Transcript Title Title Title - Norris McLaughlin & Marcus, P.A.

Environmental Management Seminar
Legal Issues in Redevelopment
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Montclair State University
Prepared by Patrick T. Mottola, Esq.
April 2005
This presentation and materials do not constitute and are
not legal advice
Norris, McLaughlin & Marcus, P.A.
Presentation Topics
• Liability Statutes
• Brownfields Redevelopment
• Natural Resource Damages
Norris, McLaughlin & Marcus, P.A.
Main NJ Remediation Programs
• New Jersey Spill Compensation and Control Act (“Spill
Act”), N.J.S.A. 58:10-23.11
• Industrial Site Recovery Act (“ISRA”), N.J.S.A. 13:1K-6
• Brownfield and Contaminated Sites Act (“Brownfields”),
N.J.S.A. 58:10B-1
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Industrial Site Recovery Act
• Predecessor statute: Environmental Cleanup
Responsibility Act (“ECRA”) effective December 31,
1983.
• ISRA amended and renamed ECRA, June 16, 1993
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ISRA Overview
• Imposes “cleanup” pre-conditions upon the sale,
transfer, or closure of Industrial Establishments
having certain North American Industrial
Classification System (“NAICS”) numbers that are
involved with hazardous substances or wastes.
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ISRA Compliance
• Requires Notice; and
• Prohibition on consummating transactions until
receipt of NJDEP Approval, which ultimately
takes the form of a No Further Action letter
(“NFA”)
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Obligation to Comply
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In a sale, it is the obligation of the Seller.
Joint and several obligation of the owner and operator.
Often landlord and tenant.
Could involve operators that do not have tenancy
agreements, such as licensee, easement holder, or even
trespasser.
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New Jersey’s Spill Act
• The foundation of NJ Environmental Law
• Enacted in 1976 and substantially amended in 1993
• Addresses Liability for releases of hazardous substances,
broadly defined
• Creates a Spill Fund for innocent parties that have been
victimized by a discharge
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Spill Act Liability
• Liability is imposed on a person “in any way responsible”
for a “discharge” of “hazardous substances” to water or
land
• The list of Hazardous Substances is found at N.J.A.C.
7:1E Appendix A
• A discharge means a release to the lands or waters of the
state
• Any quantity is required for reporting obligation
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Who is “in any way responsible”?
• The current property owner
• The current operator
• Former owners and operators at the time of the past
discharge
• Intermediary owners/operators NOT responsible if
contaminated deemed to be in “passive migration” stage
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What kind of liability?
• Strict liability (attaches with no fault or causation element
required)
• Joint and several (attaches to all found “in any way
responsible”)
• Retroactive (attaches to past actors)
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Contribution and Cost Recovery
• The State may seek cost recovery for cleanup
expenditures
• Private parties may seek contribution from other parties
for contribution to cleanup costs
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Spill Act Defenses
• Discharge was the result of:
– Act of God
– Act of war or sabotage
– Compliance with permit
• Innocent Purchaser
• Reliance on previously issued No Further Action Letter
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CERCLA
• Federal Law
• Comprehensive Environmental Responsibility Cleanup
Liability Act, 42 U.S.C.A. § 9601 to 9675
• Enacted primarily in response to the Love Canal disaster
• A tax on the transfer of chemicals is put into a special
governmentally-managed account called the “Superfund”
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CERCLA
• Discharges of hazardous substances to water, land or
air
• Quantity depends on the nature of the substance but
may be 1 to 10 pounds or 100 to 1000 pounds
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CERCLA – Liable Parties
• Current owner or operator
• Former owner or operator
• Arrangers/Transporters
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CERCLA - Defenses
• Discharge was the result of:
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Act of God
Act of war or sabotage
Compliance with permit
Act or omission of a third party not in privity with the party
• Bona Fide Purchaser
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Liability Statutes – Common Threads
• Impose liability for cleanup on the parties that are bestsuited to clean up
• Put the liability on the property itself (“in rem”)
• Result – many lingering cleanups, abandoned sites, and
development of green space
• Creation of “upside down” properties – cleanup costs
higher than property values
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1993 Amendments:
ECRA and the Spill Act
• After 10 years of ECRA, the statute was revised
and re-named ISRA
• Spear-headed by State Senator Hank
McNamara and Assemblyman Jim McGreevey
• Introduced expedited compliance procedures to
ISRA
• Introduced some liability relief by amending the
Spill Act to include an Innocent Purchaser
defense
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Spill Act Innocent Purchaser Defense
• Purchase the property after September 14, 1993
(the amendment effective date)
• Perform due diligence (defined as a Preliminary
Assessment and Site Investigation)
• Do not find any evidence of discharges
• Later found to be WRONG
• Give notice to NJDEP when the discharge is
discovered
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CERCLA Bona Fide Purchaser
• Applies to parties that knowingly acquire
contaminated property after 1/11/2002
• Buyer must undertake “all appropriate inquiry” and
“appropriate care”
• Perform an ASTM Phase I Environmental Site
Assessment
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1998 Amendments to the Spill Act and
Creation of the Brownfields Act
• Introduced incentives for the redevelopment of
abandoned or underutilized properties
• Liability protection
• Reimbursement of remedial costs
• Introduced the “Covenant Not to Sue” for No
Further Action Letters (“NFA”)
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Brownfields Program
• A “brownfield” is an unused or under-utilized
former industrial property
• Encourages revitalization of these contaminated
sites
• Provides liability protection and financial
incentives to developers who agree to remediate
and redevelop
• NJ and Federal Programs
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New Jersey Brownfields Program
• Brownfields are any former or current
commercial or industrial site that is currently
vacant or underutilized and on which there
has been, or there is suspected to have been, a
discharge of a contaminant
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Reasons to favor Brownfields
Redevelopment
• Smart Growth – reduce sprawl to greenfields, which
are limited
– Preserved space
– Pinelands Preservation Area
– Highlands Preservation Area
• Revitalize urban centers and unused/abandoned
areas
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Voluntary Cleanup Program
• Cleanup due to market, rather than government,
forces
• Memorandum of Agreement (“MOA”)
• Contract between a party and the NJDEP
• A brownfields developer must enter into an MOA
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Brownfields – Liability Protection
• If the developer enters into an MOA before taking
title to the property, it is shielded from liability
from third-party tortfeasors
• Is it constitutional? Not tested.
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Brownfields Reimbursement Fund
• Allows reimbursement up to 75% of remedial costs
once an NFA is issued, so long as the projected tax
revenue can support the claim
• Most common forms of taxes:
– Sales tax on building materials
– Sales tax on retail sales
– Corporation business tax
• This changes the polluter-pays game
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Brownfield Development Area
(“BDA”)
• NJDEP works with selected communities affected by
multiple brownfield sites to develop comprehensive
plans to allow for a coordinated effort for
remediation and reuse
• Streamlines the state oversight procedures
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Natural Resource Damages (“NRD”)
• Compensation for lost use, over and above the cost of
remediation
• Public Trust Doctrine and Parens Patriae
• Spill Act, CERCLA and other environmental statutes
create statutory rights for trustees to recover NRD
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Public Trust Doctrine
• Found in Roman Civil Law
• Submerged lands are preserved for public use in
navigation, fishing and recreation, and the state, as the
trustee for the people, bears responsibility of preserving
and protecting these public rights
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Parens Patriae
• Refers to the role of the state as sovereign and guardian
other those who cannot care for themselves
• A concept of standing to protect interests such as health,
comfort and welfare of the people, interstate water rights,
and more recently, groundwater
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NRD - Trustees
• State Government – Commissioner of the NJDEP
(delegated to NJDEP’s Office of Natural Resource
Restoration)
• Federal Government
– Secretary of the US Department of the Interior (US Fish and
Wildlife Service, US National Park Service)
– Secretary of the US Department of Commerce (National Oceanic
and Atmospheric Administration)
– Secretaries of the US Departments of Defense, Energy and
Agriculture
• Native American Tribes
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NRD – Typical Media
• Both the state and feds are trustees for
– Surface water
– Sediments
– Wetlands
• NJ is the sole trustee for groundwater
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NRD – Five Key Terms
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Natural resources
Natural resource services
Natural resource injuries
NRD
Restoration
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NRD – Natural Resources
• Includes all land, biota, fish, shellfish, and other
wildlife, air, water (including groundwater) and
other such resources
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NRD – Natural Resource Injuries
• Any adverse change or impact of a discharge into or
on a natural resource or impairment of natural
resource services, whether direct or indirect, longterm or short-term, and include a partial or complete
destruction or loss of the natural resource
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NRD – Natural Resource Services
• The physical, chemical, and biological functions that
natural resources perform
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Purification of air and water
Drought/flood mitigation
Generation and preservation of soils
Erosion protection
Cycling and movement of nutrients
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NRD Defined
• The dollar value of the restoration that is necessary
to restore the injured resource and to compensate the
citizens for the injury to the natural resources as a
result of a discharge
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NRD - Restoration
• The remedial action that returns the natural
resources to pre-discharge conditions. It includes the
rehabilitation of injured resources, replacement, or
acquisition of natural resources and their services
which were lost or impaired.
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Signature Chemicals
• Help to identify a responsible party
• Lead from a local foundry that discharged to Jackson’s
Run/East Lake in Bridgeton, NJ
• PCBs from General Electric in the Hudson River
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Passaic River NRD Initiative
• The lower Passaic River from Dundee Dam in
Paterson to Newark Bay
• Receptor of industrial wastewater, domestic
sewage, and storm water for over 200 years
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Spill Act Statute of Limitations
• 4,000 Cases in New Jersey
• In property damage cases, the default statute of
limitations to bring a claim is 6 years
• In the 1993 amendments to the Spill Act, the legislature
added a 10-year statute of limitations for it to recover
costs under the Spill Act
• In 2001, as the ten-year deadline approached, the
legislature extended the deadline another 5 years
• The drop dead date is now Jan 1, 2006
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Passaic River NRD Initiative
• In September 2003, EPA and NJDEP initiated legal
action against 66 companies at 18 sites seeking funding
for a federal investigation and feasibility study
• Also seeks to impose liability for NRD
• Study is estimated to take 5 to 7 years
• Estimated river cleanup and potential NRD liability is
on the order of multi-millions to billions of dollars
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Passaic River Initiative - Background
• During the Vietnam War, Diamond Shamrock produces
agent orange at its facility on Lister Avenue, Newark, on
the Passaic River
• As a result of these operations, dioxin is deposited in
sediments of the Passaic River
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Passaic River Initiative - Background
• Diamond Shamrock spends $30 million and years
studying the river
• Other contaminants, including volatile and base/neutral
organic compounds, PCBs, and metals all found in river
sediments
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Passaic River Initiative - Background
• In the mid-1990s, EPA, through Diamond Shamrock,
sends information request letters, “104(e) letters”, to
other potentially responsible parties (“PRPs”)
• The PRPs are selected based on review of Passaic Valley
Sewerage Commission (“PVSC”) files
• PRPs selected from those where any incident reported
to PVSC in the 1950s and 1960s
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Passaic River – EPA Initiative in 2003
• EPA wants to continue study of the river, at an
estimated cost of $35 million
• EPA, DOT, and Army Corps of Engineers put up $25
million
• $10 million shortfall
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Passaic River – EPA Initiative in 2003
• EPA goes back to the PRPs identified in the 1990s from
the Diamond Shamrock investigation
• A new round of letters go out to about 100 PRPs
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Passaic River – DEP Directive in 2003
• NJDEP, separately, issues a Directive to 66 companies
• Based on 16 ISRA sites in Newark/Kearney and 2 ISRA
sites in Lodi (Napp Chemical and Hexcel)
• Demands $980 million to cleanup river
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PRPs
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NJDEP Directive to 66 companies
EPA notices to 100 companies
Only about 30 get both
Memorandum of Understanding between DEP and EPA
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NRD – Trade Association Suit
• A coalition of trade groups filed suit against
the NJDEP for its NRD program
• Suit is pending
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Passaic River NRD – Is it Justified?
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River declared dead in 1850
Not a navigable river
No economic mandate to remediate
A societal problem – why pin this on selected
companies, most of which never polluted?
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CERCLA Analogy?
• Landfill/multiple PRP cases
• Steering committee formed and multiple PRPs meet and
agree to divide the costs on a mutually-acceptable
formula based on contribution
• Consultant retained to evaluate records and model data
to arrive at a contribution formula
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Can this work for the Passaic River?
• PRP Group has retained common counsel (Bill Hyatt of
Kirkpatrick & Lockhart)
• The group has identified 4,000 to 5,000 other PRPs that
will be brought in
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New River Initiatives
• Raritan River – in 2004
– 5 sites along the river, including 3 landfills
– Additional sites being considered
• Delaware River expected in 2005
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NRD Settlements
• $45 million recovered since 1945
• $25 million under Commissioner Campbell
• $30 million spent or allocated to specific
restoration projects
• Over 2,000 acres protected/restored
• As of June 2004, of the 4,000 sites:
– 60 RPs/250 cases settled
– 80 RPs/800 sites in settlement negotiations
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Brownfields – NRD Problem in 2004
• Because of NJDEP’s NRD initiative, it refuses to
issue any No Further Action letters (“NFAs”) until
NRD resolved
• This was inconsistent with NJDEP’s Policy Directives
providing that brownfields developers would not be
held liable for NRD
• As a practical matter, NFAs were not being issued,
which is required in order to receive the brownfields
reimbursement funding
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Brownfields – NRD Solution in 2005
• On January 19, 2005, A-2444/S-1374 is enacted
• It provides an NRD exemption, by law, for brownfields
developers (in theory)
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Must have acquired property after 1/16/98
Must have acquired property after the discharge
Must not have assumed NRD liability by contract
Person is not “in any way responsible for the discharge
• NJDEP is working on a certification for developers to prepare
and submit when requesting NFAs
Norris, McLaughlin & Marcus, P.A.