United States: Un-Natural Resource Damages: NJDEP Goes Too Far Afield – Part II

Originally published in Metropolitan Corporate Counsel – June 2003

In aggressively pursuing enforcement actions to restore ecological injuries, Governor McGreevey’s administration is stepping up its program for collecting damages as a result of injury to natural resources in the State of New Jersey. Damages may be appropriate in situations where the discharge of hazardous substances has deleteriously affected wetlands or other vital offsite natural resources if remedial action has not adequately restored such resources. However, as illustrated in the four groundwater scenarios discussed below, collection of damages may be inappropriate in many other circumstances.

Evidence of the New Jersey Department of Environmental Protection’s ("DEP") campaign to expand its broad Natural Resource Damage ("NRD") enforcement authority may be gleaned from its regulatory amendments adopted in 2003. For example, in re-adopting the Technical Requirements for Site Remediation ("Tech Regs") that govern cleanups in New Jersey, DEP’s intentions on NRD are made manifest. In the comments to the amendments, one commentator suggested that DEP "should clarify that the definition of ‘natural resource injury’ is actual injury orimpact to natural resource, as opposed to potential injury or impact."¹ In response, the Department stated that the Tech Regs contain no definition of "natural resource injury," only a definition of "natural resources" ("all land, biota, fish, shellfish, and other wildlife, air, waters and other such natural resources") and a definition of "injury" ("any adverse change or impact of a discharge on a natural resource or impairment of a natural resource service, whether direct or indirect, long term or short term, and includes the partial or complete destruction or loss of the natural resource").² Indeed, DEP declined the invitation to create a specific definition for "natural resource injury" or place any limitations on the scope of "injury" to a "natural resource" for which it may seek to collect damages. Rather, under the broad definitions for "natural resources" and "injury" in the Tech Regs, DEP has discretion to seek NRD for minimal environmental harm as well as catastrophic environmental harm to a natural resource, such as groundwater.

The definitions that were adopted with the amendments to the Tech Regs in 2003 not only maintain but potentially expand DEP’s enforcement authority on NRD. Under the current definitions, DEP has the flexibility and discretion to characterize any type of "adverse" effect, be it direct or indirect, permanent or temporary, as an "injury" to a "natural resource." Under its broad regulatory authority, DEP may seek enforcement on NRD under a wide variety of environmental media including: injuries to land (and potentially soils), air, water (including surface water and groundwater), biota, fish and other wildlife. These areas are all potentially fair game for NRD enforcement under the 2003 Tech Regs. DEP’s potential actions regarding most of these media are beyond the scope of this article. As such, the remainder of the article will focus exclusively on DEP’s potential NRD action in the most likely scenario that it will exercise its enforcement discretion – contaminated groundwater situations.

New Jersey’s broad regulatory regime allows it to engage in enforcement actions to collect NRD under a multitude of groundwater contamination scenarios. The following are four examples of potential NRD actions on sites with groundwater impacts: first, in the scenario contemplated by statute, groundwater contamination is flowing offsite and is impacting natural resources in unspoiled areas of the State; second, and not contemplated by statute, is where groundwater contamination is flowing offsite but is not impacting significant natural resources (such as in an urban area or an "old" suburb); third, where groundwater contamination is only on a discharger’s property but is impacting unspoiled and significant natural resources; and fourth, where groundwater contamination is only on a discharger’s property and is not impacting vital natural resources.

DEP’s Office of Natural Resource Damages ("ORND") currently uses a "Sample Surrogate Groundwater Injury Calculation" to derive a surrogate dollar value for NRD when there is an "injury" to groundwater resources of the State.³ The DEP’s present formula for groundwater injuries utilizes five factors to calculate a surrogate dollar value for NRD: (1) Planning Area and Projected Status (determined from the New Jersey Statewide Water Supply Plan 1996, which divides the State into groundwater "deficit areas" and groundwater "surplus areas"); (2) Annual Groundwater Recharge (also determined from the New Jersey Statewide Water Supply Plan 1996); (3) Water Rate (the current value in $/1000 gallons for the Planning Area derived from NJ Board of Public Utilities Data); (4) Aerial Extent of Contaminant Plume (both on and offsite); and (5) Duration of Remediation (time in years from remedial decision until New Jersey Groundwater Quality Standards are met or 30 year maximum, whichever occurs first). DEP uses these values to calculate NRD for groundwater in the following manner:

Reviewing the four potential groundwater injury scenarios in light of the NRD formula produces several conclusions. First, where groundwater contamination is flowing offsite and is impacting significant natural resources, NRD may be warranted but the DEP formula may not generate a technically legitimate result. The formula is distorted: its emphasis on the loss of "use" of a natural resource rather than setting damages as the amount to repair the particular resource damaged is troubling and puts a greater emphasis on collecting damages than remediating are source. Further, the calculation of a surrogate dollar value for groundwater "use" from a simplistic formula based on input variables related to groundwater area planning/status and the regional "utility" water rate for the area does not accurately reflect or account for site specific data and information. Second, and not contemplated by statute, is where groundwater contamination is flowing offsite but is not impacting significant natural resources, such as in an urban area or an "old" suburb. Here, the DEP formula does not yield an appropriate result. Where contamination is not affecting a vital natural resource, such as a wetland or potable drinking water, but groundwater may be contaminated from numerous different sources (including non-point pollution from the collection of contaminated storm water from the street of that urban area) there is no true "injury" or "loss" for which compensation should be demanded of an individual party. Moreover, the formula simply does not deal with the deteriorated "quality" of the natural resource in this scenario. Third, where groundwater contamination is only on a discharger’s property but is impacting significant natural resources, the DEP NRD formula does not work. In this scenario, even though a critical natural resource or aquifer may be impacted, the only impact is to the property of the discharger itself. As such, if the groundwater contamination is limited and/or contained to the discharger’s property, then there may be no public "injury" or loss to be compensated for – and the discharger should not have to pay itself.