Natural Resource Damage Assessment: Methods and Cases

gives a histogram of the claims made in cases that used the Washington state compensation
schedule method. These claims are mostly moderate in size. While few exceed $25,000 (though
the largest case involved a claim for over a million dollars), almost none are lower than $100.
Figure 2.5 provides a scatter-plot of the value of NRD claimed against the volume of the
spill in each of the cases for which the compensation schedule was used. The biggest cases were
dropped from the graph in order to make the rest easier to display. While the claims do tend to be
larger when the spill is bigger, the schedule is complex enough that the correlation between these
two values is not perfect. For all 209 cases in the data set the correlation coefficient is 0.94, but
when the largest five spills are dropped the correlation coefficient drops to 0.80.
The Washington compensation schedule has many desirable features. It is inexpensive
and easy to use, since it is designed to produce an estimate of damages using little more
information than the type and volume of oil released and the location of the spill. Given its
simplicity, this assessment method has a surprising amount of spill specificity, since the factors
used to scale damages are calculated separately for each of a very large number of different
geographic regions within the state. Many of the parameters used in the method were developed
with the input of a knowledgeable scientific advisory board.
The damage assessment formulas discussed above yield damage estimates that increase
with the magnitude of the spill, proxies for the magnitude of the injury (e.g. vulnerability of
different habitat types to mechanical injury and acute toxicity) and the length of time the injury is
likely to persist. Damage estimates are likely to be higher in cases where the injured resources
are of relatively great value. There are many places in the schedules where judgments of relative
values are implicitly being made; four examples can be readily identified. First, spill
vulnerability scores are higher in marine and estuarine areas if species of special importance
(such as those thought to be endangered) are likely to have been affected. Second, spill
vulnerability scores are higher in freshwater areas if the water system in question is important for
benefits such as municipal water supply, recreation, or wildlife habitat. These scores are also
higher if the water system is relatively pristine. Pristine water systems may actually be better
able to recover from a spill than systems that are already highly degraded; this element of the
SVS for freshwater spills seems to act as a measure of variation in the value of what is being
injured. Third, the index of recreation vulnerability includes factors relevant to the social value
of the damaged resource, since recreation vulnerability is a function of how many people
participate in recreational activities in the area affected by a spill. Fourth, spill vulnerability
scores are higher for freshwater wetlands that are important (for example, those that harbor
endangered species) or unusual.
However, there is no unified, transparent mechanism through which the value to society
of damaged resources is brought into the calculations; many features of the assessment schedules
seem to impose arbitrary and possibly undesirable structures on the damages that are assessed.
For example, the multipliers used to adjust monetary damages to lie between $1 and $50 are
arbitrary; there is no a priori reason that the monetary damages caused per gallon of oil spilled in
each of the four types of receiving environments should adhere to the same numerical range. In
general, placing a cap on the amount of damages assessed may reduce incentives to prevent the
most harmful oil spills. Also, in the marine and Columbia River compensation schedules,
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