Adoption of N.J.A.C. 7:26B, In re

CourtNew Jersey Superior Court – Appellate Division
Citation250 N.J.Super. 189,593 A.2d 1193
PartiesIn re ADOPTION OF N.J.A.C. 7:26B. PUBLIC INTEREST RESEARCH GROUP OF NEW JERSEY, New Jersey Environmental Lobby, Keith Onsdorff, Society for Environmental Economic Development, Chemical Industry Council of New Jersey, Ashland Chemical Company and Cooper Industries, Inc., Appellants, v. NEW JERSEY DEPARTMENT OF ENVIRONMENTAL PROTECTION, Respondent.
Decision Date06 May 1991

Page 189

250 N.J.Super. 189
593 A.2d 1193
In re ADOPTION OF N.J.A.C. 7:26B.
Environmental Lobby, Keith Onsdorff, Society for
Environmental Economic Development, Chemical Industry
Council of New Jersey, Ashland Chemical Company and Cooper
Industries, Inc., Appellants,
Superior Court of New Jersey,
Appellate Division.
Argued Nov. 15, 1990.
Decided May 6, 1991.

[593 A.2d 1197]

Page 197

Edward Lloyd, for appellants Public Interest Research Group of N.J., N.J. Environmental Lobby and Keith Onsdorf (Deborah Schwenk, on the brief).

Kenneth H. Mack, for appellants Soc. for Environmental, Economic Development and Chemical Industry Council of N.J. (Picco Mack Kennedy Jaffe Perrella & Yoskin, attorneys; Steven J. Picco and Kenneth H. Mack, of counsel; Kenneth H. Mack and Linda Mack, on the brief).

Anthony King, admitted pro hac vice, for Ashland Chemical Co. and Cooper Industries, Inc. (Kaye, Scholer, Fierman, Hays & Handler, attorneys; Christopher H. Marraro, of counsel and on the brief).

Gerard D. Burke, Deputy Atty. Gen., for respondent, Dept. of Environmental Protection (Robert J. Del Tufo, Atty. Gen., attorney; Mary C. Jacobson, Deputy Atty. Gen., of counsel; Paul H. Schneider, Deputy Atty. Gen., on the brief).

Before Judges KING, R.S. COHEN and STERN.

The opinion of the court was delivered by


This is a challenge by industry and environmental appellants to regulations promulgated by the Department of Environmental

Page 198

Protection (DEP) to implement the Environmental Cleanup Responsibility Act (ECRA or the Act), N.J.S.A. 13:1K-6 to -14, L. 1983, c. 330. ECRA imposes [593 A.2d 1198] responsibilities on owners and operators of industrial establishments as a precondition for the sale, transfer, or termination of operations at these facilities.

In this matter the Society for Environmental Economic Development, Chemical Industry Council of New Jersey, Ashland Chemical Company and Cooper Industries, Inc. (industry appellants) have lodged broad-based attacks on several sections of the regulations, particularly those sections which "trigger" operation of the Act. The Public Interest Research Group of New Jersey, the New Jersey Environmental Lobby, and Keith Onsdorff (environmental appellants), present a more limited challenge to the regulations which exempt from ECRA certain intra-family transfers and partial conveyances.

Industry appellants contend that DEP is without statutory authority to issue these "business-oriented" regulations, that the regulations are not entitled to any presumption of validity because they are beyond the scope of DEP's special expertise, and that they violate the Commerce Clause as an impermissible burden on interstate commerce because they provide that transactions by an out-of-state parent corporation may impose ECRA obligations on an industrial establishment in New Jersey owned by that parent corporation. In addition, industrial appellants contend that several specific provisions of the regulations--primarily those regulations which define and elaborate on the transactions which trigger ECRA--impermissibly expand the scope of the statute and apply it to situations remote from the actual transfer or sale of an industrial establishment.

Specifically, industrial appellants attack regulations which: (1) provide that certain transactions involving a parent corporation trigger ECRA obligations with respect to an industrial establishment owned or operated by a subsidiary of the parent; (2) define the statutory trigger "proceeding through which an industrial establishment becomes nonoperational for health or

Page 199

safety reasons" as including temporary closing for fires, explosions or other events; (3) apply ECRA to some situations where only a portion of the real property of the establishment is conveyed; and (4) define such terms as "sale of the controlling share of the assets" of a corporation, a statutory ECRA trigger. Appellants also attack regulations which hold that ECRA is applicable to any sale of a general partnership interest, as well as certain sales of limited partnership interests, in a partnership which operates an industrial establishment and regulations which require the "cleanup plan" required by ECRA to include measures for remedying contamination not actually on the site of the industrial establishment.

This is the procedural background of these challenged regulations. On May 4, 1987, DEP published proposed rules which were designed to implement ECRA, 19 N.J.R. 681(a). Public hearings on the proposed regulations were held in June, 1987; written comments were also accepted. On November 30, 1987 the Commissioner of DEP adopted these regulations and the notice of adoption was published on December 21, 1987, 19 N.J.R. 2435(a).

In January 1988, the industry appellants filed appeals challenging these regulations (hereafter "prior regulations"). The environmental appellants also filed a joint notice of appeal challenging the regulations on February 4, 1988. The appeals were consolidated by us on February 22, 1988.

DEP moved on September 21, 1988 to remand the matter to allow it to reconsider the prior regulations and develop revised regulations after consultation with appellants. We granted DEP's motion on October 20, 1988 and directed that the proceedings on remand be completed, as proposed by DEP, by March 1, 1989.

After consultation with appellant, DEP proposed amendments to the prior rules on February 21, 1989, 21 N.J.R. 596(a). On February 10, 1989, DEP requested an extension of time until June 30, 1989 to complete its rulemaking process. We

Page 200

granted this request on April 10, 1989. Revised rules were adopted by DEP on June 30, 1989, and published in the New Jersey Register on August 7, 1989, 21 N.J.R. 2367(a). This appeal followed.
 Table of Contents
                I " Review of ECRA 1199
                II " Standards of Review for ECRA "Trigger" Regulations 1201
                III " Parent"Subsidiary Triggers 1203
                IV " Regulation Defining "Corporate Reorganization" 1207
                V " Regulation Defining "Controlling Interest" 1208
                VI " Regulation Defining "Cessation of All Operations" 1211
                VI(A) " Standards Needed for Nonapplicability Provision, N.J.A.C. 7:26B 1212
                VII " Closures for Health or Safety Reasons under N.J.S.A. 13:1K"8b 1214
                VIII " Sales of Partnerships Triggers 1215
                IX " Changes in SIC Number Triggers 1218
                X " Regulation Defining "Sale of Controlling Share of Assets" 1219
                XI " ECRA as "Site Specific" 1221
                XII " Regulations on Condemnations as "Triggers" 1222
                XIII " Regulation Defining "Industrial Establishment" 1224
                XIV " The Commerce Clause Challenge 1225
                XV " Regulations Exempting Intrafamily Transfers 1226
                Conclusion 1227


I[593 A.2d 1199]

A General Review of ECRA

A brief review of ECRA and its regulatory progeny is useful in understanding the Act. "A determination of responsibility for contamination plays no part in the ECRA process." Dixon Venture v. Joseph Dixon Crucible, Co., 235 N.J.Super. 105, 109, 561 A.2d 663 (App.Div.1989), modified and aff'd, 122 N.J.

Page 201

228, 584 A.2d 797 (1991). ECRA was designed to impose a "self-executing duty to remediate without the necessity and delay of a determination as to liability for the contamination" upon closure, sale or transfer of certain potentially polluted properties. Superior Air Prod. v. NL Indus., Inc., 216 N.J.Super. 46, 62-63, 522 A.2d 1025 (App.Div.1987). Environmental cleanup, or firm arrangements for such remediation, was a precondition of the land transaction and was under the control of DEP.

Our Supreme Court recently stated as to ECRA:

ECRA is quite unlike other environmental regimes in that it uses market forces to bring about the reversal of environmental pollution. It recognizes that some environmental conditions not posing an imminent hazard to air or water resources of the state may safely attend economic activities. Thus, ECRA does not impose an independent duty to clean up the property during a period of operation, although the owner cannot walk away from the scene after deciding to cease operations. But, absent provisions in the contract, in the event of sale, under ECRA the seller assumes the risks of compliance. [Dixon Venture v. Joseph Dixon Crucible, Co., 122 N.J. at 231-232, 584 A.2d 797.]

N.J.S.A. 13:1K-7 sets forth the legislative findings which resulted in the enactment of ECRA: the legislation was prompted by a concern that the generation, handling, storage and disposal of hazardous wastes posed an inherent danger to the citizens, property and natural resources of the State. The Legislature determined that it was necessary to ensure that appropriate cleanup procedures be implemented as a precondition for the closure or transfer of facilities involved in these activities. Ibid. The only legislative history for ECRA is the "Senate Energy and State Energy and Environmental Committee Statement" for Assembly No. 1231-L. 1983, c. 330. See Schmidt, "New Jersey's Experience Implementing The Environmental Cleanup Responsibility Act," 38 Rutgers L.Rev. 729, 744, n. 79 (1986). This statement is included after N.J.S.A. 13:1K-[593 A.2d 1200] 6 and outlines the theory of the Act. For other comments on the Act see generally: Farer, "ECRA Verdict: The Successes and Failures of the Premiere Transaction-Triggered Environmental Law," 5 Pace Envir.L.Rev. 113 (1987); Note,

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"The Environmental Cleanup Responsibility Act," 8 Seton Hall Leg.J. 331 (1984-1985).

N.J.S.A. 13:1K-8, the definitional section of the Act, delineates those industrial establishments which are subject to the Act, and those cessations, transfers or terminations of operations which trigger the Act. Only businesses which have a Standard Industrial Classification Number (SIC) as set forth in N.J.S.A. 13:1K-8f are subject to the Act. SIC numbers are set forth in a SIC manual...

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