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Thursday, September 8, 2011

The 2010 Deepwater Horizon Oil Spill: Natural Resource Damage Assessment Under the Oil Pollution Act

James V. DeBergh
Legislative Attorney

The 2010 Deepwater Horizon oil spill leaked an estimated 4.1 million barrels of oil into the Gulf of Mexico, damaging the waters, shores, and marshes, and the fish and wildlife that live there. The Oil Pollution Act (OPA) allows state, federal, tribal, and federal governments to recover damages to natural resources in the public trust from the parties responsible for the oil spill. Under the public trust doctrine, natural resources are managed by the states for the benefit of all citizens, except where a statute vests such management in the federal government.

In particular, OPA requires the Trustees to assess the damages to natural resources resulting from a spill, and to develop a plan for the restoration, rehabilitation, replacement or acquisition of the equivalent, of the natural resources. The types of damages that are recoverable include the cost of replacing or restoring the lost resource, the lost value of those resources if or until they are recovered, and any costs incurred in assessing the harm. OPA caps liability for offshore drilling units at $75 million for economic damages, but does not limit liability for the costs of containing and removing the oil.

The process established by OPA for assessing the damages to natural resources is known as Natural Resources Damage Assessment (NRDA). In the three steps of the NRDA process, the Trustees are required to solicit the participation of the responsible parties and design a restoration plan. This plan is then paid for or implemented by the responsible parties. If the responsible parties refuse to pay or reach an agreement with the Trustees, the Trustees can sue the responsible party for those damages under OPA. In the alternative, the Trustees may seek compensation from the Oil Spill Liability Trust Fund, but there is a cap of $500 million from the Fund for natural resources damages. The federal government may then seek restitution from the responsible parties for the sums taken from that Fund.

The Trustees are not required to adhere to the NRDA process set forth in the OPA regulations. However, they are accorded a rebuttable presumption in court for any determination or assessment of damages conducted pursuant to the regulations. Of course, the Trustees and the responsible parties are permitted to enter into settlement agreements at any point throughout the NRDA process.

The NRDA process in the Gulf is in the Restoration Planning Phase. The caps on the Oil Spill Trust Fund and on OPA liability have captured Congress’s attention, as has Gulf restoration. In the 112th Congress, bills have been introduced that repeal OPA’s limitation on liability, change OPA’s definition of responsible party, and allow for advance payments from the Oil Spill Liability Trust Fund. Other proposed legislation would require an evaluation of natural resource damages resulting from the Deepwater Horizon spill in addition to NRDA.

Date of Report: August 25, 2011
Number of Pages: 20
Order Number: R41972
Price: $29.95

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