Restoration-Based Compensation Measures in Natural Resource Liability Statutes

In the past two decades, the U.S. Congress has passed several major environmental statutes that designate natural resource management agencies as trustees of the resources on behalf of the public and that allow the trustees to recover damages for injuries to public resources from releases of hazardous substances and discharges of oil. The standard measure of damages in the various statutes is the cost of restoring the resources to baseline conditions ("primary restoration") plus the interim loss in value from the time of the incident until full recovery from the injuries. However, trustees are allowed to spend their damage recoveries only on enhancing or creating ("restoring, rehabilitating, replacing or acquiring the equivalent of") natural resources. The statutory restriction on the use of the recoveries has motivated the development of an alternative measure of damages for interim losses--the cost of "compensatory restoration" actions providing in-kind compensation--which the National Oceanic and Atmospheric Administration (NOAA) incorporated in its 1996 regulations implementing the natural resource liability provisions of the Oil Pollution Act (OPA). This analysis first identifies the statutory measure of damages and the traditional framing of damages for interim losses (monetary compensation). It then defines an alternative utility- theoretic measure of resource compensation and identifies alternative methods of implementation