october 2007

Court Invalidates Formula Used by NJDEP to Calculate Natural Resource Damages

BACKGROUND

The Superior Court of New Jersey recently dismissed a claim by the New Jersey Department of Environmental Protection (NJDEP) for natural resource damages, ruling that the NJDEP’s groundwater injury calculation formula is not a formal rule and that NJDEP did not provide adequate scientific evidence to make the formula reliable under the facts of the case.

Under New Jersey’s Spill Compensation and Control Act, a party liable for cleanup of contamination is also liable for damages to the State for any injury to natural resources caused by the contamination. NJDEP considers groundwater to be injured when contaminants are present above New Jersey’s Groundwater Quality Standards.

NJDEP utilizes a formula to calculate groundwater injury when determining the magnitude of natural resource restoration or the amount of monetary damages required as compensation for the injury. The formula, adopted in May 2003, calculates a dollar value based upon:

  • the size of the groundwater contaminant plume;

  • the anticipated time period during which the contamination will exceed groundwater standards and;

  • the water rate as set by the New Jersey Board of Public Utilities.

    • The court invalidated the use of the formula in calculating the groundwater natural resource damages, and determined that the formula could only be used and relied upon in litigation if it was promulgated as a rule or sufficiently supported within the context of the case. Because NJDEP had not met its burden of proof to make the formula reliable in either regard, the court dismissed NJDEP’s claim for natural resource damages.

    WHAT YOU SHOULD KNOW

    NJDEP is still using the formula to calculate NRD claims with parties who voluntarily approach the agency for settlement. NJDEP may seek to appeal the court’s decision or may alternatively attempt to promulgate the formula as a formal rule, in which event interested parties will be permitted to submit public comments to the agency during the rulemaking process. We will continue to monitor the progress of this matter and inform you of any changes.

    If you have any questions concerning these issues, please contact Jay A. Jaffe or Julia C. Rinne.