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Federal Pacific Electric Co. v. New Jersey Department of Environmental Protection

September 22, 2000


Before Judges Kestin, Wefing and Steinberg.

The opinion of the court was delivered by: Kestin, J.A.D.


Argued: February 9, 2000

On appeal from the Department of Environmental Protection.

In a letter dated July 24, 1997, a section supervisor in the Department of Environmental Protection's (Department) Bureau of Environmental Evaluation and Cleanup Responsibility Assessment disapproved the groundwater component of Federal Pacific Electric Company's (FPE) remedial action workplan for complying with the requirements of the Industrial Site Recovery Act (ISRA), N.J.S.A. 13:1K-6 to -13 (sometimes referred to as S. 1070). FPE then sought to pursue the dispute resolution process mandated in N.J.S.A. 58:10B-17. At each of four intermediate steps, the disputed determination was approved or reaffirmed on the merits. The matter then came before the Commissioner who, in a January 30, 1998 letter disposition, stated:

[E]very case does not offer circumstances which present themselves for dispute resolution. In particular, issues of interpretations of statutes, which are inherently questions of law, do not lend themselves to dispute resolution. It does not appear that there are factual disputes or, in fact, questions of policy contained within the record. Therefore, . . . I am satisfied that this particular case does not lend itself to resolution under the dispute resolution process.

From this effective dismissal of its objections to the disapproval of its groundwater cleanup proposal, FPE appeals.

The challenge was initially filed in the Law Division on a complaint for declaratory judgment. The Department moved to transfer the matter to the Appellate Division on the basis of our exclusive jurisdiction over the final decisions or actions of state administrative agencies or officers and over issues implicating the validity of state agency rule promulgations. See R. 2:2-3(a)(2). An order transferring the matter was entered, and we denied FPE's subsequent motions to remand the matter to the Law Division for want of a final agency determination and to supplement the record with a toxicologist's affidavit. In other orders, we granted four motions for leave to appear as amicus curiae. Three of those amici have participated.

In general outline, FPE's appeal is based on two arguments: (1) in rejecting the groundwater component of FPE's workplan as non-compliant with minimum remediation standards, the Department erred because it had failed to adopt the standards applied in accordance with the Administrative Procedure Act (APA), N.J.S.A. 52:14B-1 to-24; and that the standards used, i.e., the Groundwater Quality Standards, N.J.A.C. 7:9-6.1 to -6.11 (GWQS), and the Technical Requirements for Site Remediation, N.J.A.C. 7:26E-1.1 to -7.1 (Technical Rules), violate the pertinent enabling acts; and (2) because the Department had not validly adopted the appropriate standards, it should have addressed FPE's workplan on a case-by-case basis. Amicus 2B Environmental, Inc. argues in addition that the Department erred in failing to reclassify the groundwater in the geographic area involved, the Ironbound section of Newark, arguably a "large area[] of historic industrial contamination", N.J.S.A. 58:10B-12h(2), as required by statute, and that currently applied standards must be invalidated as a result.

Based on FPE's arguments premised upon the requirements of the APA governing rulemakings, N.J.S.A. 52:14B-3 to -8, -22 to -24, we reverse and remand for such further proceedings as the Department may elect to undertake between repromulgation of the regulations at issue in conformity with APA requirements or treatment of FPE's workplan on a case-by-case basis.

FPE's remedial action workplan recites an undisputed history. Beginning in the 1860's, a significant portion of the City of Newark primarily comprised of salt marsh was "systematically filled" with "any available materials, including hazardous industrial waste, . . . municipal solid wastes, construction debris, industrial wastes, coal cinders, ash, dredged materials from Newark Bay, as well as clean fill."

From the 1940's to 1983, FPE owned and operated an electric panel manufacturing facility located at 14-16 Herbert Street in the "Ironbound" area of Newark. The site has a long history of industrial usage reportedly dating back to the nineteenth century, when it was used as a steel foundry. The Ironbound area is a heavily industrialized section of the city, surrounded by major roadways, rail yards, and Newark International Airport. Immediately adjacent to FPE's site are a Conrail rail spur and several industrial operations including a salvage yard, a container company, and a barrel cleaning company. Thirty-three environmentally contaminated sites are also located within a one-mile radius.

FPE's manufacturing processes included "painting, plating, cleaning, degreasing, and component assembly and pack-out." In its processes, FPE used trichloroethene (TCE), a chlorinated volatile organic compound (VOC) classified as a probable carcinogen. Raw materials, manufactured goods, and drummed wastes were stored on site.

In 1983, FPE sold the property to a realty company, but continued operations on a leased portion until 1986, when it contracted to sell its assets. That transaction triggered the application of the Environmental Cleanup Responsibility Act (ECRA), the predecessor statute of ISRA at issue here. In June 1986, FPE entered into an administrative consent order with the Department which allowed FPE to sell its assets before ECRA remediation requirements were satisfied. Thereafter, FPE commenced an investigation in accordance with its obligations under the consent order to identify environmental conditions at the site. In May 1996, FPE submitted a remedial action workplan to the Department in which it reported significant levels of TCE contaminating the groundwater at the site. Sampling by FPE had revealed unacceptably high levels of TCE in groundwater at the downgradient border contrasted with considerably lower levels at the upgradient border.

The workplan noted that although the total volume of TCE used in FPE's manufacturing processes was not known, "spillage into floor trenches in the plating and painting area, where it combined with waste water, is believed to have occurred." The workplan noted further a belief that TCE had been released "to the subsurface . . . through leaks in the floor, floor trenches and/or sewer lines and sumps."

FPE's workplan proposed active on-site remediation of groundwater through a recovery well and treatment near the downgradient border until the concentration of TCE or other VOCs leaving the site reached its "remedial goal" of 50 milligrams per liter (mg/L). The workplan explained that the Department had not adopted minimum remediation standards as mandated by N.J.S.A. 58:10B-12, and that FPE had derived its site-specific remedial goal by integrating the findings of scientific studies, risk and exposure assessments, and information on site-specific conditions. In respect of site-specific conditions, FPE's workplan noted the industrial location and the historic environmental contamination of the area. Given those factors, the workplan concluded that it was "highly unlikely" that the site would be used for anything other than industrial purposes. Additionally, the workplan noted that there were no wells used for drinking water purposes in the vicinity, although three wells were used for fire protection and one had a possible future use as "non-contact cooling water." The conclusion was that groundwater impacted by site operations would not be used for any industrial or potable purposes, currently or in the foreseeable future, and that "no exposure pathways exist between the impacted groundwater . . . and any potential human or ecological receptors."

Nevertheless, the workplan examined various hypothetical exposure scenarios by way of "a conservative approach to the assessment of the former FPE leasehold." These hypothetical scenarios included the risk of exposure to an on-site excavation worker and off-site commercial and residential basement contamination. "For each of these exposure scenarios, the potential risks were determined for (a) the maximum ground water concentrations of TCE . . . currently observed at the site, (b) ground concentrations equal to the proposed remedial goal of 50 mg/L, which will occur on-site or off-site following remediation, and (c) ground water concentrations predicted to occur on-site or off-site following the completion of the active remediation." The conclusion reached in respect of these hypothetical exposure scenarios was that the concentration of TCE in the groundwater during and after remediation did not pose unacceptable risks.

In developing its risk and exposure assessments, FPE relied upon United States Environmental Protection Agency (USEPA) tables in which "a target risk of one excess cancer in one million is applied to human carcinogens[.]" It concluded that

[b]ased on the results of both the baseline and post remediation risk assessments, the weight-of-evidence supports the conclusion of no unacceptable risk associated with the relevant exposure scenarios after achievement of the proposed remedial goal. Thus, the proposed remedial goal has been determined to be protective of public health and safety, and the environment.

The Department approved substantially all of FPE's report of the on-site investigation and its proposal for on-site remedial action, but it rejected FPE's "remedial goal" in favor of the considerably more demanding criterion of the GWQS. The Department also advised FPE that it would have to delineate the off-site TCE groundwater plume, and directed it to propose a classification exception area*fn1 for the groundwater contamination and remediation criteria consistent with the requirements for natural attenuation or to contain the off-site plume. The Department, in its initial determination, explained:

FPE shall propose remediation criteria that take into consideration such factors as the extent of the plume, biodegradation rates and attenuation rates, etc. If FPE chooses to allow any portion of the plume to naturally be remediated (e.g., through biodegradation), FPE shall submit a natural remediation proposal for the VOC plume that is consistent with N.J.A.C. 7:26E-6.3(d) and (e). This proposal shall provide the contaminant concentrations that can be left in the aquifer, along with adequate justification to show that these levels can naturally degrade to the [GWQS] or to background levels. In effect, then, these would be remediation criteria. Any higher contaminant concentrations would have to be actively remediated, even those portions of the plume located off site. If FPE does not submit a natural remediation proposal, FPE shall contain the entire VOC plume (both on site and off site) that exceeds the appropriate remediation criteria.

By letter dated August 18, 1997, FPE requested dispute resolution pursuant to N.J.S.A. 58:10B-17, arguing that application of GWQS criteria as the minimum remediation standards was inconsistent with the governing statute, and that the Department was obligated to adopt minimum standards taking into consideration site-specific factors.

By letter dated August 26, 1997, the Chief of the Department's Bureau of Environmental Evaluation and Cleanup Responsibility Assessment responded that the GWQS were the "primary basis for setting numerical criteria for limits on discharges to ground water and standards for ground water cleanups." The Department maintained that

FPE is required to delineate and remediate contamination emanating from the FPE property to the applicable GWQS to receive an approval of the RAW [remedial action workplan]. The CEA [classification exception area] and natural attenuation policies are important but are not the only components responding to the policies of S. 1070. The Department's regulations taken as a whole, including the Technical Rules, and the review of remedial plans adequately address the site-specific factors and specific criteria provided in S. 1070 and other applicable statutes. Under the site-specific conditions at FPE, the Department does not foresee that active remediation of the entire plume will be required. However, appropriate source control/removal and remediation plan for the entire plume migrating from the FPE site remains a minimum requirement.

The Assistant Director of Industrial Site Evaluation Element affirmed this position by letter dated September 15, 1997, noting that the Department "continues to maintain that FPE is required to delineate and remediate contamination emanating from the FPE property to the applicable GWQS to receive an approval of the RAW." Similar determinations were subsequently made by the Director of the Division of Responsible Party Site Remediation and the Assistant Commissioner in charge of the Site Remediation Program. Following these determinations, the Commissioner declined to review the matter on the grounds set forth above.

FPE and the amici argue that the Department erred in rejecting the groundwater component of the remedial action workplan on the basis that FPE did not comply with minimum remediation standards. FPE contends the Department failed to adopt minimum remediation standards in accordance with the APA, and that the applicable statutes do not authorize the Department's use of the standards embodied in the GWQS and the Technical Rules for application in the instant circumstances.

New Jersey was one of the first states to enact legislation confronting its environmental problems. In 1976, the Spill Compensation and Control Act, N.J.S.A. 58:10-23.11 to -23.24 was enacted to establish standards and mechanisms regarding the cleanup of hazardous discharges. See N.J.S.A. 58:10-23.11f(a)(1) and 23.11q. Thereafter, the federal government enacted the ...

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