Natural Resource Damage Assessment: Methods and Cases

Both of these states’ methods could be modified by using benefit transfer methods to
incorporate resource values estimated using economic valuation methods. This would enable
better identification of how these values are being assessed, the types of values that are included
(such as use or non-use values), the time over which lost value is being assessed, and the human
population whose lost values are being assessed.
If another state wants instead to design its own groundwater damage assessment tool, it
should try to adopt the best features of the New Jersey and Minnesota simplified methods. For
example, the New Jersey method allows the damage associated with groundwater contamination
to vary across parts of the state based on plume size recharge rate, water rate and duration. On
the other hand, the Minnesota method reflects a better understanding of the true economic
damage associated with groundwater contamination, in that it moves towards a formula that
calculates the damage as the increased cost of providing municipal water as a result of the
contamination. A more accurate assessment method would assign damages as the lower of the
cost of decontamination or of providing water from alternative sources altogether. However, that
specificity may be beyond the scope of a simplified method.
This sort of simplified assessment method is relatively easy for a state trustee agency to
design because damages to only one resource are being assessed there are not too many statespecific
parameters that need to be developed. However, while a price is available for water, that
price ignores ecological service benefits. These valuation tools would benefit from being
expanded to include non-consumptive and non-use values using benefit transfer methods.
Economists have much work to do in this area if these tools are to capture more than the simplest
use values of groundwater.
All of these simplified assessment methods need to be tested. Trustees should be wary of
a formula that yields results that are highly sensitive to the exact values chosen for the
parameters (as seems to be the case of the New Jersey groundwater valuation method). Research
should be done which conducts non-simplified NRDAs for a set of cases in states such as
Washington and Florida, and compares the damages that emerge from the more costly casespecific
methods to the damage estimates yielded by the simplified methods. This sort of study
could determine at least whether the simplified methods are subject to chronic over- or underestimation
of damages. If such bias is found, the simplified methods can be modified to correct
it. While it is surely desirable to develop tools capable of yielding NRD estimates in a quick and
inexpensive manner, we can still strive to make them as accurate as they can be.
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