The Office Of The Natural Resources Trustee

September 01, 1995

Summary
The most important federal environmental laws pertaining to natural resources damages are the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), as amended, and the Clean Water Act ("CWA") , as amended, most recently through the Oil Pollution Act ("OPA"). Other federal laws which contain natural resources damages provisions include the Marine sanctuaries Act and the Trans-Alaska Pipeline Authorization Act. All these statutes authorize natural resources trustees to recover compensatory damages for injury to, destruction of, or loss of natural resources resulting from a release of a hazardous substance, or a discharge of oil into navigable waters.

I. INTRODUCTION

The most important federal environmental laws pertaining to natural resources damages are the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), as amended, and the Clean Water Act ("CWA") , as amended, most recently through the Oil Pollution Act ("OPA"). Other federal laws which contain natural resources damages provisions include the Marine sanctuaries Act and the Trans-Alaska Pipeline Authorization Act. All these statutes authorize natural resources trustees to recover compensatory damages for injury to, destruction of, or loss of natural resources resulting from a release of a hazardous substance, or a discharge of oil into navigable waters.

Demands for natural resources damages differ from traditional environmental claims. Traditional CERCLA or CWA cases are brought by the Environmental Protection Agency ("EPA") or an analogous state agency, for harm or potential harm to human health, and for remedial action. Typically they are based on discharges that exceed limits set by a permit. Traditional CWA and CERCLA claims do not depend on whether or not there is damage to natural resources, and usually they do not involve restoration of the environment from a discharge. This is true even though in the usual situation, even after a clean-up is completed, residual contamination may remain that presents harm to natural resources. For example, if streamside tailings from mining operations leach hazardous substances into a river, the usual clean-up, removal of the tailings, may not fully restore the river. The sediments, fish, and other life downstream from the tailings may remain injured. Additionally, there may be damages from the lost use and other values of an injured resource until it is restored.

Natural resources damages claims under CWA and CERCLA are intended to fill the gap left by traditional suits. Claims can be brought to require responsible parties to pay monetary damages necessary to rehabilitate the damaged environment, costs involved in assessing the damage and in bringing a legal action, and prejudgment interest. However, there is no Superfund for natural resources damages.

Natural resources damages actions start with the proposition that there has been a significant injury to the environment, be it oily birds, mine tailings in streams, or the like. The agencies profess that the purpose of these claims is not to punish polluters. Rather, responsible parties are asked to pay to restore an area or ecosystem to its "baseline," that is, the state of the area absent the damage caused by the responsible party. Also, the basic purpose of CERCLA's natural resources damages provision is to require polluters to bear the costs of their polluting activities. Those who benefit financially from commercial activity must internalize the health and environmental costs for that activity into the costs of doing business. S. Rep. No. 848, 96th Cong., 2d Sess. 13 (1980). The focus is full restoration of the environment, which is often a very expensive proposition. consequently, in many cases the agencies will apply for very large recoveries.

Federal and state officials may be designated to serve as natural resources trustees under CERCLA and CWA. CERCLA also recognizes the authority of Indian tribes to commence actions for natural resources damages. Currently, the EPA is not a designated natural resources trustee. Designated trustees include agencies and sub-agencies such as the Department of Interior ("DOI"), the Army Corps of Engineers, the U.S. Fish and Wildlife Service, the Bureau of Land Management, and where authorized by state statute, .various state agencies. There have been as many as fifteen or twenty different natural resources trustees involved in a single claim. This has led to disagreements and "turf wars" among trustees regarding assessment of damages.

Members of the public have no direct right to sue persons or entities who cause natural resources damages. However, under the citizen suit provisions of both CERCLA and CWA, trustees who fail to adequately protect the natural resources entrusted to their care may be forced by private citizens to live up to their duties under the public trust doctrine.

II. GENERAL STATUTORY GUIDELINES

A. Federal

Section 107 (a) (4) (C) of CERCLA establishes liability for "damages for injury to, destruction of, or loss of natural resources, including the reasonable costs of assessing such injury, destruction, or loss resulting from such a release." The potentially responsible parties ("PRPs") for natural resources damages under CERCLA are the (1) current owner or operator of a vessel or facility, (2) past owner or operator of a facility at the time of the disposal of hazardous substances, (3) generators and other who arrange for the disposal or treatment of hazardous substances, and (4) transporters of hazardous substances for disposal or treatment who selected the disposal or treatment site. Owners, operators, generators and transporters generally will be liable for natural resources damages under CERCLA if there is (1) a release (2) of a hazardous substance (3) from a facility. 42 U.S.C. § 9607(a).

A hazardous substance under CERCLA is any substance that is designated as hazardous by EPA, and those substances that are designated or regulated pursuant to other federal environmental statutes, such as CWA, the Resource Conservation and Recovery Act, the Clean Air Act, and the Toxic Substances Control Act. There are presently several hundred identified hazardous substances. Primary products as well as waste products may be hazardous substances.

Natural resources are defined by CERCLA as "land, f ish, wildlife, biotic, 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 local government, any foreign government [or] any Indian tribe." 42 U.S.C. § 9601(16). Passive uses such as hiking and fishing also fall under the definition of natural resources.

Under Section 311 of CWA, trustees representing the United States or any state are appointed in order to sue for the "costs or expenses incurred by the Federal or State government in the restoration or replacement of natural resources damaged or destroyed as a result of a discharge of oil or hazardous waste in violation" of the Act. 33 U.S.C. § 1321(f) (4) and (5).

B. State

The New Mexico Natural Resources Trustee Act, §§ 75-7-1 to -5 NMSA 1978, was enacted by the 1993 Legislature. It became effective on April 7, 1993. The Trustee is charged with acting on behalf of the public as trustee of natural resources within the state, or belonging to, managed by, controlled by, or appertaining to the state. The Trustee is also authorized to prosecute claims for natural resources damages permitted by the various federal environmental laws which arise within the state.

New Mexico's natural resources Trustee is James Koch. Steve Cary is director of the Office of Natural Resources Trustee ("ONRT") , and Charlie DeSaillan is the ONRT attorney. The ONRT staff is currently identifying sites in New Mexico which have natural resource damages and is trying to catalog those sites. Part of that effort involves communication with other state agencies to learn about sites where natural resources may have been injured. Also, ONRT is sharing information with federal trustees concerning sites in New Mexico. The ONRT staff currently estimates that there are some fifty to sixty sites in New Mexico that may have injured natural resources. The criteria that the ONRT utilizes in identifying and selecting sites is largely governed by federal regulations. In particular, the DOI regulations establish procedures and tests to determine whether there is a natural resources injury. The ONRT intends to contact PRPs directly by telephone or in writing to see if there is a basis to negotiate the settlement of national resource damage claims.

In addition to the resources which are specifically made the subject of natural resources damages claims under CERCLA and CWA, such as air and water, the ONRT includes cultural resources in the list of natural resources. To date, there have been no claims pursued for this controversial item of damages, but ONRT may consider pursuing such claims in the future.

The regulated community in New Mexico is concerned about the lack of certainty and finality created by the ONRT. For instance, a company might undertake a remediation in strict compliance with all of the New Mexico Mining Act regulations and requirements of the Energy and Minerals Department and the Environment Department ("ED"), and yet still have liability to the ONRT that could arise at some later time. The ONRT anticipates developing some policy guidelines concerning the types of cases that it will become involved in, and the stage at which they will become involved. ONRT also hopes to work closely with the ED in order to coordinate efforts.

Many officials within the ED believe that the Office of the Trustee should be held by the Secretary of the ED. ED has already had problems trying to negotiate clean-ups with parties only to have the Trustee derail the negotiations by coming in late with the threat of potential CERCLA liability for natural resources damages. PRPs should consider including the Trustee at the table of any negotiations before agreeing to and finalizing any clean-up plans with ED.

III. REGULATIONS AND RULEMAKING

Section 302(c) of CERCLA requires the President to promulgate regulations for the assessment of damages for injury to, destruction of, or loss of natural resources resulting from a release of oil or a hazardous substance. 42 U.S.C. § 9651(c). The DOI, after being delegated this responsibility by the President, published rules governing natural resource damage assessments in 1986, 1987, 1988, and 1994.

Department of Interior regulations are found at 43 C.F.R Part 11. The natural resource damage assessment regulations under CERCLA provide an administrative process for conducting assessments, as well as technical methods for the actual identification of injuries and calculation of damages. Type A regulations apply only to specific coastal and marine environments. 43 C.F.R. § 11.41. The Department is developing Type A regulations for other specific ecosystems, such as for Great Lakes environments. Type B regulations apply in other site-specific individual cases. They specify various protocols for conducting assessments to determine the type and extent of injury, destruction, or loss.

Under both Type A and Type B regulations, damage assessments consist of four major phases. The first phase involves the activities that precede the actual assessment. For example, upon detecting or receiving notification of a discharge or release, trustee officials are to perform a pre-assessment screen to ascertain whether further assessment actions are warranted. The second phase involves the preparation of an assessment plan. This is subject to public review and comment, and it generally assists the involvement of PRPS, other trustee officials, the general public, and any other interested parties.

In the third phase, trustee officials conduct the work described in the assessment plan. The work involves three steps: injury determination, injury quantification, and damage determination. In Type A assessments, trustee officials perform injury determination, quantification and damage determination through the use of standardized procedures involving minimal field work. In Type B assessments, injury determination, quantification, and damage determination are performed through the use of a range of alternative scientific and economic methodologies.

The regulations under CERCLA provide a general definition of injury applicable to natural resources for purposes of injury determination. The definition is:

A measurable adverse change, either long- or short-term, in the chemical or physical quality or the viability of a natural resource resulting either directly or indirectly from exposure to a discharge of oil or release of a hazardous substance, or exposure to a product of reactions resulting form the discharge of oil or release of a hazardous substance.

43 C.F.R. § 11.14(v). Thus, for there to be an injury to natural resources, there must be a measurable adverse change in the resource that is detectable by observation or scientific methods. Secondly, the adverse change must be to the chemical or physical quality or to the viability of a resource. 51 Fed. Reg. 27,682.

Three aspects of an incident must be documented in the showing of a natural resource injury. First, there must have been a statutorily defined discharge of oil or a release of a hazardous substance. Second, one or more of the defined injury standards contained in 43 C.F.R. § 11.62 must have been exceeded. Third, the injury must be linked to the discharge or release through a pathway of contamination as provided for in § 11.63 of the regulations.

The fourth phase of every natural resources damage assessment consists of post-assessment activities, such as the preparation of a report of assessment, establishment of an account for damage assessment awards, and development of a restoration plan for use of the awards.

The Type B rules were challenged in State of Ohio v. United States Dep't of the Interior, 880 F.2d 432, (D.C. Cir. 1989), essentially because they were viewed as too stingy in measuring "damages," the monetary quantification of a physical injury to the natural resource. The court in Ohio v. Interior upheld various challenged aspects of the Type B rules but remanded on three issues, including the damage issue. First, the court ordered DOI to revise the regulations in order to reflect the statutory preference for using restoration costs as the basic measure of natural resource damages. The court struck down the regulation's limitation of damages to the "lesser of" either the cost of restoring or replacing the resource, or the diminution of use value of the resource. Second, the court ordered DOI to revise the rules to allow for the recovery of all reliably calculated lost values of injured natural resources, including both lost use values and lost non-use values. Use values are derived through activities such as hiking or fishing. Non-use values are not dependent on use of the resource. Non-use values include existence value, which is the value of knowing that a resource exists, and bequest value, which is the value of knowing that a resource will be available for future generations. Finally, the court asked DOI to clarify whether the natural resource damage assessment regulations apply to natural resources that are not actually owned by the government.

Following notices of proposed rulemaking and comment periods, on March 25, 1994, DOI issued a final rule addressing all aspects of the Ohio v. Interior remand, other than the assessment of lost non-use values. 59 Fed. Reg. 14,262. In part, the final rule contains a new measure of damages based on the cost of restoring, rehabilitating, replacing, and/or acquiring the equivalent of the injured resources. Additionally, the Department has proposed a revision to the Type B rule to include certain standards to improve the reliability of the contingent valuation methodology ("CVM") when used to calculate lost non-use values. 59 Fed. Reg. 23,098, May 4, 1994. CVM is a way to determine the economic value of goods and services through the use of survey questions. This methodology is the only one currently available to explicitly determine non-use values.

OPA was signed into law on August 18, 1990. Among other things, OPA amended the natural resources damage provisions of CWA. OPA authorized the National Oceanic and Atmospheric Administration ("NOAA") to develop natural resources damage assessment regulations for discharges of oil into navigable waters. DOI is attempting to coordinate its rulemakings with NOAA to ensure, to the extent possible, that consistent processes are established for assessing natural resource damages under both CERCLA and OPA. NOAA published a proposed natural resources damages assessment rule on January 7, 1994 (59 Fed. Reg. 1062).

Proposed natural resources damages regulations under OPA are similar to the regulations under CERCLA. Some of the more significant differences relate to injury determination/quantification, pre-spill planning, review of regulations, and settlement guidance.

Section 107(f)(2)(C) of CERCLA specifies that "any determination or assessment of damages to natural resources for the purposes of this Act ... made by a Federal or State trustee in accordance with regulations promulgated under section 301(c) of this Act shall have the force and effect of a rebuttable presumption...."

IV. DETERMINATION OF DAMAGES

Damages are defined by Section 101(6) of CERCLA to mean "damages for injury or loss of natural resources as set forth in section 107(a) or 111(b) of this Act." CERCLA does not define the terms "injury, destruction, or loss." Further, CERCLA does not specify the standard of proof necessary for showing that a particular discharge or release caused a particular injury to a natural resource.

Damages may be recovered for those natural resource injuries and losses that are not fully remedied by response actions. All sums recovered in compensation for natural resources injuries by trustees must be used to restore, rehabilitate, replace, or acquire the equivalent of the injured natural resources.

V. DEFENSES

Many have considered that privately owned natural resources should not be subject to these sorts of claims. The 1986 DOI regulations excluded damages to privately owned natural resources from the natural resources damages assessments. 51 Fed. Reg. at 27,696. The court in Ohio v. interior questioned the validity of this exclusion, however. CERCLA does not prohibit recovery for natural resources that were privately owned since CERCLA speaks of resources "otherwise controlled by" the trustee. The new DOI regulation states that the "rule is available for assessments of all natural resources covered by CERCLA, which under the plain language of the statute includes more than just resources owned by the government." 59 Fed. Reg. 14,265. Thus, it is possible that privately owned natural resources which are heavily-regulated or managed may be deemed "controlled" by the government, and thus subject to claims for natural resources damages.

Section 107(f)(1) of CERCLA provides that "there shall be no recovery... where such damages and the release of hazardous substance from which such damages regulated have occurred wholly before [December 11, 1980, which is the enactment day of CERCLA] . 11 42 U.S. C. § 9607 (f) (1) . This provision has been interpreted to mean that liability is precluded only for damages suffered on or after the enactment of CERCLA. United States v. Reilly Tar and Chemical Corp., 546 F. Supp. 1100 (D. Minn. 1982). If damages to natural resources occurred both before and after the enactment of CERCLA, only the post-enactment damages may be recovered. In re Acushnet River and New Bedford Harbor Proceeding, 716 F. Supp. 676 (D. Mass. 1989). Where the damages are not divisible between pre- and post-enactment releases, both may be recovered. Id.

The limitations period for claims for natural resources damages is found at 42 U.S. C. § 9613 (g) (1). It provides that CERCLA's three-year statute of limitations begins to run for natural resource damage actions on the later of (1) the date of discovery of the loss and its connection with the release, (2) the date of promulgation of the natural resources damage assessment final regulations (this has not yet occurred - see 59 Fed. Reg. at 14,266), or (3) the date of completion of remedial action at a National Priorities List site.

With respect to release or damage authorized by permit as a defense, 42 U. S. C. § 9607 (f) (1) provides there is no liability where the damage to natural resources complained of "were specifically identified as an irreversible and irretrievable commitment of natural resources in an environmental impact statement, or other comparable environment analysis, and the decision to grant a permit or license authorizes such commitment of natural resources, and the facility or project was otherwise operating within the terms of its permit or license .... 11 This affirmative defense only excuses liability for natural resources damages resulting from a newly permitted project, and not those resulting from prior activities. Idaho v. Hanna Mining Co., 882 F.2d 392 (9th Cir. 1989). Furthermore, 42 U.S.C. § 9607(j) says that natural resource damages which result from a "federally permitted release" are not recoverable under CERCLA, but may be under other existing laws.

Noteworthy potential defenses to CWA liability are found in 33 U.S.C. § 1321(f), which permits the avoidance of liability if the discharge was caused solely by an act of God, an act of war, negligence on the part of the United States government, or an act or omission of a third party. Similar defenses exist to CERCLA actions. 42 U.S.C. § 9607(b).

PRPs may also argue that their activities did not cause the asserted natural resources damage. 42 U.S. C. § 9607 (a) (4) (c) requires that the damages must result from a release of oil or a hazardous substance. The Ohio v. Interior court found that CERCLA is at best ambiguous on the question of whether the causation of injury standard under § 107 (a) (c) must be less demanding than that of the common law. 880 F.2d at 472. Consequently, the trustee must show that a particular spill or release caused a particular injury.

VI. SELECTED CASE LAW SUMMARIES

In In re Acushnet River and New Bedford Harbor Proceeding, 712 F. Supp. 1019 (D. Mass 1989), the court held that all CERCLA settlements which contain covenants not to sue settlors for natural resources damages must also include provisions which insure that the settlor will take all appropriate actions necessary to protect and restore the injured natural resources. The court rejected a partial CERCLA settlement because it was unclear that the natural resources damage trustee had consented to it. Also it did not include a "re-opener" provision which assures that the settlor may be sued for natural resource damages discovered in the future.

In State of Idaho v. Howmet Turbine Component Co., 814 F.2d 1376 (9th Cir. 1987), it was held that Idaho met the statute of limitations and notice provisions for civil actions requirements under CERCLA. The case involved suit against mining companies for acidic drainage containing copper, cobalt and iron from the Blackbird Mine, and contamination from tailings. It was alleged that the drainage killed fish, reduced and eliminated spawning runs, and caused other adverse effects on the stream's aquatic life.

In Satsky, et al. v. Paramount Communications, Inc., 7 F.3d 1464 (10th Cir. 1993), the court held that a consent decree between the State of Colorado and an alleged polluter barred an adjoining property owner's claim against the polluter, under the doctrine of res judicata.

In Exxon Corp. v. Hunt, 475 U.S. 359, 106 S. Ct. 1103 (1986), it was held that CERCLA does not preempt the New Jersey Spill Compensation and Control Act.

In State of Colorado v. Idarado Mining Co., 916 F.2d 1486 (10th Cir. 1990), it was held that CERCLA does not permit state injunctive relief. In that case, Colorado attempted to require the defendant mining companies to perform the state's clean-up plan.

VII. EXPECTED TRENDS

Although CERCLA is thirteen years old, there has been little focus on natural resources damages within the agency community. This is explained at least in part by the lack of enabling regulation. Also, there has been little funding provided to trustees. The oil spill from the Exxon Valdez has been a catalyst for increased efforts by the regulatory community, however. In general, the new regulations under CERCLA by the DOI and the proposed regulations for OPA by NOAA promise to increase the activity in this area.

The trend for resolving these kinds of claims is very early focus on restoration. More and more PRPs are getting involved themselves in restoring ecosystems, rather than just handing funds over to the agencies for them to conduct the restoration. Typically, PRPs can restore an environment to its "baseline" faster and cheaper than can an agency. Responsible parties often propose innovative solutions to difficult problems as well. In one case, a responsible party bought a parcel of land which contained rare birds, and deeded it to the federal government to replace a parcel where contamination killed much of the bird population.