Economic Valuation of Resource Injuries in Natural Resource Liability Suits

Abstract

Several major federal environmental statutes enacted in the 1970s designate federal, state, and tribal resource management agencies as trustees of natural resources on behalf of the public and enable the trustees to recover damages for injuries to public resources. The measure of damages in the statutes is the cost of restoring the resources to baseline conditions, plus the interim loss in value from the time of the incident until full recovery of the resources. The statutory restriction limiting use of the monies to enhancing or creating natural resources motivated the development of an alternative measure for interim losses—the cost of compensatory restoration actions providing in-kind compensation. In this paper alternative measures of damages are outlined and approaches and methods for scaling compensatory restoration are discussed. Two basic scaling approaches are presented: a simplified in-kind trading procedure and the more general valuation approach, in which a variety of economic methods may be employed to assess the trade-offs between gains from proposed actions and interim losses from the injuries. Experience indicates that natural resource liability actions represent a potent tool for federal and state resource managers to address injuries to public resources.