New Jersey Site Remediation Process to Change Significantly With Signing of New Law

Anyone who owns, finances, or is considering purchasing property in New Jersey needs to be aware of a new law that will significantly change the way in which sites are remediated in that state.

The Site Remediation Reform Act (SRRA, or Act), which was signed by New Jersey Governor Jon Corzine on May 7, 2009, attempts to address the significant backlog of environmental cases in New Jersey and streamline the site remediation process. The Act adopts a Licensed Site Remediation Professional (LSRP) Program, in which the LSRP, adhering to a Code of Conduct, will certify when a site has been remediated in a manner that is protective of human health and the environment and in accordance with state standards. In addition, the Act establishes direct oversight of certain high priority cases, in which the New Jersey Department of Environmental Protection (DEP, or Department) will take a very active role in selecting the remedy.

Upon signing the SRRA, the Governor also issued Executive Order No. 140, which addresses certain concerns raised by environmentalists, including the need to audit cleanups near sensitive populations, the need for annual reports, and the need for technical assistance grants for communities.

Many of the provisions of the Act became effective immediately. The Department is working expeditiously to establish temporary licensing provisions for the LSRPs and to provide interim guidance on various aspects of the new law.

The LSRP Program

The principal changes brought about by the Act include the following:

• The Act establishes an LSRP Program that will now oversee most cleanups in New Jersey. All new remediation cases must be directed to an LSRP after November 3, 2009, and all existing cases must be transitioned to an LSRP by May 7, 2012.
• Each LSRP must have 10 years of experience in the field. There will be two categories of LSRPs under the temporary licensing program, but only one under the permanent program.
• The Act creates a 13-member Licensing Board that will administer the licensing exam, adopt a Code of Conduct, act as a clearinghouse about LSRPs, and audit LSRP submittals. LSRPs are expected to take their responsibilities seriously, and may lose their licenses or incur significant penalties and fines if they fail to do so. Anyone may file a complaint about an LSRP with the Board.
• LSRPs will issue a Response Action Outcome (RAO) report in lieu of the state issuing a No Further Action (NFA) letter, and they are encouraged to exercise professional judgment under Section 14(c) of the Act.
• At least 10 percent of LSRP submittals will be audited. The state has three years after an RAO has been filed in which to audit a site.
• LSRPs must submit a Remediation Certification at sites subject to the Industrial Site Recovery Act (ISRA). LSRPs may also certify remedial action work plans.

Affirmative Duty to Remediate and Direct Oversight by DEP

• DEP will assume Direct Oversight of certain, high-priority cases, including cases involving “recalcitrant” parties and sensitive uses. An LSRP will still be involved, but it will submit its reports to DEP and the remediating party at the same time. DEP – rather than the LSRP – will select the remedy at those sites based upon the Feasibility Study. The responsible party must post remediation trust funds to guarantee performance and must prepare a public participation plan.
• There will be unrestricted or presumptive remedies for sensitive uses, such as residential property, day care facilities and schools.

Other Elements

• There will be stringent timeframes for accomplishing certain activities. Key goals include conducting a receptor evaluation, reporting any Immediate Environmental Concerns (IECs), and preparing a Preliminary Assessment/Site Investigation (PA/SI). Failure to meet one of the deadlines will result in Direct Oversight by DEP.
• The use of former landfills requiring leachate or methane collection will be limited.
• Anyone with knowledge of an IEC must report it to DEP immediately.
• DEP must rank and prioritize sites.
• Remediating parties must establish Remediation Funding Sources (RFS). If DEP is forced to draw on these funds, a lien may be placed on the property of the discharger and the person responsible for the funding source.
• Grants and loans will not be awarded from the Hazardous Discharge Site Remediation Fund (HDSRF) if the applicant has relinquished its rights to recover cleanup costs from the responsible party.
• There will be a permitting program and fees for engineering and institutional controls.
• Owners of underground storage tanks (USTs) may elect to use an LSRP or complete a remedial investigation/remedial action within three years.
• The statute of limitations for Natural Resource Damages (NRD) claims has been extended, so that claims must now be brought within five-and-a-half years of when a claim accrues, which can now be the later of January 1, 2002, or upon completion of the remedial action for the entire contaminated site. This extension will not affect expired NRD claims.

Aggressive Timeframes for Implementation

• Within two months, DEP must establish guidelines for sensitive use sites that will be subject to direct oversight.
• Within three months, DEP must issue guidance for presumptive remedies, issue the license application and fees, and provide the criteria for granting or denying a license.
• Within six months, DEP must publish the Interim Rules and initiate the LSRP Program. The Interim Rules, which will not be subject to public notice and comment, will remain in effect for eighteen months.
• Within twelve months, DEP must finalize the rules under the Act, as well as its site-ranking system.

What Does SRRA Mean for Property Owners?

If you have an existing open case, you will need to determine whether you are likely to fall within the Direct Oversight program or whether you can and should move forward “voluntarily” with an LSRP; you also will need to verify that your consultant has the appropriate experience for the task at hand. For example, if you are dealing with releases from a UST during the temporary licensing period, your LSRP will not have to have a bachelor’s degree, but must have relevant experience working with USTs. You may need to establish a RFS, such as a letter of credit, and you will need to take the Act’s timelines seriously. After November 7, 2009, if you initiate remediation (e.g., trigger an ISRA notification, identify a new discharge, prepare a key document such as a PA/SI), you must use an LSRP.

What Does SRRA Mean for Prospective Purchasers?

A prospective purchaser does not need to use an LSRP to conduct routine due diligence. Using a consultant who is not an LSRP may avoid some of the mandatory reporting obligations that might otherwise be triggered if an LSRP were involved. On the other hand, the work may need to be re-done at a later time using an LSRP if the prospective purchaser acquires the property and needs to remediate existing releases in accordance with DEP standards. If the prospective purchaser intends to use any brownfields funding for the project, it must be careful in its negotiations with the seller not to give away or waive any rights to recover cleanup costs from the seller or other responsible parties.

What Does SRRA Mean for Lenders?

Lenders will need to become comfortable with RAOs issued by LSRPs, because DEP will no longer be issuing NFA letters or Memoranda of Agreement (MOAs). Lenders need to understand whether contamination on a site will be addressed under the “voluntary” LSRP program or under the Direct Oversight program. Lenders should verify that the RFS is adequate given the anticipated nature and extent of the cleanup at the site. They should also confirm that no liens have been placed on the property of the discharger or the funding source if DEP has drawn upon the RFS. In addition, lenders should assess potential NRD claims.

Conclusion

The SRRA is modeled after the Massachusetts Licensed Site Professional (LSP) Program, which has worked successfully for more than a decade. The Act’s intent is to streamline the site remediation process and to place the highest priority on public health and safety and the environment. It will take some time for property owners and their lenders to become familiar with the new processes and procedures, but expectations are high that these changes will result in more and better cleanups, not fewer or less-robust cleanups.