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In re Petition of Hackensack Water Co.

Decided: June 7, 1991.


On appeal from Decisions and Orders of the Watershed Property Review Board and Board of Public Utilities.

Judges Antell, Scalera and Keefe. The opinion of the court was delivered by Antell, P.J.A.D.


Appellants herein are the Environmental Defense Fund and Bergen Save the Watershed Action Network, presumably non-profit organizations organized and functioning to monitor conditions potentially adverse to the environment. They appeal from orders dated January 12, 1990, of the Watershed Property Review Board (hereinafter "Review Board") and the Board of Public Utilities (hereinafter "BPU") permitting the Hackensack Water Company (hereinafter "Hackensack") to divest itself of 287 acres of watershed property. Appellants contend that the orders were granted without sufficient regard to the adverse impact the property transfer would have upon open space, water quality, recreation and conservation.

In 1981 BPU issued an order which required Hackensack to justify its retention of all lands included within its rate base "in order that surplus lands could be identified, removed from rate base and thus no longer reflected in customer rates." As a result, after securing a study of its land inventory, Hackensack petitioned BPU on December 12, 1983, pursuant to N.J.S.A. 48:3-7, for permission to transfer 700 acres of excess property to a non-utility affiliate, Rivervale Realty Co., Inc. (hereinafter "Rivervale"). BPU determined that the property was not needed for buffer purposes and approved the transfer out of rate base in a decision dated December 17, 1984.

On December 30, 1987, Hackensack filed a further petition under N.J.S.A. 48:3-7 with the BPU seeking approval for the transfer of an additional 287 acres of land which it claimed was no longer used and useful for public utility purposes. The tracts, surrounding the Oradell Reservoir in Bergen County, were then being used as private golf courses by the Emerson Golf Club, the Pascack Valley Country Club and the Haworth Golf Club. Public comment hearings were conducted on June 2, 1988, and evidentiary hearings were held on June 23 and 28, and July 15, 1988. These largely addressed the issue of watershed protection.

The proposed transfer by Hackensack was the target of vigorous opposition based upon the belief that transfer of the buffer lands would imperil water quality. At the time, there were no definite state standards or regulations to safeguard the transfer of peripheral land serving as a watershed buffer. However, while the application was pending before BPU, the State Legislature introduced a bill which would eventually be enacted as the Watershed Protection and Moratorium Act, and which directly addressed the Hackensack application. Because of the anticipated legislative action BPU decided not to act on the matter before the Legislature and the Governor completed their work.

On November 16, 1988, the Watershed Protection and Moratorium Act (hereinafter "the Moratorium Act") was enacted as P.L. 1988, c. 163. It placed an 18-month moratorium on transfers of watershed property by public utilities and directed the Department of Environmental Protection (hereinafter "DEP") to "evaluate the effectiveness of establishing buffer zones around public water supply reservoirs for the purpose of protecting drinking water quality." DEP was further directed to transmit its study, upon completion, to the Governor, the BPU and the Legislature. The Act provided for exemptions from the moratorium, but only upon a showing "that there is a compelling public need for the conveyance of the property, that the denial of the exemption would result in extraordinary hardship, or that the sale or development of the watershed property is otherwise consistent with the purposes of this act." Applications for exemptions under the Moratorium Act were made subject to consideration by the Review Board, which was created by the Act, consisting of the Commissioner of DEP, the Commissioner of the Department of Community Affairs and the President of the BPU.

Section 4 of the Moratorium Act delineates additional criteria concerning water quality, open space, recreation and conservation to be considered by the BPU in connection with applications under N.J.S.A. 48:3-7 for permission to transfer public

utility watershed land to entities not subject to the jurisdiction of the BPU.

According to a news release from the office of Governor Kean dated November 17, 1988, "the legislation was introduced to protect 287 acres in Bergen County owned by the Hackensack Water Company from sale and development." The release also quoted the Governor as stating that "preservation of open space is a top environmental priority of this Administration." The Moratorium Act has since been extended under P.L. 1990, c.19, to until such time as DEP adopts "rules and regulations establishing buffer zones for all watershed lands associated with public water supply reservoirs for the purpose of protecting drinking water quality."

Recognizing that the Moratorium Act was drafted to meet this precise case, by decision and order dated February 15, 1989, the BPU determined that it was precluded from considering or acting on Hackensack's application until the exemption requirements of the Moratorium Act had been satisfied. Although the order and decision was not issued until February 15, 1989, the BPU had apparently announced its determination at a public meeting of December 14, 1988, and Hackensack filed its appeal therefrom with the Appellate Division on December 29, 1988, under Docket A-2468-88T1.

On February 17, 1989, Hackensack applied to the Review Board for an exemption under the Act on the ground that the transfer was justified by a "compelling public need," and was "otherwise consistent with the purposes of th[e] act." Hackensack's application was accompanied by a statement that it would be willing to restrict the property, after conveyance to its subsidiary, Rivervale, "to golf and country club uses." The application acknowledged that under the Moratorium Act the Review Board was required "to assess the environmental impact of proposed conveyances . . . upon 'water supply,' 'open space,' 'conservation' and 'recreation.'"

A public hearing was held on August 17, 1989, before the Review Board at which Hackensack presented its "Evergreen Plan," ostensibly designed to insure that the 287 acres proposed for transfer would be permanently used for golf course purposes. The plan was rejected, however, because of its lack of assurance that the use restrictions would be permanent and unqualified. The Evergreen Plan then presented provided that Rivervale and its transferees could terminate unilaterally the golf course use restriction at their option or upon condemnation or a court determination that either the 700-acre tract or the 287-acre tract was subject to the Moratorium Act. The Review Board therefore could not find that Hackensack's proposal was "consistent with the purposes of the Act." The exemption application was denied at the Review Board's open public meeting of December 14, 1989, "without prejudice to the Company's submission of further proposals to meet the stated Review Board concerns."

By letter of January 5, 1990, counsel for Hackensack wrote to the Review Board and to BPU to advise that the company had addressed the concerns noted by the Review Board, that it had "subsequently met with Review Board Counsel and Staff," and that the company had been advised by counsel and staff that the new proposed deed restrictions prepared by the company "adequately satisfied those concerns." Thus, Hackensack requested "that the Review Board and BPU convene to formalize the conditions outlined in the deed restrictions assuring permanent dedication of the properties to golf course use." The letter also suggested that the Review Board "Sunshine Notice the record on file . . . for public inspection and . . . similarly notice the sequential meetings by the Review Board and BPU on January 12, 1990."

The Review Board met to consider the modified deed restrictions on Friday afternoon, January 12, 1990, after two days' public notice. Vehement protests were voiced by members of the public and elected officials as to the limited period of time, prior to the meeting, they were provided to examine the modified

proposals. A new State government administration was to take office within four days after the date of that meeting, and in denying the requests for delay the President of the Review Board reasoned that if the Board did not make a decision that day a new membership would thereafter have to "be entirely constituted before any further meetings would be likely to be held."

At the outset of the meeting, counsel to the Review board announced that the new deed restrictions "now require that these properties be permanently restricted to golf course and country club use in perpetuity. In addition to that, this restriction limited any construction on the property commensurate with that purpose to 15 percent impermeable cover." The BPU President, acting in her capacity as a Review Board member, agreed that the deeds would "permanently dedicate these properties to golf course and country club purposes" and that "these deed restrictions will continue to keep these lands open." The acting DEP Commissioner, who was also a member of the Board, observed that the restrictions would keep "the land in perpetuity." Accordingly, the BPU president and DEP commissioner found the exemption to be "consistent with the purposes of the Act." The Commissioner of the Department of Community Affairs dissented.

Immediately following the Review Board conference the BPU president, who had presided over the meeting of the Review Board, convened a telephone meeting with one other member of the BPU. The BPU then voted to allow the transfer.

In their written decisions, dated January 12, 1990, the same day on which the public hearing was held, both boards made the modified restrictions proposed by Hackensack conditions of approval. Both decisions stated that "the initially proposed restrictive covenants are herein modified so as to provide for the unqualified, permanent restriction of these properties to golf course use, and appurtenant country club uses, in perpetuity." The decision and order of the Review Board also stated

that the terms of transfer are such that the property will be restricted to golf course and appurtenant country club uses "subject to indefeasible restrictions against uses inimical to the maintenance of water quality."

We conclude that the orders of January 12, 1991, must be reversed and the matters remanded to the agencies for further ...

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