ELR Citation: ELR 20263
No(s). s. 96-1096 et al (D.C. Cir. Nov 18, 1997)

The court vacates the portion of the National Oceanic and Atmospheric Administration's (NOAA's) natural resource damage assessment rule that authorizes the removal of residual oil and the recovery of attorney fees, but upholds the final rule in other respects. The court first holds that the rebuttable presumption created for a natural resource trustee's damages valuation is appropriate, because it was created by Congress in the Oil Pollution Act (OPA), rather than by agency regulation. The court then holds that NOAA did not act arbitrarily or capriciously by failing to consider comments regarding contingent valuation, or by not barring the use of contingent valuation when assessing natural resource damages. NOAA ignored neither the comments nor criticisms of contingent valuation made by the special panel studying the damages valuation method. It simply gave trustees discretion to use contingent valuation, so long as the technique produces valid and reliable results for the particular incident. The court next holds that the industry challenge to the rule's provision authorizing the recovery of passive use values for temporary losses of natural resources is not ripe for review. The proper time to address the question will be if and when a trustee actually assesses damages for temporary losses in a particular case.

In response to industry's argument that NOAA exceeded its statutory authority by authorizing trustees to remove residual oil, the court holds that by not explaining the difference between the residual oil removal authority provided in the final rule and the language of the proposed rule, NOAA failed to exercise reasoned decisionmaking. The proposed rule merely directs trustees to consider whether conditions, such as residual contamination, exist that would make the primary restoration alternative impractical. By comparison, the final rule clearly authorizes trustees to remove conditions that would prevent or limit the effectiveness of any restoration action. NOAA also did not explain the interrelationship between trustees' residual removal authority and the primary removal authority of EPA and the U.S. Coast Guard. Because NOAA failed to address these central issues and to explain the difference between proposed and final rules, the court vacates the final rule's provision implementing residual removal authority. The court then upholds the inclusion of monitoring and oversight costs in the rule's definition of reasonable assessment costs, but vacates the rule's authorization for recovery of attorney fees. Monitoring is essential to ensure that restoration actions accomplish their intended goals and objectives and do not cause unanticipated harm to the environment or public health. As for attorney fees, because NOAA did not oppose the vacatur of the definition of assessment costs to the extent that it refers to attorney fees incurred in pursuing litigation of a natural resource damages claim, the court leaves the issue to NOAA to draw the line between recoverable and nonrecoverable legal costs in subsequent rulemaking.

Last, the court addresses insurance company petitioners' claims. To begin with, the insurance companies do not have standing to argue that §990.20(b) of the rule, which allows trustees who have begun damage assessments under the Comprehensive Environmental Response, Compensation, and Liability Act to switch to the final rule, is impermissibly retroactive. They make no claim that any particular trustee has switched to the final rule, nor can they argue that such a switch resulted in a trustee imposing greater damages upon a responsible party insured by them. The court also holds that the OPA does not preclude the recovery of passive use losses, and that the rule does not violate parties' rights to seek contribution if the trustee seeks to assess costs for restoration activities undertaken more than three years after initial settlement. Responsible parties can refuse payment, forcing the trustees to bring a judicial action and obtain another judgment, which would trigger the running of another three-year period for contribution actions.

Counsel for Petitioner
E. Edward Bruce
Covington & Burling
1201 Pennsylvania Ave. NW, Washington DC 20004
(202) 662-6000

Counsel for Respondent
Naikang Tsao
Environment and Natural Resources Division
U.S. Department of Justice, Washington DC 20530
(202) 514-2000

Before Silberman and Rogers, JJ.