Appellate Court Rules On Liability For Environmental Remediation And Valuation Of Eminent Domain Takings - July 2012

Appellate Division Concludes Condemnation of Former Landfill Is Not Subject To Trust-Escrow Valuation Approach

The Superior Court of New Jersey, Appellate Division, has clarified the state's eminent domain law related to the valuation and remediation of contaminated property in its July 16, 2012 decision in Borough of Paulsboro v. Essex Chemical Corporation, which has been approved for publication.

The Court considered whether property containing a former landfill that had been closed with the approval of the New Jersey Department of Environmental Protection (DEP) could be properly valued under ordinary valuation principles, or if it should instead be subject to the special trust-escrow approach for valuing contaminated property in condemnation established in Housing Auth. v. Suydam Investors, 177 N.J. 2 (2003).

Under the Suydam trust-escrow approach, the property is valued as if remediated, and an escrow in the estimated amount of remediation costs is withheld from the valuation amount deposited into court pending the outcome of a subsequent cost recovery action, or other resolution.

In Essex Chemical, the municipality had acquired by eminent domain the owner's 67 acre tract of land, which included a 17-acre former landfill consisting of a 40-foot high mound of gypsum. The DEP had approved the 1994 landfill closure and the tenant had assumed responsibility for the DEP-required...