On July 6, 2012, the New Jersey Appellate Division, in the case of Des Champs Laboratories, Inc. v. NJDEP, invalidated the NJDEP’s regulation requiring an owner or operator of an industrial establishment to certify that their property is clean when applying for a De Minimus Quantity Exemption (DQE) under the Industrial Site Recovery Act (ISRA).  There has been much press recently indicating that this is a big “win” for business.  However, the reality is that this is a very limited decision with very limited applicability.
 
The ISRA statute specifically allows an exemption to its requirements if an applicant can show that it handled less than certain specific quantities of hazardous substances.  NJDEP added one more requirement while updating the regulations promulgated under the statute; that the applicant must also certify to the best of their knowledge that the property is not contaminated.  Simply put, the court found that NJDEP's additional requirement was not authorized by the ISRA statute, and that NJDEP went beyond the bounds of its authority when it adopted that regulation.

This decision does not change the fact that if there is contamination at the property, the owner or operator may still be required to investigate and cleanup the contamination under other environmental statutes.

In the Des Champs case, Des Champs Laboratories, Inc. operated an industrial establishment located in Livingston, New Jersey.  In 1996, after complying with ISRA, NJDEP issued a no further action letter to Des Champs.  In 2005, NJDEP initiated an investigation of groundwater contamination in Livingston, and determined that the Des Champs property was the source of the contamination.  NJDEP rescinded the no further action letter and ordered Des Champs to enter into a remediation agreement requiring the cleanup of the property.  In response, Des Champs submitted an application for DQE stating that because it handled very small quantities of hazardous substances, its operations were exempt from ISRA.  NJDEP denied Des Champs’s DQE application, stating that an industrial establishment with known contamination cannot qualify for a DQE.

Des Champs appealed NJDEP’s decision arguing that ISRA does not require a property to be clean in order to obtain a DQE.  After reviewing the statutory history, the court noted that when the legislature enacted ISRA, it specifically included a DQE provision, the purpose of which was to streamline the regulatory process.  That provision did not require an applicant’s property to be clean.

The court found that nothing in ISRA or its legislative history requires a DQE applicant to certify that its property is clean, and found that NJDEP acted arbitrarily and capriciously in denying Des Champs’s DQE application.  The court also invalidated NJDEP’s regulatory requirement that a DQE applicant certify that its property is clean.  However, the court cautioned that its decision was limited in that NJDEP did have the right to pursue enforcement actions against Des Champs to clean up the property under other environmental laws.