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VOL. CLXXV NO. 10 INDEX 965 MARCH 8, 2004 ESTABLISHED 1878

This article is reprinted with permission from the MARCH 8, 2004 issue of the New Jersey Law Journal. 2004 ALM Properties, Inc. Further duplication without permission is prohibited. All rights reserved.

Real EstateTitle Insurance

By Richard J. Hoff Jr.

The Department of Environmental

Protection has finally begun to

recognize that through strict polic-

ing and review of those entities that

provide water, it can effectuate a pow-

erful chokehold on development within

New Jersey. In fact, as recently as Dec.

2003, DEP Commissioner Bradley

Campbell stated that there are approxi-

mately 20 water purveyors statewide

that have been determined by the DEP

to have no additional water resources to

supply.

While much attention has been

paid to Gov. James McGreeveys

promise of broad and sweeping legisla-

tive efforts to prevent unwanted devel-

opment within New Jerseys suburbs,

the reality is that such legislation has

not been forthcoming. However, such a

short fall in legislative initiativesshould not be construed as an indica-

tion that the administration has given

up its assault on what it has termed

sprawl, or what most of us know as

suburban, residential development.

Quite to the contrary, the adminis-

tration and the DEP recognize that

developers in New Jersey require

resources beyond the simple procure-

ment of land use approvals to proceed

with construction. While many of those

resources are not within the ambit of

DEP jurisdiction, some vital ones are

squarely within the DEPs regulatory

control. Specifically, the DEP controls

the states water resources. Without

water there can be no new develop-

ment.

Moreover, the claimed lack of

water is not limited to future develop-

ment within the affected municipali-

ties, but also to projects that, in some

instances, have already commenced

construction. In certain instances, the

DEPs declarations as to lack of avail-

able water for water companies and

municipalities come suddenly to both

landowners and water purveyors. The

consequences have proved devastating

for developers, their workforces andbuyers awaiting finished products.

However, municipalities that con-

tinue to plead for the states aid in turn-

ing back unwanted housing welcome

the DEPs new stance on water alloca-

tion as an addition to the ever-growing

regulatory arsenal in use to prevent

such additional housing in the suburbs

Is New Jersey Really

Running Out of Water?

Of course, the obvious question in

light of these separate water moratori-

ums is whether or not the state is truly

running out of available water suppliesIn particular, are New Jerseys ground-

water resources (i.e., aquifers) safely

sustaining present levels of develop-

ment? Could those same ground water

resources sustain additional develop

ment?

Not surprisingly, the state has

taken the position that restrictions on

water usage, including moratoriums

are necessary to preserve groundwater

resources. However, the rationale for

that determination seems to be that anyadditional water withdrawn from the

states groundwater resources would

create adverse ecological and water

supply consequences. In short, more

water withdrawn is too much water

withdrawn.

While this reasoning seems to

serve the apparent policy objective to

stop additional, unwanted develop

ment, it fails to address the real ques-

tion: Can New Jerseys groundwater

resources, from an ecologic and water

supply perspective, safely serve addi-tional development? That question

an issue of science and hydrology is

one that the DEP has yet to answer.

If recent experience is any indica-

tion, it seems that protecting New

Jerseys groundwater resources is but a

secondary motivation for the states

and the DEPs recent actions to scale

back the allocation of water supplies

As the rise and fall of Executive Order

Some believe water resource managementis being used as a tool to stifle development

DEP Commences Effort To Limit

Water Resources Across the State

Hoff is an associate in the real estate, land use, construction and environmental law

practice group at Flaster/Greenberg of Cherry Hill.

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No. 32, and the DEPs accompanying

Administrative Order No. 2002-22,

demonstrate, ecological and water sup-

ply concerns that may serve as a pre-

amble for the states regulatory action

are little more than a thinly veiled pre-

text for yet another measure to stop

residential expansion in New Jerseyssuburban and rural areas.

If it were otherwise, then the mora-

torium that befell three municipalities

in the summer of 2002, following the

enactment of Executive Order No. 32

would have been applied even-handed-

ly across a number of municipalities in

Atlantic County. However, an impar-

tial path toward ecological protection

was not taken.

New Growth Control Strategy

Perhaps the most prominent effort

by the current administration to use

water resources as a growth control

measure was the Sept. 22, 2002,

issuance of these orders.

In short, Executive Order No. 32

prohibited two water companies from

distributing additional water in the

municipalities of Egg Harbor

Township, Galloway Township and

Hamilton Township in Atlantic County.

Each water purveyor obtained their

respective water supplies by drilling

wells into a groundwater source known

as the Kirkwood-Cohansey aquifer

system.

The supposed rationale behind the

water moratorium was that the two

water purveyors serving the three

municipalities in question were at or

near their water distribution limits and,

in the assessment of the state, any fur-

ther water diversions by those purvey-

ors would create adverse ecological

and water supply consequences to theKirkwood-Cohansey aquifer system.

From the date of the order through

Dec. 2002, the two water purveyors

were prohibited from providing water

to any additional developments

even those developments to which the

DEP had previously granted the neces-

sary approvals.

Quite literally, on Sept. 22, 2002,

construction crews walked off active

job sites, not to return for months.

While the supposed basis for the mora-

torium was the protection of the eco-

logically threatened aquifer, the reality

is that Order No. 32 was the unveiling

of the states bold strategy of growth

control by means of stringent water

resource regulation.

The Kirkwood-Cohansey aquifer

system contains an estimated 17 tril-lion gallons of water and serves as the

primary water source for approximate-

ly 80 municipalities across five New

Jersey counties. In order to provide

water service to the Townships of Egg

Harbor, Galloway and Hamilton, the

wells that draw from the Kirkwood-

Cohansey aquifer system are located

next to the very same wells that serve

other municipalities, including Atlantic

City.

In fact, most of the wells that pro-

vide water service to Atlantic City arelocated in Egg Harbor Township. The

irony of Order No. 32 is that while it

prohibited the provision of additional

water service to three municipalities, it

did nothing to prevent or curtail other

water purveyors from increasing their

withdrawal of water from the same

Kirkwood-Cohansey aquifer system to

meet the development demands in

municipalities other than the

Townships of Egg Harbor, Galloway

and Hamilton. The order contained no

mechanism to preserve New Jerseys

groundwater; it simply prohibited

ground water distribution to areas

experiencing residential development.

Following a lawsuit by the

Builders League of South Jersey, the

moratorium created by the order was

lifted. However, the DEPs use of

water resource management as a tool to

stifle development persists.

Unfortunately for developers, avoiding

hurdles imposed by the DEPs ever-

increasing declarations that water pur-veyors have depleted their respective

water resources is proving to be a

daunting and time-consuming task.

Most difficult and frustrating is

that the DEP has not approved and

adopted any new regulations that make

the availability of water supply more

possible. Rather, the DEP is enforcing,

with fervor, long-standing procedures

that when combined with a review

process approaching inertia, have led

to a system in which water purveyors

have been prevented from supplement-

ing their available water supplies

quickly enough to match the pace of

new development.

While determining how and why

these moratoriums have occurred is

one challenge, resolving them is a

much more difficult task.

Water Service Basics

Key to understanding how the

DEP has managed to transform water

supply regulations into a measure of

growth control is an understanding of

how water is distributed throughout the

state.

Municipal corporations or private

utility companies receive franchises

that allow them to provide water ser-

vice to designated areas. When a prop-erty owner proposes to construct a pro-

ject requiring water usage, the property

owner must submit a water application

to the designated water purveyor. The

water purveyor must review the appli-

cation, in part, to confirm that the pur-

veyor has a sufficient water supply to

meet the water demands posed by the

construction outlined in the water

application.

If the water purveyor determines

that it has an adequate supply, the

water purveyor will endorse the appli-

cation and submit it to the DEP for

approval. If the DEP is satisfied that an

available water supply exists for the

water purveyor submitting the water

application, the DEP should approve

the water application.

The volume of water that each of

New Jerseys water purveyors may dis-

tribute to its franchised customers is

controlled through the issuance of

Water Allocation Permits. The receipt

review and issuance of WaterAllocation Permits are handled by cer-

tain divisions within the DEP. Each

permit issued to a water purveyor sets

forth the maximum amount of water

allowable for distribution on a monthly

and yearly basis. A water purveyor

may not exceed its monthly or yearly

limits.

In theory, when a water purveyor

recognizes that demand within its fran-

chised area is increasing and at some

point in the foreseeable future will out-

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grow the limits of its permit, the water

purveyor must develop a plan for meet-

ing that increasing demand. Depending

on the pace and speed of new develop-

ments requiring water supplies, a water

purveyor can seek to increase the lim-

its of its permit by either increasing the

potential water yield of its presentwater sources or by seeking new water

sources.

By way of example, a water pur-

veyor only seeking a minimal addition

to the limits of its permit may choose

to simply update or improve its current

water supply system. Measures to

accomplish such efficiency increases

could include a well rehabilitation pro-

gram or a water system maintenance

program that, quite literally, checks the

existing water lines for leaks.

Although sometimes overlooked, aleak or other mechanical problem with-

in a water line pumping hundreds of

thousands, or even millions of gallons

of water per day, can result in a sizable

loss of water resources. While

improvements or upgrades to a water

system may allow a water purveyor

some relief in meeting increasing

demand, the more typical case is one in

which the water purveyor must secure

additional water from existing sources

or develop an entirely new source of

water.

In most instances, when a water

purveyor faces rising levels of devel-

opment, it must develop a future water

strategy that includes the additions of

new water sources. In areas where the

majority or all of the water supply

comes from groundwater, as was the

case with Order No. 32, the conven-

tional means of increasing the limits of

a permit is to drill a new well for place-

ment into service.The process of developing, testing

and obtaining approval for a new well

is costly and time consuming. It is

especially time consuming in light of

the pace of regulatory approval. As

many water purveyors have learned

(and others will undoubtedly soon

learn), the pace of that regulatory

review has not matched the pace of the

need for housing.

So slow is that regulatory process

that even prudent water purveyors who

have been diligent in assessing andanticipating their need for expansion

over the years have been unable to

meet increased demand because of the

DEPs inability to efficiently process

the necessary applications.

Whether the delays within the

DEP are a function of policy or

unavailable resources, many applica-

tions submitted in conjunction with

water resources can be subjected to

internal DEP processing and reviews

that sometimes take years. Whether it

is a simple water application submit-

ted by a property for water service to a

particular project or a complex appli-

cation for an increase in the limits of a

water purveyors permit, the DEP

rarely acts in an expeditious manner.

Awaiting Regulatory Overhaul

While both current and prior

administrations have recognized that

New Jerseys population will continueto grow, the state has failed to imple-

ment an efficient regulatory process for

allocating the states water resources in

order to meet the housing need posed

by that population growth. This lack of

a satisfactory process is only further

undermined by the DEPs re-discov-

ered diligence in policing the states

water purveyors.

The result, while perhaps desirable

from the prospective of prohibiting

additional residential development, is

inconsistent with the recognized needto address a state population that con-

tinues to grow. The challenge for the

state and the DEP will be to implement

a system of allocating the states water

resources in a safe, efficient and timely

manner. Whether the state and the DEP

have the will to undertake the neces-

sary, regulatory overhaul remains to be

seen.

Benjamin Franklin once observed

that, When the wells dry we know the

worth of water. In recent years, the

DEP and developers have dis-

covered that the worth of water is more

than even the great statesman could

have envisioned.

175 N.J.L.J. 965 NEW JERSEY LAW JOURNAL, MARCH 8, 2004 3