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New Jersey Department of Environmental Protection v. Exxon Mobil Corporation

May 31, 2011

NEW JERSEY DEPARTMENT OF ENVIRONMENTAL PROTECTION, PLAINTIFF-APPELLANT,
v.
EXXON MOBIL CORPORATION, DEFENDANT-RESPONDENT.



On appeal from the Superior Court of New Jersey, Law Division, Union County, Docket Nos. L-3026-04 and L-1650-05.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued January 25, 2011

Before Judges Carchman, Graves and Waugh.

By leave granted, the Department of Environmental Protection (DEP) appeals from a July 23, 2009 order of the Law Division denying its application for an award of natural resource damages (NRD) against defendant Exxon Mobil*fn1 (Exxon Mobil) under the Spill Compensation and Control Act, N.J.S.A. 58:10-23.11 to -23.11z (Spill Act). Specifically, DEP contends that the trial court erred in denying DEP's motion for interlocutory payment now of approximately $1 million in natural resource damages assessment costs. We disagree and conclude that, under the facts presented, the issue of the award of such costs is best reserved until the conclusion of the litigation. Accordingly, we affirm.

DEP moved for an order requiring defendant to pay the invoices of five experts that prepared reports for DEP regarding the natural resource damages assessment at defendant's Bayway and Bayonne refinery sites. To understand the nature of the dispute, we identify each expert and then provide an expansive statement of facts related to the cleanup.

The first expert was Emily W. B. Southgate, an historical ecologist, whose itemized bills total $34,228.19. Southgate prepared an historical report entitled "Pre-Twentieth Century Site History of the Bayonne Plant, Constable Hook, Bayonne, New Jersey, and Bayway Refinery, Linden," prepared in October 2006, with corrections added in December 2007 (the Southgate report). The report described the Bayonne site in the "Constable Hook" area. Until the late nineteenth century when the Standard Oil Company, Exxon Mobil's predecessor, began its operations the area included: salt marshes farmed for salt hay, inland fruit and vegetable farming until at least 1880, and good water quality supporting fisheries and oyster beds in New York Bay. The Bayway site in Linden, north of the Rahway River and east of U.S. Route 1, also contained salt marshes along the Arthur Kill, Morses Creek and Piles Creek; farming was the primary occupation; and water quality in the Arthur Kill was appropriate for swimming until the beginning of the twentieth century.

DEP's second expert was Dr. Eldon C. Blancher, of Toxicological & Environmental Associates, Inc. (TEA), who presented itemized bills totaling $257,887.54. TEA jointly participated in preparing a report described below in the section on DEP's fourth expert, Stratus Consulting, Inc. (Stratus).

DEP's third expert was 3TM International, Inc. (3TM), whose bills totaled $135,517.23. 3TM prepared a November 2, 2006, report entitled "Summary Expert Report: Pro Forma Economic Analysis, New Jersey Natural Resource Damage Claims, New Jersey v. ExxonMobil Corporation, Bayonne and Bayway, New Jersey Sites" (the 3TM report). This report described the nature and extent of the contamination at the Bayway and Bayonne sites, set forth a conceptual restoration model for the sites and presented an economic analysis of reasonable restoration methodologies. 3TM reported numerous toxic contaminants on almost 580 acres of historical wetlands and concluded that restoring certain parts of the sites into productive wetlands was technically feasible. 3TM envisioned a thirty-year restoration program, with two years of pre-construction activities, four years of cleanup and infrastructure demolition and reconstruction, two years of wetlands construction and twenty-two years of wetlands maintenance and monitoring. 3TM projected that its proposed restoration program would cost $2.457 billion (or $1.594 billion at net present value), with 62% of those costs attributable to contaminated soil excavation, removal and disposal and backfilling.

The fourth DEP expert was Stratus, whose bills totaled $416,900.90. Stratus and TEA prepared a November 2006 report entitled "Natural Resource Damages at the ExxonMobil Bayway and Bayonne Sites" (the Stratus report). The Stratus report outlined a plan to restore and replace natural resources at the Bayway and Bayonne sites, which would cost $8.9 billion. The report addressed only the refinery sites themselves, and not "the Arthur Kill, the Kill van Kull, Newark Bay, New York Harbor, or the broader Hudson-Raritan Estuary," which would be addressed in future reports. The Stratus report described in great detail the natural environment that was present at the sites before they became contaminated, the nature of the contamination found on the sites and a proposed restoration plan, relying upon the on-site restoration specifications and costs established in the 3TM report. The report estimated that the Bayway site could sustain restoration of 464 acres of intertidal wetlands, 59 acres of palustrine meadow and 28 acres of upland forest; the Bayonne site, with ongoing industrial operations, could sustain 25 acres of restored intertidal habitat. Those on-site restorations would cost $2.5 billion. In addition, off-site replacement of 11,000 acres of intertidal salt marsh, 19,000 acres of palustrine meadow/forest, and 3,400 acres of upland meadow/forest would be needed to compensate for the decades of harm at the site and because some portions of the site cannot be restored; this would cost $6.4 billion.

DEP's fifth expert was Robert Morrison of DPRA Inc., whose bills totaled $336,501.07. Morrison prepared a December 15, 2006, "Expert Witness Report" including three opinions: (1) "Concentrations of hazardous substances in soil at the Bayway and Bayonne facilities exceed soil restoration criteria"; (2) "Concentrations of hazardous substances in groundwater at the Bayway and Bayonne facilities exceed the appropriate criteria for restoration purposes"; and (3) "Intrusive investigations performed at the Bayway and Bayonne facilities are sufficient to identify the need for a comprehensive restoration program."

In support of its motion seeking payment of these costs, DEP submitted certifications of John N. Sacco, Director of DEP's Office of Natural Resource Restoration. In his March 2006 certification, Sacco explained that DEP initiated a natural resource damages initiative in 2002 in order to establish liability for those natural resources contaminated by hazardous substances. Through that process, DEP had reached voluntary settlements for natural resource damages at about 1,500 sites, preserving more than 5,200 acres and recovering $50 million in compensation for the public. At that time, Sacco's office was actively negotiating with a number of responsible parties regarding natural resource damages at 200 other sites. Unlike many other responsible parties, from 1993 through 2006, defendant had never approached Sacco's office about possible restoration plans for its sites.

Sacco was assigned to identify possible preliminary restoration projects for the natural resource injuries caused by defendant, which he analyzed in consultation with DEP case managers for the Bayway and Bayonne sites. At Bayway, the managers recommended dredging the highly contaminated sediments of Morses Creek, which the refinery had used as a discharge trench for its wastewater, and also removing a dam and the hardened creek banks, to restore daily tidal flows. Dredging was also needed for the polluted Piles Creek. The former marshlands adjacent to Morses Creek required removal of contaminated sediments, fill and petroleum tar, and filling instead with clean substrate so that marsh vegetation could be restored. A similar process was needed for the site's 45 acres of sludge lagoons.

At the Bayonne site, Sacco noted the chromium fill used in former wetlands, and he recommended excavation of that contaminated fill and rehabilitation of the wetland environments. Sacco noted that International Matex Tank Terminals had purchased part of this site from defendant, and defendant's settlement of its natural resource damages liability with DEP could be used as a model for similar restoration projects for defendant to undertake at the site.

In his December 2007 certification, Sacco explained that his office seeks to achieve "primary restoration" whenever possible, meaning the return of natural resource to its condition prior to the discharge of the hazardous substance or, if that cannot be accomplished, replacement of the lost resource and its services. In Sacco's view, "[p]rimary restoration includes the costs of assessing the damage to natural resources caused by a discharge." In addition, "compensatory restoration" is the public's loss of the uses, values, and benefits of the resource during the time between the discharge and the completion of restoration or replacement. The discharger has a duty to provide both primary and compensatory restoration, and DEP prefers restoration projects and improved public access to natural areas over payments of cash.

Sacco assisted in coordinating experts to assess the damage at defendant's Bayway and Bayonne sites, and he opined that the proposals they developed were consistent with DEP's goals. He explained: "Tidal wetlands are one of the most productive ecosystems on the planet, and their restoration, especially in the highly urbanized and developed region of northeastern New Jersey, is an important goal" of DEP, and is "extremely important" for New Jersey's citizens. He noted the area's "limited open space and recreational opportunities associated with functioning natural ecosystems," adding that restoration "would provide the Arthur Kill region . . . with unparalleled public use potential that has been unavailable due to the degree of contamination at and adjacent these sites." DEP's plans for the Bayway site would change it from an "industrial outfall to a functioning tidal creek and associated wetlands complex," allowing for the return of interdependent species that rely upon a healthy ecosystem. The Bayonne site's ongoing industrial uses limited the potential for on-site restoration; some wetlands restoration would be possible, and defendant could also provide off-site replacement for those resources that could no longer be restored.

In his June 2008 certification, Sacco further explained that after DEP initiated its litigation, defendant was given the opportunity to participate in developing DEP's restoration plans at these sites, but defendant declined. In Sacco's opinion, the Bayway and Bayonne sites "contained, and continued to contain (in a highly degraded condition), valuable and unique resources of the State which are especially important because of their location." Sacco observed that defendant sought to consider the "baseline" for restoration purposes as including "current 'background' levels of pollution in New Jersey," an approach Sacco viewed as contrary to the Spill Act and having "no bearing on [defendant's] duty to restore the natural resources it has damaged and destroyed."

In interrogatory answers, DEP acknowledged that "oversight costs have been incurred in connection with the Site Remediation Program which have been billed and reimbursed to and by [defendant]. Based on the best ...


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