Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-96-01101/USCOURTS-caDC-96-01101-0/pdf.json

Parties Involved:
American Institute of Marine Underwriters
Petitioner
United States Department of Commerce
Respondent
Water Quality Insurance Syndicate
Petitioner

Document Text:

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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

-

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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 decisionmaking, we vacate this portion of the rule and remand to 

the agency for further consideration. With the agency's 

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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. §§ 2701-20, 2731-37, 

2751-53, 2761 (1994)) ("OPA"), natural resource damages 

resulting from oil spills were assessed pursuant to the Comprehensive Environmental Response, Compensation, and Liability 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. 

§ 1321(c)(1). Section 1002, the primary focus of this litigation, 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. § 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. § 2706(a)-(b). The Act limits 

responsible party liability, e.g., id. § 2704(a)(3) (limiting liability 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 

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Spill Liability Trust Fund, id. § 2712(a)(2), a fund financed 

primarily by a five cent per barrel tax on imported and 

domestic oil, 26 U.S.C. § 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. § 2706(e)(1). Natural resource 

damage assessments made by a trustee in accordance with 

those regulations "shall have the force and effect of a rebuttable presumption on behalf of the trustee in any administrative 

or judicial proceeding" under OPA. Id. § 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 damages in 1996. Natural Resource Damage Assessments, 61 

Fed. Reg. 440-510 (1996) (adding 15 C.F.R. §§ 990.10-

990.66). The final rule reflects NOAA's determination to 

accomplish OPA's goals through a restoration-based approach, focusing not merely on assessing environmental damagesthe approach taken by CERCLAbut rather on developing and implementing plans for restoring and rehabilitating 

damaged resources or services.

The final rule lays out a three-stage procedure for assessing 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 restoration planning activities, and open a publicly available administrative record. 15 C.F.R. §§ 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, 

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whether a "pathway" can be established between the discharged oil and the injury, and whether the injury resulted 

from the discharge. Id. § 990.51(a)-(b). If the trustee determines 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. § 990.52(a)-

(b). If that analysis leads the trustee to conclude that the 

injury requires restoration, the trustee proceeds to the "restoration 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.

§§ 990.53-990.54. Once the trustee chooses the restoration 

plan that best restores the value destroyed by the oil discharge, 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 considered, how the alternatives were evaluated, and which alternatives were chosen. Id. § 990.55(b). After giving the public 

an opportunity to review and comment on the Draft Plan, id.

§ 990.55(a), the trustee ends this stage by developing a Final 

Restoration Plan, id. § 990.55(d).

In the third and final stage of the process, the "Restoration 

Implementation Phase," the trustee presents a written demand for payment to the owner of the tanker or other party 

or parties responsible for the oil discharge. Id. § 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. § 990.64(a). In any suit filed by 

the trustee, its damage assessment is entitled to a rebuttable 

presumption, id. § 990.13, if the trustee can demonstrate that 

its assessment procedures are "capable of providing assessment information of use in determining the type and scale of 

restoration appropriate for a particular injury," id.

§ 990.27(a)(1), that any additional cost of a "more complex 

procedure" reasonably relates to the expected increase in the 

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quantity or quality of information, id. § 990.27(a)(2), and, 

most important, that its assessment procedures are "reliable 

and valid for the particular incident," id. § 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. § 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 assessment 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 monitoring and legal costs from responsible parties. The second 

group, "insurance petitioners," consists of the American Institute of Marine Underwriters and The Water Quality Insurance 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 petitioners' 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 proceedings, 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 capricious standard. 5 U.S.C. § 706(2)(A) (1994).

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II

We begin with section 990.13's rebuttable presumption. 

Relying on our decision in Chemical Mfrs. Ass'n v. Department of Transp., 105 F.3d 702 (D.C. Cir. 1997), industry 

petitioners argue that rebuttable presumptions are appropriate 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 presumptions created by agencies and has no applicability where, as 

here, Congress created the presumption. Id. at 705 (legislative bodies, unlike administrative bodies, are "free to adopt 

presumptions for policy reasons").

Industry petitioners also argue that the rebuttable presumption gives trustees a "powerful advantage" in any subsequent 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 presumption 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 clearbefore 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. § 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 

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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 develops 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 peoplesurvey respondentshow much they 

would pay to preserve or protect a given resource. Averaging 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 resource damage. See 58 Fed. Reg. 4601, 4602-14 (1993) 

(Appendix IReport 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 valuation 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 

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whichever assessment techniques they wish, subject to section 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 § 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 applications 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 contingent valuation studies must be conducted subject to stringent 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 Kennecottwhether the Interior Department exceeded its 

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CERCLA authority by arguably authorizing recovery of certain damages through language in the regulation's preamblewas 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 rulemaking process, is quite different. Unlike in Kennecott,

where our treatment of the preamble issue would have benefitted 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 ignored 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. Documenting its findings in the record, NOAA reasonably concluded 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 trustees do not abuse their discretion. If a responsible party in a 

particular case believes that a trustee using contingent valuation 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 arguUSCA Case #96-1101 Document #309584 Filed: 11/18/1997 Page 10 of 29
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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 arbitrarily by authorizing the recovery of passive-use values for 

temporary losses of natural resources. According to petitioners, 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 petitioners' 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 effectiveness of any restoration action (e.g., residual sources of 

contamination)." 15 C.F.R. § 990.53(b)(3)(i). Explaining this 

provision, NOAA poses an example of a trustee needing to 

remove residual oiloil left behind by EPA or the Coast 

Guardin order to implement a restoration plan to replant or 

reseed vegetation. Without removal authority, NOAA claims, 

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the trustee would be unable to reseed or replant the area 

contaminated by the residual oil, leaving restoration incomplete.

Industry petitioners argue that because OPA delegates sole 

responsibility for oil removal to the President, NOAA exceeded 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. § 2701(30) (defining "removal"); 

§ 2706(d) (defining "natural resource damages"); § 2702(b) 

(liability provisions); § 2717(f) (statute of limitation provisions). 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 considered completed when so determined by the President in 

consultation with the Governor or Governors of the affected States. However, this determination shall not 

preclude additional removal actions under applicable 

State law.

Id. § 2711. From these provisions, industry petitioners conclude 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. Chevron, 467 U.S. at 842-43. The parties disagree about whether 

NOAA is even entitled to Chevron deference given the primary 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 

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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 Vehicle 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 impossible, 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 contention conflicts with the proposed rule's plain language, which 

merely directs trustees to "consider" whether conditions exist 

that would make the primary restoration alternative impractical. 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. § 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 between the final rule, on the one hand, and its preamble and 

the proposed rule, on the other, but it has also not explained 

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the interrelationship between trustees' residual removal authority and the primary removal authority of EPA and the 

Coast Guard. If trustees are to have residual removal authority, 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. § 2711. How, for example, 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 originally 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 agency action.

Monitoring Costs and Legal Fees

Section 990.30 of the final rule defines reasonable assessment costs to include both "monitoring and oversight costs" 

as well as "administrative, legal, and enforcement costs." 15 

C.F.R. § 990.30. Industry petitioners first contend that 

NOAA acted arbitrarily by including monitoring coststhe 

costs associated with trustee monitoring of the implementation of restoration plans and their environmental consequencesas 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 mentions monitoring costs, 33 U.S.C. § 2712(a)(1), while the othUSCA Case #96-1101 Document #309584 Filed: 11/18/1997 Page 14 of 29
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er, which makes the Fund available for restoration actions, 

contains no reference to monitoring costs, id. § 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 recoverable from responsible parties. Moreover, the two provisions are not parallel. The former refers only to "removal 

costs," while the latter refers to a significantly broader activity"developing and implementing plans." Because plan implementation 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 defining 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.

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We are equally unpersuaded by industry petitioners' argument 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 recoverable 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 

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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 "pathway," Brief for Industry Petitioners at 41, would allow trustees 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. 

§ 2702(a) (responsible parties only liable for damages that 

"result from" an oil discharge). NOAA responded by pointing 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 satisfaction 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 replacement 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. § 990.53(d)(3)(ii). Originally taking 

issue with the word "estimate," industry petitioners claimed 

that it conflicted both with the immediately preceding provision which directs trustees to "explicitly measure" the value 

of injured resources and services, id. § 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

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"measure," "calculate," and "estimate"has no significance 

because it used the words interchangeably. Brief for Respondents at 54. To NOAA, the terms all mean the same 

thing. Indeed, Webster's Third New International Dictionary defines "calculate" as "to reckon by exercise of practical 

judgment rather than by strict mathematical process: ESTIMATE." At oral argument, agency counsel confirmed 

NOAA's view that "estimate" means "calculate." See Appendix at 24.

The parties' final area of agreement relates to section 

990.27(b), which provides that the range of assessment procedures available to trustees includes, but is not limited to, field 

procedures, laboratory procedures, model-based procedures, 

and literature-based procedures. 15 C.F.R. § 990.27(b)(1)(i)-

(iv). According to section 990.27(b)(2) of the final rule, trustees may use these procedures alone or in any combination. 

Petitioners argued that because model-based procedures require 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 sitespecific restoration plans. 33 U.S.C. § 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 simplified procedures to assess damages, they may not, under the 

final rule, avoid developing site-specific restoration alternatives, see 15 C.F.R. § 990.53(a)(2) ("Trustees must consider a 

reasonable range of restoration alternatives ... Each restoration alternative is comprised of primary and/or compensatory 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.

§ 990.56. At oral argument, we asked agency counsel whether, 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 

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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 insurance petitioners. Lacking merit, they require but brief discussion.

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 responsible 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 imposes 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, destruction of, loss of, or loss of use of, natural resources," 33 

U.S.C. § 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.

§ 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 provide for recovery of diminished value without indicating 

whether the value is of the active or passive variety. Congress, however, clearly intended to authorize trustees to 

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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 passiveuse 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 responsible party's right to invoke the statute's liability limits. If 

trustees need resources above and beyond statutory limitations to implement restoration plans, they may draw upon the 

Oil Spill Liability Trust Fund. 33 U.S.C. § 2712(a)(2).

Insurance petitioners next argue that, by authorizing trustees to assess costs for restoration activities undertaken after 

the date of the initial demand, the final rule violates responsible 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. § 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' concerns 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 responsible parties. 15 C.F.R. § 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 

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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 section 990.27's requirement that plans be "reliable and valid for 

the particular incident" adequately constrains trustee discretion, 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 assessment costs" to the extent that it includes legal fees, and 

section 990.53(b)(3)(i)'s authorization of residual removal authority. We adopt NOAA's construction of section 990.51 

(trustee must prove causation), section 990.53(d)(3)(ii) ("estimate" 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 issue?

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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 Petitioner 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 requires 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'sthe 

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 Honor, 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 notI think the Petitioner quite 

legitimately read the rule as suggesting 

that there was some effort to avoid the 

obligation to show causation and the 

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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 

lookagrees 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 calculate?

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 "estimate" in the regulation to mean "calculate" that's something the Agencyit 

would be consistent with your understanding of the issue?

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MS. MEDINA: Yes, Your Honor.

THE COURT: Okay, that's it. So calculate and measure 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 inputs, 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 regulation under which a trustee would send 

that $100,000 bill to the responsible party?

MS. MEDINA: No ...

THE COURT: Okay, let me go back to my intermediate 

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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 procedure serve under the rules? ... In other words, the tanker spilled X gallons of 

oil off Juneau, Alaska. Look at our model to see what that means in terms of 

damage, bang, that's our simplified assessment. 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 

work, in my prior life I actually was

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 percentage of the grass in the wetlands is 

dead, et cetera, and then try to develop a 

restoration plan accordingly.

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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 approximate costs of those. The trustees 

can then use the simplified assessment 

method, the model to develop the restoration 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 restoration plans and the Petitioners don't challenge those. You do need

THE COURT: Wait a minute, counsel. I didn't understand that at all. What do you mean?

MR. LEHNER: The rulesyou can have a site specific 

plan or you canthe rules allow a trustee 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 

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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 separate 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 doyou 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 Government's position?

MR. BRUCE: Well, if the Government's position were 

written into the rules the way the Government 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 a

fter the NOAA's rule, they say "when trustees use a Type A procedure, that's the 

model, they perform injury determination, quantification and damage determination through a computer model." 

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Keep that in mind, damage determination. 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 designed 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 certainly hasn't suggested that in their argument here, then you don't have a 

problem. The fact that they're using 

computers and starting with the simplified methodthat can't possibly be your 

objection.... Your objection is if they 

were going to impose, come to Court, 

seek damages based on a computer without 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.

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