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

I. Introduction

As a state with a historical presence of heavy industry and manufacturing, New Jersey has always been at the forefront of developing environmental law and policy regarding hazardous waste and substances. In 2003, again ahead of most of the country, New Jersey is poised to roll out its long-awaited policy on natural resource damages ("NRD"). This program is designed to collect damages as a result of the degradation of our environment caused by hazardous contamination from a Spill Fund or an Industrial Site Recovery Act ("ISRA")¹ site. Indeed, for the past several years, the New Jersey Department of Environmental Protection ("DEP" or "the Department") has quietly but effectively prepared for this program by amending regulations in an ongoing effort to expand the scope of its authority to assess and impose NRD penalties at contaminated sites throughout New Jersey. Recent NRD litigation and settlements have emboldened DEP, which has threatened to seek NRDs not only in appropriate situations where the discharge of hazardous substances has deleteriously affected off-site natural resources (such as wetlands or natural habitats), but also in inappropriate situations where contaminant plumes are in areas of non-potable (non-drinking) aquifers where public water has always been delivered though utility water lines.

This article sets forth a brief history of the NRD-related regulatory amendments and rule adoptions by DEP over the past several years, as well as the relevant court cases concerning those amendments. The article then describes the current status of New Jersey's NRD law, and sets forth the process by which DEP may order remediation or compensation under its rules and regulations. The article next describes four different groundwater scenarios in which DEP could impose NRD remediation requirements and/or monetary penalties upon dischargers, and then advances policy arguments why DEP should exercise its discretion so as not to seek NRD in some of those scenarios.

As part of the ISRA statute, the New Jersey legislature in 1993 empowered an Environmental Advisory Task Force to "make recommendations to the Department on the feasibility, development, and application of remediation standards protective of the environment."² Until the Task Force made its recommendations on cleanup standards, DEP was to act on a case-by-case basis regarding ecology-based remediation standards.³ However, the Task Force was never convened by then Governor Whitman. Despite the legislation that prohibited general standards until the Task Force made its recommendations, DEP in October 1997 adopted "Procedures of Department Oversight of the Remediation of Contaminated Sites," ("Oversight Rules")⁴ as well as amendments to the "Technical Requirements for Site Remediation" ("Tech Regs").⁵ The amendments to the Tech Regs required all parties then remediating contaminated sites to perform a "baseline ecological evaluation" to determine the specific contaminants of concern in each case, identify environmentally sensitive areas, and evaluate potential contaminant pathways to any environmentally sensitive areas at each site.⁶ If these elements existed at a site, the Tech Regs required that an "ecological risk assessment" be completed to determine actual or potential impacts to environmentally sensitive areas and to develop remediation standards for the contaminants and measures to mitigate such impacts."⁷ Thereafter, a "remedial action selection report" was to be submitted to DEP to demonstrate that the proposed remedial action was appropriate to address any ecological impacts.⁸

In May 1997, DEP moved beyond requiring analysis and remediation of ecological impacts and adopted amendments to several definitional sections of the Tech Regs which allowed for the collection of monetary damages for injuries to natural resources. Specifically, under these amendments, "remedial action costs" including NRDs, were defined as "the amount of money the Department has determined is necessary to restore, rehabilitate, replace or otherwise compensate for the injury to natural resources as a result of the discharge." The term "injury" was defined as "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."⁹ "Natural resources" is broadly defined as "all land, biota, fish, shellfish, and other wildlife, air, waters, and other such resources."¹⁰ Thus, the impact of DEP's definitional amendments required owners or operators of contaminated sites to not only assess damages to natural resources at their sites, but also allowed DEP to seek monetary damages from the owners/operators for injuries to natural resources.

The first legal challenge by the regulated community to DEP's amended NRD rules took place in New Jersey Site Remediation Industry Network v. New Jersey Department of Environmental Protection, ("New Jersey Site Remediation Industry Network").¹¹ In that case, appellants made three major arguments against the expansion of DEP's regulatory authority on NRD. First, they argued that DEP violated the legislative provisions prohibiting it from adopting ecology-based remediation standards before the Task Force made its recommendations. Second, appellants argued that the administrative process described in the amendments adopted by DEP improperly usurped the historical role of the state courts in adjudicating NRD claims, and expressed concern regarding the possibility of DEP's arbitrary withholding of a No Further Action ("NFA") letter for a site remediation. Finally, appellants argued that DEP violated the Administrative Procedure Act ("APA")¹² requirements concerning opportunity to comment on the proposed NRD regulations.

In its brief, DEP made plain its view that the Legislature granted it expansive authority to address and recover NRD in contamination cases. The Department argued that the appellants' positions were flawed because "the Legislature intended to protect the environment as well as public health and safety and gave the Department wide discretion to define the scope of a remediation to include mitigation or restoration of natural resources." DEP's legal brief then cited portions of more than 10 separate state statutes, which expressed the general objective and policy of the State to protect natural resources.¹³ According to DEP, "the broad scope of environmental concerns expressed by the Legislature in [these] various enactments, and the totality of the powers granted to DEP to address those concerns, vest DEP with the authority to comprehensively address injuries to natural resources from discharges of hazardous substances in the same set of rules that address the remediation of contamination due to a discharge."¹⁴

The Appellate Division rejected all of appellants' claims and ruled that the adoption of the amendments to the Tech Regs and Oversight Rules was not ultra vires, finding that DEP had acted within its broad authority as set forth in the Brownfield and Contaminated Site Remediation Act ("Brownfield Act")¹⁵ to adopt "procedures under which the remediating party would describe possible risks and injuries to the environmental without quantifying what amounts of what contaminants would amount to natural resource damages that would need remediation or restoration."¹⁶ The Appellate Division ruled that DEP's administrative assessment of penalties did not improperly usurp the authority of the Superior Court to assess damages, stating that "[h]istorically, common law natural resource damages could be obtained through litigation, and even after the creation of the DEP, the State has initiated natural resource damage claims in the Superior Court [citations omitted]. However, the fact that an action commenced does not mean that the DEP is prohibited from administratively addressing its natural resource damage responsibilities."¹⁷ The Court also rebuffed appellants' claim that DEP had fashioned itself as "judge and jury" regarding NRD and stated that, upon imposition of monetary damages or the arbitrary withholding of a NFA letter by DEP, a remediating party could challenge DEP's administrative decision on NRD in a court action.¹⁸ Finally, the Court held that the adopted amendments to the rules were not substantial enough to warrant a new notice and comment procedure.¹⁹

In the wake of the New Jersey Site Remediation Industry Network decision, the Brownfield Act was amended in 2001 to include language mandating that no NRD claim accrued prior to January 1, 2002.²⁰ As the applicable statute of limitations for NRD claims under the Brownfield Act is four years from accrual of a claim,²¹ DEP obtained an extension from the State Legislature for its NRD program until January 1, 2006, and may now sue for any and all NRD claims related to prior known contaminated sites until that time. Also, on August 18, 2002, DEP's groundwater quality standards ("GWQS") were extended by gubernatorial decree until February 5, 2004. On February 3, 2003, the DEP adopted the existing GWQS as the minimum remediation standards under the 2003 Tech Regs.²² With these legislative and regulatory changes, DEP is now able to pursue its NRD agenda. The centerpiece of this scheme will include claims for monetary damages for groundwater contaminant plumes that cause "injury" to natural resources. This scheme is evidenced by the fact that in the first nine months of 2002 under the McGreevey administration DEP has quietly recovered more than $8.1 million in NRD settlements, an amount greater than that reached in the previous six years combined. The largest recovery during that period involved a $3 million settlement to compensate the State of New Jersey and East Hanover Township for contamination of the local drinking water supply in a 10-square mile area of Morris County.²³ In that case, the groundwater plume impacted potable water supplies in East Hanover and required the installation of municipal water lines to former well-dependent homes.

DEP Commissioner Bradley Campbell has publicly stated that DEP has stepped up enforcement to restore ecological injuries, including payment of monetary damages, in cases involving contamination of natural resources.²⁴ DEP's NRD enforcement initiative is operating in a target-rich environment: there are at least 12,000 sites in New Jersey with known contamination that could be potential NRD candidates.²⁵ Based on these facts, some have projected that NRD damages could exceed $750 million, and site owners and operators who already have approved cleanup programs in place or have obtained conditional NFA letters may be forced to pay for natural resource damages.²⁶

Footnotes

1 N.J.S.A. 13:1K-6 to -13.
² L. 1993, c. 139, 3 § 7(c).
³ N.J.S.A. 58:10B-12.
⁴ N.J.A.C. 7:26C-1 et seq.
⁵ N.J.A.C. 7:26E-1.1 et seq.
⁶ N.J.A.C. 7:26E-3.11.
⁷ N.J.A.C. 7:26E-4.7(b).
⁸ N.J.A.C. 7:26E-5.2(a).
⁹ N.J.A.C. 7:26E-1.8 (emphasis added).
¹⁰ N.J.A.C. 7:26E-1.8 (emphasis added).
¹¹ New Jersey Site Remediation Industry Network v. New Jersey Department of Environmental Protection, A-5272-97T3.
¹² N.J. Stat. Ann. § 52:14B-1 to -15 (Supp. 2002).
¹³ DEP cited: the Brownfield and Contaminated Site Remediation Act, L. 1997, c. 2781; general enabling authority at N.J.S.A. 13:1D-1 et seq.; the Spill Act (N.J.S.A. 58:10-23.11(a); the Water Pollution Control Act (N.J.S.A. 58:10A-2); the Endangered and Nongame Species Conservation Act (N.J.S.A. 23:2A-2); the Industrial Site Recovery Act (N.J.S.A. 13:1K-7); the Division of Travel and Tourism Act (N.J.S.A. 34:1A-46); the New Jersey Wild and Scenic Rivers Act (N.J.S.A. 13:8-46); the State Planning Commission Act (N.J.S.A. 52:18A-200); and the New Jersey Council on Environmental Quality (N.J.S.A. 13:DD-1).
¹⁴ DEP brief at (I)(C) (pp. 41-44)
¹⁵ L. 1997, c. 278 §1.
¹⁶ New Jersey Site Remediation Industry Network at 21, 29.
¹⁷ New Jersey Site Remediation Industry Network at 30.
¹⁸ New Jersey Site Remediation Industry Network at 32.
¹⁹ New Jersey Site Remediation Industry Network at 39.
²⁰ N.J. Stat. Ann. §58:10B-17.1(b)(2) (Supp. 2002).
²¹ N.J. Stat. Ann. §58:10B-17.1(b)(1) (Supp. 2002).
²² N.J.A.C. 7:26E-1.13.
²³ "New Jersey Settles $ 3 Million Case for East Hanover Ground Water Contamination Site," NJDEP Press Release, November 19, 2002.
²⁴ Daily Environment Report, Wednesday, November 20, 2002.
²⁵ The 2001 DEP Known Contaminated Sites List includes approximately 12,600 known contaminated sites in the State of New Jersey. However, DEP has stated that this list does not include a number of closed or abandoned landfill or dump sites that were formerly used by municipalities or other operators within the state.
²⁶ "New Jersey to Press Additional Claims Against Polluters Consultant Warns," http://www.ewire-news.com/wires/ 0B33430C-0E24-41E6-9E9C7C38EF06C03D.htm (last visited March 9, 2003).