Officials seek to “improve the efficiency and cost effectiveness” of NRDAs — which could help expedite the resolution of claims.

By Janice M. Schneider, Gary P. Gengel, Joel C. Beauvais, Kegan A. Brown, and Thomas C. Pearce

On August 27, 2018, the US Department of the Interior (DOI) issued an Advance Notice of Proposed Rulemaking (ANPR) requesting comments by October 26, 2018 on potential changes to its natural resource damage assessment (NRDA) regulations under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). This law authorizes federal, state, and tribal trustees to recover natural resource damages (NRD) for injuries to natural resources resulting from hazardous substance releases. NRDAs that follow the DOI regulations are entitled to a rebuttable presumption of validity in later court proceedings.

In the ANPR, DOI seeks input on how to “improve the efficiency and cost effectiveness” of NRDAs and accelerate restoration of injured natural resources. While there are many areas in which to improve the regulations that will be considered, DOI specifically requests comment on the following six issues:

1. Whether to simplify the NRDA regulations, for example by adopting “plain English” revisions that would make the DOI regulations more like the shorter NRDA regulations promulgated by the National Oceanic and Atmospheric Administration (NOAA) under the Oil Pollution Act (OPA)

2. Whether to provide greater clarity and a pragmatic framework for use of the existing “simplified” Type A NRDA regulations that require minimal field observation

3. Whether to amend the NRDA regulations to encourage early scoping of restoration opportunities

4. Whether to amend the NRDA regulations to encourage early settlements and implementation of early restoration projects

5. Whether to promulgate new regulations concerning the use of natural resource restoration credits, including restoration “banking”

6. Whether to adopt a categorical exclusion from the National Environmental Policy Act (NEPA) for NRDAs and natural resource restoration

Overall, the August 27 ANPR focuses on two policy goals for comment: (i) making the NRDA regulations simpler, more streamlined, and more cost-effective, and (ii) accelerating the NRDA process to enable earlier restoration of injured natural resources and resolution of NRD claims.

The ANPR provides an important opportunity for stakeholders to propose “win-win” reforms to the DOI NRDA regulations. The current NRDA process is known to be complex and lengthy — with assessments sometimes lagging for decades. To date, some trustees, such as the New Jersey Department of Environmental Protection (NJDEP), have decided not to use the DOI NRDA regulations, relying instead on litigation expert opinions on NRDs. Indeed, on August 1, 2018, NJDEP declared that it was getting “back in the environmental enforcement business” and filed three separate lawsuits seeking NRDs for a variety of natural resources, including groundwater, surface water, sediments, wetlands, and biota. None of the three complaints allege that a NRDA has been completed for the natural resources at issue.

While the existing DOI NRDA process can be time-consuming and costly, leading some trustees such as NJDEP to forgo a pre-litigation NRDA, trustees may have difficulty recovering NRD in the absence of an appropriate NRDA. For example, Latham & Watkins successfully obtained two complete defense trial verdicts finding that NJDEP was not entitled to any NRD because NJDEP failed to prove that any natural resource services had been lost, and that its proposed restoration plan was necessary and appropriate. See New Jersey Dep’t of Envtl. Prot. v. Essex Chem. Corp., No. A-0367-10T4, 2012 WL 913042 (N.J. Super. Ct. App. Div. Mar. 20, 2012) (affirming trial court’s refusal to award NJDEP primary restoration and compensatory damages); N.J. Dep’t of Envtl. Prot. v. Union Carbide Corp., No. MID-L-5632-07 (N.J. Super. Ct. Law Div. Mar. 29, 2011) (rejecting NJDEP’s claim for primary restoration and compensatory natural resource damages).

To the extent DOI adopts amendments that simplify the NRDA process, federal, state, and tribal NRD trustees may be more likely to follow the regulations in order to obtain CERCLA’s “rebuttable presumption” on their damages claims. More streamlined DOI NRDA regulations could incentivize trustees to follow the NRDA process, providing greater certainty and predictability to the regulated community on what an NRDA does (and does not) entail and the quantification of any NRD. Greater consistency, in turn, should allow for quicker resolution of NRD claims, reduce transaction costs, promote fair settlements, and ultimately facilitate earlier natural resource restoration. Consequently, any amendments to the DOI NRDA regulations should provide transparent, reasonable, and scientifically sound procedures that focus on timely identification and quantification of NRD if natural resource service losses are identified, as well as opportunities for early restoration of injured natural resources.