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  • A New Way to Assess Natural Resource Damages

    In the latest episode of Digging Into Land Use Law, Nossaman’s Brian Ferrasci-O'Malley and John O’Meara explore the Department of the Interior’s (Interior) proposed rule to change the way agencies evaluate injuries to natural resources at contaminated sites and how much restoration will cost. They examine Interior’s new “Type A” rule for streamlined natural resource damage assessments, the first changes to that rule in more than 27 years, and discuss who will be affected by the proposed revisions.

    Transcript: A New Way to Assess Natural Resource Damages

    0:00:00.7 John O'Meara: For the first time in a generation, federal environmental regulators could change the way they evaluate contamination and determine costs for restoration. What prompted this change, and who will be affected?


    0:00:18.4: Welcome to Digging Into Land Use Law, Nossaman's podcast, covering the development of all things in on or above the ground.

    0:00:33.6 JO’M: Thank you for joining us for this episode of Digging Into Land Use Law. In this episode, we analyze a proposed rule from the US Department of the Interior that has the potential to speed up the process through which interior restores the public's contaminated natural resources. My name is John O'Meara and I'm an associate attorney in Nossaman's environment and land use group. I counsel clients through complex environmental issues such as contaminated site cleanups, which often require collaborative, creative and cost-effective solutions. Joining me is Brian Ferrasci-O'Malley, a partner in Nossaman's Environment and Land use group. Brian's practice includes both transactional work and litigation and he regularly advises clients across the United States on contaminated site cleanups, energy development projects, and federal wildlife law issues. Brian has particular experience with natural resource damages matters, both at Nossaman and previously as an attorney with the US Department of The Interior's Office of the Solicitor, where he managed a nationwide docket of NRD cases under CERCLA, also known as the Superfund Act, concerning the nation's largest and most complex environmental responses. Enforcement actions and lawsuits concerning natural resource damages, or NRD, can be costly and time-consuming for those accused of releasing hazardous substances that injure the public's natural resources.

    0:02:03.8 JO’M: The US Department of the Interior, or simply Interior, recently published a proposed rule that would overhaul the type A rule that Interior uses to perform natural resource damage assessments and evaluate the need for restoration activities following the release of hazardous substances. The proposed revisions would be the first significant changes in more than 27 years to this portion of Interior's natural resource damage assessment regulations. If finalized the proposed rule could provide a more flexible structure for settling natural resource damage claims, allowing Interior to get restoration on the ground more quickly. So Brian, I'd like to turn the conversation over to you now. I'd like to better understand the existing regulatory framework and what some key terms mean. Would you please explain, what are natural resource damages?

    0:03:00.2 Brian Ferrasci-O'Malley: Thanks, John. And it's a pleasure to be speaking with you today. Natural Resource Damages refers to a couple of federal laws that allow federal, state and tribal natural resource agencies to evaluate the impacts of oil spills and releases of hazardous substances into the world that affect the public's natural resources, habitats, and the ability for members of the public like you and I to go out and use those natural resources. It's a way to get the public back to where they were before a spill or a release happened.

    0:03:40.8 JO’M: And what are the differences between an assessment and a restoration in the NRD context?

    0:03:47.9 BFO'M That's a good question. So, it's a two-part process. You have these trustee agencies, federal agencies like Interior or the National Oceanic and Atmospheric Administration, state agencies, departments of marine resources or the like, and Indian tribes are collectively called The Trustees. They're given the role of assessing what type of injury happened, what resources were killed or injured or reduced, and then how do we bring those resources back up to where they were before the incident. So it's a two-part process. There is a assessment process and then the restoration process where projects are undertaken to bring back the resources that were lost.

    0:04:40.2 JO’M: And within this framework, what is a type A assessment?

    0:04:44.9 BFO'M So within Interior's regulations under the Superfund Act, there are two ways that the government trustees can move forward with assessments. There is the type A rule that is a simplified and meant-to-be-streamlined assessment process. And then there's the type B rule, which is a more site-specific process that is more in-depth and takes a longer time and really looks at just this one case, just this one spill, "How can we figure out what was lost and what we need to get back?" The Type A assessment rules, which is the subject of the current proposed rule from Interior, focuses on "Is there a way to have a simplified assessment where we can use models rather than going out and doing two or three or four more years of studies?"

    0:05:46.4 JO’M: And speaking of studies, I'm curious to know, who's involved with studying? Does the Environmental Protection Agency participate in NRD matters?

    0:05:54.8 BFO'M The Environmental Protection Agency, or EPA, its main role is really in the cleanup process and the cleanup process and the NRD process have been described sometimes as parallel tracks. Sometimes NRD is considered the tail at the end of a cleanup process. It can change depending on the type of cleanup that's involved or the way in which the various trustee agencies work together. But usually EPA is not terribly involved in the NRD process. If you're running a parallel track, EPA is there consulting, making sure that the trustees, the NRD trustees, are doing their work and kind of not getting in the way of cleanup, because EPA's role is cleanup. They're there to make sure the site is no longer a risk to human health and the environment. Their focus is stop whatever the spill was or the release was, they're not focused on, "And then how do we give back what was taken away?" That's really the role of the NRD trustees. So you will see the state, federal and tribal trustees, NRD trustees, being involved with, "What exactly was injured and how do we restore it?" They're not in that role dealing with cleanup. EPA is dealing with cleanup.

    0:07:22.3 JO’M: And I understand you've mentioned that there are federal agencies that participate as trustees. Are there state entities that participate as trustees as well?

    0:07:33.4 BFO'M Yes, depending on... And I should say John, that we're talking really about federal NRD actors under Superfund, there are states that have their own NRD statutes, their own ability to litigate natural resource damage claims under state law, New Jersey, Washington State, are just some examples. But at the federal level, you do have this working group of trustees dependent on what was injured and where it's happening. So you will have your federal trustees and those will be the resource agencies that have the legal background to say, "Here... " instead of the public saying, "Oh, I was injured here because of an oil spill," you have... The way the law is set up, it says, "All right, standing in for you, standing in for the public is going to be," again, "At the federal level, Department of the Interior." So that would be the US Fish and Wildlife Service, sometimes it's the National Park Service if it's a spill that happens near or impacting parks, you also have Bureau of Land Management, and others. At the state level, it's usually a resource agency like they're a state Fish and Wildlife Service or a Department of Marine Resources if it's a coastal spill. And then the tribes will have their own way of... Each individual tribe is going to have a setup that will have a similar type of resource-based trustee at the table.

    0:08:58.8 JO’M: Now that we have a better understanding of the current law, how does the new type A rule differ from the current rule?

    0:09:04.0 BFO'M So the current type A rule, which as I said earlier hasn't been used in decades because it's pretty outdated, is structured that it's only available for cases with $100,000 or less in damages. That in natural resource damages, in the arena there, is virtually nothing. Most cases involve at least 300, 400, 500 thousand dollars of damages and they can go way up from there. You may be familiar with Deepwater Horizon, that was a multi-billion dollar NRD claim. So the current type A rule, if you're over $100,000 in damages, you can't use it. The current rule is also only available in two environments. You either have to be in the Great Lakes region or in a coastal environment. If you're not in one of those regions where the case is, you're not able to use the Type A simplified assessment process. And finally, as I alluded to earlier, you've got to use this static outdated model that's written into the regulations themselves and doesn't allow for anything that has changed since 1997 when these were last updated.

    0:10:17.8 BFO'M So the new rule turns all three of those things on their head. First of all, it increases the limit for the size of cases that can be used. So it goes from $100,000 in the current rule, in the proposed rule, it's up to $3 million in damages that can be eligible to use the Type A process, even up to $5 million for certain discreet cases where there's one or two potentially responsible parties, or PRPs. On the geographic side, gone is the restriction that you have to be in one of those two areas. The new type A rule will be able to be used nationwide. And because it's no longer tied to those specific models and the regulations, it allows for a much wider range of models to determine damages. Interior's proposed rule mentions a couple of currently very well-used rules, the Habitat Equivalency Analysis model, the Resource Equivalency Analysis model. Those are both models that have been used in NRD practice for decades and are well established, people on both sides of the coin understand that from the regulators and the regulated community. But the new rule also leaves open that there could be other models in the future.

    0:11:33.5 JO’M: You mentioned three new aspects of the proposed rule, and I'm curious to know whether there's any other details that people might find interesting.

    0:11:42.9 BFO'M Good question, John. This proposed rule from Interior follows up on an advanced notice that Interior issued about a year ago, where they put some of these ideas out for the first time and asked, not in a proposed rule form, but in sort of a brainstorming session, to say, "What do folks in the natural resource damage field think about these potential changes?" And in addition to the three main changes I talked about earlier, there are some other additional details in the proposed rule that I see really as responses to comments that interior got on that initial query. So for example, all of the trustees, all the trustee agencies at a particular case, state, federal, and tribal, have to agree to use the Type A process in order for it to move forward. And at least one of the potentially responsible parties has to voluntarily agree. In practice that means the government agencies can't force a private party to go forward with a type A, but private parties also can't force the government to move forward.

    0:12:49.0 BFO'M It has to be a collaborative process, which in a lot of ways, is what natural resource damage settlements and collaborative assessments are the norm. It's the exception that you end up going to trial on something. As far as... Members of the public might be interested in, the new type A rule has a big focus on public notice and opportunity for comment. There's a, what's going to be called, a Type A report that the trustees will have to publish for public comment before the process is complete that shows the public, "here's why we chose to take the Type A path. Here are the models, the specific models, that we used and how we see this connecting to restoration". Because at the end of the day, the NRD process is all about restoring the public's natural resources. It's about bringing things back up to that baseline where they were before the incident or the spill occurred.

    0:13:46.0 JO’M: What are some of the positives of the proposed rule?

    0:13:49.8 BFO'M Well, first and foremost, John, it revives the Type A process. It gives parties an opportunity to use a more streamlined, simplified, process for easier, simpler, more run-of-the-mill NRD cases. Right now, if you have what, for all intents and purposes, is a simple case, you still have to go through the complicated long process that you would have to for the most complex case that you could come up with. So, that's a big positive, is reinstating this track to get through quicker. And it's also a positive that private parties have to agree for the government to move forward. It makes it so that there is an element of collaboration there. Other positives include the fact that now there's no geographic restriction. Anyone in the United States, any case can use this and that there's that new limit, so, up to $3 million and it's just more flexible in general. By allowing for new models in the future that might make sense, we won't be in the same situation in 10 or 15 years where, "Wow, we've got a great new model, wouldn't it be nice if we could use it except, oh no, the regulation say that we can't." The proposed rule is smartly drafted to avoid that situation.

    0:15:16.0 JO’M: And of course there's no federal regulation that doesn't have some drawbacks. So what are the drawbacks that you've identified in this new type A proposed rule?

    0:15:25.0 BFO'M I think the biggest potential drawback is there are no explicit timeframes for how long the type A process should last. And for a pathway that's designed to streamline and get to restoration faster, it's not clear on its face how this rule accomplishes that. So exactly how the new type A rule will result in quicker resolutions of claims, that's to be determined. Another issue, I think, it's a minor one but it could be important, is the fact that the new cap is not indexed in any way to inflation. So if the proposed rule were finalized this year and you had a $3 million case, you could move through, but if in five years your $3 million case, it might be in today's dollars only a two and a half million dollar case. And just because of the passage of time, you wouldn't be able to go through the type A process. So I think I expect Interior's going to hear from a lot of commenters and that'll be one of the points made that "you should at least tie that number, that $3 million to some government index, because otherwise we'll be in a situation like we were with the current rule where $100,000 in 1997 is very different from $100,000 today".

    0:16:46.2 JO’M Brian, thanks for explaining all that. What are Interior's next steps with the proposed rule?

    0:16:54.1 BFO'M As I mentioned earlier, Interior extended the comment period deadlines. So they could host a number of tribal listening sessions to get specifically tribal perspectives on the proposed rule. Those should be wrapping up this month. And comments are due on April 5th of this year, 2024. Once Interior receives those comments, they'll take them in, they'll review them and they'll decide A; whether to move forward and produce a final rule, and B; if they're going to do so, what changes they'll make from the proposed rule.

    0:17:30.8 JO’M When would we expect to see this finalized rule?

    0:17:33.9 BFO'M Late last year Interior was still talking about getting a final rule out by late spring of 2024 and having that be effective in summer of 2024. When they extended the comment period a month that necessarily is likely to push out the timeline a little bit. There is the small concern that eventually you start running into the Congressional Review Act timeline, which is a topic for a whole other podcast. But suffice to say for here, is the period at the end of a legislative session wherein the next Congress can take a look back at particular regulations, proposed rules or finalized rules and essentially wipe them out if they were at the very end of a presidential term. That's a possibility anytime you have an election coming up, and so you see agencies like Interior try to push through regulations that might be politically charged before that timeline comes into effect.

    0:18:40.6 BFO'M I don't think that the NRD changes here, the type A rule, is particularly problematic. It's not overtly politically sensitive, so it may not come into play and that as a result may mean it waits a little bit while Interior tries to get some more of its additional rules and regulations out. But that's the complicated answer. I think the short answer is we should expect to see a final rule in late summer, maybe early fall with an effective date that would be 30 days after. And once effective, all of a sudden that process would be open and I think you would end up seeing a lot more cases take the simplified pathway to try and streamline and smooth through their process. Because from the private party perspective, you want to find out what you're liable for and get out and move on as fast as you can. And from the government's perspective, you want to figure out what the damage was and get it restored as soon as possible. So there really are benefits for both sides to finalizing this new type A rule and reestablishing a streamlined pathway for getting through NRD assessments.

    0:19:52.6 JO’M Thank you Brian for talking with us today about the proposed new type A rule for natural resource damages matters. And thank you to our listeners for joining us for this episode of Digging Into Land Use Law. For additional information on this topic or other environmental and land use matters, please visit our website at nossaman.com. And don't forget to subscribe to Digging Into Land Use Law wherever you listen to podcasts so that you don't miss an episode. Until next time.


    0:20:25.7: Digging Into Land Use Law is presented by Nossaman LLP and cannot be copied or rebroadcast without consent. Content reflects the personal views and opinions of the participants. The information provided in this podcast is for informational purposes only, is not intended as legal advice and does not create an attorney-client relationship. Listeners should not act solely upon this information without seeking professional legal counsel.

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