Reliance on Past Environmental Compliance Does Not Create a Waiver in New Jersey | Practical Law

Reliance on Past Environmental Compliance Does Not Create a Waiver in New Jersey | Practical Law

A New Jersey appellate court recently held that an industrial property owner subject to the Industrial Site Recovery Act (ISRA) and the Site Remediation Reform Act (SRRA) could not rely on a previously issued no further action (NFA) letter evidencing past environmental compliance to waive the owner's remediation obligations under the SRRA.

Reliance on Past Environmental Compliance Does Not Create a Waiver in New Jersey

Practical Law Legal Update w-006-5585 (Approx. 4 pages)

Reliance on Past Environmental Compliance Does Not Create a Waiver in New Jersey

by Practical Law Real Estate
Published on 27 Feb 2017 • New Jersey
A New Jersey appellate court recently held that an industrial property owner subject to the Industrial Site Recovery Act (ISRA) and the Site Remediation Reform Act (SRRA) could not rely on a previously issued no further action (NFA) letter evidencing past environmental compliance to waive the owner's remediation obligations under the SRRA.
On December 29, 2016, the appellate court in Drytech, Inc. v. New Jersey Dept. of Env. Protection (), affirmed a lower court's holding that an industrial establishment owner could not rely on its previous compliance and environmental remediation efforts under the Industrial Site Recovery Act (ISRA) (N.J.S.A. 13:1K-6 to 13:1K-18) to waive new remediation requirements under the Site Remediation Reform Act (SRRA) (N.J.S.A. 58:10C-1 to 58:10C-29).

Background

The plaintiff was the owner of an industrial property in New Jersey. The business operations at the property classified it as an "industrial establishment" making the owner a regulated entity under the ISRA (N.J.S.A. 13:1K-8).
ISRA was enacted in 1993. It requires owners or operators of industrial establishments to remediate hazardous releases under the supervision of the New Jersey Department of Environmental Protection (NJDEP) before transferring or closing an industrial establishment (N.J.S.A. 13:1K-9).
Under ISRA, when a regulated entity transfers ownership of an industrial establishment to an affiliated entity, it is required to notify the NJDEP to:
  • Obtain a negative declaration that no hazardous substances have been released on the property.
  • Seek approval of a remedial action plan if there was a hazardous discharge on the property.
After completing remediation, the NJDEP delivers a no further action (NFA) letter to the owner. NFAs include covenants not to sue for areas of concern (AOC) that were properly remediated.
In 2009, the legislature passed SRRA. Under SRRA:
  • The NJDEP is not responsible for supervision of remediation.
  • The entity is required to hire a licensed site remediation professional (LSRP) to oversee remediation. The LSRP is required to exercise independent professional judgment in the investigation and supervision of remediation.
  • The entity must pay $900 as an annual remediation fee each year it remains out of compliance until the LSRP completes its assessment and issues a response action outcome (RAO).
The LSRP is responsible for reviewing the remediation and ensuring compliance with all applicable regulations. The LSRP then issues an RAO to the NJDEP to certify compliance.
The plaintiff triggered ISRA obligations in 1998, 2001, and 2002. The plaintiff remediated each AOC and received NFAs for each occasion.
The plaintiff triggered ISRA and SRRA again in 2013 by transferring the same industrial establishment to an affiliated limited liability company (LLC). The plaintiff hired an LSRP that completed a preliminary investigation of the site and reported that there were no new AOCs other than those identified in 1998, 2001, and 2002.
The LSRP notified the plaintiff that it would need to completely reinvestigate the site and prior remediation work to issue an RAO. The cost of the work was expected to be more than $12,000. The plaintiff requested that the NJDEP waive the SRRA's LSRP requirements and the annual remediation fee because of its prior ISRA compliance.
The NJDEP did not immediately respond to the waiver request and the plaintiff filed a complaint for a declaratory judgment. The NJDEP responded by filing a motion to dismiss for failure to state a claim.
The lower court granted the NJDEP's motion and the plaintiff appealed.

Outcome

The appellate court affirmed the holding of the trial court. The court reasoned that:
  • There was no basis to support a waiver. The SRRA was a new law that imposed new obligations. Nothing in the SRRA mentions the possibility of waivers for past compliance under the ISRA.
  • There was no legal authority that the NJDEP determinations before the implementation of the SRRA were binding on LSRPs.
  • LSRPs are required by the SRRA to exercise independent professional judgment, further indicating that they are not bound by previous NJDEP determinations.
The plaintiff argued that the previous NFAs and covenants not to sue prevented it from being compelled to comply with the new SRRA requirements. However, even the laws as they were in 1998 specified that an NFA and covenant not to sue would not relieve an entity from the obligation to comply with future laws and regulations.

Practical Implications

Owners and operators of industrial establishments in New Jersey previously subject to remediation actions under the ISRA may find the requirements of the ISRA and SRRA to be onerous and repetitive.
Although the Drytech case is an unpublished decision, counsel for owners or operators of industrial establishments in New Jersey should advise their clients that previously issued NFA approvals at a property are not grandfathered and do not exempt the client from the obligation to hire an LSRP each time the client intends to transfer or close that same property.
This case also emphasizes that compliance with the ISRA is required for each triggering event even if the industrial establishment is known to have no existing environmental conditions.