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When Polluters Pay States for Their Damage, Who Should Benefit?

Poised for settlement money from gas companies, New Jersey voters will decide next month whether it should be spent on the environment -- or balancing the state budget.

The Passaic River in Paterson, N.J.
The Passaic River in Paterson, N.J.
(AP/Larry Scucci)
This story is part of our elections coverage. Read our list of the most important races and ballot measures to watch here.

New Jersey is likely on the cusp of receiving hundreds of millions of dollars from companies settling pollution lawsuits. The largest of those is a proposed $225 million settlement with ExxonMobil for pollution near two refineries in the northern part of the state. Sunoco, BP and Shell have also settled with the state for pollution near gas stations. Together, those settlements could bring in another $165 million.

Next month, voters there will determine where the bulk of that money -- and all future pollution payouts -- will be spent: on environmental projects or for general state operations.

Environmentalists are pushing a constitutional amendment that would require the legal payouts to go toward projects like building parks, removing dams or adding bike trails. If voters reject the amendment, all but $50 million would go into the state’s main checking account to pay for things like health insurance, prisons or schools.

Ed Potosnak, executive director of the New Jersey League of Conservation Voters, one of the groups behind the ballot measure, says it would effectively create a “lockbox” for environmental uses.

“The administration [of Gov. Chris Christie] has been raiding those funds and diverting them away from polluted communities, away from environmental restoration projects that enhance the neighborhoods, that help restore the habitats, that [allow for] recreational usage of waterways available to residents,” he says. “Instead, that money has gone to general funds to make up for budget shortfalls and bad fiscal decisions."

But the Christie administration isn’t the only culprit, says Potosnak. Other New Jersey governors have used similar tactics, and the Democratic-controlled state legislature has allowed Christie to veto restrictions on the use of environmental settlements.

Even though Potosnak blames lawmakers for many of the diversions, he notes that they were the ones who put the constitutional amendment on the ballot.

“Interestingly, 70 percent of the legislature voted to put the question to the public so that they could stop themselves and the administration from doing this. They’re asking for help,” he says. “In the face of Democrats and Republicans coming together and stealing money from communities that were polluted, this [amendment] makes a lot of sense.”

The amendment invokes a debate that's happening around the country. As governments become more transparent about how tax dollars and other sources of money are spent, lawmakers and taxpayers are pushing for them to be used more wisely or fairly. Earlier this month, for example, Louisiana voters approved a ballot measure that bans future gas tax revenue from funding transportation employee salaries.

Since the 1980s, New Jersey has been pushing for polluters to clean up industrial waste, particularly in the Passaic River watershed near New York City. One of the ways it’s done that is by using a state law nicknamed the “Spill Act,” which not only requires companies to clean up the pollution they caused but also to pay to fix the damage caused by that pollution.

Regarding the Passaic River alone, New Jersey has recovered more than $355 million in three rounds of settlements. That money has been designated, among other things, for restoring the waterfront in Newark and building a marina around the Arthur Kill, the strait of water that separates New York's Staten Island from northern New Jersey.

Debbie Mans, the executive director of NY/NJ Baykeeper, an environmental group, says those types of projects are especially important in poor neighborhoods that have long had to deal with contaminated waterways and a lack of parks and other outdoor recreation areas because of the pollution.

“It makes sense that the money that’s collected for these impacts go back into those communities to make them healthier, to provide more open space and to provide outdoor recreational opportunities. That’s what this whole program is about,” she says. “Allowing it to be diverted to the general fund, where it could go anywhere for any reason undercuts the purpose of the program and does a huge disservice to these communities."

There is no organized opposition to the constitutional amendment.

Meanwhile, environmental groups are still contesting the 2015 Exxon settlement, which falls far short of the $8.9 billion in damages that the state had originally sought. Environmentalists charged that Christie’s office pushed for the deal for political reasons. Although the Christie administration has settled many large natural resource damage cases from previous administrations, it has not launched any of its own.  

This story is part of our elections coverage. Read our list of the most important races and ballot measures to watch here.

Dan is Governing’s transportation and infrastructure reporter.
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