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In re Railroad Realty Associates

313 N.J. Super. 225, 712 A.2d 1165 (App. Div. 1998)

ENVIRONMENTAL LIABILITY; NEGATIVE DECLARATIONS—The New Jersey Department of Environmental Protection is under no obligation to rescind previously issued “negative declarations” even if failing to do so increases the financial burden of remediation on the current property owner.

The New Jersey Industrial Site Recovery Act (ISRA), previously known as the New Jersey Environmental Cleanup Responsibility Act (ECRA), requires owners and operators of industrial establishments to demonstrate that the property is environmentally sound as a precondition to sale or transfer of the property or the closure of a business. This precondition may be met through submission to the Department of Environmental Protection (DEP) of either a “negative declaration” or a “remedial action workplan.” A “negative declaration” is a written declaration, submitted by the owner or operator of an industrial establishment or other person assuming responsibility for the remediation to the DEP certifying that there has been no discharge of hazardous wastes on the site, or that any such discharge has been remediated in accordance with procedures approved by the DEP and in accordance with applicable remediation regulations.

When the current owner of a property undertook to sell it, hazardous contaminants were discovered at the site. Rather than wait until remediation requirements were satisfied, the seller submitted an application to the DEP for an administrative consent order which, together with adequate financial assurance that the clean-up would eventually be carried out, would permit the sale. An administrative consent order was issued and the seller posted a surety bond. Subsequently, the seller declared bankruptcy and DEP directed the surety company to perform under the surety bond.

The provisions of ISRA or ECRA applied not only when the seller acquired the property, but also when its seller acquired the property. At the time of each of those earlier transactions, the seller applied for, and obtained, a “negative declaration.” The negative declarations were issued by DEP based upon the submissions of the then sellers and upon a site inspection by DEP. In neither case was any ground water or soil sampling done. As a result, the surety alleged that the negative declaration should not have been issued in the first place because the DEP’s own regulations require ground water and soil sampling and that the DEP’s refusal to rescind the negative declarations was arbitrary, capricious, and unreasonable and not supported by substantial credible evidence. In substance, if the negative declarations were rescinded, the earlier sellers would be required to join in the site remediation.

The Court found that the DEP has no obligation to rescind negative declaration approvals previously issued nor does DEP have the authority to relieve parties of their obligations under ISRA. Decisions of this kind are extraordinary relief which may be granted only in the rarest of circumstances, none of which was present in this case. Just because prior case law affirmed decisions by the DEP to rescind two particular negative declarations, did not mean that the DEP is obligated to rescind a negative declaration. In each of the cited earlier cases, the parties had made affirmative misrepresentations regarding the condition of the property in the documentation submitted to DEP in support of its negative declaration. Here, the DEP, as the “expert authority” had the discretion to decide the degree of testing to be done at a particular property, provided that it complied with law and its own regulations. The record in this case did not disclose that the DEP failed to follow prevailing law in approving the negative declarations. Also, approval or rejection of negative declarations is an action which is uniquely within the DEP’s province of expertise. The Court refused to usurp such an executive function by deciding that the DEP’s actions were clearly erroneous. In its words, “[w]here reasonable minds may differ, an agency’s action will not be disturbed if it was undertaken honestly and upon due consideration, even though others might have reached a different conclusion.” Lastly, the Court rejected the surety company’s assertion that the DEP is obligated, as a matter of law, to rescind a negative declaration issued to a former landowner upon the request of a successor, where the DEP seeks to impose environmental remediation costs upon the successor. Even if the current owner or operator is not responsible for the contamination, it may be held responsible for the clean-up. This is because the statute focuses on the environmental wrong, not the wrongdoer. Identification of the polluter plays no part in the ISRA process, which imposes a “self-executing duty to remediate.”


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