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Site Remediation Reform Act of 2009 Creates Significant Changes to Site Cleanups in New Jersey

June 2009

On May 7, 2009, Governor Corzine signed into law the Site Remediation Reform Act (the "Act") which introduces sweeping changes to the administration of site cleanups in New Jersey. Among other important changes to existing environmental laws, the Act introduces a licensed site remediation professional ("LSRP") program modeled under a program that has been operating in Massachusetts for a number of years. One of the key objectives of the Act is to streamline the regulatory closure process for the more than 20,000 known contaminated sites across New Jersey by allowing LSRPs, instead of the New Jersey Department of Environmental Protection ("NJDEP"), to oversee site cleanups. The Act introduces many new issues that the regulated community will need to address over the months and years to come. The NJDEP is scheduled to adopt interim regulations in November 2009; however, it is anticipated that many issues may take years to mature since promulgation of permanent regulations is not projected until May 2011. The devil will be in the details of the implementing regulations to be issued by NJDEP. These details will need to be considered when negotiating purchase and sale, environmental services, and access agreements.

Timing

By August 5, 2009, the NJDEP must establish a temporary LSRP licensing program and issue guidelines for applying for temporary licensure. By November 3, 2009, the NJDEP must adopt interim rules and regulations establishing a program that provides for the responsibilities of persons responsible for conducting a cleanup. These interim rules will be effective immediately and will stay in effect for up to 18 months, during which time the NJDEP is required to promulgate final rules. As a general matter, any person who initiates a cleanup of a contaminated site after May 7, 2009 must hire an LSRP to perform the cleanup and notify the NJDEP of the name and license information of the LSRP -- however, during the interim period between May 7, 2009 and November 3, 2009, responsible parties need to evaluate options for regulatory oversight given that LSRPs will not exist until at least November 3, 2009 and the NJDEP is no longer entering into a Memorandum of Agreement. Parties that initiated cleanups prior to May 7, 2009 have until May 7, 2012 to either complete the cleanup or hire an LSRP to oversee the cleanup. For existing cases with the NJDEP, there are advantages to opt-into the LSRP program (e.g., a more efficient review and approval process); however, there are real pitfalls as well - responsible parties need to weigh the risks and rewards carefully.

LSRP Duties

The Act states that an LSRP's highest priority in the performance of professional services shall be the protection of public health and safety and the environment. The LSRP must certify that the investigation and cleanup work was performed consistent with all applicable cleanup requirements of the NJDEP. As drafted, the degree of subjective discretion that can be exercised by an LSRP is not clear, and appears limited.

When, in the opinion of the LSRP, the site has been remediated so that it is in compliance with all applicable cleanup requirements, the LSRP shall issue a response action outcome ("RAO"), which will be the statutory equivalent to the No Further Action letter. Upon issuance of an RAO, a covenant not to sue ("CNS") issues as a matter of law.

The Act imposes a myriad of reporting obligations upon LSRPs that will likely create tensions between LSRPs and their clients. The dual role of an LSRP as both a client advocate and an NJDEP police officer will undoubtedly affect the client-consultant relationship.

Mandatory Timeframes

The NJDEP is required to establish mandatory cleanup timeframes, and expedited site specific timeframes, when necessary, to protect the public health and safety and the environment. The imposition of mandatory timeframes is consistent with one of the main objectives of the Act, which is to expedite cleanups. In addition, the Act will limit a client's ability to "mothball" sites.

Engineering and Institutional Controls Permit Program

The NJDEP must establish a permit program to regulate the operation, maintenance and inspection of engineering or institutional controls installed as part of a remedial action of a contaminated site. The NJDEP also may require that the person issued such a permit maintain financial assurance to guarantee that funding is available to operate, maintain, and inspect the engineering controls.

NJDEP Inspection and Review of Documents

The NJDEP is required to "inspect" all documents submitted by an LSRP. It is envisioned that NJDEP will develop a screening procedure to ensure general compliance with the Act and implementing regulations. While the NJDEP has discretion to perform additional review of documents, it must review at least 10 percent of all documents submitted annually by LSRPs as well as documents pertaining to certain high risk sites (i.e., child care centers, schools, and other sensitive populations).

NJDEP Re-Opener

The NJDEP must invalidate an RAO issued by an LSRP if the NJDEP determines that the remedial action is not protective of public safety, health or the environment or if a presumptive remedy is not implemented. The NJDEP shall not audit an RAO more than three (3) years after the date the LSRP filed the RAO unless new contamination is identified at the site, or the LSRP is the subject of an investigation or has had his/her license suspended or revoked. This re-opener raises issues of finality, especially in the 3-year audit window, and should be considered during transaction negotiations and during the LSRP selection process.

NJDEP Direct Oversight

The Act directs NJDEP to undertake direct oversight of a cleanup of a contaminated site if the person responsible for conducting the cleanup: (1) has a history of noncompliance with the laws concerning cleanup that includes the issuance of at least two enforcement actions after the date of the Act during any five year period; (2) has failed to meet a mandatory cleanup timeframe or an expedited site specific timeframe; or (3) has, prior to the Act, failed to complete the remedial investigation of the entire contaminated site 10 years after the discovery of a discharge at the site and has failed to complete the remedial investigation within 5 years after the date of the Act. The NJDEP has discretion to undertake direct oversight of a cleanup of a contaminated site in several other circumstances.

For sites under direct NJDEP oversight, the Act authorizes NJDEP to review all submissions, as under the current system, to select the remedy, and to require a remediation funding source in the form of a trust fund to guarantee completion of the cleanup. The message is clear: you don't want to be under NJDEP direct oversight.

Unrestricted Use Standards or Presumptive Remedies

The Act requires NJDEP to establish presumptive remedies which shall be based on the historic uses of the property, the nature and extent of the contamination, the future use of the site, and any other factors deemed relevant by the NJDEP. Alternate remedies may be proposed where the presumptive remedies are deemed to be impractical, however, alternate remedies can only be approved by NJDEP, which will inevitably result in significant delay.

The Site Remediation Reform Act will present many challenges (and opportunities) as the regulated community begins to navigate the new site remediation landscape in New Jersey. Buyers, sellers, and other interested parties are urged to exercise continued caution when negotiating agreements concerning contaminated properties in New Jersey.

For more information, please contact: Robert H. Crespi at (973) 530-2060 or via email at: rcrespi@wolffsamson.com or Todd W. Terhune at (973) 530-2091 or via email at: tterhune@wolffsamson.com.

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This Client Alert should not be construed as legal advice or a legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own lawyer concerning your specific situation or any legal questions you may have.