Real Property & Environmental Law Alert : New Jersey, New York, Pennsylvania & Delaware Lawyers & Attorneys for Real Estate Development & Environmental Law

The answer you get depends on the question you ask. That’s the take-home lesson from the Supreme Court’s decision in Los Angeles Flood Control District v. Natural Resources Defense Council. All parties agreed on the answer to the specific question on which the Court granted certiorari. The Court, applying its own 2004 precedent, said they were correct -- there was no “discharge” that violated the District’s permit because the flows in question simply went from one part of the same river system to another. The Court never reached the alternative ground for liability urged by the plaintiffs because it went beyond that narrow question. The result? A reversal and a win for the District on essentially procedural grounds.

The Clean Water Act requires a permit for discharges from some municipal stormwater systems. The District has had such a permit for discharges from its stormwater sewers into the Los Angeles and San Gabriel Rivers since 1990. Under the statute’s citizen suit provision, NRDC and the Santa Monica Baykeeper sued the District, alleging, among other things, that water-quality measurements from stations within the rivers demonstrated violations of the District’s permit. The District Court granted summary judgment to the District, pointing to “thousands of permitted dischargers” to the rivers and holding that the record was insufficient to show that the District had violated its permit. The Ninth Circuit reversed in relevant part, holding that the District was liable for discharges from certain concrete-lined portions of the river over which it exercised control into downstream portions of the rivers that had no concrete linings.

The Supreme Court granted the plaintiff’s petition for certiorari, but on the narrow question of whether a Clean Water Act “discharge of pollutants” occurs when polluted water flows from one portion of a river, through a concrete channel or other engineered improvement in the river, into a lower portion of the same river. The grant of certiorari was curious since all of the parties, as well as the United States as amicus curiae, agreed that the answer to the question was “no.” Indeed, the Court had already held in 2004, in South Florida Water Management District v. Miccosukee Tribe, that the transfer of polluted water between two parts of the same water body did not constitute a discharge of pollutants under the statute, which defines the term as “any addition of any pollutant to navigable waters from any point source.” In Miccosukee, the Court had held that no discharge occurred when water was removed from a water body, transported through a pump station, and returned to the same water body. The case at hand was even easier, for the polluted water in question never even left the rivers; it simply flowed from a concrete-lined portion of a waterway to an unimproved portion of the same waterway. Therefore, in an 8-0 decision by Justice Ginsburg (Justice Alito concurred in the result), the Court reversed and remanded the case to the Ninth Circuit.

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In December, we reported on the release of a draft report from United States Environmental Protection Agency’s (EPA) Office of Research and Development on a possible link between groundwater contamination in some Wyoming wells and hydraulic fracturing (“fracking”) activity in the area. Now, as promised, EPA is initiating an independent assessment of the report by outside peer reviewers.

The EPA report garnered intense attention from both proponents and opponents of fracking, which extracts natural gas from underground rock formations through the pumping of a pressurized mixture of water, sand, and chemicals that creates cracks, or fractures, in the rock, allowing the trapped gas to escape, flow into the well and up to the surface. Concerns over groundwater contamination could delay or limit fracking in New York, Pennsylvania, and a number of other states.

EPA published a Federal Register notice on January 17, 2012 that seeks nominations for experts to review the draft report as well as all public comments received during a comment period that will close on January 27. An EPA peer review contractor will select five to seven outside reviewers from among those nominated.

The agency is looking for recognized experts in a variety of fields (e.g., petroleum engineering, hydrology, geophysics, and water quality) who have no financial conflicts of interest or whose position would otherwise create an appearance of a lack of impartiality. Nominations (preferably via e-mail) must be submitted by February 17.

Paul M. Hauge is an Associate in the Gibbons Real Property & Environmental Department.

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A draft report from United States Environmental Protection Agency’s (EPA) Office of Research and Development has tentatively pointed a finger at hydraulic fracturing (“fracking”) as a cause of groundwater contamination detected in a number of wells near the town of Pavillion, Wyoming. The report, which has not yet undergone outside peer review, is likely to set off alarm bells among both proponents and opponents of fracking, including those in eastern states like New York, New Jersey, and Pennsylvania.

Fracking involves the pumping of pressurized water, sand, and chemicals into underground rock formation (such as the Marcellus Shale formation in Pennsylvania and New York) that contains natural gas. The high-pressure fluid creates cracks, or fractures, in the rock, allowing the trapped gas to escape, flow into the well and up to the surface. Eastern states have adopted a variety of policies toward fracking, ranging from Pennsylvania’s enthusiastic promotion to New York’s temporary moratorium and ongoing effort to promulgate protective regulations to New Jersey’s attempted legislative prohibition that was vetoed in favor of a temporary ban.

Whether fracking may contaminate groundwater is a critical question facing policy makers across the country. The EPA study, conducted in response to complaints from residents about objectionable taste and odor problems in water drawn from the drinking water wells after fracking in nearby gas production wells, concludes, based upon both data and complex scientific reasoning, that fracking has caused impacts to ground water in the Pavillion area. EPA also noted certain limitations of the study: its purpose was “to determine the presence, not the extent, of ground water contamination in the formation,” and the results are specific to the Pavillion area, where fracking occurs in and below a drinking water aquifer and near drinking water wells, unlike production practices in many other parts of the country.

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The Clean Water Act regulates the placement of fill into the “waters of the United States.” That term has come to include wetlands -- or at least some wetlands. The Supreme Court’s last attempt, in Rapanos v. United States, to clarify which wetlands fall within the statute’s coverage caused great confusion, as the five Justices who agreed on the judgment (a four-Justice plurality led by Justice Scalia, and Justice Kennedy, who concurred separately) generated two separate tests for jurisdiction. Which test should lower courts apply? In an opinion released on October 31, the Third Circuit said, “both” -- if the wetlands in question satisfy either Justice Scalia’s test or Justice Kennedy’s test, they fall within the statute’s reach.

Justice Scalia’s plurality opinion Rapanos, decided in 2006, took a “wet” view of “waters of the United States,” restricting that term to “relatively permanent” water bodies that formed “geographic features.” Wetlands, under this test, fall within the statute’s scope only if they have “a continuous surface connection” to such bodies of water. By contrast, Justice Kennedy’s “dry” test construed the statute to cover any wetlands that have a “significant nexus” with “waters of the United States, i.e., that the wetlands, alone or in combination with similar lands in the region, significantly affect the chemical, physical, and biological integrity of covered waters.

In United States v. Donovan, the Third Circuit affirmed a district court summary judgment against Delaware landowner David Donovan, who had been fined $250,000 and ordered to remove 0.771 acres of fill that he had placed on his property without obtaining a permit from the Army Corps of Engineers. Donovan argued that the multiple opinions in Rapanos failed to provide a governing legal standard for Clean Water Act jurisdiction, and that therefore pre-Rapanos case law should govern. The Third Circuit disagreed, and, adopting the position taken by the First Circuit and the Eighth Circuit, held that the Corps of Engineers could assert jurisdiction if the wetlands on Donovan’s property met either test set forth in Rapanos. The Court further held that the government’s evidence indisputably showed that Donovan’s wetlands satisfied the “significant nexus” test, and thus did not have to decide whether there was any genuine issue as to whether they satisfied the Rapanos plurality’s test.

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In February and May of 2011, the New Jersey legislature induced identical bills in the Senate (S 2722) and Assembly (A3915) to ban the manufacture and sale of products containing decabromodiphenyl ether (decaBDE). DecaBDEs are used in plastics for TV cabinets, consumer electronics, wire insulation, back coatings for draperies and upholstery. Growing concerns over the connection between decaBDEs and liver, thyroid and neurodevelopmental toxicity have lead a number of states, countries, as well as the European Union to institute bans.

Under the proposed legislation, the ban would go into effect on January 1, 2014, and apply to products containing more than 0.1% decaBDE, unless it is used for military or transportation purposes or is solely derived from recycled materials and used exclusively in electronic equipment. Sellers would have up to December 31, 2014 to sell off existing stock. Violations of the act would be an unlawful practice under the NJ Consumer Fraud Act, N.J.S.A 56:8-1 et seq., carrying a penalty of $10,000 for the first offense and up to $20,000 for subsequent violations.

Washington was the first state to implement a ban on decaBDE products, joined by several others, including Oregon, Maine, Vermont and Maryland. In addition, in December 2009, EPA negotiated phaseout commitments from three companies responsible for most of the decaDBEs sold or imported into the United States who agreed to end all uses of the chemical by December 2013.

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Encouraging development of environmentally challenged real estate -- brownfields -- is usually the task of state agencies. In New Jersey the Office of Smart Growth; the Economic Development Authority and the Department of Environmental Protection all offer programs intended to encourage redevelopment of brownfields. However, states are struggling to fund and support their brownfield programs and funds for outreach to potential developers and their allied professionals are in short supply.

As a result USEPA’s recent “Federal Programs Guide” is a welcome reminder of the federal resources that may be available to assist brownfield redevelopment projects. This comprehensive guidebook provides an agency-by-agency survey of brownfield-related initiatives. EPA’s guidebook also presents a valuable primer on tax credits and favorable tax treatment for brownfield remediation.

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On May 18, 2011, the New Jersey Appellate Division upheld a trial court’s decision that the New Jersey Department of Environmental Protection had failed to establish sufficient “nexus” or connection between the operator of a dry cleaner and regional groundwater contamination. In New Jersey Department of Environmental Protection v. Dimant, et al., (Docket A-3180-09T2), the Appellate Division soundly rejected New Jersey’s claim that “the Spill Act must be interpreted and applied very broadly to find that any discharge at any time, even a de minimis one, imposes liability on all operators handling that product, and that a direct causal connection between the discharge and the damages need not be established.” This sort of argument which asks the court to overlook critical connections is all too common in environmental cases. Indeed, governmental plaintiffs often invoke policy reasons when asking for relaxed nexus requirements whereas private parties seeking contribution frequently call on the courts to shift the burden to the alleged dischargers.

However, in Dimant the Appellate Division reminded all potential plaintiffs seeking to impose liability for clean-up costs on former owners or operators that they must meet their burden by coming forward with a preponderance of the evidence sufficient to prove a “nexus” between the defendant and the discharge as well as connecting the damages to the contamination. Although plaintiffs may resort to circumstantial evidence and experts, any break in the chain of connections between a defendant and the discharge or the discharge and the alleged contamination (or the contamination and the plaintiff’s damages) should be fatal after Dimant.

Dimant involved the dry cleaning solvent perchloroethylene (PCE) which had impacted over 350 acres of groundwater in and around Bound Brook. Although there were no less than three dry cleaners in the neighborhood (each of which had several owners and operators), as well as two or three other possible sources of PCE, NJDEP’s investigations eventually focused on only one relatively short term operator of one of the dry cleaners. Using a combination of inspection reports that confirmed the presence of discharge pipes in and around dry cleaning operations, and sampling data, NJDEP’s expert concluded that one particular operator was the “primary source” of the groundwater contamination. However, the trial court took a critical look at the alleged connections between this dry cleaner’s operations and the PCE discharge as well as the nexus between any potential discharge and the probability that it caused such extensive contamination. After a non-jury trial, the court found that NJDEP failed to prove its case primarily because its expert failed to address the presence of older, weathered PCE which pre-dated defendant’s activities. NJDEP’s expert was further faulted for the failure to consider other possible sources of the PCE. Indeed, reading between the lines it appears that NJDEP probably cobbled together sufficient evidence to prove that defendant’s operations resulted in minor discharges into a paved parking area. However, it also appears that NJDEP utterly failed to establish that defendant’s discharge was of sufficient volume or duration to have permeated the pavement and entered the groundwater and then caused the contamination. Thus, the chain of connections between the dry cleaning operations and the contaminated groundwater was broken.

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The other shoe dropped on February 28 in the closely watched CERCLA case involving PCB contamination of the Fox River in Wisconsin. District Judge William C. Griesbach, who had previously ruled that the paper companies that made and discharged PCBs to the river could not seek contribution from recycling mills that unknowingly bought PCB-laden waste paper, called “broke,” and also discharged PCBs, held that those companies must reimburse those comparatively innocent companies for 100% of the costs they have incurred for most of the polluted river. But he held that it was too early to say whether the paper companies knew, and did, enough, to make them liable for “arranging for” disposal of the PCBs that ended up in the recycling mills’ discharges to an upstream stretch of the river.

In his recent decision, Judge Griesbach considered arguments concerning two separate stretches of the Fox River Superfund Site in Wisconsin, which the U.S. Environmental Protection Agency has divided into five operable units (OUs). The plaintiff paper companies discharged PCBs into OU2, and the PCBs flowed downstream to OUs 3,4, and 5. The recycling mills discharged PCBs to all five OUs, including OU1, which is upstream from all of the others. (Another decision in the Fox River case was the subject of an earlier blog post.

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On June 8, 2010, in Westport Insurance Co. v. Appleton Papers, Inc., the Wisconsin Court of Appeals for the First District held that two insurers, namely Munich Re Ag and Westport Insurance Co., are liable each for $5 million dollars to compensate Appleton Papers, Inc. (Appleton) for cleaning up the sediment contamination in the Fox River. The Fox River is undergoing a cleanup pursuant to oversight by the United States Environmental Protection Agency.

Appleton acquired assets of National Cash Register Inc. (NCR) during the l950’s and later, NCR manufactured carbonless paper using PCBs (polychlorinated biphynols). The Fox River became polluted with PCBs, a suspected carcinogenic substance. Appleton had sued nine insurers but settled with seven. The remaining two filed the appeal decided by the Wisconsin Court of Appeals in a 2 to 1 decision. Among the issues raised on appeal was whether the insurers were responsible for “after-acquired liability,” namely liability that Appleton acquired along with NCR assets after the policy periods in question expired. The insurers also asserted that Appleton had made voluntary payments not covered by the policies and that notice to the insurers was late, excusing coverage.

While the case was decided under Wisconsin state law, it bears significance to USEPA led river cleanups here in New Jersey. At present the USEPA has entered into a consent decree with 73 potentially responsible parties to conduct a remedial investigation and feasibility study of the Lower Passaic River, a seventeen mile stretch of the estuarine portion of the Passaic River. Presumably parties potentially responsible for sediment contamination in the Passaic will be scrutinizing both their old insurance policies for possible coverage and this decision for legal authority.

Passaic River, Newark, NJ. Photo courtesy of EPA.

John H. Klock is a Director in the Gibbons Real Property & Environmental Department.

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On March 3 the City Council of New York approved legislation designed to deter illegal dumping into the city's waterways. The measure increases the maximum penalty for illegally dumping such materials as dirt, sludge, acid, or any other "refuse matters" from $250 to $10,000 for a first violation and $20,000 for subsequent violations.

John H. Klock is a Director in the Gibbons Real Property & Environmental Department.

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