that a policyholder may be responsible as a result of its carrier’s insolvency.

Analyzing PLIGA’s enabling act, as well as its prior decisional law, the Supreme Court held in the Farmer’s Mutual case that the policy limits of solvent carriers’ insurance must be exhausted before benefits can be accessed from PLIGA.  More importantly, the Court rejected the argument that the policyholder, not the solvent carrier, should make payments under the Owens-Illinois allocation scheme for the years attributed to the insolvent carrier.  Citing one of the goals of the PLIGA act “to minimize financial loss to claimants or policyholders because of an insolvency of an insurer” the Court found that to make the policyholder bear the loss for a carrier’s insolvency would defeat that goal.  This decision clarifies, regardless of any suggestion to the contrary in prior case law, that policyholders should not be responsible for the share allocated to an insolvent carrier.

Third Circuit Reaffirms EPA's Ability to Regulate Interstate Air Pollution

On July 13, 2013, the United States Court of Appeals for the Third Circuit issued a ruling that upheld the ability of the EPA to use the Clean Air Act (“CAA”) to limit a power plant’s emissions deemed to drift across state lines.  GenOn REMA, LLC v. EPA, 722 F.3d 513 (2013).  The CAA contains a provision (commonly known as the “good neighbor provision”) that prohibits sources within one state from emitting air pollutants in amounts that affect another state’s ability to attain the national ambient air quality standards (“NAAQS”). 42 U.S.C. 7410(a)(2)(D)(i).  The cooperative federalism structure of the CAA, whereby the federal and the state governments collectively govern certain air issues,  authorizes the EPA to establish NAAQS, but requires states to implement the NAAQS through state implementation plans (“SIPS”) that specify how the NAAQS will be achieved and maintained in the state.

A corresponding provision of the CAA, Section 126(b), allows a downwind state to petition the EPA for a finding that a source located in a neighboring state is interfering with the downwind state’s ability to comply with the NAAQS.  As such, Section 126(b) allows the EPA to directly regulate specific sources within the upwind state when a major source (or group of sources) violates the “good neighbor provision” of the CAA.

On September 17, 2010, the NJDEP filed a petition with the EPA under Section 126(b), alleging that the Portland Generating Station (“Portland”), a 427-megawatt coal-fired electric generating facility located in Upper Mount Bethel Township, Pennsylvania, directly across the Delaware River and upwind from New Jersey, emits sulfur dioxide (“SO2”) in amounts that significantly contribute to New Jersey’s nonattainment of the 1-hour SO2 NAAQS in four New Jersey counties.  On November 7, 2011, in response to the NJDEP’s petition, the EPA issued a final rule granting the NJDEP’s petition and requiring Portland to reduce its SO2 emissions by approximately 81% within three years (the “Portland Rule”).

GenOn REMA, LLC (“GenOn”), the owner of the facility, petitioned the Third Circuit to review the Portland Rule, challenging the EPA’s authority to impose direct regulations on Portland before the time that Pennsylvania is required to complete its SIP process for the 1-hour SO2 NAAQS.  GenOn contended that the EPA’s actions were arbitrary and capricious and that such actions offend the cooperative federalism structure of the CAA by undermining a state’s power to determine how to achieve air control standards.

The Third Circuit upheld the EPA’s Portland Rule and denied GenOn’s petition for review.  The Court found that it was reasonable for EPA to interpret Section 126(b) to be an independent mechanism for enforcing interstate pollution control, thereby giving it authority to promulgate the Portland Rule even before the state had finished implementing its SIP process.  The Court also held that the Portland rule, which directly regulates the emissions of one power plant, was not arbitrary, capricious or abusive of EPA’s discretion.

This decision is significant in the sense that it may lead to more petitions by downwind states seeking to require sources in neighboring states to reduce emissions that are affecting the state’s ability to attain EPA’s NAAQS.

Statute of Limitations Applies to New Jersey Spill Act Contribution Claims

Recently, in Morristown Associates v. Grant Oil Company, Docket No. A-0313-11T3 (App. Div. August 23, 2013), the New Jersey Appellate Division for the first time applied a statute of limitations to a private party contribution claim asserted pursuant to the New Jersey Spill Compensation and Control Act (“Spill Act”).  Whether a limitations period applies to a Spill Act contribution claim had been unsettled for many years, with federal courts in New Jersey holding that a limitations period of six years existed even though it was not explicitly stated in the Spill Act, while State courts had held that no such limitations period should be applied.  Our own Dennis Krumholz published an article three years ago advocating that the conflict between the federal and State courts should be reconciled in favor of a limitations period, as now held by the Appellate Division in a published and hence, binding, opinion.

According to the Morristown court, the general six-year Spill Act statute of limitations begins to run when the “plaintiff discovered or should have discovered the grounds for its claims.”  This is a factual analysis as to “whether enough indications of environmental contamination were present to put the plaintiff on reasonable notice of a need to investigate further.”  The Court acknowledged that the discovery rule, equitable in nature, may extend the limitations period in order to avoid a harsh or unfair outcome when circumstances warrant.

In Morristown, the owner of a shopping center asserted a claim under the Spill Act against several oil delivery companies and a dry cleaner tenant.  The owner sought the recovery of its costs for the remediation of contamination resulting from a leaking fill pipe connected to an underground storage tank.  It claimed to be unaware of the presence of the underground tank until recently, although it learned more than six years before bringing its claim that a similar tank had been found on the property.  The Court reasoned that the owner should have investigated the property further when it discovered the other tank, and had it done so it would have discovered the contamination that is the subject of the litigation.  The Court also noted that the tank at issue had an observable fill and vent line that protruded through the exterior wall of the building and that stain ing was present where the vent line was located, facts which should have placed the owner on notice years earlier of the need to further investigate his property.

New Jersey law is now clear that a statute of limitations will apply to a private Spill Act claim.  What is less certain is the amount and type of evidence necessary to establish when a plaintiff “discovered or should have discovered the grounds for a claim,” an issue that is likely to be the subject of much contention in future litigation.

Petition for certification to the New Jersey Supreme Court was filed on September 19, 2013 on behalf of Morristown Associates and is still pending.

Regulatory Update

New Jersey Department of Environmental Protection

New Jersey Receives Millions in Grants for Improvement of Water Treatment Facilities

In May 2013, the EPA announced the award of $229 million in grants to the state of New Jersey to improve wastewater and drinking water treatment facilities which sustained severe damage in SuperStorm Sandy.   This funding is intended to ensure that wastewater and drinking water treatment facilities are no longer vulnerable to effects of future severe, hurricane-size storms.

The Disaster Relief Appropriations Act of 2013, signed into law by President Obama on January 29, 2013, authorizes the provisions of the funding, 70 percent of which will be distributed and repaid in the form of no interest or low interest loans, with the remainder being distributed as grants.

Applicants are encouraged to submit projects that incorporate green infrastructure capable of mitigating storm water impacts, which will be subject to a 30-day public comment period.

The funds received by New Jersey form part of the $600 million provided to the EPA for administration under the Disaster Relief Appropriations Act in New York and New Jersey.

For further information, please visit www.epa.gov/sandy.


$20 Million Dredging Project Begins in Lower Passaic River

Pursuant to an agreement reached with 70 potentially responsible parties in 2012 regarding the contamination of the Lower Passaic River (“the River”), the removal of approximately 20,000 cubic yards of highly contaminated sediment from a half-mile stretch of the River in Lyndhurst commenced in August 2013.

The cleanup is being undertaken with EPA oversight.  Following the removal of the contaminated sediment, an approximately two-foot thick cap will be placed over the excavated area.  All work will be undertaken by barge on the River, with the contaminated sediment being disposed of out-of-state.

Work is expected to be concluded by the end of 2013.  A long-term study relating to the contaminated sediment of the entire River is also being conducted.

For further information, please visit www.epa.gov/region02/superfund/npl/diamondalkali.


Drew Among Universities to Assist with Public Health Data and Research

On July 25, 2013, the EPA announced the eight universities selected to develop innovative methods to conduct public awareness campaigns concerning the release of toxic chemicals in their communities.

EPA has utilized the Toxic Release Inventory (“TRI”) in order to gather and transmit this data for more than 25 years.  Although there is no financial reward, the challenge to the participating universities is to put forward more innovative methods through which to communicate such data to the public concerning chemical releases into the air, water and land.

The EPA will work with the universities selected in the development of projects focused on pollution prevention, sustainability, community engagement and technology to improve the presentation and understanding of TRI data.

The universities selected are Drew University, Huston-Tillotson University, Indiana University-Bloomington, SUNY Plattsburg, University of California-Los Angeles, University of Washington-Bothel, University of Wisconsin-Green Bay and Washington University in St. Louis.

The selected projects are expected to be concluded at the end of the 2014 school year.

For further information please visit www.epa.gov/tri/university.


United States Environmental Protection Agency

John Giordano Appointed Assistant Commissioner for Compliance and Enforcement

Following the retirement of Wolf Skacel, John Giordano was appointed as Assistant Commissioner for Compliance and Enforcement on July 2, 2013.  Mr. Giordano joins the Department from the Pennsylvania Department of Conservation and Natural Resources.

For more information, please visit  http://www.nj.gov/dep/newsrel/2013/13_0069.htm.


All New Jersey Counties in Compliance with EPA Air Pollution Standards

For the first time, all counties in New Jersey are in compliance with federal health standards for air pollution for fine particles.  Fine particles, which are approximately the size of 1/30th of the width of a human hair, can lodge deep in the lungs, causing severe health issues, particularly for those with asthma and heart disease.

This distinction is the result of efforts to control sources of pollution existing in state and pollution impacting New Jersey from out-of-state.

In an effort to improve air quality in New Jersey, Governor Christie has also prohibited the building of coal-fired power plants, approved a pilot program encouraging the reduction of diesel emissions from construction vehicles and is seeking the future replacement of diesel engines on NJ Transit Commuter buses.

For more information, please visit www.nj.gov/dep/daq.


Rules Adopted to Expedite Sandy Projects

In an effort to assist communities affected by Superstorm Sandy, changes to the coastal rules were adopted on April 16, 2013.  These changes reduce the NJDEP review time, as well as the costs and fees, connected to certain permit requirements.

Residential and commercial structures now can be rebuilt through a permit by rule for lateral or landward relocation of the existing footprint of a structure, the expansion of which can be no more than 400 square feet.  In addition, the allowance of permits by rule allows small businesses and marinas to utilize the general permit for the construction of support facilities without DEP intervention.

For more information, please visit http://www.nj.gov/dep/newsrel/2013/13_0037.htm.


Legislative Update

Recently Enacted Environmental Bills

P.L.2013, c.69 (S2861): Concerns closure of, and other activities at, certain landfills.

P.L.2013, c.107 (A3890): Provides limited exemption from development regulations to allow certain structures to be raised as high as the highest applicable flood elevation standard.


Recently Introduced Environmental Bills

A4231: Establishes Environmental Justice Advisory Council.  Status: Pending in Assembly Environment and Solid Waste Committee.


Updated Status of Previously Reported Environmental Bills

A1312: Requires report and public hearing prior to NJDEP recommendation of site for inclusion on Superfund list.  Status: Passed in Assembly; pending in Senate Environment and Energy Committee.

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

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 out of Senate Environment and Energy Committee and pending in Senate Budget and Appropriations Committee.

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