1. Understanding Site Remediation in New Jersey
Steven M. Dalton
Co-Chair
Remediation Practice Group
Giordano, Halleran & Ciesla
May 17, 2017
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2. Statutory Power Source
Site Remediation Reform Act
(NJAC 58:10C)
Privatizes the remediation approval process
LSRPs replace DEP in “approving” remediation strategies
LSRPs may issue Response Action Outcome (RAO), which replace the old “NFAs”
LSRPs cannot issue permits
Affirmative obligation to remediate
Mandatory / regulatory remediation timeframes
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3. The New Program: Expectations v. Reality
Expectation: Would Privatization Work? Reality: Home Run 641 LSRP’s +9,500 RAO’s / 301 Withdrawn / 9 Invalidated
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4. Deciphering New Rules (Three competing frameworks)
Site Remediation Reform Act
(NJAC 58:10C)
Technical Regulations for Site Remediation
(NJAC 7:26E)
Administrative Requirements for Remediation
(ARRCs Rules NJAC 7:26C)
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5. Technical Regulations (NJAC 7:26E)
“Technical Regulations for Site Remediation”
The LSRP’s “playbook and rulebook”
What has to be sampled?
Where do we have to sample?
How to complete RE/PA/SI/RI/RAW
What remedies are legal?
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6. Things are SO Different Now.
Radical Change?
The LSRP Program:
Things are SO Different Now.
(Really)?
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7. What is the Same? INDUSTRIAL SITE RECOVERY ACT (ISRA)
Industrial Establishments still need clearance
Know the Scope: Site wide v. Limited Leasehold
Letters of Non-Applicability unavailable
De minimis Quantity Exemptions are available
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8. What is the Same? Funding Sources are still required under ISRA
Minimum $100,000 where soil contamination exists
Minimum $250,000 for groundwater contamination
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9. What is the Same? (ISRA Under the New Law)
What “ISRA Approval” is Needed to Close a Deal?
Remedial Action Workplan (LSRP certifies)
De minimis Quantity Exemption (DEP issues)
Response Action Outcome (LSRP certifies)
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10. Financing Issues
Lenders are accepting RAOs and LSRP Certifications instead of No Further Action Letters
Legal Opinions frequently required confirming effectiveness of RAO
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11. Closing Deals Prior to Cleanup
Remediation Certifications
Replace “Remediation Agreements” under ISRA
LSRP completes the Certification Form
No pre-closing approval by DEP (time saver)
Funding Source must now be posted pre-closing
DEP review may occur post-closing
Cost Estimate is prepared by LSRP
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12. Due Diligence and Innocent Purchaser Protection
When: Pre-closing & allocate time
Why: Assess Risk Exposure & Affirmative Defenses
What: Deal & Issue Specific
Who: LSRP v. Non-LSRP
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13. Due Diligence General Concerns:
Environmental Liability Exposure: Inherited liability - Joint and Several, Strict Liability Without Regard To Fault for remediation costs, off-site contamination, NRD.
Statute of Limitations: Continuous Trigger
Property Value / Marketability
Financing: Lender Requirements
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14. Due Diligence
Lawyer’s Perspective: Obtain Facts and Information About Property
Interviews with the client regarding intended use/significant concerns
Buyer: Intended use
Seller: Protecting prior NFA
Current and Past Use of Property.
Buyer: could dictate scope of remediation and levels of investigation and/or applicable clean-up obligations.
New Jersey specific transactions: Is ISRA is applicable to the transaction? dictates some level of environmental review and clean-up if you have an ISRA applicable operation.
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15. Due Diligence
Lawyer’s Perspective: Obtain Facts and Information About Property (cont’d.)
Any past environmental issues or cleanups?
Is there any on-going remediation?
Direct Oversight?
Pre or Post Closing Completion? Site Access Agreement.
Buyer: Effect on use of the property as intended.
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16. Due Diligence
Lawyer’s Perspective: Obtain Facts and Information About Property (cont’d.)
Existing and former Underground Storage Tanks
Environmental Controls: Limits on future use
Responsibility for remediation if hazardous substances exist
Buyer cleanup: Liability shifting provisions.
Seller cleanup: environmental escrow
Permits for current/intended use
Regional Restrictions
Time of closing
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17. Due Diligence Due Diligence Provisions / Issues
Delivery of existing materials on environmental issues.
Buyer: obtain as much existing materials from Seller regarding environmental issues to limit the scope of necessary work, expedite and reduce costs, within fixed time frame.
Seller: provide materials if requested.
Define Timeframe and extension rights
Access provisions (built-in or scheduled agreement)
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18. Due Diligence Due Diligence Provisions / Issues (cont’d.)
Will the due diligence include physical investigation/sampling?
Problem: Significant Reporting Obligation/Liability Issue
Buyer perspective: As contract purchaser, Buyer has no responsibility to report any findings to the State. Buyer wants to know as much as possible about the property to understand its risks and potential costs of remediation.
Seller perspective: Seller wants to limit its knowledge of any due diligence results because of reporting/remediation liability.
Solution? Limit Information Sharing.
Disclosure Requirements
LSRP v. non-LSRP: LSRP has an affirmative obligation to report IEC. Seller may seek to preclude Buyer use of LSRP.
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19. Due Diligence Due Diligence Provisions / Issues (cont’d.)
Termination Right: Buyer right to terminate agreement for any/no reason on notice with return of deposit.
Break-Up Fee? Seller contribution to Buyer’s costs of due diligence
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20. Innocent Purchaser Protection
Pre-LSRP world: Innocent purchaser status granted if minimum due diligence is taken and No Further Action Letter is ultimately issued
New “LSRP” world: Innocent purchaser status applies after issuance of Response Action Outcome – as long as that same minimum due diligence is taken
PA/SI v. Phase I/Phase II
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21. Contractual Remediation Provisions
Closing When Contamination Discovered
One Size Does Not Fit All
Seller Remediation: Seller to remediate and provide NFA/RAO at closing.
Buyer right to:
Extend timeframe
Proceed to Closing without NFA/RAO subject to post-closing remediation obligations/escrow
Proceed to Closing and assume remediation obligation
Terminate agreement
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22. Contractual Remediation Provisions
Seller right to terminate: Right to terminate if the estimated costs of remediation exceeds a certain amount, unless Buyer agrees to assume remediation obligation: Affirmative obligation to remediate.
Clean up standards and Controls: Critical for both Buyer and Seller.
Restricted v. Unrestricted Use
Post NFA/RAO responsibility for Controls
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23. Contractual Remediation Provisions
Post Closing Remediation Agreements
Level of Detail Varies
Continuing Remediation Obligations
Escrow
Post-RAO Issuance Obligations
Transfer of RAP’s / Financial Assurance
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24. Attorneys and Consultants: What’s the Net Effect?
More responsibility (LSRP’s license on the line)
Higher stakes (“your reputation is everything”)
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25. New Reporting Obligations
Reporting “Spills and Discharges”
If No LSRP has been retained:
“Owners/operators” must call DEP hotline
Follow-up with detailed written report to DEP
When an LSRP is retained:
LSRP must report discharge directly to DEP
LSRP also must report discharge to responsible party
Historical fill discharge exception
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26. Response Action Outcomes
It’s Over, When It’s Over Limits of 3-year look-back / audit RAOs are subject to re-opener (forever) Should contracts have a 3-year escrow clause?
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27. U-HOT Exception
Unregulated Storage Tanks Section 15 of SRRA gives RPs the “option” of utilizing an LSRP or non-LSRP to remediate an unregulated UST
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28. Covenant Not to Sue (CNS)
Pre-LSRP, the CNS was physically attached to the NFA issued by the State Under the new law, the CNS is deemed issued by “operation of law” when an RAO is issued
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29. Remedial Action Permits Required
Deed Notices
Remedial Action Permits Required
LSRPs must submit application for permit (recording of Deed Notice now precedes application to DEP)
Funding sources are required
Test Note
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30. Major Guidance Documents
1. Fill Material Guidance 2. Historic Fill Guidance 2. Off-Site Source Guidance (Diligence) 3. Pesticides Guidance 4. Comingled Plume Guidance 5. Classification Exception Areas (CEA)
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31. Questions?
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