Natural Resource Damages: The Assessment Battle Strategies for - - PowerPoint PPT Presentation

Natural Resource Damages: The Assessment Battle

Strategies for Valuing and Contesting NRD Injury and Damages

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WEDNESDAY, AUGUST 8, 2012

Presenting a live 90-minute webinar with interactive Q&A

John Carlucci, U.S. Department of the Interior, Washington, D.C. Brian D. Israel, Partner, Arnold & Porter, Washington, D.C.

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NRDAR Assessment Injury and Damages

John Carlucci U.S. Department of the Interior JOHN.CARLUCCI@sol.doi.gov

Strafford Webinar August 8, 2012

NRDAR

The Natural Resource Damage Assessment and Restoration (NRDAR) process manifests a mix

• f common, statutory, and administrative law

concepts.

6

Common Law Concepts in Natural Resource Damages

Government agencies acting as trustees on behalf

• f the public is derived from common law

concepts such as:

• Public Nuisance
• Public Trust Doctrine
• Parens Patriae

7

Statutory Authority for Natural Resource Damage Claims

• CERCLA (1980) creates a comprehensive

scheme for responding to hazardous substance releases, and authorizes federal, state, and tribal governments to seek damages for natural resource injury caused by such releases.

• OPA (1990) authorizes a substantially similar

liability scheme for discharges of oil into navigable waters.

8

Administrative Law Concepts in Natural Resource Damages

• Section 301 of CERCLA requires the federal

government to issue regulations outlining “the best available procedures” for assessing natural resource damages.

• DOI was designated by the President to undertake

promulgation of the CERCLA NRDA Regulations.

• CERCLA does not require trustees to follow the

regulations to bring a claim, but assessments done in accordance with the regulations are entitled to a rebuttable presumption in a legal or administrative proceeding.

9

Administrative Law Concepts in Natural Resource Damages

The CERCLA NRDAR Regulations provide for two types of assessments:

• Type A Procedures that estimate damages with

minimal field analysis, by means of a computer model or other simplified method.

• Type B Procedures for conducting site specific

procedures when simplified techniques are not appropriate.

10

Administrative Law Concepts in Natural Resource Damages

• NOAA is responsible for developing NRDA

Regulations under OPA.

• Section 1006 of OPA provides that an

assessment in accordance with the OPA NRDA Regulations is entitled to a rebuttable presumption in legal or administrative proceedings.

11

Interplay of Courts, Statutes, and Regulations in NRDA

When agencies like DOI and NOAA issue regulations pursuant to a statute, potentially affected members of the public can go to court to challenge the validity of the regulation (usually arguing that the agency exceeded its authority or misinterpreted what Congress wanted it to do when it passed the statute.

12

Interplay of Courts, Statutes, and Regulations in NRDA

• In addition to interpreting statutes and

regulations, Courts are also the forum for any legal claim for damages that follows an assessment.

• Ruling principles in these cases are sometimes

governed wholly by common law, or by a mixture with statutory and regulatory law.

13

Touchstones for NRDA Claims

General Liability:

• Release or discharges of hazardous substances
• r oil;
• By a responsible party;
• From a vessel or facility;
• Resulting in injury (or for OPA, the threat of

injury) to natural resources.

14

Touchstones for NRDA Claims

Pre-assessment Activities:

• Described in CERCL NRDA Rules as a “rapid

review of readily available information” to determine whether to proceed with an assessment.

• Both CERCLA and OPA discourage ranging data

collection until there is a determination to proceed.

15

Touchstones for NRDA Claims

Assessment Planning:

• Injury Determination
• Injury Quantification
• Legal Causation
• Damage Determination/Restoration Planning

Both CERCLA and OPA describe notice of intent to proceed, and an invitation to PRPs to”participate”.

16

Touchstones for NRDA Claims

Injury Determination:

• CERCLA “ambient” injuries, “acceptance

criteria”, and 18 specific biological conditions (43 CFR 11.62).

• CERCLA “catch-all” “measurable adverse change

in the chemical or physical quality or the viability of a natural resource.” (43 CFR 11.14)

• OPA “including but not limited to adverse

changes in survival, growth, and reproduction; health, physiology,…ecological process and functions…and public services.”

17

Touchstones for NRDA Claims

Injury Quantification:

• Spatial and temporal extent (straightforward);
• “Service” reduction (not always straightforward)

“Service” analysis involves identifying/quantifying the functional impairments-to people or to other resources-that result from the determination

• injuries. Functional impairments are measured

from the “baseline” condition that the resources would have existed in had the release of hazardous substances or oil not occurred.

18

Touchstones for NRDA Claims

Legal Causation:

• A pathway from the released substance to the

resource(s) assessed.

• Evidentiary strength of association of injury with

the released substance (temporal relationship, consistency, biological plausibility, dose- response relationship, consideration of alternative explanations,etc.)

19

Touchstones for NRDA Claims

Legal Causation (cont…):

• Burdens of Proof for Common Law Civil Claims

(including admissibility of evidence);

• Burdens of Proof for CERCLA and OPA NRDA

claims (i.e., the rebuttable presumption and shifting burdens of production and persuasion.

20

Touchstones for NRDA Claims

Legal Causation (cont…):

• Legal Defenses:
• Losses already cleared by and EIS or federal

permit;

• Release and damages occurred “wholly before”

the enactment of CERCLA (Dec.1980);

• Per release damage caps;
• Statute of Limitations (“remedial action” vs.

“discovery” sites);

21

Touchstones for NRDA Claims

Legal Causation (cont…):

• Legal Defenses (cont…):

 Divisibility from other causes (vs. strict, joint & several liability);  Trusteeship(i.e., jurisdiction);  Adherence to NRDA Regulations, etc.; Encourage attorneys to analyze these types of issues as soon as feasible.

22

Touchstones for NRDA Claims

Damage Determination: (Measure of damages common to both CERCLA and OPA)

• The cost of restoring, (rehabilitating), replacing,
• r acquiring the equivalent of injured resources

(baseline or primary restoration);

• The reasonable costs of assessment.

23

Touchstones for NRDA Claims

Damage Determination (cont…):

• CERCLA NRDA Rule damages can include the

value of services lost to the public pending restoration (compensable value [all reliably calculated values?])

• OPA NRDA Rule damages include the cost of

actions taken to compensate for diminution in resource value pending restoration (compensatory restoration).

24

Touchstones for NRDA Claims

Damage Determination (cont…):

• CERCLA Rule-Restoration and Compensation

Determination Plan to evaluate restoration alternatives and compensable values (See also, Preliminary Estimate of Damages);

• OPA Rule-Scaling and Restoration Planning.

25

Post NRDA Assessment

• Litigation (written demand, Notice of intent to

file suit, etc.)

• Settlement Negotiations
• Restoration Implementation
• Report of Assessment (CERCLA), Administrative

Record (OPA), etc.

26

Litigation

• Trial Advocacy
• Discovery
• Privileges

27

Settlement Negotiations

• Generally, law encourages settlement, rather

than litigation of claims.

• Getting to Yes

 Interests vs. Positions  Issues vs. Personalities  Objective Criteria  Options for Mutual Advantage Since settlements require compromise, identification and prioritization of objectives is critically important.

28

August 8, 2012

29

Natural Resource Damages: Understanding Baseline

Brian D. Israel Arnold & Porter LLP 202.942.6546 Brian.Israel@aporter.com August 8, 2012

Outline

 Baseline – The Basics  A Few Hard Questions  Baseline – From Theory to Practice  A Few Concluding Thoughts

August 8, 2012

30

What is Baseline?

 Baseline is the condition of the ecological services

“but for” the release of oil or hazardous substances.

 Interior: Baseline is the “condition or conditions that

would have existed at the assessment area had the discharge of oil or release of the hazardous substance under investigation not occurred.” 43 CFR 11.14(e).

 NOAA: Baseline “means the condition of the natural

resources and services that would have existed had the incident not occurred.” 15 CFR 990.30.

August 8, 2012

31

Pre-industrial Baseline Degradation

Baseline A B

Site Releases Recovery to Baseline

Time Resource Services

What is the Basis of Baseline?

 All of the key operative statutes include an

important “resulting from” limitation to NRD damage claims.

 CERCLA: trustees are only entitled to damages

“resulting from such a release.” 42 USC 9607(4)(C)

 OPA: trustees only entitled to “damages…that

result from such incident.” 33 USC 2702(a)

 CWA: recoverable costs include “any

costs…incurred…in the restoration or replacement

• f natural resources damaged…as a result of a

discharge of oil or a hazardous substance…” 33 USC 1321(f)(4).

 Israel

August 8, 2012

33

What is Baseline?

How is Baseline Used?

 Baseline conditions serve as the starting point for

calculating natural resource damages:

 Interior: DOI shall “quantify for each resource

determined to be injured…the effect of the discharge or release from the baseline condition in the quantity and quality of services...” 43 CFR 11.70(a).

 NOAA: “Trustees must quantify the degree, and

spatial and temporal extent of such injuries relative to baseline.” 15 CFR 990.52.

August 8, 2012

34

How is Baseline Used (Part 2)?

 In addition to calculating damages, baseline

establishes the restoration objective:

 Interior: “Restoration…means actions undertaken

to return an injured resource to its baseline condition...” 43 CFR 11.14(ll).

 NOAA: The restoration goal of OPA “is achieved

through the return of the injured natural resources and services to baseline…” 15 CFR 990.10.

August 8, 2012

35

How is Baseline Used?

How is Baseline Calculated?

 While DOI’s regulations are more detailed, both DOI

and NOAA regulations contemplate review of non- impacted areas (reference sites) and pre-impacted areas (historical data of assessment area) to calculate baseline.

 Interior: “Baseline data should be as accurate,

precise, complete, and representative of the resource as data used” in quantifying the injury. 43 CFR 11.72(b)(3).

 NOAA: “Baseline data may be estimated using

historical data, reference data, control data, or data

• f incremental changes…alone or in combination.

15 CFR 990.30.

August 8, 2012

36

How is Baseline Used?

A Few Hard Questions

 Is Baseline Different Than Causation?  How Does Baseline Impact Joint & Several

Liability in NRD Actions?

 Can Baseline Concepts Address Concurrent

Causes?

August 8, 2012

37

The Relationship Between Baseline & Causation

 Both concepts derive from the “resulting from” statutory

language.

 In theory, the two concepts are separate.  Causation asks whether the injury was caused, in whole or

in part, by the release.

 Baseline requires a quantification of the services that

would have been provided “but for” the release. This is a hypothetical exercise (since the release did occur).

 For causation, there are two known conditions (release and

impact) and the burden is to show a link.

 For baseline, there are two known conditions (release and

impact), and the burden is to ascertain an unknown condition (i.e., condition without release).

 Baseline is harder to show than causation.

August 8, 2012

38

The Relationship Between Baseline & Causation

August 8, 2012 39

NO

No NRD Claim

NRD Issues of Proof -- Flowchart

BASELINE

Would the services be greater had the release not

• ccurred?

YES

CAUSATION

Are injuries due to release of oil or hazardous substances? YES

INJURY

Are any natural resources injured?

NO

No NRD Claim

NO

No NRD Claim DAMAGES

What is the value of remaining injury? YES

August 8, 2012

40

 The distinction between baseline and causation is

further supported by case law requiring a showing

• f causation in NRD matters.

 Thus:

• the regulations support the concept of baseline
• the courts support the concept of causation.

 While the distinction between baseline and

causation is logical, is it two bites at the apple?

 In any event, a baseline analysis would, in most

cases, incorporate and resolve the causation question.

The Relationship Between Baseline & Causation

August 8, 2012

41

 The trustees could argue that the “resulting from”

requirement is satisfied by a showing of causation.

 Furthermore, as is well-known, the NRD regulations

are operative only to the extent that the trustees want the benefit of the rebuttable presumption.

 Nonetheless, PRPs possess the strong argument

that “damages resulting from the release” should exclude damages resulting from other causes.

 Finally, a trustee decision to ignore baseline is

unlikely given the litigation risk and potential inability to rely upon other provisions of the NRD regulations.

Is Baseline Really Required?

August 8, 2012

42

 Trustees maintain that liability for natural resource

damages -- like liability for response costs -- is joint and several.

 Some case law supports this proposition (see, e.g.

Montrose, 104 F.3d at 1518-19) at least in dicta, but the Courts have not fully examined this point.

 Conceptually, a baseline analysis is inconsistent

with joint and several liability since the defendant is

• nly liable for damages resulting from its releases.

 Also, baseline is an element of the plaintiff’s claim,

not an affirmative defense.

Does Baseline Eviscerate Joint & Several Liability?

August 8, 2012

43

 In one case we are working on, independent

scientists have concluded that significant deforestation was due to the combined stress of metals releases and forest fires: “either stress alone would have caused much less damage.”

 In this case, the damage did not “result from” the

metals release. On the other hand, “but for” the metals release, there would be less damage.

 Difficult for baseline analysis to tease out concurrent

stressors combining to cause a single injury.

 May be necessary to use surrogates or estimates.

Can Baseline Address Concurrent Causes?

August 8, 2012

44

BASELINE: FROM THEORY TO PRACTICE

 Common Baseline Factors  Finding Reference Sites  Using HEAs

 Other industrial releases, including permitted and unpermitted  Natural events (forest fires, floods, weather)  Ecosystem trends (e.g., declining productivity, transitions, etc)  Urbanization (development, stormwater runoff, mobile sources)  Sewage discharge and overflows  Invasive species and diseases  Physical disturbances (highways, pavement, dredging, trespassers)  Historic uses of property (recreational, agricultural, hunting)  Non-recoverable releases by PRP (e.g., preenactment, permitted,

• r non-hazardous substances)

 Bioaccumulation (different sources over time)  Acid precipitation  Global climate change

August 8, 2012

45

Potential Baseline Factors

An Example from the Coeur d’Alene Trial

 The Trustees Claimed that Mouth Deformities in

Midge Larvae were Injuries Caused by Lead Contamination

August 8, 2012

46

Chironomid Midges

August 8, 2012

48

An Example for the Coeur d’Alene Trial

 And, Indeed, there Was a Greater Prevalence of the

Deformity in the Assessment Area

 But the Deformity did Not Correlate with Lead

Concentrations

Lead vs. Deformities in Laboratory Study

Source: Martinez (2000) Adapted from Falter 4977

August 8, 2012

50

An Example for the Coeur d’Alene Trial

 The Defendant’s Experts Determined that the Cause of

the Deformity was Mineralized Sand Grains which the Larvae Ate

 The Sand Grains Resulted from Mining Operations but

were not a Hazardous Substance

August 8, 2012

51

 The use of reference sites is, in theory, a useful way to

ascertain baseline conditions.

 However, it is often very difficult to find appropriate sites

• r agree with the Trustees on appropriate sites.

 In one case where we recently got involved, the Court

had previously sided with the Trustees on the selection

• f the appropriate reference location, holding that the

issue was subject to the Trustee agency’s expertise and discretion.

 Possible solution is to select multiple reference locations

to form a “reference envelope” around the site.

Baseline Reference Sites

August 8, 2012

52

 The Habitat Equivalency Analysis provides a common

language for negotiating NRD settlements.

 Within the HEA, there is an input for percent service lost

in the initial year.

 The percent service lost is an estimate that is based

upon professional judgment and input from all parties.

 In the context of negotiations and a cooperative

assessment, the value ascribed to “percent service lost” can – and should – incorporate baseline considerations.

Baseline in HEAs

August 8, 2012

53

Outline

 Baseline – The Basics  A Few Very Hard Questions  Baseline – From Theory to Practice  A Few Concluding Thoughts