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From Products Liability Law Daily, February 20, 2014

Primary restoration costs not recoverable absent evidence of necessity and implementation

By Michael J. Bartholomew J.D. LL.M.

An oil company was not required to pay costs incident to a study of whether a site might be restored to its pre-contamination condition absent evidence that such a restoration was being implemented or that restoration was necessary, a New York federal court ruled (In re: MTBE Products Liability Litigation (New Jersey Dep't of Envtl. Prot. v. Atlantic Richfield Co.), February 18, 2014, Scheindlin, S.).

Background. This case was part of multi-district litigation relating to contamination of groundwater from the use of the gasoline additive methyl tertiary butyl ether (MTBE) and tertiary butyl alcohol, a product formed by the breakdown of MTBE in water. Here, the New Jersey Department of Environmental Protection (NJDEP) and other state agencies, alleged that Shell Oil Company’s and others’ use and handling of MTBE contaminated groundwater surrounding Ridgewood, New Jersey (Ridgewood Site). In 1987, MTBE was detected in groundwater at the Ridgewood Site. Since that time, Shell worked to remediate the contamination at the direction of the NJDEP.

In August 2000, the NJDEP issued an Administrative Order and Notice of Civil Administrative Penalty Assessment against Shell for the Ridgewood Site. In 2007, Shell and the NJDEP entered into an Administrative Consent Order (ACO), settling the NJDEP's claims for alleged violations in remediation at the Ridgewood Site. The ACO provided that a remedial action work plan would be designed and implemented according to NJDEP standards and subject to NJDEP review. The ACO provided that the scope of the remediation required would include all contaminants at the site, and all contaminants which were or had emanated from the site, and did not preclude the NJDEP from seeking further relief for "natural resource damages relating to the Site, including but not limited to, the cost of restoration and replacement, where practicable, of any natural resource damaged or destroyed ….”

Site remediation. To remediate the Ridgewood Site, Shell employed two systems, both of which ceased operation in 2009 with the approval of the NJDEP. The NJDEP reiterated that approval in 2010. That same year, the Site's Licensed Site Remediation Professional (LSRP), Julian Davies, took control of the remediation. Pursuant to applicable New Jersey law, the party responsible for remediation of a contaminated site paid for an independent LSRP, who was authorized "to conduct investigations, approve remedial alternatives, and determine when remedial action was complete.” In 2012, Davies approved the permanent shutdown and removal of both systems. Davies, bound by NJDEP standards, approved Monitored Natural Attenuation as the remedial strategy at the site.

Expert testimony. NJDEP’s expert offered the opinion that it was necessary to add monitoring wells at the site, and that remediation to date may have addressed effectively on-site water contamination, but that it had not stopped effectively the "off-site migration of groundwater contamination.” However, the expert did not disagree with the approval to shutdown the systems at the site, but asserted that he could not determine whether groundwater at the site had been remediated to a "risked-based" contamination level because, in his opinion, the extent of the contamination had not been delineated sufficiently. His  analysis suggested that contamination had spread beyond the ability of the monitoring wells to measure. In addition, without providing a reason for the necessity of primary restoration, he asserted that the necessary first step in restoring the groundwater at the site to its pre-discharge condition, was to delineate the extent of contamination, and that "multiple data gaps" had to be addressed to "assist in the selection, design, and implementation of a restoration approach, or support a determination that no further restoration is needed." The increased monitoring measures he recommended—eighteen new wells and five years of additional monitoring—cost approximately $1.3 million.

Thereafter, Shell challenged the expert opinion by seeking a judgment that NJDEP had not presented sufficient evidence from which a reasonable jury could find Shell liable for primary restoration costs at the Ridgewood Site.

Decision. In considering whether NJDEP was entitled under state law to seek costs incidental to primary restoration where there was no evidence that restorative measures were necessary or would be implemented, the court explained that while Shell had to prove it was entitled to judgment, NJDEP was not relieved of its burden to prove it was entitled to primary restoration damages at the Ridgewood Site. Disagreeing with NJDEP’s assertion that it should be able to recover primary restoration costs because Shell had not restored the groundwater surrounding the Ridgewood Site to its pre-discharge condition, the court observed that NJDEP was not seeking to recover the costs of primary restoration, but rather wanted Shell to pay for more investigation, basing their claims on an expert report which stated that further investigation might reveal the necessity of additional remediation or for primary restoration—or might reveal nothing.

Therefore, the court concluded that NJDEP had not presented evidence from which a reasonable jury could conclude that Shell was liable for primary restoration costs at the Ridgewood Site, and granted Shell’s motion for judgment on the issue.

The case number is  08 Civ. 312 (SAS).

Attorneys: John J. Hoffman (Office of the Attorney General of the State of New Jersey) for the New Jersey Department of Environmental Protection. Richard E. Wallace, Jr., for Shell Oil Company

Companies: Shell Oil Company

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