Exxon May Be Sued for Natural Resource Damage Done Prior to Passage of NJ Spill Act

New Jersey can pursue Exxon Mobil for natural resource damage done by two refineries prior to enactment of the state's Spill Compensation and Control Act, a Union County judge has ruled. Ruling on the company's attempt to limit its exposure to damages for pollution at the 288-acre Bayonne works and the 1,800-acre Bayway Refinery in Linden, Superior Court Judge Ross Anzaldi held the Spill Act can be applied retroactively, not just forward from its 1977 enactment.

Background

Anzaldi's Jan. 22 ruling, in N.J. Department of Environmental Protection v. Exxon Mobil Corp., Unn-L-3026-04, is important because the case is a vehicle for setting the legal parameters of the state's six-year-old Natural Resource Damages (NRD) initiative. The initiative is aimed at wresting huge sums from polluters to compensate for the public's loss of use of properties, not just for remediation in accordance with cleanup standards.

The state has said it does not want money damages, but wants expenditures by defendants to return the target properties to as near a pristine state as possible or for the purchase of lands elsewhere to compensate for the losses of the polluted acreage for recreation and other public pursuits. Exxon Mobil says it has spent millions of dollars since 1991 on a state-supervised remediation under a consent order covering the two facilities, interconnected oil and petrochemical operations from 1909 to 1972.

Under a 1990 amendment to the Spill Act, polluters can be held responsible for the costs of repairing, restoring or replacing property “from the time the property is damaged.” Exxon Mobil argued that the responsibility applied only to remediation like the measures it has taken at the sites.

However, Anzaldi ruled that the statute's language should be read broadly to encompass the Department of Environmental Protection's power to assess damages caused to natural resources and to require compensation for their loss of use by the public. He did rule in Exxon Mobil's favor that common law claims for damages, such as claims for nuisance and trespass, were subject to statutes of limitation.

Environmental Statutes

Under nine environmental statutes such as the Spill Act, there are no statutes of limitations on suits to compel remediation, and the state argued such liberality should be applied to the common law claims in the complaint. Anzaldi, however, agreed with Exxon that there was no authority to extend the wide-ranging expansion of the statute of limitations to common law claims.

Even so, Richard Engel, the deputy attorney general supervising NRD litigation, says, “essentially everything we are looking for in the case we believe we can get through the Spill Act, so the fact that we won on the Spill Act issue is the most important thing.”

Exxon Mobil argued that there were numerous reported spills and historic discharges well before 1992, giving the state ample notice. But Engel says even the judge's ruling on the law of the statute of limitations question does not rule out the possibility that common law claims could survive.

Fee-Shifting in Doubt

The state has hired outside contingency lawyers to pursue Exxon Mobil and other defendants in the damages cases. The state wants defendants to pay the firms' fees, but an element of fee switching appears to be in jeopardy under Anzaldi's ruling, though lawyers in and out of the case disagreed about the effect.

Anzaldi ruled that Appellate Division decisions and the spirit and purpose of the Spill Act “should allow for fees to be given for all legal costs associated with remediation and restoration of the site but not for loss of or loss of use of natural resources.”

Engel says it is correct that Anzaldi ruled that fee switching is not permissible when the damages are expressed in monetary terms. However, he says the goal of the loss-of-use claims is not to collect money damages but to effect primary restoration of the properties or the acquisition of new lands to replace the loss of use of the polluted ones. He does not think the ruling will affect the state's ability to find contingency lawyers to take cases like the one against Exxon Mobil.

A lawyer outside the case, Edward McTiernan, leader of the environmental law team at Gibbons in Newark, says the ruling on legal fees is a blow to the state's Natural Resources Damages program. “The initiative has, in some part, been about going to outside lawyers to try and do things the state wouldn't or couldn't do,” he says. “In these relatively tight resource times, there are cases that might be marginal and without legal fees they may not be brought.”

In the meantime, the company is trying to slice away more of the state's case. It has two partial summary judgment motions pending, the first seeking to bar the state from recovering damages relating to the vast majority of the sites. The natural resource damage provisions of the Spill Act are limited to lands encompassed within the so-called public trust doctrine such as waterways and certain shore areas, the company says.

The claim for damages for pollution of privately held sites “raises significant constitutional issues, including issues that implicate the due process and takings clauses of the U.S. Constitution,” the company says.

The company also is seeking a ruling that Spill Act liability for discharge of hazardous substances does not extend to liability for physical modifications of property, such as the construction of refinery buildings, “especially given that the development and expansion of the refinery was encouraged by the state and some of the modifications were specifically permitted.”

Henry Gottlieb is a senior writer for the New Jersey Law Journal, an Incisive Media sister publication of this newsletter in which this article first appeared.

New Jersey can pursue Exxon Mobil for natural resource damage done by two refineries prior to enactment of the state's Spill Compensation and Control Act, a Union County judge has ruled. Ruling on the company's attempt to limit its exposure to damages for pollution at the 288-acre Bayonne works and the 1,800-acre Bayway Refinery in Linden, Superior Court Judge Ross Anzaldi held the Spill Act can be applied retroactively, not just forward from its 1977 enactment.

Background

Anzaldi's Jan. 22 ruling, in N.J. Department of Environmental Protection v. Exxon Mobil Corp., Unn-L-3026-04, is important because the case is a vehicle for setting the legal parameters of the state's six-year-old Natural Resource Damages (NRD) initiative. The initiative is aimed at wresting huge sums from polluters to compensate for the public's loss of use of properties, not just for remediation in accordance with cleanup standards.

The state has said it does not want money damages, but wants expenditures by defendants to return the target properties to as near a pristine state as possible or for the purchase of lands elsewhere to compensate for the losses of the polluted acreage for recreation and other public pursuits. Exxon Mobil says it has spent millions of dollars since 1991 on a state-supervised remediation under a consent order covering the two facilities, interconnected oil and petrochemical operations from 1909 to 1972.

Under a 1990 amendment to the Spill Act, polluters can be held responsible for the costs of repairing, restoring or replacing property “from the time the property is damaged.” Exxon Mobil argued that the responsibility applied only to remediation like the measures it has taken at the sites.

However, Anzaldi ruled that the statute's language should be read broadly to encompass the Department of Environmental Protection's power to assess damages caused to natural resources and to require compensation for their loss of use by the public. He did rule in Exxon Mobil's favor that common law claims for damages, such as claims for nuisance and trespass, were subject to statutes of limitation.

Environmental Statutes

Under nine environmental statutes such as the Spill Act, there are no statutes of limitations on suits to compel remediation, and the state argued such liberality should be applied to the common law claims in the complaint. Anzaldi, however, agreed with Exxon that there was no authority to extend the wide-ranging expansion of the statute of limitations to common law claims.

Even so, Richard Engel, the deputy attorney general supervising NRD litigation, says, “essentially everything we are looking for in the case we believe we can get through the Spill Act, so the fact that we won on the Spill Act issue is the most important thing.”

Exxon Mobil argued that there were numerous reported spills and historic discharges well before 1992, giving the state ample notice. But Engel says even the judge's ruling on the law of the statute of limitations question does not rule out the possibility that common law claims could survive.

Fee-Shifting in Doubt

The state has hired outside contingency lawyers to pursue Exxon Mobil and other defendants in the damages cases. The state wants defendants to pay the firms' fees, but an element of fee switching appears to be in jeopardy under Anzaldi's ruling, though lawyers in and out of the case disagreed about the effect.

Anzaldi ruled that Appellate Division decisions and the spirit and purpose of the Spill Act “should allow for fees to be given for all legal costs associated with remediation and restoration of the site but not for loss of or loss of use of natural resources.”

Engel says it is correct that Anzaldi ruled that fee switching is not permissible when the damages are expressed in monetary terms. However, he says the goal of the loss-of-use claims is not to collect money damages but to effect primary restoration of the properties or the acquisition of new lands to replace the loss of use of the polluted ones. He does not think the ruling will affect the state's ability to find contingency lawyers to take cases like the one against Exxon Mobil.

A lawyer outside the case, Edward McTiernan, leader of the environmental law team at Gibbons in Newark, says the ruling on legal fees is a blow to the state's Natural Resources Damages program. “The initiative has, in some part, been about going to outside lawyers to try and do things the state wouldn't or couldn't do,” he says. “In these relatively tight resource times, there are cases that might be marginal and without legal fees they may not be brought.”

In the meantime, the company is trying to slice away more of the state's case. It has two partial summary judgment motions pending, the first seeking to bar the state from recovering damages relating to the vast majority of the sites. The natural resource damage provisions of the Spill Act are limited to lands encompassed within the so-called public trust doctrine such as waterways and certain shore areas, the company says.

The claim for damages for pollution of privately held sites “raises significant constitutional issues, including issues that implicate the due process and takings clauses of the U.S. Constitution,” the company says.

The company also is seeking a ruling that Spill Act liability for discharge of hazardous substances does not extend to liability for physical modifications of property, such as the construction of refinery buildings, “especially given that the development and expansion of the refinery was encouraged by the state and some of the modifications were specifically permitted.”

Henry Gottlieb is a senior writer for the New Jersey Law Journal, an Incisive Media sister publication of this newsletter in which this article first appeared.