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Natural Resource Damage Assessment: Methods and Cases

Natural Resource Damage Assessment: Methods and Cases

Both of these states’

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. 50

References Cozine, M. H. 1999. “Natural Resource Damages: A Sleeping Giant Awakes.” New Jersey Law Journal. CLVII-No. 1-INDEX 6, July: 156-158. Desvousges, W. H., R. W. Dunford, K. E. Mathews, C. L. Taylor and J. L. Teague. 1999. A Preliminary Economic Evaluation of New Jersey’s Proposed Groundwater Damage Assessment Process. Prepared for New Jersey Site Remediation Industry Network by Triangle Economic Research, Durham, NC. Loomis, J. B. and D. S. White. 1996. “Economic Benefits of Rare and Endangered Species: Summary and Meta-analysis.” Ecological Economics 18: 197-206. Minnesota Pollution Control Agency (MPCA). Closed Landfill Program – Insurance Recovery Effort. Downloaded from http://www/pca.mn.us/cleanup/landfill-closed.html [7/02]. Mitchell, R. C. and R. T. Carson. 1989. Existence Values for Groundwater Protection. Draft Final Report Prepared Under Cooperative Agreement CR814041-01 between the U.S. Environmental Protection Agency and Resources for the Future. National Research Council. 1997. Valuing Groundwater: Economic Concepts and Approaches. Washington, D.C.: National Academy Press. New Jersey Department of Environmental Protection (NJDEP). 1999. Frequently Asked Questions about Natural Resource Damages in New Jersey. Office of Natural Resource Damages, NJDEP. Ruotsinoja, S. 1997. Natural Resource Damages Calculations for Closed Landfill Program Insurance Settlements. State of Minnesota Office Memorandum. Shrestha, R. K. and J. B. Loomis. 2001. “Testing a Meta-analysis Model for Benefit Transfer in International Outdoor Recreation.” Ecological Economics 391: 67-83. State of New Jersey (New Jersey). 1999. Technical Requirement for Site Remediation N.J.A.C.7:26E. State of Washington (Washington). 1992. Preassessment Screening and Oil Spill Compensation Schedule Regulations. Title 173 Washington Administrative Code, Chapter 173-183. Downloaded from http://www.leg.wa.gov/wac/index.cfm?fuseaction=title&title=173 [9/01]. State of Washington (Washington). 2001. Oil and Hazardous Substance Spill Prevention and Response. Revised Code of Washington Chapter 90.56. Downloaded from http://search.mrsc.org/nxt/gateway.dll?f=templates&fn=legpage.htm$vid=rcwwac:leg [9/01]. U.S. Coast Guard (USCG). 2001. Pollution Incidents In and Around U.S. Waters – Internet Version. Created August 2001. Downloaded from http://www.uscg.mil/hq/g- 51

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