Valuing the Environment: Courts' Struggles with Natural Resource Damages

Abstract

Valuing the environment is an extremely difficult and contentious issue. Courts have struggled with this issue in determining natural resource damages (NRD) under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA) and the Oil Pollution Act of 1990 (OPA). Beginning with the D.C. Circuit opinion in Ohio v. Department of Interior, courts and legal scholars have engaged in an extensive debate about the proper techniques for calculating NRD. However, to a great extent, this debate has taken place on a general and abstract level. Instead of examining the theory of natural resource damages, this Article analyzes how courts have handled the problem of calculating NRD in practice. It examines all of the cases where a court has ruled on the validity of specific economic evidence for calculating natural resource damages in the twelve years following the Exxon Valdez disaster and the Ohio decision. It focuses on two principles of calculating natural resource damages that were identified by the Ohio court: the principle that damages should be calculated on the basis of restoration costs, and the principle that the contingent valuation method (CVM) should be used to calculate nonuse values. This Article finds that courts have been more receptive and better prepared to evaluate evidence based on restoration costs than evidence based on valuation studies. It also finds that we have encountered significant difficulties in using CVM studies for NRD cases. Based on this experience, this Article suggests a simplified, alternative structure for determining which economic technique to apply in NRD claims. Under this structure, emphasis on the valuation of the environment is replaced by an emphasis on restoring damaged resources.