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Natural Resource Damage Assessment: Methods and Cases

Natural Resource Damage Assessment: Methods and Cases


LDF = Location-of-discharge factor, equal to: 8 if inshore origin 5 if nearshore origin 1 if offshore origin or origin outside state waters 1 if small release in terminal facility or port authority SMAF = Special-management-area factor, equal to: 1 if origin outside special management area 2 if origin inside special management area 2 if origin outside SMA but discharge enters SMA H = Amount of habitat HF = Habitat factor for areas damaged, equal to: $10/sq.ft. if coral reef $1/sq.ft. if mangroves, sea grasses $1/ft. if sandy beach $.50/sq.ft. if live bottom, oyster reef, worm rock, perennial algae, salt marsh, freshwater tidal marsh $.05/sq.ft. if sandy bottom, mud flat PCF = Pollution-category factor, equal to: 8 if Category 1 (bunker, residual fuel) 4 if Category 2 (waste, crude, lubricating oils; asphalt, tars) 1 if Category 3 (e.g. diesels, heating oil, jet fuels, gasoline) E = Compensation for death of imperiled species, equal to: $10,000*number of animals if species listed as endangered $5,000*number of animals if species listed as threatened C = Cost of damage assessment. The first segment of the equation assigns some damages just for the existence of a release, even if there is no relevant contact with habitat or harm done to endangered animals. That amount of base damages increases with the volume of the release and proximity to shore. Base damages are also higher if the release is in (or spreads to affect) a “special management area” such as a state or national park or aquatic reserve. Each factor is multiplicative, not additive. Thus, inshore status and the presence of a special management area act to increase damages by a larger absolute amount for larger spills. The second segment of the equation adds to total damages in cases where habitat has been affected. That amount of damages increases with the amount of habitat. Damages are greater per unit of habitat for some habitat types than for others (coral is valued at $10 per square foot, while a mud flat is valued at only five cents per square foot), and damages are greater for the same amount of a given habitat type if it is located in a special management area. Habitat is deemed affected if the pollutant comes in contact with it; the agency need not demonstrate harm. Both of the damage components outlined above are increased by a multiplicative factor of four or eight if the material discharged is deemed to fall into a category of pollutants that is more harmful than Category 3 (which includes motor fuel and heating oil). The total bill is calculated by adding that amount to the costs of doing the assessment and a fine for the deaths of animals that are listed as being endangered ($10,000 each) or “threatened” ($5,000 each). 38

Example of the Florida formula in use: Suppose there were a spill of 1,000 gallons of waste and crude oils in a nearshore area within the boundaries of a coastal protection area. The resources damaged are: 100 square feet of coral reef, 200 square feet of mangroves, 1,000 feet of beach, 100 square feet of live bottom, and 100 square feet of sandy bottom. The cost of conducting the assessment is $40,000. NRD ($) = {($1*1,000*5*2) + [($10*1,000) + ($1*200) + ($1*1,000) + ($.50*100) + ($.05*100)]*2}*4 + $40,000 = $170,040 Source: Nick Stratis, Florida DEP Discussion of Florida method The Florida DEP has applied this simplified method to over 4,000 cases since 1992. The distribution of damages assessed since 1995 can be seen in Figure 2.6. Over 80% of all cases have had damages billed of $50 or less – the oil-spill equivalent of a speeding ticket. While 33 cases have been assigned damages of over $5,000, the monetary value of claims made in Florida are generally much lower than the NRD damages being charged in the state of Washington. Recovery rates (damage payments as a percent of damages assessed) have been approximately 75-80% in cases where the PRP is identifiable; this is comparable to the rates observed in the Washington data. One key to the use of this simplified method of NRDA is that Florida state law grants rebuttable presumption to any results of its proper use. The agency staff need not worry about a PRP challenging their NRD estimate in court just because they use a simplified NRDA method. Other state agencies interested in adopting a method like this might have little success unless they can convince their state legislatures to bless its use in their own body of state law. The correct damages associated with the deaths of endangered and threatened species may or may not be $10,000 and $5,000, respectively (see Loomis sand White (1996) for some estimates of values of endangered species.) However, it does make sense for some value to be added to the other damages in cases where species of particular importance are lost. This may be the only feasible way to incorporate that value given the large number of listed species. If there is the potential for a large number of such species to be killed, it is worth considering a modification to the schedule that recognizes that the marginal value of species killed is probably not linear. One would need to study the literature on endangered-species valuation to ascertain whether the incremental value of a threatened creature is increasing or decreasing with the number of such creatures that are lost. 39

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