March 31, 2011 | Comments Off
Posted by Marc Policastro
The Industrial Site Recover Act (ISRA) is not monumentally affected by the LSRP Program. However, the means utilized to work the ISRA maze and close transactions have been altered and the rules of engagement for remediation have changed for sure. When confronted with a site qualifying as an “industrial establishment” in NJ, under the new LSRP program there are three primary ways to close a deal when environmental contamination exists: (1) hire an environmental consultant to investigate and remediate the site, to certify that the property is clean and to also issue a “Response Action Outcome” (RAO) (2) file a “Remediation Certificate”, which entitles the responsible party to close the deal first, and then cleanup after closing or (3) file a “Remedial Action Workplan” (RAW) with NJDEP.
The RAO route is basic. The professional must investigate, and then remediate in accordance with applicable technical regulations. Under the ISRA statute, the RAO qualifies as an “authorization letter”, which by law permits a closing to occur. “Closing” may include, for example, a sale of property, sale of assets, sale of a controlling interest in stock or a cessation of operations.
Remediation Certificates replace “remediation agreements” under the old ISRA regulations. Under the new regulations the consultant prepares and files the Certificate. Under the prior regulations, NJDEP would approve the form of the remediation agreement. DEP approval is not required when a Remediation Certificate is in play. Remediation Funding Sources (collateral securing the cleanup obligation) are required. Under the new procedures, the LSRP must still provide an estimate for the cost of the remediation. In practice, NJDEP has been accepting the minimum $100,000 for the funding source. Under the new law, NJDEP will once again accept a letter of credit as a form of RFS.
Filing of a Remedial Action Workplan may also serve as an “authorization letter” which permits a closing to occur. Here, the State reserves the right to review and approve the Workplan. When utilizing a RAW for clearance to close, a Remediation Funding Source is required.
In addition to these three basic clearance vehicles, DEP continues to entertain “De Minimis Quantity Exemption” applications. In certain cases, approval for closing may be achieved where levels of contamination don’t exceed applicable standards. The process may also be streamlined where there is an existing cleanup underway. In that case, the responsible party may be eligible for a “Remediation in Progress Waiver”. In certain transactions, sellers and purchasers may need one, or several, clearance mechanisms to effectuate closing.