Natural Resource Damage Assessment: Methods and Cases

ased funding for the program was provided for in the Minnesota Landfill Cleanup Act of 1994.
The 1996 Amendments to that Act (Minn. Stat. Ch. 115B.441 – 115B.445) set forth a
mechanism for obtaining contributions from insurance carriers to the funding for the program. In
many cases, the people who bore legal responsibility for environmental response costs at these
facilities (the owners or operators, those who hauled waste to the facility, or those who produced
waste that was disposed of at the landfills) held liability insurance for environmental response
costs at the landfill. The Minnesota Pollution Control Agency (MPCA) works with the Attorney
General’s Office to obtain appropriate payments from those insurance carriers which have
outstanding exposure for cleanup liability at the closed landfill sites.
In order to have a foundation for the settlement negotiation process, the MPCA has
developed estimates of the environmental response costs the state expects to incur at each of the
landfills in the program. The agency has also developed estimates of NRDs, since the carriers
can request settlement for NRDs at the time they settle for response costs and thus be granted
immunity from future legal action regarding NRD compensation. As of November of 2001, the
NRD portion of the settlements paid to the state totaled $3,359,072. 11
The MPCA chose to base its NRD estimates on groundwater contamination at the 66
landfills at which groundwater contamination exceeds the state’s Health Risk Limits (HRL). The
method they used was simplified, and used only data that was already readily available. Total
damages at the 66 landfills were estimated to be $50,712,046. The approach involves four
steps: 12
(1) Estimate average cost of lost groundwater services at a landfill ($/gallon).
(2) Estimate the volume of groundwater contaminated at each of the 66 sites.
(3) Calculate value of the groundwater injury as (volume * average cost).
(4) Allocate damages among carriers by multiplying the total groundwater damages at a
landfill by each carrier’s percentage share of the liability for costs at that landfill.
The average cost of lost groundwater services was estimated as the amount by which
source groundwater contamination increases the cost of providing potable municipal water. The
average cost to design, construct, operate, and maintain a groundwater treatment system over 30
years was calculated (based on information from six landfills in the program) to be .57
cents/gallon. The cost of supplying drinking water based on uncontaminated groundwater
supplies was estimated (based on five municipalities) to be .1 cents per gallon. Thus, the average
cost of groundwater services lost due to contamination was assumed to be .47 cents/gallon (the
difference between the two numbers).
Discussion of Minnesota method
The MPCA’s simplified valuation method is employed for a somewhat different purpose
than New Jersey’s groundwater damage assessment method. The MPCA is seeking to file
damage claims against those companies that insured the PRPs rather than the PRPs themselves,
and insurance carriers have often settled with the state with a single payment that releases them
11 Personal correspondence with Shawn Ruotsinoja at the MPCA.
12 Ruotsinoja (1997).
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