January 1, 1900

by Nielsen V.Lewi

The Grandfathering Provision

On May 7, 2007, moving in a seemingly contradictory direction, the New Jersey Department of Environmental Protection (DEP) proposed rules incorporating extraordinarily stringent new site remediation standards for soils. The new soil cleanup standards include substantial changes in the required cleanup levels for many contaminants, especially with regard to soil impact to groundwater standards. For Brownfield redevelopers, the critical threshold question is whether they qualify for “grandfathering” protection from compliance with DEP’s onerous new cleanup standards.

The proposed new cleanup rules do include a grandfathering provision reading:

(d) The person responsible for conducting the remediation of a site shall remediate soil:

1. To meet the remediation standards at N.J.A.C. 7:26D; or
2. To meet the standards or criteria developed by the Department under N.J.S.A. 58:10B-12a for that site prior to [the effective date of N.J.A.C. 7:26D] provided: 

1. A remedial action workplan or a remedial action report containing standards or criteria developed for the site under N.J.S.A. 58:10B-12a is submitted “The proposed rules would frustrate a vital goal of the Brownfield Act.” to the Department before [the effective date of N.J.A.C. 7:26D plus 6 months];
2. The remedial action work- plan or a remedial action report meets the requirements of N.J.A.C. 7:26E-6; and
3. The standards or criteria developed by the Department under N.J.S.A. 58:10B-12a for the site are not greater by an order of magnitude or more, than the soil remediation standards otherwise applicable under N.J.A.C. 7:26D.

Inconsistency with Brownfield Act and Spill Act

In its comments, DEP explains its purported order of magnitude “re-opener” exception to grandfathering protection as follows: “When a new remediation standard is lower than a soil cleanup criterion by an order of magnitude or more, the Brownfield Act …mandates that the new standard must be used.” DEP’s explanation is legally incorrect because the referenced provision of the Brownfield Act is not a “mandate”; it is simply a limitation on DEP’s cleanup re-opener powers. More importantly, DEP’s explanation ignores other controlling provisions of the Brownfield Act and the Spill Compensation and Control Act (Spill Act). A relevant provision of the Brownfield Act states:

Upon the adoption of a regulation that amends a remediation standard, or where the adoption of a regulation would change a remediation standard which was otherwise approved by the department, only a person who is liable to cleanup and remove that contaminant pursuant to section 8 of P.L. 1976, c. 141 [the Spill Act], and who does not have a defense to liability pursuant to subsection d. of that section [N.J.S.A. 58:1023.11g. d], shall be liable for any additional remediation costs necessary to bring the site into compliance with the new remediation standards except that no person shall be so liable unless the difference between the new remediation standard and the level of concentration of contaminant at the property differs by an order of magnitude.

(ii) performed, following the effective date of P.L. 1997, c. 278 [January 6, 1998] a remediation of the site or discharge consistent with the provisions of section 35 of P.L. 1993, c. 139 (C. 58:10B12), or relied upon a valid no further action letter from the department for a remediation performed prior to acquisition, or obtained approval of a remedial action workplan from the department after the effective date of P.L. 1997, c. 278 and continued to comply with the conditions of that workplan, and

(iii) established and maintained all engineering and institutional controls as may be required pursuant to sections 35 and 36 of P.L. 1993, c. 139. [N.J.S.A. 58:10-23.11g.d(2)(d)]

shall not be liable for any cleanup and removal costs or for any damages to the State or to any other person for the discharged hazardous substance pursuant to subsection c. of this section [N.J.S.A. 58:10-23.11g.c] or pursuant to civil common law, if that person can establish by a preponderance of the evidence that [the foregoing innocent purchaser defenses apply].

To the same effect, the Brownfield Act mandates that NFA letters issued by DEP include a covenant not to sue containing:

(1) a provision releasing the person who undertook the remediation from all civil liability to the State to perform for 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;

(2) for a remediation that involves the use of engineering or institutional controls [a provision requiring continued maintenance and compliance with such controls].

As stated by the Legislature when enacting the Brownfield Act,

in order to encourage the cleanup of contaminated sites, there must be finality in the process, the provision of financial incentives, liability protection for innocent persons who clean up, cleanup procedures that are cost effective and regulatory action that is timely and effective. [N.J.S.A. 58:10B-1.2]

What Do the New Soil Cleanup Standards Mean for You?

Continued cleanup liability of innocent Brownfield redevelopers who voluntarily clean up (or purchase property relying on a prior cleanup and NFA letter) would deny the Brownfield Act’s promise of finality in cleanups by innocent persons. It would discourage the cleanup of contaminated sites by persons who did not contribute to the problem. The proposed rules would frustrate a vital goal of the Brownfield Act.

It is essential that the DEP redraft its proposed rules to specify that the “order of magnitude” exception to grandfathering protection against compliance with future cleanup standards does not apply to innocent purchasers who have defenses to liability under the Spill Act. In the meantime, parties considering the acquisition of Brownfield sites for redevelopment should consult with their legal advisors and environmental consultants to fully assess their cleanup liability exposure and defenses if they should close on a deal.

Nielsen V. Lewis is a partner of the firm’s Environmental Law Practice Group and a member of the Land Use Division. He concentrates his practice in the areas of environmental law, insurance law and land use, with an emphasis on prosecuting and defending complex environmental litigation.