On March 21, 2013, the New Jersey Appellate Division upheld the validity of the New Jersey Department of Environmental Protection’s (DEP) controversial “Waiver Rule.”  The Waiver Rule generally allows the DEP to waive regulatory requirements under certain conditions.  The Waiver Rule was proposed by the DEP in March 2011, and was finalized in March 2012 with an effective date of August 1, 2012.

The Waiver Rule contains several conditions that must be met before the DEP will waive a regulatory requirement.  First, the waiver request must fall within at least one of four bases for obtaining a waiver: (a) the applicant faces conflicting rules; (b) strict compliance would be unduly burdensome; (c) a waiver would yield a net environmental benefit; or (d) a public emergency warrants the waiver.  Second, the waiver cannot fall within any of thirteen categories of DEP rules that cannot be waived (e.g., federal requirements cannot be waived).  Finally, the DEP applies several additional specific criteria in reviewing waiver requests.  The court indicated that one of the most significant of these additional criteria was to ensure that waivers are consistent with the DEP’s core mission.

A number of environmental groups challenged the legality of the Waiver Rule, claiming that the Waiver Rule was invalid because it exceeded the DEP’s authority and failed to provide adequate standards governing the implementation of the Waiver Rule.

The Appellate Division upheld the Waiver Rule.  The court first noted that it was required to defer to the DEP’s interpretations of the various statutes for which it is responsible.  Next, the court held that under those environmental statutes, the DEP has inherent authority to waive the requirements of its own regulations, provided that it does so in limited and well defined situations. This authority exists where waivers do not violate a statutory requirement or federal law and comport with the agency’s core mission.  Additionally, the agency must issue properly adopted regulations and provide clear standards for how the agency will issue waivers.  The court determined that the Waiver Rule met these requirements.  An appeal to the New Jersey Supreme Court is expected.

The court did invalidate the Waiver Rule guidance documents issued by the DEP.  Before the Waiver Rule became effective in August 2012, the DEP established several  guidance documents ostensibly governing the implementation of the Waiver Rule.  These  guidance documents were available on the DEP’s Waiver Rule webpage.  The court held that the DEP’s Waiver Rule guidance documents were invalid because they were effectively agency rules that had not been issued in compliance with the rulemaking requirements of the Administrative Procedures Act.  Nevertheless, the Waiver Rule remains in effect because the court found that the rule itself was detailed enough to stand on its own without the guidance documents.

There are almost 50 days left until the NJ Department of Environmental Protection’s Waiver Rule takes effect on August 1, 2012.  That is unless the NJ Senate decides to follow in the path blazed by the Assembly last month to derail the rule by approving a resolution directing NJDEP to amend or withdraw the Waiver Rule as inconsistent with the legislative intent of the statutes cited by NJDEP as support for the rule.  An identical Senate resolution was approved in committee but then pulled from the Senate agenda at the end of May.  The regular legislative session is nearing its end, but a resolution technically could be heard either beforehand or during a special session over the summer.

The Waiver Rule was adopted on March 8, 2012 pursuant to Governor Christie’s Executive Order No. 2 issued on his very first day in office and allows NJDEP to waive any of its rules where (1)  the rule conflicts with another NJDEP rule or a rule of another state or federal agency in a way that makes compliance with both rules impossible or impracticable; (2) strict compliance with the rule would result in actual and exceptional hardship or excessive cost where there is a cheaper alternative that is as or more protective of the public or the environment;  (3) there will, despite the waiver, be a net protection of the natural resource or other environmental good that is protected by the rule being waived; or (4) an authorized federal or state official declares a public emergency justifying the waiver.

Environmental special interest groups oppose the rule as a broad attack on environmental regulations by providing NJDEP the ability to waive any of its rules for reasons that are easy to assert, including economic hardship.  Business and industry trade groups welcome the rule as much needed relief from years of technical Catch-22’s that have led to protracted and expensive development delays even where every effort to comply with NJDEP’s often inconsistent maze of rules has been undertaken. 

Aside from the legislative efforts to derail the waiver rule, 27 environmental and labor groups filed a lawsuit in the NJ Appellate Division in March, just after rule adoption, seeking expedited review from the court, arguing that the rule should be invalidated on constitutional grounds, including alleged violations of separation of powers and due process.

By most accounts, it is unlikely that there will be either a legislative or court resolution  before August 1 when DEP will begin to accept waiver applications.  While DEP is not expected to grant waivers lightly, there are certain types of cases that DEP itself is anxious to use the waiver rule to resolve, for example, where its land use and site remediation groups are deadlocked due to inconsistent rules that make it impossible for the remediating party to move forward.

When hiring an environmental consultant, it is important to carefully review the terms and conditions governing the agreement between you and your consultant.  One of the key components of the professional services agreement is the section dealing with the consultant’s potential liability for its own negligence.  Consulting firms will often look to limit their liability to the contract price or some other nominal amount.  Richard Ericsson and David Steinberger of the Cole Schotz Environmental Law Department discuss this issue and a recent New Jersey court decision in an article titled, "Be Aware of Your Consultant’s Liability Limit."

In its decision, the Appellate Division upheld a consultant’s contract which limited the consultant’s liability to $25,000.  In that case, the consultant, retained by a real estate buyer for pre-acquisition due diligence, had grossly underestimated the cost to clean up the property.  The consultant’s initial cleanup cost estimate was between $13,000 to $17,000, while the final cleanup cost estimate was over $3 Million.  Nevertheless, the court upheld the consultant’s contractual liability limit of $25,000.  This case reinforces the need to carefully review professional services agreements to make sure you are adequately protected.