Disclose all information when filing an ISRA exemption

Seeking an ISRA Exemption? It Never Pays to Hide the Ball

By Katherine Riopel Suell

 

In the recent case R&K Assoc. LLC v. Dep’t of Envt’l Prot., N.J. Super App. Div. No. 17-2-3054, the Appellate Division found that although the former owner of a property may legally be eligible to obtain a de minimis quantity exemption under the Industrial Site Recovery Act (“ISRA”), the specific former owner who helped established that principle would not be eligible for the exemption on account of a “troublesome lack of documentation.”

Background

In 1997 Des Camps Laboratories, Inc. (“Des Champs”) submitted a negative declaration to the New Jersey Department of Environmental Protection (“DEP”), certifying that there had been no discharge of hazardous substances from the property during its operations from 1982 through 1996. Based on that information, the DEP issued a no further action letter (“NFA”) in January of 1997, and Des Champs was authorized to terminate its operations at the property.

Later, in 2005, the DEP determined that certain nearby groundwater contamination could be traced to the property and on that basis it rescinded the 1997 NFA and directed that Des Champs investigate groundwater contamination and submit an ISRA-compliant site investigation report.

In January of 2009, Des Champs applied for a de minimis quantity exemption pursuant to ISRA. N.J.S.A. 13:1K-9.7. In conjunction with that application, Des Champs submitted a limited affidavit detailing the hazardous substances on the property. In January of 2011, the DEP denied Des Champs’ application for a de minimis quantity exemption.

A series of appeals followed. In conjunction with those appeals, the Appellate Division clarified that:

  1. ISRA does not require a property to be free of contamination for an entity to qualify for the de minimis quantity exemption
  2. A current owner has a legal right to participate in the case concerning the applicability of the de minimis quantity exemption as an intervenor
  3. ISRA does not disallow a former property owner to receive a de minimis quantity exemption

See: Des Champs Labs. Inc., v. Martin, 427 N.J. Super. 84 (App. Div. 2012); R&K Assocs., LLC v. N.J. Dep’t of Envtl. Prot., No. A-0413-12 (App. Div. May 16, 2013); R&K Assocs., LLC v. N.J. Dep’t of Envtl. Prot., A-4177-14 (App. Div. Apr. 10, 2017).

Following the 2017 decision of the Appellate Division and the Court’s determination that ISRA permits a former property owner to seek a de minimis quantity exemption, the case was remanded to the DEP and an Administrative Law Judge (“ALJ”) to permit Des Champs an opportunity to demonstrate its entitlement to a de minimis quantity exemption by a preponderance of the evidence.

Selective Information Disclosure Will Not Be Rewarded

The ALJ found that “the evidence did not justify Des Champs receiving a DQE” referencing “numerous discrepancies in Des Champs’ various submissions” as well as Des Champs “fail[ure] to identify in its application at least two of the operations” and the “troublesome lack of documentation regarding the company’s actual usage of hazardous substances.” Des Champs appealed.

Upon appeal, the Appellate Division affirmed the determination of the ALJ, holding, in effect, that “selective information” disclosure will not be rewarded. Entities seeking entitlement to a limited exemption such as the de minimis quantity exception must be prepared to present more than a “relative paucity of evidence.”

The Appellate Division cautioned that the DEP and courts will be on the look-out for gaps in information which may constitute strategic omissions by a party seeking to qualify for an exemption they are not entitled to.

Lessons

  1. A business must be prepared to present robust evidence if it seeks entitlement to an ISRA exemption. It is established that an applicant must prove its entitlement to a de minimus quantity exemption by a preponderance of the evidence. The Appellate Division has signaled with the R&K Associates case that obviously incomplete records will not necessarily meet that burden.
  2. If offered an opportunity to supplement the record, a genuine effort should be made to take advantage of that opportunity. Here, it was noteworthy that Des Champs was afforded opportunities to strengthen and expand the record before the ALJ and it chose not to.

The DEP and Courts widely acknowledge the impact of passage of time on the existence of records and the clarity of individuals’ recollections. Legal practitioners, environmental consultants and businesspeople alike all understand how difficult it can be to piece together a detailed record of business activities relating to a business that ceased operations more than a decade ago. Despite these considerations, the R&K Assocs line of cases makes clear that every effort should be made to compile and present as complete a record as possible.

If you have questions about ISRA exemptions or any other environmental compliance matter, contact MARC today.

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