In the wake of increased damage from storms as well as growing recognition of the environmental benefits of floodplains, states are increasingly limiting development in areas that are prone to flooding during storms. This regulatory trend sometimes conflicts with state and federal historic preservation programs where historic building may be located in areas that are now considered flood hazard areas.
An example of the tension between these two regulatory initiatives was Asdal Builders, Inc v NJDEP, 2012 N.J. Super. LEXIS 108 (App. Div. 06/25/12). Note that this cite is to the published opinion. There was also an unreported decision containing some additional rulings that were omitted from the reported opinion. The unpublished ruling is available at 2012 N.J. Super. Unpub. LEXIS 1487 (App. Div. 06/25/12).
In this case, the appellants purchased 24-acres of former farmland that was located in a designated flood hazard area. Farming activities had ceased around 2000 and the building structures had fallen into disrepair. In addition, property was littered with a variety of debris and solid waste, including 14 tons of tires. Nonetheless, the Historic Preservation Office (HPO) of the New Jersey Department of Environmental Protection (NJDEP) had listed the property on the State Register of Historic Places.
After purchasing the property, the appellants removed the debris, restored the main building to a bed and breakfast that was said to be the first pre-existing, single-family residence that used a Civil War shell to achieved zero energy. The appellants also restored a smaller residential cottage, a barn, and a woodshed while removing a chicken coop, garage, and barn. They constructed a new garage in a different location and erected a stone retaining wall using foundation stones from the removed structures. The appellants also hired a farmer to re-establish the farm. The farmer mowed the existing natural vegetation, and then planted and cultivated orchard grass and hay on each side of a millrace.
Prior to commencing the work, the appellants applied for a Stream Encroachment Jurisdiction Determination (SEJD) from the NJDEP to replace the property’s septic system. The NJDEP informed the plaintiffs that a Stream Encroachment Permit (SEP) was not required based on the drawings that showed the proposed system would not require placement of any fill above the existing grades. Meanwhile, the local building department issued construction permits for the proposed renovation. The planning board approved the development, finding it complied with the local Flood Damage Prevention Ordinance and certificates of occupancy for the two residential structures and a certificate of approval for the garage were issued.
In May 2004, the NJDEP issued a notice of violation (NOV) advising the appellants that a SEP was required prior to construct the garage and for additions to the main house since these activities would disturb the floodway. NJDEP also required submittal of a restoration plan along with a SEP application.
Plaintiff then applied for an “after-the-fact” SEP or, alternatively, a hardship waiver. After the SEP application was returned for deficiencies, the NJDEP issued a second NOV for additional violations of the Flood Hazard Area Control Act, (FHACA). NJDEP later rejected the SEP request because the footprint of the existing buildings had been expanded and the septic field was built above existing grades in violation of a SEPJD. Following another site inspection, the NJDEP issued yet a third NOV based on the New Jersey Freshwater Wetlands Protection Act (FWPA) for disturbing vegetation within the transitional freshwater wetlands. NJDEP then recorded its notice of the wetlands violations as an encumbrance to the property’s deed.
The appellants sought administrative review of the SEP denial. While the SEP case was pending, NJDEP issued an Administrative Order and Notice of Civil Administrative Penalty Assessment (Order) imposing a $66,000 penalty for replacing native vegetation with a lawn and hayfield in a transitional wetlands area. NJDEP then issued a second administrative order seeking enhanced penalties of $100K for ongoing FWPA violations in the wetlands transitional area as well as $75K for new FWPA violations alleged to have been observed during a recent inspection.
During a two-day hearing, the appellants admitted it knew the property was in a flood plain and acknowledged that it had slightly expanded the footprint of the main structure when it had added an enclosed porch. However, the appellants argued that there was actually less net fill on the property because it had removed extensive debris and dilapidated structures from the property, and had reused some of the building material.
The administrative law judge (ALJ) agreed that the total net fill resulting form the activities at the property were “insignificant” and ruled that NJDEP’s denial of the SEP was arbitrary and capricious. The ALJ also dismissed the enhanced penalties under the EEEA since all of the plaintiff’s activities predated the statute. The ALJ also recommended dismissal of the $100K penalty due to the historic value of the structures and the insignificant profits generated by the B&B and farming activities.
The ALJ also ruled that the property was not eligible to be “grandfathered” for the wetlands farming exemption because farming had ceased for more than five years. However, the ALJ reduced the penalty assessment for the transitional FWPA violations to $10K per year of improper farming activities. Appellant was also ordered to reduce the size of its cultivated fields over the course of the next three growing seasons to conform to the boundaries of the wetland transition areas as well as to plant natural wetland transition area vegetation within that area.
NJDEP objected to the ruling and the NJDEP Commissioner issued a decision that modified some of the ALJ’s factual findings and rejected most of the ALJ’s conclusions. The Commissioner said the appellant was not entitled to an after-the-fact SEP because the existing structures had been abandoned and therefore there was no expansion of a pre-existing use. In addition, the Commissioner ruled the retaining wall, driveway, and garage were new structures that increased the prohibited fill in the floodway. He also rejected the ALJ’s finding that the obstructions were insignificant and disagreed with the “net fill” approach, ruling that plaintiff could not offset an increase in the obstruction to flow from one structure with a decrease in obstruction to flow from another. The Commissioner also denied the request for a hardship waiver, holding the appellants’ difficulties were self-created. The Commissioner then partially reinstated the $166K penalties, and said the corporate officer doctrine could be used to impose individual liability against appellants’ principals.
The unreported version of the court opinion addressed the issue of when buildings could be considered abandoned. While the court disagreed with the Commissioner’s findings, this part of the opinion did not appear in the published decision.
The court also found that appellants’ removal of debris and damaged structures, the renovation of the remaining structures and the repositioning existing fill into a stone wall did not cause additional displacement of flood volume but instead created an overall net result that either reduced or insignificantly altered the property’s obstruction to flow. This part of the opinion was in the unpublished decision but omitted from the published ruling.
Likewise, the analysis of the application of the “net fill” finding appeared in the unpublished opinion but was deleted from the published decision. The court had concluded the Commissioner erred when he declined to consider the totality of the site renovations and only examined each individual activity. The court said such a narrow view would violate the Legislature’s intent to preserve and restore pre-existing uses. The court also noted the removal of the debris helped remove the kind of hazards sought to be prevented by the FHACA and provided a public benefit.
In the unpublished portion of the opinion, the court also remanded the denial of the hardship waiver and upheld the Commissioner’s finding that the property was not grandfathered under the farming exemption. The court noted that the NJDEP had adopted its five-year rule based on EPA’s wetlands regulations and found the agency’s interpretation of the enabling statute was rationally based. The court said the property lost the exemption because farming was abandoned for a period greater than five years.
Turning to the issue of individual liability, the court said that persons who violated the FHACA regulations could be subject to penalty and injunctive relief. However, the court said the term “responsible corporate official” was not added to the definition of “person” until the October 3, 2006 amendments to the FHACA regulations. Since the Commissioner sought to impose individual assessment of penalties for violations prior to October 2, 2006, the court vacated this part of the Commissioner’s decision.
The court also rejected the Commissioner’s conclusion that NJDEP could assess enhanced penalties under the EEEA. The NJDEP asserted the renovations to the pre-existing structures that were completed in 2004 constituted “ongoing violations” and were not wholly past violations. However, the court distinguished “ongoing pollution violations” from “continuing violations” under the FHACA. The court held that the presence of renovated buildings on the property did not constitute FHACA “continuing violations”. Finally, the court concluded the Commissioner failed to properly weigh the credibility determinations made by the ALJ and remanded the matter for further review.