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Spill Act Amendment Provides Protection From NRD Claims; Proposed Law Would Make Funds Available For Redevelopment



January 25, 2005

Two pieces of legislation — one recently enacted, one pending — promise to make redevelopment of brownfields easier in New Jersey.

The 1998 Brownfield and Contaminated Site Remediation Act (“Brownfields Act”) did much to encourage the redevelopment of underutilized and/or abandoned contaminated properties. However, the State’s ongoing Natural Resource Damages (NRDs) initiative has had an unintended chilling effect on potential brownfield developers, who despite the Brownfields Act’s provisions were still vulnerable to potentially costly NRD claims. The Legislature moved to address this issue with P.L. 2005, c.4, which does not explicitly mention brownfield redevelopers but creates a zone of protection from NRD claims that will certainly benefit such redevelopers.

The statute adds to the Spill Compensation and Control Act a new provision that protects certain landowners from liability for NRDs. The provision applies to any landowner who (1) acquired the property on or after January 6, 1998, the effective date of the Brownfields Act, (2) acquired the property after the discharge, (3) did not discharge the hazardous substance, is not in any way responsible for the discharged hazardous substance, and is not a corporate successor to the discharger or to any person in any way responsible or to anyone liable for cleanup and removal costs, and (4) did not expressly assume liability for payment of compensation for loss of natural resources or for restoration of natural resources. Landowners who meet the foregoing requirements “shall not be liable for the payment of compensation for damage to, or the loss of, natural resources, or for the restoration of natural resources.”

P.L. 2005, c.4 offers no protection to those who acquired real property prior to January 6, 1998. Such landowners might qualify for some protection under the other “innocent purchaser” provisions of the Spill Act, N.J.S.A. 58:10-23.11g.d(2), (5), which, in conjunction with N.J.S.A. 58:10-23.11g11, provide protection from liability for both cleanup and removal costs and NRDs. The existing “innocent purchaser” defenses are not as generous as the protection provided by P.L. 2005, c.4, however. Landowners that have not already conducted a cleanup or obtained a DEP approval can qualify for protection under the old provisions only if, at the time of purchase, they did not know, and after conducting appropriate inquiries had no reason to know, about the contamination. In contrast, the new statute contains no such “lack of knowledge” requirement, recognizing that brownfield developers, by definition, purchase contaminated properties with clear knowledge of the environmental conditions and precisely because those properties are contaminated.

Also pending in the Legislature is Senate Bill No. 277, which is intended to promote brownfields redevelopment by making it easier for municipalities, counties, and redevelopment entities to obtain funding for remediation projects in brownfield redevelopment areas. The bill would amend and supplement N.J.S.A. 58:10B-1 et seq., concerning the Hazardous Discharge Site Remediation Fund (“the Fund”), to allow counties, municipalities and redevelopment authorities to receive financial assistance and grants from the Fund for the development of properties in brownfield areas. It would also give DEP the authority to develop procedures for designating brownfield development areas, and spells out certain requirement that such DEP guidelines must impose. Under the bill, a municipality, county or redevelopment entity need not have an ownership interest in the property to qualify for grants from the Fund for the remediation of property, provided the property is located in a brownfield redevelopment area. However, any expenditure of grants under those circumstances would operate as a “debt of the property owner to the fund” and would “constitute a lien on the real property on which the remedial action is performed.” The lien would remain in effect until the property is transferred to the municipality, county or redevelopment entity.