Site Remediation Reform Act: How will the Act Impact the ISRA Process?

September 30th, 2009 | Posted by: Christopher DeGrezia 0| comments:

DSC_0362Although the Site Remediation Reform Act (SRRA) will not have a dramatic impact on the Industrial Site Recovery Act (ISRA) program as it does with the remediation process in general, SRRA has not left the ISRA program untouched.  SRRA has added some additional options with respect to ISRA compliance.

Remediation Certification

The most significant new addition to ISRA is the opportunity to use a Remediation Certification, rather than a Remediation Agreement (formerly an Administrative Consent Order), to close a transaction prior to achieving ISRA compliance.  Until the enactment of SRRA, a party wishing to close a transaction prior to NJDEP’s approval of a remedial action workplan was required to enter into a Remediation Agreement.  The Remediation Agreement is a contract between NJDEP and a responsible party under which, in exchange for allowing the transaction to close prior to the satisfaction of ISRA requirements, the responsible party agrees to: (1) acknowledge the applicability of ISRA to the transaction; (2) subject itself to NJDEP’s regulatory authority, including potential penalties; (3) complete ISRA compliance post-closing; and (4) post a Remediation Funding Source.

The Remediation Agreement application process is relatively simple and NJDEP has a history of executing Remediation Agreements in a timely manner so as not to interfere with commercial transactions.  On receipt of a signed Remediation Agreement from NJDEP, the responsible party typically countersigns and returns the Remediation Agreement to NJDEP at the time of the closing and posts the Remediation Funding Source within 30 days after the closing.  Many, if not most, transactions subject to ISRA close pursuant to a Remediation Agreement.  Once the Licensed Site Remediation Professional (LSRP) program is up and running, the Remediation Certification process will allow a party subject to ISRA to avoid interacting at all with NJDEP in connection with a closing.

SRRA is not clear as to whether the Remediation Certification is to completely replace the Remediation Agreement.  As discussed below, it seems that a Remediation Certification is not appropriate when the closing of an ISRA-subject transaction must take place before any environmental investigation of a site has occurred.

The components of a Remediation Certification are substantially similar to those of a Remediation Agreement. They are:

  1. An estimate of the cost of the remediation prepared and certified by an LSRP;
  2. A certification of the statutory liability of the owner or operator to remediate the industrial establishment in accordance with NJDEP requirements;
  3. Evidence of the establishment of a Remediation Funding Source;
  4. A certification that the owner or operator of the industrial establishment is subject to the provisions of ISRA, including: liability for penalties; defenses and limitations to liability; the requirement to remediate; and allowing NJDEP access to the industrial establishment;
  5. An agreement to prepare and submit any document required by NJDEP relative to the remediation of the industrial establishment; and
  6. Evidence of the payment of all applicable fees.

The Remediation Certification seems to be intended to be a substitute for the Remediation Agreement.  The estimate of the cost of remediation, which is the basis for the amount of the Remediation Funding Source, could prove to be a significant limitation on the use of a Remediation Certification, however.  An LSRP will have little on which to base an estimate if the responsible party has not completed a remedial investigation and developed a remedial action workplan.  In the past, NJDEP has avoided this issue for Remediation Agreements by establishing $100,000 as the default amount for Remediation Funding Sources.  Through this mechanism, NJDEP has been able to issue Remediation Agreements early in the ISRA process, before the remedial action workplan is even being thought about and even prior to the completion of a Preliminary Assessment.  SRRA does not contain a provision that would allow an LSRP to certify that an arbitrary sum, such as $100,000, constitutes an estimate of the cost of remediation.  Our discussions with NJDEP, however, indicate that NJDEP may include a default amount for Remediation Funding Sources (probably the familiar $100,000 amount) in its regulations for Remediation Certification.

Remedy Selection

SRRA revises the ISRA process by no longer allowing property owners to implement a non-residential cleanup by using restricted use and limited restricted use remediation standards in every case. Other revisions to ISRA include acknowledgement of NJDEP’s power to require presumptive remedies and “hot spot” removal. SRRA also amends ISRA to allow the person responsible for remediation to proceed with both soil and groundwater remediation under the supervision of an LSRP without NJDEP oversight.

Letter of Credit

Another impact of SRRA on the ISRA process relates to Remediation Funding Sources.  The letter of credit, a popular form of Remediation Funding Source that was lost to the regulated community in 1993, has been reinstated.  In 1993, under prior ISRA reform legislation, the letter of credit financial assurance mechanism was replaced by the line of credit Remediation Funding Source.  Lines of credit proved to be less popular with financial institutions than the former irrevocable standby letter of credit.  In response to popular demand, the Legislature has restored the letter of credit to supplement the line of credit as a Remediation Funding Source option.

Response Action Outcome

The other major change to ISRA made by SRRA is the recognition of the Response Action Outcome (RAO) as a substitute for an NJDEP No Further Action Letter (NFA).  The issuance of a RAO by an LSRP serves to document compliance with ISRA.  The filing of the RAO with NJDEP by the LSRP is the final action for an ISRA case.  Click here to for more information on the distinctions between RAOs and NFAs.

NJDEP’s revisions to the ISRA regulations, required to be issued by November 3, 2009, will undoubtedly highlight additional impacts of SRRA on ISRA.

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