On certification to the Superior Court, Appellate Division.
For reversal and remandment -- Chief Justice Wilentz, and Justices Handler, O'Hern, Garibaldi and Stein. For affirmance -- Justices Clifford and Pollock. The opinion of the Court was delivered by O'Hern, J. Clifford, J., dissenting. Justice Pollock joins in this dissent.
This appeal requires us to resolve a controversy about application of the one-year time bar set forth in the New Jersey Spill Compensation and Control Act (the Act), which requires that claims against the Spill Fund be filed not later than one year after the date of "discovery of damage." N.J.S.A. 58:10-23.11k. The case arises in the context of the pollution of a farmer's well by a distant chemical spill. The legal principles are familiar. We accept a recent Appellate Division statement of them:
Neither the legislative history nor any reported cases [on the Spill Fund] discuss the meaning of "discovery of damage." But see In the Matter of NL Industries, Inc., 240 N.J. Super. 162, 572 A.2d 1177 (App.Div.1990) (determining when "damage" in fact occurred). However, an extensive body of New Jersey case law has established and defined our "discovery rule," under which accrual of a cause of action is delayed "'until the injured party discovers, or by the exercise of reasonable diligence and intelligence should have discovered[,] that he may have a basis for an actionable claim.'" Vispisiano v. Ashland Chemical Co., 107 N.J. 416, 419, 527 A.2d 66 (1987) (quoting Viviano v. CBS, Inc., 101 N.J. 538, 546, 503 A.2d 296 (1986), quoting Lopez v. Swyer, 62 N.J. 267, 272, 300 A.2d 563 (1973)). We think it fair to infer that the Legislature contemplated that "discovery rule" principles would be applicable in determining "the date of discovery of damage." [ Enertron Indus., Inc. v. Mack, 242 N.J. Super. 83, 90, 576 A.2d 28 (App.Div.1990).]
Some history provides background for the issues. The New Jersey Spill Fund was a pioneering effort by government to provide the monies for a swift and sure response to environmental contamination. Since New Jersey's enactment, many states have followed suit and the federal government has enacted a so-called "Superfund" under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), 42 U.S.C.A. §§ 9601-9675 (West Supp.1990).
The impetus for the New Jersey Spill Fund arose from the specter of massive contamination from an offshore oil spill.
Still feeling the effects of the earlier Arab oil embargo, major oil companies contemplated supertanker ports and exploratory drilling off the coast of New Jersey. McCarter, "New Jersey Clean Up Your 'Act': Some Reflections on the Spill Compensation and Control Act," 38 Rutgers L.Rev. 637, 642 (1986). The New Jersey tourist industry dreaded a massive oil spill that could seriously damage the beaches and waterways of the state. The recent spills in Prince William Sound, involving the Exxon Valdez, and in our Arthur Kill are more recent examples of the feared environmental devastation.
In response to this fear, the Legislature enacted the "Spill Compensation and Control Act," L. 1976, c. 141 (codified as amended at N.J.S.A. 58:10-23.11 to -23.24), with the express intent to "prohibit the discharge of petroleum and other hazardous substances into New Jersey waters and provide for the cleanup of any such discharge * * *. [The Act] addresses the dangers posed to the coastal environment by the imminence of offshore drilling." Sponsor's Statement to S.1796, L. 1976, c. 141.
A key feature of this Act is the establishment of a revolving fund known as the Spill Fund. N.J.S.A. 58:10-23.11i. The purpose of the Spill Fund is to finance the prevention and cleanup of oil spills and hazardous-waste discharges and to compensate resort businesses and other people damaged by such discharges. N.J.S.A. 58:10-23.11a. As originally enacted, the Spill Fund raised revenues by taxing the first transfer of petroleum or petroleum products in the state and any transfers between major facilities, while non-petroleum hazardous substances were taxed only at the first transfer, N.J.S.A. 58:10-23.11h (as amended), again reflecting the primary concern of the Legislature with a massive oil spill. This Spill Fund is "strictly liable" for all cleanup and removal costs and for all direct and indirect damages resulting from a discharge. N.J.S.A. 58:10-23.11g.
The Spill Fund originally adopted a prospective approach to environmental spills, providing a kind of insurance policy against possible disaster. A swift and sure governmental response would be required if there should be a spill from a massive source. In this setting, the role of the New Jersey Department of Environmental Protection (DEP) was clear -- protector, preserver, and restorer. The DEP was to provide the direction for an effective cleanup. It could tap the Spill Fund for deployment of booms, detergents, and other necessary cleanup supplies.
Although the DEP assumed the role of manager for purposes of operation and implementation, the Administrator of the Spill Fund, who is the official authorized to make disbursements from that Fund, was a functionary within the Department of Treasury. Inevitably, tensions of administration arose.
Within just a short time of the Spill Fund's enactment, a fuller appreciation of the extent of toxic pollution began to emerge. The disasters at Love Canal in New York and at the Kin Buc Landfill in New Jersey were among the catalysts for increased concern. Long-buried chemical wastes had spread from their deposit sites to contaminate underground water supplies and to invade even the air. The cruder threat of the spreading oil slick was displaced as the primary concern by the vastly more complex hazard posed by the unseen and unknown contamination of natural resources. The Spill Fund needed to assume a broader scope and to be more efficiently administered if it was to cope with these new threats to the environment.
Our Legislature reacted promptly. In 1979, it broadened the Spill Fund's tax base to include transfers of non-petroleum hazardous substances whenever transferred between major facilities. N.J.S.A. 58:10-23.11h (as amended). The amendments also created two rates of taxation for petroleum and non-petroleum hazardous substances. Petroleum products continued to be taxed at a rate of one cent per barrel transferred, while the transfer of non-petroleum hazardous substances was taxed at a
rate of one cent per barrel or one percent of the fair market value of the product, whichever was greater. The Spill Fund was also authorized to be used to clean up discharges that occurred before the enactment of the Act. N.J.S.A. 58:10-23.11f(b)(3). In addition, the requirement that claims be filed within six years of the date of the incident causing damage was deleted (presumably to permit recovery by those suffering loss from long-hidden contamination), although the one-year date-of-discovery limitation remained. N.J.S.A. 58:10-23.11k (as amended by L. 1984, c. 142, § 3).
In 1985, the administration of the Spill Fund was shifted from the Department of the Treasury to the DEP. N.J.S.A. 58:10-23.11i (as amended by L. 1985, c. 115, § 3). Of course, the DEP continued its managerial role under which it must quickly deploy entrusted public funds to restore the environment and abate damages. But now the DEP assumed a second role, a more defensive one, as keeper of the public purse. Today, the DEP must seek to fulfill both these roles in the face of complex and sometimes protracted environmental cleanups.
In re Kimber Petroleum Corp., 110 N.J. 69, 539 A.2d 1181 (1988), and In re J.I.S. Industrial Service Co. Landfill, 110 N.J. 101, 539 A.2d 1197 (1988), illustrate the newer methods for the Spill Fund's administration. In those cases, subsurface deposits or stored chemicals leaked into underground water supplies and spread to distant areas of the community. In the J.I.S. case, the DEP exerted its extraordinary administrative powers under the Spill Fund to order a suspected polluter to pay for a remedial investigation and feasibility study (RI/FS) for cleanup of a landfill. 110 N.J. at 111, 539 A.2d 1197. That case, like this one, involved the provision of an alternative water supply. Similarly, in Kimber, the DEP, pursuant to its "broad implied powers" under the Act, ordered the defendants to fund the construction of an alternative water supply for affected residents. 110 N.J. at 74, 539 A.2d 1181.
At one end of the spectrum of complexity is massive multiparty litigation involving cleanup of large sites. Such cases involve the interplay between the administration of the Superfund under CERCLA and our own Spill Fund, private litigants' suits, and sometimes actions in the bankruptcy courts. See New Jersey Dep't of Envtl. Protection v. Gloucester Envtl. Management Servs., Inc., 719 F. Supp. 325, 330 (D.N.J.1989) (environmental case in federal court involving "hundreds of parties").
This case presents a much less complex, but nonetheless far from simple, case for application of the nineteen words of the statute of limitations under the Spill Fund: "Claims shall be filed with the administrator not later than one year after the date of discovery of damage." N.J.S.A. 58:10-23.11k. In addition to analyzing the effect of the dual-office function held by the DEP, we must assess the effect of the additional overlay of the municipal government, which acted both as a regulator of the environment (it threatened the homeowner with penal consequences for failure to seal a private well) and as an advocate for its citizens by negotiating with the DEP over the nature and ...