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SRRA 2.0 and the Direct Oversight Program – Important Information for Prospective Purchasers
By Natalia P. Teekah, Yin Zhou on October 24, 2019

In a prior blog post we examined recent changes to New Jersey Site Remediation Reform Act ("SRRA") stemming from the passage of Assembly Bill A-5293. This new law, colloquially known as "SRRA 2.0," makes a few important changes to New Jersey's site remediation laws that may impact clients involved in purchase-and-sale or other property transfer transactions.

In this post, we address one specific aspect of SRRA 2.0 that may benefit prospective purchasers of sites subject to the Department of Environmental Protection's ("DEP") Direct Oversight. SRRA 2.0 now makes it clear that Direct Oversight runs with the property, “regardless of who owns the property, and regardless of whether there is a transfer of ownership of the property.” However, other provisions of the statute also have the potential to relieve prospective purchasers from some of the requirements of Direct Oversight, as described in further detail below.

Direct Oversight generally involves a higher level of DEP involvement in site cleanups, and can be triggered when the Person Responsible for Completing the Remediation (“PRCR”) has a history of noncompliance with DEP cleanup laws or has failed to meet certain remediation timeframes. Once a site has been placed into Direct Oversight, the PRCR is subject to more stringent and onerous requirements in cleaning up the site including: (1) DEP review, and approval or denial, of each report submitted; (2) implementing a DEP-selected remedial action; (3) establishing a remediation funding source in the amount needed to complete the remediation; (4) conducting a feasibility study for DEP approval; and (5) complying with a DEP-approved public participation plan.

SRRA 2.0 now provides a clear avenue to ease some of the compliance burdens for prospective purchasers of contaminated properties subject to DEP Direct Oversight.

SRRA 2.0 allows the DEP to modify “any or all” Direct Oversight requirements for a prospective purchaser by entering into an administrative consent order ("ACO"), so that new property owners are not per se subjected to all Direct Oversight requirements as a result of a predecessor owner's non-compliance. The caveat is that the prospective purchaser can have no connection to or responsibility for the discharge. The ACO offers prospective purchasers an opportunity to work out an acceptable arrangement with DEP, and establish certainty with respect to their remediation obligations in advance of taking title.

If you are contemplating purchasing a site with an open or active DEP remediation case, whether the site is potentially subject to Direct Oversight is something that should be assessed as part of your due diligence. If Direct Oversight is an issue, then you should consult with your environmental consultant and your attorney as to how to approach and negotiate an ACO with DEP, since the modification of Direct Oversight requirements remains within DEP’s discretion. With remediation timeframes lapsing for more sites since the passage of SRRA ten years ago, the number of properties subject to Direct Oversight will likely increase. Prospective purchasers of Direct Oversight properties should be aware of these changes to the site remediation program and enter into discussions with DEP as early as feasible to avoid uncertainty and delay in the transaction.

Should you have any questions regarding SRRA 2.0, or site remediation in general, the attorneys of our Environmental Law Department are available to assist you.

The content of this post is for informational purposes only and should not be construed as legal advice or legal opinion. You should consult a lawyer concerning your specific situation and any specific legal question you may have.

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