The investigation and clean up of contaminated sites in New Jersey will never be the same. Gov. Jon S. Corzine’s May 7, 2009, adoption of the Site Remediation Reform Act (SRRA) started a new chapter in the state’s environmental regulatory history.
Under SRRA, the New Jersey Department of Environmental Protection (NJDEP) takes on a significantly reduced level of direct oversight with respect to the vast majority of cleanups. In such cases, the NJDEP will no longer be issuing No Further Action letters, or (NFAs). Rather, qualified private consultants will be authorized as Licensed Site Remediation Professionals (LSRPs), and these professionals will conduct and approve the cleanup of the contaminated sites. LSRPs will issue Response Action Outcomes, or (RAOs), to certify completion of the investigation and cleanup of a contaminated site in accordance with state standards. Each LSRP’s work product and approved RAOs may be subject to an audit by a newly formed Licensed Site Remediation Professional Board and its NJDEP staff or additional review by NJDEP.
Undoubtedly, the current relationship between a client and its environmental consultant, now LSRP, will change as a result of the Act. Whether you have a new remediation case requiring an LSRP under SRRA from the start or you decide to opt into the program prior to the end of the three-year phase-in period, the selection of an LSRP for your remediation projects will require careful consideration. The new law addresses a wide range of topics that will raise numerous issues as the implementation unfolds. To that end, Drinker Biddle’s Environmental Practice Group has prepared a list of initial questions and responses relating to SRRA and the LSRP program. Please click on each question of interest and you will be linked to the question and response.
The following questions and responses are designed to assist you in learning about this brave new world of New Jersey site remediation:
- When do I need to hire an LSRP, if I have an existing case? A new case? Can an employee of a “Person Responsible for Conducting Remediation” serve as the LSRP?
- How will SRRA affect my relationship with or use of environmental consultants?
- How will an RAO issued by an LSRP differ from an NFA issued by NJDEP?
- Why is Direct Oversight by NJDEP under SRRA a bad thing?
- How does SRRA impact the Industrial Site Recovery Act (ISRA) program?
- How will SRRA impact the NJDEP’s Voluntary Cleanup Program?
- How does SRRA impact my next Brownfield project, property sale or other business transaction?
- What does Gov. Corzine’s Executive Order No. 140 add to SRRA?
- Will SRRA affect the choice and pace of a remedy at my site?
- How does SRRA impact the NJDEP’s Natural Resource Damage (NRD) program?
- Will the New Permit Program for Operation, Maintenance and Inspection of Engineering and Institutional Controls be Different from NJDEP’s Current Biennial Certification Program?
- How will SRRA impact the use of Alternate Remediation Standards (ARS)?
- What other questions are on the horizon that may need to be answered?
New questions about SRRA and the LSRP program arise each day. This advisory only begins to deal with the many issues raised by this new law. We will continue to monitor the NJDEP’s implementation of SRRA as new regulations and other guidance are proposed and published by NJDEP, and will send periodic updates as the LSRP program develops.
We look forward to helping you understand SRRA and its impact on your business. Please feel free to contact us with any questions about SRRA that you would like to see answered in upcoming advisories.
Eventually, the requirement to hire a Licensed Site Remediation Professional (LSRP) pursuant to the Site Remediation Reform Act (SRRA) will apply to virtually everyone conducting a remediation. Moreover, an LSRP cannot be a salaried employee of the person responsible for conducting remediation, so the LSRP must be someone outside the company. The time for hiring an LSRP depends on your circumstances:
- Do you have a “new” case where remediation was initiated after May 7, 2009?
- Do you have an existing case where there has been NO remedial activity in more than two years?
- Have you received a final order from NJDEP after May 7, 2009, for penalties concerning remediation or a demand for stipulated penalties under an exiting oversight document?
- Do you have an existing case where remedial activity has been ongoing?
So that you may determine your own site remediation strategy, it is important to understand how NJDEP will approach these different circumstances and how it plans to proceed with implementation of its new remediation paradigm.
New Cases. For new cases, compliance with SRRA and retention of an LSRP theoretically is to begin immediately. There is a bit of a “horse before the cart” problem posed by the statute, however. Right now, no one has been licensed as an LSRP, and the board that will license and determine the requirements for LSRPs must be populated. For these reasons, SRRA directs NJDEP to issue temporary licenses for LSRPs. Applications for the issuance of temporary LSRP licenses are available from NJDEP.1 In addition, by November 3, 2009, NJDEP must issue Interim Rules that will define some of the substantive requirements that will guide LSRPs in their remedial decisions and activity. These rules will be effective upon issuance for a period of 18 months without further public comment. At that time, November 3, 2009, the LSRP program will formally commence and changes in SRRA to existing statutes such as ISRA, the Spill Act and the Brownfields Act become effective. If you have a case where remediation was initiated after May 7, 2009, you will not be able to hire an LSRP until sometime between August 5 and November 3. By November 3, 2009, however, you must have an LSRP on board. In the interim, if you need to retain a consultant to work on a new ISRA case, you should be sure that the consultant will be able to transition to the role of LSRP, or you may find yourself looking for an LSRP to replace or review and approve work by your non-LSRP consultant as of November 3, 2009.
Inactive Cases. If you have an existing case where remediation was initiated before May 7, 2009, but where there has been NO remedial activity in more than two years, NJDEP plans to treat this as a new case. So, for example, if you signed a Memorandum of Agreement (MOA) just to perform a Remedial Investigation and completed that effort two or more years ago but did not continue with any subsequent phase of remedial work, NJDEP will consider your case to be “new” when you proceed to the next phase. NJDEP has said that it will take into account that the work was not done because you were waiting for NJDEP approval when it reviews a case to determine whether the two years have run.
Post-SRRA Violations. As set forth more fully below, cases where remediation was initiated prior to May 7, 2009, are not required to use an LSRP until May 7, 2012. Likewise, there are a limited class of cases, such as certain underground storage tank remediations, where an LSRP is not required. SRRA includes a provision, however, that enables NJDEP to require a party otherwise temporarily exempt or excluded from the LSRP requirement to retain an LSRP at NJDEP’s direction. Those cases are limited to matters where, after May 7, 2009, NJDEP: (a) issues a final order or a penalty becomes due and payable concerning the performance of remediation; or (b) issues a demand for stipulated penalties pursuant to the provisions of an oversight document in which the person waived a right to a hearing on the penalties. While these circumstances may arise infrequently, you should take care to avoid running afoul of existing remediation obligations because there are now implications beyond the requirement to pay a penalty.
Existing Cases. The class of cases where remediation was initiated prior to May 7, 2009, presents some interesting issues in the face of SRRA. In the first instance, existing cases do not require an LSRP until May 7, 2012. At the same time, certain other provisions of SRRA, such as the need to meet mandatory remediation deadlines that will be established in the Interim Rules and thereafter, must be complied with immediately. Click here to read more about mandatory remediation deadlines. Likewise, the passage of time in certain cases could subject your case to direct NJDEP oversight. Click here to read more about direct NJDEP oversight. This phased approach of SRRA gives rise to a number of questions:
- Can I proceed with remediation under the old methods with NJDEP review and oversight to complete my case before an LSRP is needed?
- Should I just wait until May 7, 2012, and/or proceed at risk to implement remedial activity without an LSRP?
- Should I hire an LSRP now and continue my remedial activity under the new program?
Anyone with an existing case will need to consider these questions and develop a remedial strategy that works best for them.
Can I proceed with remediation under the old methods with NJDEP review and oversight to complete my case before an LSRP is needed?
Nothing in SRRA prevents NJDEP from proceeding under the old remediation paradigm during the three-year phase-in period for existing cases. That said, practical reality will likely pose obstacles to such an approach unless your case is very near completion and you have a willing case manager. Moreover, as discussed below, an apparent gap in the language of the statute regarding the availability of a Covenant Not to Sue (CNS) could pose another concern.
NJDEP is currently reviewing its inventory of cases to identify which will be considered priority cases under SRRA. Generally, these will be cases with potential vapor intrusion issues or ecological impacts. Because NJDEP's limited resources are being so consumed by the tasks necessary to implement SRRA, case managers are not expected to be focusing their limited time on cases that do not fit into the NJDEP priority categories. That said, NJDEP’s case review will also identify cases where a remedial action work plan (RAWP) was submitted prior to December 2, 2008 (the “grandfather” date for already-submitted RAWPs that allows utilization of the previously existing cleanup criteria rather than the currently adopted remediation standards). NJDEP might be convinced to focus attention on cases with grandfathered RAWPs, completed RAWPs, pending remedial action reports or pending requests for No Further Action. Cases in earlier phases of remediation likely have been pushed off the radar screen by SRRA, however. This shift is already apparent. NJDEP is encouraging responsible parties with existing cases to proceed “at risk” with remedial investigation work and then either to submit a remedial action work plan and implementation schedule to NJDEP for approval or preferably to hire an LSRP when those individuals become available. Completion of even those cases in advanced stages of remediation might be doubtful under the old program unless:
- your case manager has advised you that NJDEP will continue to provide case oversight; or
- you can convince your case manager to provide case oversight.
One significant note of caution to keep in mind if you can convince your case manager to continue oversight to close out an existing remediation: once it issues temporary licenses to LSRPs, NJDEP is prohibited by the Legislature from issuing a CNS except as to discharges from unregulated heating oil tanks. Any No Further Action (NFA) that NJDEP might issue will not be accompanied by a CNS, which typically provides protection against liability to parties such as a prospective purchaser, a subsequent owner or other interested party, other than the responsible party, for the conditions that were remediated. Under SRRA, the CNS is now intended to arise by operation of law once an LSRP issues a Response Action Outcome (RAO). Click here to read more about the new Response Action Outcome and CNS.
As written, SRRA implies that issuance of an RAO by an LSRP is a condition precedent to obtaining a CNS by operation of law. If you complete remediation without an LSRP and receive an NFA from NJDEP after the point at which NJDEP has issued temporary LSRP licenses, and is prohibited from issuing a CNS, there is real question as to whether a CNS by operation of law will be available to you.
Should I just wait until May 7, 2012, and/or proceed at risk to implement remedial activity without an LSRP?
Because NJDEP will have limited resources to review existing case submittals, the potential benefit of waiting to continue remedial work is that further costs will not be incurred while you wait for NJDEP’s response to a submittal. In addition, more time may allow natural attenuation processes to take place or the development of new remediation technologies. Of course, contamination may continue to spread during this dormant period and there is no guarantee remediation several years from now will be less expensive.
The wait-and-see approach is not without other risks as well. Regardless of when you hire an LSRP, persons conducting remediation must immediately comply with, among other provisions, mandatory remediation time frames. Click here to read more about SRRA’s mandatory time frames here. Although we expect NJDEP to focus on time frames for receptor evaluations and immediate environmental concerns while phasing in schedules for other remedial activities, allowing time to pass without moving forward on remediation could put you at risk of missing a mandatory deadline. Likewise, if you have a case that commenced more than 10 years ago and a remedial investigation (RI) is not yet complete for the site, waiting could cause you to run afoul of SRRA’s direct oversight provisions. Click here to read more about SRRA’s direct oversight provisions. Any case that has been under NJDEP review for more than 10 years must complete the RI for the entire site within five years (May 7, 2014). Failure to complete the RI in five years results in mandatory direct oversight by NJDEP. If there has been no significant progress on your case prior to May 2012, when you are required to hire an LSRP, and an LSRP can not complete the RI in the two years remaining after May 7, 2012, your case must be placed under direct oversight by NJDEP. SRRA provides strong incentive to implement remedial activity without an LSRP or to hire one before the 2012 deadline.
Should I hire an LSRP now and continue my remedial activity under the new program?
As noted above, NJDEP is encouraging responsible parties with existing cases to proceed “at risk” with remedial investigation work and then either to submit a remedial action work plan and implementation schedule to NJDEP for approval or preferably hire an LSRP. Indeed, NJDEP may strongly encourage “at risk” work for cases without an LSRP. Of course, the issue with the “at-risk” work is that, historically, NJDEP always seems to find a problem with the "at-risk" work, which results in additional RI work and increased costs. If you hire an LSRP and proceed with the work under that program, the NJDEP review will generally be limited to a checklist review (unless NJDEP audits your site, which should occur in about 20 percent of the LSRP cases), so hiring an LSRP may result in a more cost effective RI. Toward this end, NJDEP has implemented a pilot program for “early adopters” who volunteer to comply with LSRP requirements before the May 7, 2012, deadline for existing cases. NJDEP will likely create a form for parties to opt in early. In most cases, NJDEP expects to approve the request, although it has hinted that some undisclosed exceptions could apply. Anyone who wants to volunteer before expiration of the three-year deadline must comply with all of the provisions applicable to new cases.2 As existing cases must already meet several of the substantive requirements of SRRA, the only additional requirements would be to hire a consultant qualified as an LSRP, identify that person to NJDEP and use that person to conduct remediation without prior approval by NJDEP.
The bottom line is that there has been a sea change in the remedial oversight paradigm. In the coming months, as NJDEP proposes new SRRA regulations and publishes LSRP guidance, you will have more information to assist you in determining when you should hire an LSRP for your remediation project. While you may not want to be one of the first to hire an LSRP, you should evaluate your case now to determine when you should do so.
Currently, the majority of persons that have responsibility for remediating contaminated sites engage one or more independent environmental consultants to perform the actual remediation work and to provide technical advice and support when dealing with the New Jersey Department of Environmental Protection (NJDEP). Now, pursuant to SRRA, “persons responsible for conducting remediation” (PRCR) (i.e., the client) are required to hire a Licensed Site Remediation Professional (LSRP) (i.e., the client’s environmental consultant) to oversee and approve the remediation. Already, some environmental consulting firms are working on having their employees licensed as LSRPs and soon some PRCRs may discover that environmental consultants they currently employ have become LSRPs. A newly constituted Site Remediation Professional Licensing Board (Board) will regulate the conduct of LSRPs and insure their compliance with the many provisions of SRRA intended to guide or govern LSRPs’ decision-making. The new LSRP program raises several issues concerning how the relationship between PRCRs and the environmental consultants they hire will look going forward:
- how best to protect the interests of PRCRs in their communications with LSRPs;
- whether to devote additional in-house resources to overseeing remediation projects and the work of the LSRP;
- how to manage client and consultant expectations for identifying remedial issues, documenting choices, and resolving disagreements;
- whether to hire an independent consultant to oversee or conduct remediation work; and
- how to navigate between LSRPs and independent consultants.
SRRA does not address these important issues and it is unlikely that the Board will provide any insight. Indeed, it is likely that additional relationship questions will arise as the Board and NJDEP move to implement SRRA. Prior to SRRA, the most important role of a company’s environmental consultant was as an advocate for the PRCR with the NJDEP. Under SRRA, however, this may no longer be the case. SRRA makes it clear that an LSRP must hold protection of public health and safety and the environment as its highest priority. Accordingly, to ensure an LSRP fulfills this obligation, SRRA:
- obliges LSRPs to notify NJDEP regarding discharges, environmental concerns, deviations by the PRCR from the remedial action workplan and subsequently discovered inaccuracies in remediation reports;
- sets forth a hierarchy of remediation requirements to which an LSRP must adhere in meeting its obligation to its clients, NJDEP and public health, safety and environment;
- contains strict requirements regarding compensation and financial interests of LSRPs in sites; and
- seeks to enforce these obligations through increasingly severe sanctions that include the loss of an LSRP’s license as well as steep penalties.
The overarching obligation to public health, safety and environment, the constraints imposed on LSRP and PRCR decision making, combined with the threat that an LSRP could lose its license and face other penalties, all create tension with respect to the traditional client-consultant relationship. And, of course, it is the client that pays the bills. As a result, the loyalty of an LSRP may be split between its client and the State of New Jersey.
Although SRRA provides some protections for an LSRP’s clients (e.g., prohibitions against revealing confidential information, prohibitions on making misrepresentations and requirements for LSRPs to advise clients of any assumptions, limitations and/or qualifications underlying their communications with the client), because an LSRP is obligated to the state and the public interest, the relationship between PRCRs and their LSRPs will be different from the relationships with environmental consultants to which PRCRs are now accustomed. One of the most obvious changes will involve issues regarding the flow of information between PRCRs and an LSRP. To protect confidentiality, PRCRs will need to control their information flow about sites and, to the extent possible, carefully construct contracts that make clear expectations for dealing with confidential information. The typical contracts that have been used for years with environmental consultants likely will not be appropriate and new contracts will need to be developed.
In addition, where PRCRs have traditionally depended on their environmental consultants’ counsel and advocacy in dealing with NJDEP regarding technical issues, such as remedial objectives and alternatives, the same may no longer be true when it comes to LSRPs because an LSRP’s loyalty is not solely to the client. Further, under SRRA, a PRCR is no longer able to assume authority for final decision making subject to ultimate NJDEP approval, because the statutory obligations of an LSRP mandate that it assume a certain level of that control over decision making based on the LSRP’s professional judgment. What will happen when there are disputes between LSRPs and PRCRs is now uncharted territory.
A number of tactics and strategies might be employed to address these concerns. PRCRs and LSRPs might work together to develop a process for decision making that will require PRCR involvement and transparency to ensure that all parties are comfortable with particular remedial decisions before they get reduced to writing. While SRRA will require more expansive documentation by LSRPs in decision making, there is a difference between documenting a decision for purposes of supporting it and documenting the decision-making steps to reveal the process utilized to reach the ultimate decision. Perhaps concepts of peer review can be incorporated into contract dispute resolution provisions. In addition, PRCRs might consider the use of a second environmental consultant to either silently shadow and evaluate the LSRP’s work or to actively participate in performing the remediation work and/or other aspects of the remediation (although cost and size of the project will clearly be issues, as will considerations regarding the use of consultants and LSRPs from the same firm).3 Similarly, increased in-house oversight could be appropriate. In any event, existing contracts or those typically employed for the retention of environmental consultants are likely to be out-moded and will need to be re-evaluated or redrafted in light of this new statutory regime.
Until such time that the Board issues the required professional standards for LSRPs and the program gets underway, exactly how the LSRP program ultimately will affect the relationships between PRCRs and environmental consultants remains to be seen. Nonetheless, SRRA, as enacted, already has far-reaching implications and new ways of thinking will be needed to adapt to the LSRP’s brave new world.
The No Further Action Letter or NFA is a familiar document to the regulated community and its lenders in New Jersey. A certain comfort level has developed over time with the NFA issued by the New Jersey Department of Environmental Protection (NJDEP). As with any new regulatory concept, the introduction of the Response Action Outcome (RAO) issued by a newly permitted Licensed Site Remediation Professional (LSRP) will undoubtedly cause some initial concern.
What is an RAO?
Basically, an RAO is an NFA issued by an LSRP under the new Site Remediation Reform Act (SRRA). The statutory definition of an RAO closely tracks the definition of an NFA. The main difference is that the private environmental consultant licensed by NJDEP as an LSRP issues the RAO written determination that a contaminated site has been remediated in accordance with all applicable statutes and regulations while the NJDEP issues the NFA. It is this distinction that may prove troubling for lenders, buyers, developers and other parties involved with contaminated sites.
RAOs Subject to Audits
Unlike an NFA, the RAO is subject to audit by NJDEP and the newly created Licensed Site Remediation Professional Licensing Board (Board), which is in, but not part of, NJDEP. The Board and its part-time members will be advised and staffed by NJDEP personnel. Therefore, as a practical matter, an audit by the Board may essentially be an audit by NJDEP with input from the members of the Board. NJDEP also can petition the Board to audit an LSRP.
NJDEP and the Board are both required to audit annually the submissions of at least 10 percent of the licensed LSRPs. In an attempt to address concerns of uneasy environmental groups, the governor, as part of his Executive Order No. 140, expanded the NJDEP's audit requirement as follows:
During the 24 months immediately following the effective date of the Legislation [May 7, 2009], the DEP’s review of 10% of all documents submitted by LSRPs shall include at least one review of case documents by every LSRP.4 Click here to read more about Executive Order No. 140.
As a result of the audit requirements, SRRA provides reason for concern about the finality and certainty of an RAO. No one wants to be audited by the Internal Revenue Service and the same will undoubtedly be true for an audit by the Board. An audit of your LSRP’s work is likely to result in delay and additional cost for your remediation.
In the vast majority of cases, NJDEP has three years after the date an LSRP filed an RAO to conduct and complete an audit. An RAO will not really be considered final until the end of this three year period. After the three-year period, NJDEP is generally prohibited under the SRRA from auditing an RAO. SRRA does provide for certain re-openers, however, that would allow an audit of an RAO after the end of the three-year period. In particular, after three years, an RAO could still be audited if: (1) undiscovered contamination is found on a site for which an RAO has been filed; (2) the Board conducts an investigation of the LSRP who issued the RAO; or (3) the license of the LSRP who issued the RAO has been suspended or revoked by the Board. This statutory requirement may be a good opportunity for the insurance markets to develop a product to cover the three year gap period. And, it raises a number of questions about the client/LSRP relationship. For example, who pays for the additional work if an RAO is rescinded and who pays other costs that may result from an audit? Once again, the provisions of SRRA underscore the need for careful legal drafting in any contract with an LSRP.
In addition, NJDEP also has the authority to invalidate an RAO issued by an LSRP if NJDEP determines that the remedial action is “not protective of public health, safety, or the environment” or if a presumptive remedy was not implemented as required. A “presumptive remedy” is a required remedial action to be established by NJDEP for use at residential sites, child care centers and public, private or charter schools. Click here to read more information about presumptive remedies under SRRA. However, even if the presumptive remedy is not implemented as required, the RAO will not be invalidated by NJDEP so long as the actual remedial action utilized is determined by NJDEP to be as protective as the presumptive remedy. Clearly, the provisions of SRRA provide a strong incentive to use a designated presumptive remedy if at all possible.
Remember: An NFA Was Always Subject to Reopeners
Of course, NFAs were also always subject to revocation and re-openers as well, though no one ever seemed to focus on that possibility. NJDEP had the authority to rescind or modify an NFA and require additional remediation necessary to “[f]ully implement any site remediation regulatory program” and “[p]rotect the public health and safety and the environment.