Academic journal article Contemporary Economic Policy

Restoration-Based Compensation Measures in Natural Resource Liability Claims

Academic journal article Contemporary Economic Policy

Restoration-Based Compensation Measures in Natural Resource Liability Claims

Article excerpt


In the United States, the atmosphere, oceans, estuaries, rivers, and plant and animal species are public trust resources. For the most part, the United States has not created private ownership rights to these resources but instead has established a system of public management to promote beneficial uses of the resources at no (or limited) charge to the public. In the past two decades, public policies have emphasized protecting the resources from injury and depletion. In particular, several major environmental statutes enacted in the 1970s designate resource management agencies as trustees of the natural resources on behalf of the public and enable the trustees to recover damages for injuries to public resources from releases of hazardous substances and discharges of oil.

The primary federal statutes containing provisions establishing liability for injuries to natural resources in the public trust are the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA, more commonly known as Superfund) and the Oil Pollution Act (OPA). When OPA was promulgated in 1990, its natural resource liability provisions for oil spills superseded those previously established in the Clean Water Act in 1978. Other federal statutes containing natural resource trustee provisions include the National Marine Sanctuaries Act (formerly the Marine Protection, Research, and Sanctuaries Act), the Federal Water Pollution Control Act (or Clean Water Act), Deepwater Port Act of 1974, Outer Continental Shelf Lands Act Amendment of 1978, and Trans-Alaska Pipeline Authorization Act. These statutes broadly define natural resources to include land, fish, wildlife, biota, air, water, ground water, drinking water supplies, and other such resources belonging to, managed by, held in trust by, appertaining to, or otherwise controlled by the United States, any state or Indian tribe, or any foreign Government.

The U.S. Department of the Interior promulgated regulations in 1986 and 1987 for natural resource damage assessments (NRDA) under CERCLA and subsequently revised the regulations in 1994 to respond to issues remanded to the agency by Ohio v U.S. Department of the Interior in 1994, as codified at 43 CFR [section]11. The National Oceanic and Atmospheric Administration (NOAA) promulgated NRDA regulations for OPA on January 5, 1996, as codified at 15 CFR [section]990. The standard measure of damages is the cost of restoring the resources to baseline conditions ("primary restoration") plus the interim loss in value from the time of the incident until full recovery. However, trustees are allowed to spend their recoveries only on enhancing or creating ("restoring, rehabilitating, replacing or acquiring the equivalent of") natural resources. The statutory restriction on the use of the recoveries has motivated the development of an alternative utility-theoretic measure of damages for interim losses - the cost of "compensatory restoration" actions providing inkind compensation.

In the aftermath of the 1991 Exxon Valdez settlement, the use of contingent valuation became very controversial during the OPA rulemaking process (as it continues to be in the ongoing CERCLA reauthorization process). During the rule-making, industry and environmental interest groups as well as academic economists submitted extensive public comments on valuation issues in general and contingent valuation in particular. In the context of the wide-ranging public debate, NOAA reframed the concept of damages for interim losses in terms of providing compensatory restoration projects. Congress is currently considering bills to reauthorize CERCLA that would incorporate these concepts in statutory language.

Reframing the damage claim brings several advantages. The revised format forces trustees to focus on the ultimate statutory goal - restoring resources - from the beginning of the assessment process, which may result in expediting restoration. …

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