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Natural Resource Damage Assessment: Methods and Cases

Natural Resource Damage Assessment: Methods and Cases

gives a histogram of the

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, 34

% of All Cases 35 30 25 20 15 10 5 0 5 cases 57 cases 40 cases $0-$100 $101-$500 $501-$1,000 $1,001-$5,000 $5,001-$25,000 $25,001+ Figure 2.4 Damages in Washington Cases, 1991-2001 NRD $ Billed 35 65 cases Source: Data from Washington Department of Ecology – OPA Division NRD Claim ($1000) 70 60 50 40 30 20 10 0 28 cases 14 cases 0 1000 2000 3000 4000 5000 6000 Volume of Spill (gallons) Figure 2.5 Value of Claim by Gallons Spilled in WA State, 1991-2001 Source: Data from Washington Department of Ecology – OPA Division. Note the five largest spills have been removed from the graph to improve readability.

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