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TAC Associates v. New Jersey Department of Environmental Protection

408 N.J. Super. 117, 973 A.2d 969 (App. Div. 2009)

ENVIRONMENTAL REGULATIONS; INNOCENT PARTY GRANTS — New Jersey’s Economic Development Authority cannot modify the definition of an “innocent party” under the Innocent Party Grant program to include a requirement of continued ownership because to do so would be inconsistent with the authorizing statute.

The New Jersey legislature enacted a special fund for the purpose of financing remediation activities at sites where there are discharges or suspected discharges of hazardous substances. The New Jersey Department of Environmental Protection (NJDEP) and the New Jersey Economic Development Authority (EDA) were designated as the two state agencies responsible for the administration of the remediation funds. NJDEP was to review applications to determine if the applicant is eligible for a grant, and final approval of the application is made by the EDA. As part of the fund, the legislature established an Innocent Party Grant (IPG) to help to defray remediation costs for property owners of contaminated property. Grants were also made available under the IPG program to property owners of real property at which there was a discharge if that person qualified for an IPG. To qualify as an “innocent party” pursuant to the statute, a person must have acquired its property before December 31, 1983, not used the hazardous substances found at the site, and not discharged any hazardous substances within the area where a discharge is discovered. In administering the program, the EDA promulgated regulations defining an “innocent party” for the purposes of an IPG and that definition mirrored the statutory definition.

In 2006, the EDA modified its regulations by revising the definition of “innocent party” to require that the person not only must have acquired the property before December 31, 1983, but also must have continued to own the property at least until the EDA rendered final approval of the application. A particular applicant applied for an IPG and would have qualified for it under old EDA regulation, but not under the revised regulation that required continued ownership of the contaminated property throughout the application process.

The applicant appealed and the Appellate Division reversed, rejecting the NJDEP’s argument that the modified EDA regulation was consistent with the statutory scheme. It found that the EDA regulation was intended to modify the definition of an “innocent party” contained in the statute, and that the inclusion of a requirement of continued ownership was inconsistent with the statute. The Court concluded that because the regulation excluded a class of individuals that were envisioned by the legislature as being eligible for a grant, the regulation must be invalidated. It rejected the NJDEP’s and EDA’s argument that there were strong public policy concerns advanced by requiring an applicant to continue owning the property during the remediation process. The Court noted that while there may be legitimate public policy concerns, it is the legislature’s role to modify the statute if it so chooses in order to address those concerns and not the agencies’ or court’s role.

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