Natural Resource Damages. A bird in the hand is worth two in the oil spill: calculating natural resource damages under the U.S. Oil Pollution Act of 1990

Your vessel was involved in an incident in jurisdictional waters of the United States. If the incident caused -- or threatened to cause -- an oil spill, you may be liable for costs to not only clean up the spill, but also to compensate the public for losses of and injuries to, and costs to restore, impacted natural resources – known as natural resource damages (NRD).

Natural Resource Damages Following a Maritime Incident

Typical natural resources injured by oil spills may include: marine, aquatic and terrestrial ecosystems and their services; birds (including migratory, endangered and common species); shorelines and vegetation; marine, aquatic and terrestrial mammals, reptiles, amphibians, finfish, lobsters and shellfish; recreational use lost; and cultural resources. But how are NRD determined – and how much will this cost?

The answer will often depend on the qualifications and experience of the responsible party’s (RP) NRD assessment (NRDA) team. The U.S. federal Oil Pollution Act of 1990 (OPA 90) and its hazardous substances counterpart, the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), formulate the framework to make RPs liable for such clean-up and NRD costs. OPA 90 provides an intricate legal framework requiring federal agencies, including the National Oceanic and Atmospheric Administration (NOAA) and the United States Fish & Wildlife Service (USFWS), states, federally recognised tribes and foreign governments (collectively, the Trustees) to conduct cooperative NRDAs with the RP.

It is critical for an RP and its NRDA team to participate in the cooperative NRDA effort because RPs ultimately must:

     A.) pay all costs (RP and Trustees) to assess the NRD; and
     B.) compensate the public for the NRDby funding and/or conducting the necessary restoration.

Importantly, under OPA 90 and its implementing regulations, the playing field is further tilted in favour of the Trustees as they are afforded a “rebuttable presumption” for their NRD determination in any administrative or judicial proceeding. In other words, the Trustees do not have to prove their NRD determination is accurate; rather, the RP must prove it isn’t.

If an oil spill triggers a NRDA, the RP’s NRDA team should quickly develop and implement procedures that capture and/or generate contemporaneous information that, in the end, can cost-effectively reduce uncertainty related to two primary NRD questions: “What natural resources were injured?” and “What was the spill’s initial impact on those resources?”

For all but the smallest U.S. maritime oil spills (and sometimes even then if significant and/or valuable natural resources are at risk), the process of answering these questions should begin as soon as the emergency response is activated, as much of the NRD data in the marine environment are ephemeral (ie., here today, gone tomorrow). This is because emergency response activation not only mobilises a small army of oil-spill responders, it also mobilises state and federal scientists – frequently drawn from (or engaged by) the Trustees – whose job is to determine how much restoration will ultimately be required. Trustees’ estimates are often exaggerated and/or not fully scientifically supported and, because of the evidentiary presumption afforded Trustee NRD calculations in an OPA 90 incident as noted above, the RP is best served to participate “early and often” to appropriately influence the NRDA outcome by ensuring the data developed are grounded in good science and rational assumptions and appropriately calibrated to actual damages.

Real life example: the common loon

Within days of a significant 2003 oil spill that impacted coastal waters and extensive shorelines in Buzzards Bay, Massachusetts and Rhode Island, two NRD considerations became clear in the context of potential avian injuries: in addition to numerous other injured bird species, hundreds of moribund common loons were being collected and, based on a NRDA matter settled in 1999, each assumed common loon mortality would likely require approximately US$10,000 (in 2003) in compensatory restoration. Given the level of NRD liability likely to be associated with the loss of common loons and their services, we worked with the Trustees to ensure that response-related information was collected in a manner that would enable the use of peer-reviewed modeling methods (as well as field experiments and literature evaluations) to estimate common loon mortality rather than rely on the Trustees’ preference for more commonly used, but less exacting, alternatives.

Investment in key field data collection during the response afforded the RP options as the agreed-upon cooperative NRDA transitioned into injury quantification and determining potential restoration options. The Trustees opined that, based on their prior experience implementing assessments, only 1 in 10 loons impacted by the oil spill were likely to have been found (ie., the other 9 out of 10 loons would not be found due to, for example, sinking, scavenging, fly-aways or low search efficiency). Further, the Trustees were willing to avoid the assessment phase and offered the RP a “10X” multiplier stipulation for the loons that, the Trustees emphasized, would save the RP significant costs of assessment.

While this approach would have been more expeditious (and would have saved some not insignificant assessment costs), its use would have resulted in common loon mortality estimates exceeding 2,200 and NRD liability would likely have exceeded $22,000,000 (ie., 220 collected loon carcasses X US$10,000 X 10). The authors’ preliminary work using a rigorous modeling approach suggested, however, that 1 out of every 2 or 3 impacted loons were likely to have been collected. Our estimates suggested total common loon mortality was likely closer to 600 than 2,200, which could reduce NRDA liability from ~US$22,000,000 to ~US$6,000,000. Thus, any “extra” assessment costs the RP would incur by conducting the assessment work would pale in comparison with the actual “extra” NRD and restoration costs the RP would be responsible for by stipulating to a 10X multiplier for the common loon injury.

In light of our modeling work, the RP’s loon NRD estimate was significantly less than the Trustees’ estimate; the RP reasoned that the Trustees’ expedited approach grossly exaggerated loon injury and ultimate restoration costs. As such, the RP declined the stipulation and the authors worked with the Trustees to refine the modeling approach and conduct related field work to more accurately estimate common loon injuries. The RP and Trustees ultimately agreed that approximately 530 – and not 2,200 – common loons likely died because of the spill. The settlement for common loon injury and restoration was around US$6,500,000 (in 2018), plus required assessment costs. A similar undertaking was conducted for piping plover (an endangered species) injuries, whereby we were able to successfully demonstrate through primary data collection, Monte Carlo analyses, and other modeling efforts that the cost of the needed restoration program was less than one third of the Trustees’ initial calculation, reducing the RP’s settlement obligation by almost $2,000,000 (in 2018 US$).

Conclusion

Don’t Wait to Activate

When an experienced NRDA team is deployed early in the oil spill response phase, it can rely on the facts of the spill and their experience conducting other OPA 90 NRDAs to predict Trustee concerns, methodologies and priorities: “Which natural resources will the Trustees assume were injured?”, “How much is compensatory restoration for each resource likely to cost?” and “What methods will likely be used to reach those conclusions?” With those concerns in mind, the RP’s NRDA team can work with both emergency responders and their Trustee counterparts to design and implement information collection protocols intended to minimize NRD and ultimate restoration requirements/costs. This is true not only of bird impact assessments but also assessment of impacts to other wildlife, fish, shellfish, shoreline habitats and resources that support outdoor recreation. Remember, in a NRDA, data gaps are often filled by Trustees (emboldened by their statutorily afforded rebuttable presumption) with an expedited approach that contains “protective” (ie., overly conservative) assumptions that can inflate NRD settlement costs far beyond those based on reasonable scientific estimates. Early involvement of the RP’s experienced NRD team is critical -- injury calculation is the starting point of the NRD process and the base from which the restoration projects are scaled and ultimately translated into projects the RP must undertake and/or fund.

Understand the Price of Speed

Trustees may lean toward (and push) simplifying assumptions that expedite the NRDA process while inflating NRD liability. RP NRDA teams should work collaboratively with their Trustee counterparts to ensure that injury estimates (and ultimate restoration requirements) reflect what likely happened in the environment given the available information rather than assuming the worst-case scenario. This collaboration may take time and more resources upfront relative to an expedited response (eg., an RP stipulation to “assumed” injury). However the decrease in compensatory restoration costs will likely dwarf any increased assessment costs the RP is obligated to pay for the NRD. RPs and their NRDA team should work together to understand the tradeoffs associated with various NRDA approaches and identify the approach that best supports the RP’s interests in a particular matter.

In our experience, in a U.S. OPA 90 maritime incident, working with the Trustees to collaboratively implement NRD information collection protocols and assessment methodologies is the best approach for an RP who wants to ensure the ultimate NRD assessment and restoration costs the RP is responsible for are grounded in good science and appropriately calibrated to actual damages.

 

This article was authored by Andrew Davis and Sarah Kettenmann of Shipman & Goodwin along with Jeffrey Wakefield and Ralph Markarian of SWCA Environmental Consultants and has been reprinted with permission from West P&I publishers of Waypoints.