The jurisdictional reach of the federal 1972 Clean Water Act, which hinges on the definition of “navigable waters” or the “waters of the United States,” has been the subject of hot debate, consternation and interpretation – with plenty of litigation, regulation, agency interpretative guidance, inter-agency memorandum of agreements, more litigation, new regulations, supplemental agency guidance and memoranda, even injunctions, and so on – for decades.

The last major action in this saga was the Obama administration’s 2015 Clean Water Rule, which broadened the Act’s jurisdiction to water bodies not previously regulated, such as smaller streams and tributaries, dry washes or intermittent streams, and certain ditches or gravel pits.  Farmers, especially in the West (where a large majority of surface water flows intermittently), developers, and the mining industry were most affected by the expansion.

One of President Trump’s first actions in office was a February 2017 executive order directing the United States Environmental Protection Agency and the Army Corps of Engineers (the two agencies share regulatory authority under the Act) to rescind and replace the Obama Rule.  Today, the two agencies released the proposed replacement rule.  As expected, it proposes a significantly more limited definition of “waters of the United States.”

Early estimates are saying that millions of acres of wetlands and thousands of miles of streams will no longer be subject to federal regulation, but there is a long road ahead before the rule becomes law.  First, the proposed rule is subject to a 60 day public comment period.  Second is the litigation, which is a practically guaranteed – environmental groups have made their opposition clear.  And the saga continues…

 

 

On the heels of the six environmental enforcement lawsuits they filed in August, New Jersey Attorney General Gurbir S. Grewal and NJDEP Commissioner Catherine R. McCabe announced eight brand new environmental enforcement lawsuits filed today.  The suits relate to sites scattered throughout the state – Camden, Flemington, Newark, Palmyra, Pennsauken, Phillipsburg and Trenton – mapped out here.  The main focus for this wave of cases is environmental justice, which means environmental enforcement that is focused on addressing pollution and environmental hazards in minority and lower-income communities.  Environmental justice is very much on the Murphy Administration radar.

One of the cases, involving the alleged pollution of drinking water drawn from the Puchack Wellfield in Pennsauken, Camden County, asserts claims for natural resource damages, known as “NRDs.”  There hadn’t been an NRD case filed in New Jersey for almost a decade until this past August, when the state filed three such cases.

The state is seeking remedies across the board from the various defendants – cleanup and removal of contamination, financial penalties, recovery of tax monies spent by the state to clean up polluted sites, as well as NRDs.  The dollar amount of each of these types of remedies can add up very quickly, so we are talking about real money here.  The state just took another big action showing it may very well be a “new day” in environmental enforcement in New Jersey.

The odds of OSHA showing up at your worksite have increased for construction employers engaged in excavation and trenching.  OSHA recently announced an update to its National Emphasis Program (“NEP”) to prevent trenching and excavation collapses after a spike in construction fatalities.  The October 2018 update focuses on both increased enforcement and education activities by OSHA Area Offices.

The updated NEP instructs inspectors to initiate an investigation whenever they observe an open trench or excavation, regardless of whether or not a violation is readily observable.  These observations could be made during the course of the inspector’s work-day travels or during a routine inspection.  OSHA will also continue to conduct inspections based on employee complaints or referrals from third-parties, such as city inspectors or other governmental agencies.

The scope of the inspection will, in most cases, be limited to evaluating the hazards associated with the excavation.  However, if other violations are observed, the inspector can expand the scope of the inspection to address those other areas.

Pursuant to the updated NEP, OSHA Area Offices are required to develop and implement a “comprehensive excavation safety outreach program.”  The education outreach activities are likely to include:

  • News releases to disseminate information concerning the updated NEP;
  • Seminars on trenching and excavation safety for employer groups, trade associations and unions; and
  • Educational material on trenching and excavation safety for (i) licensing or other municipal agencies for distribution to employers when they request dig permits; (ii) utility and plumbing companies for distribution to employers; and (iii) industry association for distribution to members.

Employers are well advised to focus on maintaining a safe worksite by complying with OSHA’s standards on trenching as well as other applicable standards.  OSHA’s website has a wealth of information regarding trenching and excavation safety.

Property owners who suffer damages as a result of contamination must be aware of time limitations to recover damages.   A New Jersey appellate court recently upheld the rule that, unlike recovery of cleanup costs in contribution actions under the New Jersey Spill Compensation and Control Act, recovery of other damages under tort theories, such as lost sales, lost rental values and the like, remain subject to the six-year statute of limitations.  In 320 Assocs., LLC v. New Jersey Natural Gas Co., (A-1831-16T2) (June 29, 2018), the Appellate Division, upheld a lower court’s decision dismissing Plaintiff’s claims for money damages as untimely.

The owner of commercial property located near a New Jersey Natural Gas property sued the gas company for damages resulting from coal tar that had migrated onto the owner’s property.  The owner asserted common law claims against the gas company for negligence, per se negligence, strict liability, nuisance and trespass.  It sought damages for a lost sale and lost rental value as well as an order mandating the gas company to cleanup up both properties.

The Appellate Division determined that, since Plaintiff discovered the contamination in 2008, the six year statute of limitations barred all but one claim.  Only the nuisance survived for further fact finding because nuisance is considered ongoing so long as the nuisance can be abated.

The case is a reminder that property owners with common law claims need to be aware that, while environmental statutes permit claims for cleanup and cleanup costs without time limitations, other damages are not recoverable if they are asserted after the statutory limitations periods.

The Tax Cuts and Jobs Act of 2017 makes it harder to take tax deductions for some payments to governmental entities.  The change may impact settlements between private entities and federal, state and local environmental agencies.  In most cases, it will not affect environmental settlements between private parties.

Section 162(f) of the Tax Code has long prohibited deductions for fines and penalties paid to the government.  The new law makes the tests for deduction of certain payments to a governmental agency more stringent.  The amended Section 162(f) substantially limits the tax deduction available for (1) any settlement or other payments, (2) made to or incurred at the direction of a governmental entity, (3) related to a violation of any law or governmental investigation or inquiry into the potential violation of any law.

There is an exception to this rule, which allows a deduction for the following payments: (1) restitution, including remediation of property; or (2) an amount paid to come into compliance with a violated law or involved in an investigation or inquiry.  To be deductible, the payment has to be expressly identified under a court order or settlement agreement as a restitution or compliance payment.  This exception does not apply to amounts paid “as reimbursement to the government for the costs of any investigation or litigation.”

Under the statute, the limitation applies only to payments made to, or at the direction of, a governmental entity.  A deduction, therefore, remains available for remediation expenses paid to private parties without governmental direction.

Finally, a new provision under Sec. 6050X requires government agencies involved in settlements to report to the Internal Revenue Service (IRS) the portions of the settlement payment that are and are not deductible under Section 162(f).

Our tax and environmental groups can advise on the implications of the new law, including factoring into negotiations the potentially higher tax cost of government settlements and ensuring that the settlements reached are well-drafted and as tax-efficient as possible.