Phil Murphy administration plans to take $125M from Exxon settlement to balance budget

In a move environmentalists likened to a betrayal, Gov. Phil Murphy plans to divert more than half of a controversial $225 million settlement with Exxon Mobil to balance the proposed state budget while using only $50 million for environmental restoration, an administration official confirmed this week.

Such a diversion was to be stopped under a constitutional amendment that voters overwhelmingly approved in November that dedicates "all moneys" from environmental settlements "to repair, restore, replace, or preserve the State’s natural resources."

But Catherine McCabe, Murphy's nominee for environmental commissioner, said this week that the Exxon settlement may not be subject to the amendment because it was reached years earlier. The money has been tied up in a legal challenge.

Only $50 million from the settlement would go to the Department of Environmental Protection, McCabe told the state Senate budget committee Tuesday. She said $125 million would go to the general fund and $50 million would be used to pay lawyers who tried the decades-long case for the state.

"The constitutional amendment doesn’t really require that full amount of funds to be made available to DEP, and the treasurer has testified, I believe, that $125 million will be earmarked for the general fund," McCabe said.

Environmental groups criticized the decision, saying the Murphy administration was trying to use a perceived loophole to circumvent the will of the voters, who approved the amendment by almost 70 percent statewide.

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“They’re hiding behind the fact that the deal was signed prior to the constitutional dedication," said Jeff Tittel, executive director of the New Jersey Sierra Club. "This is a technicality that they’re using as a rationalization and false argument. They’re just looking for an excuse to grab the money."

The $225 million, known as a natural resource damages settlement, is designed to compensate the public for a century's worth of Exxon pollution that contaminated 1,800 acres of wetlands around two of its former refineries in Linden and Bayonne.

The legal case began more than a decade ago, when the administration of Gov. James McGreevey sued Exxon for $9 billion. The Christie administration settled in 2015 for $225 million, 2.5 percent of the original amount sought, drawing criticism from environmentalists.

The money has not been transferred to New Jersey's coffers because four environmental groups and former state Sen. Ray Lesniak, a Union County Democrat, are trying to appeal the settlement, saying it's much too low.

In a move that surprised environmentalists, the Murphy administration filed court papers in March to block that appeal to the state Supreme Court. Environmental groups now say the Murphy administration did this so it can secure the $225 million for the state's $37.4 billion proposed budget, which would take effect July 1 if the Legislature approves it on time and Murphy signs it.

The constitutional amendment was passed in March largely in response to Gov. Chris Christie's use of about $300 million of $355 million from settlements with Passaic River polluters to balance the state's budget.

"Christie was wrong for his raids, and Murphy should uphold his campaign promises and rescind this raid," said Doug O'Malley, director of Environment New Jersey.

McCabe told two legislative panels this week that it was a "pure question of law" as to whether the Exxon settlement is covered under the amendment.

That made state Sen. Bob Smith, D-Middlesex, bristle at another legislative hearing on Monday. "It’s not just a question of law, but a question of core values," he said.

Lesniak agreed. He said the move by the Murphy administration goes against the spirit of the amendment.

"I think they're legally correct, but why do this when the public doesn't believe this is right?" said Lesniak, who represented the district where Exxon's former refinery in Linden sits.

Lesniak said Murphy would likely have to cut a deal with legislative leaders who write the budget. Murphy can take appropriations out of the budget with a line-item veto after it's passed by the Legislature, but he can't put appropriations in.

"This money should be used for restoring the marshlands around the Linden and Bayonne refineries," Lesniak said. "They need it there. It would help against storm surges. It would help make the air better by restoring more plant life."

Murphy has already been criticized by environmentalists for plans he announced earlier to divert more than $140 million in clean energy funds to help pay for NJ Transit's budget and to pay for the cost of utilities at state buildings.

McCabe said at an earlier hearing that the Murphy administration is going to "wean" itself off the practice of diverting such funds in future budgets.

McCabe said all of the $50 million earmarked for the DEP would be used for natural restoration projects.

But environmentalists on Thursday said they are dismayed so far with many of Murphy's budget moves.

"I can't believe this is going to end up in the pig trough called the general fund," Bill Sheehan, head of the Hackensack Riverkeeper advocacy group, said of the Exxon diversion. "This really feels like a betrayal."

Email: fallon@northjersey.com