Un-Natural Resource Damages: NJDEP Goes Too Far Afield – Part III

I. Critique Of DEP’s NRD Formula

Obviously, there are several problems with DEP’s NRD formula. First, and most importantly, the formula is based on the concept of damage to "use" of the groundwater as a natural resource and attempts to calculate its value by use of a simple formula that disproportionately considers the amount of water impacted by the contamination as well as the projected duration of the remediation. To calculate the alleged value of lost groundwater "use" the formula employs generic data complied under the New Jersey Statewide Water Supply Plan 1996 for annual groundwater recharge and water rate values for a limited number of groundwater planning areas. The calculation of the utility of groundwater in the absence of any consideration of the actual site data and value of the specific groundwater at a property as a natural resource results is a distortion of the purpose of natural resource damages – to protect and restore critical areas of the natural environment. Second, DEP should not use the geographically broad "deficit" and "surplus" designations as set forth in the New Jersey Statewide Water Supply Plan 1996 to determine the Planning Area and Projected Status and Annual Groundwater Recharge. Instead, DEP should use a much more site-specific approach that includes consideration of the actual status of the aquifers in discrete areas, and assesses the value of an NRD claim in direct proportion with the importance of an aquifer for drinking water purposes or for saving a critical wetland. In other words, not all aquifers are equal. Third, this formula does not contain any offsets for contamination coming from other sources, resulting in the potential disproportionate imposition of penalties on a single party in a joint and several liability statutory scheme such as that of the Spill Act. Finally, no substitutes (such as the cost of water filters or cost of a pipeline) are considered or credited in this formula.

In assessing DEP’s quest to expand its NRD authority, in light of recent statements by DEP Commissioner Bradley Campbell, there may not be a choice between remediation and compensation and NRD may in effect become a tax to the landowner couched in the form of "compensation" to the public for "injury" to our natural resources.

In early May 2003, Commissioner Campbell testified before the Assembly Budget Committee regarding the State’s NRD program. During the Commissioner’s testimony Assemblyman Malone asked the Commissioner why the state has retained Allan Kanner, an environmental lawyer from Louisiana who is senior partner with Allan Kanner & Associates, to prosecute New Jersey NRD claims. The Commissioner stated that he chose Kanner’s firm because he felt comfortable with him and because Kanner was willing to prosecute the claims at his own expense. The Assemblyman asked if they would eventually be paid for their work, and Commissioner Campbell stated that once the review of cases has been completed, he would work through the state Attorney General’s office to arrange a retainer with Kanner if he so chooses. The Commissioner also testified that out of the 9,000 cases that are eligible for NRD claims, only half would be pursued. Additionally, out of the 4,500 cases, the Commissioner felt that 1,800 cases are viable for collection of NRD monies. These numbers may be conservative, based upon the fact that the DEP’s Known Contaminated Sites List includes approximately 12,600 sites in the State of New Jersey, which list has not been updated and may not account for a number of closed or abandoned landfill or dump sites that were formerly used by municipalities or other operators within the state.

In DEP’s view, the Tech Regs do not require a party to pay natural resource damages. Rather, DEP simply believes that a party has a choice: either restore the natural resource or pay NRD. Specifically, DEP requires parties to conduct a baseline ecological evaluation and, if appropriate, an ecological risk assessment pursuant to EPA guidelines. If the ecological risk assessment demonstrates that an "injury" to a natural resource has occurred, then the person conducting the remediation is required to restore that natural resource. Restoration of a natural resource may be accomplished by either rehabilitating or replacing the resource, or, at the discretion of the person conducting the remediation, by making payment to the Department to compensate the public for the lost use of the natural resource to fund or administer a restoration project.¹ There are several difficulties inherent in this perspective. First, groundwater cleanup may not be feasible at some sites, or it may be prohibitively expensive. Thus, NRD payment may be theonly option for some sites with groundwater impacts. Similarly, if a party relies on monitored natural attenuation to reduce levels of groundwater contamination over a number of years because there is no superior cost-effective technology or option for cleanup, the party is not performing "active groundwater" cleanup and DEP could argue that party must compensate for long term natural resource loss. Indeed, over the last decade, the DEP has approved remedies and closures at numerous properties that are based on natural attenuation to address groundwater impacts. Those sites may now be in jeopardy of potential NRD claims or enforcement. As such, a party may not have a "choice" of whether to rehabilitate/replace the natural resource or to pay the Department for an "injury" to groundwater.

As discussed above, DEP’s has expanded its regulatory and enforcement authority vis-à-vis NRD in contemplation of imposing penalties even in situations where a contaminant plume does not reach beyond the boundaries of a discharger’s own property and may not impact a significant natural resource. In effect, DEP would impose an "NRD tax" upon land owners simply for owning contaminated property by reasoning that groundwater is a public natural resource. If the level of groundwater contamination exceeds the New Jersey groundwater quality standards ("GWQS"), DEP could argue that there is an "injury" to natural resources which is compensable under the regulations as NRD.

It is conceded that groundwater contamination may constitute a natural resource "injury" under the broad definitions of the 2003 Tech Regs. However, proving that contaminated groundwater is a "lost resource" that must be rehabilitated or compensated for is a separate and altogether more contentious issue. In situations where groundwater is impacted and potable water supply wells are affected, a use is clearly prevented and an "injury" or "loss" has occurred, for which restoration or compensation should be made. However, where levels of particular chemical compounds in excess of DEP standards exist in groundwater which is contained to a single property and/or are not affecting potable water or other natural resources, it may be argued that there is no "loss" for which rehabilitation must be undertaken or compensation be made. Similarly, in cases where a natural resource "injury" leads only to a minor "loss" of resource, it may be debated whether or not such a "loss" must be compensated for.²