Greenbaum Rowe Smith & Davis Newsletter

New NRD Legislation Offers Protection for Developers and Redevelopers of Brownfields

By Robert S. Goldsmith, Esq. and Robert Beckelman, Esq.

 

On January 20, 2005, Governor Codey signed into law amendments (“Amendments”) to the New Jersey Spill Compensation and Control Act (“Spill Act”) that offer protection to innocent purchaser developers from natural resource damages (“NRD”) claims. The Bill had previously passed the Assembly by a vote of 77-0 and the Senate by a vote of 40-0.

 

Recognizing the need to encourage remediation and redevelopment of Brownfields, the Amendments offer protection for innocent purchasers from liability for NRDs. The Amendments provide that a person who acquires contaminated property on or after January 6, 1998, shall not be liable for NRDs in connection with the discharge of hazardous substances on the property in the following circumstances:


  1. The property was acquired after the discharge;

  2. The person is not in any way responsible for the discharge and is not a corporate successor to a person in any way responsible for the discharge or otherwise liable for cleanup under the Spill Act; and

  3. The person has not expressly assumed liability for payment of compensation specifically for damages to or loss of natural resources caused by a discharge.


 

The Amendments also provide that any person who acquires property on or after January 6, 1998, shall not be liable for discharges of hazardous substances that have migrated from the property under the following circumstances:


  1. The property was acquired after the hazardous substance discharge;

  2. The person is not in any way responsible for the discharge and is not a corporate successor to a person in any way responsible for the discharge or otherwise liable for cleanup under the Spill Act;

  3. The person can demonstrate through a remedial investigation that the offsite contamination originates from more than one source and that remedial action of the offsite contamination is not necessary to limit the risk to the public health and environment; and

  4. The person has not voluntarily assumed liability from the person liable for cleanup and removal costs for the offsite contamination caused by a discharge that has migrated from the property prior to the person’s acquisition of the property.


 

Finally, the Amendments extend the scope of no further action letters and covenants not to sue, noting that, in addition to a release from liability for NRD, such covenants shall further release a

party from liability for restoration of natural resources.

 

The protections offered by the Amendments should have a significant impact in encouraging remediation of Brownfields, particularly in the context of redevelopment. Without these Amendments, there was a great deal of uncertainty for innocent purchaser developers as to what level of remediation commitment would be assumed in developing Brownfields and what was required for a no further action letter. There was no concrete assurance concerning potential exposure for NRDs. Indeed, beginning in 2003, the New Jersey Department of Environmental Protection (“NJDEP”) implemented a policy to address a large number of potential NRD claims across the State. Although the NJDEP had later issued policy directives that recognized the importance of encouraging redevelopment of Brownfields and provided for an exception from liability for developers meeting the innocent purchaser exemption under the Spill Act, such directives were subject to change and discretionary application by the NJDEP. The Amendments remove this cloud of uncertainty.

 

The impetus for the adoption of the Amendments was, in large part, influenced by a situation in the South Bound Brook redevelopment of the GAF property in which Matzel & Mumford had proceeded to undertake extensive remediation obligations. Matzel & Mumford has been negotiating for a no further action letter and covenant not to sue with the NJDEP for more than a year. Meanwhile, in an effort to address this and many similar situations in which many would-be purchasers/developers of Brownfields faced huge uncertainty, risks, and potential liability, the Bill to amend the Spill Act was introduced. Thereafter, the Bill’s sponsors, Assemblymen Christopher Bateman and John F. McKeon and Senator Henry P. McNamara, engaged in extensive negotiations with the Commissioner of the NJDEP and NJDEP Chief Counsel.

 

Mayor Jo-Anne B. Schubert of South Bound Brook, David B. Fisher of Matzel & Mumford, Colin Driver, redevelopment consultant to South Bound Brook, and attorneys Robert S. Goldsmith, Esq., of Greenbaum, Rowe, Smith & Davis LLP, and George Tyler, Esq. Of Tyler & Carmeli, P.C., were instrumental voices for the adoption of the Amendments. While the Amendments are not perfect and continue to impose some burden and level of potential risk upon innocent purchasers, it is a vast improvement and offers some concrete and substantial protection for innocent purchasers who previously had absolutely no assurance that they would not be subjected to liability for NRDs.