Compensation for Natural Resource Damages from Oil Spills: A Comparison of USA Law and International Conventions

Compensation for Natural Resource Damages from Oil Spills: A Comparison of USA Law and International Conventions

Compensation for Natural Resources Damages from Oil Spills: A Comparison of USA Law and International Conventions a detail view.

Carol Adaire Jones

National Oceanic and Atmospheric Administration

U.S. Department of Commerce

On February 15, 1996, the Liberian tanker Sea Empress ran aground in the Milford Haven estuary off the Welsh coast, spilling at least 19 million gallons of light crude oil. The spill, one of the 10 largest tanker spills since 1978, occurred in the vicinity of two environmentally sensitive wildlife sanctuaries, and productive lobster, mussel, and cockel fisheries. Within the first 10 days after the grounding, the slick was 500 square miles wide and was being driven by gale force winds eastward along the coast of Wales. Much of the Pembrokeshire Coast National Park was heavily polluted with oil, and the British government outlawed fishing in a 300-square mile zone. At risk were dozens of seabird species, including cormorants, hawks, guillemots and rare birds, such as puffins, razorbills, and one-third of the worlds’ population of manx shearwater

The focus of this paper is on measuring natural resource damages for oil spills. To provide a context for the discussion, we compare the damage measures in the natural resource liability provisions in the Oil Pollution Act (OPA) of 1990 [USA], with those in the two major international conventions addressing oil spill liability, the 1969 International Convention on Civil Liability for Oil Pollution Damage (CLC) and the 1971 International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage (Fund). The international conventions provide the liability framework for the Sea Empress spill, since the United Kingdom is a party to the Conventions. Under the Convention Protocols in place at the time of the spill, the responsible party is not liable for damages to public natural resources, except to compensate for lost profits or earnings, for example, from commercial fishing and tourism. [Responsible parties are also liable for damages to private property.] 2

1 Carol Adaire Jones is Chief, Resource Valuation Branch, Damage Assessment Center, National Oceanic and Atmospheric Administration, Silver Spring MD 20910 USA. She gratefully acknowledges the contributions of Christy Poulos, Katherine Pease, Douglas Helton, Brian Julius, Norman Meade, and Linda Burlington, all of the NOAA Damage Assessment and Restoration Program, and of Patricia

Kraniotis, of NOAA General Counsel/International. This paper reflects the views of the author and does not necessarily reflect the views of NOAA.

2 In the United Kingdom, the Merchant Shipping Act 1992 is a consolidating statute that contains the main law relating to shipping, including natural resource liability provisions. The Merchant Shipping Act 1995 implements into UK law the 1992 CLC and Fund Conventions (which incorporate some restoration-based liability concepts, as discussed below.) The main provisions relating to natural resource damages are contained in sections 156(3) and 181(1).

However, air, water, biota and other resources are in the public domain –consequently, individuals typically do not have to pay to enjoy them for reasons of health and well-being, recreation, aesthetics or altruism. For example, individuals do not pay an entrance fee to enjoy a day at the beaches in Algarve, along the southern coast of Portugal. But if a large oil spill closed all beaches in the area for several weeks, most people would agree that individuals who would have visited those beaches during the closure period experienced a loss. As a result, a measure of natural resource damages based on lost profit or earnings will capture only a limited portion of the social losses from injuries to public natural resources.

In contrast, the measure of natural resource damages in OPA, the USA law, is designed to capture the social losses from injuries to natural resources. The measure of damages includes the costs of restoring the injured resources to baseline plus compensation for the interim loss of resources from the time of the injury until full recovery. The interim loss component is designed to compensate for the reduction in the public’s enjoyment of natural resources, in non-market uses as well as market uses .3 Further, OPA designates resource management agencies to serve as resource trustees on behalf of the public, and directs trustees to spend all recoveries on “restoration, rehabilitation, replacement, or acquisition of the equivalent resources.”4

Despite the past divergence between the damage measures in international and USA law, recent developments in both contexts suggest a path toward convergence. Both the new USA regulations outlining procedures for the conduct for damage assessments and the 1992 Protocols of the CLC and Fund Conventions, which enter into force in May 1996, incorporate restoration-based measures of damages for environmental harm. In the OPA regulations, compensation for the interim losses of resources is denominated in “compensatory restoration” projects

The new international Protocol includes a provision to cover the “costs of reasonable measures of reinstatement actually undertaken or to be undertaken.” Though the International Oil Pollution Compensation [IOPC] Fund 1992, the international organization administering the new compensation regime, has not provided explicit guidance on the scope of “reinstatement” actions covered by the international Protocols these issues, it appears that the scope may be more limited than in USA law. A broad interpretation of the international protocols, consistent with the restoration concepts in the OPA regulations, could provide an

3 The focus is on the “consumer” side of public uses, including the consumption of naturalresource related products as well as non-consumptive uses of natural resources, (e.g., recreation, aesthetics or bequests to future generations.) Separate liability provisions cover private claims for lost profit incurred by producers using natural resources in production and for property damage incurred by private property owners. See the discussion below in section 1.2.

4 33 U.S.C. § 2706(c)(1)(C).

inclusive measure of damages for environmental harm. Furthermore such a measure would not contravene the policy, previously articulated by that only losses quantifiable in financial terms may be claimed.

In section 2 below, we discuss briefly the key features of the USA measure of damages. We then outline the international measure of damages and identify how it excludes losses incurred by members of the public — for both market and non-market uses of resources. With this background, we present in section 3 an overview of key economic concepts for valuing the loss of public enjoyment of natural resources, which provides the analytic framework underlying the component of damages in USA law compensating for interim losses.

In section 4, we briefly outline the OPA process for determining a restoration-based measure of damages, and in section 5 we outline approaches and methods for measuring the second component of the USA damage measure — compensation for the interim loss of resources. The Appendix provides an example of the restoration-based approach from a recently settled mining waste case in Idaho.

1. Federal Statutory Liability Framework in the USA

1.1 Natural Resource Damages

The Oil Pollution Act (OPA) of 1990 is the primary federal statute5 in the USA establishing liability for “injuries to,… or loss of use of, natural resources due to discharges of oil”.6 The trustee authorities for oil spills in OPA largely supersede the authorities previously specified in the Federal Water Pollution Control Act [1977 Amendments], the Outer Continental Shelf Lands Act [1978 Amendment], the Deepwater Ports Act [1974], and the Trans-Alaska Pipeline Authorization Act [1973].7 OPA establishes strict, joint, and several liability for owners and operators of vessels of facilities for removal costs and damages attributable to a discharge or a substantial threat of a discharge of oil into navigable waters,

5 Some states have similar statutes or may rely on other legal theories to recover for injury to natural resources.

6 33 U.S.C. § 2706.

7 Federal Water Pollution Control Act (Clean Water Act), 33 U.S.C. § 1321(f)(4) & (5)

adjoining shoreline or the exclusive economic zone .8 Limits on liability are based on tonnage and vessel type, unless the discharge is caused by gross negligence or willful misconduct, or by a violation of applicable federal safety, construction or operating regulations .9

OPA, and other natural resource liability statutes,

10call on the President and State

governors to designate officials in natural resource management agencies to serve as trustees for natural resources on behalf of the public. These federal laws are based on the common law principles of the public trust doctrine11 and parens patriae12 whereby the sovereign has certain legal obligations to protect and preserve the trust corpus.13 The trustees

are to claim damages and use the recovered monies to compensate the public by restoring, rehabilitating, replacing, or acquiring the equivalent of the injured resources. Natural resources are defined broadly to include “land, fish, wildlife, biota, air, water, ground water, drinking water supplies, and other such resources” belonging to, managed by, held in trust by, appertaining to, or otherwise controlled by the United States, any state or


Indian tribe or any foreign Government.

33 U.S.C. § 2702(a).

33 U.S.C. § 2704(c).

10 Other federal statutes containing natural resource trustee provisions not previously mentioned include the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA, more commonly known as Superfund) 42 U.S.C. § 9607

11 The public trust doctrine provides that the government hold in trust property and natural resources for the benefit of the public. See Ward, Kevin & John Duffield, Natural Resource Damages: Law & Economics, (1992) at 11-21 for a discussion of the doctrine.

12 Parens patriae is similar to the public trust doctrine and provides the legal basis for a state to assert a claim on behalf of its citizens when their health or welfare is threatened. Id. at 21-23.

13 See, e. g., Sierra Club v. De partment o f the Interior , 376 F. Su pp. 90 (1974 ), 398 F. Su pp. 284 (N.D. Cal. 1975).

14 The Act further specifies that the President, acting through designated trustees, is to promulgate regulations for the assessment of damages for injury to, destruction of, or loss of natural resources resulting from a release of oil or a hazardous substance for the purposes of both CERCLA and the Federal Water Pollution Control Act. The US Department of the Interior was designated to write the regulations implementing CERCLA

Natural resource damage claims under OPA have three basic components:

the costs of restoring, rehabilitating, replacing or acquiring the equivalent of the damaged natural resources [primary restoration]

the diminution in value of those natural resources pending recovery of the resources to baseline,but for the injury [compensation for interim losses]


the reasonable cost of assessing those damages.

Primary restoration refers to human actions taken to return injured resources to the baseline (but -for the spill) conditions. Various techniques may be employed to return resources to their baseline, including natural recovery, removal of sources of contamination, restoration or rehabilitation on-site, or off-site replacement and/or acquisition of equivalent resources.

Consider a diesel oil spill that killed a variety of birds and oiled tidal wetlands that serve as habitat for a range of marine and estuarine species. Primary restoration actions may include removal of contaminants (not otherwise removed during oil spill response) that would impair the recovery of injured resources. However, in many cases, further actions to remove contaminants may cause more harm than good. Other types of primary restoration actions expedite natural recovery processes — for example, replanting vegetation, providing alternative food sources, or controlling predators. In other cases, it may be appropriate to create replacement habitat to reduce competition and expedite recovery. The first component of the claim is the cost of conducting such restoration activities.

In the period from the spill or release until full recovery, the benefits provided to the public by the injured or destroyed resources may be substantially diminished. The period of recovery will vary with the habitat or the species injured — for example, it may be short-lived for beach impacts and many years for bird and marine mammal species. During the interim period from the injury until full recovery, contamination of the wetland may impair on-site ecological services such as faunal food and shelter, sediment stabilization, nutrient cycling, and primary productivity. Though on-site human uses of the wetland may be limited, on-site ecological impairments may affect off-site human services, such as water quality improvements due to on-site water filtration, storm protection and flood control for on-shore properties, as well as bird watching along the flyway and commercial and/or recreational fishing. Wildlife kills, and continuing population effects, also may affect recreational wildlife viewing as well as any commercial harvests throughout the range of the populations, which may be international for many species. The second component of the damage measure provides compensation for the interim losses to the public from the time of the incident until full recovery of the resources

15 33 U.S.C. § 2706(d).

As noted above, the USA measure ensures compensation to consumers of natural resources and/or the services they provide, not only for lost market uses, such as the consumption of fresh fish,

16 but also for lost non-market uses of resources, such as recreational boating, swimming, hiking and fishing. Note that there is an important relationship between the timing of restoration actions and interim lost uses of impaired resources: the sooner resource services are restored to baseline conditions, the smaller will be the interim lost uses of resources, all other things being equal.

The final component of a trustee natural resource damage claim in the USA is the cost of performing the assessment. OPA provides for the recovery of reasonable assessment costs incurred by trustees.

1.2 Other Liability Elements

The OPA statute also specifies several other elements of damages.

17 The other

public component of damages covers the net loss of taxes, royalties, rents, fees or net profits due to the injury, destruction or loss of real property, personal property, or natural resources. This component is recoverable by the Government of the USA, a State, or a political subdivision thereof

OPA also creates an Oil Spill Liability Trust Fund to provide expedited funding for removal activities, initiation of damage assessments, and damages, when the responsible party does not respond to an initial request for compensation or when no responsible party has been identified. With the expedited payments, the USA government acquires by subrogation all rights of claimants to recover the damages.

16 In addition, private parties may claim for lost profits associated with injuries to natural resources in commercial uses, as noted below.

17 33 U.S.C. § 2702(b).

2. Comparison of Measures of Damages in USA and International Law18

Compensation for damage caused by certain types of oil spills from laden tankers is addressed by two international conventions, the 1969 International Convention on Civil Liability for Oil Pollution Damage (CLC) and the 1971 International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage (Fund). The CLC, which entered into force in 1975, addresses the liability of ship owners for oil pollution damage in the territorial sea or exclusive economic zone of a Contracting Party from the discharge of oil carried in bulk. This Convention establishes the principle of strict liability for ship owners and creates a system of compulsory liability insurance. The ship owner is entitled to limit his liability to an amount which is linked to the tonnage of the ship (with an overall liability cap), unless the claimant proves that damage is due to


fault and privity of the owner, in which case liability is unlimited.

The Fund Convention, which is supplementary to the CLC, establishes a regime for compensating victims when the compensation under the CLC is inadequate. The International Oil Pollution Compensation Fund (IOPC Fund) is a world-wide intergovernmental organization established when the convention entered into force in 1978, for the purpose of administering the regime of compensation created by the Fund Convention. As of February 1992, 70 states were parties to the CLC and 48 states were parties to the Fund Convention.20 Currently, the combined liability limit for a responsible vessel and the IOPC Fund is $84 million

The scope of application is limited to oil pollution damage resulting from a spill of cargo of persistent oil.21 Unlike in the USA law, spills of refined products, such as gasoline, kerosene, and light diesel oils are not covered. Though other differences exist

18 For other comparative discussions of damage measures, see Sheehan, Daniel F., “OPA 90 and The International Regimes Concerning Oil Pollution Liability and Compensation: Are they so far apart, must they remain so?1995 International Oil Spill Conference Proceedings, American Petroleum Institute, Washington DC, 261-264

19 Article V(2), 1969 International Convention on Civil Liability for Oil Pollution Damage.

20 International Oil Pollution Compensation Fund, “General Information on Liability and Compensation for Oil Pollution Damage”, London, United Kingdom, February 1992, p. 1.

21 Persistent oil includes any persistent hydrocarbon mineral oil such as crude oil, fuel oil heavy diesel oil and lubricating oil. Article I (5), 1969 International Convention on Civil Liability for Oil Pollution Damage.

between the USA law and the international conventions, we focus on the measure of damages.22

The measure of pollution damages in the original Convention is vague: “loss or damage outside the ship resulting from the escape or discharge of oil from the ship, wherever such escape or discharge may occur, and includ[ing] costs of prevention measures and further loss or damage caused by preventive measures.” [Art. I(6), 1969 CLC]. However, the IOPC Fund Assembly has developed certain principles regarding its implementation. As articulated in a Fund guidance document,

23 the first component of

damages is limited to costs of cleaning or replacing property damaged as a consequence of the spill and to lost earnings or profit “suffered by those who depend directly on earnings from coastal or sea-related activities.” The “preventive measures” covered are limited to “reasonable” post-spill expenditures designed to prevent or minimize pollution damage, and typically will include clean-up operations on shore and at sea as well as measures to prevent physical damage.

This measure of pollution damages is analogous to the private liability claims provisions and the removal cost provisions in OPA. Prior to the 1992 Protocol entering into force in 1996,24 the international Conventions have not covered any of the elements of natural resource damages under OPA. In fact, in response to a USSR claim under the Conventions for pollution damages calculated by a mathematical formula, the IOPC Fund Assembly explicitly resolved [Assembly Resolution No. 3] to exclude any claims for natural resource damages based on “an abstract quantification of damage calculated in accordance with theoretical models,” and subsequently affirmed the restriction of claims to “quantifiable economic losses.”

25 Note that the term “quantifiable economic loss” has a broader meaning in the economics profession than is apparently intended here. In the terminology of the economics profession, the term appears to refer to “financial losses”, such as lost profit, the increase in costs of purchasing a good or service, or lost property value or the cost of replacing the property. Throughout the paper, we use the term “financial losses” to refer to the international measure.

The 1992 Protocol [and the 1984 Protocol, which was never entered into force,] both amend the definition of pollution damage to incorporate a restoration-based component of damages. Though the international provisions and the new OPA regulations

22 See Sheehan, Daniel F.op.cit., for a side-by-side comparison of all key features of the liability regimes.

23 Op. cit. , IOPC Fund, 1992, p. 12-13.

24 A 1984 Protocol with similar pollution damage provisions to the 1992 Protocol was never entered into force.

25 See FUND/A/ES.1/13. paragraph 11(a) and Annex I, and Fund/A.4/16, paragraph 13.

appear to moving toward convergence, we identify several issues of interpretation and scope that remain.

The new definition of pollution damage includes the “costs of reasonable measures of reinstatement actually undertaken or to be undertaken” [Art. 2(3), 1992 Protocol CLC].26 An IOPC Fund Working Group met during 1994 to establish guidelines for implementation of the reinstatement cost provisions. The group discussed whether reinstatement measures should refer not only to restoration of the injured or destroyed resources themselves, but also to replacement of injured or destroyed resources or acquisition of the equivalent when in situ restoration is not feasible. The final report does not provide explicit guidance on the issue.

27 The Working Group agreed on the following criteria for admissibility of reinstatement claims: the costs should be reasonable, should not be disproportionate to results achieved or reasonably expected to be achieved, and should


be appropriate and offer reasonable prospect of success.

In addition to questions regarding the type of restoration activities included within the “reinstatement” provisions, questions also remain regarding the scope of losses to be covered. In particular, does reinstatement include replacement of the interim losses of resources and their services as well as returning the resources to their baseline levels? As discussed above, the other components of damages in the international Conventions [which were unchanged in the 1992 Protocol] limit claims for interim losses to financial losses – either due to injury to property or lost profit, independent of property injuries. Such losses are covered under private causes of action in the USA (unless the entity with damaged property or lost profits is publicly owned.)

A substantial body of law and economics literature argues that, in order to provide adequate incentives for firms to take precautions to prevent harm to the environment, the

26 The main goals of the Protocols were to increase the compensation amounts available and to widen the scope of the conventions. The 1992 Protocol contains similar provisions to the 1984 Protocol, but contains easier terms for entering into force. Consequently, the 1992 Protocol essentially replaces the 1984 Protocol.

As the Torrey Canyon spill off the cost of England in 1967 motivated the original Conventions, the Amoco Cadiz spill off the coast of France motivated the 1984 Protocol. Jacobsson, Mans, “Future of the International Conventions on Liability and Compensation for Oil Pollution Damage”, 1991 International Oil Spill Conference Proceedings, 689-723.

27 In contrast, the broader definition of reinstatement (consistent with USA law) is explicitly included in the 1993 Council of Europe Convention on Civil Liability for Damage Resulting from Activities Dangerous to the Environment. [Article 2(8), Treaty] In further contrast, the measures of damages in the draft protocols [UNEP/CHW.1/WG.1/1/5, UNEP/CHW.1/WG.1/2] for the 1989 Basel Convention on the Control of Transboundary Movement of Hazardous Wastes and Their Disposal (entered into force in 1992) [(1989) 288 I.L.M.] and for the Antarctic Treaty [XVIII ATCM/WP.2, April 10, 1994] allow for calculations of lost value as an alternative to reinstatement costs.

28 The Working Group further re-affirmed that only “quantifiable economic loss” should be admissible, not claims for impairment of the environment per se. FUND/WGR.7/21, Annex I, page 4.


responsible parties should bear the full social cost of accidents – not just financial losses. Full social costs include not only the costs of restoration,30 but also compensation for the net social losses incurred by individual members of the public from the time of the injury until full recovery of the resources. Furthermore, a policy that holds responsible parties liable for interim losses will provide incentives for the responsible parties to perform restoration (reinstatement) in a timely manner, because interim losses tend to increase with restoration delays.

In contrast, by limiting damages to financial losses, the international conventions potentially exclude a major portion of social losses as a result of two fundamental limitations.31 First, by definition, public natural resources are in the public domain — they are not privately owned. Consequently, the resources, and the uses of the resources, are not typically bought and sold on markets, and so users do not necessarily incur financial losses when resources are injured. Recall the beach example above, which we explore further in the next section.

The more basic problem with limiting damages to financial losses is more subtle, and more complex. Financial loss is calculated as the change in price for a fixed quantity of goods or services –it cannot capture the loss to consumers associated with a substantial reduction or elimination of the supply of any good or service. For example in the Exxon Valdez oil spill, important salmon fisheries supplying a large share of certain consumer markets on the Pacific Coast and in Japan, were closed for most of a season — as a result, the price of canned salmon was substantially higher than it would have been without the spill. The concept of “financial loss” does not capture the losses borne by consumers who reduced their consumption or who dropped out of the market entirely because of the price increase.

We illustrate these concepts below.

29 See, for example, Shavell, Steven, Economic Analysis of Accident Law, Harvard University Press, 1987.

30 This assertion assumes that the costs of restoration are reasonably commensurate with the gains generated.

31 In contrast to those who argue that damages for interim losses should be limited to financial losses, others alternatively argue that resources are priceless — that it is morally repugnant to place a value on them. Yet, when resources are scarce, and have competing demands for their use, the reality is that society must make difficult judgments regarding the wise use of resources. For example, how much of the stock of fish in a fishery should be allocated to current catch (and consumption) and how much should be protected from catch now, in order to ensure the viability of the future fish stocks? Further, how much of the current catch should be allocated to recreational use versus commercial use? Taking the position that resources are priceless does not help develop the information necessary to weigh the relative merits of the alternatives among which society must choose.

3. Conceptual Framework for Valuing Natural Resources

Economic theory indicates that the concept of consumer surplus is critical to measuringthe public’s enjoyment of natural resources or the social losses associated with injuries to natural resources.32 Consumer surplus is the consumer analog to profit (or “producer surplus”) generated by firms (or “producers”). Whereas profit is the excess income received by a firm above what it costs to produce a good, consumer surplusis the additional value received by consumers above what it costs them to acquire a good. And public claims to compensate for lost consumer surplus are the analog to the private claims by producers seeking compensation for lost profit — claims which occur in private liability suits under OPA and under the international conventions.

The classic illustration of the limitations of price as a measure of total value [and of change in price (i.e., financial losses) as the measure of damages] is the diamond-water paradox of value. Of the two goods, water is the one that is essential to life, and consequently is extremely valuable in a fundamental way. On the other hand, diamond jewelry is nice, but most people can get along quite well without it. Yet we look around and see that water is relatively cheap and diamonds are very expensive, which seems paradoxical.

The solution to the paradox has to do with relative scarcity of the two goods — the level of supply relative to the level of demand. Currently diamonds are very scarce, costly to produce, and their supply is controlled by a small set of producers. The result is a small quantity of diamonds is marketed and sold at a high price. On the other hand, water is plentiful and not that costly to supply: households use it for all sorts of things, including many non-essential uses — washing the car, watering the flower garden, and allowing our faucets to leak without calling the plumber to fix them. But if the water supply were reduced to the levels needed to supply life’s essential needs, households would be willing to pay much higher prices for water — in other words, households accrue a substantial consumer surplus for the water they consume.

We illustrate these concepts in Figure 1. [Figures appear at the back of the paper.] Figure 1.1 presents the market demand for water in the metropolitan area, say of York England. The market demand function for water shows how much the households in the market area are willing to pay for different quantities of water to be consumed within a

32 As noted above, we focus is on the “consumer” side of public uses, including het consumption of natural-resource related products as well as non-consumptive uses of natural resources, (e.g., recreation, aesthetics or bequests to future generations) — because this is the major component of public trustee claims for natural resource damage.

For more complete discussions of the economic theory applicable to calculating social losses attributable to environmental harm see Johansson, Per-Olov, 1993. Cost-Benefit Analysis of Environmental Change, Cambridge University Press

specified time period. 33 On the horizontal axis is the number of liters of water to be consumed per month

In any given market, each consumer observes the price of a good, and makes a choice about how much to purchase. With the demand function in Figure 1.1, if the price of tap water per liter is Pw [in British pounds], then total consumption by households in York will beQw liters. The total expenditure for water would be area 0PwSQw , labeled “Expenditures” in Figure 1.1

If there were a major environmental catastrophe in York that made inaccessible all local water supplies, then local residents would be willing to pay much a higher priceper liter of water than they are currently charged in order to meet their essential needs for water. Figure 2 illustrates that, if total quantity available in York were restricted to the amount Q1 liters (fromQ0 liters), then households in the area would be willing to pay the higher price P1 for the last available liter of water. In other words, there is a lot of consumer surplus for water, particularly for the portion of the water bill that meets the essential requirements for water.

If the reduction in the quantity of water available was in fact accompanied by an increase in the price of water to P1, consumers would incur a two-part loss in consumer surplus: the loss due to reducing water consumption from Q0 to Q1 [Area A], and the loss due to paying more for the water they continue to consume, Q1 [Area B]. A financial loss measure of damages does not capture area A — the loss in consumer surplus due to the reduction in quantity consumed (available). Though Area B is a financial loss incurred by consumers, it represents a gain in revenues to the supplier of the water — consequently, unless the costs of supplying water have increased, there is no social loss attributable to the price increase. 34 So this example illustrates the ways in which the financial loss measure can be both over-inclusive and under-inclusive of social losses at the same time.

33 Market price is a single point on a demand function — when the market is in equilibrium, it is the price at which the quantity demanded by the consumers equals the amount producers choose to supply. As discussed in section 5, demand functions can be estimated from market data characterizing the quantity of goods or services purchased at different price levels.

34 Alternativel y a p roductivi ty loss attributable to the s pill (e. g., increasin g the costs of su pp lyin g the water by area B as a result of the damage to the local water supplies) will cause a social loss. This social loss would be measured on the production side.

The discussion to this point has been in terms of a market use of a public resource. But it is well known that many of the uses of natural resources do not involve market transactions – recreational fishing, swimming, bird-watching, etc. Nonetheless economic theory indicates that the losses to the public’s enjoyment due to a spill-related closure of a beach or a recreational fishing area also are measured as the loss in consumer surplus, employing a logic analogous to that employed to value changes in water supply.

To provide a specific example for non-market use of resources, we illustrate in Figure 3 a household demand curve for visits to Algarv beaches during the summer season. On the horizontal axis is the number of visits to Algarve beaches by a household during the summer

Suppose that for this particular household, a visit to Algarve beaches costs P$ [in Portuguese escudos]. The demand function indicates that they will choose to go q times

per season. The total willingness to pay for this many visits is the area under the demand function up toq visits, area0ABq. The amountP$ q (area 0PBq) is what they actually will spend on travel (and other costs of access) to this site. The shape of the demand function will depend upon the nature of the substitutes available to beachgoers — if there are close substitutes, in travel cost and quality, then the demand function will be relatively flat, if the site is relatively unique (with high levels of consumer surplus) then it will be relatively steep.

If the area were closed for the season and they did not take any trips to the site, the value they would lose is the consumer surplus for a season of trips, area PAB: total willingness to pay (0ABq), minus what they actually would have paid in travel and access costs if they had gone (0PBq). Beachgoers have not incurred the costs of getting to the site — they still have that money (area 0PBq) and can spend it elsewhere.

In summary, public trustees in the USA seek to recover compensation for the social loss, represented by the lost consumer surplus associated with resource impairments such as closures or impaired quality of beaches.

35 These public claims to compensate for

lost consumer surplus are the analog to the private claims by producers seeking compensation for lost profit — claims which occur in private liability suits under OPA and under the international conventions. In section 5, we highlight various methods available to measure lost consumer surplus associated with environmental harm, or gains in

35 Commercial claimants may seek to recover lost profit associated with changes in the expenditures part of the above diagram. However, the private loss of business in the vicinity of the spill may simply be the gain of business in another location, and may not represent a net social loss.

consumer surplus associated with restoration projects designed to compensate for the losses.

4. The OPA Process for Determining a Restoration-based Measure of Damages: An Overview

Within the resource compensation framework in the new OPA regulations, a natural resource damage claim consists of the costs of primary and compensatory restoration actions. Though the focus of the paper is on the compensatory portion of the claim, in this section we briefly outline the full assessment process because of the complementary nature of the choices of primary and compensatory restoration actions.

The assessment process requires several steps:

determining and quantifying the injury to natural resources and/or natural resource services

identifying and scaling primary restoration actions [including natural recovery] to restore the resources to baseline

identifying and scaling compensatory restoration actions to compensate for interim losses of natural resources and/or services pending recovery, conditional primary restoration actions under consideration

selecting a preferred restoration alternative(s), consisting of primary and compensatory actions, based on costs, extent to which trustee restoration objectives will be achieved, likelihood of success, and other factors.

Based on the above analysis, the Trustees prepare a Restoration Plan that will be the basis of the claim.

We discuss each of the steps briefly in this section. First, however, we illustrate the concept of resource services, which is critical to establishing restoration goals for returning resources and/or services to baseline levels and to determining whether the value provided by compensatory projects is comparable to the interim loss in value due to the injury.In section 5, we discuss approaches appropriate for calculating resource compensation and identify economic methods for valuing different types of services.

The major categories of services provided by different resources include the following:

Recreational/aesthetic: beach use/swimming, fishing, boating, wildlife viewing (including bird-watching), hunting, and scuba diving/snorkeling

Commercial/productive: waterway navigation, municipal drinking water, aquaculture, agricultural irrigation, commercial process water

Cultural/historical: religious and cultural ritual uses

Ecological: faunal food and shelter, sediment stabilization, nutrient cycling, and primary productivity

Passive use: Species, habitat and ecosystem protection for existence and for bequest value.

The first three categories are examples of direct usesof resources, which provide value to individuals. The fourth category represents the on-site ecological services that natural resources provide to other natural resources. Ecological services in turn may support either direct uses by humans on-site or off-site, or passive uses. For example, offsite services supported by a wetland may include storm protection for nearby waterfront property owners and water filtration, supporting water uses such as swimming or municipal drinking water supply.

The fifth category captures the fact that individuals are willing to pay to protect resources that are significant to them and to their national heritage, independent of their direct use of them.Passive use valuesderive from valuing use of the resource by others, or protection of the resource for its own sake or as a bequest to future generation.

Without taking into account such values, resources that are the most pristine and the most remote from human access (such as Prince William Sound, Alaska) would appear to have the lowest value to humans, and resources stressed by intensive public use would appear to have the highest value.

We turn now to briefly outline the steps in the restoration planning process. Determining and Quantifying Injuries to Resources and Services

The goal of injury assessment is to determine the nature, degree, and extent of any injuries to natural resources and services. Under the OPA regulations, injury is defined as an observable or measurable adverse change in a natural resource or impairment of a natural resource service. Injuries are quantified by comparing the condition of the injured natural resources or services to baseline, which refers to the conditions of the resource and its services that would have existed if the discharge had not occurred. This information is necessary to provide a technical basis for evaluating the need for, type of, and scale of restoration actions.

Identifying and Scaling Primary Restoration Projects

Once the trustees have identified and quantified the impaired resources and services, the next step is to identify possible primary restoration actions — that is, restoration actions to return the resources to the condition they would have attained if the discharge had not occurred. Options will include natural recovery, as well as active human restoration actions such as removing sources of contamination, restoring or rehabilitating on-site, or off-site replacement and/or acquisition of equivalent resources. Primary restoration projects may both expedite, and increase the likelihood of, recovery. Consequently, the benefits of primary restoration actions are reductions in the interim loss to the public of the injured resources.

For primary restoration actions, the scaling question is, what scale of a primary restoration action is necessary to return the stock of natural resource to baseline levels? The recovery trajectory implied by a particular primary restoration action will determine the extent and duration of the interim loss in services.

Identifying and Scaling Compensatory Restoration Actions

The statutes mandate the trustees to “restore … the equivalent” of the injured resources. For this reason, the OPA regulations articulate a preference for identifying compensatory restoration actions that provide services of the same type and quality, and of comparable value as those injured, to the extent practicable. If such actions do not provide a reasonable range of alternatives, the regulations indicate the trustees should identify actions that, in their judgment, will provide services of at least comparable type and quality as those injured.

For example, for injuries to a spartina wetland habitat with degraded baseline conditions relative to its potential, it may be possible to conduct compensatory restoration on-site that achieves service levels in excess of baseline. Alternatively, compensatory restoration projects may involve creating or enhancing spartina wetland habitat at a comparable nearby site. Or, to compensate for a three-week closure of beaches due to a spill, restoration actions may include building boardwalk over sand dunes (to provide access to the beach while at the same time protecting, and providing access to, the fragile dune habitat) or constructing near-shore artificial reefs for snorkeling, diving, or fishing.

For compensatory restoration actions, the “scaling” question is: what scale of compensatory restoration action is necessary to compensate for the interim loss of natural resources and services from the time of injury until full recovery of the natural resources? The scaling process determines the size of compensatory restoration actions for which the present discounted value of gains from the action equals the present discounted value of the interim losses. The interim losses and therefore the scaling of compensatory restoration are conditional upon the choice of primary restoration actions. For this reason, scaling of compensatory actions must be done where the action is defined as part of a restoration “alternative,” which consists of both primary and compensatory actions.

Selecting a Preferred Restoration Alternative(s)

The identified restoration alternatives are evaluated based on a number of factors including costs, extent to which trustee restoration objectives will be achieved, likelihood of success, and other factors. Trustees must select the most cost-effective of two or more equally preferable alternatives.

As noted above, the Trustees prepare a Restoration Plan that will be the basis of the claim based on the analysis outlined in the previous discussion.

5. Approaches and Methods for Scaling Compensatory Restoration

In natural resource liability provisions in the USA, the conventional economic measure of damages for the interim loss of resources is the interim lost value incurred by individual members of the public (“monetary compensation.”)

36 This measure of damages

is well suited for litigation where individual claimants receive monetary compensation directly, for example in private tort suits, because it indicates the amount of money necessary to “make whole” the individuals. However, public trustees in the USA do not have the authority to provide recoveries for natural resource damages directly to individuals


(“restoring, rehabilitating, replacing or acquiring the equivalent of”) natural resources. The statutory restriction on the use of the recoveries has motivated the development of an alternative measure for interim losses, “resource compensation” in which compensation for interim losses is denominated in compensatory restoration projects. Resource compensation for interim lost services is measured as the cost of the preferred compensatory restoration project.38

To ensure that the public is fully compensated for the interim losses, the scaling process determines the size of compensatory restoration actions for which the present discounted value of the gains from the actions equals the present discounted value of the interim losses.39 As discussed above in section 3, the major category of interim social

losses is the lost consumer surplus due to resource injuries, which measures the change in well-being of an individual user of a resource-related good or service as a result of the resource injuries. Analogously the major category of gains from compensatory restoration


also will be consumer surplus.

36 See 43 CFR § 11.83 and Ohio v. U.S. Dept. of the Interior, 880 F.2d 432, 464 (D.C. Cir. 1989), reh ‘g denied, 897 F.2d 1151 (D.C. Cir. 1989).

37 Note that, if the compensation were paid to individuals in the form of money, there would be analogous limitations on the use of the compensation monies. Individuals generally cannot make autonomous decisions regarding expenditures on public resources because public decision-making processes must be invoked. Consequently, the recipients essentially are able to spend private recoveries only on private goods.

38 Alternatively the responsible party may assume responsibility for implementing the restoration plan, subject to performance monitoring by the trustees. See Jones, C.A. and K.A. Pease, “Restoration

Based Measures of Compensation in Natural Resource Liability Regimes,” Benefits in and Costs in Natural Resource Planning, Western Regional Research Publication, 1996.

39 As noted above, we apply discounting to the streams of past and future losses and gains to take into account the fact that the value of receiving a dollar in one year is less than the value of receiving a dollar today.

40 Consumer surplus is the net value of a good or service to an individual, which equals the total

willingness to pay for a specified quantity of a good, minus the amount the individual must actually pay.

The scaling analysis for compensatory restoration actions (as part of a restoration alternative including primary restoration actions as well) requires:

quantifying the extent and duration of lost services due to the injury, taking into account the primary restoration actions,

quantifying services gained for different scales of compensatory restoration actions, and

determining the relative value of the lost services due to the injury and the incremental gains in services from restoration actions (i.e., the rate at which the public is willing to make trade-offs between the lost services and the replacement services.)

The OPA regulations outline two basic approaches for scaling compensatory restoration projects: the service-to-service approach 41 and the valuation approach.

Service-to-Service Approach

Service-to-service scaling is a procedure in which the appropriate quantity of replacement natural resources and/or services is determined by obtaining equivalency between the quantity of discounted services lost due to the injury and the quantity of discounted replacement services provided by compensatory actions. The use of discounting takes into account the differences in timing. The implicit assumption of the service-to-service approach is that the public is willing to make a one-to-one trade-off between a unit of lost services and a unit of restoration project services. The assumption may be met when, in the judgment of the trustees, the restoration project provides services


of the same type and quality, and of comparable value as those lost due to the injury.

In addition, a second category of interim losses is lost economic rent, which measures the change in the public value of a resource allocated to commercial uses, which may be claimed provided such economic rent is not recovered under a private cause of action. Economic rent is the value of a public resource that may accrue to a private party because the government or Indian tribe does not charge a price or fee for the use of the resource.

Economic rent may occur when a resource, such as fish, is commercially harvested and sold. The issues associated with measurement of economic rent are beyond the scope of this paper. For a discussion, see Jones, Carol A., Theodore D. Tomasi, and Stephanie W. Fluke, Public and Private Claims in Natural Resource Damage Assessments, Harvard Environmental Law Review, 20: 111-163, 1996.

41 In this document, we will use the term “service-to-service” to refer to this class of methods. The term “resource-to-resource” is also sometimes used in the literature and the OPA regulations.

42 To illustrate the role of the different factors in determining comparable value, we provide fruit analogies. Comparing services of the same type but different quality is like comparing fresh to canned pineapple. On the other hand, comparing services of the same type and quality, but found under different supply and demand conditions is like comparing the value of harvesting another orange when oranges are in abundant supply to when the harvest has failed in much of the country. The value of providing another unit of fruit may be substantially greater when the pineapple is fresh or the oranges are scarce. [We assume the quality of harvested oranges is not different in the two scenarios.] Valuation methods can

For restoration actions providing the same types of services, the determination of comparable value is based on an evaluation of the relative quality of the lost and replacement services,43 and the extent of changes in aggregate supply and demand over the period of injury and period of provision of the services by the restoration project. The

issue to be evaluated is whether the differences are sufficiently small that values per unit of services are comparable for the losses and gains across the different periods. The OPA regulations indicate that the service-to-service approach must be considered in this context.

A variety of methods is available to implement the service-to-service approach, depending upon the kinds of resources and services that have been injured. For example, Habitat Equivalency Analysis

44 can be applied for habitat injuries. In essence, HEA calculates the scale of projects to replace injured resources in terms of present discounted quantities of “effective” habitat acres (or more generally, effective resource units). The simplified calculations in Habitat Equivalency Analysis (HEA) are appropriate when it has been determined that the project(s) selected by the trustees will provide replacement resources and services of “comparable type, quality, and value” to the injured resources.

In the Appendix , we illustrate the use of HEA with a brief summary of its


application to the Blackbird Mine hazardous material release in Idaho.

measure the rate of tradeoff between the differing quality or differing scarcity of fruits in the two circumstances.

43 A critical question in determining whether the lost services and the replacement services are of comparable quality is whether the metric used to characterize services captures any quality differences between lost and restored services. For example, an acre of replacement habitat may be more or less productive than an acre of the injured habitat. However, if it is possible to capture these differences in service levels per acre in a metric, then the quality differences may be accounted for in the calculations.

44 For an overview of the method, see “Habitat Equivalency Analysis: An Overview,” Damage Assessment and Restoration Program Policy and Technical Paper Series, 95-1, National Oceanic and Atmospheric Administration, revised June 1996. Other authors discuss the general concept, but suggest different possible standards for appropriate applications. See Mazzotta, M., James J. Opaluch, and Thomas A Grigalunas, “Natural Resource Damage Assessment: The Role of Resource Restoration,” Natural Resources Journal, Vol. 34, No. 1, Winter 1994 (153-178)

45 U.S. v. Blackbird Mining Ltd. Partnership, Civ. No. 93-0235-E MLR (D. Idaho) (DOJ No. 90-11-2-816)

Valuation Approach46

Alternatively, when impaired and replacement services are of different type, quality and/or value, the assumption of a one-to-one trade-off does not apply. In this context, the valuation approach allows for a variety of economic methods to determine what the appropriate trade-offs are.

Economic methods for valuing natural resources have traditionally been characterized as either revealed preference or stated preference methods.

47 We highlight

each in turn.

Revealed preference studies infer values based on individuals’ behavior (which is construed to reveal their preferences). Included in this set are demand and supply functions for marketed resources, such as water, timber, or fish.

48 Demand and supply

functions can be estimated from data characterizing the quantity of goods or services purchased at different price levels. The estimated models may be used to calculate lost consumer surplus for marketed goods, when supply is restricted or quality changes due to

a spill. Market models of demand and supply are employed less frequently than some other methods, because most uses of resources are not bought and sold directly in a market.

However, as discussed above in section 3, analogous demand functions can be constructed for non-market goods and services, such as the recreational use of resources. Though a recreational trip is a non-market good (i.e., without a market price), recreators pay an implicit “price” for use of a site’s services through their travel and time costs. Consequently, data on recreationists’ travel costs and levels of use for different recreation

46 The discussion in the text focuses on the “value-to-value” version of the valuation approach, in which the compensatory actions are scaled so that the value gained from the actions is comparable to the value lost from the injuries.

Alternatively, in certain circumstances, a variant of the valuation approach may be employed in which the restoration plan is scaled by the equating the cost of the restoration plan to the dollar value of losses due to the injury. To apply this procedure, the trustees must judge that the valuation of the lost services is practicable, but valuation of the replacement natural resources and/or services cannot be performed within a reasonable time frame or at a reasonable cost. Generally, these circumstances will generally arise only in the context of spills with limited injuries. Factors to consider in determining whether a time frame or cost is “reasonable” are put forth in 15 CFR § 990.27(a)(2).

47 For more information about use of the different methods for valuing natural resources, see Freeman, A. Myrick,The Measurement of Environmental and Resource Values: Theory and Methods, Resources for the Future, Washington DC, 1993.

48 In addition , hedonic models of p ro p e rty value estimate how the p rice of p ro p e rty (g enerall y residential housing), a marketed good, varies with important attributes of the property, including the local environmental quality. With this method, an implicit “price” for changes in environmental quality can be estimated. However, the value of environmental changes associated with oil spills generally is difficult to observe in the property market, due to its high transactions costs and the other factors influencing price variability.

sites can be used to estimate a travel cost demand function for the recreation sites. From the demand function it may be possible to calculate the loss of consumer surplus due to the closure or impairment of a site, or the gains in consumer surplus from site improvements.

In contrast, stated preference studies infer value based on individuals’ statements about choices they would make among alternative scenarios describing a good or service and the context in which it will be provided, including the method of payment. Because the good does not have to be currently available, these studies are much more flexible than revealed preference methods — they can value changes in the quality or quantity of resources that are outside the range of current observation. For example, since all Great Lakes fisheries in the USA have fish consumption advisories, these methods can be used to value clean-up of contaminants sufficient to allow removal of the advisories, whereas revealed preference methods cannot. Further, with stated preference methods, it is possible to calculate the total value of goods and services, including both direct use and passive use values.

Some stated preference surveys elicit respondents’ intentions to visit recreational sites, if changes described in the survey scenario were to occur at the site. Other forms of stated preference surveys elicit individuals’ intentions to purchase goods or to support public programs (through taxes) that are not yet available.

A growing literature is highlighting the benefits of combining revealed preference and stated preference data and methods in a single analysis.

49 If the environmental

characteristics of the baseline level of resources or of the restoration projects are outside the range of currently observed circumstances, then it may be necessary to link stated behavior data with the observed participation data in order to use the travel cost method

to scale resource compensation. Combining stated preference and revealed preference data provides additional advantages, including allowing identification of attribute effects that cannot be identified with revealed preference data due to collinearity in the dataset. Collinearity can be reduced in the combined dataset by judicious design of scenarios.

It may be possible to use some stated preference methods, or a combination of stated and revealed preference data, to elicit direct resource tradeoffs required by the public — i.e., to determine the amount of additional resource projects necessary to compensate for the injury. In particular, analysts have suggested that conjoint analysis, or more broadly, choice experiments, may be well-suited for determining resource

49 See, for example, Louviere, Jordan J., “Combining Revealed and Stated Preference Data: The Rescaling Revolution,” Presented for the Association of Environmental and Resource Economists, Lake Tahoe, June 2, 1996

compensation.50 These survey-based methods are used to derive the values of particular attributes of goods or services based on individuals’ choices between different goods that vary in terms of their attributes or service levels. They have been used extensively to assist firms in the design of new products, a design problem with some similarities to the problem of designing a restoration plan. Applications of conjoint analysis to


environmental or health risk policy issues are beginning to appear in the literature.

Alternatively, another procedure for calculating resource compensation would be to calculate separately the interim loss in value and the gains from alternative restoration projects. Trustees would select the method(s) to employ for the calculations from the set of standard methods for valuing natural resources, as described above.

6. Conclusion

The basic framework for public damage claims under natural resource liability statutes in the USAis the cost of restoring the injured resources, plus compensation for the interim loss of resources from the time of injury until their full recovery. The inclusive measure of public damages in the USA law, the Oil Pollution Act (OPA) of 1990, captures the social losses due to the reduction in the public’s enjoyment of natural resources. [Lost profit and lost property value are captured in private causes of action under OPA.] Consequently, OPA can provide the affected public with effective compensation for natural resource injuries, while at the same time providing incentives to responsible parties to invest in pre-spill preventive activities to reduce future injuries.

We identified two different approaches for quantifying compensation for interim losses. The first approach, which we refer to as “monetary compensation,” relies on valuing in monetary terms the interim loss of natural resources and their services due to the injury. In

50 See, for example,Matthews, Kristy E., F. Reed Johnson, Richard W. Dunford, and William H. Desvouges, “The Potential Role of Conjoint Analysis in Natural Resource Damage Assessments,” Triangle Economic Research, Durham NC, undated. For a survey of the literature see, Jordan J. Louviere, “Conjoint Analysis Modeling of Stated Preferences,” Journal of Transportation Economics and Policy, Vol. 10 , 93-119, January 1988.

51 See, for example, Christopher Gan, and E. Jane Luzar, “A Conjoint Analysis of Waterfowl Hunting in Louisiana,”Journal of Agricultural and Applied Economics, 25:36-45, 1993

contrast, under the “resource compensation” approach, compensation is denominated in “compensatory restoration” projects. OPA mandates that resource trustees spend all their recoveries on the restoration or replacement of resources. Reflecting the statutory mandate, the recently finalized regulations for performing damage assessments under OPA incorporate the concept of resource compensation. Note that under the new regulations, the basic measure of natural resource damages is the costs of implementing a Restoration Plan, designed to return resources to baseline and to compensate for interim losses.

Until 1996, the two major international conventions addressing oil spill liability, the

1969 International Convention on Civil Liability for Oil Pollution Damage (CLC) and the 1971 International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage (Fund), did not hold the responsible party liable for damages to natural resources, except to compensate for lost profits and earnings of commercial users of the resources. However, the 1992 international Convention Protocols, which entered into force in May 1996, include the costs of resource “reinstatement” measures. A clear definition of the scope of reinstatement has not yet been provided by the International Oil Pollution Compensation Fund 1992, the international organization administering the compensation regime.

Precedent exists in other international conventions for a broad interpretation that is consistent with the OPA statute. An interpretation of “reinstatement”, along the lines of the resource compensation concepts in the OPA regulations, could provide an inclusive measure of compensation for injuries to the public from spills such as the Sea Empressspill off the coast of Wales. At the same time it would provide incentives to invest in pre-spill preventive activities to reduce future injuries. Furthermore, such a measure would not contravene the policy previously articulated by the IOPC Fund Assembly that only losses quantifiable in financial terms may be claimed.



Case Study: Blackbird Mine Hazardous Material Release

Site Characteristics/Source of Contamination

Located in the Panther Creek drainage basin of the upper Salmon River, the Blackbird mine site in east central Idaho includes underground tunnels, an 11-acre open pit, millions of tons of tailings and over two million cubic yards of waste rock. Panther Creek historically was the fourth most important source of Chinook salmon among the Salmon River tributaries. Toxic releases from the copper mine have contributed to the decline of resident trout species and the ultimate elimination of endangered spring and summer Chinook salmon and steelhead from Panther Creek. Surface and groundwater continue to flow through the mining tunnels, discharging contaminants into the watershed.

Resource Injuries/Lost Services

The fishery populations plummeted to zero in 1963 with only sporadic sightings since that time. Elsewhere throughout the upper Salmon River basin, the annual number of salmon has declined gradually since the 1960s, reflecting the effects of dam construction and habitat change on the Columbia and Snake Rivers. It is clear, however, that mining caused the loss of the Panther Creek salmon prior to the impacts of downstream dams.

Operation of the Blackbird mine also resulted in fishery habitat degradation and loss through the construction of access roads, timber clearing, sedimentation and creek channel re-alignments. Recreational, commercial, and subsistence fishing have been impaired by the injuries

Restoration Plan

The restoration plan is designed to:

restore the water quality of Panther Creek to support all life stages of salmon

restore Chinook salmon runs to the numbers that would return each year, but for the Blackbird Mine discharge

compensate for the losses in Panther Creek incurred from the period of initial injury until restoration is complete.

Restoring Injured Resources to Baseline : The restoration plan focuses on returning approximately 200 spawning adult Chinook salmon each year, after the EPA Superfund remedial process restores Panther Creek water quality by 2002. Return of the Chinook

52 U.S. v. Blackbird Mining Ltd. Partnership, Civ. No. 93-0235-E MLR (D. Idaho) (DOJ No. 90-11-2-816)

salmon is considered a proxy for restoring full function of the impaired Panther Creek ecosystem. Considering the unrelated factors that have reduced spawning populations throughout the Columbia River Basin, this is the number that Panther Creek could support, but for Blackbird Mine. Other injured species will quickly repopulate Panther Creek after the water quality is restored. Since Chinook salmon return only to their natal streams to spawn, the original stock has been lost. Restoring the salmon run will thus require the use of a hatchery to culture select wild donor stocks for introduction into Panther Creek, as well as some streamside stabilization and restoration work to ensure survival of juvenile Chinook.

Scaling Compensatory Restoration: The compensatory projects, located both within and outside of the Panther Creek drainage basin, include: channel meander reconstruction


R2 Resource Consultants and Industrial Economics, Panther Creek Biological Restoration and Compensation Program, prepared for the National Oceanic and Atmospheric Administration, March 1995.