The Cost of Certainty in Natural Resource Damage Assessment Under the Oil Pollution Act of 19901

Abstract

ABSTRACT Pursuant to the Oil Pollution Act of 1990 (OPA 90), natural resource trustees are empowered to seek recovery for damages to natural resources caused by discharges of oil and/or certain threats of discharges of oil. To determine the proper amount of damages, trustees undertake the process of “scaling,” which is an attempt to calculate the size of restoration actions that would be required to expedite recovery of injured natural resources to baseline and compensate the public for interim lost resources and services. Trustees utilize various scaling methods, including service-to-service methods, such as habitat equivalency analysis, and value-to-value methods, such as hedonic price models and contingent valuation. Regardless of the method chosen, however, the scaling is directly dependent on the level of injury caused by a spill. Disputes between trustees and those parties designated as responsible for the spill (responsible parties or RPs) often occur in determining the level of injury. In many cases, as a result of either these disputes or the trustees' desire to determine the precise level of injury, trustees undertake costly and time-consuming injury studies. These studies oftentimes are inefficient because the resulting gains in certainty often are achieved through disproportionately expensive studies relative to the resulting gains in restoration. In certain instances, attempts to achieve greater certainty can destroy an otherwise efficient and cooperative restoration effort and run contrary to the OPA 90 regulations. Such attempts also can lead to costly litigation for both the public and the RP involved. Lastly, attempts to achieve greater certainty during injury assessment can unnecessarily increase the scale of compensatory restoration because of delays in implementing restoration actions. Both trustees and RPs must recognize those instances in which achieving greater certainty leads to increased costs to both the public and the RP. In such situations, stipulating to certain injury assumptions can lead to overall net gains for both the public and the RP. These stipulations can be used to induce RPs to increase other aspects of the restoration, thereby increasing overall gains for the public at less cost to the RP.