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Frederick Gumm Chemical Co. v. Dep't of Environmental Protection


June 1, 2007


On appeal from the Department of Environmental Protection.

Per curiam.


Argued: October 11, 2006

Before Judges Kestin, Weissbard and Graves.

Petitioners, Frederick Gumm Chemical Co. (FGCC) and Clepo, Inc. (Clepo), appeal from a final decision of the Department of Environmental Protection (DEP or the Department) rescinding an underground storage tank (UST) waiver of February 27, 1998 (sometimes incorrectly stated by DEP to be February 27, 1996), and reiterated in exactly the same terms on August 1, 2001. The waiver had been issued pursuant to the Industrial Site Recovery Act (ISRA), N.J.S.A. 13:1K-6 to -14. The rescission was announced in a letter from DEP dated April 4, 2005, which also stated that the pertinent "ISRA cases are hereby reopened[,]" noting that ISRA establishes certain compliance measures "as a precondition of a sale of property [] or business" and "requires the establishment of a remediation funding source sufficient to cover the cost of remediati[on.]" The rescission was further formalized by DEP's denial, in a letter dated September 20, 2005, of petitioners' request for consideration by the Site Remediation and Waste Management technical review panel. The notice of appeal specifies both of the latter communications as constituting the agency action from which the appeal is taken.

The agency's letters set forth the bases for its decision to rescind the waivers and reject petitioners' technical review request. The letter of April 4, 2005, signed by the chief of DEP's Bureau of Risk Management Initial Notice & Case Assignment (the Bureau), stated that the approval had been based on the certified information provided to the Department concerning the satisfactory completion of a Preliminary Assessment/Site Investigation Report (PA/SIR) in accordance with the Technical Requirements for Site Remediation (N.J.A.C. 7:26E). The certified reports supported that the only area of concern at the referenced site where a discharge of a hazardous substance had occurred was from underground storage tanks regulated by New Jersey's Underground Storage of Hazardous Substances Act and the implementing regulations[,] N.J.A.C. 7:14B. This qualified Clepo, Inc[.] as the property owner and Frederick Gumm Chemical Company as the operator for the ISRA Underground Storage Tank Waiver and effectively closed the referenced ISRA cases.

Subsequent to the ISRA waivers being issued, the Department became aware of contamination at the referenced site from areas other than from regulated under[]ground storage tanks. In section 5.4.11 of the certified Remedial Action Workplan dated April 2004 submitted to the Department's Bureau of Southern Case Management, Clepo Inc[.] as the property owner identified that areas other than the regulated underground storage tanks were contributing to the contamination detected at the referenced site.

Clepo Inc. and Frederick Gumm Chemical Company failed to incorporate this information in the PA/SIR for the referenced ISRA cases.

The September 20, 2005 letter denying petitioners' request for a technical review was signed by DEP's director of Remediation Management and Response. It stated:

The disputed technical issue identified is not considered appropriate for this process. The Site Remediation Program issued ISRA Underground Storage Tank Waivers dated February 27, 1998 and August 1, 2001 based on certified information provided to the Department concerning the satisfactory completion of a Preliminary Assessment/Site Investigation Report in accordance with the Technical Requirements for Site Remediation (N.J.A.C. 7:26E). These reports had supported that the only area of concern at this site was a discharge of a hazardous substance from an underground storage tank regulated by the [] Underground Storage of Hazardous Substances Act and the implementing regulations of N.J.A.C. 7:14B. As you are aware, subsequent information provided as part of the Remedial Action Workplan (April 2004) identified that areas other than the regulated underground storage tank were contributing to the contamination detected at this site.

Given the new information, the ISRA waivers were rescinded. This rescission is an appropriate enforcement response to this new information. Challenges to enforcement actions are not appropriate for review by a Technical Review Panel.

. . . Clepo is required to continue to investigate and remediate all discharges of a hazardous substance or hazardous waste on or emanating from the industrial establishment and to establish a remediation funding source under a Remedial Action Work Plan or Remediation Agreement.

On appeal, petitioners contend that DEP "is estopped from rescinding the 1998 waiver after seven years" by reason of petitioners' reliance on the waiver, "as well as [] DEP's assurances with respect to the waiver;" that rescission "is barred . . . by the doctrine of laches;" and that the rescission, having been "based upon an isolated hearsay statement, violated [petitioners'] due process rights because [] DEP has not provided a hearing on the matter or any other means for review of its decision." DEP responds by asserting that the rescission "was based on substantial evidence in the record, comports with the express language in ISRA and, thus, is clearly not arbitrary, capricious or unreasonable;" that "DEP properly invoked its inherent power to reconsider the UST waiver approval after Clepo and FGCC presented new facts that invalidated earlier, certified submissions;" that "this matter is not a contested case within the meaning of the Administrative Procedure Act and therefore should not be remanded to the Office of Administrative Law for an adjudicatory hearing;" that "a remand is unnecessary as the DEP has identified the facts and evidence underlying its decision;" and that concepts of equitable estoppel and laches are inapplicable because petitioners "failed to report to [] DEP before April 2004 that [a] trench was [a] non-UST contamination source, thereby creating the lapse in time between [] DEP's waiver issuance and rescission."

There appears to be no dispute regarding the background facts of the matter. We summarize those facts as they have been represented by the parties.

DEP initially became involved with the site in the late 1980s as a UST matter. FGCC had used the property, owned by Clepo, for many years for the manufacture and storage of paint removers and cleaning and preparation compounds, such as metal cleaners and rust inhibitors. The site had come to DEP's attention when, in December 1988, a contractor had removed two USTs, one of which had been used to store methylene chloride and showed signs of leakage. The contractor reported, however, that its soil-sampling efforts had disclosed a presence of contaminants "significantly below the state recommended action levels." Subsequent tank removal efforts showed that a discharge of fuel oil had also occurred. Further exploration revealed other contaminants not associated with the USTs that had formerly been in place. FGCC undertook further testing and remedial steps in addition to the UST removals.

Contemplating a sale of its stock to W. Canning U.S.A., Inc. (Canning), and because ISRA, at N.J.S.A. 13:1K-9, requires the owner or operator of industrial property to notify DEP of an anticipated sale or transfer of operations, FGCC, in late 1997 and early 1998, sought from DEP the issuance of a "regulated underground storage tank waiver," see N.J.A.C. 7:26B-5.3, that would permit the stock sale transaction to go forward. Based, in part, on FGCC's certification that the only then extant discharges at the site were from regulated USTs, the waiver was granted and the sale of stock proceeded on March 2, 1998. DEP's authorization letter, dated February 27, 1998 stated:

Pursuant to the authority vested in the Commissioner of the [NJDEP] by [ISRA] and duly delegated to the Bureau Chief of the Bureau of Field Operations pursuant to N.J.S.A. 13:1B-4, the referenced application is hereby approved. This authorization is based upon information provided in your Notice, as well as the additional certifications required pursuant to N.J.S.A. 13:1K-6, et seq.

This authorization shall be limited to the above referenced transaction only and shall not restrict nor prohibit the NJDEP or any other agency from taking regulatory action under any other statute, rule or regulation. By issuing this letter of Authorization, the NJDEP continues to reserve all rights to pursue appropriate enforcement actions allowable under the law for violations of ISRA as associated with this transaction.

At the time of this waiver, two open UST cases were pending in which FGCC was actively addressing identified problems.

In a December 2003 letter, DEP raised a concern about the site, stating: "Based upon the investigation conducted to date, contaminants which are not related to the material stored in the underground storage tank systems under investigation have been detected in the soil and/or groundwater at this site." The letter identified several contaminants specifically.

In April 2004, as part of the ongoing remediation of the site, FGCC and Clepo submitted a Remedial Investigation Report to DEP, the document referred to by the agency in its rescission letter of April 4, 2005 as the "certified Remedial Action Workplan dated April 2004." That report identified and described a non-UST area of concern (AOC) associated with the former drum storage and trench area. It stated, in section 5.4.11, entitled "AOC #13-Drum Storage and Trench": This AOC included a small area near the former methylene chloride UST where 55-gallon drums of chemicals were stored. These chemicals included trichloroethene, tetrachlorethane, and 1, 1, 1-trichloroethane. Immediately below this storage area was a blind trench. The trench was reportedly eroded.

This area has been evaluated a part of the [volatile organic compound] plume . . . . It is likely the source for the [substances] found in the predominantly methylene chloride plume.

The April 4, 2005 letter from DEP rescinding the waiver granted in 1998, was followed by the denial of a request to reverse the decision in a letter dated June 1, 2005, in which the chief of the Bureau stated, inter alia:

The Department has never implied that Clepo has not acted in good faith when remediating the site under the authorities of the UST program and laws and the Department does not believe that it was intentionally deceived with the ISRA filings. The facts simply support that the trenches and troughs were not intact as [] previously thought.

Petitioners' efforts to invoke an alternative dispute resolution process and to seek a technical review met with the responses we have noted above as the agency action giving rise to this appeal.

We reject petitioners' argument that the Department is estopped from rescinding the previously granted waiver or is barred from doing so by the doctrine of laches. In general, equitable estoppel and, by logical extension, cognate doctrines such as laches, are rarely invoked against governmental entities, O'Malley v. Department of Energy, 109 N.J. 309, 316 (1987), and only to prevent manifest injustice, ibid., because courts are loath to interfere with the essential governmental functions of other branches. Ibid. See also Bonaventure Int'l, Inc. v. Borough of Spring Lake, 350 N.J. Super. 420, 436 (App. Div. 2002); W.V. Pangborne & Co. v. Department of Transportation, 226 N.J. Super. 367, 372-73 (App. Div. 1988).

Clearly, the agency, in granting the earlier waiver, relied upon the view of the situation disclosed by the certified reports submitted at that time. The waiver was based on the stated assumptions that such contamination as had resulted from the USTs on the site had been adequately dealt with in an agency-approved remediation plan, and that there was no contamination on the site from sources other than the USTs. Once the Department was apprised of information that apparently contradicted petitioners' earlier certifications, and raised the likelihood, either that contamination from the USTs had not been dealt with in a remediation plan suited to the purpose or that contamination from other sources existed, the Department was correct, in pursuit of its responsibility for vigorous enforcement of environmental standards, particularly ISRA in this matter, to rescind the granted waiver, at least provisionally until the facts of the matter could be fully developed and analyzed. The waiver grant, itself, had reserved that right.

Even if the right to rescind the waiver had not been reserved, agencies, in general, in the absence of specific legislative restriction, have the inherent power to reopen, and reconsider or modify, prior decisions. See In re Cadgene Family Partnership, 286 N.J. Super. 270, 277 (App. Div. 1995). An agency charged with protecting the public health has a continuing responsibility to administer the provisions of its governing statute in the public interest. St. Joseph's Hosp. and Med. Ctr. v. Finley, 153 N.J. Super. 214, 223 (App. Div. 1977), certif. denied, 75 N.J. 595 (1978). An agency's power to reopen matters previously decided must, of course, be exercised fairly, reasonably and with due diligence. See Cadgene, supra, 286 N.J. Super. at 277.

It follows that an agency's power to rescind a prior permit or approval cannot validly be based upon a presumed fact where the person or entity affected disputes the existence of the fact or its sufficiency as a basis for the rescission action taken. A party whose liberty or property interests are directly affected by an administrative order has the right to test the order's basis or sufficiency in "some form of hearing" suitable for a principled exploration of the issues presented. Matthews v. Eldridge, 424 U.S. 319, 333-35, 96 S.Ct. 893, 902-03, 47 L.Ed. 2d 18, 32-33 (1976); see also Henry J. Friendly, Some Kind of Hearing, 123 U. Pa. L. Rev. 1267 (1975).

Manifestly, the rescission action taken here is a threat to petitioners' property interests, at least to the extent their stake in the continuing viability of the sales transaction between FGCC and Canning is concerned. It is essential that petitioners be afforded a fair and full opportunity to test the existence and sufficiency of the factual bases undergirding the rescission order. DEP actions to enforce environmental standards are subject to the requirements of procedural due process. E.I. du Pont de Nemours and Co. v. Department of Environmental Protection and Energy, 283 N.J. Super. 331, 357-58 (App. Div. 1995); St. James v. Department of Environmental Protection and Energy, 275 N.J. Super. 342, 349 (App. Div. 1994); Avon Products v. Department of Environmental Protection, 243 N.J. Super. 375, 379 (App. Div. 1990).

Here, the previously granted waiver was rescinded by DEP solely on the basis of a single section of a remedial action workplan, prepared as required by DEP, that "identified that areas other than the regulated underground storage tank were contributing to the contamination detected at this site." Petitioners, as affected parties, have not been afforded an adequate opportunity to test the validity of that assertion or, if accurate, its sufficiency as a basis for the action taken. Given the agency's positions denying petitioners any practical opportunity to test the accuracy and sufficiency of the statement, the only fitting course is to remand for a contested case hearing in the Office of Administrative Law (OAL), see N.J.S.A. 52:14B-10, in which petitioners and the staff of the agency will have an opportunity to test, with evidence and argument, the accuracy of the reasons given for the agency action taken and their sufficiency within the standards established by statute and regulation; or otherwise conclude the matter within the ambit of the Uniform Administrative Procedure Rules, N.J.A.C. 1:1-1.1 to -21.6. Of course, such a hearing must include an opportunity for the agency to demonstrate, irrespective of the reason, that the actual situation regarding actionable contamination was not reported by petitioners in the initial waiver application; or that there are independent bases for the rescission action of which petitioners have received notice or should have known.

DEP's denial of petitioners' request for a hearing is reversed; the matter is remanded to DEP for referral to OAL as a contested case.


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