These provisions go a long way towards codifying the relief from NRD liability that the regulated community has sought. Purchasers no longer need to met the “innocent purchaser” standard. Rather, they merely need to establish that they are neither dischargers nor in any way responsible for hazardous substances on the property.
Not all purchasers, however, may be able to meet this standard. For example, one who purchases property that still contains leaking underground storage tanks may not be entitled to the statute’s protection. See Marsh v. New Jersey Dep’t of Envtl. Prot., 152 N.J. 137, 145-46 (1997) (owner of property that contains a leaking underground storage tank is in any way responsible under Spill Act). If the Legislature intended to relieve such purchasers from liability, it would have been better to explicitly provide the relief so long as the prospective purchasers were not already “in any way responsible” at the time of the purchase. This formulation is precisely what the NJDEP has already been using in its PPAs � except that PPAs do not provide NRD and offsite contamination liability relief. On the other hand, purchasers of property from which mere passive migration of contamination continues to occur should be absolved from NRD liability. See White Oak Funding, Inc. v. Winning, 341 N.J. Super. 294, 298-301 (App. Div. 2001) (passive migration does not result in Spill Act liability); accord New Jersey Dep’t of Envtl. Prot. v. J.T. Baker Co., 234 N.J. Super. 234 (Ch. Div. 1989), aff’d 246 N.J. Super. 224 (App. Div. 1991).
Liability Relief
A-2444 also provides purchasers of contaminated property with relief from liability for cleanup and removal costs for offsite contamination migrating from a property if:
1. The owner meets the first three conditions pertaining to NRD relief;
2. The owner demonstrates by a remedial investigation that the off-site contamination is similar or identical to contamination originating from more than one source;
3. The owner can demonstrate through the performance of a remedial investigation that a remedial action for the offsite contamination is not necessary to limit the risk to the public health and the environment from that contamination; and
4. The owner has not contractually assumed liability for the migration of pre-existing contamination from the property.
These provisions raise serious questions. It appears that the Legislature is codifying the use of risk-based standards for determining whether a purchaser of contaminated property must remediate off-site contamination. The NJDEP currently forbids the use of risk-based standards for surface water and groundwater. See N.J.A.C. 7:26E-1.13(d) and (f). The question remains whether the NJDEP will re-evaluate its position on this issue, in light of this new statutory language. Moreover, the legislation in no way alters the obligation of sellers of contaminated property to remediate the contamination.
Consequently, these provisions create difficult issues between buyers and sellers with respect to off-site contamination. For example, the buyer may be able to escape off-site liability if it can establish multiple sources and no risk to public health and the environment. The seller, on the other hand, presumably remains liable for such contamination, regardless of risk, if the contamination exceeds New Jersey’s numerical standards. Similarly, the buyer will be able to escape off-site NRD liability, which will remain with the seller. Since A-2444 allows the parties to a transaction to adjust their respective statutory and regulatory obligations by contract, intensive contractual negotiations are a likely consequence of the bill.
Furthermore, for sites for which there is no financially viable seller, for example sites where the “responsible party” is defunct and a municipality has acquired title, the Legislature is apparently prepared to allow off-site contamination to go unremediated where there is no risk to the public, and to let NRD go unrecovered.
The Legislature has taken a step in the right direction, in terms of both clarifying the statute of limitations and affording much-needed protections to purchasers of contaminated property. However, the questions raised by the Legislature in A-2444 will cause new tensions between buyers and sellers of contaminated properties, both in drafting their contracts, and in litigation over the contractual terms.
Ricci is a member of Lowenstein Sandler, and the chair of its Environmental Law and Litigation Department. Smithson is counsel in the department.
