Is The Legislature’s Attempt to Dedicate Natural Resource Damage Funds A Trojan Horse?
Poison Pill Cap On DEP Funds Would Cripple NRD Program
No Private Law Firm or Consultant Would Accept a 5% Cap
[Update – 12/16/16 – the Resolution SCR39 was amended on the Senate floor back on 11/14/16 to increase the cap to 10% and to include a nexus to local injury, as we urged. Read the Senate floor statement on amendments. Apologies to readers for not updating this sooner, I’ve been under a Trump cloud.]
[Updated below with Notes and a Treachery Alert]
During the Whitman Administration, the business community strongly and successfully opposed the use of Natural Resource Damage (NRD) settlement revenues for the purchase of open space with this harsh rhetoric:
We refuse to be the Governor’s ATM to fund her million acre open space goal.(1)
During the McGreevey Administration, DEP Commissioner Campbell ramped up a moribund DEP NRD program – a much feared “sleeping giant” – including the use of hired private legal counsel. The “sleeping giant” had awakened.(2)
In response, the business community again went into high gear opposition mode, calling Campbell’s effort a “crusade” and the private outside law firm a “bounty hunter” that would “shake down” and “hold NJ businesses hostage” and filing a lawsuit to block it:
An industry coalition filed suit in March 2004, against the state of New Jersey opposing highly criticized tactics, including the state’s use of a New Orleans-based firm known for representing plaintiffs in toxic tort and related litigation, to recover money damages for natural resource claims. The action seeks to end the state’s plan to rely upon contingent fee attorney Allan Kanner to sue more than 80 companies for alleged damages to natural resources. The lawsuit highlights industry concerns over the aggressive program recently launched by the New Jersey Department of Environmental Protection (NJDEP) to recover for alleged losses and injuries resulting from natural resource damages (NRDs).
During the Corzine Administration, business lawyers and lobbyists had a field day in response to DEP Commissioner Lisa Jackson’s filing of over 120 NRD lawsuits to meet a legislatively imposed statute of limitations deadline those lobbyists secured and had thought would cripple the DEP NRD program.
And just a little over a year ago, the business community supported the Christie Administration’s sweetheart settlement with Exxon, for pennies on the dollar of an $8 billion NRD claim. The business community quietly applauded as Gov. Christie used NRD settlement revenues to close budget shortfalls created, in part, by Christie’s $5 billion in corporate tax breaks.
So, the business community is fully aware of the multibillion stakes of the NRD program and has a long track record of aggressive lobbying on NRD issues, especially attempts to use NRD funds for the popular Open Space program.
Their concerns are valid: public desire to preserve open space and scarce resources to fund purchases of open space create enormous pressure. An NRD honeypot for open space at DEP could result in a dramatic increase in the business community’s NRD liability.
But last week, business lobbyists were curiously silent when the Senate Environment Committee revived a measure to Constitutionally dedicate DEP NRD revenues.
What explains the lack of opposition by the business community?
So, with that NRD history in mind, we ask: are voters about to be duped again by environmentalists’ efforts to dedicate funds to open space?
Recall that in 2014, the Keep It Green coalition spent almost $1 million on a PR campaign to convince voters to approve an open space bond question. Voters were unaware that that measure diverted $32 million in previously dedicated State Parks maintenance funds, as well as about an additional $20 million from DEP clean water and toxic site cleanup programs.
This year, another Legislative Resolution to dedicate Natural Resource Damage (NRD) revenues for open space purchases is moving through the Legislature. The Senate released its version (SCR39) last Thursday (see NJ Spotlight coverage as well as my more critical set up story).
The initiative is a response to Gov. Christie’s diversion of over a hundred millions dollars of NRD funds into the General Fund and not for restoring natural resources.
The dedication of NRD revenue is sound policy, but the current draft of SCR39 has unrelated and ill advised “poison pill” provisions.
Just like the prior Open Space ballot question, the Resolution represents an attempt to divert revenue and defund critical DEP programs (recall that the KIG folks explicitly criticized DEP’s use of funds for professional staff and supported provisions to cap DEP revenues to punish them).
I warned the Senate sponsors that:
Passage of the SCR/ACR in its current form with the 5% cap would starve already under-resourced DEP programs and virtually guarantee that:1) there would never again be anything like a large scale complex Exxon case, 2) that the current small bore pennies on the dollar DEP NRD and enforcement programs would persist, 3) perhaps those programs would be further scaled back due to lack of adequate resources and 4) result in an inability to compensate private legal and technical consultants required to prosecute NRD cases.(3)
Additionally, first priority for dedicated use of these funds should be to restore the $32 million dedication to State Parks capital maintenance that was eliminated by the recent Open Space ballot approval.
Senate Environment Committee Chairman Bob Smith agreed that the Resolution was flawed and needed to be amended. Regardless, he released the Resolution from his Committee, and with no specific commitments on how or when it would be amended.
This would not be the first time that Smith provided major relief to corporate toxic polluters, while crippling DEP programs.
NJ’s environmental laws are stacked in favor of the polluters over DEP on the NRD issue. Smith knows that.
Keep in mind that Smith was the prime sponsor of the law known as the Site Remediation Reform Act that privatized the toxic site cleanup program. That law effectively put industry in charge of cleanup decisions, saving them billions of dollars in cleanup costs of more aggressive DEP and public oversight.
Because the NRD program is part of the DEP toxic site cleanup program, that same privatized cleanup law allows consultants hired by polluters to conduct the “baseline ecological assessments” that determine if and how badly natural resources may have been damaged by toxic pollution.
How many industry consultants will willingly put their corporate client’s neck in a billion dollar NRD noose?
Does anyone think that consultants that worked for Exxon would have documented $8 billion in NRD damages? Would have monetized $8 billion in natural resource injuries?
Yet that is exactly what NJ law and the DEP NRD program allow – private consultants that work for the responsible polluters conduct the “baseline ecological evaluation” that documents the existence and extent of any Natural Resource Injuries. That is the basis for the NRD calculation. See DEP NRD program website:
Ecological Injury
The ecological risk assessment process involves collecting and evaluating all data necessary to identify actual and potential ecological impacts and to characterize all natural resource injuries, including the nature and extent of injury to soil, water, flora and fauna. (see N.J.A.C. 7:26E) If this work is carried out with oversight from DEP’s Site Remediation Program, there is no need for input from the Office of Natural Resource Restoration (ONRR). ONRR will only review SRP-approved Ecological Risk Assessments (ERA) that indicate risk. Information generated by the ERA will then be used to develop a NRD position / restoration plan.
Examples of natural resources for which ecological injuries can occur are fisheries, sediments, surface waters, ground water, wetlands, forests, wildlife habitat, wildlife, and lost public use / recreation.
Also keep in mind that, despite all the political noise on the Christie Exxon NRD sweetheart deal, that the Legislature held no oversight hearings of the DEP’s NRD program.
Despite the testimony of the NJ Attorney General in the Exxon case that he reached the Exxon settlement instead off litigating the case due to substantial litigation risk:
The state “knows it has a weak legal hand,” making it reluctant to push too hard and more willing to settle, Wolfe said, adding that Exxon’s lawyers are “sharp enough to know this” too.
“There’s this wink and a nod going on where the DEP is saying, ‘We won’t squeeze you too hard if you just come to the table and settle,’” Wolfe said, adding that it’s been “a quiet little dance for 10 years,” with the state knowing it can’t get more than pennies on the dollar.
In response to that litigation risk, the Legislature made no changes in law and held no hearings on legal loopholes that give corporate polluters huge legal leverage over DEP.
Despite NJ court decisions that dismissed DEP NRD legal claims due to the failure of DEP to promulgate NRD regulations, and DEP’s own commitment to a Judge to adopt such regulations, the Legislature held no oversight hearings or passed any laws to mandate that DEP adopt those NRD regulations.
Finally, the Legislature repealed DEP’s authority to adopt “ecological standards” that would strengthen DEP’s scientific and legal hand in enforcement of NRD claims.
With all this pro-polluter legislative damage, unless Senator Smith amends SCR39 on the Senate floor BEFORE it gets considered by the Assembly Committee, I can only assume that the SCR is a Trojan horse and that the environmental groups supporting it are clueless useful idiots.
Notes:
1) I think that was Jim Sinclair, NJ Business and Industry Assc.’s line, but it could have been Hal Bozarth, the Chamber of Commerce or the Petroleum Council – there was consensus within the business community “murderers row” on this point.
2) I am not naive – Campbell’s bark was a lot bigger than his bite on NRD. Campbell also cut dirty NRD deals for pennies on the dollar, and I criticized those deals publicly at the time (e.g. over a decade ago, (Bergen Record 7/12/05)):
“The department had a very strong litigation hand,” said Bill Wolfe, a former aide to Campbell who now heads the state chapter of Public Employees for Environmental Responsibility. “This is a paltry settlement given the magnitude of the damage that the company has imposed on the taxpayers, the environment and the public health of the state. They’re one of the largest polluters in the world.”
3) I am not advocating outsourcing or privatization of NRD work. Ideally, DEP should have expert professionals on staff – but they don’t and therefore. must rely on private consultants to fill the void.
Treachery Alert
The current version of SCR 39 passed the full Senate last session. It included the 5% cap (poison pill) and did not include a “nexus” provision, yet the LCV and conservation groups supported it.
But last week in testimony before the Senate Environment Committee – coming only after I exposed their treachery and then explained the significance of the 5% cap, especially regarding private legal and technical consultants – the same conservationists tripped all over themselves supporting a nexus and warning about the 5% DEP cap and role of private consultants.
They are self interested and dangerously incompetent.
For their 40 gold coins for their pet projects and open space, they threw the “nexus” (local communities) and DEP under the bus.
Just like they did for State Parks.