United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued September 11, 1997 Decided November 18, 1997
No. 96-1096
General Electric Company,
Petitioner
v.
United States Department of Commerce, National Oceanic
and Atmospheric Administration,
Respondent
American Forest and Paper Association Inc., et al.,
Intervenors
Consolidated with
Nos. 96-1101, 96-1102, 96-1103, 96-1104, 96-1105
On Petitions for Review of Orders of the
United States Department of Commerce
---------
E. Edward Bruce argued the cause for the non-insurance
petitioners. With him on the briefs were James R. Bieke, G.
William Frick, Philip A. Cooney, Dean A. Calland, Thomas
B. Smith, Harold E. Mesirow, James L. Connaughton, David
F. Zoll, Ronald A. Shipley, Christina Franz, L. Charles
Landraf, Linda K. Breggin, and Cynthia H. Evans.
Marilyn L. Lytle argued the cause and filed the briefs for
petitioners American Institute of Marine Underwriters and
Water Quality Insurance Syndicate.
Monica P. Medina, General Counsel, U.S. Department of
Commerce and Naikang Tsao, Attorney, U.S. Department of
Justice, argued the cause for respondent. On the brief were
Lois J. Schiffer, Assistant Attorney General, and Eileen T.
McDonough, Attorney.
Peter H. Lehner argued the cause for intervenor Natural
Resources Defense Council, Inc. With him on the brief was
Sarah Chasis.
Thomas S. Udall, Attorney General, State of New Mexico,
Charles de Saillan, Assistant Attorney General, and Charles
E. Magraw, Assistant Attorney General, State of Montana,
were on the brief for amici curiae State of New Mexico, et al.
Before: Silberman, Rogers and Tatel, Circuit Judges.
Opinion for the Court filed by Circuit Judge Tatel.
Tatel, Circuit Judge: Seventeen months after the oil
tanker Exxon Valdez ran aground in Prince William Sound,
spilling almost eleven million gallons of North Slope crude,
Congress enacted the Oil Pollution Act of 1990 to make
parties responsible for oil spills liable for damage to natural
resources. In this case, we consider both procedural and
substantive challenges to the final rule that the National
Oceanic and Atmospheric Administration issued pursuant to
the Act. Concluding that the final rule's authorization for
removal of residual oil suffers from a lack of reasoned deci-
sionmaking, we vacate this portion of the rule and remand to
the agency for further consideration. With the agency's
consent, we also vacate and remand the final rule's authoriza-
tion for recovery of legal fees. In all other respects, we
sustain the final rule.
I
Prior to the Oil Pollution Act of 1990, Pub. L. No. 101-380,
104 Stat. 486 (codified at 33 U.S.C. ss 2701-20, 2731-37,
2751-53, 2761 (1994)) ("OPA"), natural resource damages
resulting from oil spills were assessed pursuant to the Com-
prehensive Environmental Response, Compensation, and Lia-
bility Act of 1980, Pub. L. No. 96-510, 94 Stat. 2767 (codified
as amended in scattered sections of the U.S.C.), amended by
the Superfund Amendments and Reauthorization Act of 1986,
Pub. L. No. 99-499, 100 Stat. 1613 (1986) ("CERCLA"), which
authorizes "trustees" (e.g., federal, state, or local officials) to
assess and collect damages from all types of environmental
polluters. In Kennecott Utah Copper Corp. v. United States
Dep't of the Interior, 88 F.3d 1191 (D.C. Cir. 1996), and Ohio
v. United States Dep't of the Interior, 880 F.2d 432 (D.C. Cir.
1989), we reviewed and largely sustained the natural resource
damage assessment regulations that the Interior Department
issued pursuant to CERCLA.
OPA focuses specifically on oil discharges in the nation's
waterways and coastlines. Amending the Clean Water Act,
section 4201(a) of OPA directs the President, who has since
delegated his authority to the Environmental Protection
Agency and the Coast Guard, to remove spilled oil. 33 U.S.C.
s 1321(c)(1). Section 1002, the primary focus of this litiga-
tion, makes responsible parties liable for "[d]amages for
injury to, destruction of, loss of, or loss of use of, natural
resources, including the reasonable costs of assessing the
damage." Id. s 2702(b)(2)(A). Only a "trustee" appointed by
either the President, a governor, the governing body of an
Indian tribe, or the head of a foreign government may
recover such damages. Id. s 2706(a)-(b). The Act limits
responsible party liability, e.g., id. s 2704(a)(3) (limiting liabil-
ity of any offshore facility except a deepwater port to removal
costs plus $75 million per incident), but if trustees need
additional funds for restoration, they can draw upon the Oil
Spill Liability Trust Fund, id. s 2712(a)(2), a fund financed
primarily by a five cent per barrel tax on imported and
domestic oil, 26 U.S.C. s 4611(c)(2)(B) (1994).
To facilitate damage recovery, OPA directs the President,
acting through NOAA, to "promulgate regulations for the
assessment of natural resource damages ... resulting from a
discharge of oil." 33 U.S.C. s 2706(e)(1). Natural resource
damage assessments made by a trustee in accordance with
those regulations "shall have the force and effect of a rebutta-
ble presumption on behalf of the trustee in any administrative
or judicial proceeding" under OPA. Id. s 2706(e)(2).
Engaging in a six-year rulemaking process, which produced
proposed rules in 1994, 59 Fed. Reg. 1062 (1994), and in 1995,
60 Fed. Reg. 39,804 (1995), NOAA promulgated its "final
rule" governing trustee assessment of natural resource dam-
ages in 1996. Natural Resource Damage Assessments, 61
Fed. Reg. 440-510 (1996) (adding 15 C.F.R. ss 990.10-
990.66). The final rule reflects NOAA's determination to
accomplish OPA's goals through a restoration-based ap-
proach, focusing not merely on assessing environmental dam-
ages--the approach taken by CERCLA--but rather on devel-
oping and implementing plans for restoring and rehabilitating
damaged resources or services.
The final rule lays out a three-stage procedure for assess-
ing injuries resulting from oil spills and for developing and
implementing plans to restore damaged resources. Termed
the "Preassessment Phase," the first stage requires trustees
to determine whether they have jurisdiction under OPA to
pursue restoration activities and whether actions taken by
other agencies have adequately addressed the injuries. This
first stage also requires the trustee to collect and analyze
pertinent data, prepare a notice of intent to conduct restora-
tion planning activities, and open a publicly available adminis-
trative record. 15 C.F.R. ss 990.41-990.45 (1997).
The second stage, the "Restoration Planning Phase," has
two substages. The "injury assessment" substage requires
the trustee to determine whether an injury has occurred,
whether a "pathway" can be established between the dis-
charged oil and the injury, and whether the injury resulted
from the discharge. Id. s 990.51(a)-(b). If the trustee deter-
mines that the oil discharge caused an injury, the trustee
must quantify its degree and spatial and temporal extent,
including the amount of services destroyed. Id. s 990.52(a)-
(b). If that analysis leads the trustee to conclude that the
injury requires restoration, the trustee proceeds to the "res-
toration selection" substage, where the trustee identifies a
"reasonable range" of restoration alternatives, evaluating
them against several factors, including cost, potential success,
risk of collateral injury, and public health and safety. Id.
ss 990.53-990.54. Once the trustee chooses the restoration
plan that best restores the value destroyed by the oil dis-
charge, the trustee develops a Draft Restoration Plan, setting
forth the injury assessment procedures employed, the nature
and extent of injuries resulting from the discharge, the
restoration goals, the range of restoration alternatives consid-
ered, how the alternatives were evaluated, and which alterna-
tives were chosen. Id. s 990.55(b). After giving the public
an opportunity to review and comment on the Draft Plan, id.
s 990.55(a), the trustee ends this stage by developing a Final
Restoration Plan, id. s 990.55(d).
In the third and final stage of the process, the "Restoration
Implementation Phase," the trustee presents a written de-
mand for payment to the owner of the tanker or other party
or parties responsible for the oil discharge. Id. s 990.62(a).
If the responsible party refuses to satisfy the demand within
ninety days, or if the trustee and the responsible party cannot
agree on an alternative figure, the trustee may sue the
responsible party or seek an appropriation from the Oil Spill
Liability Trust Fund. Id. s 990.64(a). In any suit filed by
the trustee, its damage assessment is entitled to a rebuttable
presumption, id. s 990.13, if the trustee can demonstrate that
its assessment procedures are "capable of providing assess-
ment information of use in determining the type and scale of
restoration appropriate for a particular injury," id.
s 990.27(a)(1), that any additional cost of a "more complex
procedure" reasonably relates to the expected increase in the
quantity or quality of information, id. s 990.27(a)(2), and,
most important, that its assessment procedures are "reliable
and valid for the particular incident," id. s 990.27(a)(3).
Pursuant to section 1017(a) of OPA, which allows interested
persons to petition this court to review any OPA regulation
within ninety days of its promulgation, 33 U.S.C. s 2717(a),
two groups of petitioners filed separate challenges to the final
rule. The first group, the "industry petitioners," consists of
General Electric, American Petroleum Institute, Beazer East,
Chemical Manufacturers Association, Rhone-Poulenc, Zeneca
Holdings, Stauffer Management, and Atkemix Thirty-Seven,
Inc. These petitioners argue that NOAA acted arbitrarily
and capriciously by authorizing trustees to employ an assess-
ment technique known as contingent valuation. They also
argue that NOAA exceeded its authority by allowing trustees
to remove residual sources of contamination, i.e., oil left
behind by EPA and the Coast Guard, and to recover monitor-
ing and legal costs from responsible parties. The second
group, "insurance petitioners," consists of the American Insti-
tute of Marine Underwriters and The Water Quality Insur-
ance Syndicate. They argue that the final rule is improperly
retroactive and that it violates OPA because it authorizes
trustees to recover what are known as passive-use values,
fails to reiterate OPA's damage limitation provisions, impairs
responsible parties' right to seek contribution under OPA,
and grants trustees "uncontrolled discretion." Thirteen
states, as amici, and the Natural Resources Defense Counsel,
as intervenor, defend NOAA's final rule. We consider peti-
tioners' arguments in turn, beginning in section two with
those advanced by industry petitioners. In section three, we
address three issues raised by industry petitioners which, in
view of representations NOAA made during these proceed-
ings, are now resolved. We take up insurance petitioners'
arguments in section four. Where appropriate, we employ
Chevron's two step analysis, Chevron U.S.A. Inc. v. Natural
Resources Defense Council, Inc., 467 U.S. 837, 842-44 (1984),
and the Administrative Procedure Act's arbitrary and capri-
cious standard. 5 U.S.C. s 706(2)(A) (1994).
II
We begin with section 990.13's rebuttable presumption.
Relying on our decision in Chemical Mfrs. Ass'n v. Depart-
ment of Transp., 105 F.3d 702 (D.C. Cir. 1997), industry
petitioners argue that rebuttable presumptions are appropri-
ate only when proof of one fact renders the existence of
another fact so likely that assuming the existence of the
inferred fact is both sensible and time-efficient. Chemical
Manufacturers, however, applies only to rebuttable presump-
tions created by agencies and has no applicability where, as
here, Congress created the presumption. Id. at 705 (legisla-
tive bodies, unlike administrative bodies, are "free to adopt
presumptions for policy reasons").
Industry petitioners also argue that the rebuttable pre-
sumption gives trustees a "powerful advantage" in any subse-
quent litigation and that the agency must issue regulations
that are sufficiently "sound and credible" to deserve the
presumption. Petitioners, however, cite no authority for this
latter proposition, nor do they explain why the final rule's
reliability and validity requirement would not satisfy their
"sound and credible" standard. More important, it is not at
all clear that the rebuttable presumption even gives trustees
a "powerful advantage." In the final rule's preamble, NOAA
"interprets" the rebuttable presumption as imposing upon
responsible parties "the burdens of presenting alternative
evidence on damages and of persuading the fact finder that
the damages presented by the trustees are not an appropriate
measure of damages." 61 Fed. Reg. at 443. As agency
counsel described it at oral argument, the rebuttable pre-
sumption thus functions as nothing more than a "burden
shifting exercise." Whatever the rebuttable presumption
means and however it will work in practice, issues we need
not resolve at this time, one thing is clear--before trustees
can take advantage of the presumption, they must prove that
their damage assessments are "reliable and valid for the
particular incident." 15 C.F.R. s 990.27(a)(3).
We turn to industry petitioners' specific challenges to the
final rule.
Contingent Valuation and Passive Use Values
In valuing damage to natural resources caused by oil
discharges, the final rule allows trustees to consider two
types of losses: active and passive. "Active-use" losses refer
to the loss of actual use of a natural resource. An oil spill
that contaminates a National Seashore, for example, causes
an "active-use" loss for those unable to use the beach for
swimming or fishing. Under the final rule, the trustee devel-
ops a plan to restore the beach to its original condition and,
while restoration takes place, to provide alternative fishing,
swimming and other active-use opportunities.
NOAA's final rule also authorizes recovery of what are
known as nonuse or "passive" losses, the value individuals
place upon the existence of natural resources, even if they
never plan to make active use of them. In the case of the
National Seashore, for example, people who have never used
the beach may nevertheless value its existence. To assess
this value, researchers employ a survey technique known as
"contingent valuation," in which they create a hypothetical
market and ask people--survey respondents--how much they
would pay to preserve or protect a given resource. Averag-
ing the responses, researchers then determine the value the
public places on the resource. See Jeffrey C. Dobbins, Note,
The Pain and Suffering of Environmental Loss: Using
Contingent Valuation to Estimate Nonuse Damages, 43
Duke L.J. 879, 882 (1994).
Because contingent valuation is not without controversy,
NOAA commissioned a special panel to study the technique
and report on its appropriateness for assessing natural re-
source damage. See 58 Fed. Reg. 4601, 4602-14 (1993)
(Appendix I--Report of the NOAA Panel on Contingent
Valuation). After considering the critiques of contingent
valuation, the panel, which included two Nobel laureates,
concluded that if properly conducted under strict guidelines,
the technique can convey useful and reliable information that
"can produce estimates reliable enough to be the starting
point of a judicial process of damage assessment." Id. at
4610. Based on the panel's report, NOAA's first proposed
rule explicitly authorized trustees to employ contingent valua-
tion and provided detailed standards for using it. 59 Fed.
Reg. at 1182-84. In its next proposed rule, however, and
then again in its final rule, NOAA omitted all references to
contingent valuation, instead authorizing trustees to choose
whichever assessment techniques they wish, subject to sec-
tion 990.27's requirements, including reliability and validity
for the particular incident. In appendix B to the final rule's
preamble, NOAA included contingent valuation on a list of
techniques trustees could choose to utilize. 61 Fed. Reg. at
499. Describing its decision to provide trustees with such
discretion, the agency said this:
NOAA believes that the standards set forth in s 990.27
are sufficient to allow trustees and responsible parties to
determine the acceptability of a particular assessment
procedure for a given incident. NOAA supports the use
of all of the procedures discussed in Appendix B of the
preamble as reliable and valid within the appropriate
context and when performed in accordance with accepted
professional practices. NOAA does not believe that the
rule should set forth specific standards regarding the
implementation of individual procedures, as it is not
feasible to prescribe all valid uses of these procedures.
The validity and reliability of procedures will depend on
the circumstances of particular incidents.... Thus,
NOAA believes that most of the comments received,
which relate to potential problems with certain applica-
tions of these procedures, will be dealt with in the
context of specific incidents.
Id. at 470.
Industry petitioners argue that NOAA acted arbitrarily
and capriciously by "ignoring" the panel's warning that con-
tingent valuation studies must be conducted subject to strin-
gent standards. Relying on our Kennecott decision, NOAA
responds that this argument is not ripe for judicial review
because the preamble's reference to contingent valuation
neither imposes a legal obligation upon petitioners nor has
any immediate effect upon them. While this argument has
force with respect to petitioners' substantive challenge to the
final rule, see discussion infra at 10-11, it has no applicability
to their purely procedural challenge. The question we faced
in Kennecott--whether the Interior Department exceeded its
CERCLA authority by arguably authorizing recovery of cer-
tain damages through language in the regulation's pream-
ble--was not ripe because whether Interior had intended to
bind anyone with the preamble's language was not at all
clear. Until a trustee invoked the preamble to affect the
outcome of a real dispute, we held, we lacked both the need
and the factual basis for resolving the question. Kennecott,
88 F.3d at 1222-23.
Industry petitioners' purely procedural argument, that
NOAA failed to consider relevant comments during the rule-
making process, is quite different. Unlike in Kennecott,
where our treatment of the preamble issue would have bene-
fitted from a "concrete case," id. at 1223, we now know
everything we need to know about NOAA's treatment of the
administrative record. The issue petitioners present will
never be more fit for review.
Industry petitioners' argument fails, however. NOAA ig-
nored neither the panel's comments nor the criticisms of
contingent valuation that the panel considered. It simply
gave trustees discretion to use contingent valuation, so long
as the technique produces, as required by section 990.27(a)(3),
valid and reliable results for the particular incident. Docu-
menting its findings in the record, NOAA reasonably conclud-
ed not only that prescribing standards for using all possible
assessment procedures in all possible situations would be
infeasible, but also that general standards, such as those
included in section 990.27, can adequately ensure that trust-
ees do not abuse their discretion. If a responsible party in a
particular case believes that a trustee using contingent valua-
tion has produced either unreasonable or invalid results for
the specific incident, it can withhold payment, forcing the
trustee to file suit under section 990.64 and to establish
validity and reliability under section 990.27 in order to gain
the rebuttable presumption.
Going beyond their procedural claim, industry petitioners
argue that NOAA acted arbitrarily and capriciously by failing
to bar contingent valuation altogether. Because this argu-
ment amounts to a facial challenge to the final rule that does
not depend on the facts of a particular case, it is, like
petitioners' purely procedural argument, ripe for review. But
also like that argument, it fails. We held in Ohio that the
Interior Department had not acted arbitrarily or capriciously
by authorizing CERCLA trustees to use contingent valuation.
Ohio, 880 F.2d at 478. Not only does nothing in the panel
report or any other portion of the administrative record cast
doubt on Ohio, but the panel report itself found that if
performed correctly, contingent valuation can produce both
useful and reliable results. 58 Fed. Reg. at 4610.
Industry petitioners next argue that NOAA acted arbitrari-
ly by authorizing the recovery of passive-use values for
temporary losses of natural resources. According to petition-
ers, passive-use losses occur only where resources are lost
forever; temporary losses, they claim, can never give rise to
passive-use losses. Although the administrative record lends
support to NOAA's contention that temporary losses can
cause loss of passive-use values, e.g., id. at 4608 (CV panel
concluding that "interim passive-use values are additive over
time"), we agree with NOAA that this issue is not ripe for
judicial review. The proper time to address the question will
come if and when a trustee actually assesses damages for
temporary losses in a particular case. Unlike industry peti-
tioners' purely procedural argument and their challenge to
NOAA's refusal to bar trustee use of contingent valuation,
right now we lack both the factual record and the detailed
findings needed to resolve their temporary loss argument.
Removal Authority
Section 990.53(b)(3)(i) of the final rule authorizes trustees
to "[r]emove conditions that would prevent or limit the effec-
tiveness of any restoration action (e.g., residual sources of
contamination)." 15 C.F.R. s 990.53(b)(3)(i). Explaining this
provision, NOAA poses an example of a trustee needing to
remove residual oil--oil left behind by EPA or the Coast
Guard--in order to implement a restoration plan to replant or
reseed vegetation. Without removal authority, NOAA claims,
the trustee would be unable to reseed or replant the area
contaminated by the residual oil, leaving restoration incom-
plete.
Industry petitioners argue that because OPA delegates sole
responsibility for oil removal to the President, NOAA exceed-
ed its statutory authority by authorizing trustees to remove
residual oil. In support of their argument, petitioners point
out that OPA treats restoration and removal separately and
for each contains distinct definitional, limitation, and liability
provisions. 33 U.S.C. s 2701(30) (defining "removal");
s 2706(d) (defining "natural resource damages"); s 2702(b)
(liability provisions); s 2717(f) (statute of limitation provi-
sions). They also rely on section 1011 of OPA, which requires
the President to:
[C]onsult with the affected trustees designated under
section 2706 of this title on the appropriate removal
action to be taken in connection with any discharge of oil.
For the purposes of the National Contingency Plan,
removal with respect to any discharge shall be consid-
ered completed when so determined by the President in
consultation with the Governor or Governors of the af-
fected States. However, this determination shall not
preclude additional removal actions under applicable
State law.
Id. s 2711. From these provisions, industry petitioners con-
clude that it is the President, acting through EPA or the
Coast Guard, who determines when removal is complete, and
that OPA limits the role of trustees in removal operations to
consultation with EPA and the Coast Guard.
We would ordinarily analyze NOAA's interpretation of OPA
under Chevron, asking first whether Congress spoke clearly
to the issue, or if not, whether NOAA's interpretation of the
statute is permissible and thus entitled to deference. Chev-
ron, 467 U.S. at 842-43. The parties disagree about whether
NOAA is even entitled to Chevron deference given the pri-
mary role that EPA and the Coast Guard play in oil removal.
See, e.g., Rapaport v. United States Dep't of Treasury, 59
F.3d 212, 216-17 (D.C. Cir. 1995) (holding that the Office of
Thrift Supervision receives no deference for its interpretation
of the Federal Deposit Insurance Act because it shares the
administration of the statute with other agencies). We need
not resolve this dispute, however, or even the underlying
question of statutory authority because, by not explaining the
difference between the residual removal authority of section
990.53(b)(3) and the language of the proposed rule, NOAA
failed to exercise reasoned decisionmaking. See Motor Vehi-
cle Mfrs. Ass'n v. State Farm Mutual Auto. Ins. Co., 463 U.S.
29, 43 (1983) (agency must provide a reasoned basis for its
actions). The proposed rule provided that trustees, "[w]hen
identifying primary restoration alternatives to be considered,"
should determine whether "[c]onditions exist that would limit
the effectiveness of primary restoration actions (e.g., residual
sources of contamination)." 60 Fed. Reg. at 39,832. As we
read this provision, it did no more than encourage trustees to
develop restoration plans not requiring removal of residual
oil. Thus, if the trustee in NOAA's revegetation example
found that oil left behind by EPA made revegetation impossi-
ble, the trustee would have to abandon the project and
develop another restoration alternative.
NOAA argues that under the proposed rule, the trustee
could have actually removed the oil, but we think this conten-
tion conflicts with the proposed rule's plain language, which
merely directs trustees to "consider" whether conditions exist
that would make the primary restoration alternative impracti-
cal. By comparison, the final rule quite clearly authorizes
trustees to "[r]emove conditions that would prevent or limit
the effectiveness of any restoration action (e.g., residual
sources of contamination)." 15 C.F.R. s 990.53(b)(3)(i). Yet
nowhere has the agency explained this change. Indeed,
NOAA's only comment on the final version of section
990.53(b)(3) in the rule's preamble quotes verbatim from the
proposed rule. See 61 Fed. Reg. at 452 ("trustees should
consider whether activities exist that would prevent or limit
the effectiveness of restoration actions (e.g., residual sources
of contamination).").
Not only has NOAA failed to explain this difference be-
tween the final rule, on the one hand, and its preamble and
the proposed rule, on the other, but it has also not explained
the interrelationship between trustees' residual removal au-
thority and the primary removal authority of EPA and the
Coast Guard. If trustees are to have residual removal au-
thority, clearly explaining how and under what circumstances
they will exercise such authority is critical, particularly since
OPA requires the President to consult with trustees during
primary removal actions. 33 U.S.C. s 2711. How, for exam-
ple, does the standard governing the President's primary
removal authority differ from the standard governing trustee
residual authority? What precisely is a trustee's role in
primary removal, and what is the role of EPA and the Coast
Guard, if any, with respect to a trustee's residual authority?
May trustees remove residual oil even if EPA or the Coast
Guard has considered and rejected a trustee's position during
the consultation process? What happens if a trustee original-
ly agrees with the extent of primary removal, but later
changes its mind? NOAA must answer these questions if it
intends to give trustees residual removal authority. We also
expect that a reviewing court will want to know not only that
EPA and the Coast Guard agree that trustees should have
residual removal authority, but also that the three agencies
concur as to how they will coordinate removal activities.
Because NOAA failed to address these central issues and to
explain the difference between the proposed and final rules,
we vacate section 990.53(b)(3)(i) and remand for further agen-
cy action.
Monitoring Costs and Legal Fees
Section 990.30 of the final rule defines reasonable assess-
ment costs to include both "monitoring and oversight costs"
as well as "administrative, legal, and enforcement costs." 15
C.F.R. s 990.30. Industry petitioners first contend that
NOAA acted arbitrarily by including monitoring costs--the
costs associated with trustee monitoring of the implementa-
tion of restoration plans and their environmental conse-
quences--as an element of assessment costs. Relying on
adjacent OPA sections dealing with the Oil Spill Liability
Trust Fund, they point out that one section, which makes the
Fund available for payment of removal costs, explicitly men-
tions monitoring costs, 33 U.S.C. s 2712(a)(1), while the oth-
er, which makes the Fund available for restoration actions,
contains no reference to monitoring costs, id. s 2712(a)(2).
According to petitioners, the difference between these two
sections shows that Congress intended to exclude monitoring
costs from costs recoverable in restoration actions.
We are unpersuaded. While monitoring costs do appear in
one section but not the other, these provisions deal only with
appropriate uses of the Fund, not with costs properly recov-
erable from responsible parties. Moreover, the two provi-
sions are not parallel. The former refers only to "removal
costs," while the latter refers to a significantly broader activi-
ty--"developing and implementing plans." Because plan im-
plementation necessarily includes monitoring, it is far from
clear that Congress would have thought it necessary to
provide explicitly for the recovery of monitoring costs in the
latter provision. More important, OPA's only provision defin-
ing the measure of natural resource damages recoverable
under OPA contains no reference at all to monitoring costs.
Because OPA is silent on the question before us, we
proceed to Chevron's second step, where we have no doubt
that NOAA acted reasonably by authorizing the inclusion of
monitoring costs as part of restoration costs. According to
NOAA, monitoring is an essential element of restoration:
NOAA believes that restoration monitoring costs are a
recoverable component of natural resource damages.
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. In addition, monitoring is essential to determine
whether the terms of restoration agreements have been
met, upon which a release from liability is premised.
61 Fed. Reg. at 491. Not only does this conclusion seem
eminently reasonable to us, but industry petitioners have
suggested no reason for excluding monitoring costs from the
cost of restoration.
We are equally unpersuaded by industry petitioners' argu-
ment that, because monitoring takes place after assessment,
NOAA improperly included monitoring costs as a component
of assessment costs. In view of our conclusion that NOAA
acted reasonably by including monitoring costs as a recovera-
ble cost, the precise heading under which the trustee may
recover monitoring costs seems insignificant, particularly
since industry petitioners have given no reason why it makes
any difference at all.
Relying on Key Tronic Corp. v. United States, 511 U.S. 809
(1994), industry petitioners also challenge section 990.30's
definition of assessment costs as including attorneys' fees.
NOAA both concedes this point and advises us that it does
not oppose vacatur of the definition of assessment costs to the
extent that it refers to attorneys' fees incurred in pursuing
litigation of a natural resource damages claim.
NOAA's concession does not end this matter, however,
because the parties continue to disagree about what other
legal costs trustees may recover. Although both sides agree
that trustees may recover assessment costs attributable to
tasks that lawyers happen to perform but which others, such
as engineers or private investigators, could have performed,
they disagree about whether trustees may recover costs
stemming from legal work not directly in furtherance of
litigation (e.g., pre-litigation legal opinions, title searches) that
only lawyers could have performed. In view of NOAA's
consent to vacatur of this portion of the rule, we decline to
resolve this question, instead leaving it to NOAA to draw the
precise line between recoverable and nonrecoverable legal
costs in subsequent rulemaking.
III
Industry petitioners present several other challenges to the
final rule which, in view of representations made by NOAA in
its brief and during oral argument, have been resolved. In
order to document the agency's representations, we summa-
rize each issue briefly and include relevant oral argument
excerpts in the appendix to this opinion.
In their opening brief, industry petitioners argued that
section 990.51 of the final rule, which they read to require the
trustee to demonstrate only "injury," "exposure," and "path-
way," Brief for Industry Petitioners at 41, would allow trust-
ees to assess liability without evidence that the responsible
party actually caused the oil discharge that did the damage,
thus violating OPA's causation requirement. See 33 U.S.C.
s 2702(a) (responsible parties only liable for damages that
"result from" an oil discharge). NOAA responded by point-
ing to section 990.51(a)'s requirement that trustees must
"determine if injuries to natural resources and/or services
have resulted from the incident," claiming that it establishes
an independent causation requirement. Brief for Respondent
at 59 ("[T]he trustee must establish causation to the satisfac-
tion of the district court before liability can be imposed."). At
oral argument, agency counsel reiterated her understanding
that trustees must prove causation, acknowledging that this
interpretation of the final rule would bind the agency in any
future proceedings. See Appendix at 22-24.
The parties also now agree on the correct interpretation of
section 990.53(d)(3)(ii), which provides that when a trustee
determines that the valuation of lost services is practical but,
due to considerations of cost or time, the valuation of replace-
ment resources or services is not practical, "trustees may
estimate the dollar value of the lost services and select the
scale of the restoration action that has a cost equivalent to the
lost value." 15 C.F.R. s 990.53(d)(3)(ii). Originally taking
issue with the word "estimate," industry petitioners claimed
that it conflicted both with the immediately preceding provi-
sion which directs trustees to "explicitly measure" the value
of injured resources and services, id. s 990.53(d)(3)(i), and
with a statement in the rule's preamble allowing trustees, in
situations where valuing replacement services or resources is
impractical, to "calculate" the value of the injured services or
resources and then select the scale of the restoration action
that has a cost equivalent to the lost value. 61 Fed. Reg. at
453. According to NOAA, its use of three different terms--
"measure," "calculate," and "estimate"--has no significance
because it used the words interchangeably. Brief for Re-
spondents at 54. To NOAA, the terms all mean the same
thing. Indeed, Webster's Third New International Dictio-
nary defines "calculate" as "to reckon by exercise of practical
judgment rather than by strict mathematical process: ESTI-
MATE." At oral argument, agency counsel confirmed
NOAA's view that "estimate" means "calculate." See Appen-
dix at 24.
The parties' final area of agreement relates to section
990.27(b), which provides that the range of assessment proce-
dures available to trustees includes, but is not limited to, field
procedures, laboratory procedures, model-based procedures,
and literature-based procedures. 15 C.F.R. s 990.27(b)(1)(i)-
(iv). According to section 990.27(b)(2) of the final rule, trust-
ees may use these procedures alone or in any combination.
Petitioners argued that because model-based procedures re-
quire no site-specific data or evidence of injury, the use of
these models by themselves, as authorized by the final rule,
would violate OPA's requirement that trustees develop site-
specific restoration plans. 33 U.S.C. s 2706(c)(1)(C) (trustees
must "develop and implement a plan for the restoration,
rehabilitation, replacement, or acquisition of the equivalent, of
the natural resources under their trusteeship"). Responding
that this argument rests on a misunderstanding of the final
rule, NOAA explained that although trustees may use simpli-
fied procedures to assess damages, they may not, under the
final rule, avoid developing site-specific restoration alterna-
tives, see 15 C.F.R. s 990.53(a)(2) ("Trustees must consider a
reasonable range of restoration alternatives ... Each resto-
ration alternative is comprised of primary and/or compensato-
ry restoration components that address one or more specific
injury(ies) associated with the incident."), unless, of course, a
regional restoration plan or project already exists. Id.
s 990.56. At oral argument, we asked agency counsel wheth-
er, if a trustee has used simplified methods to come up with a
number representing the damages caused by an oil spill, the
trustee could then simply send the responsible party a bill for
that amount, or whether instead the trustee would have to
develop an actual site-specific plan to restore the lost value.
Counsel responded, and NRDC counsel agreed, that the final
rule permits only the latter course of action, i.e., that the
trustee could not send the responsible party a bill based
solely on the number derived from a simplified model, but
would have to develop a site-specific restoration plan or rely
on an existing plan. See Appendix at 24-30.
IV
This brings us finally to the arguments advanced by insur-
ance petitioners. Lacking merit, they require but brief dis-
cussion.
To begin with, petitioners have no standing to argue that
section 990.20(b), which allows trustees who have begun
damage assessments under CERCLA to switch to the final
rule, is impermissibly retroactive. They make no claim that
any particular trustee has switched to the final rule, nor have
they argued, as they could not at this time, that such a switch
resulted in a trustee imposing greater damages upon a re-
sponsible party insured by petitioners. Because petitioners
have thus shown neither concrete nor imminent injury, see
Louisiana Envtl. Action Network v. Browner, 87 F.3d 1379,
1383 (D.C. Cir. 1996), challenge to this section must wait until
a trustee actually switches assessment procedures and impos-
es heavier damages on a responsible party.
Pointing to section 1002(b)(2)(A) of OPA, which makes
responsible parties liable for "[d]amages for injury to, de-
struction of, loss of, or loss of use of, natural resources," 33
U.S.C. s 2702(b)(2)(A), and to section 1006(d)(1)(B), which
defines "natural resource damages" as "the diminution in
value of those natural resources pending restoration," id.
s 2706(d)(1)(B), insurance petitioners argue that OPA does
not authorize recovery of passive-use values. We disagree.
Nothing in the plain language of sections 1002 or 1006
excludes passive-use values. These two sections simply pro-
vide for recovery of diminished value without indicating
whether the value is of the active or passive variety. Con-
gress, however, clearly intended to authorize trustees to
recover passive-use values. The House Conference Report
defines diminution of value as "the standard for measuring
natural resource damages used in [Ohio, at 462-80]," H.R.
Conf. Rep. No. 101-653, at 108 (1990), reprinted in 1990
U.S.C.C.A.N. 779, 786, and Ohio explicitly approves passive-
use values. Ohio, 880 F.2d at 464 ("Option and existence
values may represent 'passive' use, but they nonetheless
reflect utility derived by humans from a resource, and thus,
prima facie, ought to be included in a damage assessment.").
Insurance petitioners also challenge the final rule because
it makes no reference to OPA's liability limits. As NOAA
points out, however, nothing in the final rule affects a respon-
sible party's right to invoke the statute's liability limits. If
trustees need resources above and beyond statutory limita-
tions to implement restoration plans, they may draw upon the
Oil Spill Liability Trust Fund. 33 U.S.C. s 2712(a)(2).
Insurance petitioners next argue that, by authorizing trust-
ees to assess costs for restoration activities undertaken after
the date of the initial demand, the final rule violates responsi-
ble parties' rights under OPA to seek contribution from other
responsible parties. Their concern stems from section
1017(f)(3), which prohibits bringing contribution actions more
than three years after either the date of judgment in any
action under OPA for recovery of costs or damages, or the
date of entry of a judicially approved settlement with respect
to those costs. Id. s 2717(f)(3). Petitioners argue that if
trustees impose costs for restoration activities undertaken
more than three years after initial settlement, responsible
parties will be unable to seek contribution. Petitioners' con-
cerns are unfounded. For one thing, the final rule requires
trustees to estimate future monitoring costs and discount
them to present value before demanding payment from re-
sponsible parties. 15 C.F.R. s 990.63(a). Even if trustees
demand payment for activities undertaken more than three
years after initial settlement, responsible parties can refuse
payment, thus forcing trustees to bring a judicial action and
to obtain another judgment, which would trigger the running
of another three-year period during which responsible parties
may bring another contribution action.
Insurance petitioners' argue finally that the final rule
grants trustees "uncontrolled discretion." But we think sec-
tion 990.27's requirement that plans be "reliable and valid for
the particular incident" adequately constrains trustee discre-
tion, giving reviewing courts the authority they need to
ensure the accuracy and reasonableness of natural resource
damage assessments.
V
We vacate section 990.30's definition of "reasonable assess-
ment costs" to the extent that it includes legal fees, and
section 990.53(b)(3)(i)'s authorization of residual removal au-
thority. We adopt NOAA's construction of section 990.51
(trustee must prove causation), section 990.53(d)(3)(ii) ("esti-
mate" means "calculate"), and section 990.27(b) (trustee must
develop site-specific restoration plans). In all other respects
we uphold the final rule.
So ordered.
Appendix
Excerpts from September 11, 1997 Oral Argument *
Causation
THE COURT:Do I understand, do we understand that
the parties are in agreement on this is-
sue?
MS. MEDINA:I'm not sure I would characterize this "in
agreement." I guess I would say that
we have determined--
THE COURT:I read your brief as conceding that Peti-
tioner was dead right and pointed out
your regulation was never intended to
avoid causation.
MS. MEDINA:Absolutely. To prove legal causation, to
prove liability. That is something for
the Court to do. All the regulation re-
quires is that we prove that the spill, the
injury was derived from or resulted from
the spill.
THE COURT:Wait a minute. Now I don't understand.
You mean is the Government's--the
rustee can come in and say look, there
was a spill. I've shown it caused terrible
problems. Now it's up to you, your Hon-
or, to determine who did it.... That is
not correct, is it?
__________
* Ms. Medina is counsel for NOAA. Mr. Tsao, an attorney with
the Natural Resources Division of the Department of Justice, also
appeared on behalf of NOAA. Mr. Lehner appeared for NRDC.
Mr. Bruce appeared for industry petitioners.
MS. MEDINA:That is not correct.
THE COURT:So you have to show causation.
MS. MEDINA:We do have a responsible party on the
other side of the table.
THE COURT:You have to show causation as part of
your case.
MS. MEDINA:Yes, we do, absolutely, but we don't have
to do it as part of our rule, as a part of
our process in assessing the damages.
THE COURT:That's not--I think the Petitioner quite
legitimately read the rule as suggesting
that there was some effort to avoid the
obligation to show causation and the
Government comes in, as often happens
on a direct challenge to rulemaking, says
no,we didn't intend that. That was--
now, what is important and we have done
this on a couple of occasions, your brief
then agrees with Petitioner and says
look--agrees in the sense that we never
intended the rule to mean that.
MS. MEDINA:Right.
THE COURT:We mean the same thing you think it
should mean.
MS. MEDINA:Right.
THE COURT:That now, whenever it's reflected in our
opinion, then binds the Agency, does it
not?
MS. MEDINA:Yes, it does.
Estimates
THE COURT:Your position is that estimate means cal-
culate?
MS. MEDINA:Yes, Your Honor.
THE COURT:Explicitly measure means being very
precise; estimate means a little general
and calculate means both is that it?
MS. MEDINA:I think we used the words very much
interchangeably. We didn't intend there
to be this huge distinction.
THE COURT:So I think Judge Silberman's question of
an earlier issue if we write an opinion
and say we understand the word "esti-
mate" in the regulation to mean "calcu-
late" that's something the Agency--it
would be consistent with your under-
standing of the issue?
MS. MEDINA:Yes, Your Honor.
THE COURT:Okay, that's it. So calculate and mea-
sure are equivalent?
MS. MEDINA:Yes, Your Honor.
Simplified Procedures
THE COURT:[D]o I understand it works this way? A
simplified method is a computer program
of some kind that takes account of in-
puts, I assume, that come from the site
of the oil spill. Is that right?
MS. MEDINA:Yes.
THE COURT:Okay, so it's not just a book you look into
like a logarithm table and say the answer
is X. You've had input regarding the
conditions at the oil spill site, right?
MS. MEDINA:Right.
THE COURT:Okay ... let's assume that that formula,
once you take account of the site specific
things produces a figure of $100,000
worth of damage. All right?
MS. MEDINA:Right.
THE COURT:Okay, are there any circumstances under
which that is the end of the process?
MS. MEDINA:I would think that we would still develop
a plan.
THE COURT:No, no, don't tell me what you think. I
want to know what the regulations say.
Are there circumstances under the regu-
lation under which a trustee would send
that $100,000 bill to the responsible par-
ty?
MS. MEDINA:No ...
THE COURT:Okay, let me go back to my intermediate
question. Are there any circumstances
under which the $100,000 calculation that
flows from the computer model that's
based on site specific data would be the
end of the process, that that's the bill
that you send to the responsible party?
MS. MEDINA:That's not the end of the process. We
then develop a plan ...
THE COURT:What function does the simplified proce-
dure serve under the rules? ... In oth-
er words, the tanker spilled X gallons of
oil off Juneau, Alaska. Look at our mod-
el to see what that means in terms of
damage, bang, that's our simplified as-
sessment. And what do you do with it
then?
MR. TSAO:Then you need to develop and implement
a plan to figure out how you're going to
compensate for that injury and as you
asked before, what you end up deciding
in terms of restoration plan could be
greater or less than $100,000 that comes
out of the simplified procedure. There's
no absolute requirement that it be the
same.
MR. LEHNER: [T]o give you an example of how models
involved in mini-oil spills. You will
have a circumstance, for example, big oil spill
where the trustees contract with people,
go out, find out the actual extent of the
oil, how many birds are dead, what per-
centage of the grass in the wetlands is
dead, et cetera, and then try to develop a
restoration plan accordingly.
You can also use in a smaller spill a
model to help you do that. You put in
the inputs of the amount of oil of the
geographic area and they will come up
with estimates of the biological injury,
the type of biological injuries and also
using their economic data base, the ap-
proximate costs of those. The trustees
can then use the simplified assessment
method, the model to develop the resto-
ration plan.
THE COURT:So that's just stage 1, right?
MR. LEHNER:The assessment is stage 1 in the stage.
THE COURT:You have to go on to stage 3?
MR. LEHNER:Yes, stage 2 is letting the feds help out
the states, so it's really a two stage--
assess and develop a plan and they all
have to go to stage 2.
THE COURT:You develop a plan without a site specific
activity?
MR. LEHNER:The rules provide for regional restora-
tion plans and the Petitioners don't chal-
lenge those. You do need--
THE COURT:Wait a minute, counsel. I didn't under-
stand that at all. What do you mean?
MR. LEHNER:The rules--you can have a site specific
plan or you can--the rules allow a trust-
ee to use what are called regional plans
...
THE COURT:What is a regional plan?
MR. LEHNER:Let me give an example and explain it.
In 1990, in the New York Harbor, we
had six oil spills, six big oil spills in the
first half of the year. The oil kept the
same place again and again and some oil
was a little further to the west and a
little to the east, but it was all in the
same region.
What the trustees recognized is that it
was absurd to develop six entirely sepa-
rate plans in those cases. We could use
one plan to address all the different
spills. They were all site specific for
their specific region, but it doesn't make
sense to try to distinguish where you
can't.
So what the rules do allow in our view is
you can use a model and then if there is
a regional plan, perhaps you can use
that, but you have to do--you do have to
come up with a plan. That's what the
statute makes clear and that's what the
regs make clear.
THE COURT:Do you really have as much problem
with that after you heard the Govern-
ment's position?
MR. BRUCE:Well, if the Government's position were
written into the rules the way the Gov-
ernment has articulated its position here
in Court today, I don't know what our
position would have been, but that's not
what the rules say. The rules explicitly
incorporate the Type A, DOI models.
They allow other models as well, but
they explicitly incorporate Type A DOI
models ...
THE COURT:What's so terrible about the DOI--
MR. BRUCE:No, no. I just want to tell you what they
do. The DOI models and this is 61 Fed.
Reg. At page 20562 describing those
models that were actually published after
the NOAA's rule, they say "when trust-
ees use a Type A procedure, that's the
model, they perform injury determina-
tion, quantification and damage determi-
nation through a computer model."
Keep that in mind, damage determina-
tion. That's the number that comes out.
It's not an assessment. It's a--
THE COURT:Oh, but in the regulation it's only an
assessment?
MR. BRUCE:No, no. The Type A models are de-
signed to put out a number that is the
whole shooting match, the whole thing,
and that's what these rules do. That's
what--
THE COURT:If we don't read them that way and the
Agency certainly, the Government cer-
tainly hasn't suggested that in their ar-
gument here, then you don't have a
problem. The fact that they're using
computers and starting with the simpli-
fied method--that can't possibly be your
objection.... Your objection is if they
were going to impose, come to Court,
seek damages based on a computer with-
out real hard evidence.
MR. BRUCE:Alone. That's correct.
THE COURT:And without any development of a plan.
MR. BRUCE:Without anything else. That's what the
rule allows them to do. Now if they've
abandoned that position, if they've
walked away from that and somehow
through the adjudicatory process they
can do that and the Court so holds, we
don't have an argument.
Gen Elec Co v. COMM
Combined Opinion