A Refinery Is Not a Gas Station: N.J. Court Says Former Oil Operation Was Abnormally Dangerous Activity

The 1976 Spill Compensation and Control Act (“Spill Act”) gave New Jersey a wide variety of new powers to address, and seek reimbursement for, environmental contamination. Despite its broad new remedies, however, it did not pre-empt or “subsume” common-law theories such as strict liability for abnormally dangerous activities. Moreover, the historical operations at an oil refinery and terminal that resulted in substantial discharges and pollution of nearby waterways could constitute an abnormally dangerous activity. So held the Appellate Division in its recent opinion in New Jersey Department of Environmental Protection v. Hess Corporation.

Hess involves a property in the Port Reading section of Woodbridge historically operated as an oil refinery and terminal. In its 2018 complaint against Hess (which developed the property in 1958 when it was known as Amerada Hess Corporation) and Buckeye Partners, LP (which acquired the property from Hess in 2013), the New Jersey Department of Environmental Protection (NJDEP) alleged discharges of oil affecting the nearby Smith Creek and Arthur Kill during Hess’s period of ownership.  The NJDEP asserted claims under the Spill Act, the Water Pollution Control Act, strict liability, trespass, and public nuisance, seeking both injunctive relief and money damages in connection with the defendants’ failure to assess injuries to natural resources and to restore the injured resources. Hess and Buckeye filed separate motions to dismiss, targeting the State’s common-law claims. The Law Division dismissed NJDEP’s strict liability and trespass claims, and struck its demand for money damages under its public nuisance claim. The Appellate Division granted NJDEP’s request for leave to file an interlocutory appeal.

The court first addressed the Law Division’s dismissal of NJDEP’s strict liability claim, and held that the Law Division had erred when it ruled that Hess’s operations did not constitute an abnormally dangerous activity and that, in any event, the strict liability claim was “subsumed” by the Spill Act. On the contrary, said the Appellate Division, the Spill Act’s remedies supplemented, and did not replace, common-law causes of action; indeed, Section 11v of the statute explicitly preserves them. The court also reversed the Law Division’s conclusion that Hess’s operations were not abnormally dangerous, rejecting its reliance on the 2002 Law Division opinion in Biniek v. Exxon Mobil Corp., which concerned a gas station. In sharp contrast, Hess operated a refinery and storage facility that covered 210 acres, was located next to sensitive waterways, and repeatedly discharged hazardous substances that injured natural resources and exposed people to potential harm. This was more than enough to meet the test articulated by the New Jersey Supreme Court in its landmark 1983 decision in NJDEP v. Ventron Corp. The court affirmed the dismissal of the strict liability claim against Buckeye, however, because the complaint did not allege any activities by Buckeye that had anything to do with a discharge or contamination. Unlike liability under the Spill Act, strict liability under the common law requires more than mere ownership of the contaminated site.

NJDEP’s trespass claim did not fare as well. The contamination of Smith Creek and the Arthur Kill cannot constitute an actionable trespass, said the court, because trespass requires an invasion of land that is in the exclusive possession of another. The State does not have exclusive possession because under the public trust doctrine, the State holds title in these waterways in trust on behalf of the people.

The Appellate Division’s analysis of NJDEP’s public nuisance was more nuanced. The Law Division had struck down NJDEP’s demand for monetary relief because under the New Jersey Supreme Court’s 2007 decision in In re Lead Paint Litigation, the only remedy available to the State is abatement of the nuisance; the State cannot collect money damages. NJDEP argued, and the Appellate Division agreed, that the Law Division had failed to consider that Lead Paint still allows the State to recover the costs of its own efforts to abate the nuisance. Thus, the Appellate Division remanded this issue to the Law Division to clarify that its dismissal of NJDEP’s claim for money damages under its public nuisance claim did not encompass the costs of abatement of the nuisance.

Hess reminds us that despite the decades-long process of the enactment of powerful remedial and regulatory statutes, common-law theories and remedies retain their vitality and relevance. And that when it comes to strict liability for abnormally dangerous activities, a gas station should not be confused with a 210-acre oil refinery.

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