ISRA - Still Creating Challenges in NJ Real Estate Transactions
It is common for a business to be subject to New Jersey Department of Environmental Protection's (NJDEP) Industrial Site Recovery Act (ISRA) regulation and not be aware of their responsibility. As buyer and seller negotiate the transaction, due diligence and financial activities are forced to meet tight closing deadlines. This causes some transactions to stall due to last minute findings to comply with ISRA requirements. Provided below is a summary of key factors of ISRA to help assist you in identifying these issues sooner than later.
A business is subject if it is considered an "Industrial Establishment" which means it must:
- Have a North American Industry Classification System (NAICS) code that is subject to ISRA, as listed in Appendix C of the ISRA regulations; and
- Have been engaged in operations at the site on or after December 31, 1983; and
- Involve the generation, manufacture, refining, transportation, treatment, storage, handling, or disposal of hazardous substances or hazardous wastes, i.e., were hazardous substances or hazardous wastes used at the site.
To determine if a business has an applicable NAICS number, one can visit http://www.census.gov/eos/www/naics/ to search by operations or known code numbers.
Triggers, Steps & Exemptions
If a certain business transaction occurs including the sale of property, sale of business or the cessation of operations, the business must complete the following steps:
- Notify the NJDEP within five days of any triggering event by filing a General Information Notice (GIN).
- Conduct a Preliminary Assessment (PA) of the site to identify potential Areas of Concern (AOCs). This typically takes around 30-45 days to complete and is performed by an environmental consulting firm.
- If the PA finds AOCs that warrant investigation, then a Site Investigation (SI) must be performed (i.e., sampling) to determine if any contaminants are present above any applicable remediation standards.
- If there is contamination present, a Remedial Investigation (RI) must be performed to determine the nature and extent of contamination so that a suitable remedial action can be implemented.
While certain businesses can be classified as an Industrial Establishment and subject to an ISRA triggering event, a business may qualify for one of the following exemptions:
- De minimis quantity: This is for sites that have or have used only small amounts (as defined by ISRA) of hazardous substances and/or hazardous wastes at any given time during the operation.
- Remediation in Progress Waiver: This is for sites already being investigated by a prior owner or operator pursuant to ISRA.
- Regulated Underground Storage Tank (UST) Waiver: This exemption applies to a UST that is either in compliance with current regulations or, if it has had a discharge, is in compliance with the required cleanup activities.
Often Overlooked Factors to Consider
- The NAICS code applicable to ISRA is from 2002 and not the most recent published codes from 2012.
- For a site which is leased to a single tenant, the industrial establishment includes all of the block(s) and lot(s) upon which the business is conducted. For properties with two or more leased spaces, the industrial establishment includes the leasehold of the ISRA subject tenant, as well as any areas that are utilized by that business. Implications include the assessment of non-operational related discharges including site wide historic fill and former agriculture.
- GINs need to be submitted within 5 days of an event which include making a specific transaction public, not just the proposed date of the transaction.
- Historic ISRA operations (no longer operational) do not need to be investigated if the property has been sold more than one time since triggering event.