Law Division Excludes “Lost Use” From Natural Resource Damages in Exxon Mobil Case

Law Division Excludes “Lost Use” From Natural Resource Damages in Exxon Mobil Case

The Superior Court, Law Division - Union County, recently held that Exxon Mobil Corporation is liable to the NJDEP pursuant to the Spill Compensation and Control Act, ("Spill Act") for natural resource damages ("NRD") to restore natural resources injured by discharges of hazardous substances. Damages for "lost use" of these natural resources, however, are not available pursuant to the Spill Act. New Jersey Department of Environmental Protection and Administrator, Spill Compensation Fund v. Exxon Mobil Corporation, Docket No. UNN-L-3026-04 (May 26, 2006). The decision is potentially significant at thousands of contaminated sites for which NJDEP has announced its intention to seek NRD for lost use of groundwater.

NJDEP sought recovery of NRD from Exxon Mobil arising from historic discharges of hazardous substances from two petrochemical facilities in Linden and Bayonne, New Jersey, generally known as the Bayway Refinery and Bayonne Refinery. Exxon Mobil already is remediating these sites pursuant to an Administrative Consent Order. NJDEP moved for summary judgment on Spill Act liability and for funding of a natural resource restoration plan. Exxon Mobil cross-moved on several grounds, including that damages for "lost use" of natural resources are not available under the Spill Act. NRD for "lost use" typically compensates the public for the value of the services provided by the natural resources that are lost or impaired as a result of a discharge, including, for example, inability to use groundwater for drinking purposes. The Court held that the New Jersey Supreme Court has defined "cleanup and removal costs" available to NJDEP under the Spill Act to include restoration of injuries to natural resources. Damages for lost use, however, have not been addressed by the Supreme Court and are not identified in the Spill Act. The Court's decision does not address, however, the availability of such damages under common law, such as the Public Trust doctrine, or other statutory law. The Court also held, among other things, that NRD does not constitute double recovery of the costs to clean up the discharge of hazardous substances.

Given that NJDEP's efforts to recover NRD for groundwater at thousands of contaminated sites are based, at least in part, on recovery of "lost use," it will be interesting to watch whether NJDEP appeals this Law Division decision. Thus, the decision's impact on current NRD litigation and the agency's initiative to develop a regulatory NRD program remains to be seen.