There is a New Sheriff in Town – State Files Six New Environmental Enforcement Cases
Touting it as the “largest single-day environmental enforcement action in New Jersey in at least a decade,” the State on August 1, 2018 filed six lawsuits seeking to recover cleanup costs, three of which also seek recovery of natural resource damages (“NRD”). The dramatic announcement yesterday left no doubt that the Murphy Administration’s approach to environmental enforcement will be markedly different than the essentially non-existent enforcement under the Christie Administration. As the administration considers pursuing other cases, many parties involved with environmentally impaired property should be aware of the new enforcement initiative and renewed efforts to obtain NRD. These parties may not realize that they have potential liability for NRD even after active remediation is completed.
The message from the State industry is clear: “If you pollute our natural resources, we are going to make you pay.” The view held by the new administration is that companies have failed to act responsibly and as a result have endangered the environment and health of the citizens of New Jersey. Accordingly, the State will hold polluters responsible, which it is seeking to do through robust enforcement.
As noted above, of the six lawsuits filed, three include claims for NRD. According to the Attorney General, the State did not file a single NRD case during the Christie Administration. It will be interesting to see how the State will handle valuation of its NRD claims in these new cases, especially in the wake of the criticism it received in the recent settlement of its case against ExxonMobil. In that case, the State initially valued its claim at approximately $9 billion, but ultimately agreed to settle the lawsuit for approximately $225 million. Moreover, to date, the New Jersey Department of Environmental Protection (“NJDEP”) has not been successful in litigating NRD claims because it has not been able to appropriately support its valuation calculations. While NJDEP had committed to adopting regulations on how to value resources for damages calculations, it has not yet done so. Accordingly, NJDEP has been defending its calculations on an ad hoc basis and has not yet been able to establish that the value it seeks is commensurate with the loss or impairment of the injured resource.
Parties that are remediating sites need to be aware that NRD liability will not be resolved automatically through remediation. In fact, recent practice has been to reserve the ability of the State to seek NRD. The Response Action Outcome issued by a Licensed Site Remediation Professional expressly states that NRD liability is not resolved. Very few parties who are remediating their sites are thinking about resolving NRD, although it may be more efficient and economical to resolve NRD through restoration during remediation rather than waiting for the State to seek to recover compensatory NRD. Although remediation does not protect against NRD liability, potentially responsible parties are not without hope as there are a number of potential defenses to NRD claims that should be evaluated (including statute of limitations and valuation defenses).
All parties involved with environmentally impaired property, including owners, operators, developers, lenders and others remediating sites, need to be aware of the State’s new enforcement perspective as well as the renewed focus on NRD as these will likely play a role in resolving liability under the new administration.