Site Remediation Reform Act: How Will a Response Action Outcome Issued by a Licensed Site Remediation Professional Differ From a No Further Action Issued by the NJDEP?

September 25th, 2009 | Posted by: Christopher DeGrezia 0| comments:

2009-02-17 Transfer 095The No Further Action Letter or NFA is a familiar document to the regulated community and its lenders in New Jersey.  A certain comfort level has developed over time with the NFA issued by the New Jersey Department of Environmental Protection (NJDEP).  As with any new regulatory concept, the introduction of the Response Action Outcome (RAO) issued by a newly permitted Licensed Site Remediation Professional (LSRP) will undoubtedly cause some initial concern.

What is an RAO?

Basically, an RAO is an NFA issued by an LSRP under the new Site Remediation Reform Act (SRRA).  The statutory definition of an RAO closely tracks the definition of an NFA.  The main difference is that the private environmental consultant licensed by NJDEP as an LSRP issues the RAO written determination that a contaminated site has been remediated in accordance with all applicable statutes and regulations while the NJDEP issues the NFA.  It is this distinction that may prove troubling for lenders, buyers, developers and other parties involved with contaminated sites.

RAOs Subject to Audits

Unlike an NFA, the RAO is subject to audit by the NJDEP and the newly created Licensed Site Remediation Professional Licensing Board (Board), which is in, but not part of, NJDEP.  The Board and its part-time members will be advised and staffed by NJDEP personnel. Therefore, as a practical matter, an audit by the Board may essentially be an audit by NJDEP with input from the members of the Board.  NJDEP also can petition the Board to audit an LSRP.

NJDEP and the Board are required to audit annually the submissions of at least 10 percent of the licensed LSRPs.  In an attempt to address concerns of uneasy environmental groups, the governor, as part of his Executive Order No. 140, expanded the NJDEP’s audit requirement as follows:

During the 24 months immediately following the effective date of the Legislation [May 7, 2009], the DEP’s review of 10% of all documents submitted by LSRPs shall include at least one review of case documents by every LSRP. [Footnote 1] Click here to read more about Executive Order No. 140.

As a result of the audit requirements, SRRA provides reason for concern about the finality and certainty of an RAO.  No one wants to be audited by the Internal Revenue Service and the same will undoubtedly be true for an audit by the Board.  An audit of your LSRP’s work is likely to result in delay and additional cost for your remediation.

In the vast majority of cases, NJDEP has three years after the date an LSRP filed an RAO to conduct and complete an audit.  An RAO will not really be considered final until the end of this three year period.  After the three-year period, NJDEP is generally prohibited under the SRRA from auditing an RAO.  SRRA does provide for certain re-openers, however, that would allow an audit of an RAO after the end of the three-year period. In particular, after three years, an RAO could still be audited if: (1) undiscovered contamination is found on a site for which an RAO has been filed; (2) the Board conducts an investigation of the LSRP who issued the RAO; or (3) the license of the LSRP who issued the RAO has been suspended or revoked by the Board.  This statutory requirement may be a good opportunity for the insurance markets to develop a product to cover the three year gap period.  And, it raises a number of questions about the client/LSRP relationship.  For example, who pays for the additional work if an RAO is rescinded and who pays other costs that may result from an audit? Once again, the provisions of SRRA underscore the need for careful legal drafting in any contract with an LSRP.

In addition, NJDEP also has the authority to invalidate an RAO issued by an LSRP if NJDEP determines that the remedial action is “not protective of public health, safety, or the environment” or if a presumptive remedy was not implemented as required.  A “presumptive remedy” is a required remedial action to be established by NJDEP for use at residential sites, child care centers and public, private or charter schools.  Click here to read more information about presumptive remedies under SRRA.  However, even if the presumptive remedy is not implemented as required, the RAO will not be invalidated by NJDEP so long as the actual remedial action utilized is determined by NJDEP to be as protective as the presumptive remedy.  Clearly, the provisions of SRRA provide a strong incentive to use a designated presumptive remedy if at all possible.

Remember: An NFA Was Always Subject to Reopeners

Of course, NFAs were also always subject to revocation and re-openers as well, though no one ever seemed to focus on that possibility.  NJDEP had the authority to rescind or modify an NFA and require additional remediation necessary to “[f]ully implement any site remediation regulatory program” and “[p]rotect the public health and safety and the environment.”  Failure to pay any uncontested oversight costs to NJDEP could also result in the rescission of an NFA.  In addition, the Department could ask for additional remediation post-NFA for an entire site or particular areas of concern if:

  •  a previously unknown pre-NFA discharge is discovered after the issuance of the NFA;
  • NJDEP adopts an amendment to a remediation standard that decreases the standard by an order of magnitude (i.e., 10 times) after the issuance of the NFA;
  • a previously unknown contaminant exposure pathway predating the NFA is identified after the issuance of the NFA;
  • the person with the obligation to comply with the conditions of the NFA fails to do so; or
  • other unspecified and undefined “factors” exist that demonstrate that the approved remediation is “no longer protective of public health, safety and the environment.”

NJDEP’s broad power to revoke an NFA for virtually any reason to “protect public health and safety and the environment” created some risk for current owners, tenants or operators of remediated property.  No one seemed to dwell on this eventuality, however.  Yet, under SRRA, the finality of an RAO has become a major issue of concern to the regulated community and their lenders.  NJDEP’s implementation of the audit program will either relieve or increase worries about the reliability of RAOs.

RAOs and Covenants Not Sue

Like a pre-SRRA NFA, each RAO will be accompanied by a Covenant Not to Sue (CNS). After an LSRP issues an RAO, the person responsible for conducting the remediation will be deemed, by operation of law, to have received a CNS for the subject remediated property. (N.J.S.A. 58:10B-13.2).  The RAO CNS is essentially the same as the CNS formerly issued by NJDEP with each NFA (the NFA CNS).  Any CNS will be subject to all conditions and limitations contained in the RAO.  An RAO CNS does not apply to subsequent discharges or afford any relief from compliance in the future with applicable environmental laws and regulations. As with the former NFA CNS, the protection from liability does not apply to any person liable for cleanup and removal costs under the Spill Compensation Control Act.

By operation of law (and except for parties liable for the remediation under the Spill Act), the RAO CNS offers a release from “all civil liability to the State to perform any additional remediation, to pay compensation for damage to, or loss of, natural resources, for the restoration of natural resources in connection with the discharge on the property or for any cleanup and removal costs;…” As with the NFA, the RAO CNS offers solid liability protection from future environmental issues at a remediated property to all future owners of the remediated property and to all persons who lease or otherwise engage in operations at the site.

An RAO CNS remains effective only as long as the subject property continues to meet the conditions of the RAO.  The RAO CNS is revoked by operation of law if any engineering or institutional controls are not maintained or are no longer in place.  Upon a finding by NJDEP of failure to meet the conditions of an RAO, NJDEP is required to provide notice to the responsible party and, at its discretion, NJDEP may allow a reasonable time to come into compliance with the terms of the original RAO.  If the property fails to meet the conditions of the RAO and if NJDEP does not allow a period to cure, the RAO CNS is deemed revoked by operation of law.  A revoked RAO CNS does not create retroactive liability, however, for any additional remediation for any person for whom the RAO CNS remained in effect during that person’s ownership, tenancy or operation of the subject property.  For example, if you sell a property subject to an RAO CNS and, one year later, the RAO is rescinded, you are still a protected party.  If you subsequently own or lease a property, however, and the existing RAO is rescinded during your ownership or tenancy, you would lose the liability protection of the RAO CNS.

Living with RAOs

As the LSRP program evolves, the utility and reliability of RAOs will come into better focus. With the audit and reopener provisions, all contracts between LSRPs, property owners and developers will need to be carefully drafted.  Although NFAs were always subject to revocation and re-openers, it appears more likely, at least in the interim implementation period, that the Board and its NJDEP staff will audit and question the validity of more RAOs than NJDEP’s previous efforts to review NFAs.  After the LSRP program becomes a fact of life in New Jersey, however, the regulated community and its lenders should become as comfortable with the RAO as with the NFA.

If you need assistance or have any specific questions, feel free to contact: 

  

Footnote:

  1. For purposes of the guidance an “environmentally sensitive natural resource” means: (a) all areas defined as “environmentally sensitive areas” pursuant to the “Discharges of Petroleum and Other Hazardous Substances” at N.J.A.C. 7:1E- 1.8(a) (see http://www.nj.gov/dep/rpp/brp/dp/downloads/NJAC_7_1E.pdf ), (b) areas and/or resources that are protected or managed pursuant to the Pinelands Protection Act, N.J.S.A. 13:18A-1 et seq. and the Pinelands Comprehensive Management Plan, N.J.A.C. 7:50, and (c) areas and/or resources that are protected or managed pursuant to the Highlands Water Protection and Planning Act, N.J.S.A. 13:20-1 et seq and the Highlands Water Protection and Planning Act Rules, N.J.A.C. 7:38.

Tagged: , , , , , , , , , , , , , , , , , , , , , , , , ,

Leave a Reply

What's this?

You are currently reading Site Remediation Reform Act: How Will a Response Action Outcome Issued by a Licensed Site Remediation Professional Differ From a No Further Action Issued by the NJDEP? at New Jersey Zoning and Land Use Law.