Economic Assessment of Natural Resource Damages

As a national leader in Natural Resource Damage Assessment (NRDA), Exponent provides corporate clients with a broad range of economic support on NRD claims. These claims are especially important because they are a potential environmental liability that extends beyond cleanup or response actions. Damage claims sought by the government or tribes can be very large, and settlement or litigation costs can be correspondingly high.

While some damage categories are easily quantifiable, others are not. Resource damages could be classified into market-based losses (losses with available commercial values) and non-market losses (losses with values that are not fully captured by the market system). Cleanup and response costs as well as resource losses with commercial values are relatively straightforward to quantify. However, non-market losses pose a significant challenge in the economic assessment of damages. Those losses typically include decreased ecological value provided by wildlife habitat as well as diminished recreational benefits and public enjoyment of the natural resource such as recreational fishing or swimming. Those non-market or “intangible” damages present a category with the widest spread of potential monetary losses, where often no quantification technique exists for use in resource damage litigation.

Exponent has a unique combination of experienced consultants in applied ecological sciences and natural resource economics that allows an interdisciplinary approach to monetizing natural resource damages. By supplementing economic expertise with specialists in ecology, toxicology, chemistry, and environmental engineering, Exponent develops a comprehensive understanding of the relationship between natural resource attributes and monetary damages.

Services

Exponent provides expert reports and analysis related to economic damages of natural resources. We have worked on a number of cases where we were asked to calculate losses of value and subsequent restoration costs for damaged natural resources.

We provide economic support and evaluation of claims for human use losses that often include losses to recreational anglers due to chemical contamination of rivers and other waterbodies. Those economic losses are typically associated with fish consumption and recreational use advisories. Potential losses may result from foregone fishing trips or trips taken to substitute sites outside of the affected area. We review available materials to determine the soundness of the approach used to develop a claim and identify technical errors or weaknesses that may influence estimates of recreational human losses. We often provide a client with an alternative estimate for a reasonable damage claim associated with human use losses.

Response to claims of non-market losses can be especially challenging. Exponent’s environmental economics have extensive experience with these non-market methods and can evaluate their appropriateness and limitations. A number of methods can be used to evaluate the non-market value of damaged natural resources. We examine NRD claims based on various estimation techniques such as travel cost models, random utility models (RUM), hedonic pricing, and contingent valuation (CV), among others.

As a result of the amendments to the NRD regulations, restoration-based methods are commonly used to evaluate economic damages. Exponent develops innovative and cost-effective restoration alternatives to compensate for damages to natural resources. Some examples of restoration options include wetland creation, hatchery construction and fish stocking, artificial reef construction. Exponent scales restoration alternatives based on quantifiable injury and negotiates restoration options with state and federal Trustees. We have been involved in scaling restoration alternatives for terrestrial and aquatic resources, including wetlands, plankton, fishes, corals, and benthic macroinvertebrates. Exponent has used resource and habitat equivalency analyses (REA/HEA) to scale restoration-based damage estimates that have been used in settlement negotiations with Trustees.

As another example of our work, Exponent’s case-specific analyses have assisted responsible parties in assessing the potential financial liability associated with damages to natural resources of a forest caused by wildland fires. As one of the latest hot litigation issues, this work addresses the controversy surrounding recoverable damages associated with these large-scale fires on public lands. With wildfires growing larger, more intense, and harder to control, the corresponding monetary damages sought and recovered by the government are larger than ever. While earlier forest fire cases were settled at the amounts close to the cost of fire suppression, more recent fires cases have been settled for amounts that are many multiples of those costs. The increasing demands for monetary recovery are based on claims related to harm to environmental services or intangible environmental damages. Those environmental services range from endangered species present in the forest to scenic views of the park to recreational enjoyment by the public. Exponent’s analysis helped a responsible party to determine a reasonable amount for the damage claim associated with wildfire-caused damages to natural resources of a forest in California.

Exponent also has developed a scaling analysis that can establish a dollar value range for non-market environmental damages based on empirical evidence from previous NRD cases. A comparative analysis of pre-event to post-event environmental conditions is conducted to help determine a reasonable amount of monetary damages associated with a particular injury to natural resources for which environmental losses have occurred. We identify key factors that are likely to affect the responsible party’s liability for damages and develop a range of estimates for environmental losses.

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