Tools and Techniques in Assigning Damage
| Author | Valerie Ann Lee/P.J. Bridgen |
| Pages | 173-198 |
Page 173
Chapter 13
Tools and Techniques in Assigning Damage
13.1 Introduction
Damage determ ination natural resource injury is reduced to a sum certain (or a set of projects) that will
fully compensate the public for losses c aused by an incident. Putting a va lue on natural resources a nd our
natural environment can be controversia l. Some people object to the very idea that nature, in part or whole,
can be given a value. To them, natural resources are unique, nonsubstitutable, and priceless.1 To others,
damage determination is appropriate and necessary precisely because we live in a market-based society.2
Even the “priceless” must be “valued,” so that we c an protect and conserve.3 A lthough both view points
have merit, NRDA requires valuation of injury to natural resources, i.e., damage assessment.
Congress enacted the NRDA laws discussed in this handbook and gave a seemingly simple direction:
make the public and environment whole for injuries to natural resources and recover the costs of restora-
tion. Congress commanded two agencies, the U.S. Department of the Interior (DOI) and the Nationa l
Oceanic and Atmospheric Administration (NOAA), to issue regulations under the Comprehensive Envi-
ronmental Response, Compensation, and Liability Act (CERCLA) and the Oil Pollution Act (OPA) of
1990 containing “best available” procedures for t he assessment of injury and the estimation of dama ges.4
Damage assessment methods have been developed and applied across the United States.
is chapter discusses general concepts of damage assessment and approaches and tools for assigning
damages. CERCLA and OPA reg ulations are frequently referenced throughout the chapter. e regu la-
tions are voluntary; trustee s are not required to follow them; however, the regulations provide meaningful
guidance on how to determine or estimate natural resource damages (NR Ds) and describe a wide array of
available tools for the estimation of damages.
e structure of this chapter is as follows. Section 13.2 explains general concepts important to under-
standing damage determination. Section 13.3 presents the techniques to a ssigning costs for primary resto-
ration. Section 13.4 describes approaches to determining interim losses. Section 13.5 presents recoverable
elements of assessment costs using the regulations as a guide.
13.2 Important Concepts in Damage Determination
Several important concepts in damage determination are described in this section: elements of damage, cost
versus value, sca ling, and baseline. A clear understanding of these concepts is essential to assigning NRDs.
1. D.J. McCauley, Selling Out on Nature, N, Sept. 6, 2006, at 27-28.
2. is position was succinctly summarized by the well-known, and oft-quoted, conservationist Aldo Leopold decades ago:
To sum up: a system of conservation based solely on economic self-interest is hopelessly lopsided. It tends to ignore, and thus even-
tually to eliminate, many elements in the land community that lack commercial value, but that are (as far as we know) essential to
its healthy functioning. It assumes, falsely, I think, that the economic parts of the biotic clock will function without the uneconomic
parts.
A L, A S C A S H T (1949).
3. Christine M. Augustyniak, Economic Valuation of Services Provided by Natural Resources: Putting a Price on the “Priceless,” 45 B L. R.
389 (1993).
4. For the history of the promulgation of the nal CERCLA and OPA regulations, see Sections 10.6 and 10.7.
Page 174 Natural Resource Damage Assessment Deskbook
13.2.1 Elements of Natural Resource Damage
Under all t he statutes d iscussed in this handbook, damages for injuries to natu ral resources consist of
two components. e rst component is the cost of activities undertaken to restore the injured natural
resources to “baseline,” the condition of the natural resource services absent the injury. e second compo-
nent of damages is compensation for “interim losses.” Interim losses are those services rendered unavailable
from the time of injury until their return to baseline.
In addition to these t wo components of damages, under all the statutes, agencies or trustees may recover
reasonable damage assessment costs. A ssessment costs may include both direct costs, such as labor and
materials, and indirect costs.5 Indirect costs are those costs with multiple objectives that cannot be allo-
cated to one NRDA project or case.6 Overhead is an example of an indirect cost.
13.2.2 The Evolution of Approaches to Damage Assessment
Returning resources to baseline and evaluating interim losses are challenging endeavors. Trustees, the
courts, and economists addressing these questions have created a complex set of precedents in policy, law,
and economics. is history informs the interpretation of the current OPA a nd CERCLA regulations and
also provides insight as to approaches to damage assessment outside the regulations that meet lega l muster.7
is section outlines the dierent ideas about valuation, how they have led to legal challenges, and changes
to the damage assessment processes. It begins with a discussion of a development in analysis of injury and
damage that has, to date, been little used in NR DA but is likely to have great utility at the megasite or spill,
like the Gulf Oil spill that occurred in 2010.
Valuation Based on Ecosystem Services
e dominant framework currently used to describe the environment’s value is the ecosystem services
framework. e 2005 Millennium Ecosystem Assessment, a landmark scientic synthesis project that
launched the framework from science to policy, denes ecosystem services as “the benets people obtain
from ecosystems.”8 Ecosystem services frameworks a re na scent, however, and only entered mainstream
academic discourses in t he late 1990s, when Gretchen Daily, a Sta nford University conservation biologist,
wrote Nature’s Services and Robert Costanza, an environmental economist at the University of Vermont,
tallied a value for the world’s ecosystem services.9 Both NOA A and DOI now use ecosystem ser vices as
guiding concepts and trace the history back to Daily’s and Cosanza’s work.10 Furthermore, the 2009 work-
shop on NRDA a nd ecological risk assessment (ERA), sponsored by the Society of Environmental Toxicol-
ogy and Chemistry, concluded that using an ecosystem service fra mework would strengthen NRDA and
ERA.11 As such, ecosystem services will likely play an increasing role in NRDA.
5. See 43 C.F.R. §11.83(b)(1)(ii); Kennecott Utah Copper v. Dep’t of the Interior, 88 F.3d 1191, 1223-24, 26 ELR 21489, 21501-02 (D.C. Cir.
1996) (citing Ohio v. Dep’t of the Interior, 880 F.2d 432, 443, 19 ELR 21099, 21103-04 (1989), and Oce of Management and Budget,
Circular No. A-87, §F).
6. See Oce of Management and Budget, Circular No. A-87, §F.
7. e focus of this discussion is from the perspective of the trustees with claims for damages for injuries to natural resources. Nevertheless,
one statute discussed in this handbook, the OPA, allows claims by private claimants and recovery for what are private losses. See 33 U.S.C.
§2702(b)(2), ELR S. OPA §1002(b)(2) (among other things, this section allows private claimants to recover economic losses resulting
from destruction of real or personal property and lost prots). It is beyond the scope of this handbook to discuss methodologies to value such
private losses.
8. Millennium Ecosystem Assessment, Ecosystems and Human Well-Being: Synthesis v (2005).
9. For a history of the evolution of ecosystem services ideas and practices, see E. Gómez-Baggethun et al., e History of Ecosystem Services in
Economic eory and Practice: From Early Notions to Markets and Payment Schemes, 2010 E. E. 1209-18.
10. For a discussion on the importance of ecosystem services by NOAA, see NOAA, E: W A E I E
S (2008), available at http://oceanservice.noaa.gov/education/kits/estuaries/estuaries03_ecosystem.html (last visited Nov. 29, 2012).
For a discussion on the importance of ecosystem services by DOI, see U.S. DOI, T D I’ E C-
(June 21, 2011), available at www.doi.gov/ppa/upload/DOI-Econ-Report-6-21-2011.pdf.
11. W.R. Munns et al., Translating Ecological Risk to Ecosystem Service Loss, 2009 I E. A M. 500-14. See Ralph
G. Stahl et al. e Nexus Between Ecological Risk Assessment and Natural Resource Damage Assessment Under CERCLA: Introduction to a Society
of Environmental Toxicolog y and Chemistry Technical Workshop, 2009 I E. A M. 496-99.
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