[Federal Register Volume 73, Number 192 (Thursday, October 2, 2008)]
[Rules and Regulations]
[Pages 57259-57268]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-23225]
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DEPARTMENT OF THE INTERIOR
43 CFR Part 11
RIN 1090-AA97
Natural Resource Damages for Hazardous Substances
AGENCY: Department of the Interior.
ACTION: Final rule.
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SUMMARY: This final rule amends certain parts of the natural resource
damage assessment regulations for hazardous substances. The regulations
provide procedures that natural resource trustees may use to evaluate
the need for and means of restoring, replacing, or acquiring the
equivalent of public natural resources that are injured or destroyed as
a result of releases of hazardous substances. The Department of the
Interior has previously developed two types of natural resource damage
assessment regulations: Standard procedures for simplified assessments
requiring minimal field observation (the Type A Rule); and site-
specific procedures for detailed assessments in individual cases (the
Type B Rule).
This final rule revises the Type B Rule to emphasize resource
restoration over economic damages. It also responds to two court
decisions addressing the regulations: State of Ohio v. U.S. Department
of the Interior, 880 F.2d 432 (DC Cir. 1989) (Ohio v. Interior); and
Kennecott Utah Copper Corp. v. U.S. Department of the Interior, 88 F.3d
1191 (DC Cir. 1996) (Kennecott v. Interior), and includes a technical
revision to resolve an apparent inconsistency in the timing provisions
for the assessment process set out in the rule.
EFFECTIVE DATE: The effective date of this final rule is November 3,
2008.
FOR FURTHER INFORMATION CONTACT: Frank DeLuise at (202) 208-4143.
SUPPLEMENTARY INFORMATION: This preamble is organized as follows:
I. What the Natural Resource Damage Regulations Are About
II. Why We Are Revising Parts of the Regulations
III. Major Issues Addressed by the Revisions
A. Further Emphasizing Natural Resource Restoration Over
Economic Damages
B. Complying With Ohio v. Interior and Responding to Kennecott
v. Interior
C. Technical Corrections for Consistent Assessment Timing
Guidelines
IV. Response to Comments
A. Emphasizing Restoration Over Economic Damages
B. Examples of Restoration-Based Damage Determination
Methodologies
C. Factors for Evaluating the Feasibility and Reliability of
Methodologies
D. Restoration of Resources Versus Services
E. Clarification on Assessment Process Timing
F. Deletion of the Bar on the Use of Contingent Valuation to
Estimate Option and Existence Value To Comply With Ohio v. Interior
G. Deletion of the Date of Promulgation for the Statute of
Limitations Provisions To Comply With Ohio v. Interior
H. Miscellaneous Comments
I. What The Natural Resource Damage Regulations Are About
The regulations describe how to conduct a natural resource damage
assessment for hazardous substance releases under the Comprehensive
Environmental Response, Compensation, and Liability Act (42 U.S.C.
9601, 9607) (CERCLA) and the Federal Water Pollution Control Act (33
U.S.C. 1251, 1321) (Clean Water Act). CERCLA required the President to
promulgate these regulations. 42 U.S.C. 9651(c). The President
delegated this rulemaking responsibility to the Department of the
Interior (DOI). E.O. 12316, as amended by E.O. 12580. The regulations
appear in the Code of Federal Regulations (CFR) at 43 CFR Part 11.
A natural resource damage assessment is an evaluation of the need
for, and the means of securing, restoration of public natural resources
following the release of hazardous substances or oil into the
environment. The regulations we are revising only cover natural
resource damage assessments for releases of hazardous substances under
CERCLA and the Clean Water Act. There are also natural resource damage
assessment regulations at 15 CFR Part 990 that cover oil spills under
the Oil Pollution Act, 33 U.S.C. 2701 (the OPA regulations). The
current hazardous substance natural resource damage assessment and
restoration regulations, this preamble, and the revisions to the
regulations use ``restoration'' as an umbrella term for all types of
actions that the natural resource damage provisions of CERCLA and the
Clean Water Act authorize to address injured natural resources,
including restoration,
[[Page 57260]]
rehabilitation, replacement, or acquisition of equivalent resources.
Natural resource damage assessments are conducted by government
officials designated to act as ``trustees'' to bring claims on behalf
of the public for the restoration of injured natural resources.
Trustees are designated by the President, state governors, or tribes.
If trustees determine, through an assessment, that hazardous substance
releases have injured natural resources, they may pursue claims for
damages against potentially responsible parties. ``Damages'' include
funds needed to plan and implement restoration, compensation for public
losses pending restoration, reasonable assessment costs, and any
interest accruing after funds are due. See 43 CFR 11.15.
The regulations establish an administrative process for conducting
assessments that includes technical criteria for determining whether
releases have caused injury, and if so, what actions and funds are
needed to implement restoration. The regulations are for the optional
use of trustees. Trustees can use the regulations to structure damage
assessment work, frame negotiations, and inform restoration planning.
If litigation is necessary to resolve the claim, courts will give
additional deference--referred to as a ``rebuttable presumption'' in
CERCLA--to assessments performed by federal and state trustees in
accord with the regulations.
The regulations provide guidance on two different types of
assessment procedures identified in CERCLA: ``Type A'' and ``Type B''
procedures. Type A procedures are simplified procedures for small
cases. The current Type A procedures are computer programs, available
in a limited range of cases, that model the fate of a released
substance in order to project the injuries caused by the release and
calculate damages. Type B procedures outline an assessment process and
assessment methods that trustees utilize on a case by case basis. We
are revising certain parts of the Type B procedures (case by case
assessment provisions) in the regulations.
II. Why We Are Revising the Regulations
CERCLA provides that we review and revise the regulations as
appropriate every two years. 42 U.S.C. 9651(c)(3). To assist in this
most recent review, in May 2005, DOI convened a Natural Resource Damage
Assessment and Restoration (NRDAR) Federal Advisory Committee (advisory
committee) to provide recommendations regarding DOI's NRDAR activities,
authorities and responsibilities. The advisory committee comprised 30
members, representing a diverse group of interested stakeholders--
including state, tribal, and federal trustee agencies, industry groups
and potentially responsible party representatives, scientists,
economists, and national and local environmental and public interest
organizations.
A key recommendation of the advisory committee was that DOI should
undertake, without delay, a targeted revision of the regulations to
emphasize restoration over monetary damages. This revision implements
that recommendation, and responds to two court decisions addressing the
regulations: State of Ohio v. U.S. Department of the Interior, 880 F.2d
432 (DC Cir. 1989) (Ohio v. Interior); and Kennecott Utah Copper Corp.
v. U.S. Department of the Interior, 88 F.3d 1191 (DC Cir. 1996)
(Kennecott v. Interior). Finally, we are making a technical revision to
resolve an inconsistency on the appropriate timing for the
administrative process set out in the rule.
We have considered:
(a) The NRDAR advisory committee report, which was released in May
of 2007;
(b) Comments provided on the proposed rule revisions published in
the Federal Register on February 29, 2008;
(c) The Ohio v. Interior opinion;
(d) The Kennecott v. Interior opinion; and
(e) The OPA regulations.
III. Major Issues Addressed by the Revisions
Our revisions will largely leave the framework of the existing rule
intact. We are not making substantive changes to legal standards for
reliability of assessment data and methodologies. The NRDAR advisory
committee made a number of recommendations to encourage faster, more
efficient and more cost-effective resolution of claims. The committee
endorsed a tiered approach to implementing its recommendations that
would immediately address the option of emphasizing restoration over
economic damages in the regulations, while leaving the implementation
of a broader range of recommendations--including providing technical
guidance documents and streamlining of the restoration planning
process--to the future. The rest of this section discusses the major
issues addressed by the revisions. The following section references the
OPA regulations. These references are solely for the purpose of
providing context and background. For guidance on conducting natural
resource damage assessments under OPA, see 15 CFR Part 990.
A. Further Emphasizing Restoration Over Economic Damages
Under the current regulations, trustees utilizing the Type B
procedures must base their claim on the cost of implementing a publicly
reviewed restoration plan designed to return injured resources to their
baseline condition, which is defined as the condition that would have
existed had the release not occurred (see 43 CFR 11.80-82). CERCLA and
the Clean Water Act authorize trustees to recover damages not only for
the cost of restoring injured or destroyed resources to their baseline
condition, but also for public losses pending restoration to baseline.
The regulations call these interim losses ``compensable values'' (see
43 CFR 11.83(c)). The regulations define compensable value as the
amount of money required to compensate the public for the loss in
``services'' provided by the injured resources pending restoration (see
43 CFR 11.83(c)(1)). Services are defined in the current regulations as
the physical and biological functions performed by the resources,
including the human use of those functions. The current regulations
provide that compensable value should be measured by the economic value
of public losses arising from the resource injury until restoration can
be achieved, which arguably could be read as excluding restoration-
based approaches to determining compensable value.
To comply with CERCLA and the Clean Water Act, trustees must spend
any compensable value recoveries on restoration actions. Under the
current regulations, however, trustees do not need to consider
restoration actions to address interim losses until they have already
determined and recovered damages. This can be inefficient and
confusing. The NRDAR advisory committee recommended that DOI should
amend its current regulation to explicitly authorize trustees to use
the cost of restoration actions that address service losses to
calculate all damages, including interim losses. Providing the option
for a ``restoration-based'' approach to all damages better comports
with CERCLA's overall restoration objectives. It also promotes an
earlier focus on feasible restoration options, which can encourage
settlements by providing opportunities for designing creative and cost-
effective actions to address losses. We are revising 43 CFR 11.83(c) to
provide trustees with the option of estimating compensable values for
losses pending restoration
[[Page 57261]]
utilizing the cost of implementing projects that restore those lost
natural resource services.
Methodologies that compare losses arising from resource injury to
gains expected from restoration actions are frequently simpler and more
transparent than methodologies used to measure the economic value of
losses. Our revisions include four examples of project-based assessment
methodologies--conjoint analysis, habitat equivalency analysis,
resource equivalency analysis, and random utility models--which have
been used successfully to resolve claims under both the CERCLA and the
OPA regulations. We are also adding a brief description of these
restoration-based methodologies to the non-exclusive list of economic
valuation methodologies in the current regulation. Our revisions do not
sanction or bar the use of any particular methodology, so long as it
complies with the four mandatory ``acceptance criteria''--which include
feasibility and reliability, reasonable cost, avoidance of double
counting, and cost effectiveness--that appear in the current rule in
Sec. 11.83(a)(3).
The list of methodologies for assessing compensable values remains
non-exclusive, allowing for the introduction of new and innovative
techniques that may arise. As mentioned above, the current regulations
provide that when choosing among any cost estimation or valuation
methodology, trustees must ensure that the methodologies selected are
feasible and reliable for a particular incident or type of damage to be
measured. To assist trustees in evaluating feasibility and reliability,
we are providing a list of factors that set out general principles of
feasibility and reliability--such as the ability to provide useful
restoration information, peer review, and methodological standards--for
trustees to consider when evaluating the reliability of all valuation
and damage assessment methodologies. Each of the listed factors may not
be applicable in every case, and other relevant factors may be
considered. Trustees continue to be required to document their
consideration of relevant factors in the Report of Assessment.
B. Complying With Ohio v. Interior and Responding to Kennecott v.
Interior
Several provisions of the current regulations were invalidated by
the DC Circuit Court of Appeals in Ohio v. Interior and Kennecott v.
Interior. Some invalidated provisions from the 1986 rule were carried
over in the 1994 revisions responding to the Ohio v. Interior decision.
Additionally, the Kennecott v. Interior decision in 1996 invalidated
certain provisions from the 1994 revisions which have not yet been
corrected to comply with the decision. In the final rule, we are making
technical corrections to the CFR in accord with these decisions.
The Ohio v. Interior decision invalidated the limitation on
estimating option and existence value in 43 CFR 11.83(c)(1)(iii). Our
revisions will therefore delete this provision from the CFR. The
restatement of this limitation in 43 CFR 11.83(c)(2)(vii)(B) will also
be deleted from the CFR.
Estimating option and existence value through the use of contingent
valuation methodologies remains controversial. We note, however, that
our revision's focus on compensating for public losses pending
restoration with restoration actions rather than monetary damages for
the economic value of the losses will provide options for comparing
functional losses from resource injuries to functional gains expected
from restoration actions, which will reduce the need for trustees to
seek to recover the monetary value of passive economic losses such as
option and existence value.
The Kennecott v. Interior decision invalidated DOI's attempt to
define the date of promulgation of the 1994 revisions to the rule. This
was relevant because it affected the three-year statutory limitations
for filing a claim at some CERCLA sites. In 43 CFR 11.91(e), DOI
defined the date of promulgation as the later of the date when either
the Type A or Type B Rule was finalized, pursuant to the Ohio v.
Interior decision. The Court of Appeals found this interpretation
unreasonable and invalidated the provision, which we will delete from
the CFR. Since both the Type A and Type B revisions finalized pursuant
to the Ohio v. Interior decision were finalized more than three years
ago, this deletion is merely a technical correction which has no
material effect.
The 1994 revisions to the NRDAR rule stated that the measure of
natural resource damages under CERCLA was the cost of restoration of
``the injured natural resources and the services those resources
provide'' (see 43 CFR 11.80(b)). In the Kennecott decision, the Court
of Appeals invalidated this language because it was inconsistent with
DOI's preamble explanation of the measure of damages, which endorsed
the concept of quantifying resource injury and resulting public losses
by utilizing a services metric. The court reasoned that creating an
apparent dichotomy between restoration of resources and restoration of
services implied an abandonment of the services approach that was
unexplained. The court therefore invalidated the ``resources and
services'' language and ``reinstated'' the services approach, pending
further clarification.
Under the current rule, natural resource damages include both the
cost of restoring injured resources to a condition where they can
provide the level of services available at baseline level of services
and, when appropriate, compensation for interim service losses pending
restoration. Under the current rule, restoration to baseline focuses on
the resource condition, while compensable value focuses on compensation
for lost services pending the restoration of resources. ``Resources and
services'' reflects the distinct emphases for different damage
components, but it was not intended as a rejection of a services-based
approach. As the revisions make clear, the metric for evaluating
natural resource conditions for baseline restoration is the
availability of the baseline level of services, while the compensable
value for losses pending restoration is either the value of the
services lost pending restoration or the cost of projects that
compensate for services lost pending restoration.
The revision to 43 CFR 11.80(b) clarifies that the measure of
damages is the cost of (1) restoring or rehabilitating the injured
natural resources to a condition where they can provide the level of
services available at baseline, or (2) replacing and/or acquiring
equivalent natural resources capable of providing such services. Of
course, damages can be measured by an appropriate combination of
partial restoration or rehabilitation, and partial replacement and/or
acquisition of equivalent resources, so long as there is no double
counting. Damages may also include, at the discretion of the trustees,
the compensable value of services lost pending restoration. This clear
construct is carried over for conforming changes to 43 CFR 11.81(a)(1)
and (2), 43 CFR 11.82(a), (b)(iii), and (c), and 43 CFR 11.83(a).
C. Technical Correction To Provide Consistent Timing Guidelines
The current regulations provide that a Restoration and Compensation
Determination Plan (RCDP) which evaluates and selects restoration
alternatives may be developed after completion of the injury
determination and quantification phases of the assessment (see 43 CFR
11.81(d)(1)). However, an earlier provision of the current regulations
provides that the RCDP can be developed ``at any time before''
completion of the injury determination or quantification phases.
[[Page 57262]]
(See 43 CFR 11.31(c)(4)). Since the evaluation and selection of
restoration alternatives can benefit from more definitive injury
determination and quantification data, we are resolving this
inconsistency by correlating 43 CFR 11.31(c)(4) with 43 CFR 11.81(d)(1)
to provide that the RCDP may be completed after the injury
determination and quantification phases of the assessment.
IV. Response to Comments
The Department received 21 comments on the February 29, 2008
Federal Register Proposed Rulemaking Notice. The Department appreciates
the time and effort expended by the commenters. This notice does not
address any comments outside of the scope of the proposed targeted
revisions. The NRDAR Advisory Committee considered other NRDAR practice
issues--such as encouraging an early focus on restoration planning and
streamlining the restoration implementation process. These and other
issues concerning these regulations may be addressed in future biennial
reviews.
A. Emphasizing Restoration Over Economic Damages
1. Providing the Option To Calculate All Natural Resource Damages
Utilizing a Restoration-Based Approach
Comment: Most commenters who expressed an opinion on the issue of
allowing for restoration-based approaches to public losses pending
restoration generally supported this change. Many commenters believed
that restoration-based approaches better comport with the purposes of
CERCLA.
Response: We believe that in many cases, restoration-based
approaches can lead to timelier, more efficient, and more cost
effective --which is the key objective of these revisions. The NRDAR
process is streamlined by focusing directly on restoration alternatives
that address losses, rather than on first estimating the monetary value
of losses and then determining how to address them with appropriate
projects. Moreover, the transparency involved in comparing resource
gains to resource losses reduces controversy and transaction costs, and
encourages collaborative efforts to identify projects that yield high
human and ecological benefits relative to their monetary cost.
Comment: The factors to consider when selecting restoration-based
alternatives to compensate for interim public losses pending
restoration should be the same as those for selecting restoration-based
alternatives to restore, rehabilitate, replace, or acquire resources
equivalent to those injured in Sec. 11.82 of the rule.
Response: We agree that all restoration-based alternatives for
damages should be evaluated consistently under the rule, and the
revisions reflect this in Sec. 11.82.
2. Preserving the Option To Calculate Interim Public Loss Damages
Utilizing the Economic Value of the Loss
Comment: Some commenters expressed concern that restoration-based
approaches were ``over-emphasized'' and that trustees should retain the
option of making claims for public losses pending restoration based on
the monetary value of the losses.
Response: The purpose of the revisions is to remove any barriers
that exist to utilizing restoration-based approaches to all damages,
including damages for public losses pending restoration (compensable
values.) The revisions do not, however, bar the use of methodologies
that estimate the monetary value of public losses pending resource
restoration. Therefore, recovering the monetary value of public losses
pending restoration remains an option for trustees. Nevertheless,
regardless of how damages are calculated, the focus of the NRDAR
program is on achieving restoration, not on recovering monetary damages
for their own sake.
B. Examples of Restoration-Based Damage Determination Methodologies
1. Formally Sanctioning or Barring Particular Valuation and Assessment
Methodologies
Comment: Some commenters suggested that DOI's decision not to
formally sanction or bar particular valuation and assessment
methodologies is inconsistent with CERCLA and prior rulemakings. These
commenters suggest that since CERCLA requires DOI to select the ``best
available procedures'' (42 U.S.C. 9651(c)) to determine natural
resource damages, and since the Ohio decision confirmed that contingent
valuation--which is listed as a valuation and assessment methodology in
Sec. 11.83 as a best available procedure--DOI is required to sanction
or bar valuation and assessment methodologies.
Response: The Kennecott decision upheld the rule's use of ``catch-
all'' provisions in Sec. 11.83 that give trustees the discretion to
utilize assessment methodologies other than those specifically listed
in that section. This directly contradicts the idea that only
specifically sanctioned assessment methodologies are consistent with
CERCLA. More importantly, the Kennecott decision made clear that the
procedures and protocols required by CERCLA at 42 U.S.C. 9651(c) are
interpreted to mean a standard method of evaluation, not a
determinative list of methodologies that are definitively accurate in
all circumstances. ``Best available procedures'' for applying an
assessment or valuation methodology to the wide range of site specific
conditions trustees might encounter should be considered in the context
of the entire rule. This includes utility for determining appropriate
restoration actions, evaluation against the four mandatory acceptance
criteria, and the documentation of trustee choices and rationales in a
plan subject to public review and comment. This is consistent with
CERCLA, judicial interpretations of this rule, and statements by DOI in
prior rulemakings.
2. The Reliability of Restoration-Based Methodologies (Habitat/Resource
Equivalency Analysis, Conjoint Analysis, and Random Utility Models)
Referred to in the Revised Rule
Comment: Some commenters welcomed the proposal to provide some
examples of restoration-based methodologies that have been used to
formulate and resolve natural resource damage claims for calculating
compensable values, and add those examples to a list that had
exclusively included methodologies to determine monetary damages based
on the economic value of the losses. A few commenters suggested that
the CERCLA NRDAR rule should affirmatively encourage the use of habitat
equivalency analysis, which is the case under the OPA NRDAR rule.
Conversely, some commenters suggested that habitat equivalency,
resource equivalency, and conjoint analyses were not unanimously
considered to be reliable, and could be applied in a way that yielded
unreliable results.
Response: The use of habitat equivalency analysis is explicitly
encouraged under the OPA NRDAR rule. Conjoint analysis--a stated
preference method that compares the resource services provided by
various restoration alternatives to each other, rather than just
estimating their monetary values--can be as properly applied and
structured, consistent with the holdings of the Ohio court and the
Report of the NOAA Blue Ribbon Panel on Contingent Valuation, as the
currently listed contingent valuation methodology. Few of the
methodologies currently listed in Sec. 11.83 of the rule are
universally accepted as definitively
[[Page 57263]]
accurate means for determining appropriate compensation for natural
resource injury, and no listed methodology is immune from being applied
in a way that could yield unreliable results. As stated in the previous
response, the reliability of any methodology applied to a specific
assessment is determined by a process that requires a trustee decision
maker to develop and consider options, to evaluate those options based
on certain criteria, and to document the rationale for choices made in
a plan subject to public review and comment.
3. The Need for Further Guidance on the Use of Restoration-Based and
Other Assessment Methodologies
Comment: Many commenters suggested that the Department should
develop guidance on the proper utilization and application of
restoration-based and other assessment methodologies.
Response: As recommended by the NRDAR FACA Committee, the
Department plans to undertake and sponsor multi-stakeholder efforts to
develop additional guidance to supplement existing guidance on best
assessment practices.
4. Some of the Restoration-Based Methodologies Referred to in the
Revised Rule Can Also Be Used To Estimate the Monetary Economic Value
of Public Losses
Comment: One commenter said that although it is true that habitat
equivalency, resource equivalency, and conjoint analyses, as well as
random utility models are examples of restoration-based methodologies,
conjoint analyses and random utility models can also be used to
estimate monetary damages based on the economic value of losses.
Response: The list of methodologies is intended to include both
restoration-based and the traditional monetary economic value based
methodologies, since the rule gives the option to calculate damages for
public losses pending restoration utilizing either approach. The
revised rule specifically states that Random Utility Models may be
suitable for to calculating either restoration-based or monetary
economic damages.
C. Factors for Evaluating the Feasibility and Reliability of
Methodologies
1. Reasonable Cost, Cost Effectiveness, and Avoiding Double Counting
Should Remain Mandatory Criteria for Valuation and Assessment
Methodologies, and Not Just Factors To Utilize To Evaluate Feasibility
and Reliability
Comment: Some commenters indicated general support for offering
guidance to trustees on discretionary factors to consider on
methodology feasibility and reliability, but pointed out that no
justification is given for transforming mandatory acceptance criteria
for valuation and assessment methodologies into discretionary
``factors'' that trustees should consider and document in their
Restoration and Compensation Determination Plan.
Response: We did not intend to suggest that reasonable cost, cost
effectiveness, and avoiding double counting were no longer mandatory
acceptance criteria. All three of these criteria are required by other
parts of the rule, so the intent was that they would be applicable in
all cases, even if they were included within a list of factors that
would not be applicable in all cases. The final rule revision clarifies
this by leaving the current rule's language on mandatory criteria for
methodologies that includes feasibility and reliability, reasonable
cost, cost effectiveness, and avoiding double counting intact, and
distinguishing these criteria from discretionary factors that can be
used to consider and document feasibility and reliability.
2. The New Feasibility and Reliability Factors in the Proposed Rule
Amount to Additional Mandatory Criteria, Which Are Unnecessary and Will
Lead to Increased Transaction Costs and Delay, Further Deterring
Trustees From Using the Rule
Comment: Some commenters indicated they were strongly opposed to
DOI suggesting additional factors that trustees could utilize to
evaluate the feasibility and reliability of assessment methodologies.
The mandatory application of some or all of these factors will increase
transaction costs, create hurdles to completing assessments and
implementing restoration, and thus deter trustees from utilizing this
discretionary rule.
Response: As indicted in the response above, the four mandatory
criteria for assessment methodologies remain unchanged in this final
rule. We do not believe that including a new section that includes
discretionary, non-exclusive factors for trustees to consider in
evaluating the mandatory (but non-specific) ``feasibility and
reliability'' criteria will unduly burden trustees, increase
transaction costs, or deter trustees from utilizing the rule and
availing themselves to a rebuttable presumption in any judicial or
administrative proceeding on the claim. In fact, since feasibility and
reliability are mandatory criteria for assessment methodologies under
the rule, offering general guidance that includes examples of standard
established indices of reliability will assist trustees in evaluating
and documenting their choices, as required by the rule.
3. The Rule Should Affirmatively Provide That Methodologies Listed in
43 CFR 11.82 Are Feasible and Reliable
Comment: Some commenters said that the rule should make clear that
all methodologies listed in Sec. 11.83 have met the four mandatory
criteria for assessment methodologies.
Response: The wide range of situations that trustees encounter when
conducting a natural resource damage assessment makes it infeasible to
determine that certain methodologies are definitively reliable in all
circumstances and applications. As previously stated, the reliability
of a particular assessment methodology in a particular situation is
determined in the context of a rule which describes a process that
requires a trustee decision maker to develop and consider options, to
evaluate those options based on certain criteria, and to document the
rationale for choices made in a plan subject to public review and
comment.
D. Restoration of Resources vs. Services
1. The Reinstatement of the Services Based Approach to Quantifying
Injury and Damages in the Rule Will Inappropriately Lead to the
Restoration of Services Instead of Resources
Comment: The proposal ``overemphasizes'' the restoration of
services over resources, and implies that CERCLA only requires the
restoration of services, not the restoration of resources.
Response: CERCLA and the CWA unambiguously require that all NRDAR
recoveries be used ``only to restore, replace, or acquire the
equivalent'' of injured natural resources. Neither this rule, nor the
Kennecott decision's ``reinstatement'' of the services-based approach
alters these mandatory and fundamental statutory requirements. As we
are specifically providing in these revisions, and have made clear in
previous rulemakings (See, e.g., 59 Federal Register 1472-73, March 25,
[[Page 57264]]
1994, 58 Federal Register 39339-41, July 22, 1993, and 51 Federal
Register 27686, August 1, 1986) ``services'' are a metric for measuring
resource conditions and resource restoration. They are not abstract
functions that are disassociated from natural resources, and they are
restored or replaced by actions related to the quality, quantity, or
availability of natural resources.
2. Describing the Services-Based Approach
Comment: A few commenters suggested that to improve clarity and
correct syntax, the description of the four types of restoration work
(restoration, rehabilitation, replacement, or acquisition of equivalent
resources) in Sec. 11.80 should be described in two separate clauses.
Response: For the purpose of clarity, Sec. 11.80 has been revised.
Similar revisions have been made to Sec. Sec. 11.81, 11.82, and 11.83.
3. Defining Services
Comment: One commenter suggested that DOI needs to emphasize that
services include the full suite of human and ecological functions
performed by natural resources.
Response: We believe the current definition of services in the rule
includes both human and ecological services.
Comment: A few commenters said that the definition of ``restoration
or rehabilitation'' in 43 CFR 11.14 needs to also be revised to reflect
the services based approach, since it refers to actions that restore
the physical, chemical, or biological properties of resources, as well
as their services.
Response: The current definition of services in the rule, which
remains unchanged, makes clear that services ``result'' from the
physical, chemical, or biological quality of resources. Accordingly, we
do not believe any revision is needed in the definition of
``restoration or rehabilitation'' to comport with the services-based
approach.
E. Assessment Process Timing Clarification
1. Consistent Timing Guidelines
Comment: All commenters who addressed this issue voiced support for
technical corrections to provide consistent timing guidelines for
completion of the Restoration and Compensation Determination Plan.
Response: This technical correction is included in the final rule.
F. Deletion of the Bar on the Use of Contingent Valuation To Estimate
Option and Existence Value To Comply With Ohio v. Interior
1. Technical Correction on Deleting the Bar on Estimating Option and
Existence Value
Comment: All commenters who addressed this issue were supportive of
this technical correction, which codifies an explicit ruling of the
Ohio decision.
Response: This technical correction is included in the final rule.
G. Deletion of the Date of Promulgation for the Statute of Limitation
Provision To Comply With Kennecott v. Interior
1. Technical Correction To Strike Out Rule Promulgation Date
Comment: All commenters who addressed this issue were supportive of
this technical correction, which codifies an explicit ruling of the
Kennecott decision.
Response: This technical correction is included in the final rule.
H. Miscellaneous Comments
1. Consideration of Damages for Compensable Values Pending Restoration
Should Be Mandatory, not Discretionary
Comment: One commenter said that damages for public losses pending
restoration should be mandatory, not discretionary as set forth in the
existing rule.
Response: This is beyond the scope of the current revisions. The
current rule grants broad discretion to trustees on formulating and
pursuing claims.
2. Cultural Resources
Comment: One commenter expressed concern that the rule revisions
would hinder trustees seeking recoveries for the value of cultural
natural resource services lost as the result of natural resource
injury.
Response: Cultural, religious, and ceremonial losses that rise from
the destruction of or injury to natural resources continue to be
cognizable under the revisions. The revisions do not affect the
treatment of these losses under the rule.
3. Terminology--Monetary Damages
Comment: One commenter suggested that the preamble should
distinguish restoration-based approaches from monetary damages for the
economic value of losses, rather than from ``economic'' approaches,
since some restoration-based approaches are economic methodologies.
Response: The revised preamble to this final rule utilizes the more
precise terminology of ``monetary damages for the economic value of
public losses''.
4. General Support for the Concept of Natural Resource Damages
Comment: One commenter voiced general support for the concept of
damages to restore natural resources injured by releases of hazardous
substances or oil.
Response: We acknowledge the comment, and believe that the
revisions will improve the NRDAR practice and encourage quicker, more
effective, and more efficient restoration of injured natural resources.
V. How We Have Complied With Rulemaking Requirements
Regulatory Planning and Review Under E.O. 12866
The Office of Management and Budget has reviewed these revisions.
The revisions are a significant regulatory action under E.O. 12866
because the rule will raise novel legal or policy issues. The revisions
clarify that trustees have the option of calculating total damages
using the cost of restoration actions that compensate for losses,
rather than requiring a two-part process where natural resource damages
are calculated using the cost of restoration actions, and public losses
pending restoration are calculated using the monetary economic value of
the loss.
These revisions do not fall under other criteria in E.O. 12866:
a. This rule will not have an annual economic effect of $100
million or adversely affect an economic sector, productivity, jobs, the
environment, or other units of government. The regulations we are
revising apply only to natural resource trustees by providing technical
and procedural guidance for the assessment of natural resource damages
under CERCLA and the Clean Water Act. The revisions are not intended to
change the balance of legal benefits and responsibilities among any
parties or groups, large or small. It does not directly impose any
additional cost.
In fact, the revisions should assist in reducing natural resource
damage assessment transaction costs by allowing trustees to utilize
simpler and more transparent methodologies to assess damages when
appropriate. The revisions do not sanction or bar the use of any
particular methodology, so long as it meets the acceptance criteria for
relevance and cost effectiveness that are set out in the rule.
We also believe that in many cases an early focus on feasible
restoration and appropriate restoration actions, rather than on the
monetary value of public
[[Page 57265]]
losses, can result in less contention and litigation, and faster, more
cost-effective restoration. Meanwhile, existing criteria in the rule
for evaluating restoration alternatives--including cost effectiveness--
remain intact (see 43 CFR 11.82(d)). The likely result will be the
encouragement of settlements, less costly and timelier restoration, and
reduced transaction costs. To the extent any are affected by the
revisions, it is anticipated that all parties will benefit by the
increased focus on restoration in lieu of monetary damages.
b. The revisions will not create inconsistencies with other
agencies' action. The general approach to losses pending restoration
set forth in this rule is consistent with the OPA regulations. Both
allow for basing damages on the cost of restoration actions to address
public losses associated with natural resource injuries.
Regulatory Flexibility Act
We certify that this rule revision will not have a significant
economic effect on a substantial number of small entities as defined
under the Regulatory Flexibility Act (5 U.S.C. 601) (see section on
E.O. 12866 above for discussion of potential economic effects.)
Small Business Regulatory Enforcement Fairness Act
This rule revision is not a major rule under the Small Business
Regulatory Enforcement Fairness Act (5 U.S.C. 804(2)). This rule
revision:
(a) Does not have an annual effect on the economy of $100 million
or more (see section on E.O. 12866 above for discussion of potential
economic effects.)
(b) Will not cause a major increase in costs or prices for
consumers, individual industries, Federal, State, or local government
agencies, or geographic regions (see section on E.O. 12866 above for
discussion of potential economic effects.)
(c) Does not have significant adverse effect on competition,
employment, investment, productivity, innovation, or the ability of
U.S.-based enterprises to compete with foreign-based enterprises (see
section on E.O. 12866 above for discussion of potential economic
effects.)
Unfunded Mandates Reform Act
This rule revision does not mandate any actions. The existing
regulations do not require trustees to conduct assessment or pursue
damage claims, and trustees who choose to conduct assessments and
pursue damage claims are not required to do so in a manner described in
the regulations. The revisions do not change the optional nature of the
existing regulations. The revisions themselves do not replace existing
procedures; they merely clarify that trustees have the option of
employing other procedures. Therefore, this rule revision will not
produce a Federal mandate of $100 million or greater in any year.
Takings Analysis Under E.O. 12630
A takings implication assessment is not required by E.O. 12630
because no party can be compelled to pay damages for injury to natural
resources until they have received ``due process'' through a legal
action in federal court. This rule and the revisions merely provide a
framework for assessing injury and developing the claim.
Federalism Analysis Under E.O. 12612
E.O. 12612 requires federal agencies to consult with elected state
officials before issuing rules that have ``federalism implications''
and either impose unfunded mandates or preempt state law. A rule has
federalism implications if it has ``substantial direct effects on the
states, on the relationship between the national government and the
states, or on the distribution of power and responsibilities among the
various levels of government.'' This rule and the revisions do not
require state trustees to take any action; therefore it does not impose
any unfunded mandates. The rule and the revisions do not preempt state
law. The rule and the revisions have no significant effect on
intergovernmental relations because they do not alter the rights and
responsibilities of government entities. Therefore, a federalism
summary impact statement is not required under section 6 of the Order.
Civil Justice Reform Under E.O. 12988
Our Office of the Solicitor has determined that the revisions do
not unduly burden the judicial system and meet the requirements of
section 3(a) and 3(b)(2) of the Order. The revisions are intended to
provide the option for an early focus on restoration, utilization of
simpler and more cost-effective assessment methodologies, and increased
opportunities for cooperation among trustees and potentially
responsible parties. This should minimize litigation.
Paperwork Reduction Act
The revisions do not pose ``identical questions'' to, or impose
``identical reporting, record keeping, or disclosure requirements,'' on
trustees. Therefore, the revisions do not include an ``information
collection'' governed by the Paperwork Reduction Act, 44 U.S.C. 3501 et
seq.
National Environmental Policy Act
We have analyzed the revisions in accordance with the criteria of
the National Environmental Policy Act, 43 U.S.C. 433 et seq. (NEPA).
Restoration actions identified through the revisions may sometimes
involve major federal actions significantly affecting the quality of
the human environment. In those cases, federal trustees will need to
comply with NEPA. However, the revisions do not require trustees to
take restoration action. Further, if the trustees decide to pursue
restoration, they are not required to follow the rule when selecting
restoration actions. Finally, the rule and the revisions do not
determine the specific restoration actions that trustees can seek.
Therefore, the rule and the revisions do not significantly affect the
quality of the human environment. Even if the rule revisions were
considered to significantly affect the quality of the human
environment, they would fall under DOI's categorical exclusion for
regulations that are of a procedural nature or have environmental
effects too broad or speculative for meaningful analysis and will be
subject later to the NEPA process.
List of Subjects in 43 CFR Part 11
Natural resources, environmental protection.
Dated: September 25, 2008.
James E. Cason,
Associate Deputy Secretary.
0
For the reasons given in the preamble, we are amending part 11 of title
43 of the Code of Federal Regulations as follows:
PART 11--NATURAL RESOURCE DAMAGES FOR HAZARDOUS SUBSTANCES
0
1. The authority citation for part 11 continues to read as follows:
Authority: 42 U.S.C. 9651(c), as amended.
0
2. In Sec. 11.31, revise paragraph (c)(4) to read as follows:
Sec. 11.31 What does the assessment plan include?
* * * * *
(c) * * *
(4) The Restoration and Compensation Determination Plan developed
in accordance with the guidance in Sec. 11.81 of this part. If
existing data are not sufficient to develop the Restoration and
Compensation Determination Plan as part of the Assessment Plan, the
[[Page 57266]]
Restoration and Compensation Determination Plan may be developed later,
after the completion of the Injury Determination or Quantification
phases. If the Restoration and Compensation Determination Plan is
published separately, the public review and comment will be conducted
pursuant to Sec. 11.81(d) of this part.
* * * * *
0
3. In Sec. 11.38, revise paragraph (c)(2)(i) to read as follows:
Sec. 11.38 Assessment Plan--preliminary estimate of damages.
* * * * *
(c) * * *
(2) * * *
(i) The preliminary estimate of compensable value should represent
the expected present value of the anticipated compensable value,
expressed in constant dollars, accrued through the period for the
restoration, rehabilitation, replacement, and/or acquisition of
equivalent resources to baseline conditions, i.e., between the
occurrence of the discharge or release and the completion of (A) the
restoration or rehabilitation of the injured natural resources to a
condition where they can provide the level of services available at
baseline, or (B) the replacement and/or acquisition of equivalent
natural resources capable of providing such services. The estimate
should use the same base year as the preliminary estimate of costs of
restoration, rehabilitation, replacement, and/or acquisition of
equivalent resources. The provisions detailed in Sec. Sec. 11.80-11.84
of this part are the basis for the development of this estimate.
* * * * *
0
4. In Sec. 11.80, revise paragraph (b) to read as follows:
Sec. 11.80 Damage Determination Phase--general.
* * * * *
(b) Purpose. The purpose of the Damage Determination phase is to
establish the amount of money to be sought in compensation for injuries
to natural resources resulting from a discharge of oil or release of a
hazardous substance. The measure of damages is the cost of (i)
restoration or rehabilitation of the injured natural resources to a
condition where they can provide the level of services available at
baseline, or (ii) the replacement and/or acquisition of equivalent
natural resources capable of providing such services. Damages may also
include, at the discretion of the authorized official, the compensable
value of all or a portion of the services lost to the public for the
time period from the discharge or release until the attainment of the
restoration, rehabilitation, replacement, and/or acquisition of
equivalent of baseline.
* * * * *
0
5. In Sec. 11.81, revise paragraph (a) to read as follows:
Sec. 11.81 Damage Determination Phase--Restoration and Compensation
Determination Plan.
(a) Requirement. (1) The authorized official shall develop a
Restoration and Compensation Determination Plan that will list a
reasonable number of possible alternatives for (i) the restoration or
rehabilitation of the injured natural resources to a condition where
they can provide the level of services available at baseline, or (ii)
the replacement and/or acquisition of equivalent natural resources
capable of providing such services, and, where relevant, the
compensable value; select one of the alternatives and the actions
required to implement that alternative; give the rationale for
selecting that alternative; and identify the methodologies that will be
used to determine the costs of the selected alternative and, at the
discretion of the authorized official, the compensable value of the
services lost to the public associated with the selected alternative.
(2) The Restoration and Compensation Determination Plan shall be of
sufficient detail to evaluate the possible alternatives for the purpose
of selecting the appropriate alternative to use in determining the cost
of baseline restoration, rehabilitation, replacement, and/or
acquisition of equivalent resources, and, where relevant, the
compensable value.
* * * * *
0
6. In Sec. 11.82, revise paragraphs (a), (b)(1)(iii), and (c) to read
as follows:
Sec. 11.82 Damage Determination Phase--alternatives for restoration,
rehabilitation, replacement, and/or acquisition of equivalent
resources.
(a) Requirement. The authorized official shall develop a reasonable
number of possible alternatives for (i) the restoration or
rehabilitation of the injured natural resources to a condition where
they can provide the level of services available at baseline, or (ii)
the replacement and/or acquisition of equivalent natural resources
capable of providing such services. For each possible alternative
developed, the authorized official will identify an action, or set of
actions, to be taken singly or in combination by the trustee agency to
achieve the baseline restoration, rehabilitation, replacement, and/or
acquisition of equivalent natural resources. The authorized official
shall then select from among the possible alternatives the alternative
that he determines to be the most appropriate based on the guidance
provided in this section.
(b) * * *
(1) * * *
(iii) Possible alternatives are limited to those actions that (i)
restore or rehabilitate the injured natural resources to a condition
where they can provide the level of services available at baseline, or
(ii) replace and/or acquire equivalent natural resources capable of
providing such services.
* * * * *
(c)(1) The possible alternatives considered by the authorized
official that return the injured resources to their baseline level of
services could range from intensive action on the part of the
authorized official to return the various resources and services
provided by those resources to baseline conditions as quickly as
possible, to natural recovery with minimal management actions. Possible
alternatives within this range could reflect varying rates of recovery,
combinations of management actions, and needs for resource replacements
or acquisitions.
* * * * *
0
7. In Sec. 11.83, revise paragraph (a)(1), add new paragraphs (a)(4)
and (a)(5), and revise paragraph (c) to read as follows:
Sec. 11.83 Damage Determination Phase--cost estimating and valuation
methodologies.
(a) General. (1) This section contains guidance and methodologies
for determining: The costs of the selected alternative for (i) the
restoration or rehabilitation of the injured natural resources to a
condition where they can provide the level of services available at
baseline, or (ii) the replacement and/or acquisition of equivalent
natural resources capable of providing such services; and the
compensable value of the services lost to the public through the
completion of the baseline restoration, rehabilitation, replacement,
and/or acquisition of equivalent natural resources.
* * * * *
(4) Factors that may be considered by trustees to evaluate the
feasibility and reliability of methodologies can include:
(i) Is the methodology capable of providing information of use in
determining the restoration cost or compensable value appropriate for a
particular natural resource injury?
(ii) Does the methodology address the particular natural resource
injury and
[[Page 57267]]
associated service loss in light of the nature, degree, and spatial and
temporal extent of the injury?
(iii) Has the methodology been subject to peer review, either
through publication or otherwise?
(iv) Does the methodology enjoy general or widespread acceptance by
experts in the field?
(v) Is the methodology subject to standards governing its
application?
(vi) Are methodological inputs and assumptions supported by a
clearly articulated rationale?
(vii) Are cutting edge methodologies tested or analyzed
sufficiently so as to be reasonably reliable under the circumstances?
(5) All of the above factors may not be applicable to every case,
and other factors may be considered to evaluate feasibility and
reliability. The authorized official shall document any consideration
of factors deemed applicable in the Report of Assessment.
* * * * *
(c) Compensable value. (1) Compensable value is the amount of money
required to compensate the public for the loss in services provided by
the injured resources between the time of the discharge or release and
the time the resources are fully returned to their baseline conditions,
or until the resources are replaced and/or equivalent natural resources
are acquired. The compensable value can include the economic value of
lost services provided by the injured resources, including both public
use and nonuse values such as existence and bequest values. Economic
value can be measured by changes in consumer surplus, economic rent,
and any fees or other payments collectable by a Federal or State agency
or an Indian tribe for a private party's use of the natural resources;
and any economic rent accruing to a private party because the Federal
or State agency or Indian tribe does not charge a fee or price for the
use of the resources. Alternatively, compensable value can be
determined utilizing a restoration cost approach, which measures the
cost of implementing a project or projects that restore, replace, or
acquire the equivalent of natural resource services lost pending
restoration to baseline.
(i) Use value is the economic value of the resources to the public
attributable to the direct use of the services provided by the natural
resources.
(ii) Nonuse value is the economic value the public derives from
natural resources that is independent of any direct use of the services
provided.
(iii) Restoration cost is the cost of a project or projects that
restore, replace, or acquire the equivalent of natural resource
services lost pending restoration to baseline.
(2) Valuation methodologies. The authorized official may choose
among the valuation methodologies listed in this section to estimate
appropriate compensation for lost services or may choose other
methodologies provided that the methodology can satisfy the acceptance
criterion in paragraph (c)(3) of this section. Nothing in this section
precludes the use of a combination of valuation methodologies so long
as the authorized official does not double count or uses techniques
that allow any double counting to be estimated and eliminated in the
final damage calculation.
------------------------------------------------------------------------
Type of Methodology Description
------------------------------------------------------------------------
(i) Market price.................. The authorized official may
determine the compensable value of
the injured resources using the
diminution in the market price of
the injured resources or the lost
services. May be used only if:
(A) The natural resources are
traded in the market; and
(B) The authorized official
determines that the market for
the resources, or the services
provided by the resources, is
reasonably competitive.
(ii) Appraisal.................... The measure of compensable value is
the difference between the with-
and without-injury appraisal value
determined by the comparable sales
approach as described in the
Uniform Appraisal Standards. Must
measure compensable value, to the
extent possible, in accordance with
the ``Uniform Appraisal Standards
for Federal Land Acquisition,''
Interagency Land Acquisition
Conference, Washington, DC, 1973
(incorporated by reference, see
Sec. 11.18).
(iii) Factor income (sometimes May be used only if the injured
referred to as the ``reverse resources are inputs to a
value added'' methodology). production process, which has as an
output a product with a well-
defined market price. May be used
to determine: (A) The economic rent
associated with the use of
resources in the production
process; and (B) The in-place value
of the resources.
(iv) Travel cost.................. May be used to determine a value for
the use of a specific area. Uses an
individual's incremental travel
costs to an area to model the
economic value of the services of
that area. Compensable value of the
area to the traveler is the
difference between the value of the
area with and without a discharge
or release. Regional travel cost
models may be used, if appropriate.
(v) Hedonic pricing............... May be used to determine the value
of nonmarketed resources by an
analysis of private market choices.
The demand for nonmarketed natural
resources is thereby estimated
indirectly by an analysis of
commodities that are traded in a
market.
(vi) Unit value/benefits transfer. Unit values are preassigned dollar
values for various types of
nonmarketed recreational or other
experiences by the public. Where
feasible, unit values in the region
of the affected resources and unit
values that closely resemble the
recreational or other experience
lost with the affected resources
may be used.
(vii) Contingent valuation........ Includes all techniques that set up
hypothetical markets to directly
elicit an individual's economic
valuation of a natural resource.
Can determine:
(A) Use values and explicitly
determine option and existence
values; and
(B) Lost use values of injured
natural resources.
(viii) Conjoint Analysis.......... Like contingent valuation, conjoint
analysis is a stated preference
method. However, instead of seeking
to value natural resource service
losses in strictly economic terms,
conjoint analysis compares natural
resource service losses that arise
from injury to natural resource
service gains produced by
restoration projects.
(ix) Habitat Equivalency Analysis. May be used to compare the natural
resource services produced by
habitat or resource-based
restoration actions to natural
resource service losses.
(x) Resource Equivalency Analysis. Similar to habitat equivalency
analysis. This methodology may be
used to compare the effects of
restoration actions on specifically
identified resources that are
injured or destroyed.
(xi) Random Utility Model......... Can be used to: (A) Compare
restoration actions on the basis of
equivalent resource services
provided; and (B) Calculate the
monetary value of lost recreational
services to the public.
------------------------------------------------------------------------
[[Page 57268]]
(3) Other valuation methodologies. Other methodologies that measure
compensable value in accordance with the public's willingness to pay
for the lost service, or with the cost of a project that restores,
replaces, or acquires services equivalent of natural resource services
lost pending restoration to baseline in a cost-effective manner, are
acceptable methodologies to determine compensable value under this
part.
* * * * *
0
8. In Sec. 11.91, remove paragraph (e).
[FR Doc. E8-23225 Filed 10-1-08; 8:45 am]
BILLING CODE 4310-RG-P