Advisories & Insights

Overview: Natural resource damage assessment, restoration and litigation

October, 2007

Under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA)[1], the Clean Water Act (CWA)[2], and the Oil Pollution Act of 1990 (OPA)[3], Natural Resource Trustees can recover for damages caused to natural resources as a result of the release of hazardous substances or oil.[4] Conceptually, an NRD claim is the claim that is left over after a contaminated site has been remediated. From the Trustees' perspective, remediating a site to a point that it no longer poses a threat to human health or the environment, what EPA does, is not enough. Trustees use NRD claims to restore natural resources injured due to contamination to baseline conditions – the condition of the resource if the release had never occurred - and to recover for diminution in the value of the injured resource.

The natural resource damage provisions of CERCLA are sometimes described as Superfund's "sleeping giant."[5] This article provides an introduction to this "sleeping giant" with an overview of what a natural resource damage claim is, who may assert it, how it is assessed, how it is valued, and how it may be resolved.

Who are Natural Resource Trustees?

Natural Resource Trustees are the federal and state agencies, and tribal governments who own, manage or otherwise control resources injured by a discharge of hazardous substances or oil. They include federal and state land management and resource agencies, such as the Department of Defense, the Department of Interior (acting through its bureaus, including the Bureau of Indian affairs, the Bureau of Land Management, the Bureau of Reclamation, the Fish and Wildlife Service, and the National Park Service), the Department of Agriculture (acting through the Forest Service), the Department of Commerce (acting through the National Oceanic and Atmospheric Administration), and the Department of Energy.[6] Under the Superfund Amendments and Reauthorization Act (SARA),[7] Indian tribes were granted authority to act as Trustees.[8]

Cities can only serve as Trustees if authorized by the governor of the state.[9] Private parties cannot be Trustees, with the exception of a limited right to a claim for damages under OPA for loss of subsistence use of natural resources, recoverable by any party who used the injured or lost resources, without regard to ownership or management of the resource.[10]

The Environmental Protection Agency (EPA) is not a Natural Resource Trustee agency and does not directly participate in natural resource damage assessment and restoration activities, or become a party in a natural resource damage lawsuit. That is not to say, however, that EPA does not have a role, albeit a very limited one, in the process of assessing natural resource damages.[11] CERCLA requires EPA to "promptly notify the appropriate Federal and State natural resource trustees of potential damages to natural resources resulting from releases under investigation" under its response authority and to "seek to coordinate the assessments, investigations, and planning" of response actions with such Federal and State trustees.[12] The CERCLA natural resource damage assessment regulations provide for coordination and consultation with EPA at various steps throughout the CERCLA response process.[13] EPA may also play a role in the resolution of natural resource damages as part of a global settlement of a responsible party's liabilities through the entry of a consent decree.[14]

Trustee agencies can recover damages for injury to only those resources "owned, controlled, or managed by" that Trustee; and, in the case of states and Indian tribes, "appertaining to such" state or tribe, or "held in trust for the benefit of such tribe.[15] In the Bunker Hill[16] natural resource damage case in Idaho, a federal district court held that federal and tribal Trustees could not recover for injury to resources owned or controlled by the state of Idaho, with whom defendants had already settled.[17] The court placed the burden on the Trustees remaining in the case to prove in the damages phase of the trial that they, in fact, are the stewards of the injured resources for which they are seeking damages.[18]

However, two years later, in a surprising turn of events (albeit in an unpublished order), the court sua sponte modified its published order as to the scope (and overlap) of trusteeship, finding that co-trusteeship of resources is the rule, not the exception, and that the plain language of the statute mandates that a co-trustee, acting individually or collectively with the other co-Trustees may seek recovery from responsible parties for the full amount of the damage to resources under its trusteeship (shared or otherwise), less any money that already has been paid as a result of settlement to another Trustee by a responsible party. If there is later disagreement between the co-Trustees, the court opined, that disagreement will have to be resolved by successive litigation between the Trustees, without affecting the liability of the responsible parties.[19]

What are Natural Resources?

CERCLA broadly defines natural resources as including virtually any identifiable aspect of the natural environment. "Natural resources" are defined as:

[L]and, 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 local government, any foreign government, any Indian tribe, or, if such resources are subject to a trust restriction on alienation, any member of an Indian tribe.[20]

Assessment and Restoration of Natural Resource Damages

The goal of restoration is to return the resource to its pre-release or baseline level. The trustee is required to develop a reasonable number of possible alternatives for the restoration, rehabilitation, replacement, and/or acquisition of the equivalent of the injured resource and the services it provided. The trustee then chooses the alternative he or she determines is the most appropriate from among the possible alternatives.[21] The alternatives are limited to those actions that restore, rehabilitate, replace, and/or acquire the equivalent of the injured resource and service to no more than their baseline (i.e., the way the resource would have been had the discharge or release never occurred).[22]

Regulations for assessing NRD injuries have been promulgated by two key federal trustee agencies: DOI and NOAA. If natural resources have been injured by a discharge or release of oil, the NOAA regulations apply.[23] Where natural resources have been injured by the release of a hazardous substance under CERCLA or the CWA, the DOI regulations are used.[24]

DOI's regulations provide a framework and standards for natural resource damage assessment and restoration in coastal and marine environments, and the Great Lakes (Type A) and other environments (Type B). The Type A process involves the use of a computer model to assess damages, in a standard and simplified manner. The more widely-used Type B process is used in situations that require an individual approach. Both Type A and Type B regulations require a four-stage assessment process[25]:

Phase 1: Pre-Assessment Screen. A pre-assessment screen is conducted to determine whether additional action is warranted. Trustees must determine whether an injury has occurred and a pathway of exposure exists. The pre-assessment screen is a prerequisite to conducting a formal Natural Resource Damage Assessment.[26]

Phase 2: Assessment Plan. Trustees must confirm the exposure of trust resources to the release of a hazardous substance, and identify how the potential damages will be evaluated. Type A Assessment Plans document that the conditions for the use of Type A procedures are met, provide the site-specific data inputs the Trustees will use to run the computer model, and provide the results of a preliminary application of the model. Type B Assessment Plans identify the site-specific studies the Trustees will conduct and the quality control/assurance procedures that will be used. Draft Assessment Plans under both Type A and Type B procedures must be available for public review and comment.[27]

Phase 3: Assessment Implementation. During this phase, Trustees gather the data necessary to quantify the injuries to natural resources and determine damages, through three steps: (1) injury determination; (2) quantification; and (3) damage determination. Under Type A assessments, these steps are performed using the computer model. Under Type B assessments, theses steps are performed through laboratory and field studies. Injuries are quantified by identifying the function or services provided by the resource, determining the baseline level of such services, and quantifying the reduction in service levels that result from the harm to the resource.[28]

Phase 4: Post Assessment. Trustees prepare a Report of Assessment detailing the results of the Assessment Implementation phase and proposing several restoration alternatives. Type A assessments will produce a printed output of the final model application, which is included in the Report. A preferred alternative is selected based on several factors, including technical feasibility, relationship of costs to benefits, and consistency with response actions.[29]

In addition to the four phases described above, the DOI regulations also require that Trustees coordinate assessment efforts, including the pre-assessment screen, with the lead response agency in any situation where response action is planned or underway at the site.[30]

Federal and state Trustees must comply with the DOI regulations in performing natural resource damage assessments in order to be entitled to a rebuttable presumption of the assessment of damages.[31]

The NOAA regulations provide a framework for conducting natural resource damage assessment and restoration where resources have been impacted by the release or discharge of oil (except for any part of oil defined as a "hazardous substance" under CERCLA)[32]. Unlike the cleanup and restoration of CERCLA sites, which may occur years or even decades after the release of hazardous substances, oil spill response actions typically occur very soon after the oil spill, on an emergency basis. The assessment and restoration of natural resource damages resulting from an oil spill are similarly paced. The NOAA regulations are intended to achieve restoration under OPA, and include the following three phases[33]:

Phase 1: Pre-Assessment. Trustees first determine whether they have jurisdiction under OPA, then, next, determine whether to conduct restoration planning.[34] Trustees determine whether it is likely that a discharge has caused an injury, if response actions will adequately address the injuries, and if feasible restoration alternatives exist.[35] If so, the Trustees proceed with the natural resource damage assessment.[36]

Phase 2: Restoration Planning. This phase has two basic components: (1) injury assessment and (2) restoration selection.[37] Injury assessment evaluates whether the discharge has resulted in an adverse change in natural resources and/or their services, and quantifies the degree and the spatial and temporal extent of the injuries as compared to baseline.[38] During restoration selection, Trustees determine the need for, and the scale of, restoration actions.[39] Trustees must develop a Draft Restoration Plan that identifies a primary restoration action to return injured resources to baseline conditions, and a compensatory restoration plan for the interim loss of services pending the return to baseline.[40] This process involves evaluating the range of primary and compensatory restoration alternatives, selecting and justifying a preferred alternative, and preparing the plans. The regulations identify six criteria that must be used in evaluating restoration alternatives.[41] The public must be given notice and the opportunity to comment on the Draft Restoration Plan.[42]

Phase 3: Restoration Implementation. The Final Restoration Plan is presented to responsible parties for implementation, or to fund the Trustees' costs for implementation.[43]

Unlike CERCLA natural resource damage assessments, where natural resource damage assessment and restoration activities may not be paid from the Superfund,[44] under OPA Trustees can access the Oil Spill Liability Trust Fund, administered by the Coast Guard's National Pollution Funds Center, to conduct natural resource damage assessments and restorations.[45]

Any determination of damages made by federal, state or tribal trustees in accordance with the NOAA regulations is afforded the rebuttable presumption in any administrative or judicial proceeding under OPA.[46]

What is the Measure of Damages?

An NRD claim usually seeks to recover for residual harm to natural resources, assessed after any remedial action which the EPA, or another authorized agency with cleanup authority, has selected and completed, or after the likely effects of the remedial action on natural resources has been taken into account.

[C]ustomarily, natural resource damages are viewed as the difference between the natural resource in its pristine condition and the natural resource after the cleanup, together with the lost use value and the costs of assessment. As a residue of the cleanup action, in effect, [damages] are thus not generally settled prior to the cleanup.[47]

The natural resource damages available under CERCLA are intended to be compensatory, not punitive. The public is to be made whole and the responsible party is required to pay only for the damages it caused. CERCLA provides that a tribe may recover damages for harm to natural resources belonging to, managed by, appertaining to, or held in trust for the benefit of a tribe.[48] Indian tribes may recover for harm to natural resources both on- and off-reservation.[49]

The measure of damages is the cost of restoration, rehabilitation, replacement and/or acquisition of the equivalent of the injured natural resources and the services those resources provide. Damages may also include, at the discretion of the trustee, the compensable value of all or a portion of the services lost to the public for the time period from the discharge or release until the attainment of the restoration, rehabilitation, replacement and/or acquisition of the equivalent of the resources and the return of those services to baseline levels (pre-spill or pre-release).[50]

Under the plain language of CERCLA, sums recovered by the United States Government as a trustee, and sums recovered by a State as a trustee may be used only to restore, replace, or acquire the equivalent of the injured resource.[51] While it was quite likely an oversight during drafting, the statute contains no such limitation placed on the sums recovered by a tribal trustee.[52]

In a response action claim, plaintiffs are seeking "response" costs - the costs of investigating and remediating a hazardous substance release. In an NRD claim, by contrast, the Trustees are seeking the costs of restoring (to their baseline condition) natural resources injured or destroyed by a release caused by the defendant. As described supra, the Trustees typically conduct a natural resource damage assessment in order to quantify the injury, following the DOI or NOAA regulations. Based on the assessment, the Trustees typically seek to recover damages for: (1) the cost of the assessment, (2) the interim loss (diminution in value) of the resource between the time of the injury and the time the resource is restored to its baseline condition, and (3) the actual cost of physically restoring the injured resource. If the injured resource cannot be restored (as often is the case), the Trustees may seek the cost of acquiring resources having an equivalent value.

Whereas the road to cleaning up a Superfund site is generally well-traveled, the mechanisms by which a chemical release does - or does not - harm a bird or a fish, and the economic value placed on that injury is an exercise that only an academic would love; and they generally do.

Quantification of damages is a two-step process. First, biologists and other scientists attempt to determine what type of lethal and sub-lethal (e.g. reproductive) injury resulted from a release. This is exceedingly difficult, especially where there are multiple defendants and non-chemical factors (such as development or weather) that may have contributed to the injury observed. Once the scientists are done with their work, natural resource economists attempt to assign an economic value to the injury. This requires answering questions like, "what is a salmon worth?" and "what is a higher risk of reproductive failure in a peregrine falcon worth?" There is no generally accepted way to answer these questions. Instead, natural resource economists have developed a number of "surrogate" damage formulas with names like "hedonic pricing," "contingent valuation," and "travel cost pricing." The fact that there is no single generally accepted economic model for valuing natural resource damages adds uncertainties to both sides in litigation.

Resolving the Natural Resource Damage Claim

The assessment of natural resource damages, and the reduction of those damages to a dollar amount, is just the first step toward the recovery of those funds and the restoration of the damaged resources. At some sites, such as the Commencement Bay Superfund Site in Tacoma, Washington, parties have resolved natural resource damage liability through the consent decree for the implementation of the CERCLA remedy.[53] At other sites, such as the Chalk Point Oil Spill, the Trustees and the potentially responsible parties have entered into agreements for performing cooperative natural resource damage assessment and restoration planning.[54]

Not surprisingly, responsible parties that are paying response costs – or fighting with EPA to reduce or avoid their share of those costs – do not generally volunteer to pay for natural resource damages. At those sites, such as Bunker Hill in Idaho, natural resource damage claims are resolved through litigation. Significant issues raised in such litigation are discussed below.

Standard of Liability

In remedial action litigation, it is well settled that liability is strict, joint and several. The strict liability standard appears to apply equally to natural resource damage and response action cases. Liability arises as a consequence of a party's status -- the government does not have to establish the breach of a regulation or standard of care, but only that the defendant falls within the category of liable parties under CERCLA.[55]

Joint and several liability is another matter. A defendant in a natural resource damage action may avoid the imposition of joint and several liability if it can show that the natural resource injury was caused by someone or something other than defendant's release. This is because CERCLA requires the Trustees to demonstrate that the injury "resulted from" a defendant's release.

The Bunker Hill court squarely rejected the government's position that natural resource damage liability is joint and several. It held that the defendants could avoid the imposition of joint and several liability if they could establish a "reasonable basis" to apportion harm among potentially responsible parties.[56]. The burden of establishing divisible harm falls on the defendants. In the Bunker Hill case, the defendants were able to satisfy the court that there was a "reasonable relationship between the waste volume [mine tailings], the release of hazardous substances and the harm at the site." The court allocated liability among the two defendants based on the volume of mine tailings generated.[57]

Causation

The standard of causation is also different in a natural resource damage action. In remedial action litigation, it is well settled that liability is joint and several. The plaintiffs in a remedial action suit do not have to prove that the defendants "caused" their response costs - but only that they are within the class of "potentially responsible parties" at a facility where a hazardous substance release occurred.

In a natural resource damage action, the Trustees must establish a nexus between injury observed and the defendant's release.

The use in Section 107(f) of the word 'resulted' ties the damages to the releases. The proof must include a causal link between releases and post-enactment damages which flowed there from.[58]

Where the debate begins - and still exists - is the amount of proof the Trustees are required to show to establish that an injury "resulted from" the defendant's release. Trustees argue that courts should adopt a low threshold - merely requiring a showing that the release was a "contributing factor" to the injury. Defense counsel, on the other hand, argue for the more stringent "substantially contributing factor" test. The courts are split. The less stringent "contributing factor" test was adopted in Acushnet.[59] The more stringent "substantial contributing factor" test was adopted in U.S. v. Montrose Chemical Corporation.[60] In Bunker Hill, the court adopted the "contributing factor" test advocated by the Trustees, holding that "the Trustees have the burden of proving a release that results in commingled hazardous substances is a 'contributing factor' [more than a de minimis amount-to an extent that at least some of the injury would have occurred if only the Defendant's amount of release had occurred]."[61]

The DOI regulations contain "acceptance criteria" that allow an injury to be proven by reference to scientific literature, as opposed to case-specific studies. If a certain biological response is documented in the literature to result from a certain exposure, then the injury is "deemed" to be proved. In practice, however, both the parties to a natural resource damage proceeding and the courts use criteria other than the DOI regulations to establish causation.

As the court noted in Bunker Hill, "[w]hile the Court will grant due deference to the agency's decisions, the Court does not find it is bound to such definition. . . "[62] Having so concluded, the court then used criteria other than DOI's regulations to evaluate whether the defendants' releases of mining waste caused injury to soils, sediments, fish, wildlife, and other resources.[63] The quantification of the damages caused by the mining companies was left for a second trial which has yet to occur.[64]

Statute of Limitations

There are three separate statutes of limitations for natural resource damage claims, and the applicable statute depends upon who is bringing the claim and whether the claim relates to a Superfund site. The general rule is that a natural resource damage action must be commenced within three years of the later of (1) the date of discovery of the loss and its connection to the release in question; or (2) the date on which the NRD regulations were promulgated.[65] The date on which the regulations were promulgated has been determined to be March 20, 1987, and is generally not in dispute.[66]

The "date of discovery of the loss and its connection to the release in question" is a factual question, and requires a review of the Trustees' knowledge. At least one court has adopted a continuous trigger approach to allow a longer statutory period, holding that because the injurious activity was in the nature of a continuing nuisance and had not yet been abated, the statute would not run[67] On the other hand, in U.S. v. Montrose Chemical Corp., the court made a factual finding that the discovery prong of the statute had run because the Trustees knew of the releases and their connection to the injury to natural resources more than three years prior to filing suit.[68]

At a Superfund site (a site that has been listed on the National Priorities List ["NPL"]), the Trustees have a different statute of limitations. At NPL sites, Trustees must commence an action no later than three years after completion of the remedial action (excluding operation and maintenance).[69] Moreover, if EPA is "diligently proceeding" with a Remedial Investigation/Feasibility Study ("RI/FS"), the Trustees cannot bring their claim for natural resource damages before selection of the remedy has occurred.[70] In effect, this gives the Trustees a window of time after issuance of the Record of Decision ("ROD") and up to three years after completion of the remedy to bring a claim.

There is some argument, however, that there really is no effective statute of limitations barring the government from bringing natural resource damage claims, because even if this period has run, Congress could enact legislation extending it. Indeed, they did so in 1986 when enacting the SARA amendments.[71] Additionally, at sites not on the NPL, the government can revive an expired claim by adding a site to the NPL, or expanding the site boundaries[72], or reopening the ROD because the remedy is not sufficiently protective of human health and the environment and additional action is required.[73]

Tribal trustees benefit from a two-year extension of the applicable statute of limitations. No action brought by an Indian tribe shall be barred until the later of the expiration of the statute of limitations or two years after the United States, in its capacity as trustee for the tribe, gives written notice to the Tribal governing body that it does not intend to pursue claims on the Tribe's behalf.[74]

Defenses

Just as there are significant differences in the statutory elements of remedial claims, as opposed to NRD claims, there are also significant differences in the statutory defenses to such claims. In litigation over remediation costs, one commonly sees defendants raise defenses or counterclaims based upon (1) failure to comply with the National Contingency Plan ("NCP"); (2) contribution; and (3) the statute of limitations. By comparison, in NRD litigation, there is no NCP to comply with, there are no statutory contribution claims, and the applicable statute of limitations is different. More importantly, there are a number of defenses to an NRD claim that simply do not exist in remediation cases. The more significant of these defenses are discussed below.

Pre-Enactment Releases and/or Damages

No recovery is allowed for natural resource damages that occurred wholly before December 11, 1980, the effective date of the CERCLA statute.[75] This contrasts with the response provisions of CERCLA, which have been interpreted to allow EPA to recover the costs of responding to releases that occurred before the statute was passed. For the pre-enactment defense to apply to a NRD claim, both the release and the resultant damage must have occurred prior to CERCLA's enactment.

A handful of cases have interpreted this "pre-enactment" defense. In May 2003, a federal district court in Montana handed defendants in NRD cases a significant victory when it held that the plain language of the statute precluded NRD claims where the contamination occurred prior to CERCLA's enactment.[76] In issuing this decision, the court rejected the reasoning from In re: Acushnet River & New Bedford Harbor Proceedings,[77] which had allowed plaintiffs to recover for damages that arose after 1980 if those damages were caused by releases that pre-dated CERCLA's enactment, if those damages were not quantified until after CERCLA's enactment.

Just as NRD defendants were beginning to savor their victory in the Montana case, however, the court issued a contrary decision in the Bunker Hill decision, in the adjoining state of Idaho. In the Bunker Hill case, federal and tribal Trustees were seeking damages from releases of mine tailings held in impoundments before 1968. The impoundments were not used after 1968, 12 years before CERCLA's enactment in 1980. While acknowledging that releases of hazardous substances from the impoundments after 1968 were "minimal," the court, in what was essentially a theory of "continuing" releases," found that there had been "re-releases" of mine tailings since the enactment of CERCLA.[78]

In addition, unlike the court in Montana, Judge Lodge accepted the Acushnet reasoning, focusing on the time when the Trustees' damages arose, rather than when the releases that caused those damages occurred. Judge Lodge agreed with the Acuschnet Court that damages "occur" at the time that the Trustees incur expenses due to the injury to natural resources, irrespective of when the release took place or whether that release occurred prior to 1980 or not. In the Bunker Hill case, he found that the damages from pre-1980 releases were not quantified until after 1980. Because the damages occurred post-enactment (even if the releases did not), Judge Lodge held that the pre-enactment defense did not apply to the facts of the Bunker Hill case.[79]

In short, there is a split of authority among federal district courts over the interpretation of the "pre-enactment" defense, and there are no published appellate decisions. Until there is further guidance, this is one more area of uncertainty for both sides in natural resource damage litigation.

Scope of Trusteeship

In natural resource damage cases there is frequently more than one Trustee seeking to recover natural resource damages. CERCLA allows public trustees to recover damages for resources "belonging to, managed by, held in trust by, appertaining to, or otherwise controlled by" them. In practice, however, it frequently is not at all clear which agency is responsible for which resource, as there is often overlapping jurisdiction among federal agencies, as well as between federal and state agencies and Indian tribes. Sometimes only some, and not all, of the Trustees are bringing a claim. In other cases (as in Bunker Hill), one or more of the Trustees may have settled. This presents fertile ground for defense attorneys, who argue that the Trustees bringing the claim are the wrong Trustees because the injured resources neither "belong" to nor are "managed" by them. That is what defense counsel argued, successfully (at least initially), in the Bunker Hill case.

Prohibition on Double Recovery

CERCLA prohibits double recovery of natural resource damages. Any recovery by one Trustee must be deducted from damages claimed by another Trustee for the same resource.[80] Note, however, that multiple Trustees could, at least in theory, claim different damages stemming from the same injury. For example, a state Trustee could claim damages for a loss of recreational value, while a Tribe could claim a loss of a cultural value.

There could also be a potential double recovery as between a trustee and the EPA. EPA remedial actions are directed to protecting both human health and the environment. Restoration of the environment can be, and often is, built into the remedy for a Superfund site. For example, recreating habitat or cleaning up soils to residential standards. When a responsible party has already been directed to implement these cleanup actions in a ROD, restoration of the environment, to a certain extent, may already have been achieved. Requiring the responsible party to do "more" is, in essence, a double recovery. To avoid this type of overlap, Trustees need to work closely with EPA to ensure that restoration planning is necessary after remediation is completed.

Divisibility

A finding of divisibility can dramatically decrease a NRD defendant's exposure. For example, in the Bunker Hill decision, the Trustees were seeking to assess 100% of NRD damages against mining company Asarco. The company, however, was able to convince the court that its contribution of mine tailings to the Coeur d'Alene River was quantifiable, and could be used as a basis for dividing harm. Ultimately, the court estimated Asarco's share at 22%.[81]

Federally Permitted Release

CERCLA excludes from the statutory liability scheme any response costs or natural resource damages that stem from a federally permitted release.[82] A party may assert as a defense to natural resource damage liability where the party can establish that the natural resource damages were specifically identified as an irreversible and irretrievable commitment of natural resources in an EIS or other comparable environmental analysis, and that the permit or license granted the party authorizes such commitment and the facility was operating within the terms of its permit or license. This exception is intended to protect dischargers from liability for releases specifically authorized under state and federal programs, including:

• Discharges authorized by a National Pollutant Discharge Elimination System permit;
• Discharges in compliance with a Clean Water Act Section 404 permit for dredged or fill materials;
• Releases in compliance with a Resource Conservation and Recovery Act hazardous waste management facility final permit; and
• The introduction of any pollutant into a publicly owned treatment works when such pollutant is specified in, and in compliance with, pretreatment standards and a pretreatment program submitted to EPA for approval under the Clean Water Act.[83]

Releases authorized under federally approved state programs also fall within the defense.[84]

EPA has taken the position that only those releases expressly specified in the statute qualify as "federally permitted" releases,[85] meaning that damage from contaminants not expressly specified are not subject to the defense.

To qualify for the "federally permitted release" defense, a party must show that its release was "in compliance" with its permit. At least one court has held that releases exceeding permit limits are not exempted.[86] Releases that violate the operating, monitoring, or reporting requirements of a permit still qualify for the defense, so long as the nature and quantity of the substance released is within permit limits.[87]

Identified Commitment of Natural Resources

CERCLA provides another defense against natural resource damage claims where the damage was "specifically identified as an irreversible and irretrievable commitment of natural resources in an environmental impact statement, or other comparable environmental analysis. . . "[88] Thus, for example, a Trustee could not recover for damage to a riverbed where that damage was specifically identified and approved in a project EIS. The party asserting this defense must show that the approved project is operating within the terms of the permit or license.[89]

The only court that has interpreted this defense gave it a narrow reading, stating that it does not apply to damages other than those identified in the EIS, such as from earlier development. A mine owner was denied the defense where there was historical damage at a mine site and the EIS was prepared in conjunction with a proposed reopening of the mine.[90]

The defense applies to resource commitments made in a document "comparable" to an EIS. Arguably, this would include natural resources committed in a ROD at a Superfund site. One can argue, for example, that the Trustees cannot recover for damage to a habitat that is capped or filled as part of a remedial action, if the area to be capped or filled is identified and committed in the ROD as part of the remedial action.[91]

Where there are tribal resources affected, the "identified commitment of natural resources" defense only applies where the issuance of a federal permit was not inconsistent with the United States' fiduciary obligation to the affected tribe.[92]

A Note About Insurance Coverage

Responsible parties with pre-1986 comprehensive general liability policies[93] may be able to obtain insurance coverage for natural resource damages.

A United States District Court in Aetna Cas. & Sur. Co. v. Gulf Resources and Chem. Corp.[94] concluded that because of the Bunker Hill decision, supra, which held that natural resource damages under CERCLA could not be recovered when "damages" occur prior to the enactment of that statute, insurance policies that expired prior to that date should not provide coverage for those claims. However, on appeal, the Ninth Circuit in Aetna Cas. & Sur. Co. v. Pintlar Corp.[95] disagreed with the District Court's grant of summary judgment for the insurance company and held that insurance coverage may in fact exist under policies that expired prior to December 11, 1980, when natural resource damages are not "quantified" until after that date. As the Circuit Court stated:

. . . coverage is not limited to damages occurring during the policy period; it also includes "damages" occurring after the period, as long as those "damages" are caused by an "occurrence", that is, a release which results in injury during the policy period.[96]

More specifically, the Ninth Circuit, focusing on how the term "damages" is defined under CERCLA, concluded that the District Court erred because it incorrectly equated the term "damages" with "injury to natural resources." The Court opined that, contrary to the District Court's view, the statute appears to have defined "damages" as "'the monetary quantification stemming from an injury.'"[97]

Thus, the Court reasoned; if its definition of the terms "damages" is accepted (the monetary quantification stemming from an injury), it is "quite possible that such damages were accrued after December 11, 1980," although caused by releases and injury occurring prior to that date, during the policy period. Moreover, the Court stated that, "if exposure to hazardous conditions results in injury during the policy, which in turn caused additional injury after the policy period, the policy would cover the additional damage."[98]

As an example, the Court offered a scenario where releases caused injury to soil and water during 1971, which later injured migratory birds. In that situation, the policies would respond to the subsequent injuries to birds. Thus, the Ninth Circuit concluded that "coverage is not limited to 'damages' occurring during the policy period, as long as those 'damages' are caused by an 'occurrence,' that is, a release which results in injury during the policy period."[99] Because the District Court did not make a finding as to whether or not there were releases and injury occurring during the policy period of the pre-1980 policies, it was premature for the District Court to grant summary judgment.

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