Recovering NRD Assessment Costs under the New Jersey Spill Act

NATURAL RESOURCE DAMAGES ASSESSMENT COSTS UNDER THE NEW JERSEY SPILL COMPENSATION AND CONTROL ACT

William J. Jackson Lauren Held Harris

Houston, Texas

www.jgdpc.com

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I. Introduction

The New Jersey Spill Compensation and Control Act (“Spill Act”), N.J.S.A. 58:10-23.11 et seq, was enacted as “a pioneering effort by government to provide monies for a swift and sure response to environmental contamination.”1 The New Jersey Legislature declared:

That New Jersey’s lands and waters constitute a unique and delicately balanced resource; that the protection and preservation of these lands and waters promotes the health, safety and welfare of the people of this State; that the tourist and recreation industry dependent on clean waters and beaches is vital to the economy of this State; that the State is the trustee, for the benefit of all its citizens, of all natural resources within its jurisdiction ….2

Many aspects of the Spill Act evolved from the public trust doctrine under common law. The public trust doctrine provides that “the State is responsible, as trustee of the state’s natural resources, to manage these natural resources for the benefit of the present and future citizens of New Jersey.”3 The State has a fiduciary obligation to seek restitution when any of the State’s natural resources are injured or otherwise impaired as a result of a discharge of hazardous substances.4

II. Cleanup and Removal Costs under the Spill Act

In addition to the common law claims that may secure restitution for natural resource damages or for injury to or loss of use of those natural resources, the New Jersey Spill Act permits recovery of natural resource damages and the costs of assessing those damages. The Act “is quite comprehensive in its scope” and vests the New Jersey Department of Environmental Protection (“NJDEP”) with broad implied powers.5 NJDEP has three means of response to a discharge of a hazardous substance:

(1) NJDEP can utilize monies from the Spill Fund to clean up a discharge of hazardous substances and bring an action to recover its costs;

(2) NJDEP can direct the discharger6 to clean up or arrange for the cleanup of the discharge; and

1 Marsh v. N.J. Dep’t of Envtl. Prot., 152 N.J. 137, 144 (1997).

2 N.J.S.A. 58:10-23.11a.

3 Arnold v. Mundy, 6 N.J.L. 1, 10 Am. Dec. 356 (1821).

4 N.J. v. Jersey Cent. Power & Light Co., 125 N.J. Super. 97 (1973), aff’d, 133 N.J. Super. 375 (App. Div. 1975), rev’d on other grounds, 69 N.J. 102 (1976).

5 Dep’t of Envtl. Prot. v. Ventron Corp., 94 N.J. 473, 496-97 (1983).

6 Under the Spill Act, a “discharger” is defined as a person who discharged a hazardous substance or was in any way responsible for such hazardous substance. In re Kimber Petroleum Corp., 110 N.J. 69, 72 (1988).

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(3) NJDEP can require the discharger to pay for cleanup and removal costs prior to remedial action.7

To enforce the Spill Act, NJDEP may bring a civil action against any discharger of a hazardous substance.8 Pursuant to Section 58:10-23.11u(b), NJDEP may commence a civil action in Superior Court for the following, either singly or in combination:

(1) a temporary or permanent injunction;

(2) the costs of any investigation, cleanup or removal, and for the reasonable costs of preparing and successfully litigating an action under this subsection;

(3) the cost of restoring, repairing or replacing real or personal property damaged or destroyed by a discharge, any income lost from the time the property is damaged to the time it is restored, repaired or replaced, and any reduction in value of the property caused by the discharge by comparison with its value prior thereto;

(4) the cost of restoration and replacement, whether practicable, of any natural resource damage damaged or destroyed by a discharge; and

(5) any costs incurred by the department pursuant to [the Spill Act].9

Those dischargers are “strictly liable, jointly and severally, without regard to fault for all cleanup and removal costs no matter by whom incurred.”10 “Cleanup and removal costs” are expressly defined in the Act as:

All direct costs associated with a discharge, and those indirect costs that may be imposed by the department pursuant to [N.J.S.A. 58:10B-2.1] associated with a discharge, incurred by the State or its political subdivisions or their agents or any person with written approval from the department in the: (1) removal or attempted removal of hazardous substances, or (2) taking of reasonable measures to prevent or mitigate damage to the public health, safety or welfare, including but not limited to, public and private property, shorelines, beaches, surface waters, water columns and bottom sediments, soils and other affected property, including wildlife and other natural resources ….11

In addition to the definition of “cleanup and removal costs” in Section 58:10-23.11b, the New Jersey Supreme Court explained that “cleanup and removal costs” also include those costs and

7 In re Kimber Petroleum Corp., 110 N.J. 69, 74-75, appeal dism’d, 488 U.S. 935 (1988).

8 N.J.S.A. 58:10-23.11u(a)(1); N.J.S.A. 58:10-23.11g(c).

9 N.J.S.A. 58:10-23.11u(b)(1)-(5).

10 N.J.S.A. 58:10-23.11g(c)(1).

11 N.J.S.A. 58:10-23.11b.

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damages listed in 58:10-23.11g.12 Those additional cleanup and removal costs include, but are not limited to, the following categories of costs and damages:

(1) The cost of restoring, repairing or replacing any real or personal property damaged or destroyed by a discharge, any income lost from the time such property is damaged or destroyed by a discharge, any income lost from the time such property is damaged to the time such property is restored, repaired or replaced, and any reduction in value of such property caused by such discharge by comparison with its value prior thereto;

(2) The cost of restoration and replacement, where possible, of any natural resource damaged or destroyed by a discharge; and

(3) Loss of income or impairment of earning capacity due to damage to real or personal property.13

At least one party has argued that the New Jersey Supreme Court’s definition of “cleanup and removal costs” in In re Kimber was dicta and based on a misreading of the statute.14 It claimed that a subsequent case, Lacey Muni. Util. Auth. v. Dep’t of Envtl. Prot., 312 N.J. Super. 298, 308-309 (App. Div. 1998), aff’d as mod., 162 N.J. 30 (1999), acknowledged that the statutory definition found in 58:10-23.11b controls the analysis of what constitutes a “cleanup and removal cost.” Yet, Lacey in no way commented upon the Supreme Court’s definition of “cleanup and removal costs.”15 Moreover, the Appellate Division recently noted that the congruity between Sections 58:10-23.11g and 58:10-23.11u permits NJDEP to seek recovery of the cost of restoration and replacement of natural resource damages as cleanup and removal costs.16 Regardless of whether the Supreme Court’s definition of “cleanup and removal costs” was dicta in In re Kimber, the courts have concluded that Spill Act’s expansive definition of “cleanup and removal costs” is “intended to expand, not contract, the agency’s abilities to recovery compensatory damages from polluters.”17

III. Natural Resource Damages Assessment Costs are Cleanup and Removal Costs for which Dischargers are Strictly, Jointly and Severally Liable Under the Spill Act

The language of the Spill Act and the case law makes clear that the costs of assessing natural resource damages are “cleanup and removal costs” for which dischargers are jointly and

12 In re Kimber Petroleum Corp., 110 N.J. at 85; N.J.S.A. 58:10-23.11g(a)(1), (2).

13 Id.; N.J.S.A. 58:10-23.11g(a)(1), (2), (3); N.J.S.A. 58:10-23.11u.

14 See Docket No. UNN-L-3026-4, Dep’t of Envtl. Prot. v. Exxon Mobil Corp., Def.’s Br. in Supp. of Cross-Mot. for Summ. J. and Reply Br. in Supp. of same.

15 312 N.J. Super. at 308-09.

16 Exxon Mobil, 393 N.J. Super. at 404-05.

17 Id.

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severally liable. Under 58:10-23.11b, “cleanup and removal costs” include “all costs associated with a discharge.” Moreover, 58:10-23.11g further defines “cleanup and removal costs” to include the costs of restoration of natural resources damaged or destroyed by a discharge, and 58:10-23.11u provides that NJDEP may file suit to recover “the costs of any investigation, cleanup or removal and the for the reasonable costs of preparing and successfully litigating an action under [the Spill Act]” and any other “any costs incurred by the department [NJDEP] pursuant to [the Spill Act].”18

Consistent with the language of the Spill Act, New Jersey courts have held that the definition of cleanup and removal costs is sufficiently broad to encompass NJDEP’s power to assess damages caused to natural resources.19 As the court in Exxon Mobil explained:

The Spill Act vests DEP with broad implied powers. And if such a power is implied, it is just as effective as if it had been expressed. Moreover, given the obvious remedial purposes of the statutory scheme, [Exxon’s] insistence on such a strict interpretation, which leaves the public less than whole for its loss, is unwarranted.

Rather, lending the Act an expansive reading necessary to accomplish its goals, the definition of “cleanup and removal costs” is sufficiently broad to encompass DEP’s power to assess damages caused to natural resources and to require compensation for their loss of use.

…

[I]f recoverable damages are limited merely to physical restoration, the amount of compensation would have no relation at all to the period of lost use. Such a limiting view of DEP’s authority not only fails to make the public whole for its loss, but creates a disincentive for polluters to undertake timely remedial action. It is, simply put, inconsistent with the purpose and obvious meaning of the Act. We conclude therefore that “restoration and replacement” requires the return of natural resources to their pre-discharge condition, and the replacement of natural resource “services” lost in the interim.20

Accordingly, the definition of “cleanup and removal costs” must be “sufficiently broad to encompass the DEP’s power to assess damages caused to natural resources and to require remediation.”21 By enacting such environmental legislation, the Legislature commanded that those who pollute the environment finance studies to determine the environmental effects of their 18 N.J.S.A. 58:10-23b.

19 E.I. du Pont de Nemours & Co. v. Dep’t of Envtl. Prot., 283 N.J. Super. 331, 341 (App. Div. 1995); New Jersey Guild of Hearing Aid Dispensers, 75 N.J. 544, 562 (1978).


21 New Jersey Site Remediation Ind. Network v. Dep’t of Envtl. Prot., Civ. No. A-5272-97T3, 2003 WL 22053346, * 10 (App. Div. April 17, 2000).

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conduct.22 Thus, it is clear that the costs of assessing any damages to New Jersey’s natural resources resulting from a discharge of hazardous substances constitute “cleanup and removal costs” for which a discharger is strictly, jointly and severally liable.

Moreover, NJDEP has the discretion under the Spill Act to require responsible polluters to pay for cleanup and removal costs prior to remedial action.23 The fact that a discharger may not know at the outset exactly how much NJDEP may recover for costs is of no consequence because the discharger would be liable for such costs anyway.24 While the NJDEP could wait to seek compensation for such costs, there is no requirement that they wait until after the cleanup is completed.25 The New Jersey Supreme Court’s definition of “cleanup and removal costs” and the principle of interpreting the Spill Act to give broad effect to its purpose fully support the inclusion of natural resource assessment costs within “cleanup and removal costs” under the Spill Act.

Likewise, the cost of assessing natural resource damages is part of “prevent[ing] or mitigat[ing] damage to the public health, safety or welfare, including … wildlife and other natural resources.”26 The State can only be made whole when it recovers the costs of assessing natural resource damages.27 Through its public initiative regarding natural resource damages, NJDEP has made clear its interpretation of the Spill Act as including costs of natural resource damages assessment, and the Legislature has not acted to correct the NJDEP in any way.28 Thus, NJDEP may recover the costs of assessing natural resource damages as cleanup and removal costs prior to any remedial action, and a discharger is strictly, jointly and severally liable for such costs.29

IV. Anticipated Responses from Dischargers

Dischargers may respond that they are not jointly and severally liable for the costs of assessing natural resource damaged based on Sections 58:10-23.11g(a) and 58:10-23.11u, by arguing that natural resource damages assessment costs sought under -11u are not “cleanup and removal costs” as defined in Section 58:10-23.11b, and therefore, joint and several liability does not apply. However, and as discussed above, the Supreme Court’s definition of “cleanup and removal costs” includes those costs and damages set forth in Sections 58:10-11g and 58:10-

22 Dep’t of Envtl. Prot. v. Lewis, 215 N.J. Super. 564, 578 (App. Div. 1987).

23 In re Kimber Petroleum Corp., 110 N.J. at 74.

24 E.I. du Pont, 283 N.J. Super. at 353-54; N.J.S.A. 58:10-23.11q.

25 See New Jersey Site Remediation Industry Network, 2003 WL 22053346 * 11.

26 See id.; In re Kimber Petroleum Corp., 110 N.J. at 74.

27 See id.

28 See id.

29 See id.

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23.11u and defeats this argument.30 Furthermore, the Exxon Mobil court dismissed an attempt to limit the definition of “cleanup and removal costs” to the exclusive definition in Section 58:10-23.11b.31

Another way dischargers may respond would be to argue that natural resource damage assessment costs are costs of “restoration and replacement” of any “natural resource damaged or destroyed by a discharge” and further argue that NJDEP is required to prove some element of causation in order to recover the costs of natural resource damages assessment. In other words, the argument would posit that a discharger cannot be jointly and severally liable for natural resource damages assessment costs because they must be apportioned according to the party whose discharge caused the natural resource damage. This argument is also weak in that it requires the court to read into “damaged or destroyed” a causation element that is not permitted by the express strict, joint and several liability imposed by the Spill Act.32 Because the New Jersey Legislature “did not leave room for judicial case-by-case analysis” under the Spill Act, any sort of divisibility defense based on causation is not viable in Spill Act cases.33

V. Conclusion

The Spill Act is a powerful tool for the State of New Jersey to restore and protect its natural resources. Through the New Jersey courts’ broad construction of its provisions and powers, the State is made whole from the damages resulting from the discharge of hazardous substances. The costs of assessing the exact nature and extent of the damage to New Jersey’s natural resources are recoverable under the Spill Act as a reflection of the intent that those who poison the land pay for its cure.

30 In re Kimber Petroleum Corp., 110 N.J. at 85.


32 U.S. v. Rohm & Haas, 939 F. Supp. 1142, 1156 (D.N.J. 1993) (“no court applying the Spill Act has applied the divisibility rationale”); Dep’t of Envtl. Prot. v. Ventron Corp., 94 N.J. at 473, 501-02 (1983) (Spill Act liability is strict and joint and several in all cases regardless of fault); Exxon Mobil, 393 N.J. Super. at 404 (“in discerning the breadth and scope of ‘cleanup and removal costs’, [the Spill Act] should not be read in isolation, but as part of the statutory scheme as a whole”).

33 Rohm & Haas, 939 F. Supp. at 1156.

Recovering NRD Assessment Costs under the New Jersey Spill Act

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