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Further Action Required Despite Issue of No Further Action Letters

In Drytech, Inc. v. State of New Jersey, the plaintiff manufacturer of desiccants appealed a Chancery Division order dismissing its complaint against the New Jersey Department of Environmental Protection (“NJDEP”), in which it sought a declaration that it did not have to comply with the remedial obligations imposed by the Site Remediation Reform Act (“SRRA”), N.J.S.A. 58:10C-1, et al.  The Appellate Division affirmed the trial court’s decision, signaling the importance of understanding the complexities of law, regulation, and site history.

New Jersey’s Industrial Site Recovery Act (“ISRA”), N.J.S.A. 13:1K-6, et al., requires certain regulated entities to remediate hazardous substance discharges before transferring or closing an industrial establishment.  There are certain triggering events under ISRA that require strict compliance, one of which, at issue here, concerns the transfer of operations to a new corporate entity. N.J.S.A. 13:1K-8.

If a transfer of ownership occurred prior to SRRA’s enactment in 2009, an ISRA-regulated entity would notify NJDEP and seek either: (1) a negative declaration indicating no discharge; or (2) NJDEP’s approval of a remedial action plan.  Once the subject property was clean, NJDEP would issue a No Further Action letter (“NFA”), together with a covenant not to sue. N.J.S.A. 58:10B-13.1(a).  However, after SRRA’s implementation, the NDJEP is no longer responsible for remediation efforts.  Responsibility for remedial oversight was thus, shifted to licensed site remediation professionals (“LSRP”), who issue Responsible Action Outcomes if a site is remediated in accordance with specific statutory and regulatory requirements.

Here, plaintiff first triggered ISRA’s remediation requirements in 1998.  It also triggered ISRA in 2001 and again in 2002.  On each of the three occasions, plaintiff applied for and received NFAs and covenants not to sue from NJDEP.  Notably, in 2013, after SRRA went into effect, plaintiff again triggered ISRA when it transferred ownership of its property to a different, yet related limited liability company.  Plaintiff contacted several LSRPs to undertake a preliminary assessment (“PA”), which is required by N.J.A.C. 7:26E-3.2(a).  In completing the PA, the LSRP advised plaintiff that there were “no new [areas of concern] at the site, other than those previously associated with” the three NFAs previously issued by NJDEP in 1998, 2001, and 2002, respectively.

Despite this advisement, each of the LSRPs contacted by plaintiff stated that they would need to “completely reinvestigate the site,” including the previous remediation work performed in connection with the prior triggering events, before issuing an RAO.  Plaintiff alleged that such a reinvestigation would cost in excess of $12,000 and that it would incur a second annual remediation fee of $900 for the 2014 calendar year because it concededly triggered ISRA in 2013.

In May 2014, plaintiff asked for a waiver from NJDEP of the requirement that it hire an LSRP, investigate the areas of concern, and issue an RAO.  Plaintiff’s basis for such an unprecedented waiver was that it had already obtained three NFAs for the subject site.  Without an immediate response from NJDEP, plaintiff filed a complaint, which was countered by NJDEP via a motion to dismiss for failure to state a claim.  NJDEP therein argued that SRRA and its regulations impose a duty upon LSRPs to exercise their independent, professional judgment in determining whether a RAO should issue.  Simply, and to date, an investigation had not commenced and a RAO had not issued for the subject site.  The motion was accordingly granted, dismissing plaintiff’s complaint.

Yet, on appeal, plaintiff repeated its very same arguments that were unsuccessful in the Chancery Division.  The Appellate Division gave great consideration to Judge Suter’s written opinion, notably that SRRA does not afford a regulated entity the option of waiving the requirement that an LSRP investigate an environmentally impacted site.  The Appellate Division found little merit in Plaintiff’s strained argument that NJDEP’s issuance of NFAs and covenants not to sue in the past barred NJDEP from compelling plaintiff’s compliance with SRRA.

In sum, NJDEP’s issuance of prior NFAs and covenants not to sue did not excuse plaintiff from complying with future laws and regulations.  Further, because plaintiff failed to obtain an RAO after it triggered ISRA in 2013, assessment of the $900 fee in 2014 was proper.

This decision is important for industrial property owners in New Jersey, especially those who may be planning a transfer of ownership in the near future.  The attorneys at Lieberman & Blecher are versed in site remediation and look forward to an opportunity to assist you or your business with regulatory compliance efforts.

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