Natural Resource Damage Assessment: Methods and Cases

B. State Groundwater Damage Assessment Cases
New Jersey has pursued more cases for groundwater damages than any other state. The
trustee agency of that state uses a simplified method for valuing damages to groundwater which
is based on market prices for municipal water supplies. For more details on this approach, see
Chapter 2 of this report.
Other state agencies have assessed the value of groundwater contamination and held
parties responsible for it. As discussed below, these cases differ in the variety of methods used to
determine damage and the types of groundwater services valued; four such settled cases are
summarized in Table 3.4. In one case, the state of Utah filed suit against the Kennecott Utah
Copper Corporation in the early 1990’s. Mining operations in Bingham Pit led to high levels of
metals such as arsenic, cadmium, lead, copper, and zinc in the groundwater and restoring the
groundwater back to baseline conditions was considered infeasible. Damages were estimated by
determining the volume of contaminated water that would need to be treated and the volume of
water that would be lost during treatment. It was estimated that 8,235 acre-feet of groundwater
per year would become contaminated. The total claim for the injured groundwater using a withand-without
contamination scenario amounted to $37 million over a 50-year period using a 7%
discount rate. These costs included the costs of pumping and treating contaminated water, lost
use during treatment and assessment costs plus future oversight costs (NRD Task Force, 1998).
In a second case, the state of Massachusetts assessed damages to groundwater at the
Charles George Landfill, a federal Superfund site. Private wells had been contaminated in the
area due to this site. A replacement cost method was used to value the loss of consumptive use
services of water to residential and non-residential users of the aquifer for 50 years due to
groundwater injury. By subtracting the costs of the current private well system without
contamination (~$3.1 million) from the cost of replacing this water with a municipal distribution
system (with contamination = $11 million), it was determined that damages were approximately
$7.9 million (NRD Task Force, 1998).
A third case involved the State of Nevada vs. Santa Fe Pacific Pipelines, Inc. and
involved the release of 2.5 million gallons of petroleum products into an aquifer in 1991.
Damages for lost nonconsumptive use values were estimated using a benefits transfer approach
based on a modified CV study performed on residents near the site. A settlement of $10 million
was agreed to (NRD Task Force, 1998).
A fourth NRD case was filed by the state of Montana against the Atlantic Richfield
Corporation (ARCO) in 1983 to recover damages for injury to natural resources caused by
mining, milling and smelting operations since the 19 th century. Natural resources that were
damaged included aquatic and terrestrial biota, surface water, and groundwater. The State’s
natural resource damage assessment report covered natural resource injuries at 150 river miles
(Silver Bow Creek and the Clark Fork River from Butte to Milltown Dam), the city of Butte, and
the Anaconda area, including surrounding mountains and opportunity ponds. The state claimed
that about 600,000 acre-feet of groundwater in the Upper Clark Fork River were injured;
substantial injuries had occurred to surface water, fish, sediment, wildlife and vegetation in the
hills around Anaconda.
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