Environmental & Energy Law Monitor : Environmental & Energy Lawyer & Attorney : Cole Schotz Meisel Forman & Leonard Law Firm : NJ, Mid-Atlantic Brownfield & Climate Change Law

In deciding to continue or cease business operations at a particular location, a business owner needs to be fully informed as to how his actions will impact the company’s rights and obligations under the laws governing his business, such as environmental and real property tax laws.  In this way, the business owner can ensure that his decisions are made with the best interests of the company in mind.  The recent New Jersey Appellate Division decision, Pan Chemical Corp. v. Hawthorne Borough, provides valuable insight as to some of the critical considerations that must be evaluated.

In Pan Chemical, the plaintiff operated a manufacturing facility in Hawthorne, New Jersey. The property consisted of 7 buildings used in the manufacture of industrial coatings, color dispersions, inks and nail polish.  Several underground storage tanks leaked contamination onto the property and the New Jersey Department of Environmental Protection (“NJDEP”) required Pan Chemical Corporation (“Pan Chemical”) to install groundwater monitoring wells to address the contamination.  

Subsequently, Pan Chemical acquired a new facility in Carlstadt, New Jersey. Rather than move its entire operations to the Carlstadt facility, Pan Chemical partially closed down operations at the Hawthorne facility. This was done in order to avoid having to comply with New Jersey’s Industrial Site Recovery Act, N.J.S.A. 13:1K-6 et seq. (“ISRA”), which requires businesses that are “industrial establishments” to comply with its requirements whenever there is a cessation of the business operations. ISRA compliance typically requires the performance of an environmental assessment of the property to determine if contamination exists and, if so, the cleanup of the contamination.

By leaving behind more than 10% of its staff and keeping open only certain buildings at the property, Pan Chemical was able to avoid ISRA compliance when it relocated and deferred the cleanup to a later time. Ultimately, Pan Chemical sold the property in 2005 in an “as is” condition and thereby shifted the cost of the cleanup to the purchaser. 

Pan Chemical also filed tax appeals against the Borough of Hawthorne for the years 2000 through 2005 with the expectation of realizing significant property tax reductions based upon the "non-operational" status of its facility. The Tax Court found that significant reductions in assessments were in order due to the disrepair of the buildings, the need for substantial environmental remediation and the property’s "closed" condition.

The Borough appealed the Tax Court decision arguing that because the property was still "in use" for ISRA purposes, this fact should be determinative for property tax purposes as well. The Borough contended that its original higher assessment on the Pan Chemical property was appropriate and supported by the marketplace.

On appeal, the Appellate Division disagreed with the Tax Court’s granting of tax relief to Pan Chemical. The Appellate Division recognized that a windfall could result if the taxpayer was able to maintain that operations were continuing for the purposes of ISRA, but argue that the property was no longer "in use,” warranting cleanup cost deductions and negative value adjustments, for real property tax valuation purposes.

In deciding this matter, the Appellate Division relied on the seminal case of Inmar Associates, Inc. v. Carlstadt, 112 N.J. 593 (1988), which involved tax assessment challenges by owners of environmentally contaminated properties. One property, which was still in use during the tax year in question, was operated by GAF Corporation. The other property, where operations had ceased prior to the relevant tax assessment date, was owned by Inmar Associates, Inc.

The Court there granted tax relief for the Inmar property but not for the GAF property. The New Jersey Supreme Court reasoned that the GAF property was still occupied and in use at the time of the assessment date; whereas the Inmar property was not then in use. As a result, the Court concluded that “when the property is in use, normal assessment techniques will remain an appropriate tool in the appraisal process.”

The Appellate Division, recognizing that Pan Chemical could not have it both ways, stated:

[Pan Chemical] wanted their property to be deemed ‘in use’ during the years on appeal for the sole purpose of avoiding the costly cleanup mandated by ISRA. Now, [Pan Chemical] wants the property to be deemed ‘not in use’ over the same period of time in order to claim a reduced tax liability.

The Pan Chemical court concluded that the Borough’s use of the statutory definition of “closed” as used in ISRA was appropriate. Thus, the Appellate Division held that the Borough conducted a “reasonable approximation of fair value” in completing its valuation of the Pan Chemical property. Accordingly, the matter was remanded back to the Tax Court with direction to utilize the recognized standards of valuation for operational facilities.

While there may be a distinct and significant dollar cost advantage to delaying the cessations of operations on the environmental front, such a decision must be weighed in light of its impact upon what would otherwise have been a strong case for tax relief. There is no right or wrong way to approach these issues. Obviously, the individual circumstances and financial considerations controlling at the time will dictate the appropriate action. There are, however, approaches that a business owner can employ to cease operations, manage its environmental cleanup obligations and thereby leave open the prospect that it can also, at the same time, advance a meritorious tax appeal.

For example, the owner/operator could obtain a fixed price contract from an environmental consultant capping the cost of cleanup.  By so doing, the owner could limit its cleanup exposure and then better assess the situation. The possibility of closing down operations without delay, thus maximizing the prospect for real tax relief, might then become a viable alternative. Only when the full measure and impact of such decisions are considered may the true merits of a company's comprehensive strategy be properly evaluated.

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On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009, also known as the Stimulus Bill. Among the numerous programs encompassed within the Stimulus Bill are significant proposed expenditures for environmental and energy projects. There are many opportunities for businesses to capitalize on the federal funding and tax incentives provided by the Stimulus Bill. But those businesses need to move swiftly to make sure they do not miss out on these opportunities.

Energy Programs

The Stimulus Bill includes approximately $30 billion for projects relating to the generation, transmission and distribution of renewable energy and approximately $5 billion for energy efficiency projects, including projects to weatherize certain properties. There are many opportunities for companies involved with the various aspects of renewable energy and energy efficiency to capitalize on the available funding within the Stimulus Bill. There may also be funds available for commercial or industrial property owners to help fund investments in energy efficiency technologies which have the potential to significantly reduce the future property operating costs. 

• Renewable Energy. Allocations in the Stimulus Bill include (a) $6 billion in loan guarantees for renewable energy generation and transmission projects, (b) $11 billion for research, development and pilot programs relating to the so-called “Smart Grid,” which will enable greater development and use of renewable power sources, and (c) $2.5 billion for research related to renewable energy and energy efficiency. Also included in the Stimulus Bill are tax cuts for businesses investing in renewable energy technologies.  Here is the link to the US Department of Energy discussion of the Stimulus Bill: http://www.energy.gov/recovery/index.htm
   
• Energy Efficiency. The Stimulus Bill also includes (a) $5.25 billion to make lower income housing more energy efficient, (b) $6.3 billion in grants for state and local government energy efficiency investments and (c) $300 million for consumer rebates for purchasers of energy efficient “Energy Star” appliances. The Stimulus Bill also includes tax cuts for individuals investing in residential energy efficiency improvements.

Environmental Programs

In total, the Stimulus Bill includes approximately $18.8 billion dollars in federal spending for environmental projects relating to site remediation, water infrastructure and flood control and mitigation projects. There may be opportunities to include funding for water infrastructure projects into on-going or planned development or redevelopment projects. Additionally, increased funding to the federal brownfields program may provide sufficient stimulus to continue planned redevelopments.

• Property Remediation. $600 million is allocated to the United States Environmental Protection Agency to fund the cleanup of hazardous waste sites listed on the National Priorities List, which is the USEPA’s list of some of the most contaminated sites in the nation. With this increased spending to cleanup Superfund sites, we expect there to be a potential rise in federal cost recovery litigation as the USEPA attempts to recoup those cleanup costs from the responsible parties. An additional $200 million is allocated to cleaning up properties with leaking underground storage tanks, and $100 million is allocated for grants providing for the cleanup and redevelopment of brownfields sites. Here is the link to the USEPA brownfields program: http://www.epa.gov/brownfields/
   
• Clean Water State Revolving Fund.  $4 billion is allocated to the states to fund loans administered under the Clean Water State Revolving Fund. This fund is designed to upgrade wastewater treatment systems and address stormwater management, nonpoint source pollution, and watershed and estuary management projects nationwide.   Here is the link to the Clean Water State Revolving Fund: http://www.epa.gov/owm/cwfinance/cwsrf/index.htm
   
• Drinking Water State Revolving Fund. $2 billion is allocated to the states to fund loans administered under the Drinking Water State Revolving Fund. This Fund provides loans to support infrastructure investments for both publicly and privately owned community water systems. Here is the link to the Drinking Water State Revolving Fund: http://www.epa.gov/safewater/dwsrf/index.html#facts
   
• Other Water Infrastructure. $4.6 billion is allocated to the US Army Corps of Engineers for projects such as environmental restoration, flood protection and dam projects. An additional $340 million is allocated to the Natural Resources Conservation Service, an entity within the US Department of Agriculture, for watershed improvement projects, including flood protection projects and water quality protection programs. Here is the link to the Natural Resources Conservation Service: http://www.nrcs.usda.gov/

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Businesses and property owners can use solar systems to reduce their annual energy costs and even generate income. The cost of installing these systems is significant. However, there are a number of incentives from the federal and state governments that reduce the upfront costs of solar system installation and generate money for many years after the initial repayment period.        

For upfront costs, the Federal Investment Tax Credit (FITC) provides a 30% tax credit for solar energy systems, so that you can take 30% of the cost of the solar system as a credit against taxes you would otherwise have to pay. The tax credit was recently extended for eight years. Front loaded depreciation is another significant tax incentive. In northern New Jersey, PSE&G's solar loan program may provide financing for 40-60% of the cost of installing a solar system which can be repaid in cash or with credits for energy produced.

Government incentives also make the use of solar systems more profitable. New Jersey is transitioning from a system of rebates to encourage solar system installations to a system of “solar renewable energy certificates” (“SRECs”) based on the amount of energy produced by the system, which can be sold, traded and, in some cases, used to repay loans for installation. “Net metering” also creates economic benefit because it allows a solar system owner to earn money for any excess power the system generates and returns to the electrical grid and of course having solar power reduces operating costs by reducing or eliminating the need to buy electricity from the utility.

Businesses can take advantage of these incentives directly or they can lease the solar system from a third party under a power purchase agreement. In that arrangement, the business avoids upfront costs, agrees to buy power at a discounted rate and passes the incentives to the third party. It is advisable for businesses to consult with legal professionals when entering into contracts with installers and power purchase agreements. 

*This article originally ran in the February 17, 2009 issue of NorthJersey.com

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On June 5, 2008, new legislation was introduced to address the overburdened New Jersey Department of Environmental Protection (“DEP”)’s current staff and budget constraints by expediting its report review process. Introduction of the Bill, sponsored by Senator Bob Smith, followed hearings before the State Senate Environment Committee and Assembly Environment and Solid Waste Committee at which the DEP recommended many of the proposed reforms set out in the Bill. An updated version of the Bill was issued on January 26, 2009, which was considered by the State Senate Environment Committee on February 2, 2009. The Bill proposes changes to the DEP Site Remediation Program that include the creation of a Licensed Site Professional (“LSP”) program. The LSPs are environmental consultants with specified education and experience who perform investigations and remediation at sites in New Jersey.

The Bill identifies who may become LSPs, establishes their qualifications, licensing procedures, a code of conduct and defines their role in the remediation process. In addition, the Bill establishes a separate Site Remediation Professional Licensing Board (“Board”), which is tasked with creating standards for education, training and experience that will be required of any person who applies for a license or a license renewal. The Board conducts examinations to certify that an applicant possesses sufficient knowledge of the state regulations, standards and requirements applicable to site remediation and the applicant is qualified to obtain a license or a license renewal. 

Since it will take some time for this legislation to be fully developed and implemented, after enactment of the Bill, it will provide for temporary licensing of LSPs . The Bill anticipates the applications for temporary LSP licenses will be submitted to the DEP within three (3) months of its effective date. Those seeking a temporary LSP license must have the same qualifications as a full LSP, as well as one of several professional certifications (i.e., certified hazardous materials manager from the Institute of Hazardous Materials Management, a certified groundwater professional from the National Groundwater Association, a licensed professional engineer from the National Council of Examiners for Engineers). Further, an applicant for a temporary LSP license must show that they have existing current site remediation experience. 

Within ninety (90) days of the effective date of the Bill, any submissions concerning the remediation of a contaminated site must be signed and certified by an LSP. The LSP certification required under the Bill will state that the work was performed, that the LSP managed, supervised or performed the work and that the work and submission conform to the Technical Requirements for Site Remediation, N.J.A.C. 7:26E-1 et seq. 

The level of coordination between the LSP and the DEP depends on the ranking of the individual site. The Bill establishes a 4-tier classification system for remediation sites. 

Tier-1: A responsible party has been recalcitrant and has failed to complete the remedial investigation after an extended period of time. DEP would review and approve/disapprove all LSP submissions and select the remedial action. Financial assurance would be required in the form of a trust fund, with DEP to pre-approve any payments out of the trust fund.  

Tier-2: High priority sites for economic development; or within brownfield development areas (commercial or industrial sites that are vacant or underutilized and contaminated) or other economic development priority areas; or posing significant detrimental impact on the public or the environment; or effecting sensitive populations such as child care or school facilities; or subject of federal oversight. DEP would review and approve/disapprove all LSP submissions. 

Tier-3: Sites that are not Tier-1, Tier-2 or Tier-4 sites. DEP would review screening documents and certifications submitted by the LSP. 

Tier-4: Leaking unregulated heating oil tanks provided there are no immediate concerns such as impact on drinking water wells or vapor intrusion risks. DEP would review required checklists and certifications.

As Tier-1, Tier-2 and Tier-3 sites are more complex, they require the involvement of LSPs, while a Tier-4 site could also be managed by a person certified to perform services at a site of an underground storage tank such as a subsurface evaluator. However, any responsible party would be allowed to submit a Preliminary Assessment/Site Investigation for sites where a no further action letter is sought from DEP based on a showing that no contamination above prevailing standards exists. 

The proposed Bill is designed to streamline the DEP’s review of environmental reports, so that transactions are not delayed due to the lack of responsiveness from the DEP. We shall see whether New Jersey can join states like Connecticut and Massachusetts, where effective LSP programs are run. 

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Often the hardest issue to negotiate in a real estate transaction involving a contaminated property is which of the parties has to pay if the actual environmental cleanup costs are much higher than the estimate used by the parties when they negotiated the deal terms. Many deals used to die over this issue either because neither of the parties to the transaction were comfortable accepting the risk or because the purchaser’s lender was the uncomfortable one. Now Guaranteed Cleanup Cost Contracts – in which the environmental consultant agrees to complete the cleanup for no more than an agreed upon guaranteed cleanup cost – are used to close many of these deals. If the guaranteed cleanup cost is exceeded, the environmental consultant pays the cost overruns to the extent provided by the Guaranteed Cleanup Cost Contract (“GCCC”). Where cost cap environmental insurance is purchased, an environmental insurance company pays the cost overruns to the extent provided in the policy. By laying this risk off on someone who is otherwise not a party to the real estate transaction, it often becomes much easier to get the parties to close. These deals are not easy to close, but much easier than they were before GCCCs.

GCCCs Without Environmental Insurance: GCCCs can be used to help close contaminated property deals regardless of the purchase price or the amount of the guaranteed cleanup cost. For transactions with a lower purchase price or guaranteed cleanup cost, the GCCC may be the only practical way to address the issue so that closing can occur immediately. This is because the parties may be unwilling to pay the cost of environmental insurance or environmental insurance may be unavailable and therefore the only practical way to secure the payment of costs in excess of the guaranteed cleanup cost is to get the consultant to accept the risk. 

All of the environmental documents the seller has concerning the contamination on the property are provided to one or more consultants; who review the documents and provide a proposed guaranteed cleanup cost to obtain a regulatory sign-off from the appropriate governmental agency with jurisdiction over the cleanup (e.g. – the New Jersey Department of Environmental Protection). If the amount of information concerning the contamination on the property is not sufficient for the consultant to provide a guaranteed cleanup cost, they are asked to provide a proposal for whatever additional work they would need to do in order to provide a proposed guaranteed cleanup cost – different consultants require different amounts of information depending upon how risk adverse they are. Some consultants require a governmentally approved cleanup plan in place before they will agree to enter a GCCC, while others simply want enough sampling data so that they can somewhat confidently predict what the governmental agency that will one day oversee the cleanup will require.

A consultant is then selected to do the cleanup, usually on some combination of their skill and experience and having a relatively low guaranteed cleanup cost. A GCCC is then negotiated with the consultant selected whereby the consultant agrees to perform the cleanup of the known contamination for no more than the guaranteed cleanup cost. Typically, the consultant entering the GCCC agrees to cleanup only the known contamination, which is broadly defined to include the entire discharge of contamination of which there is any evidence in the existing sampling data, both its source and the full extent of its migration. Newly discovered discharges of contamination not seen by the consultant in the sampling data before the GCCC was entered are not part of the consultant’s remedial obligation, although environmental insurance can be obtained to cover this risk as discussed below.

Some consultants want the guaranteed cleanup cost to be paid in full no matter what the cleanup actually costs them to perform, while others are willing to be paid on a time and materials basis with the understanding that upon completion of the cleanup the consultant will receive some percentage (e.g. – 50 percent) of the unspent portion of the guaranteed cleanup cost as a bonus. These GCCCs cover a wide range of issues, but most importantly they make it clear that the environmental consultant is liable for all costs to clean up the known contamination in excess of the guaranteed cleanup cost. Of course, often the only security for the environmental consultant’s obligations, which may take many years for the consultant to fully perform (e.g. – where there is groundwater contamination), is the financial strength of the environmental consultant. Clearly, that financial strength may change over time and could reduce the security of the property owner for the consultant’s performance, so that it needs to be scrutinized at least before entering a GCCC.

GCCC With Environmental Insurance: Environmental insurance is often used either to provide coverage for the discovery of new discharges of contamination (which are excluded from the consultant’s remedial obligation under the GCCC) or as a better form of security for the consultant’s performance than is provided by the consultant’s assets. Typically, the environmental insurance policy can provide two kinds of coverage: Pollution Legal Liability Coverage and Cost Cap Coverage (the names of coverages vary from insurance company to insurance company).

Pollution Legal Liability Coverage: Pollution Legal Liability Coverage ordinarily covers new discoveries of pre-existing contamination during the policy term. This covers what is ordinarily excluded from the consultant’s remedial obligation under the GCCC. Since the time when pre-existing contamination is most likely to be discovered is in the course of cleaning up the known contamination, we strongly recommend purchasing this coverage as it is usually quite affordable.

Pollution Legal Liability Coverage also covers third party lawsuits (i.e. – lawsuits by anyone other than the seller and purchaser of the property) for property damage or bodily injury arising from any pre-existing contamination, whether known or not when the policy was purchased. So if groundwater contamination on the property migrates off-site and impacts a neighbor’s property, the Pollution Legal Liability Coverage would protect against a lawsuit by the neighbor for property damage or bodily injury. Coverage can be purchased for claims for either new discharges of pollution occurring after the policy is purchased or for business interruption caused by the contamination or its remediation. This coverage is often the key to getting the parties to close, as it covers virtually all of the risks about which a purchaser of contaminated property and its lender are concerned.

Cost Cap Coverage: Cost Cap Coverage generally provides insurance coverage if the cost to cleanup the known contamination exceeds the guaranteed cleanup cost. For as long as the Cost Cap Coverage remains in place, the environmental insurance company is primarily liable for cleanup costs in excess of the guaranteed cleanup cost that must be incurred to obtain the regulatory sign-off from the governmental agency with jurisdiction over the cleanup. There are only a few insurance companies interested in issuing cost cap coverage, as its claims history has often resulted in it being unprofitable.

The guaranteed cleanup cost serves as the deductible that must be exceeded before the insurance company is obligated to provide the Cost Cap Coverage. While this would seem to take the environmental consultant off the risk of such cost overruns, ordinarily the environmental consultant assumes the risk of such overruns once the term of the Cost Cap Coverage has expired and also if the cost of the cleanup exceeds the amount of the Cost Cap Coverage. Since the insurance companies are only willing to provide Cost Cap Coverage for a fairly tight timeframe (e.g.- usually only one year longer than the consultant’s estimated time to conduct the cleanup), this motivates the environmental consultant to finish the cleanup before it assumes the risk of all cost overruns in excess of the guaranteed cleanup cost.

In our experience, using the environmental consultants that we recommend, the insurance companies are willing to provide Cost Cap Coverage even where there is no cleanup plan approved by the governmental agency with jurisdiction over the cleanup. There just needs to be enough investigation done for the consultant to have a good handle on the nature and extent of the contamination. It is the consultant’s job to convince the insurance company that there is a sound basis for its guaranteed cleanup cost to serve as the deductible for the Cost Cap Coverage.

Using one of the options above can make it much easier to close a transaction involving a contaminated property. In fact, by using a GCCC with both Pollution Legal Liability Coverage and Cost Cap Coverage, and adding the lender to the policy as an insured, we have been able to get many of the large institutional lenders to accept the contaminated property as the sole collateral for a purchase money mortgage. Otherwise, they would never accept the contaminated property as the sole collateral for the loan. And when the GCCC and environmental insurance make both the parties and the lender comfortable with the risk, the transaction can close immediately. Only time will tell if, and the extent to which, the recent global economic difficulties for insurance companies and banks will change how GCCCs and related environmental insurance will be used to close transactions involving contaminated property.

This article originally ran in the February 23, 2009 issue of New Jersey Law Journal.

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The New Jersey Department of Environmental Protection ("DEP") is expected to adopt new rules governing the reporting of emissions of certain greenhouse gases in the near future.  These new rules were proposed recently pursuant to the Global Warming Response Act of 2007, which required the DEP to establish a greenhouse gas emission monitoring and reporting system.  Greenhouse gases that are subject to the proposed rules include refrigerants such as hydrofluorocarbons (HFCs) and perfluorocarbons (PFCs), methane, nitrous oxide, sulfur hexafluoride, ethers and halogentated ethers.  The aim of the rule amendments is to generate information on major sources of greenhouse gases as part of a strategy to meet future goals to reduce emissions.

The change in emission reporting requirements will affect numerous types of facilities.  Among the most likely to be impacted are facilities with large refrigeration systems such as supermarkets, restaurants and cold storage warehouses such as those used to store perishable foods.  In addition, various industrial processing facilities.  Finally the new rules would likely change requirements for many landfills and wastewater treatment facilities.

The proposed rules would change the requirements for emission statements under the Air Pollution Control Rules by requiring greenhouse gas reporting requirements for more facilities.  The rule would also amend the Worker and Community Right to Know Rules by requiring reporting concerning the amount of fossil fuels used by certain facilities subject to the Worker and Community Right to Know Act Rules including prime suppliers of fossil fuels, gas public utilities, and natural gas pipeline operators.

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In June 2008, the United States Environmental Protection Agency announced a $4.3 million dollar settlement against four national residential real estate development companies. The government alleged that those companies violated the federal Clean Water Act (“CWA”) requirements addressing the discharge of stormwater (i.e., rainwater/snow melt runoff) from construction sites. Under the CWA, a permit and a stormwater management plan are required for the discharge of stormwater from a construction site. The EPA alleged that the companies had either not obtained a permit before commencing their construction activities or failed to abide by the terms of permits they had obtained. This enforcement action follows several other recent high profile stormwater permit enforcement actions undertaken over the past several years that resulted in $4.4 million dollars in penalties against two national box retail stores.

The CWA generally requires that a developer obtain a stormwater discharge permit before starting construction activities at a property. It allows states to assume the role of the permitting authority for stormwater permits. Delaware, New Jersey, New York and Maryland have been delegated such permitting authority from the EPA. As such, the state environmental agency within a delegated state issues permits for stormwater discharges under the CWA. EPA retains oversight authority over the state stormwater permitting programs – that is why the recent enforcement actions were brought by the EPA.

In New Jersey, a construction project which will disturb more than one acre of land requires a stormwater discharge permit. The state Department of Environmental Protection (“DEP”) has established a general stormwater discharge permit for construction activities, through which the DEP pre-determined that any construction projects meeting the criteria for the general permit will be covered by the general permit. (There are also general stormwater permits for industrial facilities, concrete manufacturers and other business categories, which permits address stormwater runoff from the operation of covered facilities.) To obtain coverage under the construction general permit, the developer must submit a Request for Authorization to the local Soil Conservation District for their approval. This is unlike an individual discharge permit, which requires a detailed state engineering review.

Obtaining the general stormwater permit for construction activities is, however, only the first step towards compliance with the CWA’s stormwater requirements. Once the permit is in place, the permit holder must comply with the terms of that permit. Failing to abide by the terms of the permit is also a violation of law which exposes the developer significant penalties. The most important component of the general stormwater construction permit is the development and certification of a Stormwater Pollution Prevention Plan 

The SWPPP consists of a soil erosion and sediment control element and a construction site waste control component. The soil erosion and sediment control element is governed by a soil erosion and sediment control plan and includes controls such as silt fences to minimize soil runoff. The construction site waste control element contains requirements which address materials management to prevent or reduce waste and waste handling, which in turn reduces the potential for such waste materials to flow off-site with stormwater. Examples of construction site waste include waste building material and rubble, chemical waste, litter, sanitary sewage, contaminated soils and concrete truck washout.

By obtaining a permit for stormwater discharges at construction sites, and complying with the terms of the SWPPP, a developer will avoid a potentially costly enforcement action by the state or the EPA. The EPA has sent a very strong signal to the regulated community that it takes stormwater discharges and compliance with the CWA very seriously. A developer must ensure that its professional team, including engineers, construction managers and attorneys, are paying close attention to stormwater permitting requirements to avoid such costly mistakes.

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On March 31, 2008, the United  States Environmental Protection Agency (“EPA”), under the authority of the federal Toxic Substances Control Act, issued new rules governing home improvement contractors and maintenance companies engaged in the renovation and repair of houses, child‑care facilities and schools constructed before 1978.  The purpose of the rule is to protect children from lead paint hazards in places they frequent.  EPA’s rules require that by April 2010, contractors and maintenance professionals performing renovation activities be certified and their employees trained by certified renovators.  The rules also require that these companies use safe work practices to eliminate airborne lead exposure from the renovation activities.

The rule applies to home improvement contractors, maintenance workers in multi‑family housing, painters and other trades engaged in renovation activities.  The covered facilities include residential, public or commercial buildings where children under the age of 6 are present on a regular basis, as well as all rental housing.  The rule applies to renovation, repair or repainting activity.  The only exceptions are (i) owner‑occupied housing where children under six or a pregnant woman do not reside; (ii) minor maintenance or repair activities affecting six square feet or less of lead based paint in a room or 20 square feet or less of lead based paint on the exterior of a building and (iii) renovations that do not involve the disturbance of lead based paint.  Determining whether a project is lead free must be made by a certified renovator using an EPA recognized test kit.

The rule prohibits certain unsafe work practices such as flame burning or torching; and sanding, grinding, or blasting with power tools.  It also prohibits the use of equipment not equipped with high efficiency vacuum attachments to minimize or eliminate airborne dust.

A certified renovator must be assigned to each renovation project to direct and train uncertified workers and to insure that all work is performed in accordance with applicable work practices and standards as outlined in the rules.  A renovator can become certified by successfully completing an EPA approved accredited training course.  To maintain the certification, a person must complete an accredited refresher course every five years.

While these regulations directly impact the companies doing the renovations, property owners must remember that they are ultimately responsible for the safety of their tenants.  It is imperative, therefore, that property owners make sure that the contractor intends to comply with the EPA’s regulations and minimize lead hazards during the work.  Any contract between the property owner and renovation contractor should, at a minimum, include a provision requiring the contractor to comply with all laws during the performance of the work and an indemnification provision whereby the contractor agrees to defend and indemnify the property owner from lawsuits arising from the contractor’s work.  Since an indemnification is only as good as the company’s assets, a property owner is well advised to require the contractor to have insurance naming the property owner as an additional named insured on the policy.  As an additional named insured, the property owner will be in a position to make a claim against the contractor’s insurance policy.  By taking these precautions, property owners will minimize their exposure to potential liability if the contractor fails to comply with these regulations.

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On January 4, 2008, the New Jersey legislature passed the Environmental Enforcement Enhancement Act. This Act enhances the enforcement authority of the New Jersey Department of Environmental Protection (“DEP”) under ten environmental statutes: Waterfront Development Act, Pesticide Control Act of 1971, Wetlands Act of 1970, Freshwater Protection Act, Coastal Area Facility Review Act, Endangered and Nongame Species Conservation Act, Water Supply Management Act, Safe Dam Act, Safe Drinking Water Act, and the Flood Hazard Area Control Act. The Act also amends the DEP enabling statute by clarifying DEP’s authority to inspect facilities, collect samples and copy documents to determine compliance with environmental laws, regulations, permits, and orders.

The Act strengthens the enforcement provisions of the ten statutes listed above and substantially increases the penalties DEP may seek against violators. The Act greatly broadens the enforcement authority of the DEP by authorizing it to issue an order requiring any person to comply, to bring a civil action, to levy a civil administrative penalty, or to petition the attorney general to bring a criminal action if a violation occurs. The amendments are substantial because many statutes prior to the passage of the Act only contained minimal penalties for violators or did not contain any provisions for assessing administrative penalties. For example, the Waterfront Development Act’s previous maximum penalty was $1,000 with an additional fine of $100 for each day the violation continued. As amended the penalty is increased to $25,000 per violation, per day. 

To help ensure compliance with environmental statutes, the Act significantly increases civil and criminal penalties including the following changes: (1) uniformly increases the maximum civil penalty amount to $25,000 per day; (2) authorizes daily penalty assessments for continuing violations; (3) authorizes the recovery of compensatory damages for loss or destruction of natural resources (e.g.-creates authority for DEP to recover natural resource damages, which are money damages from anyone responsible for spills or discharges of hazardous substances); (4) authorizes the DEP to recover reasonable costs incurred by the State in removing or correcting a violation, and to recover all reasonable costs incurred in bringing a civil action, which could be interpreted to mean recovery of attorneys’ fees; and (4) clarifies and in some statutes creates criminal provisions for purposeful, knowing, and reckless violations or falsifications. In addition, the Act broadens the DEP’s authority to compel a property owner to record a deed notice on its property where an alleged violation has occurred, under acts such as the Dam Safety Act or the Flood Hazard Protection Act. Prior to the Act’s passage the DEP only had this authority for a violation of the Freshwater Wetlands Protection Act. In fact, the Act allows DEP to require the recording of such a notice based only upon an allegation prior to adjudication.

With the passage of this Act, DEP has increased its enforcement authority and permits it to seek higher penalties for violations that may have previously been cost effective to commit and new avenues to seek such penalties. Its passage will likely lead to an increase in enforcement actions brought by the DEP.

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