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DOI Releases Proposed Revisions to its Natural Resource Damage Assessment Regulations

Beveridge & Diamond, P.C., March 5, 2008

On February 29, 2008, the Department of the Interior (“DOI”) published proposed revisions to its natural resource damage assessment regulations for hazardous substance releases. (“NRDA Regulations”). 73 Fed. Reg. 11081.  The proposed revisions to the NRDA Regulations seek to “emphasize [natural resource] restoration over economic damages.” 73 Fed. Reg. 11082. This approach was recommended to DOI by the Natural Resource Damages Assessment and Restoration Federal Advisory Committee, which DOI created to provide suggestions about DOI’s natural resource damage assessment programs and responsibilities. DOI’s proposed amendments also seek to implement changes required by two federal court decisions, Ohio v. U.S. Dep’t of the Interior, 880 F.2d 432 (D.C. Cir. 1989) (“Ohio”) and Kennecott v. U.S. Dep’t of the Interior, 99 F.3d 1191 (D.C. Cir. 1996) (“Kennecott”), and to make technical revisions to “resolve an inconsistency on the appropriate timing for the administrative process set out in the [NRDA Regulations].” 73 Fed. Reg. 11082.

The proposed revisions only apply to the NRDA Regulations promulgated under the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) and the Federal Water Pollution Control Act (“CWA”).  The proposals do not affect the NRDA rules under the Oil Pollution Act, codified at 15 C.F.R. Part 990. Additionally, the proposals do not apply to “Type A” natural resource damage assessment procedures, only “Type B” procedures. Type A assessment procedures are designed for small cases and use computer programs and modeling to predict injuries. Type B assessment procedures provide “an assessment process and assessment methods that trustees utilize on a case by case basis.”  73 Fed. Reg. 11082. 

Emphasizing Restoration over Economic Damages

Under the current NRDA Regulations, trustees using Type B procedures may recover damages for restoring injured or damaged resources to their baseline condition and for losses the public suffers between the time an injury occurs and the time restoration is completed. See 43 C.F.R. 11.80-82. These interim losses are called “compensable values.” See 43 C.F.R. 11.83(c). Under the current regulations, “compensable values” consist of the amount of money it takes to compensate the public for physical and biological functions that the damaged resources, while injured, could not perform.  The proposed rule attempts to expand options available to trustees in calculating “compensable values” to include the cost of restoration actions that will provide services that offset the interim losses. 

Under the proposed regulation, a trustee may “use the cost of restoration actions that address service losses to calculate all damages, including all interim losses.” 73 Fed. Reg. 11083. Such an option is not available to trustees under the current rules. The new rule would modify 43 C.F.R. 11.83(c) “to provide trustees [the] option of estimating compensable values for losses pending restoration utilizing the cost of implementing projects that restore those lost natural resource services.” 73 Fed. Reg. 11082. 

According to DOI, natural resource assessment approaches that allow trustees to “compare losses arising from resource injury to gains expected from restoration actions are frequently simpler and more transparent than those used to measure the economic value of losses.” Id. To achieve this objective, the proposed rule contains four project-based assessment methodologies: (1) conjoint analysis; (2) habitat equivalency analysis; (3) resource equivalency analysis; and (4) random utility models. The proposed rule makes clear that this list is non-exclusive and allows for new assessment methods and techniques to be introduced later. 

In effect, the proposed rule formally incorporates approaches that parties have been using for some time in cooperative assessments or settlement negotiations under CERCLA.

In choosing a natural resource damages assessment methodology, the current regulations require trustees to choose a method that is “feasible and reliable for a particular incident or type of damage to be measured.” 73 Fed. Reg. 11083. The regulations currently list factors, including cost reasonableness, cost effectiveness, and avoidance of double counting, for trustees to consider when making the “feasible and reliable” determination. The new rule would add more factors for trustees to consider when choosing an assessment methodology:  the ability to provide useful restoration information, peer review, and methodological standards.

Complying with Ohio and Kennecott

DOI also proposes corrections to the C.F.R. to reflect the D.C. Circuit’s invalidation of provisions in the NRDA Regulations in Ohio and KennecottOhio invalidated 43 C.F.R. 11.83(c)(1)(iii), a provision that limited estimation of option and existence value.  Kennecott invalidated 43 C.F.R. 11.91(e), which designated the “later of the date when either the Type A or Type B rule was finalized” as the date of promulgation for the 1994 NRDA rule. The Federal Register notice proposes to delete these provisions.

Kennecott also invalidated language in the NRDA Regulations stating that the measure of natural resource damages was the “cost of restoration of the injured natural resources and the services those resources provided.” 43 C.F.R. 11.80(b). The proposed rule seeks to rewrite 43 C.F.R. 11.80(b) in a way that incorporates the holding in Kennecott and “makes clear that the metric for evaluating natural resource conditions for baseline restoration is the baseline level of services, while the compensable value for losses pending restoration is either the value of the services lost pending restoration or the cost of projects that compensate for services lost pending restoration.” 73 Fed. Reg. 11084.     

Correcting to Provide Consistent Timing Guidelines

The proposed rule also resolves an ambiguity in the regulations as to when Restoration and Compensation Determination Plans (RCDP) may be developed. Currently, the NRDA Regulation’s language is inconsistent as to when RCDPs, a process whereby restoration alternatives are evaluated and selected, may occur. The proposed rule resolves this confusion by “provid[ing] that the RCDP may be completed after the injury determination and quantification phases of the assessment.”    

Comments on these proposed changes, available here, may be submitted to DOI through May 29, 2008.  Beveridge & Diamond, P.C. will be examining the proposed rule in more detail, and we would be pleased to answer questions regarding the proposal.  For more information, please contact Steven M. Jawetz at 202-789-6045 or sjawetz@bdlaw.com.

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