Surveying the landscape – an approach to compensatory mitigation

Posted on December 9, 2016 by Thomas Lavender

Not that there is anything wrong with wetlands mitigation banking.  I, for one, would certainly like to own one with the perceived return on investment and lack of control on the market – but, there is another option that achieves the same “no net loss” goal for impacting wetlands.

While we all recognize that the Corps’ mitigation rule establishes a hierarchy that favors the purchase of credits from approved mitigation banks, permitted responsible mitigation is still allowable under certain circumstances.  In fact, most recently in South Carolina the landscape mitigation approach has been successfully used to further economic development projects.  In at least one instance, the landscape approach was used entirely in lieu of the purchase of mitigation banking credits.  In another, a hybrid approach was used which combined a permittee-responsible-project with the purchase of credits.

How did it work – you ask?  Rather well, I might say.  But how did it work? 

In each instance, the applicant involved a conservation entity to serve as the sponsor for the project.  Desirable property was identified which had previously been targeted for preservation by a state or federal resource agency.  The sponsor then entered into an agreement with the applicant to secure the mitigation property and, if necessary, perform any enhancement work to achieve the required mitigation credit for the project.  The applicant agreed to reimburse the sponsor for acquiring, holding, and enhancing the mitigation property.  In one instance, the sponsor will ultimately convey the property to a state resource agency.  The mitigation property will be transferred to the state resource agency, subject to a restrictive covenant to encumber the property as approved by the Corps and the resource agency.  The mitigation property only partially satisfied the mitigation obligation.  A small credit purchase for the balance was also necessary.   In the other instance, the mitigation obligation will again be partially satisfied by the purchase of the mitigation property by the sponsor on behalf of the applicant and then transferred to the federal resource agency.  However, the ratio of the credit purchase and the property purchase were approximately equal.  This approach seemed to work more effectively because it also provided for the involvement of an approved mitigation bank which did not object to the project.

Why do it – you ask?  Time and money – when time is money. 

On many large economic development projects there is often resistance from third parties or resource agencies.  Working with these third parties and resource agencies to identify desirable mitigation properties can facilitate consensus for securing a 404 permit in a timely manner.  The approach only works for the applicant when the permit timeline tracks with the project and the cost of the landscape mitigation approach is essentially equivalent to the cost of purchasing credits from an approved mitigation bank.

Try it, you might like it, Mikey. 

BP Tightens its Grip on the Deepwater Horizon Checkbook

Posted on June 9, 2014 by Jarred Taylor

BP Exploration and Production, Inc. (“BP”) was recently dealt another blow in its fight to reinterpret its multibillion dollar settlement for economic and property losses arising from the 2010 Deepwater Horizon disaster when the Fifth Circuit refused to rehear BP’s appeal of a prior district court ruling on “causation nexus” requirements in the agreement.  In December 2013, U.S. District Court Judge Carl Barbier ruled that individuals and businesses do not have to prove that they were directly harmed by the oil spill in order to get paid under the terms of the settlement agreement.

In 2012, nearly two years after the spill, BP reached a settlement with the Plaintiffs’ Steering Committee (which acts on behalf of individual and business plaintiffs in the multi-district litigation proceedings) to resolve hundreds of thousands of private economic, property damage, and medical claims stemming from the Deepwater Horizon explosion and oil spill.  BP has disputed many of the economic and property damage claims brought pursuant to the settlement agreement.  BP argues that the claims administrator was incorrectly interpreting the meaning of the settlement agreement, particularly with respect to whether or not a claimant must submit evidence that its losses were directly caused by the spill.

Judge Barbier, who is presiding over the multidistrict litigation stemming from the Deepwater Horizon disaster, ruled that the settlement agreement did not contain a causation requirement beyond the revenue and related tests set out in the agreement, opening BP’s checkbook to economic loss claimants who may not be able to trace the cause of their damages back to the 2010 disaster.  BP already had revised its original $7.8 billion estimate of its potential costs under the settlement agreement up to about $9.2 billion.  Later, as it began challenging economic loss claims, BP proclaimed it could no longer provide a reliable estimate of the ultimate cost of the deal.   

BP appealed the district court’s ruling to the Fifth Circuit Court of Appeals, claiming in December that it had to pay hundreds of millions of dollars to businesses and individuals that exaggerated losses from the disaster.  The Fifth Circuit affirmed the district court’s ruling in March 2014, and on May 19, declined to rehear BP’s appeal. In a strongly worded dissent joined by two other justices, though, Judge Edith Clement argued that the district court’s rulings would “funnel BP’s cash into the pockets of undeserving non-victims” of the 2010 spill, adding that the appeals court had made itself “party to this fraud” by rejecting BP’s arguments. Judge Clement concluded that “another court surely must resolve this.” BP clearly agrees and has vowed to appeal its case to the U.S. Supreme Court, declaring that “no company would agree to pay for losses that it did not cause, and BP certainly did not when it entered into this settlement.” 

Ted Olsen, BP’s lead attorney, said in a 60 Minutes segment in May that the company would take its argument “as far as it is necessary to go to make sure that this settlement agreement is construed properly.” The New Orleans Times-Picayune reports that some experts following the case expect that the Supreme Court will not take up the case, but suspect that BP’s true motive may not be to win on appeal, but to simply prolong the litigation and delay paying claims. The Fifth Circuit lifted its stay on payout of settlement claims, and the Supreme Court just rejected BP’s request that the Supreme Court reimpose the stay pending filing and disposition of its petition for writ of certiorari. 

Meanwhile, in the midst of its attempt to walk back from the economic and property loss settlement it negotiated and—at the time—happily agreed to, BP rejected a $147 million claim from the National Oceanic and Atmospheric Administration (“NOAA”) demanding additional funds to conduct its ongoing Natural Resource Damage Assessment (“NRDA”) activities related to the Deepwater Horizon oil spill. NRDA is the process created by the Oil Pollution Act (“OPA”) and its implementing regulations that authorizes natural resources Trustees to assess injuries to natural resources caused by oil spills and spill response activities, and to restore the injured resources. OPA requires that the party or parties responsible for the oil spill pay for the reasonable costs incurred by the Trustees to carry out the NRDA and restoration. 

Last July, NOAA submitted a claim to BP for the estimated costs of NRDA activities that NOAA planned to implement in 2014. NOAA’s claim includes $2.2 million for research on the recovery of coastal wetlands, more than $10 million to remedy damage to dolphin and whale habitat, and $22 million for oyster habitat restoration. The Financial Times (free subscription required) reports that BP rejected the majority of NOAA’s requests, saying it was concerned by “the lack of visibility and accountability” in the process, and the unwillingness of the Deepwater Horizon NRDA Trustees (a handful of U.S. federal agencies and five Gulf Coast state governments) “to engage in technical discussions of the substantive issues.” The Financial Times reports that “BP said it had paid for work that was not done or done properly, been double-billed for the same study, and not been allowed to see research findings that it had been told would be shared”—evidence BP argues could be used at the trial over civil penalties to show that ecological damages from the spill are much less than once feared. 

According to an April 30 report on BP’s website, BP has already paid nearly $1.5 billion to federal and state government agencies for spill response, NRDA activities, and other claims related to the Deepwater Horizon spill, and over $11 billion to individuals and businesses. I need to disclose, too, that my firm is assisting several claimants to the BP settlement fund.

Natural Resource Damages - Why Not a Cooperative Restoration Approach?

Posted on December 7, 2009 by Susan Cooke

There’s lots of talk among environmental lawyers these days about how to litigate Natural Resource Damage (NRD) claims, but relatively little discussion of  how those claims can be settled through restoration projects. The latter approach deserves more attention.

Last year the Department of Interior (DOI) issued amendments to its NRD assessment regulations to focus on resource restoration through the use of cost/benefit methodologies.  Those methodologies compare losses from resource injury to the gains expected from restoration actions. Under the amended regulations they have been expanded to include habitat and resource equivalency analyses for measuring resource losses used in determining the value of project benefits, which value is in turn needed to compensate for the damaged resource. See 73 Fed. Reg. 57259-57268 (Oct.2, 2008). 

A project restoration approach can be very attractive from a monetary standpoint. Past experience has shown that the benefits to be achieved from restoration projects can be significantly greater than their cost, with the cost/benefit ratio often being 1:5 and sometimes even greater. 

 

A good example of this favorable cost/benefit ratio is the NRD settlement reached with some of the Potentially Responsible Parties (PRPs) at the Hylebos Waterway portion of the Commencement Bay Superfund site in Tacoma, Washington. As noted in an article appearing in the Summer 2009 issue of the ABA’s Natural Resources & Environment publication authored by Suzanne Lacampagne and Jeffrey Miller, the NRD trustees determined that those PRPs could settle their NRD liability for a cash payment of $13.5 million. Alternatively, they could underwrite restoration projects that provide an equivalent monetary benefit. The PRPs chose the latter route, expending about one sixth of the amount required for a cash settlement.

Of course, before the restoration projects were completed, the Hylebos PRPs faced the prospect of potential cost overruns. If concern about additional expenditures in the future is of paramount importance, or if there is a need to close out all liabilities in the near term, then an NRD credit strategy may make the most sense. Such an approach involves the purchase, or a commitment to purchase, NRD credits equivalent to the value of the damaged resource once the NRD trustees have certified the validity and transferability of those credits.

This approach is being implemented at the Duwamish River Superfund site in Seattle, Washington, where the city is leasing out parcels of its property along the river that are in need of restoration to a company that will carry out the restoration work and sell NRD credits to PRPs interested in settling their NRD liability. The Seattle mayor’s announcement of the restoration project and credit approach can be found here.  

A link to the protocol entered into by the NRD trustees and the company carrying out the restoration projects can be found here as well.

One interesting feature of the Duwamish River restoration effort is the willingness of NRD trustees to consider settlement of a PRP’s NRD liability prior to completion of the remediation effort. See, e.g., discussion at p. 7 of the inventory of properties for the Lower Duwamish River Habitat Restoration Plan prepared by the Port of Seattle.  

A related feature of that willingness to consider settlement is that restoration activities will begin earlier in the process, while cleanup is still underway. This in turn can lead to more cost effective cleanup and restoration activities, as both categories of actions can be formulated and coordinated contemporaneously for maximum benefit.

Another example of a comprehensive settlement approach encompassing both remediation and restoration activities is set forth in the consent decree for the West Site/Hows Corner Superfund site in Plymouth, Maine. As memorialized in Appendix H of that decree, the settling PRPs have addressed their NRD liability through a restoration project, i.e., acquisition of property to be held and maintained by the state government as wildlife habitat. The consent decree with its appendices and the November 19, 2009 Federal Register notice of the settlement at pp. 59991-59992 can be found here.

In addition to the cost/benefit and related timing issues just mentioned, two other favorable aspects of the restoration project approach are the positive publicity that can be generated in the local community upon implementation of such a project and the cost savings associated with earlier resolution of NRD liability. With all these attributes in its favor, and with increasing experience in using the new equivalency methodologies and implementing projects based on their numbers, the restoration project approach may yet achieve the attention it deserves.

Global Warming Litigation Heating up - Village of Kivalina Lawsuit

Posted on August 21, 2008 by Mark Walker

As the debate regarding the contribution of anthropogenic greenhouse gases to global warming continues, some parties are taking their concerns directly to the courts. Perhaps the latest in the growing number of global warming lawsuits is the Native Village of Kivalina, Alaska v. ExxonMobil, et al., Case No. CV-08-1138, in the United States District Court for the Northern District of California, San Francisco Division.

THE VILLAGE OF KIVALINA

The Village of Kivalina is located in northwest Alaska about 120 miles from the Arctic circle. The Village is comprised of roughly 1.9 square miles of land which lies on the tip of a barrier island which separates the Chukchi Sea and a lagoon on the mainland side. There are 399 residents of Kivalina, 97% of whom are Native Alaskans referred to as "Inupiat" Eskimos, meaning "the people."

THE PROBLEM

With claims presaged by Al Gore's "An Inconvenient Truth", Kivalina claims that global warming has caused the melting of Arctic sea ice which formerly protected the Village from winter storms. Without the protective ice, the Village claims that storms have caused massive erosion, leaving "houses and buildings in imminent danger of falling into the sea." The Village contends that, "if the entire village is not relocated soon, the village will be destroyed." Governmental estimates of the cost to relocate run as high as $400 million –roughly $1 million per resident.

THE DEFENDANTS

The defendants are 9 oil and gas companies, 14 electric generation companies and 1 coal company. Kivalina contends that the defendants are among the largest emitters of greenhouse gases in the United States, and that the defendants "are responsible for a substantial portion of the greenhouse gases in the atmosphere that have caused global warming." The Village is pursuing a public nuisance theory.

CONSPIRACY CLAIMS

With allegations that are indeed carbon copied from the "Science Fraud" chapter in "An Inconvenient Truth", Kivalina claims that eight of the defendants have engaged in a civil conspiracy to generate misinformation and propaganda to create doubt as to whether global warming is occurring and, if so, whether man-made emissions are to blame. The Village claims that the alleged co-conspirators have used "front groups, fake citizens organizations, and bogus scientific bodies" to generate the alleged misinformation and doubt.

MOTIONS TO DISMISS

The Kivalina lawsuit is in its early stages, however, the defendants have filed motions to dismiss claiming, inter alia, that (1) the plaintiffs cannot pursue a federal common law nuisance claim because such claim is available only to States seeking injunctive relief and because the Clean Air Act displaces the authority of the courts to regulate nationwide greenhouse gas emissions and global warming; and (2) the plaintiffs' conspiracy claims are not independent torts, but are derivative of their underlying nuisance claims and should fail along with the nuisance claims. 

POLITICAL QUESTION DOCTRINE

Similar lawsuits have previously been dismissed on the grounds of lack of standing and non-justiciability under the political question doctrine. See Comer, et al. v. Murphy Oil, et al., Case No. 1:05-cv-00436-LTS-RHW, in the United States District Court for the Southern District of Mississippi, dismissal currently on appeal to the Fifth Circuit Court of Appeals (Appeal No. 07-60756); State of California v. General Motors, et al., Case No. C-06-05755-MJJ, in the United States District Court for the Northern District of California, dismissal currently on appeal to the Ninth Circuit Court of Appeals (Appeal No. 07-16908). In Comer the plaintiffs blamed Hurricane Katrina on global warming and on 8 oil companies, 31 coal companies and 4 chemical companies that allegedly contributed to global warming. 

So far, the courts appear to be of the view that the responsibility for developing a comprehensive global warming policy which balances the interests of reducing air pollution and its social costs with the corresponding harm to economic development and its attendant social costs is a political question which is reserved for the political branches of government, and that such policies should not be developed on an ad hoc basis by the courts. Kivalina is once again testing the resolve of the courts to stay out of the global warming debate until Congress and/or the EPA establish clear policies regarding man-made greenhouse gas emissions.

To view a copy of the Kivalina Complaint, click here.

For more information on the author, click here.