In In Re Appeal of the New Jersey Department of Environmental Protection’s September 6, 2022 Denial of Request for Adjudicatory Hearing (A-42-23/089182) (Decided April 7, 2025), the New Jersey Supreme Court held that the Department of Environmental Protection’s (DEP) grant of a waiver suspending certain environmental remediation obligations did not create a constitutionally protected property interest in that waiver.
Facts of the Case
The Industrial Site Recovery Act (ISRA) prohibits the owner of an industrial establishment from transferring ownership until certain conditions are met, unless the owner pursues one of the alternatives that ISRA provides. One of the listed exceptions, N.J.S.A. 13:1K-11.5, provides for an “[a]pplication for closing [or] transfer when remediation is already in progress.” Under that provision, an entity may apply to the DEP for a Remediation in Progress Waiver (RIP Waiver), which allows that entity to proceed with a triggering event (i.e., sale or cessation of operations) without the typical attendant ISRA requirements “if the industrial establishment is already in the process of a remediation.”
To receive a RIP Waiver, an entity must submit evidence “that the property . . . is being remediated by a prior owner or operator” and that a compliant “remediation funding source” (RFS) has been created. In 2006, the corporate predecessor of Clarios, LLC, purchased an industrial site (“the Site”), for which the seller had executed a remediation plan under ISRA and placed funds in trust for future remediation (“the RFS Trust”). In 2007, Clarios ceased operations, triggering its ISRA responsibilities. Clarios, therefore, sought a RIP Waiver. In March 2007, the DEP granted Clarios’s RIP Waiver but expressly reserved the right to enforce Clarios’s ISRA obligations in the future, informing Clarios that the DEP “continues to reserve all rights to pursue appropriate enforcement actions allowable under the law for violations of ISRA.”
In August 2011, Clarios sold the Site. In 2016, the purchaser of the Site filed for bankruptcy. In July 2021, the purchaser certified that the estimated cost to complete remediation was $563,000 but that the RFS Trust was fully depleted. The purchaser thereafter also missed its February 2022 deadline for completing remediation of the Site. In April 2022, the DEP rescinded Clarios’s RIP Waiver because remediation of the Site was no longer in progress, the RFS Trust was depleted, and the Site was out of compliance. Clarios requested an adjudicatory hearing before the DEP, arguing that the DEP’s rescission of the RIP Waiver without notice or an opportunity to be heard violated its due process rights. The DEP denied the request, stating that rescission of a RIP Waiver does not entitle Clarios to request an adjudicatory hearing pursuant to N.J.A.C. 7:26C-9.10(a) and that rescission does not constitute a contested case requiring a hearing under the Administrative Procedure Act. Clarios appealed that decision.
The Appellate Division ruled in favor of the DEP, holding that Clarios did not have a protected property interest in the RIP Waiver.
NJ Supreme Court’s Decision
The New Jersey Supreme Court affirmed. It held that the DEP’s initial grant of the waiver did not create a property interest in the continued suspension of Clarios’s remediation obligations. According to the Court, neither the controlling statutes and regulations nor a mutually explicit understanding between the parties provided an entitlement to the indefinite continuance of the waiver; to the contrary, the governing laws and agency materials all anticipate the DEP’s ability to enforce remediation obligations in the future.
In reaching its decision, the New Jersey Supreme Court emphasized that a protected property interest requires a “legitimate claim of entitlement,” which may arise from “statutes, regulations, nor a mutually explicit understanding.” It went on to explain that an express statutory or regulatory grant is the clearest and strongest proof of an entitlement.
According to the Court, one indication that a statute or regulation creates a protected property interest is through limitations placed on agency decision-making with respect to an alleged benefit. In contrast, “[i]f the decisionmaker is not ‘required to base its decisions on objective and defined criteria,’ but instead ‘can deny the requested relief for any constitutionally permissible reason or for no reason at all,’ the State has not created a constitutionally protected” interest.
The New Jersey Supreme Court next explained that when an entitlement is not granted and secured through explicit language or limitations on discretion, it may be derived from mutually explicit understandings. However, for an “understanding” to give rise to a property interest, the party asserting an entitlement must establish that both parties mutually recognized the existence of an entitlement. When an agency has broad discretion to grant, deny, or remove a purported benefit, there is also not likely to be a mutually explicit understanding of an entitlement.
Applying these principles to the case, the New Jersey Supreme Court concluded that there was no such indication of an express statutory grant of entitlement in the indefinite continuation of the RIP Waiver at the time of rescission. In support, the Court noted that ISRA provides no guidance on how the DEP should exercise its discretion in enforcing remediation obligations once a property falls out of compliance. Additionally, ISRA does not guarantee Clarios continued viability of the RIP Waiver, regardless of the Site’s compliance status. “Nor do we find any indication of such an entitlement in ISRA’s implementing regulations,” Justice Hoffman wrote. “To the contrary, ISRA’s implementing regulations expressly state that the DEP retains discretionary authority to rescind a RIP Waiver.”
The New Jersey Supreme Court further found that Clarios failed to demonstrate that an extra-statutory or extra-regulatory understanding existed that would support its claim of entitlement. In support, the Court noted that that an “understanding” capable of establishing a property interest cannot exist when, as here, “the government has ample discretion” to deny or withdraw the benefit in question. “[W]hen site remediation is no longer in progress, the DEP’s discretion regarding RIP Waiver rescission is unfettered, countering any argument that a lack of discretion created a mutually explicit understanding that Clarios was entitled to the continuation of the RIP Waiver when the Site was no longer compliant with ISRA,” Justice Hoffman wrote.