Big Corporate Polluters Quietly Veto Natural Resource Damage Compensation Standards
Senator Smith’s Legislative Task Force Failed To Reach Consensus Or Deliver Recommendations
Smith Just Quietly Noted A Billion Dollar Failure – Yet A Virtual News Blackout
It’s Exxon All Over Again – On A Statewide Basis
[Updated below]
During the February 10, 2022 meeting of the Senate Environment Committee, Chairman Bob Smith quietly and very casually noted that his previously formed Legislative Task Force on Natural Resource Damage (NRD) Standards had failed to reach consensus and deliver recommendations to the Committee (listen, starting at time 3:30):
And by the way, we also did one Task Force that didn’t work, and that was for natural resource damages (NRD). We appointed co-Chairs; they met, they met, they met, they met, they met and then they came back a few months later and said “we can’t agree on anything”. So that happens too.
Presumably, that means that he has abandoned his multi-year effort to enact legislation to establish NRD monetization and compensation standards.
I almost fell off my chair when I heard this, but, incredibly, Smith’s major admission was virtually ignored – no media reports and no howls of protest by environmental groups. This is astonishing. Let me explain, briefly:
In the wake of the Christie Administration’s scandalous settlement of a DEP $8.9 BILLION “Natural Resource Damage” (NRD) lawsuit against Exxon for just pennies on the dollar, Senator Bob Smith announced that he would form a legislative Task Force to develop enforceable standards to prevent recurrence of that scandal.
Long prior to the Exxon scandal, we had been warning for over a decade that DEP’s failure to adopt NRD regulations was the cause of courts rejecting DEP lawsuits and the reason why DEP was forced to settle for pennies on the dollar, thus letting polluters off the hook for billions of dollars in liability, see:
Our analysis was finally reported by the NJ Law Journal, see:
But some lawyers and environmental advocates said the state’s failure to adopt a methodology for calculating damages for harm to natural resources through the formal rule-making process—as it committed to do more than a decade ago when it settled another suit—weakened its negotiating position and led to a lower settlement in not just the Exxon case but in other natural resource damage suits it has brought. […
Wolfe said the lack of valuation rules leaves the state vulnerable to challenges on the amount of damages.
The state “knows it has a weak legal hand,” making it reluctant to push too hard and more willing to settle, Wolfe said.
Exxon’s lawyers are “sharp enough to know this” and to assume the state knows it is legally vulnerable, Wolfe said.
“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.
It’s been “a quiet little dance for 10 years,” with the state knowing it can’t get more than pennies on the dollar”, Wolfe said.
Finally, in response, NJ Spotlight reported: (6/12/18)
The state is seeking ways to shore up how it assesses damages to natural resources when polluters contaminate New Jersey’s waters, wildlife, and land.
By establishing clear and objective standards, the state would have an easier time of prying the money needed to restore drinking-water supplies, habitats, and other natural resources from the companies whose spills and other actions harmed them, environmental advocates say.
To that end, Sen. Bob Smith, the Democratic chairman of the Senate Environment and Energy Committee, said he plans to set up a stakeholder process to try to come up with a workable mechanism that would set such standards.[…]
The staff of the Office of Legislative Services has been trying to come up with standards to assess damages in natural resources cases for the past two years, according to Smith.
“It’s a struggle. It’s a tough, tough area,’’ Smith said. So he is turning to a process he used to help reach consensus on another contentious environmental issue —guaranteeing public access to the state’s beaches and waterfronts. That stakeholder group agreed on a bill that is now making its way through the Legislature, Smith noted.
Smith’s NRD Task Force immediately set off loud alarms and warning bells at NJ Business And Industry Association (NJ BIA) and all the State’s major corporate law firms, who knew that billions of dollars of corporate pollution liability was at stake.
Natural Resources Damages
Smith had put together one of his task forces to make recommendations on how to get those who have “polluted the land” to financially compensate the state for the loss of environmental resources. That task force, however, has not been able to develop consensus legislation. He said he will now develop his own legislation with the goal to establish some objective standards for damage assessments.
Looks like Senator Smith has failed to “develop his own legislation with the goal to establish some objective standards for damage assessments.”
The timing of the NRD lawsuits is interesting. Unlike the federal government, New Jersey has declined to enact regulations that govern NRD claims. The State therefore pursues NRD on an ad hoc basis, which often leads to complex and protracted litigation. Recognizing this issue, the chair of the New Jersey Senate’s Environment and Energy Committee, Sen. Bob Smith, recently convened a NRD Task Force to develop suggestions regarding possible NRD legislation or regulations, including approaches for valuing injury to natural resources. The Task Force includes NJDEP officials, industry representatives, NRD practitioners (including Archer attorneys), and individuals from many of the State’s environmental advocacy organizations. This week’s NRD lawsuits were filed one day after the first meeting of Sen. Smith’s NRD Task Force.
Some of the anticipated legal challenges may be addressed through ongoing legislative efforts focused on developing objective standards for evaluating and calculating recoverable NRDs. Specifically, Senator Bob Smith convened an NRD Task Force comprised of NJDEP officials, industry representatives, NRD practitioners and environmental advocacy groups in the summer of 2018. The purpose of the Task Force was to develop suggestions on topics such as NRD policy and how to value NRDs. Although the state developed a formula to calculate groundwater injury previously in connection with its first NRD initiative launched in the early 2000s, it has been rejected by the courts (see NJDEP v. Exxon, Mer-L-2933-02 (N.J. Super. Law Div. Aug. 24, 2007)) and there are currently no regulations regarding how to calculate NRDs. At the December 2018 NJICLE Annual Review of New Jersey Environmental Law, representatives of NJDEP publicly announced that that they are working to finalize an objective formula for calculating NRDs, at which point NJDEP intends to vigorously pursue NRD claims.
The BIA and corporate lobbyists obviously went into high gear and effectively killed this NRD legislative Task Force work behind the scenes.
And they did so with no fingerprints and no accountability!
Billions of dollars of public compensation, killed. Just like that.
And no press reports.
And no protests from environmental groups.
I was told that environmental groups were represented by Tim Dillingham of ALS and Doug O’Malley of Environment NJ (see update below, this may not be correct). I contacted them both and they both refused to even respond.
They sold you out and you don’t even know it. They lack the courage to even call out the corporate polluters who killed the Task Force and effectively vetoed legislative recommendations.
[Update: 3/1/22 – I tried hard to document the work of this task force, but found nothing. Only 2 people responded to my questions, but provided very little reliable information. But I just received this email from an OLS staffer to the Senate Environment Committee – I may be wrong about Tim and Doug, but am surprised that Tittel has apparently done nothing:
Hi Mr. Wolfe,
I was unable to find much information about this task force, unfortunately. If it did issue any final report, it was not submitted to the OLS. And the OLS was not involved in any of the meetings or correspondence of the task force. The previous OLS committee aide to SEN remembered that Jeff Tittel (formerly) of the Sierra Club and Dennis Toft of CSG Law were on the task force. She also recalled that Senator Smith did not end up introducing a bill on the topic. ~~~ end update]
Ironically, before I was aware that the NRD Task Force had been sunk by corporate veto power, upon formation of his Forestry Task Force, I warned Senator Smith that his “consensus based approach” was doomed to failure because it gave private economic interests veto power.
On 2/2/22, I wrote to Smith:
2. Consensus based approach
I heard you suggest the need for consensus based recommendations for forestry management and legislation.
By definition, a consensus based approach results in the least common denominator.
Given the tremendous values (ecological, public interest, and economic) inherent in NJ’s forests, it is – at best – naive to assume consensus can be a realistic or desirable goal or model.
Selfish private economic and political interest simply must not be allowed to block sound management in the public interest by blocking formation of consensus. Consensus gives these interests an effective veto power. That is an unacceptable model.
As a longtime legislative leader, you know that effective public policy requires choice – sometimes hard choices. A consensus based Taskforce must not be allowed to provide cover fort such hard choices
I guess I was right. And here we are now.
NRD is dead.
And the law firms and corporate polluters are laughing all the way to the bank as they just dodged billions of dollars of NRD liability.
Of course, this was all predictable, especially given the fact that a corporate lawyer who successfully litigated a damaging precedent setting NRD case against DEP is now DEP Commissioner. As I wrote to expose a larger gaslighting fraud:
One case LaTourette litigated, however, stands out for its harm to the environment, DEP, and the public interest. And that case is:
Alan E. Kraus argued the cause for respondent (Latham & Watkins, L.L.P., attorneys; Mr. Kraus, Kira S. Dabby, Kegan A. Brown, and Shawn M. LaTourette, on the brief).
LaTourette Essex Chemical victory case was one of three major inter-related court cases involving DEP’s attempts to collect what are known as natural resource damages (NRD). See:
It’s Chinatown, Jake!
[End Note: I just fired off the following note to Smith, with a copy to NJ Spotlight reporters and editor.
Dear Senator Smith – I was quite surprised to hear you casually note during the February 10, 2022 Senate Environment Committee hearing that your Natural Resource Damage (NRD) Standards Task Force had failed to reach consensus and deliver recommendations.
As you know, as illustrated by the Christie Administration’s Exxon NRD settlement, literally billions of dollars are involved in these standards. As you also know, DEP has failed to adopt NRD regulatory standards and NJ Courts continue to reject State NRD lawsuit claims as a result.
You have been quoted by others that you planned to pursue an NRD bill that monetized and established enforceable standards despite a lack of consensus by the Task Force.
I excerpted some of those quotes in the following essay, which I provide for your information, see:
Big Corporate Polluters Quietly Veto Natural Resource Damage Compensation Standards
I look forward to learning of your legislative plans on NRD and reading your NRD bill. I am available to provide additional information at your pleasure.
Respectfully,
Bill Wolfe