NJDEP's 'PACT' to Address Climate Change: Potential Impacts on Real Estate Development

The Chinese philosopher Confucius is said to have noted that those who do not plan long ahead may one day find trouble at their doors. This aphorism lies at the heart of the potentially forthcoming—but not yet made public—New Jersey Department of Environmental Protection’s (NJDEP or “Department”) Protecting Against Climate Threats (“NJ PACT”) regulations. These regulations have the potential to significantly impact how and where property in New Jersey can be developed.

In 2020, the NJDEP launched NJ PACT, a regulatory reform effort to avoid, mitigate, and adapt the state to the effects of climate change. In addition to monitoring and aggressively reducing emissions of greenhouse gases and other climate pollutants, NJ PACT notably includes modifying land use regulations to incorporate climate change considerations. At its base level, climate change is a real estate issue, and so land use measures to adapt to climate change are proposed to be addressed by the NJDEP in a section of the proposed rules called Resilient Environments and Landscape (REAL).

Under REAL, the proposed modification of environmental land use regulations includes Coastal Zone Management, Freshwater Wetlands, Flood Hazard Area, and other rules addressing chronic flooding, preparing sea level rise guidance to provide a science-based framework and method for building, design, and other adaptation measures, as well as incorporating climate change considerations into grant, loan, contracting, planning, and policy programs and general Department guidance. A draft of these new rules and requirements is anticipated in 2022. A number of these anticipated rules are worth examining closely, as they are expected to significantly impact real estate development in the Garden State. Since draft rules have not yet been made public, this examination is necessarily based on information provided by the Department at this time.

New ‘Inundation Risk Zone’ Regulatory Area

Citing a Rutgers University Science and Technical Advisory Panel (STAP) Report that indicates a 50% probability that sea level rise will exceed 3.3 feet and a 17% probability that sea level rise will exceed 5.1 feet by 2100, assuming “moderate emissions,” NJDEP is poised to establish a new regulatory area known as the Inundation Risk Zone (IRZ). This zone consists of currently dry land that the Department expects to be inundated by tidal waters daily or permanently by 2100. The IRZ is proposed to encompass all land that lies below the IRZ elevation, which is calculated by adding five feet to the elevation of the mean higher high water (MHHW). Development within the IRZ will be subject to more protective standards than the remainder of the floodplain beyond it.

New buildings within the IRZ would require the developer to establish a hardship exception, in which the applicant developer must demonstrate that there is no other reasonable use for the site and that preventing construction of a new building would constitute an exceptional and undue hardship. As part of this process, the applicant developer must provide an “Owner-Certified Climate Risk Assessment” that acknowledges the flooding risks linked to development. A recorded Deed Notice is also proposed to be required, summarizing both the present and future flooding risks.

Under the IRZ rules, new buildings must be elevated to the new Climate Adjusted Flood Elevation (CAFE) plus one foot. It is proposed that non-residential buildings can be flood-proofed to the CAFE plus one foot if elevating the building is impracticable. Installing new drainage systems, inlets, stormwater improvements, and simple intersection improvements will require individual permits with a hardship exception if the work is considered to constitute a major development. In that case, the applicant must demonstrate that there is a compelling need for the project that cannot otherwise be achieved without the proposed improvements. Permitting will be done by registration for drainage and intersection improvements that do not constitute a major development. Permitting by registration is accomplished through an online permitting portal, which would allow NJDEP to track the climate impacts of these permits. It is unclear how or which permits would be modified over the course of time.

For new road construction on a public roadway, for which expenditure of public funds is highly discouraged, the applicant must demonstrate that there is a compelling need for the project that cannot be achieved through other means. For new private road construction, the applicant must demonstrate that the road is necessary to serve or access the private property that cannot otherwise be accessed, and also provide public notice summarizing both the present and future flooding risks to each lot served by the private road. For both public and private road construction, the applicant must provide a “Climate Impact Statement” and acknowledge the flooding risks proposed by the construction. Signage will also be required for roads constructed below the CAFE. Reconstruction of bridges and culverts would have similar requirements.

Redefining Tidal Flood Hazard Areas

The existing tidal floodplain is based on the higher of the Federal Emergency Management Agency’s (FEMA) effective or preliminary 100-year flood event elevation. According to the NJDEP, the FEMA mapping is based on data that considers only past flood events and does not take into account a rapidly changing climate. For example, the NJDEP cites one recent study that concludes that the precipitation intensities in New Jersey are likely to increase by as much as 35% by the year 2100. As a result, NJDEP suggests that today’s 500-year flood limits may therefore be a good approximation of the future 100-year flood limits. The agency proposes to adjust FEMA’s 100-year floodplain to make it reflect current rising sea level trends, by redefining the tidal and fluvial flood hazard areas. For fluvial areas, the Department is considering two different options:

1. Calculating the highest of either FEMA’s 500-year flood elevation plus one foot, NJDEP’s flood hazard area design flood elevation plus two feet, or FEMA’s 100-year flood elevation plus three feet; or
2. Calculating the flood hazard area using hydrologic and hydraulic calculations based on 125% of the 100-year discharge.

The current flood hazard area design flood elevation is equal to one foot above the FEMA 100-year flood elevation. The Department is said to be considering significantly increasing it to as much as three feet over the FEMA 100-year flood elevation marker. Approximately 35% of New Jersey lies in a flood hazard area.

National Flood Insurance Program

NJDEP seeks to amend the Flood Hazard Area Control Act (FHACA) regulations to better align with the National Flood Insurance Program (NFIP). These proposals include:

• Automatically pausing a permit and requiring the applicant to reinstate it if work within a flood hazard area is not commenced within 180 days of approval.
• Clarifying the regulations to ensure that a permit will not be issued if it violates minimum NFIP standards.
• Ensuring that buildings approved under the hardship exception still meet the minimum NFIP standards or comply with FEMA’s waiver process.

Freshwater Wetlands

In alignment with the agency’s goal to increase protection of land and water resources, the Department proposes a slew of new regulations pertaining to development in freshwater wetland areas. One of these proposed rules would require applicants to demonstrate compliance with the Stormwater Management Rules (“SWMR”) for any project impacting wetlands or transition areas, which is associated with or part of a major development. Another proposed rule would clarify that wetlands impacts must be unavoidable for the construction of a project regardless of whether the impacts meet the general permit criteria. Another would require that all activities in a wetlands transition area stay at least 25 feet from the wetlands and that the entire transition area be protected by a conservation restriction once modified through averaging.

Stormwater Management

On March 2, 2021, the recent amendments to the SWMR became effective. Most significantly, these amendments require major developments to utilize green infrastructure to meet the groundwater recharge and stormwater runoff quantity and quality standards. In addition, the amendments revised the definition of a “major development” in a manner that considerably expanded the reach of the SWMR. Building on these concepts, REAL proposes further additions to the SWMR, such as requiring 80% total suspended solids removal for redeveloped / reconstructed motor vehicle surfaces and requiring onsite retention of the water quality storm system in order to reduce offsite pollution and flooding impacts.

Takeaways

The NJDEP was established on April 22, 1970, the first official Earth Day in the United States, and flooding has since been one of New Jersey’s greatest natural threats. In 1981, the Legislature amended the Municipal Land Use Law by adding the Stormwater Management Act, which delegates to the NJDEP the authority to regulate stormwater management. In reporting the bill, the Senate Committee recognized that, from 1968 to 1981, flood damage in New Jersey amounted to more than half a billion dollars. Subsequently, in 2004, two sets of stormwater rules were published establishing a comprehensive framework focused on addressing the water quality impacts associated with existing and future stormwater discharges. The latest set of stormwater rules, in addition to the other proposed NJ PACT REAL regulations, reflect a renewed NJDEP concern with flooding, but this time in the context of the perceived ramifications of climate change.

At this time, there is no indication that the Department is contemplating any exemption or grandfathering provisions to the REAL regulations, even for existing agency letters of interpretation or local preliminary and final site plan approvals. Accordingly, if the REAL regulations are adopted as proposed, developers with previous approvals in hand will be left with little recourse besides arguments based in equitable estoppel.

While the not-yet-made-public REAL regulations, if ultimately drafted and adopted, may not directly affect existing buildings and infrastructure, they are certain to significantly affect future real estate development in the nation’s most densely populated state.

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Reprinted with permission from the April 25, 2022 issue of the New Jersey Law Journal. © 2022 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved. For information, contact 877-257-3382 or reprints@alm.com or visit www.almreprints.com.