NRD: The New Battlefield in Environmental Litigation
By Ken Stier
and Mark J. Magyar
Over the last 30 years, New Jersey has been the focal point of more important legislative, administrative and court battles over environmental issues than any other state. From the preservation of the Pinelands to the current battle over the Highlands, from the 1976 Spill Compensation and Control Act that served as a model for the federal Superfund law to the first state law requiring the cleanup of industrial property before sites are sold, New Jersey has both served as a model for other states and has regularly enacted tougher environmental laws than the federal government and other states.
But business leaders and environmentalists agree that the current battle over the state Department of Environmental Protection’s Natural Resource Damage program is one of the bitterest and most complex environmental policy disputes yet, even though it is being waged below the public’s radar screen.
“This is the sleepinggiant of environmental liability,” said Richard Stewart, a New York Univers ity law professor who has written extensively about this little-known feature of environmental law that requires polluters to go beyond cleanup and pay not only for restoration, but compensation to society for the public’s “lost use” of potential drinking water, recreational opportunities or other water resource use.
The stakes are high: DEP Commissioner Bradley Campbell opened the NRD campaign with a press conference on the banks of the Passaic River at which he announced his intention to seek $950 million from a corporate “who’s who” of 66 companieshe was holding responsible for decades of pollution to a 17-mile stretch of the lower Passaic River before it empties into Newark Bay.
Most recently, Campbell and Attorney-General
Peter C. Harvey filed suit against 12 companies ranging from Sony and Viacom
to AT&T, General Electric and United States Steel for natural resource
damages in eight counties from Gloucester to
“My administration isholding polluters accountable,” Governor McGreevey pronounced. “We have made New Jersey a national leader in pursuing natural resource damage claims.”
The Natural Resource Damageprogram is Campbell’s signature initiative, and his decision to make New Jersey the first state to systematically exercise NRD claims for years of incremental pollution, rather than for catastrophic spills, which the “natural resource damage” clause of the Spill Act was principally drafted to cover, represents a major expansion of potential environmental litigation.
“The damage caused torivers and groundwater by a series of smaller injuries committed over the years can be just as devastating as a single-instance catastrophic spill, and we should pursue those claims just as hard,” said Campbell, who became aware ofthe potential for Natural Resource Damage claims while working as a lawyer for the federal Environmental Protection Agency (EPA) on the Exxon Valdez case.
For Campbell and for Governor McGreevey, the NRD program underscores their determination to “make polluters pay,” in sharp contrast to the environmental policies not only of the current Bush administration, but also of Christine Todd Whitman, whom both McGreevey and Campbell have criticized for not pursuing NRD claims harder as governor and for taking a business-friendly approach to environmental regulation both as governor andas head of the federal EPA.
But Michael Egenton, director of government relations for the New Jersey State Chamber of Commerce, and other business leaders view the McGreevey administration’s NRD program as just the latest in a series of anti-business initiatives that started with an overhaul of the corporate income tax that levied an additional $1.5 billion in alternative minimum taxes last year on companies that failed to make a profit and continued recently with a proposal to raise the income tax on those making $500,000 or more a year, many of whom are corporate executives or small business owners.
“NRD is vigilantism at its worst,” declared Hal Bozarth, executive director of the Chemistry Industry Council of New Jersey, who warned that the billions of dollars in threatened NRD fines would further undermine New Jersey’s business climate.
The Chemical Industry Council and the Chamber of Commerce joined New Jersey SEED (Society for Environmental and Economic Development), New Jersey Business and Industry Association, New Jersey Fuel Merchants Association and American Petroleum Institute this spring in filing a lawsuit in the Law Division of Superior Court in Mercer County to block implementation of the NRD program. In New Jersey Society for Environmental and Economic Development, et al, v. Bradley M. Campbell, the business groups contend that Campbell should have followed regular administrative procedures in proposing and adopting a regulation to implement the NRD program, and that the hiring of outside counsel – specifically, the New Orleans-based environmental lawyer Alan Kanner and the law firm of Democratic power broker John Lynch – to seek damages on a contingency fee basis is improper.
“What Campbell and Kanner are saying to companies is that the calculation for NRD damages they have worked up is a preliminary formula, and that if companies don’t agree to settle now, as Honeywell did, the next formula will be even more onerous,” said Steven J. Picco,the Reed Smith LLP partner who is the lead attorney in the New Jersey SEED v. Campbell lawsuit.
“The state policy is ‘Pay us now or we’ll hurt you really bad later.’ If Tony Soprano was running the program, you would call it a protection racket,” Picco fumed.
Picco not alone in questioning the role into which Campbell thrust in the current program. Jeff Tittel, executive director of the New Jersey chapter of the Sierra Club, also has reservations, but for different reasons.
“This program puts Brad Campbell on the firing line in a no-win situation,” said Tittel. “No matter what he does, the settlements he approves will be called into question. Too often, we’re going to settle for 10 cents on the dollar just to get a settlement, and then more than 25 percent of that money is going to go into the pockets of lawyers, rather than for programs.
“I’d rather seeus ask the legislature to amend the law to drop the June 2005 deadline for filing NRD claims, so that the DEP can adopt the program by regulation and use its own lawyers to go after the money. This approach makes no sense,” Tittel said.
Ironically, while McGreevey and Campbell often criticize Whitman, it was Whitman who revived the NRD program in the late 1990s, viewing it as a potential source of funding for her goal of preserving a million acres of open space.
Industry groups challenged Whitman in court, but the Appellate Division of Superior Court in April 2000 upheldthe state’s right to assert its “ecological-based” regulations in a case decided by a three-judge panel. With Whitman departing for Washington and Senate President Donald DiFrancesco taking over as governor, the chemical industry then prevailed upon the Republican-controlled Legislature in 2001 to require the DEP to seek Natural Resource Damage claim settlements through litigation and to file all claims within four years. If Republicans had won the governorship, NRD might have disappeared.
But McGreevey won, bringing in a Democratic Legislature and an environmental activist commissioner in Campbell.
“I was astonished to find on taking office in January (2002) that the department had not pursued, or left unsettled thousands of cases against polluters responsible for a wide rangeof damages to New Jersey’s natural resources,” Campbell has said repeatedly. “We’re putting this program back on track.”
For Steven Picco, there is a certain irony in his status as the lead lawyer in the case challenging the “natural resource damage” clause in New Jersey’s landmark Spill Compensation and Control Act. After all, he was one of the lawyers who wrote it,
In 1978, Picco recalls, he was Director of Government and Regulatory Affairs for the fledgling Department of Environmental Protection, an eight-year-old agency that did not yet have its own buildingand was occupying two floors in the Labor and Industry Building.
“We were sitting in my office in Room 802, which had a great view looking upriver toward the State House,” Picco said. “Don Linky, who was the Assistant Counsel in the Governor’s Office, his cousin, Ed Linky, who was a DEP lawyer, and I wrote the Spill Act for Brendan Byrne. The purpose was to protect the state against offshore oil spills. The Spill Act was a response to ‘What if?’ How do we reassure the Shore that if there’s a major spill that wipes out the tourism season, they will be covered?”
Originally, the bill was strictly intended to cover oil spills, said Don Linky, now Director of the Electronic Democracy Project at Rutgers University’s Eagleton Institute of Politics, “but there was some incident involving a nonpetroleum chemical spill that occurred while we were working on the legislation, so we broadened the definition to cover natural resource damage from hazardous substances.”
The Spill Act was controversial, and its passage was not assured, Picco noted.
“There was an oil spill on the Delaware the day before the Assembly was supposed to vote,” Picco said. “They called and told me, and I said, ‘Get me a dead oil-spill duck.’ I can’t remember if we got the duck itself or a photo, but it helped. There were a lot of compromises. Don Stewart was chair of the Assembly Environmental Committee, and the only way to get it out of committee was to create a special nuclear zone encompassing his Salem County district in which the bill didn’t apply.”
Both Picco and Linky said the intent of the legislation was to cover catastrophic spills.
“We were focused on the catastrophic Exxon Valdez problem,” Linky said. “We may have inadvertently left the definition wide enough that it (incremental pollution) was covered. I’m surprised it has become so broad.”
Two years after New Jersey enacted the Spill Act, then-Congressman Jim Florio succeeded in winning passage of the federal Superfund law, which provided the legal underpinning for the federal government to pursue natural resource damage claims in the Exxon Valdez caseand other catastrophic cases.
“Natural Resource Damage issues have always been a little controversial, because of the subjectivityof damage claims,” Florio conceded. “But intellectually and conceptually, it is very legitimate for state governmentto seek compensation to the public for losses over and above the cost of cleanup.”
Andrew Wilner, Executive Director of the New York/New Jersey Baykeepers,for which the Passaic River is a principal focus, noted that the state’s right to seek natural resource damages from companies for river, groundwater and other water pollution has a firm legal basis.
“The ancient common law principle called the Public Trust Doctrine was codified in Rome to give fishermen access to the water’s edge,” Wilner said. “It came down through English common law and American common law that the people have access to the water for fishing, and it holds that the people together own the resources.
“The Spill Act is a perfect codification of the Public Trust Doctrine, which states that everyone has the right to use these resources, but no one has the right to use them at the expense of anyone else. We ask that those who abused the resource compensate the rest of us. Occidental Petroleum has stolen every single blue crab fromus because no one is able to use a blue crab for any purpose now other than to hold pollution. So Occidental Petroleum should pay.”
John Maxwell of the New Jersey chapter of the American Petroleum Council notes that there is widespread concern that New Jersey’s NRD approach could spread. “I have received calls from around the country about what’s going on here - in disbelief.”
“This is a major evolutionary step in environmental consciousness that New Jersey is (bringing) to the rest of the country,” says Michael Gordon, a prominent private environmental lawyer who wrote the state’s industrial clean-up law (ECRA) while at the DEP in the early1980s.“If successful, I expect a number of states would follow New Jersey’s lead.”
Although there is no nationwide tracking of state NRD claims, New Jersey seems to be the first to state to implement a comprehensive NRD policy, according to Judy McKee, editor of the National Association of Attorneys General’s Environmental Enforcement Journal. In the past, those NRD claims that have been asserted by federal and state authorities have generally been limited to catastrophic events, such as major oil spills, and have been “mainly ad hoc, not very coherent, separate programs.”
At least 26 states to have independent state authority to recover for natural resources damages, according to a 1997 survey carried out by the Association of State and Territorial Solid Waste Management Officials (ASTSWMO), which elicited responses from 36 states. Several states have adopted the New Jersey’s methodology for measuring natural resources damages to groundwater, including Illinois, South Carolina and New Mexico.
However, New Jersey’s reliance on the Public Trust Doctrine limits the extent to which New Jersey’s NRD program can be copied by other states. Picco pointed out that NRD claims for damages to societal rights could never be exercised in Western states where private landowners also own the mineral and water rights, and Tittel noted that political realities would make it hard to adopt NRD in states such as Ohio because it is Republican-controlled or Michigan, where officials would be worried about the impact on the automobile industry.
And under the current Republican Bush administration, there is little chance that New Jersey’s aggressive approach to NRD claims would be followed at the federal level.
In fact, the dispute over federal-state jurisdiction is a core issue on the Passaic River, which Campbell made the first – and principal – public NRD battle.
In focusing on the pollution of the last 17 miles of the Passaic River as the focus for his rollout of the NRD program, Campbell chose not only one of the most visible and largest polluted waterways, but also one of the most complex environments in which to assertNRD claims.
While groundwater pollutioncan generally be traced easily to a company or a handful of companies that used particular hazardous substances in their manufacturing operations, riverine environments are more complex, and perhaps none more so than the Passaic, on which the nation’s first manufacturing city was founded by Alexander Hamilton.
The Passaic River was seriously polluted more than a century ago, and there have been hundreds, if not thousands. of potential responsible parties, ranging from Thomas Edison, as historian George Hill describes in his accompanying article, to a “who’s who” of North Jersey industry. The complexities in everything from assessing damages to ascribing responsibilities making litigation almost a foregone conclusion.
Then there is the issue of federal jurisdiction, with the federal Environmental Protection Agency, the National Oceanic and Atmospheric Administration, the U.S. Fish and Wildlife Service,and the Army Corps of Engineers all serving as co-trustees for the 17-mile stretch of the Passaic River on which Campbell is seeking his $950 million in claims from 66 companies.
Campbell said last summer he expected the federal government to follow – and not obstruct – state efforts to settle NRD cases, but at this point thereare not fewer than four projects underway on that part of the Passaic River, as Wilner describes.
In addition to Campbell’s NRD claims, the New Jersey Department of Environmental Protection and the Army Corps of Engineers are working on a dredging initiative that includes research into whether the removal of contaminated materials is feasible or counterproductive. Wilner’s group is involved in an initiative with the Rutgers Environmental Law Clinic and the Hackensack Riverkeeper to work with state and federal agencies to identify open land along the Passaic for restoration, and has filed notice to sue over the fourth project.
That project, the Passaic River Restoration Initiative, is being pushed by Tierra Solutions Inc., a companyset up by Occidental Petroleum and Diamond Alkali with a $20 million fund to work with the federal government on resolving potential NRD claims against those companies, which are among the 66 firms that Campbell is going after for state damages.
Tierra’s plan is to work with the federal government on a seven-year study of the river.
“Tierra and the other companies that have invested in it are the only ones trying to do actual cleanup,” said Michael Turner, group vice president for public affairs at the MWW Group and spokesman for Tierra. “We are working on a comprehensive and efficient cleanup plan that will look at the historical issues affecting the Passaic River, including the leaking landfills and overflow that continue to this day.
“The $950 million Campbell is seeking is politically motivated. The money’s not going to the Passaic River for actual cleanup, but for a lot of other feel-good projects. Why would you want to build boat ramps to a dirty river?”
Campbell and Wilner dismiss Tierra as a front for the some of the worst corporate polluters, and criticize the federal government’s willingness to wait seven years for another study before pursuing NRD claims.
“Where there is overlapping jurisdiction and the federal government fails to act, it is clearly the responsibility of the state to step forward and do the right thing,” Campbell said. “This (Bush) administration is no friend of the environment.”
Still, for companies whose claims fall in the “no man’s land” of competing federal jurisdiction, the question remains of whether the state can make a final settlement on NRD claims or whether this or a future federal administration could come in and seek additional millions in damages. The questions businesses want answered, said one corporate official, is “What is the process for closing out on all issues?”
The Groundwater Crisis
Campbell, DEP officials and some environmental lawyers say monies recovered from Natural Resource Damage claims — or their equivalent in restoration projects — are urgently needed to protect and restore the state’s beleaguered water resources, battered by overdrawing and accumulated contamination, and to cope with looming crises, such as the prospect that the City of Camden will run out of water in the next ten years.
“Last year’s recurrent drought reinforced the fact that we need to be better stewards of groundwater and surface waters resources in the state, and we can no longer afford to simply write off large volumes of groundwater when that very groundwater may be essential for ensuring the water supply we need for future growth in the state,” explains Campbell “There is certainly no place in the state where work is not needed to enhance water supply and strengthen protection of that water for the long-term.”
The state has a huge backlog of projects for which recovered NRD funds could bespent, including: better protecting reservoirs, restoring wetlands, which serve as purifying “kidneys” for groundwater, water conservation measures, new urban parks, more equipment for oil spills, as well as covering the cost of providing new water supplies for a densely populated, and still growing state -- and for the growing number of cities that will run out of water.
A million more people are expected to make New Jersey their home by 2020 and there are many areas in the densely-populated state where rising water demand will outstrip water supplies within the next five years. The city ofCamden is just the first of a growing list of cities expected to exhaust their current water supplies. Atlantic City and Lodi are headed for a similar reckoning. Raritan Basin water authorities used to expect they could safely use surface water until 2040, but now they say they can only count on the next three to five years.
Even in more rural areas, private well testing, required under a two year-old law, has exposed dispiriting contamination rates up to 75 per cent in some counties. In Cape May County, overdrawing has caused saltwater intrusion, forcing desalination treatment of water drawn from on-shore, fresh water wells.
The DEP’s formula for NRD damages relating togroundwater contamination is directly tied to the current cost of water replacement, and as a result, companies face NRD claims 10 times higher for the same level of pollution in Cape May County than in counties like Essex and Union, where most people would expect the level of groundwater pollution to be higher.
Roughly half of the state's residents draw their household water needs directly from groundwater; the other half receives water from reservoirs, streams and rivers. Of course these are linked; much of the groundwater flows in slow-moving underground rivers, most of which eventually discharge into surface waters.In fact, the U.S. Army Corps of Engineers was considering laying a clay berm on the bottom and sides of a section of the Saddle River several miles long to protect the river from severely contaminated groundwater.
Contamination spreads from its
original site by seeping into the groundwater and then drifting in "plumes" of
pollution that knock out fresh water supplies as they come in contact with
community wells. The state's clean-up program—which business funds
through an excise tax—pumps
and treats contaminated groundwater, trying to hold these plumes in place.
This is rarely, if ever, completely effective. One gallon of gasoline is
sufficient to pollute a million gallons of water to a level detectable by
smell and taste, according to Amy Goldstein, executive director of the New
Jersey Environmental Federation.
Of the DEP's current list of 9,000 contaminated sites across the state, about 3,500 sites are believed to be affecting groundwater in a significant way. About 500 of these have pollution plumes that are within12 years' “traveling time” to major community wellheads. Industry experts admit there are thousands of additional contaminated sites that have not yet been identified—silent, unmapped threats to groundwater.
For impoverished cities like Camden, which will lose its water supply in 10 years, the NRD program is a “huge honey pot” potentially worth billions of dollars, Tittel noted.
To reach quickly into that honey pot, the DEP devised a unique, cut-to-the-quick formula that yields a dollar amount for groundwater damage -- based on the water that could have been sustainably extracted from the contaminated area, were it not polluted -- over which negotiations can begin.
“They basically quantify
something which in the federal system doesn't get
quantified for a long time because you do all these studies first and they
take a long time before you know the scope of what you are dealing with,
whereasNew Jersey starts with essentially a dollar demand." says Michael
L. Rodburg, managing director of Lowenstein Sandler PC, who has practiced environmental law for more
than 30 years.
DEP officials see the formula as a “settlement tool” that is an “extremely conservative” reflection of the resource's total value. Industry disagrees.
“While the regulated community
is generally willing to pay something, they are not going to pay anything.
The fear is that their [the state's] numbers are going to be out of whack—that
is going to be where the battleground is going to be," says Richard
F.
Ricci, chair of the environmental law and litigation department of Lowenstein Sandler PC.
The most important revision made to the DEP formula by the McGreevey administration is the inclusion of contamination on-site into the calculation—not just to the underground plume traveling off-site. DEP officials insist there is no basis for excluding on-site contamination since all groundwater is owned by the public—and is entrusted to the state.
“Gee whiz, let me think, it's my property, I had a spill, I cleaned it up, now I have to pay natural resources claims that doesn't seem appropriate,” reacts the Petroleum Council's Maxwell. This can significantly boost a company's liabilities. A fictitious five acre site in Camden that would have previously yielded a claim of $26,716 would now be assessed at $293,878 according to Drinker Biddle reckoning. The Exxon Bayway site, which floats on a sea of oil, is 1,300 acres.
Industry says it is patently unfair for the state to charge responsible parties the full cost of “finished water” for water that was never used and in many cases could never have been used.
State officials emphasize they are offering a discount on liabilities—to be negotiated—as well as the long-desired finality in 30 years, or sooner, even for sites where cleanups, depending on the water standards demanded, could go for 100 years.
Industry attorneys say thereare a range of very debatable legal issues raised by the NRD program. Particularly objectionable is what they regard as short-circuiting of normal tort standards, which require proof of actual damages. Furthermore, they reason, should they be held accountable for groundwater that for one reason or another was not being used and perhaps could never really be used because it was in an area settled for hundreds of years, or was a saline aquifer, or for some other reason, unrelated to contamination, was never commercially available?
“Industry accepts remediation of groundwater is necessary in the areas where it has been damaged, but they have a question as to whether in many cases the injury to groundwater has actually injured anyone, whether there has been any loss,” explains William L. Warren,a Trenton-based environmental lawyer with the national firm, Drinker Battle & Reath LLP, headquartered in Philadelphia.
This is the apparent logical inconsistency that irritates the Fuel Merchants Association of New Jersey, whose members are responsible for much of the state's petroleum tank leaks. Most leak sites are not being actively cleaned up because the state has accepted they are not affecting groundwater anyone is trying to use and that the best means of cleaning these is through natural attenuation—by which bugs inthe soil gradually consume the petroleum, explains Eric Degesero, the association executive director.
Roughly 65 percent of all underground storage tank (UST) remediation sites fall under this category, known as classification exemption areas. This is true even if the plume migrates off-site.
“If nobody is being injured by it [the plume of oil], what difference does it make where it is, as long as nobody is using it,” says Degesero. But now, he complained, "on the one hand, the remediation is allowed to happen naturally because nobody is being impacted by it and then you are going to turn around and propose to assess a penalty against somebody for the lost use of something that nobody is using. The logic just doesn't add up and that'sthe biggest question we have regarding this.”
The strict joint and several liability of the state's Spill Compensation and Control Act (Spill Act) 1976— the primary law relied on for NRD—also provokes charges of unfairness by businesses. Under the “polluter pays” principle, authorities typically target polluters, but state officials are also able to hold new landowners accountable. This appears true even if they bought just the particular piece of property, not the entire former owner's firm, with all its assets and liabilities.
This can lead to an unfair situation in which new property owners, after spending their own money to clean up the former owner's mess, can now find themselves subject to NRD claims, complains attorney Ed Hogan, who serves as chairman of the environmental quality committee of New Jersey Business and Industry Association. "This is a potential nightmare and [in general, the program] is terribly counterproductive to so much else of what the department wants to achieve, in particular their Smart Growth Initiative and Brownfields program," he warns.
Campbell says he is sensitive to these issues and that the NRD program is being implemented in such a way that it does not undermine brownfields redevelopment.
But Michael Egenton of the state Chamber of Commerce warns that developers, who already plucked much of the “low-hanging fruit” brownfield plots before word of NRD surfaced, will need more assurances they will not be exposing themselves to additional liabilities. Getting this right is particularly important because far more cleanup occurs as a result of real estate development than through the state's enforcement program.
For Hogan, the danger is not just mucking up the property market, but also possibly undermining the state's current cleanup program. “Their idea of innocent parties are new developers of properties and [they say] we will protect new developers from NRD claims but for every parcel there is a seller and no seller is going to want to raise his head and do remediation if he knows it's going to be followed up by natural resource damages," he argues.
Faced with those prospects, many current property owners will be tempted to warehouse their land. "If you don't look, you don't find; if you don't find, you don't do clean-up; you don't do clean-ups, then they don't hit you with natural resource damages, which are basically pinned onto the back of a cleanup program; so if you don't do a cleanup the state has no real effective mechanism to go out there and find contaminated property that has not [already] become an acute problem," Hogan says. There are still many thousands of undeclared contaminated sites and a contentious NRD program might have a chilling effect on further cooperation in what is essentially a voluntary reporting system, he cautions.
All this suggests the importance of a flexible implementation of the NRD program and may go some ways to explaining why it took 20 months to launch the program, even though Campbell signaled his intention to pursue NRD claims early on in his administration.
For his part, Campbell has been encouraging companies to come in to settle. “It is our hope that we can establish a program that will make clear to the regulated community that these issues can be addressed reasonably and effectively and that our objective is restoration of the resource and not to collect exorbitant money damages, says Campbell.
The ‘Bounty Hunter’
While Campbell proffers the carrot, outside counsel Alan Kanner wields the stick. Kanner's impressive track record in tort cases goes back to Three Mile Island, and more recently includes winning a one billion dollar settlement against Cooper Tire company in New Jersey last year. Kanner was brought in originally to review the DEP's backlog of case files and has been retained on a contingency fee basis ranging from 10 percent to 25 percent to pursue claims.
Kanner declined to be interviewed, but John A Keefe Jr., who has worked with Kanner in the past, said: “I think Commissioner Campbell was smart. He said, ‘Look, let'sget a guy who has got great credentials who can help us put together a program.’ No one man can do this program but he can the leader of it, put a couple of field generals in place who know environmental law, put some good litigators who are well-financed to help prosecute these cases and you have a helluva team. These are not going to be tobacco, these are going to be real knuckle-chucks, you know, sock-em out litigation."
With obvious parallels to the states’ use of deputized counsel in the tobacco lawsuits, Kanner's involvement has struck a nerve in the business community. “There is the feeling that this attorney is going to be a NRD bounty-hunter,” says Egenton,noting that the state's right to use outside counsel on a contingency basis is oneof the two principal issues being contested in the court case.
Campbell is dismissive of the "flap and doodle" about the use of outside counsel, which he says has sufficient precedent in the state, and is a common sense” way to minimize expense and risk to taxpayers while trying to pursue these claims. Lack of resources—state attorneys and money to hire expensive technical experts—has long been the biggest obstacle to states pursuing these NRD claims. That, and a lack of political will.
Through Campbell, the McGreevey administration
signaledmany months ago its intention to activate these claims which
have a statute of limitations
clock ticking against them—and
in the interim has been quietly encouraging companies to come in and settle
early or face more robust damages claims
later.
“What this comes down to is that these companies have destroyed resources that belong to everyone, they have contaminated our waters, our land and wetlands, they've made fish uneatable, and they should have to pay for what they have done to all of us,” says Tittel of the firms that state environmentalists call the “Big Toxic 100,” which they say have generated the bulk of the state's hazardous contamination.
To the corporate community, part of NRD's sting isthe perception that it is a new liability, or a kind of second cleanup program. But there is little doubt NRD obligations have always been out there - the other shoe that had not yet dropped. NYU law professor Richard Stewart has long warned that “unless prompt steps are taken to reform the NRD programs, they will spill out of control like the clean-up program has.”
Because of the magnitude and complexity of the claims, individual litigation of particular cases is likely. “I bet a lot of companies [inNew Jersey] are thinking they will win in court, but I think their chances are not red-hot; in cases which involve pollution the courts generally have got very little patience for it—almost zero sympathy for the companies,” says one Fortune 50 executive with extensive expertise in environmental matters, who spoke on condition of anonymity. “But companies have a way of deluding themselves on their prospects for success in the court.”
Campbell is concerned that lawyers, particularly outside lawyers “have a perverse stake in this because many of them want to litigate and there is going to a wide divide between the clients’ interest and the attorneys’ interests in many of these cases.”
It is far better, and cheaper, in the long-run for companies to a take a pro-active role in addressing their liabilities by offering voluntary restoration projects, insists the chemical industry executive, who says this approach has saved his firm plenty. “It is in your own selfish interest to be forward looking and say, look, if I can settle this case at 20 cents on the dollars today why should I wait for the other shoe to drop and maybe pay 100 cents on the dollar or more,” he says.
Campbell is receptive, a point he underscored with a $14 million settlement in the Honeywell case that was criticized by environmentalists as too low, but which sent a message to industry that damage amounts were negotiable.
“The best-case scenario for us is where no money changes hands at all and we can simply be assured that restoration projects or a suite of restoration projects is making up for the public’s loss from a contaminated groundwater or other resource,” says Campbell, who is reluctant to offer a monetized estimate of the damages he is aiming to collect. “We have made clear we are going to be open and creative about what we consider to appropriate restoration.”
While there seems to be some convergence around restoration projects, it is hardly complete congruence. “If the state blinks a little bit and agrees that they have to recognize real lost use issues and real impact issues and thenis willing to accept some equivalence, then I think there is a basis to talk and I am optimistic that they will go for that route and then we‘ll see some project approach for the larger groundwater sites,“ says Rodburg, the Lowenstein Sandler managing partner..
Rodburg predicted last fall that if Campbell has not achieved some level of settlements within the first six months to a year, “then industry is going to be in a position where it is going to see the brunt of a very aggressive enforcement-minded approach.” The action announced in mid-May by Campbell and Attorney General Harvey may be the first salvo in that approach.
Equivalence raises a host of other issues. Chief among these is how to value natural resources that are not the same, such as groundwater versus wetlands. Then there is the need to factor in the degree of contamination and the functionality of the wetlands. How many acres of wetlands would it take to compensate the state for contamination of groundwater under a 100-acre site?
Even more complicated is calculating an acceptable trade off between resources that are not nearly so readily monetized as groundwater can be under the state place. What, for example, would compensate for polluted river sediment, which has bioaccumulated in fish that can no longer be safely eaten?
Without strong guidelines on equivalence—and there are few agreed-upon guidelines offered by the adolescent science of environmental economics there is a tremendous measure of discretion left to state officials, which some environmentalists find unsettling, even those, such as Tittel, who generally give Campbell high marks.
Another concern is how to make sure the benefits of restoration are spread around, especially to urban areas that have been most affected by longstanding contamination. State officials say they intend to focus restoration on affected areas but in many instances there are inherent difficulties to do this. Groundwater, for instance, is very difficult to restore and in the more contaminated areas it is simply not worth the effort.
“It’s clearly much easier to just buy green property in less impacted areas, to not even attempt to restore brownfield areas, to say it’s too late, but this perpetuates environmental injustice,” says Tom Borden, director of the Rutgers Environmental Law Clinic. “I think it’s crucial that restoration be localized in the areas that have been contaminated…they were thriving communities a century and a half ago.“
James Boyd, a senior fellow at the environmental think-tank, Resources for the Future, advises the state to build into its restoration settlement projectsa margin of error for the risk of failure—both outright and intermediate. “It might look like a nice ecosystem, but if you talk to the biologists they’ll tell you that healthy, mature and complex and diverse ecological systems, that is a much tougher thing to recreate once it‘s been damaged, and a lot of social value is coming from that quality, that real health and just superficial replanting or something that looks like restoration doesn’t totally cut it,” he explains.
At least at a rhetorical level, there is a striking convergence between companies and their lawyers, on the one hand, and environmentalists and state officials on the other, about their overriding shared interest in seeing on-the-ground restoration projects. One of the main criticisms of all the yesteryear skirmishing over environmental issues such as Superfund, is that expensive litigation left precious little to actually put into the environment. Furthermore, there is fear on both sides that money from NRD settlements could be siphoned off for the general treasury, although the DEP defeated such a move when it was proposed by Republican legislators last year.
Both camps say it’s time for greater maturity - from the other side. An environmental consultant who works nationally to try to bridge the gap between corporate and environmental stakeholders is concerned the New Jersey program is premised on an outmoded showdown between guys in “white hats and black hats—which is ludicrous—it’s so 1970s, and so not 2004ish.
“I think really the industry is going to have to make a judgment whether they feel if they step up and seek to fulfill their obligations whether they will be recognized in a significant way that they would be give up that battle [in court],’ says Gordon, the environmental plantiff lawyer. “The opportunity is there. Will it happen? I would hope it would happen, but I don’t think you can count on it.”
Rodburg, the corporate environmental lawyer, says, “I am reasonably optimistic that there are ways to get people together as longas government and frankly environmentalists don’t see this as an opportunity to be punitive and to try to extract every last nickel of what remains of New Jersey’s industrial base.”
New Jersey Reporter has been tracking issues relating to Natural Resource Damage claims since last summer. This article is based on a series of interviews conducted over a period of months by Ken Stier and Mark J. Magyar. Stier, who grew up in Montclair, spent more than a dozen years reporting from South and Southeast Asia and is now a free-lance writer. Mark J. Magyar is President of the Public Policy Center of New Jersey and Publisher of New Jersey Reporter.