§15.5 - Natural Resource Damages Assessment and Damages Awards

• Jurisdiction: Washington

§15.5 NATURAL RESOURCE DAMAGEs ASSESSMENT AND DAMAGEs AwardS

The assessment of damages in NRD actions requires trustees to conduct a thorough assessment of the effects of hazardous substances on the resource, the best method for restoration, and the type and extent of restoration required. The EPA directs trustees to use the U.S. DOIs regulations to first determine the extent of injury and then quantify the injury into monetary damages. Exec. Order No. 12,580, 52 Fed. Reg. 2,926 (Jan. 23, 1987). Court decisions following the adoption of the U.S. DOIs rules provide guidance concerning the methods for determining the scope and extent of NRD and quantification of the injury.

(1) Statutory limitations on damages

CERCLA §107(c), 42 U.S.C. §9607(c), contains various caps on damages awards for different types of releases. In general, there is a cap of $50 million on NRD per release or incident involving a release of a hazardous substance. Section §107(c) describes exceptions to this cap and different limitations that may apply; however, there is no limitation on damages resulting from willful misconduct or willful negligence. See CERCLA §107(c)(2); 42 U.S.C. §107(c)(2).

The U.S. Court of Appeals for the Ninth Circuit has narrowly construed the application of the $50 million cap. In California v. Montrose Chemical Corp., 104 F.3d 1507 (9th Cir. 1997), Montrose Chemical Corporation and several successor corporations operated a site that released substantial amounts of DDT and PCBs over several decades. Montrose and its successors subsequently brought a motion for summary judgment to enforce the $50 million cap on liability. The lower court granted the motion, but the Ninth Circuit reversed on appeal, ruling that the phrase incident involving releases has a narrow, temporal reading. Id. at 1520. The court interpreted the phrase to mean an occurrence or series of occurrences of relatively short duration involving a single release or a series of releases all resulting from or connected to the event or occurrence. Id. The court remanded the case to the district court to determine how many incidents involving release occurred under this definition.

(2) Summary of the U.S. DOIs assessment procedures

The U.S. DOI issued regulations governing NRD assessment procedures in two parts: Type A rules (containing simplified assessment procedures) and Type B rules (containing alternative methods for individual cases). The general rules pertaining to both Type A and Type B assessments, along with the Type B rules, were issued first (August 1, 1986), followed by the Type A rules (March 20, 1987). See 43 C.F.R. pt. 11. Under 42 U.S.C. §9651(c)(3), the regulations are to be reviewed every two years.

The U.S. DOI published revisions to the Type B rules on March 24, 1994, and October 2, 2008, and to the Type A rules on May 7, 1996. Certain provisions of the Type B rules were subsequently invalidated in litigation, as discussed below. On October 2, 2008, the U.S. DOI issued revisions to the Type B rules, bringing them into compliance with court decisions following their promulgation and making changes to emphasize restoration over monetary damages.

Trustees may perform separate assessments for injuries to different natural resources resulting from a single release using either Type A or Type B procedures, or a combination of both, as long as no injuries are double counted. 43 C.F.R. §11.15(d).

The U.S. DOIs rules set up a five-step procedure for determining injury and quantifying the injury into monetary damages: (l) conducting an initial preassessment; (2) conducting a preassessment screen; (3) preparing an assessment plan; (4) measuring damages by using either Type A or Type B rules, or a combination of both; and (5) preparing a post-assessment report.

Use of the U.S. DOIs assessment procedures is not mandatory, but a federal or state natural resource trustee that uses them gains a rebuttable presumption for [a]ny determination or assessment of damages to natural resources ... in any administrative or judicial proceeding under this chapter or section 1321 of Title 33. 42 U.S.C. §9607(f)(2)(C); 43 C.F.R. §11.10.

The United States District Court for the Eastern District of New York considered whether a federal or state natural resource trustee that failed to follow the Department of Interior procedures for NRDA is entitled to a rebuttable presumption of deference under CERCLA. New York v. Next Millennium Realty, LLC,160 F.Supp.3d 485 (E.D.N.Y. 2016). The court held that because the state of New York had not performed a NRDA in accordance with Interior's regulations, its assessment was not entitled to CERCLA's rebuttable presumption. However, the court held that, even in the absence of a rebuttable presumption, the state could still seek summary judgment on liability against a defendant.

In general, the U.S. DOIs rules state that natural resource trustees who perform assessments in accordance with the rules may recover (1) either damages measured in a Type A assessment or damages measured in a Type B assessment; (2) the costs of emergency restoration efforts undertaken by the trustee; (3) the reasonable and necessary costs of performing the assessment, including preassessment and administrative costs; and (4) interest on the amount recoverable. 43 C.F.R. §11.15.

When an assessment determines that no resources have been injured, a trustee may not recover assessment costs. 43 C.F.R. §11.15(c).

(a) Preassessment phase

In the preassessment phase the trustee either discovers or is notified of injury to the natural resource and helps identify other trustees whose resources may be affected. 43 C.F.R. §11.20(c). During this phase, trustees are also required to coordinate their investigation, planning, and assessment. 43 C.F.R. §11.20(a)(1).

(b) Preassessment screen

In this phase, the trustee rapidly reviews any readily available information, including any studies prepared under the NCP, to ensure that a reasonable probability of establishing a successful claim exists. 43 C.F.R. §11.23(b). The authorized official makes a determination whether to proceed with an assessment of damages and documents the determination. The determination must indicate whether specific findings justifying preparation of an assessment are met, including:

(1) A discharge of oil or a release of a hazardous substance has occurred;

(2) Natural resources for which the Federal or State agency or Indian tribe may assert trusteeship under CERCLA have been or are likely to have been adversely affected by the discharge or release;

(3) The quantity and concentration of the discharged oil or released hazardous substance is sufficient to potentially cause injury, as that term is used in this part, to those natural resources;

(4) Data sufficient to pursue an assessment are readily available or likely to be obtained at reasonable cost; and

(5) Response actions, if any, carried out or planned do not or will not sufficiently remedy the injury to natural resources without further action.

43 C.F.R. §11.23(e).

(c) Assessment plan

The trustee must develop a plan for assessing natural resource damages that identifies all scientific and economic methodologies expected to be used. 43 C.F.R. §11.31(a)(1). The trustee coordinates the assessment plan with any NCP investigations. 43 C.F.R. §11.31(a)(3).

The trustee is required to make reasonable efforts to identify any PRPs and at least proceed against those potentially responsible for significant portions of the injuries. If the number of PRPs is large and some parties cannot be located, the trustee may proceed against any one or more of the parties identified. 43 C.F.R. §11.32(a)(2)(ii). The trustee is required to send a notice of intent to perform an assessment to all identified PRPs, inviting PRPs to participate in the development of the type and scope of the assessment. The trustee must wait at least 30 calendar days for the PRPs to respond, and must make the assessment plan available for public review for at least 30 calendar days before performing an assessment. 43 C.F.R. §11.32(a)(2)(iii)(A), (B). At the option of the trustee and if agreed to by any PRP, a PRP or other party may implement all or any part of the assessment plan finally approved by the trustee. Any modification of an assessment plan that a trustee considers significant must be made available for review by any PRP for at least 30 calendar days. 43 C.F.R. §11.32(e)(2)(i).

During the assessment plan phase, the trustee must confirm that at least one of the natural resources identified in the preassessment screen as potentially injured has, in fact, been exposed to the hazardous substances released. 43 C.F.R. §11.34. The trustee must also estimate replacement and restoration costs and determine whether damages will be assessed by replacement and restoration costs or by diminution-of-use valuation. 43 C.F.R. §11.35(a).

In the assessment plan phase, the trustees also determine whether to use Type A procedures, Type B procedures, or a combination of both. Type A procedures use a computer model rather than an actual injury study to determine damages. If the Type A procedures are carried out correctly, the trustees obtain the benefit of a rebuttable presumption of up to $100,000 in damages.

Before proceeding with a Type A assessment, the trustees must perform a preliminary application of the model and include the data inputs and results in the assessment plan. The trustees must also determine that the assumptions underlying the model, as set forth in 43 C.F.R. §11.43, are reasonable in a particular case. If not, the trustees may not use the model to obtain a rebuttable presumption. Natural Resource Damages Assessments: Type A Procedures; Final Rule, 61 Fed. Reg. 20,560, 20,564 (May 7, 1996). If the preliminary application of the model indicates that damages exceed $100,000, the trustees can (1) proceed without a...