[Federal Register Volume 59, Number 85 (Wednesday, May 4, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-10636]


[[Page Unknown]]

[Federal Register: May 4, 1994]


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Part II





Department of the Interior





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Office of the Secretary



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43 CFR Part 11



Natural Resources Damage Assessments; Proposed Rule
DEPARTMENT OF THE INTERIOR

Office of the Secretary

43 CFR Part 11

RIN: 1090-AA43

 

Natural Resource Damage Assessments

AGENCY: Department of the Interior.

ACTION: Notice of proposed rulemaking.

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SUMMARY: This notice solicits comment on proposed revisions of the 
regulations for assessing natural resource damages resulting from a 
discharge of oil into navigable waters under the Clean Water Act or a 
release of a hazardous substance under the Comprehensive Environmental 
Response, Compensation, and Liability Act. The Department of the 
Interior has previously developed two types of natural resource damage 
assessment regulations: Standard procedures for simplified assessments 
requiring minimal field observation (the type A rule); and site-
specific procedures for detailed assessments in individual cases (the 
type B rule).
    The Department is proposing, as part of its compliance with a court 
remand, to revise the type B rule to address the use of the economic 
methodology known as contingent valuation to assess lost values of 
injured natural resources. In general, the Department is considering 
and soliciting comment on a proposed natural resource damage assessment 
rule regarding contingent valuation recently published by the National 
Oceanic and Atmospheric Administration pursuant to the Oil Pollution 
Act of 1990. This notice constitutes the Department's proposed 
rulemaking document and solicits comment on rule language under 
consideration for a final rule. Upon consideration of the comments 
received in response to this notice, the Department intends to issue a 
final rule. The Department recently published a final rule to revise 
the type B rule to comply with all other aspects of the court order.

DATES: Comments must be received by July 7, 1994.

ADDRESSES: Comments should be sent in triplicate to the Office of 
Environmental Policy and Compliance, ATTN: NRDA Rule, Mail Stop 2340, 
Department of the Interior, 1849 C Street, NW., Washington, DC 20240.

FOR FURTHER INFORMATION CONTACT: Mary C. Morton or David Rosenberger at 
(202) 208-3301.

SUPPLEMENTARY INFORMATION: This notice is organized as follows:

I. Background
    A. Statutory Provisions
    B. Regulatory History
    C. Judicial Review
    D. Implementation of the Court Order
    E. Other Rulemakings
II. Calculation of Damages Under the Type B Rule
    A. Costs of Restoration, Rehabilitation, Replacement, and/or 
Acquisition of Equivalent Resources
    B. Compensable Value
III. Contingent Valuation: Discussion and Rule Language under 
Consideration
    A. Survey Instrument Design and Development
    B. Survey Administration
    C. Nature of Results
    D. Calibration
    E. Reporting
    F. Additional Requests for Comment
IV. Technical Information Document
V. Response to Comments

I. Background

A. Statutory Provisions

    The Clean Water Act, as amended (33 U.S.C. 1251 et seq.) (CWA) and 
the Comprehensive Environmental Response, Compensation, and Liability 
Act of 1980, as amended (42 U.S.C. 9601 et seq.) (CERCLA) authorize 
natural resource trustees to recover compensatory damages for injury 
to, destruction of, or loss of natural resources resulting from a 
discharge of oil into navigable waters or a release of a hazardous 
substance. CWA sec. 311(f); CERCLA sec. 107. Federal and State 
officials may be designated to serve as natural resource trustees under 
CERCLA and CWA. CERCLA also recognizes the authority of Indian tribes 
to commence actions as natural resource trustees.
    Damages may be recovered for those natural resource injuries and 
losses that are not fully remedied by response actions. All sums 
recovered in compensation for natural resource injuries must be used to 
restore, rehabilitate, replace, or acquire the equivalent of the 
injured natural resources. Trustee officials may also recover the 
reasonable costs of assessing natural resource damages and any 
prejudgment interest.
    CERCLA requires the promulgation of two types of regulations for 
the assessment of natural resource damages resulting either from a 
discharge of oil under CWA or from a release of a hazardous substance 
under CERCLA. CERCLA sec. 301(c). The type A regulations constitute 
standard procedures for simplified assessments requiring minimal field 
observation. The type B regulations constitute site-specific procedures 
for detailed assessments. Both regulations identify the best available 
procedures for determining natural resource damages. Assessments 
performed by Federal and State natural resource trustee officials in 
accordance with these regulations receive a rebuttable presumption in 
court. CERCLA sec. 107(f)(2)(C). The promulgation of these regulations 
was delegated to the Department of the Interior (the Department). E.O. 
12316, as amended by E.O. 12580.
    The Oil Pollution Act (33 U.S.C. 2701 et seq.) (OPA) was signed 
into law on August 18, 1990. Among other things, OPA amended the 
natural resource damage provisions of CWA. OPA authorized the National 
Oceanic and Atmospheric Administration (NOAA) to develop new natural 
resource damage assessment regulations for discharges of oil into 
navigable waters. The Department is coordinating its rulemakings with 
NOAA to ensure, to the maximum extent appropriate, that consistent 
processes are established for assessing natural resource damages under 
CERCLA and OPA. OPA provides that until NOAA develops final 
regulations, the Department's regulations may be used to assess natural 
resource damages under OPA. OPA sec. 6001(b).

B. Regulatory History

    The Department has issued various final rules for the assessment of 
natural resource damages: 51 FR 27674 (Aug. 1, 1986); 52 FR 9042 (March 
20, 1987); 53 FR 5166 (Feb. 22, 1988); and 53 FR 9769 (March 25, 1988). 
These rulemakings are all codified at 43 CFR part 11. The Department 
also recently published a final rule that has not yet been codified in 
the Code of Federal Regulations. 59 FR 14261 (March 25, 1994).
    The natural resource damage assessment regulations provide an 
administrative process for conducting assessments as well as technical 
methods for the actual identification of injuries and calculation of 
damages. Under the regulations, both type A and type B, assessments 
consist of four major phases.
    The first phase of an assessment conducted under the regulations 
involves the activities that precede the actual assessment. For 
example, upon detecting or receiving notification of a discharge or 
release, trustee officials perform a preassessment screen to ascertain 
whether further assessment actions are warranted.
    The second phase involves the preparation of an Assessment Plan. 
The Assessment Plan, which is subject to public review and comment, 
assists the involvement of other interested trustee officials, 
potentially responsible parties (PRPs), and the general public. The 
Assessment Plan also ensures that assessments are performed at a 
reasonable cost.
    In the third phase, trustee officials conduct the work described in 
the Assessment Plan. The work involves three steps: Injury 
Determination; Quantification; and Damage Determination. In Injury 
Determination, trustee officials determine whether any natural 
resources have been injured. If trustee officials determine that 
resources have been injured, they proceed to Quantification, in which 
they quantify the resulting reduction in services provided by the 
resources. Finally, in Damage Determination, trustee officials 
calculate the monetary compensation to be sought as damages for the 
natural resource injuries.
    In a type A assessment, trustee officials perform Injury 
Determination, Quantification, and Damage Determination through the use 
of standardized procedures involving minimal field work. The Department 
has adopted a phased approach to developing type A procedures for 
different environments. Only one type A procedure has been developed to 
date. The existing type A procedure provides for the use of a computer 
model to assess damages from small releases or discharges in coastal or 
marine environments. For other releases or discharges, trustee 
officials conduct a type B assessment, in which Injury Determination, 
Quantification, and Damage Determination are performed through the use 
of a range of alternative scientific and economic valuation 
methodologies. This notice addresses the use of a particular valuation 
methodology during the Assessment Phase.
    The fourth phase of every natural resource damage assessment, 
whether the type A or type B rule is followed, consists of post-
assessment activities such as: Preparation of a Report of Assessment; 
establishment of an account for damage assessment awards; and 
development of a Restoration Plan for use of the awards.

C. Judicial Review

    A party may petition the Court of Appeals for the District of 
Columbia Circuit to review any regulation issued under CERCLA. CERCLA 
sec. 113(a). A number of parties filed such petitions for review of the 
natural resource damage assessment regulations.
    The type B rule was challenged in State of Ohio v. United States 
Department of the Interior, 880 F.2d 432 (DC Cir. 1989) (Ohio v. 
Interior). The court in Ohio v. Interior upheld various challenged 
aspects of the type B rule but did remand three issues. The court 
ordered the Department to revise the rule to reflect the statutory 
preference for using restoration costs as the measure of natural 
resource damages. The court used the term ``restoration costs'' to 
encompass the cost of restoring, rehabilitating, replacing, and/or 
acquiring the equivalent of the injured natural resources. 880 F.2d at 
441.
    The court also ordered the Department to allow for the assessment 
of all reliably calculated lost values of injured natural resources, 
including both lost use values and lost nonuse values. Use values are 
derived through activities such as hiking or fishing. Nonuse values are 
not dependent on use of the resource. Nonuse values include existence 
value, which is the value of knowing that a resource exists, and 
bequest value, which is the value of knowing that a resource will be 
available for future generations. Finally, the court asked the 
Department to clarify whether the natural resource damage assessment 
regulations apply to natural resources that are not actually owned by 
the government.
    The type A rule was challenged in State of Colorado v. United 
States Department of the Interior, 880 F.2d 481 (DC Cir. 1989) 
(Colorado v. Interior). The court held that, based on the reasoning in 
the Ohio v. Interior decision, the type A procedure for coastal and 
marine environments should be revised to allow for the calculation of 
restoration costs.

D. Implementation of the Court Order

    The Department published an advance notice of proposed rulemaking 
on September 22, 1989, to announce its intent to revise the type B rule 
to comply with Ohio v. Interior. 54 FR 39016. The Department issued a 
proposed rule on April 29, 1991, with comments requested by June 28, 
1991. 56 FR 19752. On July 2, 1991, the Department extended the comment 
period to July 16, 1991. 56 FR 30367. On July 22, 1993, the Department 
reopened the comment period to allow consideration of additional 
comments, including newly developed information on the contingent 
valuation methodology (CV), the only method currently available for the 
express purpose of estimating nonuse values. 58 FR 39328. The comment 
period was originally reopened until September 7, 1993, and then 
extended until September 22, 1993. 58 FR 45877 (Aug. 31, 1993).
    After reviewing the comments received in response to the July 22, 
1993, Federal Register notice, the Department proposes to revise the 
type B rule to include appropriate standards to improve the reliability 
of CV when used to estimate lost nonuse values. The Department is 
issuing this notice to ensure that interested parties have an adequate 
opportunity for review and comment.
    On March 25, 1994, the Department published a final rule to revise 
the type B rule to comply with all aspects of the Ohio v. Interior 
remand other than the assessment of lost nonuse values. 59 FR 14281. 
Pending completion of this rulemaking, the Department is temporarily 
leaving unchanged the language of the original type B rule concerning 
the assessment of lost nonuse values.

E. Other Rulemakings

    CERCLA mandates biennial review and revision, as appropriate, of 
the natural resource damage assessment regulations. The Department 
plans to begin the biennial update of the type B rule in July 1994. All 
aspects of the administrative process and the type B rule will be 
subject to review during that update. During the biennial review, the 
Department will consider ways of ensuring the greatest consistency 
appropriate between its damage assessment regulations and the damage 
assessment regulations being developed by NOAA.
    Further, later this year the Department plans to issue a proposed 
rule to revise the type A rule for coastal and marine environments in 
compliance with Colorado v. Interior. The Department is also developing 
an additional type A rule for assessing damages in the Great Lakes. 
Like the type A rule for coastal and marine environments, the type A 
rule for the Great Lakes will incorporate a computer model.

II. Calculation of Damages Under the Type B Rule

A. Costs of Restoration, Rehabilitation, Replacement, and/or 
Acquisition of Equivalent Resources

    The type B rule as originally published on August 1, 1986, provided 
that damages consisted of the lesser of the cost of restoring the 
injured resources (plus the lost interim use value) or the diminution 
in the value of the injured resources without restoration. In Ohio v. 
Interior, the court ordered the Department to revise the rule to 
reflect the statutory preference for using restoration costs as the 
measure of natural resource damages. CERCLA provides that sums 
recovered in natural resource damage actions may be used to restore, 
rehabilitate, replace, or acquire the equivalent of the injured natural 
resources. The court used the simple term ``restoration'' costs as 
shorthand for the cost of performing any of these actions. 880 F.2d at 
441. On March 25, 1994, the Department published a final rule that 
revised the type B rule to allow trustee officials to recover the costs 
of restoration, rehabilitation, replacement, and/or acquisition of 
equivalent resources in all cases. 59 FR 14281.
    The March 25, 1994, final rule provides guidance on projecting the 
costs of restoring, rehabilitating, replacing, and/or acquiring the 
equivalent of the injured resources. Under that final rule, trustee 
officials first identify and consider a reasonable number of possible 
alternatives for restoring, rehabilitating, replacing, and/or acquiring 
the equivalent of the injured resources. Trustee officials also 
estimate those services that are likely to be lost to the public 
pending completion of each alternative under consideration. Trustee 
officials then select one of the possible alternatives based on several 
factors. The trustee officials document their decisions in a 
Restoration and Compensation Determination Plan, which is subject to 
public review and comment.
    Once the trustee officials select a restoration, rehabilitation, 
replacement, and/or acquisition alternative, they choose the methods 
they intend to use to estimate the costs of implementing that 
alternative. To do this, trustee officials select among specified cost 
estimating methodologies. Trustee officials include the rationale for 
their selection in the Restoration and Compensation Determination Plan.

B. Compensable Value

    Under the March 25, 1994, final rule, the costs of restoring, 
rehabilitating, replacing, and/or acquiring the equivalent of the 
injured resources are the basic measure of damages; however, these 
costs are only one component of the damages that trustee officials may 
assess. Trustee officials also have the discretion to assess the value 
of the resource services that the public lost from the date of the 
release or discharge until completion of restoration, rehabilitation, 
replacement, and/or acquisition of equivalent resources. 59 FR 14283. 
The term ``compensable value'' is used to encompass all of the lost 
public economic values, including both lost use values and lost nonuse 
values. The Restoration and Compensation Determination Plan includes a 
description of the methodologies trustee officials intend to use when 
estimating compensable value during Damage Determination.
    The original type B rule provided a ranked list of methodologies 
that could be used to calculate lost use values. If the market for the 
injured resource was ``reasonably competitive,'' then the diminution of 
the market price attributable to the discharge or release was used to 
estimate damages. If a market price methodology was not applicable, 
then the trustee officials were required to use appraisal 
methodologies. Only when neither market-price nor appraisal 
methodologies were appropriate for the resources being assessed did the 
original version of the rule allow trustee officials to use non-market-
based methodologies.
    Further, Secs. 11.83(b)(2) and 11.83(d)(5)(ii) of the original 
version of the type B rule provided that lost nonuse values could only 
be assessed if trustee officials could not determine any lost use 
values. In the August 1, 1986, preamble to the original type B rule, 
the Department provided the following explanation for this restriction:

    Ordinarily, option and existence values would be added to use 
values. However, section 301(c) of CERCLA mentions only use values. 
Therefore, the primary emphasis in this section is on the estimation 
of use values * * * Another related reason for this limitation is 
that more is known about the determination of use values than option 
and existence values. Option and existence values are less well-
defined and more uncertainty surrounds their measurement. 51 FR 
27719.

    Ohio v. Interior held that the type B rule incorrectly established 
a strong presumption in favor of the use of market price and appraisal 
methodologies to estimate lost use values. The court also held that the 
Department had ``erroneously construed the statute'' with regard to the 
assessment of lost nonuse values. The court stated:

    (S)ection 301(c)(2) requires Interior to ``take into 
consideration factors including, but not limited to * * * use 
value.'' 42 U.S.C. 9651(c)(2) (emphasis added). The statute's 
command is expressly not limited to use value; if anything, the 
language implies that DOI is to include in its regulations other 
factors in addition to use value. 880 F.2d at 464.

The court went on to say that the Department

is entitled to rank methodologies according to its view of their 
reliability, but it cannot base its complete exclusion of option and 
existence values on an incorrect reading of the statute. Id.

The court instructed the Department to consider a rule that would 
permit trustee officials to include all reliably calculated lost values 
in their damage assessments. Id.
    CV is currently the only method available for the express purpose 
of estimating nonuse values. Under the original type B rule, CV was 
listed as a non-market-based methodology for calculating either lost 
use or lost nonuse values. Ohio v. Interior upheld the Department's 
inclusion of CV as a ``best available procedure.'' Id. at 478. However, 
the court did not require the Department to allow unlimited use of CV. 
Moreover, the court did not address the difference between use of CV to 
calculate lost use values and use of CV to calculate lost nonuse 
values.
    The March 25, 1994, final rule leaves trustee officials free to 
choose among the listed valuation methodologies, including CV, when 
estimating lost use values. 59 FR 14285-86. The final rule provides a 
number of criteria to guide the selection of valuation methodologies, 
including a requirement that the chosen methodologies are reliable for 
the particular incident and type of damage being measured. The final 
rule renumbers Secs. 11.83(b)(2) and 11.83(d)(5)(ii) of the original 
rule, which restrict the assessment of lost nonuse values to cases 
where lost use values cannot be determined, as new 
Secs. 11.83(c)(1)(iii) and 11.83(c)(2)(vii)(B), respectively. Pending 
completion of this rulemaking to address the final issue affected by 
the Ohio v. Interior remand, the Department is temporarily leaving 
unchanged the language of these renumbered sections.

III. Contingent Valuation: Discussion and Rule Language Under 
Consideration

    CV is a survey-based approach to the valuation of nonmarket goods 
and services that relies on a questionnaire for the direct elicitation 
of information about the value of the good or service in question. The 
value obtained for the good or service is said to be contingent upon 
the nature of the constructed (hypothetical or simulated) market and 
the good or service described in the survey scenario. In the natural 
resource damage assessment context, CV studies generally derive values 
through elicitation of respondents' willingness to pay (WTP) to prevent 
injuries to natural resources or to restore injured natural resources.
    The first published CV study, valuing outdoor recreation, appeared 
in 1963. There are now over 1,400 documented papers, reports, and books 
on CV. In recent years, CV has become one of the most widely used 
methods of nonmarket valuation.
    Four basic elements common to CV questionnaires are: (1) An 
explanation of the structure and rules of the market in which the good 
or service being valued is either bought or sold; (2) a description of 
the good or service and how it is to be provided; (3) the value 
elicitation question; and (4) validation questions to verify 
comprehension and acceptance of the scenario and to elicit 
socioeconomic and attitudinal characteristics to interpret the 
variation in responses to the valuation question across respondents. 
There are no universal rules on how each of these elements of a CV 
questionnaire should be designed, since the appropriate formulation of 
each depends on the good or service being valued and its context and, 
consequently, will vary across applications.
    CV surveys generally measure total value of a good or service, 
which includes both use values and nonuse values. However, nonuse 
values, unlike use values, are not linked to observable behavior and, 
thus, are more difficult to validate externally than use values. 
Therefore, criticisms of CV pertain primarily to its use in valuing the 
nonuse component of total value and the difficulty of external 
validation of that component of total value. Among the most commonly 
cited criticisms of CV studies of nonuse values are: The stated 
intentions of WTP in CV surveys may exceed ``true'' WTP; CV may produce 
results that appear inconsistent with the tenets of rational choice; 
respondents to CV surveys on nonuse may be unfamiliar with the good or 
service being valued and therefore may not have an adequate basis for 
articulating their true value; CV respondents may be expressing a value 
for the satisfaction (warm glow) of giving rather than the value of the 
good or service in question; and respondents may fail to take CV 
questions seriously because the financial implications of their 
responses are not binding. Most proponents of CV acknowledge that 
poorly designed and administered CV studies can produce results that 
reflect the potential problems identified above. However, proponents 
also assert that these problems are not inherent to the method and that 
well-designed and well-executed CV studies can eliminate them or render 
them inconsequential. Proponents further assert that survey design, 
development, and administration standards will improve quality control 
for CV surveys.
    The Department received many, often conflicting, comments on the 
use of CV to calculate nonuse values. As the Department noted in the 
July 22, 1993, Federal Register notice, NOAA convened a panel of 
economic and survey experts (the NOAA panel), pursuant to its 
rulemaking authority under OPA, to evaluate the reliability of CV to 
measure nonuse values. The NOAA panel issued a report in January, 1993. 
58 FR 4601 (Jan. 15, 1993).
    Based upon consideration of all comments received and the NOAA 
panel report, the Department is proposing to revise the type B rule to 
include standards for the use of CV to estimate lost nonuse values. The 
Department believes that standards to improve the reliability of CV 
surveys of lost nonuse values are needed in the Department's type B 
rule, because assessments performed in accordance with the rule will be 
given a rebuttable presumption in litigation over the specific amount 
of money a particular party must pay as compensation for liability. 
However, this same level of precision for CV surveys may not 
necessarily be required for other applications of CV, such as use of CV 
in regulatory cost-benefit analyses.
    On January 7, 1994, NOAA published a proposed natural resource 
damage assessment rule under OPA. 59 FR 1062. Section 990.78(b)(5) of 
NOAA's proposed rule includes standards for the use of CV. 59 FR 1182-
83; see also 59 FR 1142-48. In the interest of consistency and after 
consultation with other Federal agencies, the Department is soliciting 
comment on whether the Department's type B rule should be revised to 
include standards for the use of CV substantially similar to those 
proposed by NOAA. Upon consideration of the comments received in 
response to this notice, the Department intends to issue a final rule.
    NOAA's proposed standards for use of CV cover five areas: (1) 
Survey instrument design and development; (2) survey administration; 
(3) the nature of the results; (4) calibration; and (5) reporting. 
NOAA's proposed standards are intended to provide flexibility to 
trustee officials so that they can take advantage of new developments 
that may occur in CV methodology. Further, any standards included in 
the Department's type B rule may be subject to amendment during the 
statutorily required biennial review of the regulations to reflect the 
results of new research.

A. Survey Instrument Design and Development

    The reliability of a CV study begins with the design and 
development of the survey instrument. NOAA has proposed several survey 
instrument design and development standards. The Department solicits 
comment on whether the same standards should be included in the 
Department's type B rule. NOAA's proposed rule language, which the 
Department is considering for its type B rule, is as follows:

    Survey instrument design and development--(A) Willingness to pay 
for Prevention or Restoration. (1) The survey instrument shall 
elicit from respondents their willingness-to-pay (WTP) either to 
prevent described injuries to natural resources or to restore 
injured resources as described to their baseline or comparable 
condition.
    (2) The trustee(s) shall document the rationale for selecting a 
prevention program or restoration program as the commodity to be 
valued.
    (B) Commodity definition. (1) During development of the survey, 
the trustee(s) shall determine whether respondents understood and 
found credible the description of the injuries (including whether 
they are permanent or interim losses) and the program (including the 
timing of the process) for preventing injuries or restoring the 
natural resources.
    (2) Prior to the value elicitation, the trustee(s) shall 
identify the natural resource context of the injured resources, if 
related resources exist, including commodities that might serve as 
substitutes.
    (C) Budget constraints. Prior to the value elicitation, 
respondents shall be reminded of their budget constraints and their 
alternative expenditures. Respondents shall be reminded that their 
WTP for the environmental program in question would reduce their 
expenditures on other goods. This reminder should be more than 
perfunctory, but less than overwhelming. The goal is to induce 
respondents to keep in mind other likely expenditures, including 
those on other environmental goods, when evaluating the main 
scenario. After the value elicitation, respondents shall be reminded 
again of their alternative expenditure possibilities. Respondents 
shall be given an opportunity to reconsider and change their votes 
(bid) after this second reminder of alternative expenditure 
possibilities.
    (D) Comparability with real transactions. (1) The survey 
instrument shall use a credible choice mechanism and payment 
vehicle.
    (2) The trustee(s) shall select a choice mechanism that is 
incentive compatible and shall document the rationale for the 
selected choice mechanism.
    (3) The trustee(s) shall ask follow-up questions to determine 
whether the respondents accepted the choice mechanism and payment 
vehicle as credible.
    (4) (Note: Calibration requirement discussed in Section III.D of 
this notice)* * *
    (E) Pretesting. (1) Survey development shall include adequate 
field testing to ensure that the above design criteria are met. 59 
FR 1182-83.

    One important aspect of survey instrument design and development is 
the selection of a choice mechanism. Past CV studies have used 
different methods to elicit values, including open-ended WTP questions; 
bidding cards; and voting formats typically termed ``referenda.'' The 
Department believes that selection of a choice mechanism should be left 
to the discretion of trustee officials, as provided in NOAA's proposed 
rule. Nonetheless, the Department believes that the current state of 
the art shows many advantages for using a voting format as the choice 
mechanism for CV surveys in natural resource damage assessments. 
Therefore, if trustee officials select a choice mechanism other than a 
voting format, they should document the factors that led them to reject 
a voting format. Nevertheless, the Department solicits comments 
regarding the incentive compatibility of alternative choice mechanisms 
and whether the final regulation or its preamble should state a 
preference for the voting format. The Department also solicits comments 
regarding the administrative and analytical costs associated with 
alternative choice mechanisms.
    The Department believes that the method of elicitation should be 
one with which people are familiar and one which provides a realistic 
context in which respondents can choose to increase levels of public 
goods. Local jurisdictions and State governments often ask voters to 
increase taxes on themselves so that public goods may be increased 
(e.g., school bond issues; special assessments for public 
infrastructure). Second, in our society, most goods are offered using 
posted prices. Asking an individual to reveal his or her maximum WTP 
for a good is both unfamiliar and unrealistic. Third, it is important 
that respondents believe that they will receive the program offered in 
the CV survey. To CV respondents, the cost of the program naturally 
determines the price they must pay. If no set price is offered, the 
respondents may perceive uncertainty regarding the program's costs and, 
therefore, uncertainty regarding the provision of the program. Finally, 
the voting format is incentive compatible. Respondents must reveal 
their preference and vote for the program if they desire the program at 
the stated price. Voting against or refusing to vote will only lower 
the probability of obtaining the program.

B. Survey Administration

    The most carefully designed CV survey can produce unreliable 
results if the survey administration is faulty. NOAA has proposed 
several standards for survey administration. The Department solicits 
comment on whether the same standards should be included in the 
Department's type B rule. NOAA's proposed rule language, which the 
Department is considering for its type B rule, is as follows:

    Survey administration--(A) Sampling procedures. (1) The 
trustee(s) shall determine the relevant population(s) to be sampled 
and document the rationale for that determination.
    (2) The trustee(s) shall draw a probability sample(s) from the 
target population for the administration of the final survey. Less 
rigorous sampling is suitable for pretesting and pilot surveys so 
long as the heterogeneity of the target population is considered.
    (3) The sample size(s) shall be sufficient to draw statistically 
significant population inferences and to estimate WTP valuation 
functions or to test relevant statistical hypotheses.
    (4) The trustee(s) shall minimize nonresponse bias to the extent 
practicable by striving for as high a response rate in the final 
survey as possible, consistent with the requirements of reasonable 
cost. In no case shall the response rate be less than seventy 
percent.
    (5) The trustee(s) shall document the rationale for the selected 
response rate.
    (B) Mode of administration. (1) The trustee(s) shall document 
the rationale for the selected mode of survey administration.
    (2) If interviewers are used, the survey administration shall be 
conducted by trained interviewers who are supervised by experienced 
interviewer field managers.
    (3) Regardless of the mode of administration, the trustee(s) 
shall use an experienced survey research organization to administer 
the survey.
    (C) Confidentiality. The trustee(s) should ensure respondent 
confidentiality. 59 FR 1183.

    One important aspect of survey administration is the determination 
of an appropriate response rate. The Department believes that trustee 
officials should obtain as high a response rate as possible, consistent 
with the requirements of reasonable cost, in order to ensure reliable 
inferences to the general population. Low response rates pose a risk of 
compromising the statistical validity of the survey when nonrespondents 
have systematically different values than respondents. Another risk 
associated with low response rates is that estimates of response 
variance may be significantly affected such that the indicated 
confidence of survey results is questioned. Since the likelihood of 
these risks cannot be determined unless nonrespondents have been 
surveyed, trustee officials should minimize nonresponse in the final 
survey to the extent practicable. For example, trustee officials could 
design the survey instrument so that individuals must decide whether to 
respond before the exact nature of the environmental insult is 
revealed.
    NOAA has proposed that response rates shall not fall below 70 
percent. The Department solicits comments on whether there should be a 
specified minimum response rate and, if so, whether 70 percent is a 
reasonable floor. Further, the Department solicits comments regarding 
the administrative costs associated with alternative response rates.
    Another important aspect of survey administration is selection of 
the mode of administration. The three generally used CV survey 
administration modes are in-person, mail, and telephone. There are 
advantages and disadvantages of each method, and often the selection of 
the appropriate method is dependent on a number of factors such as 
cost, turn-around time, desired response rate, type of information to 
be conveyed, use of visual aids, required population coverage, and the 
ultimate use of the survey results. For example, telephone surveys can 
approximate simple random sampling of households through random digit 
dialing; can produce fast results; are relatively easy to administer; 
and are less expensive than in-person interviews. On the other hand, 
visual aids cannot be used; interviews need to be relatively short; 
interviewer bias may be involved; and individuals without telephones 
are necessarily omitted from the sample. Self-administered mail surveys 
are the least costly of the three methods. However, probability 
sampling is difficult; respondents can review the survey before 
deciding to participate (imparting self-selection bias); there can be 
no random selection within the household and no control of question 
sequencing; and a higher number of incomplete responses are likely to 
result because there is no interviewer to motivate the respondent. 
Finally, in-person interviews permit random selection of the respondent 
within the household; maintain control of question ordering; allow the 
use of visual materials; and generate high response rates. In-person 
interviews, though, are the most costly method to administer; require 
complex field operations; involve the use of many documents and forms 
(e.g., calling cards, interviewer evaluation forms, verification 
forms); and may involve interviewer bias. For a more in-depth 
discussion of each method, see EPA, ``Survey Management Handbook,'' 
vol. II, pp. 24-35, 230/12-84-002, December, 1984.
    The Department believes that selection of a mode of administration 
should be left to the discretion of trustee officials, as provided in 
NOAA's proposed rule. Nonetheless, the Department believes that in-
person interviews provide certain advantages in the natural resource 
damage assessment context. Therefore, if trustee officials select a 
mode of administration other than in-person interviews, they should 
document the factors that led them to reject in-person interviews. The 
Department solicits comments on whether the final regulation or its 
preamble should state a preference for in-person interviews.
    While recognizing that mail surveys can provide invaluable 
information for many academic studies and regulatory purposes (e.g., 
the U.S. decennial census), the Department believes that mail surveys 
at this time lack certain features that are desirable for use in the 
natural resource damage assessment context. Telephone surveys also have 
limitations. A CV survey designed for natural resource damage 
assessment purposes is likely to impart a large amount of information 
to respondents causing interviews to be lengthy and often complex. In-
person interviews offer the opportunity to motivate the respondents and 
to hold their interest by providing important information in a graphic 
and pictorial format and asking interactive questions regarding the 
respondents' understanding and acceptance of key features of the survey 
instrument. In-person interviews also permit interviewers to record 
verbatim responses to important open-ended questions. Such information 
may be critical in demonstrating that a trustee official has adhered to 
regulatory standards for the design and administration of the CV study.
    The Department also believes that trustee officials should consider 
the use of modes of administration other than in-person interviews 
during the survey instrument development stage. For example, a 
telephone survey may be an appropriate and cost-effective method to 
test a design feature such as question ordering or the understanding of 
technical terms. Further, the Department is interested in comparative 
empirical testing of other administration modes, such as random digit 
dialing for initial contacts, followed by mailed descriptive 
information and visual materials, culminating with a telephone survey. 
If such testing demonstrates that other modes can produce the type of 
information and results comparable to in-person interviews, the 
Department would consider encouraging trustee officials to use those 
methods for the final survey.
    Regardless of the mode of administration, the Department believes 
that all surveys should be administered by a survey research 
organization, as provided in NOAA's proposed rule. The Department 
believes that use of a survey research organization is necessary 
because the preparation and administration of a general population 
survey require practical survey expertise and substantial logistical 
support. The Department also believes that trustee officials should 
select a survey research organization that has implemented procedures 
to meet the standards outlined in either the Council of American Survey 
Research Organizations' Code of Standards for Survey Research or the 
American Association for Public Opinion Research's Code of Professional 
Ethics and Practices. Use of such an organization would help to 
maintain reliability and confidentiality. Further, such organizations 
are likely to have proven track records and the staff necessary to 
conduct a survey in accordance with any regulatory standards. 
Nevertheless, the Department solicits comments regarding the 
requirement that surveys be administered by an experienced survey 
research organization. Further, comments regarding alternative codes of 
standards for survey administration are solicited.

C. Nature of Results

    A commonly expressed concern about CV is that it can produce 
results that are not sensitive to all relevant characteristics of the 
described natural resource injuries and methods of preventing or 
restoring the injured resources. NOAA has proposed a test to address 
this concern. The Department solicits comment on whether the same test 
should be included in the Department's type B rule. NOAA's proposed 
rule language, which the Department is considering for its type B rule, 
is as follows:

    Nature of results. (A) Scope test. Controlling for attitudinal, 
demographic, perceptual, and other differences across respondents, 
the trustee(s) shall demonstrate statistically that the aggregate 
WTP across all respondents for the prevention or restoration program 
increases (decreases) as the scope of the environmental insult is 
expanded (contracted). The scope of the environmental insult is 
characterized by the severity of the natural resource injuries and 
the level of effectiveness and timing of the restoration or 
prevention program. The demonstration shall be conducted through the 
use of split samples.
    (B) Number of scenarios. The trustee(s) shall administer to 
split samples different survey instruments containing three 
variations of the scope of the environmental insult that respondents 
perceive as different unless the trustee(s) can provide a reasonable 
showing that the three-scenario test is infeasible due to 
considerations of cost or lack of plausibility of scenarios. Where 
three scenarios are feasible, the statistical test shall involve 
pairwise comparisons. In either case, the scenarios may vary along 
any of the margins of intensity, geography, and duration of damage 
and, for prevention scenarios, the probability of an event 
occurring. The trustee(s) shall document the rationale for the 
selected variations of the scope of the environmental insult. In 
determining the descriptions to be used with the split samples, the 
trustee(s) shall use realistic injury scenarios and prevention or 
restoration programs that the respondents accept as credible.
    (C) Maximum amount of difference between scenarios. The 
trustee(s) shall develop scenarios for the total value test. Prior 
to the performance of the test, the trustee(s) shall demonstrate 
that not more than ninety-five percent of respondents in a pre-test 
or in focus groups indicate that there are meaningful value 
differences between the scenarios to be tested in any pairwise 
comparison. The demonstration shall be based on a minimum of sixty 
valid responses. The trustee(s) shall exclude from this 
demonstration any individuals who indicate in screening questions 
that they are not willing to pay anything for any size environmental 
cleanup or who would be willing to pay unrealistically large and 
invariant amounts for any size environmental cleanup. 59 FR 1183.

    If this test were included in the Department's type B rule, one 
important aspect would be the determination of the relevant dimensions 
of the scope of the environmental insult. The scope of an environmental 
insult such as a discharge of oil or release of a hazardous substance 
is multi-dimensional, where the dimensions are influenced by biological 
and social attributes. A discharge or release can affect all or part of 
an ecosystem. Its effects can be short- or long-lived, lethal or 
sublethal, geographically contained or widely dispersed. From the human 
perspective, the effects of a discharge or release may be directly 
visible and disturbing, or out of sight and perceived only indirectly 
once there is knowledge about the loss of natural resources.
    In the first phase of NOAA's proposed test, the relevant dimensions 
of the scope of the discharge or release under investigation would need 
to be identified. Once the trustee official had defined the relevant 
dimensions of scope, the trustee official would employ a split sampling 
technique where some respondents were provided with an alternative 
survey instrument. The trustee official would begin the analysis with 
the primary survey instrument that would be used to estimate the values 
lost due to the discharge or release in question. This instrument would 
be designated the base instrument. Trustee officials would pre-test and 
perform pilot tests on the instrument to ensure that the instrument met 
any design and development standards. Analyses performed using 
incompletely developed or tested preliminary instruments would not be 
considered evaluations of scope sensitivity because in these situations 
it would not be possible to distinguish the effects of variations in 
survey instrument design from the effects of changes in the scope of 
the injury or proposed prevention or restoration program.
    In designing a CV survey instrument, trustee officials would 
determine the dimensions of scope that were relevant to the discharge 
or release under investigation and decide whether there existed a 
subset of dimensions that were important to the values being measured 
or whether all of the dimensions were linked and therefore equally 
important. In cases where a subset were deemed important, trustee 
officials would choose whether to scale these dimensions up or down in 
relation to the levels described in the base instrument and by how much 
to scale the dimensions. If all relevant dimensions were to be scaled, 
trustee officials would still decide in which direction and magnitude 
to scale each dimension.
    After the trustee officials had decided on the dimensions to be 
scaled, in what direction and by how much, they would produce second 
and third instruments that differed from the base instrument only with 
respect to the scope dimensions. Trustee officials could choose to 
scale dimensions regarding the injury description, dimensions 
concerning the prevention or restoration programs offered to 
respondents, or both. Regardless, trustee officials must take care to 
ensure that the expected ordinal change in WTP remains unambiguous when 
simultaneously scaling different dimensions.
    The scope test would be designed to determine ordinal changes in 
the aggregate WTP estimates. The Department is considering a hierarchy 
of preferred scope tests. The first priority in this hierarchy would be 
to demonstrate the transitivity of aggregate WTP estimates with respect 
to the scope of the environmental insult. The second priority would be 
to demonstrate the sensitivity of aggregate WTP estimates to both an 
expansion and a contraction of the environmental insult.
    The most preferred test would involve two alternative instruments: 
One reflecting an expansion of the environmental insult from that 
described by the base instrument and the other reflecting a contraction 
of the environmental insult from that described by the base instrument. 
Joint pairwise comparisons would determine whether the three aggregate 
WTP estimates were transitive (i.e., A