ABA Section of Business Law

However, by statute and court decisions, this list of natural resources has been expanded in many states to include nonnavigable waters, state parks, air, wildlife and other natural resources.

Tribal-owned natural resources are those natural resources that exist on any tribally owned lands, including nonreservation lands.

The regulatory framework guiding the actions of trustees for conducting natural resource damage assessments under CERCLA and the Clean Water Act (CWA) lacks clarity and finality. When trustees believe a business has damaged a natural resource, they determine compensation for injury to that resource by conducting a natural resource damage assessment. CERCLA authorizes the Department of the Interior (DOI) to promulgate regulations guiding trustees in how to perform these assessments.

In the past, the DOI's natural resource damage assessment rules have faced challenges from state governments, administrative agencies, industry and the president, resulting in changes to the rules and leaving trustees unsure of the content of the rules. Based on the checkered history of the natural resource damage assessment rules, the DOI's current Draft Proposed Natural Resource Damage Assessment Rule (draft proposed rule) also has an uncertain future.

The DOI recently proposed its draft proposed rule as a standardized rule "to provide…cost-effective procedures for assessing natural resource damage." 43 C.F.R. Part 11. The rule would amend the current regulations regarding natural resource damage assessments for hazardous substances under CERCLA and the CWA. 43 C.F.R. Part 11. It is intended to be an instruction booklet for natural resource trustees, describing how to conduct a natural resource damage assessment in order to restore damaged natural resources.

The draft proposed rule mainly addresses the major natural resource damage assessments. These are often referred to as Type B assessments because they are described in Section 103(c)(2)(B) of CERCLA. Yet the draft proposed rule is comprehensive, also applying to Type A assessments, described in CERCLA Section 103(c)(2)(A), which are for simpler, single releases of hazardous substances into natural resources.

The DOI's past natural resource damage assessment rules have gone through many changes and therefore have not been able to provide clear guidance to trustees. The DOI first promulgated regulations for natural resource damage assessments in 1986 and later revised these regulations in 1988. The state of Ohio challenged those regulations in Ohio v. U.S. Department of the Interior, and, in 1991, the DOI issued a new proposed rule to address the issues in the Ohio ruling.

Then President George Bush signed the new rule in the waning days of his administration, but the rule was not published in the Federal Register before the Clinton administration took office. As a result, the Clinton administration withdrew the rule.

In 1994, the DOI published a new final rule that again addressed the issues in the Ohio ruling, but with the Clinton, instead of Bush, imprint. This rule was challenged in Kennecott Utah Copper Corp. v. U.S. Department of the Interior. Although the rule emerged largely unscathed by this challenge, the court struck down some of the rule's provisions, which resulted in prior Reagan-era provisions of the rule being reinstated.

The DOI, under Clinton, revised the rule, releasing the draft proposed rule in April 1999. Numerous stakeholders objected to the draft proposed rule, including state governments, the U.S. Department of Energy (DOE), and industry. The DOI undertook to once again modify the rule, finalizing a draft that was sent to the Office of the Federal Register for publication at the end of the Clinton administration.

The draft was not published before the current Bush administration took office, and President George W. Bush withdrew it from publication. Thus, at present, it is unclear when or if the draft proposed rule will be codified.

Given this history of the assessment regulations, there is understandable confusion on the part of trustees, responsible parties, and other stakeholders as to what rules actually govern natural resource damage assessments. Therefore, the trustees' approaches to natural resource damage assessment reflect a hodgepodge of various Reagan era and Clinton era rules, and guesses at what the draft proposed rule contains.

This situation creates uncertainty, which often leads to disagreements about how natural resource damage assessments should proceed. These disagreements in turn add to the time it takes to assess and restore a resource, as well as to the transaction costs for government and responsible parties.

Considering the regulatory uncertainty, the trustees have tried an increased reliance on a cooperative assessment process. This has been instrumental in revitalizing the natural resource damage program. In this process, trustees and responsible parties work together to develop privately funded natural resource damage assessments. Proponents advocate that cooperative assessments allow for improved settlement negotiations with restoration-focused agreements instead of monetary claims.

In a survey conducted by the Association of State and Territorial Solid Waste Management Offices Natural Resource Damage Focus Group (focus group), the focus group consulted industry representatives regarding the possible benefits and problems associated with the cooperative assessment process. The focus group concluded that the cooperative assessment process between trustees and responsible parties can be a winning alternative to natural resource damage litigation.

Cooperative assessments can be an efficient and effective approach to resolving natural resource damage liability for site restoration. See: Dale C. Young, "Natural Resource Damages: Perspectives on Cooperative Assessment and Restoration of Natural Resources." Nat'l Ass'n of Attys General: Nat'l Envtl. Enforcement Journal, April 2000.

Other emerging developments may overcome obstacles faced by trustees, allowing for more efficient, expedited case preparation and if appropriate, litigation. These developments include:

• Consent decrees that include reservations of rights: By and large, CERCLA consent decrees negotiated since 1980 include a reservation of rights relating to natural resource damage actions. These consent decrees should clarify for trustees when the statute of limitations on the natural resource claim is triggered, and may help them prioritize which claims to pursue.
• New Mexico's Contingency Fee Program: New Mexico has adopted an innovative approach for lawyers trying natural resource damage cases on a contingency fee basis. While some may applaud the ingenuity of these state trustees, others question the legality of such arrangements under CERCLA. Under CERCLA, damages recovered in natural resource damage cases only may be used to "restore, replace or acquire the equivalent of natural resources." It is unclear if contingent-fee lawyers can be compensated from the money recovered in a natural resource damage case.
• Natural resource damage administrative initiatives: In a bold move aimed at minimizing financial burdens on state trustees, New Jersey has proposed legislation requiring responsible parties to assess and restore natural resources as part of an administrative cleanup program. The proposed legislation also requires responsible parties to compensate the state for damages based on the value such resources would have provided the public.

The clear effect of the above developments is the ability of trustees to pursue more effectively natural resource damage cases. Shifting the burden of case development, coupled with lessened financial concerns, will allow federal and state trustees to pursue more aggressively natural resource damage claims. In addition, the trustees' use of the cooperative assessment process will further enhance their abilities to take action on natural resource damages.

While it is difficult to ascertain the exact number of natural resource damage settlements, we know that the economic burden, both threatened and actual, is increasing. These claims, and the monetary values attached to them, haunt businesses as did the earliest Superfund demands. Given the complexity of these cases, businesses try to avoid litigation, if feasible, as do government prosecutors, as a result of the human and economic costs at stake. Consequently, case law on key statutory provisions is unavailable to help businesses respond to natural resource damage claims in a reasoned, sound manner.

For these reasons, businesses by and large remain fearful of such claims arising in a virtually unknown, untested area of environmental law. For different reasons, federal and state trustees fear aggressive pursuit of these cases in most instances because they often lack the resources to litigate. Again, the move in favor of a cooperative assessment approach seems, at first blush, advantageous to both sides.

A review of recent significant natural resource settlements demonstrates that a great deal is at stake for targeted companies:

• Montrose Chemical Corp. settlement: DDT defendants settled this $1.7 billion claim for $30 million in natural resource damages and $43 million in past and future response costs for alleged injuries to the marine environment off the southern California coast. Prior settlements in this case included $45.7 million in response costs and natural resource damages from the sewer operator and other governmental entities, and $21.5 million in response costs and natural resource damages from various polychlorinated biphenyl (PCB) defendants.
• Summitville Mine Superfund site: The company paid $5 million of a $27.75 million settlement to resolve federal and state natural resource damage claims.
• Bunker Hill Superfund site partial settlement: Sunshine Mining Co. and Sunshine Precious Metals (then in Chapter 11) settled natural resource damage claims in the Coeur d'Alene basin in Idaho by imposing conservation easements on sensitive timberlands, paying royalties to the United States and a tribe on mining revenues, issuing warrants convertible into 9.95 percent of Sunshine Mining's stock, and performing cleanup work at the Silver Mine site.
• Indiana v. Dow Chemical Co. : Dow donated 17 acres of floodplain habitat to resolve natural resource damage claims associated with its Zionsville chemical plant.
• Chemical Leaman Tank Lines Superfund Site, N.J. : The company paid $4.2 million paid to settle natural resource damage claims and assessment costs. The money collected is to be used for wetlands restoration.
  
  
• United States v. Goodyear Tire & Rubber Co. : The company paid $445,000 to resolve alleged natural resource damage at a New York plant site.

These cases illustrate that natural resource damage claims do exist and, depending on the facts, are costly to resolve. See: Karl S. Lytz, "Recent Development in Superfund Natural Resource Damage Claims," in Environmental Hot Topics for Business Lawyers, ABA Business Law Section Spring Meeting (March 2001).

In addition to bringing more natural resources claims, trustees are trying to keep those claims alive longer by avoiding the application of the statute of limitations.

For sites not on the national priority list (NPL), the statute of limitations for natural resource damage actions is three years after the "date of discovery of the [natural resource loss] and its connection with the release in question." For NPL sites, federal facilities, or any vessel or facility at which a remedial action is otherwise scheduled, the statute of limitations is three years after the completion of the remedial action.

Typically, the statute of limitations for the NPL sites and federal facilities gives trustees more time to bring a claim than the statute of limitations for non-NPL sites. Consequently, these two provisions set the stage for trustees to try to gain the longer statute-of-limitations period for NPL sites at what originally were non-NPL sites.

State trustees may be able to avoid the statute-of-limitations problem in its entirety. As a general rule, there is no statute of limitations for state public trust doctrines and nuisance law. Accordingly, using these legal theories, state trustees will have unfiltered access to the courthouse to bring natural resource damage claims.

Another issue that responsible parties face on an increasingly frequent basis is dueling trustees. At many sites where natural resource damages are at issue, both federal- and state-owned natural resources are affected. It is very common that releases of hazardous substances affect natural resources that fall under the jurisdiction of more than one trustee.

For example, a release of hazardous substances on state-owned land may have affected a groundwater resource and may have also injured migratory birds or endangered species. In such an instance, the state trustee would have jurisdiction over the groundwater resources, while the federal trustee would exercise jurisdiction over the natural resources or habitat of the migratory birds.

In addition, in the event the natural resource damage occurred on federal- or state-owned lands, state and federal land management agencies also would have jurisdiction to pursue claims for natural resource damage to their properties. While the CERCLA natural resource damage provisions mandate that state and federal natural resource damage trustees cooperate at sites where joint ownership of natural resources is an issue, that cooperation does not always occur.

A legitimate concern for private parties is that they do not want to be liable for a double cleanup and a double recovery. Parties should not be asked to restore a natural resource to baseline if that natural resource already was part of a Superfund remediation. For example, the method to clean up and restore sediment is largely the same — dredging. Responsible parties do not want to fund a cleanup under the Superfund and then have a trustee require the same area to be dredged.

One way of addressing industry's concern about double cleanups and recoveries is to add the U.S. Environmental Protection Agency — the federal agency that brings many of the Superfund cases that often later spawn natural resource damage claims — to the natural resource damage assessment process.

The idea of the EPA, the natural resource trustees, and responsible parties coordinating with each other was raised by the DOE in response to the draft proposed rule when the DOI circulated it in 1999. In fact, in a September 2000 letter, the DOE specifically called for the draft proposed rule to contain a provision requiring such coordination.

As a practical matter, the natural resource assessment process often can be conducted in parallel with the Superfund's remedial investigation and feasibility study phase. Likewise, any natural resource restoration can be incorporated into the remediation reflected in a record of decision. At an existing Superfund site, integrated actions typically are preferable and more cost effective than a separate legal action for natural resource damage claims. While historically Superfund consent decrees excluded coverage for natural resource damage claims, if possible, one document incorporating all site legal issues is more efficient.

As noted above, trustees increasingly are interested in participating in a cooperative assessment process designed to identify and quantify natural resource issues. Even in instances where such an approach is not used, private parties should aggressively negotiate to be participants in any ecological risk assessment to be conducted. Typically, the lead agency will conduct or direct the ecological risk assessment work that is critical to an evaluation of possible natural resource claims.

If possible, private parties should offer to conduct the ecological assessment in lieu of the lead agency. If the lead agency is unwilling to relinquish control of the eco work, a private party can negotiate a role as an active participant in the process or even consider completing a "shadow" ecological assessment to better assess the work completed and, more important, the natural resource damage conclusions reached.

Private parties are better able to defend against and manage natural resource claims in instances where they were engaged in the assessment process. Important decisions regarding, for example, the focus and the breadth of the assessment, can be effectively addressed as the work is continuing. Such issues are more difficult to respond to after the assessment process. While it is more costly for a private party to conduct or be a more active participant in the eco work, any economic burdens are greatly mitigated or eliminated by the minimization of natural resource claims.

For businesses faced with natural resource damage claims, the future remains one of uncertainty and — most often — chaos. The development of more case law will improve industry's ability to effectively respond to these claims and hopefully will encourage trustees to work more cooperatively with each other and responsible parties.

In the alternative, an improved regulatory scheme with businesses treated as equal partners with trustees would also assist the aims of federal, state and tribal programs.

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Grayson is a partner at Jenner & Block in Chicago. She is the chair of the Environmental, Energy and Natural Resources Committee of the Business Law Section. Her e-mail is lgrayson@jenner.com. Halpin is an associate at Jenner & Block in Chicago.