FEATURE
Calculating the Cost of Natural Resource Damage Critics label Super-fund's natural resources damage assessments a costly "sleeping giant". REBECCA RENNER
I
n the summer of 1995, the Salmon River region of central Idaho scored a major victory. A natural resources damage assessment (NRDA) conducted by federal and state officials secured a $60 million agreement with the former owners of the Blackbird Mine site to bring salmon back to the area's streams. Restoration of publicly owned natural resources is the purpose of NRDAs, which are part of the Superfund law. Blackbird Mine is an NRDA success story. It was a quick agreement—a settlement was reached in about two and a half years—and it targeted a glaring environmental problem: die local eradication of an endangered fish species. The Blackbird Mine agreement also signaled a turning point in the evolution of the NRDA process, according to Joshua Lipton, an environmental toxicologist with extensive NRDA experience who is employed by consultants Hagler Bailly, Inc., in Boulder, Colo. It was the first major setdement to focus primarily on achieving a quick and efficient restoration. Government officials, industry critics, and NRDA specialists note that earlier NRDAs which conducted in an adversarial atmosphere, focused more on estimating die value of the lost resources. The move toward more cooperative assessments comes at a time when die program, whose future is tied to the Superfund reauthorization process, is being increasingly attacked. Superfund reauthorization could weaken NRDAs by limiting the scope of damages covered by the assessments. But since the current impasse over Superfund reform shows no signs of ending soon, legislative changes are unlikely to affect the program in the near future. The Comprehensive Environmental Response, Compensation, and Liability Act of 1980, CERCLA or
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the Superfund law, established the NRDA program as a companion to its more well-known remediation actions. Unlike Superfund remediations, which are the sole responsibility of EPA, any federal, state, or tribal agency responsible for publicly owned resources can conduct an NRDA as a trustee. The majority of NRDAs are conducted by the states, although federal agencies are involved in the largest, most costly settlements. Unlike Superfund, there is no federal trust fund to finance NRDAs. Apart from administration costs, assessments are financed entirely by potentially responsible parties. The major industries constituting these potentially responsible parties have expressed concern about NRDAs, labeling the program a sleeping giant that could rival Superfund's remediation program in terms of cost and litigation (see box). "The giant is awake," according to James Connaughton, an environmental lawyer involved in legislative and regulatory advocacy in Sidley and Austin's Washington, D.C., office. "There are some two dozen big claims—billion dollar claims—pending," he said. Industry disputes me scientific and economic bases of these assessments, alleging tiiat "these claims have no rational relationship with reality," he said. Looming large among industry concerns as an example of what these big claims could become is the NRDA for the Exxon Valdez oii spiill Thii sargess tnd most famous assessment cost Exxon close to $1 billion in addition to a cleanup bill of nearly $2 billion. To date, NRDAs at hazardous waste sites have been much more modest. The majority of NRDAs involving federal trustees are settled as part of a Superfund cleanup agreement negotiated witii EPA. Almost half require the responsible party to make no separate payment for natural resource damages, be0013-936X/98/0932-86A$15.00/0 © 1998 American Chemical Society
At the Stray Horse Gulch National Priorities List site in Leadville, Colo., the volume of material in the waste rock pile is evident by comparison with surrounding trees. (Courtesy Tom Hesemann, Rocky Mountain Consultants, Inc.)
cause either the negotiated cleanup corrects the injury or no injury was found. Of cases that were settled separately, federal authorities settled nearly 70 cases for a total of $177 million, according to Government Accounting Office (GAO) reports, and 6 settlements accounted for most of the expenditure (Table 1) (J). That there are some big claims in the offing is not in dispute. Federal trustees recently told GAO that there will eventually be 20 cases, each with claims of more than $50 million (2). Big claims represent an important aspect of the trustees' work, according to National Oceanic and Atmospheric Administration (NOAA) Assistant General Counsel Craig O'Connor. "We will aggressively pursue cases where there is substantial degradation, and it would not be appropriate to tolerate any other action," he said. "Look at the big cases, for example, die Montrose site off the California coast. This is the largest aggregation of DDT [l,l,l-trichloro-2,2-bis(p-chlorophenyl)ethane] in the world. We can't ignore that." However, the big claims do not represent the whole picture, according to Lipton. "If you look at the progress of the NRDA program as a whole in this country, the story is not just about big sites. It is also about the many environmental gains associated witii restoration and improved site cleanup at many smaller sites." Evolving practice and regulations The aim of NRDAs is to restore damaged natural resources so that they can continue to be enjoyed by the public. Yet this simple aim has complex scientific and economic consequences. Agencies must assess the extent of the injury and link it to a toxic re-
Estimated value of NRDA claims Federal trustees say that as many as 20 sites may have NRDA claims exceeding $50 million. These claims estimates do not include the $765 million Clark Fork River Basin claim filed by Montana that covers 127 miles of the upper Clark Fork River Basin. Status
Over $50 million
S5-S50 million
Ongoing Started Not started
5 7 8
9 8 23
Source: Reference 2.
lease, devise a restoration plan, and determine the full value of what the public has lost. The three principal activities—assessing injury, planning for restoration, and determining damages—have evolved as scientific and economic understanding has increased and because of previous NRDA experience. This evolution is facilitated by the legal structures that define NRDAs. CERCLA does not require trustees to use a particular standard or method for assessing natural resource damages. It did, however, direct the Department of the Interior (DOI) to develop standardized procedures for all trustees to consider when assessing and valuing natural resources injuries. These regulations appeared in 1986. In 1996, NOAA also produced regulations implementing the Oil Pollution Act of 1990. When CERCLA was enacted, no one was sure of what might constitute an injury. "Before NRDAs, short of throwing a bucket of dead fish on a judge's bench, it wasn't clear what it meant to say that a resource FEB. 1, 1998 / ENVIRONMENTAL SCIENCE & TECHNOLOGY / NEWS • 8 7 A
TABLE 1 Major NRDA settlements The monetary value of NRDA settlements is substantial, and at some sites, additional settlements are being pursued. Site name and location
Value
Settlement date
Elliot Bay, Seattle, Wash.
$24.3 million December 1991
Montrose, Calif, (offshore $12.0 million May 1992 Los Angeles county)
Issue
Metals and PCBs have contaminated sediments in an urban estuary in Puget Sound PCBs and DDT have injured fish, birds, and mammals in Southern California
New Bedford Harbor, $20.0 million November 1992 PCBs and heavy metals have injured fish and shellfish Achushnet River, Mass. and closed fishing areas near Buzzards Bay, Mass. Commencement Bay, Tacoma, Wash.
$13.3 million October 1993
A variety of hazardous substances have contaminated intertidal and subtidal sediments in an urban estuary in Puget Sound
Cantara Loop, Dunsmuir, Calif.
$14.0 million March 1994
Biocide spill destroyed all aquatic life along a 42-mile stretch of river and caused extensive injuries to a native trout fishery
Blackbird Mine, Idaho
$60.0 million May 1995
Mine drainage has injured endangered Chinook salmon and other fish in a tributary of the Salmon River, Idaho
Source: Reference 2.
was injured," according to DOI's Mary Morton. DOI regulations in 1986 included death, disease, deformities, cancer, effects on reproduction, and other measures as injuries (3). Injuries added to the regulations include impairing the services a habitat provides and the growth of organisms. Determining damage is also an evolving practice with evolving regulations. This situation is further complicated because direct evidence of economic losses is less observable than injury. Still controversial is how to determine the value for noncommercial activities, such as recreational fishing. Most controversial are "existence values" or "nonuse values," such as the value people place on the intrinsic beauty of a scenic vista or the existence of natural resources that may never be seen. In part, the emphasis on settling damages arose because trustees did not know how to go about planning for restoration, according to Thomas Campbell, former NOAA general counsel. "No one was certain about how to restore damaged natural resources in the early course of NRDAs," he explained. "So the default was to litigate and recover money. The DOI regulation focused on money. Restoration W3.S 3.1most an afterthought." The New Bedford Harbor, Mass., case, the first federal suit filed under CERCLA in 1987, is a prime example of these early actions, according to Connaughton. High levels of PCBs and heavy metals in the harbor's fish and shellfish led to a $20.2 million NRDA settlement in 1992; but when it was reached, "the trustees didn't know what to spend the money on and even now they don't know how to spend it." The adversarial atmosphere that characterized the early NRDAs is being replaced in recent cases by an emphasis on restoration and cooperation between trustees and responsible parties. This focus includes favoring approaches that lead to restoration as quickly and efficiently as possible. Cooperation be8 8 A • FEB. 1, 1998 / ENVIRONMENTAL SCIENCE & TECHNOLOGY / NEWS
tween trustees and responsible parties includes agreeing on sampling strategies and sharing data. These ideas occupy center stage in NOAA's November 1996 NRDA regulations (4). This emphasis on restoration will also form part of DOI's regulations, according to Morton. O'Connor said, "We have changed the focus of the regulations from being basically an evaluation of monetary value. Our new focus is upon determining what the loss was and how to restore it. The bill is the cost of implementing the restoration." He cites the Blackbird Mine settlement as one of the first steps in this direction. "In the Blackbird Mine case the companies that were responsible agreed to do the restoration work themselves," he said. This new spirit of cooperation has prompted considerable discussion among NRDA specialists. Included in their concerns are possible delays in initiating studies and sampling programs, increased assessment costs, and delays caused by protracted negotiations. However, NOAA's new guidelines have received positive reviews from many in industry. "Heretofore the guidelines largely forced a lengthy assessment period. The new guidelines focus on minimum time and cost of assessment to get the longterm result of restoration," said Al Maki, chair of the American Petroleum Institute's NRDA committee.
No consensus about scientific issues Critics of the NRDA process frequently describe NRDA injury assessments as bordering on the cutting edge of science, but questions facing environmental scientists working on NRDAs are not unique (5). Determining sampling strategies, collecting samples, and conducting toxicity tests are common tasks. Even the broader scientific questions about NRDAs are those that surround the environmental sciences discipline. "The interesting scientific questions that crop up are not limited to NRDAs. In fact,
Colorado's Blackbird Mine: Case Study of a Successful NRDA The 1995 Blackbird Mine NRDA is one of the largest settlements to date. NOAA, the U.S. Forest Service, and the government of Idaho worked together on the assessment. The trustees had little difficulty demonstrating injury, defined by DOI regulations as "a measurable adverse change either long-term or shortterm in chemical or physical quality or viability" (3). The site of one of the world's few major cobalt deposits, Blackbird Mine had a long history of resource exploitation beginning in the early 1900s. Copper and cobalt contamination in area streams completely eradicated a run of Chinook salmon, virtually eradicated a run of steelhead trout, and damaged the resident trout population. A series of studies performed by environmental consultants Hagler Bailly, Inc., in Boulder, Colo., determined that death, changes in behavior, and reduced growth of salmon, trout, and other fish stemmed from chemical contamination of the water. Studies followed the accepted NRDA route for demonstrating contamination, pathway, exposure, and harm. Field studies of invertebrate communities living in the creeks focused on observable changes in community composition, including biomass and diversity. Toxicity testing included on-site experiments with caged trout and site-specific toxicity studies. Factors affecting the bioavailability of metals in waters of the region's Panther Creek watershed were also studied. Concurrent hydrogeological investigations based on groundwater discharge sampling and geophysical investigations determined that contamination sources included waste rock underground mine water and contaminated sediments Historic runs of salmon in the Panther Creek system are thought to have numbered 2000-3000 spawning adults each year. However, studies assumed that these population levels would not occur Dresentlv because of other factors affectina the survival of
because of the legal requirements surrounding these actions, NRDA cases require more certainty in scientific findings than many other endeavors in environmental science," according to Lipton. Among the two most important broad scientific issues in injury assessments are establishing a baseline from which to measure resource injuries and the debate over the significance of individual organisms versus populations and communities of organisms. The concept of baseline requires that any assessment identify a resource's normal condition— the condition that would have existed if the hazardous release had not occurred. Critics argue that the variability of natural systems means that ecosystems have their own intrinsic cycles, waxing and waning over time regardless of particular environmental incidents. This that the baseline condition actually encompasses IH3.HV conditions Another chcillenge in determining the baseline occurs because most environmental systems are not pristine Isolating the effects of one release be difficult particularly in alleady ssressed svstems such as the Hudson River Mathematical models are used to estimate natural variability and comparing reference sites and using historical data are some of the techniques used to isolate the effects of one release
Contaminated mine tailings piles along the right bank and iron precipitate discoloration of water in West Fork Blackbird Creek are evident at the confluence of the Blackbird (left) and West Fork Blackbird (right) Creeks. (Courtesy William Conner, NOAA)
the migrating fish. Therefore, the trustees estimated a baseline: How many salmon would exist at Panther Creek if there had been no toxic releases? To do this, the Panther Creek habitat was compared with reference streams in the area. A second independent evaluation method involved applying the overall reduction of Columbia River salmon to historic runs in Panther Creek. These methods estimated a present-day baseline of 200-500 salmon. A sustainable population of 200 was the restoration objective. Ecosystem modeling demonstrated that limiting releases of contamination from groundwater, surface runoff, and sediments would restore water quality to safe conditions. Apart from the salmon, most of the fish, invertebrates, and prey species would quickly repopulate the watershed without human intervention. A hatchery program using wild salmon is expected to take 30 years to redevelop a sustainable population. —R.R.
The widespread debate among ecologists over the significance of individual organisms versus populations and communities also figures into NRDAs. In damage assessments and in the majority of existing environmental regulations, harm to wildlife is almost always judged in terms of individuals, according to Lipton. This is done to protect individuals and because individuals serve as surrogates for higher order, but more difficult to examine, ecological effects. Critics argue that measuring injury in terms of individuals can overestimate injury to an environmental system or community (5). This is because a community of organisms may compensate for loss or injury to individual organisms so that the overall viability of the community is unaffected. Industry lobbyists argue that regulations have yet to tackle this issue which is an active topic of environmental research NRDA economics Unlike the scientific aspects of NRDAs, those related to natural resource economics are unique. Damage assessments evaluate two environmental problems: restoration of the damaged natural resources (primary restoration) and compensatory damages. Economics plays a role in determining the value of FEB. 1, 1998 / ENVIRONMENTAL SCIENCE & TECHNOLOGY / NEWS • 8 9 A
primary restoration, but its role is crucial in determining compensatory damages. Compensatory damages are aimed at compensating the public for the loss of a resource from the time the damage occurred until restoration. Previously, these damages were valued in monetary terms, but the emphasis has shifted to compensatory restoration, according to William Conner, who heads NOAA's Damage Assessment Center in Silver Spring, Md. Habitat equivalency analysis is the new approach used to determine the appropriate amount of compensatory restoration needed to make up for the temporary loss of a resource (6). The objective of habitat equivalency is to find one aspect of a habitat—a metric—that accounts for several different types of lost services. "It is practically impossible to look at every aspect of a natural resource," explained NOAA economist Brian Julius, "so we look for some sort of metric which can be tied to "Before N R D A s , all of the services." The metm u s t be readily meashort of ric sured and amenable to int h r o w i n g a corporation into restoration planning. Once established, bucket of dead the metric is used to assess other habitats and to find fish on a judge's comparable replacements. In the Blackbird Mine bench, it w a s n ' t determining the scale of compensatory clear w h a t it tion involved estimating the n u m b e r of returning Chim e a n t t o say nnnk salmon adults on an annual basis and then addt h a t a resource ing up the salmon over the w a s injured." vpars hptween thp iniurv nrnirrpnrp and thp rpstnra tinn Thp n n m p p i K a t n r y
—Mary Morton, Department of the Interior
projects are linked by the salmon's water quality needs For example c o m p e n s a projects involve purchasing land restrictions to limit cattlf1 gra7tng that rlamaapQ water mialitv An PYfltnpleof a metric from rnastal setting is the hpipht of marsh grass In instances Avnere it is impossiDie to nnd equivalent services, value-to-value memods are necessary, according to Julius. The value-to-value approach requires trustees to place a value on the service loss caused by the pollutant release and the resource gain that can be realized from the compensatory restoration. Once the trustees identify a restoration effort that produces a gain in value, equivalent to the lost value caused by the resource injury, they ask the responsible party to implement or pay for the restoration effort.
Valuing the costs of restoration Such methods are an essential part of damage assessments, according to economist Raymond Kopp, director of Resources For the Future s Quality of the Environment Division in Washington, D.C., You need 9 0 A • FEB. 1, 1998 / ENVIRONMENTAL SCIENCE & TECHNOLOGY / NEWS
to find out how much people will pay out of their own pockets to preserve, for example, birds or wilderness. The only method that gets at those sorts of values is contingent valuation," he said. Contingent valuation is an economic technique used to provide monetary values for goods, services, and public programs for which market data do not exist. The technique determines the value of goods and services based on the results of carefully designed opinion surveys. This active research topic has attracted a wide range of theoretical economists and econometricians, including several Nobel laureates. In 1993, a panel chaired by two Nobel laureates, commissioned by NOAA to evaluate contingent valuation, reported its findings. The panel's final conclusion is that contingent valuation studies can produce estimates reliable enough to be the starting point of a judicial process of damage assessment (7). Contingent valuation is still the subject of active research and is controversial. "We are proposing a new and somewhat unprecedented way of valuing natural resources," said Richard Bishop, a University of Wisconsin economist who is an expert in contingent valuation. "These methods deserve a good hard look," he said; but Bishop believes that the large sums of money at stake fuel much of the criticism. When habitat equivalency suggests high-cost restoration projects, the new mood of cooperation begins to fade, according to David Allen, a Minnesota Department of Fish and Wildlife assessment manager. "The new paradigm is to talk about projects instead of money. But if the trustees come up with expensive projects, there is still a big storm," he said. The new NRDA paradigm, which emphasizes restoration and cooperation, is set to be further reinforced when the DOI publishes revised regulations later this year. Whether this philosophy succeeds when faced with the challenges of forthcoming large and complex assessments remains to be seen.
References (1) Superfund: Status ofSelected Federal Natural Resource Damage Settlements; GAO/RCED-97-10; Government Accounting Office, U.S. Government Printing Office: Washington, DC, 1996. (2) Superfund: Outlook for rnd Experience with Natural Resource Damage eettlements; GAO/RCED-96-71; Government Accounting Office, U.S. Government Printing Office: Washington, DC, ,996. (3) U.S. Department of the Interior. Fed. .egist. 1986,61,20609. (4) NOAA OPA Regulations for Natural Resource Damage Assessment. Code ofFederal Regulations, Part 2, Title 43,1996. (5) Boehm, P. D.; Galvanii P B.; O'Donnell, E P. Scientific and Legal Conundrums in Establishing Injury and Damages: The Natural Resource Damage Assessment Regulations. In Natural Resource Damages: A Legal, Economic, and Policy Analysis; Stewart, R. B., Ed.; The National Legal Center for the Public Interest: Washington, DC, 1995. (6) Damage Assessment and Restoration nrogram, Habitat Equivalency Analysis; Policy and Technical Paper SerSer NoN 95-1; National Oceanic and Atmospheric Administration, U.S. Government Printing Office: Washington, DC, 1996. (7) Report of the NOAA Panel on Contingent Valuation. Fed. Regist. .199, 58, 4601-4614. Rebeccci Renner is o. contributing editor of ES&T.
