NJDEP Legislative, Regulatory and Policy Update - Highlands Water Protection and Planning Act, Stormwater Regulations and ISRA Letters of Nonapplicability ('LNA')

Highlands Water Protection and Planning Act
By Douglas J. Janacek and Gregory R. Alvarez

One of the most significant environmental proposals of the McGreevey era took another step closer to becoming law this month. The proposal would designate approximately 350,000 acres in the Northwest corner of the state, otherwise known as the Highlands, as part as a critical ground water recharge zone, establish a super agency to oversee the area, and preserve 145,000 acres of critical watershed lands from development. The proposal has been hotly contested by developers and by many towns that lie within the region. However, environmentalists in favor of the proposal have strong support among residents. This has culminated in several heated debates at public meetings being held on the proposal throughout the region. Most notably, a public meeting held in Morris Township earlier this month had to be shut down due to overcrowding and unruliness. On April 22, 2004, a joint committee of the Senate and Assembly Environment committees met regarding the pending legislation. Entitled the “Highlands Water Protection and Planning Act,” it is designated at bill S-1 in the Senate. It was introduced by this chamber on March 29, 2004. At the April 22^nd committee meeting, amendments were introduced for consideration. Therefore, another committee meeting will be required to consider the amendments prior to the legislation being reported out of this committee, enabling it to be considered and voted upon by the full legislature. No date has been set for the next committee meeting. Also, no vote has taken place on the floor of either chamber. As of now, the earliest scheduled voting session of the Senate is on May 20^th, and for the Assembly on May 24^th. Moreover, although the bill was introduced in the Senate on March 29^th, it has not yet been introduced in the Assembly. The earliest scheduled date it could be introduced in the Assembly is May 3^rd. It has been reported that Governor McGreevey intends to be aggressive in pushing this legislation through the Legislature, with some estimating that it will be effective by July 1. Future editions of In-Sites will provide further information updates.

Stormwater Regulations
By Douglas J. Janacek and Gregory R. Alvarez

Supplementing our prior E-Alert on January 20, 2004, there is additional news regarding the applicability of the new Stormwater Management Regulations (the “Regulations”). The New Jersey Department of Environmental Protection (“NJDEP”) has made clear that nonresidential projects, if not otherwise exempt from the Regulations because of the “grandfathering” provision discussed in the previous E-Alert, are not automatically subject to the Regulations. Instead, for those nonresidential projects that did not require relevant NJDEP permits and did not receive necessary local land use approvals prior to February 2, 2004 (the date on which the Regulations were adopted), they will only be subject to the Regulations upon the applicable municipality adopting an ordinance which makes the Regulations effective.

First, NJDEP expressly recognizes the inability of municipalities, at present, to apply the Regulations to nonresidential development. Specifically, the Department sets forth that:

The Stormwater Management Rules do not affect the jurisdiction or requirements of municipal planning boards under the Municipal Land Use Law. Planning Boards should continue to exercise their authority under the Municipal Land Use Law, reviewing projects for compliance with their existing stormwater management ordinances. However, planning boards should be aware that the new Stormwater Management Rules will become effective on February 2, 2004 for residential development through Residential Site Improvement Standards [“RSIS”].

NJDEP Website, at http://www.nj.gov/dep/watershedmgt/stormwaterfaqs2.htm . (Emphasis added).

For the RSIS to be operative, the proposed project must meet the following test:

[t]hese rules shall govern any site improvements carried out or intended to be carried out or required to be carried out in connection with any application for residential subdivision, site plan approval, or variance before any planning board or zoning board of adjustment created pursuant to the Municipal Land Use Law (N.J.S.A. 40:55D-1 et seq.); or in connection with any other residential development approval required or issued by any municipality or agency or instrumentality thereof.

N.J.A.C. 5:21-1.5(a).

Assuming a proposed residential project requires such approval, the Regulations will apply to all such developments that involve an acre or greater of land disturbance or one-quarter acre or more increase in impervious surface. N.J.A.C. 7:8-1.2.

The regulations, at N.J.A.C. 7:8-4.3, provide that municipalities may only enforce the Regulations as to nonresidential developments upon adoption of an ordinance providing same. Moreover, the ordinance itself must be adopted within one year after adoption of a municipal stormwater management plan. The purpose of the municipal stormwater ordinance is to implement the municipal stormwater management plan. Absent a municipal stormwater management plan and implementing ordinance, municipalities have no authority to enforce the Regulations as to nonresidential developments. NJDEP has verbally confirmed that a municipality must first adopt an ordinance in order to apply the Regulations to commercial projects that are not otherwise subject to state environmental land use law such as freshwater wetland, stream encroachment and similar provisions.

ISRA LNAs
By Arthur J. Clarke

Citing to the fact that NJDEP receives over 5,000 applications for LNAs each year, NJDEP has decided to stop processing LNA applications for a number of transactions and property types that it has determined are “clearly not subject to ISRA.” As of April 2004, NJDEP will issue form letters to LNA applicants stating that the Department will no longer process applications for LNAs for the following transactions:

1. 1. The refinance of a loan or obtaining a construction loan;

1. The sale, purchase, or corporate transaction involving the following property types:
   • • residences including apartment buildings and nursing homes;
   • • agricultural land;
   • • restaurant/bars;
   • • medical offices;
   • • retail gasoline stations;
   • • automobile repair shops, body shops and dealerships;
   • • dry cleaning operations;
   • • undeveloped land not located adjacent to an industrial establishment;
   • • garden centers/home improvement centers/lumber yards/hardware stores;
   • • hair or beauty salons;
   • • motels, hotels or rooming houses;
   • retail stores, excluding print shops.

The reason for the change in policy is rooted in the fact that many lenders, landlords and other parties with an interest in real property institutionalized the requirement to obtain an LNA resulting in thousands of LNA applications needing to be processed by NJDEP each year. Even though a LNA is neither required by ISRA nor is it indicative of the presence or absence of contamination, many parties take comfort in receiving these letters from NJDEP. The issuance of a LNA makes properties easier to sell, lease and finance. However, the popularity of the LNA as a comfort letter has led to its downfall. As of this month, should you submit an application for a LNA for one of these types of properties, you will receive the application and review fee back from NJDEP unprocessed. The absence of LNAs for certain transactions may increase the demand for No Further Action letters (“NFA”) under NJDEP’s Voluntary Cleanup Program or may create the need for opinion letters from counsel as to the applicability of ISRA to a particular transaction. NJDEP has acknowledged that the change in policy is somewhat unilateral and has offered Gibbons the opportunity to comment on the policy shift. To participate in the commenting process, please refer to “NJDEP Changes Policy Regarding Letters of Non-Applicability“. In any event, real estate transactions will change as a result of this policy shift. For additional information see “NJDEP Stops Processing LNA Applications for Certain Property Types“.