Superfund: Outlook for and Experience With Natural Resource Damage
Settlements (Letter Report, 04/16/96, GAO/RCED-96-71).

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  RCED-96-71
     TITLE:  Superfund: Outlook for and Experience With Natural Resource 
             Damage Settlements
      DATE:  04/16/96
   SUBJECT:  Natural resources
             Conservation
             Environmental law
             Government collections
             Pollution control
             Liability (legal)
             Environmental policies
             Damages (legal)
             Damage claims
             Claims settlement
IDENTIFIER:  Superfund Program
             Superfund National Priorities List
             Elliott Bay (WA)
             Seattle (WA)
             Montrose Superfund Site (CA)
             Los Angeles (CA)
             New Bedford (MA)
             Commencement Bay (MA)
             Tacoma (WA)
             Dunsmuir (CA)
             Cantara Loop Superfund Site (CA)
             
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Cover
================================================================ COVER


Report to Congressional Requesters

April 1996

SUPERFUND - OUTLOOK FOR AND
EXPERIENCE WITH NATURAL RESOURCE
DAMAGE SETTLEMENTS

GAO/RCED-96-71

Natural Resource Damages

(160293)


Abbreviations
=============================================================== ABBREV

  CERCLA - Comprehensive Environmental Response, Compensation, and
     Liability Act
  DDT - Dichloro-diphenyl-trichloro-ethane
  EPA - Environmental Protection Agency
  GAO - General Accounting Office
  NOAA - National Oceanic and Atmospheric Administration
  NPL - National Priorities List
  PCB - polychlorinated byphenyl
  PRP - potentially responsible party

Letter
=============================================================== LETTER


B-270985

April 16, 1996

The Honorable John H.  Chafee
Chairman, Committee on Environment
 and Public Works
United States Senate

The Honorable Robert Smith
Chairman, Subcommittee on Superfund,
 Waste Control and Risk Assessment
Committee on Environment
 and Public Works
United States Senate

The Honorable Michael G.  Oxley
Chairman, Subcommittee on Commerce,
 Trade and Hazardous Materials
Committee on Commerce
House of Representatives

Under the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980 (CERCLA), a party responsible for a hazardous
substance release is liable for injury to natural resources, such as
wildlife and groundwater, resulting from the release.  The
regulations implementing the act designate certain federal agencies,
state governments, and tribal authorities as natural resource
trustees and authorize them to make claims against responsible
parties for natural resource damages.  As of April 1995, relatively
few claims had been settled and their amount was small compared with
the cost of cleaning up sites, but some recent claims have been quite
sizeable.  These large claims have heightened concern over the
potential for future claims. 

Because of your interest in the act's natural resource damage
provisions, you asked us to (1) obtain information on the potential
for future federal natural resource damage claims, (2) determine what
funds federal agencies have collected from natural resource damage
settlements and how these funds have been used, and (3) describe the
procedures that federal agencies use to determine the amount of
damage claims.  In responding to your second question, we limited our
analysis, as agreed with your offices, to the five largest natural
resource damage settlements that represent nearly four-fifths of the
total dollars settled through April 1995. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

The Department of the Interior and the Department of Commerce's
National Oceanic and Atmospheric Administration, the two principal
federal natural resource trustees, estimate that as many as 20 sites
may have natural resource damage claims exceeding $50 million each.\1
They also estimate that up to another 40 sites may have claims
totaling between $5 million and $50 million each.  Agency officials
cautioned that these estimates are based on limited data.  For
example, only 5 of the 20 sites where claims are estimated to exceed
$50 million have been studied sufficiently to estimate the range of
the claims with certainty. 

Settlements from the five largest natural resource damage cases
totaled $83.8 million as of April 1995.  Of this total, $33.9 million
had been collected, and of this amount, $3.6 million had been spent. 
Expenditures have gone mostly to reimburse trustees for performing
past damage assessments and to pay for preparing natural resource
restoration plans.  With the exception of one small experimental
restoration project, no restoration actions had been taken with the
moneys collected as of July 1995.  Agency officials stated that
restoration had not begun at sites because of continuing litigation,
the need to coordinate with the Environmental Protection Agency's
cleanup process, and other site-specific reasons.  The act stipulates
that funds may not be used for restoration until a plan has been
developed, reviewed by the public, and adopted by the affected
trustees.  All five settlements are currently in various stages of
the restoration planning process.  (See app.  I.)

The act does not provide a standard procedure for assessing natural
resource damages.  The implementing regulations provide for two
procedures for assessing damages, but their use is optional.  The
first procedure is applicable to limited types of injuries, and the
second procedure can be costly and time-consuming, requiring
extensive site-specific data.  The agencies seldom fully implement
either method.  Agency officials said they use elements of the second
procedure to the extent necessary to reach a settlement in a
cost-effective manner.  The vast majority of the 98 settlements
reached as of April 1995 used an abbreviated procedure. 


--------------------
\1 The $50 million figure is significant, since some recent CERCLA
reauthorization bills propose limiting natural resource damages to
that amount. 


   BACKGROUND
------------------------------------------------------------ Letter :2

Under CERCLA, the parties responsible for releasing hazardous
substances into the environment are liable for their cleanup.  The
cleanup of hazardous waste sites is administered by the Environmental
Protection Agency (EPA) under its Superfund program, which is
financed mainly by taxes on corporate income, crude oil, and certain
chemicals.  EPA places the most dangerous sites on the Superfund
National Priorities List (NPL) for cleanup actions.  As of September
1995, there were 1,290 sites on the NPL.\2

In addition to imposing cleanup obligations, CERCLA makes responsible
parties liable for the costs of restoring injuries to natural
resources resulting from a hazardous substance release.\3 These
resources are defined broadly under the law to include land, fish,
wildlife, groundwater, and other resources belonging to, managed by,
or otherwise controlled by federal or other governmental entities. 
Only natural resource trustees can file suits under CERCLA against
parties responsible for injuring natural resources. 

The law and its implementing regulations designate federal, state,
and tribal authorities as trustees for natural resources.  The
Department of the Interior (Interior) and the National Oceanic and
Atmospheric Administration (NOAA) are the two principal federal
trustees for natural resources.\4 Other federal agencies, such as the
departments of Agriculture, Defense, and Energy, are the trustees for
natural resources on the lands that they manage.  States have
traditionally acted as trustees for groundwater; the lands they own
(e.g., state parks and forests); and fish, game, and other wildlife. 

Under CERCLA and implementing regulations, Indian tribes have certain
responsibilities as natural resource trustees.  Although trustees'
responsibilities for natural resources are not always exclusive and
can overlap, damages cannot be recovered by more than one trustee for
injuries to the same resource by the same release.  Thus, federal,
state, and tribal trustees often coordinate their natural resource
damage claims.  Superfund money may not be used to restore injuries
to natural resources or to conduct natural resource damage
assessments.  Instead, the trustees may recover monetary compensation
(damages) from responsible parties to restore natural resources and
to pay for the reasonable costs of assessing any damage to natural
resources. 

Several factors limit recoveries for natural resource injuries,
according to Interior officials.  First, injuries must be traced to
particular releases of hazardous substances; second, a viable and
solvent responsible party must be found; third, the claim must be
filed within the statute of limitations;\5 and fourth, a federal
agency must have the financial resources available to assess the
damage and develop the information necessary to support a claim. 
Furthermore, Department of Justice (Justice) officials state that the
level of appropriations to fund federal natural resource damage
programs is the single most important factor in determining how many
sites can be assessed for damages. 

For a site being cleaned up under CERCLA, the trustees can seek
damages only for injuries that remain after the cleanup has been
completed, according to Justice officials.  Residual injuries occur
when (1) a cleanup leaves significant contamination in the
environment or (2) animal populations have been reduced or wildlife
habitat has been destroyed and cannot recover quickly without human
intervention.  The federal trustees estimate that as of May 1995, the
total compensation for residual natural resource injuries at all
Superfund sites on the National Priorities List has been less than 1
percent of the total cost to clean up the sites. 

A natural resource damage claim has three basic components: 

  -- the necessary and reasonable costs of performing the damage
     assessment;

  -- the costs of restoring the resource to the condition that would
     have existed at the time of the injury (restoration costs),
     taking into consideration the effects over time of natural and
     human activities unrelated to the release of contamination; and

  -- the costs associated with the loss of resources or of the
     benefits/services derived from such resources (e.g., a wetland's
     provision of habitat for animals and birds or a body of water's
     provision of commercial or recreational fishing opportunities)
     from the date of the injury until the full restoration of the
     resources and/or services (referred to as interim lost values). 

According to Interior and NOAA officials, the majority of natural
resource damage cases involving federal trustees are settled as part
of the cleanup agreement negotiated by EPA.  Almost half of the
settlements require the responsible party to make no separate payment
for natural resource damages either because the negotiated cleanup
will correct the injury to the natural resource or because no such
injuries were found.  Justice reports that through the end of April
1995, federal trustees had settled 98 natural resource damage cases
for a total of $106 million.\6 Of these settlements, 48 required no
payment and the remaining 50 involved monetary recoveries ranging
from about $4,000 to $24 million. 


--------------------
\2 Natural resource damage claims may be filed under CERCLA for
natural resource injuries both at NPL sites and at other hazardous
waste sites. 

\3 Natural resource damages can also be recovered under other federal
laws, such as the Clean Water Act and the Oil Pollution Act, as well
as under certain state laws. 

\4 NOAA is the trustee for the nation's coastal and marine
environment, including commercial and recreational fisheries,
anadromous fish, and marine mammals.  Interior is the trustee for
resources such as migratory birds and endangered species and for its
own lands, including the national parks. 

\5 Under CERCLA, the statute of limitations for filing a natural
resource damage claim is 3 years from the completion of a cleanup at
a Superfund site or at a site owned or operated by the federal
government.  For all other sites, the statute of limitations is 3
years from the later of the date when damage assessment regulations
were promulgated by Interior or the date when the natural resource
injury and its connection to a hazardous substance release were
discovered. 

\6 The Blackbird Mine case in Idaho was settled for a value of about
$60 million after we had completed the data collection phase of this
review. 


   OUTLOOK FOR NATURAL RESOURCE
   DAMAGE CLAIMS
------------------------------------------------------------ Letter :3

At our request, Interior and NOAA officials developed preliminary
estimates of the number of sites where natural resource damage claims
involving federal trustees may ultimately reach $5 million or more.\7
The agencies estimate that 60 sites may eventually have claims for
damages to natural resources that will equal or exceed $5 million and
that up to 20 of these sites may have claims exceeding $50 million. 
Sixty sites represents less than 5 percent of the current number of
Superfund sites. 

Interior and NOAA officials cautioned that their projections are very
preliminary and could change for a variety of reasons.  Most
importantly, as table 1 shows, detailed studies to assess the
injuries to natural resources have not even begun at more than half
(31) of the 60 sites estimated to have claims of $5 million or more. 
Furthermore, most of the sites have not been evaluated to determine
whether natural resource losses can be traced to specific releases of
hazardous substances and whether the parties responsible for these
releases are capable of paying damages--prerequisites to pursuing
natural resource damage claims.  Another factor affecting agencies'
ability to make projections is that many sites will be cleaned up
under the Superfund program, so that until EPA determines the scope
of its cleanup efforts, the agencies do not know what, if any,
residual resource damage will remain to be addressed through a
claim.\8 Finally, the value of these claims may ultimately differ
from the initial estimates because the claims may be settled through
negotiations with responsible parties.  To date, almost all natural
resource damage claims have been settled without litigation. 



                                Table 1
                
                  Preliminary Estimates of Sites With
                   Known or Potential Federal Natural
                Resource Damage Claims of $5 Million or
                  More, by Status of Studies to Assess
                      Damage to Natural Resources

                              Known or
                             potential        Known or
                                 value       potential           Total
Status\a of              of $5 million           value          number
studies to                          to     of over $50              of
assess damage              $50 million         million         studies
----------------------  --------------  --------------  --------------
Ongoing                              9               5              14
Recently begun                       8               7              15
Not started                         23               8              31
======================================================================
Total                               40              20              60
----------------------------------------------------------------------
\a Status is as of July 1995, when GAO received the data. 

Source:  GAO's presentation of data from Interior and NOAA. 


--------------------
\7 These estimates include only claims involving federal trustees. 
Although states and tribes can make claims without federal trustees,
they usually coordinate large (in excess of $5 million) claims with
the federal trustees because of the large up-front costs of assessing
damages.  The state of Montana has, however, filed a large natural
resource damage claim independently of the federal government.  This
claim, which may exceed $600 million, covers 127 miles of the upper
Clark Fork River basin. 

\8 The Superfund Amendments and Reauthorization Act of 1986 prohibits
the filing of a natural resource damage claim at a site undergoing
cleanup until the remedy for cleaning the site has been selected. 


   RESTORATION STILL IN THE
   PLANNING PHASE FOR THE FIVE
   LARGEST SITES
------------------------------------------------------------ Letter :4

Together, the five largest natural resource damage
settlements--Elliott Bay in Seattle, Washington; Commencement Bay in
Tacoma, Washington; New Bedford Harbor on the Achushnet River in
Massachusetts; Montrose located offshore Los Angeles County,
California; and the Cantara Loop Train Derailment outside of
Dunsmuir, California--totaled $83.8 million, about four-fifths of the
total dollar value of all 98 settlements reached as of April 1995. 
Through July 1995, about 40 percent of the moneys for the five
settlements had been collected from the responsible parties.\9 Of
these collections, about 11 percent had been disbursed either to
reimburse trustees for completed damage assessments or to pay for
planning natural resource restorations.\10 However, no other
restoration actions had been taken with the moneys collected.\11

Collections and disbursements are governed by settlement agreements. 
Although some of the funds collected from responsible parties are
paid directly to the trustees to reimburse them for the costs they
incurred in performing damage assessments, most of the funds usually
reside in court-administered registry accounts until the trustees are
ready to use them.  Frequently, settlements are structured so that
payments may take place over a period of years.  Additionally, CERCLA
requires that all participating parties agree to a restoration plan
requiring extensive public review before the restoration can begin. 

For each of the five cases, restoration planning was taking place at
the time of our review.  Settlement dates ranged from December 1991
to March 1994.  The reasons that restoration had not yet begun
included the need at all sites to develop and obtain public comments
on a restoration plan; unexpected cleanup problems at New Bedford,
which hampered the planning process; and intervening lawsuits at
Cantara Loop, which postponed the disbursement of collected funds. 

Table 2 summarizes the amounts collected and disbursed for the five
largest settlements as of July 1995.  The settlements are arranged by
age, from the oldest to the most recent.  (App.  I describes the
status of restoration activities for each settlement.)



                                Table 2
                
                 Collections and Disbursements for the
                  Five Largest Natural Resource Damage
                  Settlements Under CERCLA, as of July
                                  1995

                         (Dollars in millions)

                              Value/
                              date of     Amount    Amount  Purpose of
Site's name                   settleme  collecte  disburse  disburseme
and location                  nt\a           d\b         d  nt
----------------------------  --------  --------  --------  ----------
Elliott Bay,                  $24.3/        $3.0      $0.7  Restoratio
Seattle, WA                   Dec.                          n planning
                              1991

"Montrose" offshore           $12.0/        $8.1      $1.4  Reimburse
Los Angeles County, CA        May 1992                      past
                                                            damage
                                                            assessment
                                                            costs

New Bedford Harbor,           $20.2/       $20.2      $0.5  Restoratio
Achushnet River, MA           Nov.                          n planning
                              1992

Commencement                  $13.3/        $2.6      $1.0  Damage
Bay,Tacoma, WA                Oct.                          assessment
                              1993                          and
                                                            restoratio
                                                            n planning

Cantara Loop,                 $14.0\c/      $0.0      $0.0
Dunsmuir, CA                  Mar.1994

======================================================================
Total                         $83.8        $33.9      $3.6
----------------------------------------------------------------------
Note:  Dollars are not adjusted for inflation. 

\a If there was more than one settlement, the date is that of the
most recent settlement.  Additional settlements are being pursued at
some sites. 

\b Collections are determined by the settlement agreement and may
take place over a period of years. 

\c Using various state and federal laws, California and Justice, on
behalf of Interior, the U.S.  Department of Agriculture, and EPA,
settled with the responsible parties for a total of $38 million.  For
consistency with the other settlements, the table shows only the $14
million settled using the natural resource damage provisions of
CERCLA. 


--------------------
\9 The percentage collected varies widely by site--from 100 percent
at New Bedford to 0 percent at Cantara Loop. 

\10 Justice, Interior, and NOAA officials noted that although the top
five settlements account for most of the dollar value of settlements,
they represent only about 5 percent of the total number of
settlements.  The officials said that injuries to natural resources
have been restored at many of these smaller settlements through the
cleanup process. 

\11 At the time of our review, one small restoration project had
begun at Commencement Bay.  The trustees classified this project as
restoration planning, since it is designed to test an experimental
option for large-scale restoration projects. 


   PROCEDURES IN REGULATIONS TO
   ASSESS NATURAL RESOURCE DAMAGES
   SELDOM FULLY IMPLEMENTED
------------------------------------------------------------ Letter :5

CERCLA does not require the trustees to use a particular standard or
method for assessing natural resource damages.  It did, however,
direct Interior to develop standardized procedures for all trustees
to consider in assessing and valuing injuries to natural resources. 
Accordingly, the regulations include two procedures for valuing
natural resource injuries, but the trustees are not required to use
these procedures.  Because one procedure is limited in scope and the
other procedure can be costly and time-consuming to implement, the
trustees seldom fully implement either one.  Instead, according to
Interior and NOAA officials, the trustees most often use an
abbreviated procedure that employs readily available site-specific
information and scientific literature to quantify damages. 


      CERCLA'S REQUIREMENTS
---------------------------------------------------------- Letter :5.1

CERCLA directs that the assessment process identify the best
available procedures to determine damages, including both direct and
indirect injuries, and takes into consideration the ability of the
ecosystem to recover on its own.  CERCLA further states that the
measure of injuries need not be limited by the sums required to
restore or replace such resources.  For example, the value of a
particular service or benefit that was lost to the public while the
resource was injured may also be calculated and collected. 


      PROCEDURES DEVELOPED IN
      RESPONSE TO CERCLA'S
      REQUIREMENTS
---------------------------------------------------------- Letter :5.2

In response to CERCLA's requirements, Interior developed two
valuation procedures:  a simplified assessment process that requires
the use of minimal data ("type A") and a detailed process that
requires extensive site-specific data ("type B").\12 The use of these
damage assessment procedures is optional.  If the trustees elect to
implement these procedures fully, they are granted a legal
presumption of correctness in a court of law that shifts the burden
to the defendants to prove otherwise.  NOAA officials said that this
rebuttable presumption is of limited value, since the trustees still
must prove their case.  Furthermore, since all but a few cases had
been settled without litigation as of December 1995, the trustees
have not had to take the time and incur the expense needed to
implement these procedures fully.  According to NOAA, Interior, and
Justice officials, full implementation of the type B procedure is
most often not necessary because settlements can be reached without
it or it is impractical because of the cost and time involved. 
According to Interior officials, the trustees use elements of the
procedures to the extent necessary to reach a settlement in a
cost-effective manner.  The type A procedure provides standard
methods for conducting simplified natural resource damage assessments
through computer modeling.  As of December 1995, only one computer
model had been developed for the type A procedure.  This model can be
used only for small incidents of limited duration (e.g., one-time
spills) that occur in coastal and marine environments.  The model
consists of programs to perform mathematical computations and
databases containing chemical, biological, and economic information. 
Although the model requires minimal use of actual field data because
it is based on general assumptions, it can be used to assess the
injuries to natural resources, quantify these injuries (e.g., the
number of fish killed or acres of wetlands contaminated), and
determine the damages from many types of discharges or releases. 
Interior has proposed adding a model for the Great Lakes region to
the type A regulations.  This model will also be appropriate only for
small, one-time incidents. 

Federal trustees said they rarely use the type A approach for CERCLA
claims because it applies to few CERCLA damage cases.  It has greater
application for oil spills, which are addressed under a separate
law--the Oil Pollution Act.  As of July 1995, NOAA, the primary
federal trustee for resources in coastal waters, had used this model
to quantify damages at only one site.  For a detailed description of
this case, see appendix II. 

The type B procedure provides a set of detailed guidelines for
conducting extensive site-specific studies to assess the extent of
the injury and to value the damages.  This procedure can involve the
use of various evaluation methods and techniques.  For example, the
regulations specify various methods for quantifying interim values
for lost use.  One such technique is the travel cost analysis, which
estimates the costs of the travel and extra time required to go to an
alternative site rather than the injured site for a purpose such as
fishing.  Trustees can also use a technique referred to as the
contingent valuation method.  This method, which is not often used by
federal trustees, employs public opinion surveys to establish a
dollar value for natural resources that do not have an established
market value.  For example, if contamination from past mining had
contributed to reducing or destroying the salmon population in a
stream, members of the public would be asked what price they would be
willing to pay to have that stream restored to a condition that would
allow the return of salmon. 

Interior and NOAA officials said they seldom use the type B procedure
fully because of the expense and time--usually several
years--required to perform such studies.  Federal officials said that
they did not believe that a full type B assessment had ever been
performed, but they identified five sites where the procedure had
been most fully pursued.\13 An illustration of the type B procedure
appears in appendix III. 


--------------------
\12 Federal court rulings in 1989 directed Interior to revise
portions of both type A and type B regulations.  Interior promulgated
most of the type B revisions in 1994 and has proposed revisions to
address the use of contingent valuation as a cost estimation method
(the remaining type B issue).  Interior has also proposed revisions
to the type A regulations. 

\13 The five sites where federal trustees have moved toward fully
employing the type B procedure to value claims are Montrose,
California; Blackbird Mine, Idaho; Coeur D'Alene (Bunker Hill),
Idaho; Commencement Bay, Washington; and New Bedford, Massachusetts. 
Justice officials stated that the most complete type B procedure was
developed at Clark Fork, Montana, a state claim. 


      ABBREVIATED PROCEDURE MOST
      OFTEN USED
---------------------------------------------------------- Letter :5.3

Federal trustees most often use an abbreviated type B procedure to
quantify damages.  Under this process, they follow the basic steps of
the type B procedure-- determining the injuries, quantifying their
value, and determining the damages.  However, instead of employing
the time-consuming and costly site-specific surveys and analyses
required by the type B procedure, they use readily available
off-the-shelf literature and other information to value damages using
various evaluation techniques. 

The abbreviated approach is commonly used when, during a negotiation
with EPA, a private party wants to settle its liability for both
cleanup costs and natural resource damages at the same time.  In such
situations, EPA or Justice notifies the trustees of the party's
request.  The trustees then typically have about 2 to 3 months to
assess any injury to natural resources at the site, quantify the
government's claim, and, if possible, obtain a mutually satisfactory
settlement agreement with the responsible party.  To meet this time
frame, the trustees use an abbreviated approach that draws on readily
available site-specific and other information to quantify the
damages. 

A 1991 settlement illustrates the use of the abbreviated process in
the context of settling a party's liability for natural resource
damages as part of the cleanup settlement.  In this case, a solvent
recovery firm was a responsible party at two different sites, both of
which are included on the NPL.  The natural resource damage
settlement came about after the responsible party asked to resolve
its liability for natural resource damages at the same time as it
settled its liability for cleanup costs.  After being notified of the
responsible party's request, a Fish and Wildlife Service field
biologist began to review available information about the potential
injuries to resources at the sites.  The field biologist identified
data that had been gathered from the sites as part of the
investigation to identify the appropriate cleanup remedies.  These
data were sufficient to show that injuries had occurred to federal
and state trust resources.  The biologist combined the data with
other readily available information to quantify the damage using a
relatively new technique, the habitat equivalency analysis.  This
analysis calculates the acreage needed to replace the services that
were lost when the habitat was injured rather than calculating the
dollar value of the loss, as is usually done.  Using this method, the
field biologist calculated that 17.5 acres of rare dune and swale
lands and 31 acres of wetlands were needed to replace the injured
resources. 


   AGENCY COMMENTS AND OUR
   EVALUATION
------------------------------------------------------------ Letter :6

We transmitted copies of a draft of this report to the Secretary of
the Interior, the Secretary of Commerce, and the Attorney General for
their review and comment.  Although the agencies did not disagree
with the facts presented in the draft report, they wanted to
emphasize information associated with three issues.  Their general
comments appear in appendixes V through VII.  In addition, the three
agencies provided technical and editorial comments, which we
incorporated into the report as appropriate.  We did not reproduce
these comments in the appendixes. 

The first issue involves the potential for future natural resource
damage claims.  Interior stressed in its comments that the projected
number of sites having natural resource damage claims in excess of $5
million represents a maximum number and that the actual number would
likely be smaller.  We have qualified our description of the estimate
to indicate that it represents an upper bound. 

The second issue involves the use of the funds collected from natural
resource damage settlements.  All three agencies said that there are
site-specific and legal reasons, beyond the control of the trustees,
why restoration has not started at the five largest settlement sites. 
The agencies pointed out that a small experimental restoration
project had begun at Commencement Bay.  Interior stated that
"restoration planning" is an essential part of the restoration
process and, as such, should be reported as a restoration action.  We
believe it is useful, when describing the status of the program, to
distinguish between restoration planning and restoration action. 
Interior also stated that it is misleading to compare the total
collections for the five largest settlements with these settlements'
total value because most of the collections resulted from one
settlement.  We believe that it is appropriate to present summary
figures to indicate the overall status of the five cases, and we have
also shown the collections and value for each settlement so that the
summary figures can be properly interpreted. 

The third issue involves the procedures used by the trustees to
develop natural resource damage claims.  Both Interior and NOAA said
that the settlement process is based on selecting appropriate
elements of the assessment procedures provided in the regulations. 
Evaluating whether the agencies were making "appropriate" selections
from the regulations was beyond the scope of our review.  Interior
said that for relatively minor cases, the type B procedure is not
necessarily costly and time-consuming.  We have added this
qualification to our discussion of the type B procedure. 


---------------------------------------------------------- Letter :6.1

We conducted our review from July 1995 through February 1996 in
accordance with generally accepted government auditing standards. 
See appendix IV for further discussion of our scope and methodology. 

As arranged with your offices, unless you publicly announce its
contents earlier, we plan no further distribution of this report
until 30 days after the date of this letter.  At that time, we will
send copies to the Secretary of the Interior, the Secretary of
Commerce, and the Attorney General.  We will make copies available to
others upon request. 

Please call me at (202) 512-6112 if you or your staff have any
questions.  Major contributors to this report are listed in appendix
VIII. 

Peter F.  Guerrero
Director, Environmental
 Protection Issues


RESTORATION STATUS FOR FIVE
LARGEST SETTLEMENTS
=========================================================== Appendix I


   ELLIOTT BAY/SEATTLE, WASHINGTON
--------------------------------------------------------- Appendix I:1

Elliott Bay is a 21-square-kilometer area in central Puget Sound
encompassing the commercial waterfront district of Seattle.  (See
fig.  I.1.) Over the past 150 years, Elliott Bay and the adjoining
Duwamish Waterway estuary have been contaminated by many hazardous
substances, including chromium, cadmium, copper, lead, zinc, and
several toxic and/or carcinogenic organic compounds, such as
polychlorinated biphenyls (PCB).\14 These pollutants have extensively
contaminated nearshore sediments, reducing the value of the area as a
habitat for fish and wildlife.  In 1991, the natural resource
trustees--including the Department of Commerce's National Oceanic and
Atmospheric Administration (NOAA), the Department of the Interior
(Interior), the state of Washington, and area Indian tribes--reached
a $24.3 million legal settlement with the city of Seattle and the
municipality of Metropolitan Seattle, both of which had contributed
to the contamination.  The settlement allocated $12 million for
remediating sediments, $10 million for developing habitat, $2 million
for controlling pollution sources, and $250,000 for reimbursing NOAA
for damage assessment costs.  As of July 1995, $3 million of the
$24.3 million settlement had been collected.  Of this amount, $0.7
million had been disbursed. 

   Figure I.1:  Elliott
   Bay/Seattle, Washington

   (See figure in printed
   edition.)

The Panel of Managers--which, in this case, included both the
trustees and the responsible parties--developed a restoration plan
that was completed in June 1994.  This plan requires cleaning up the
bay's contaminated sediments and also studying sediment
recontamination patterns to ensure the success of planned habitat
development projects.  In July 1995, the Elliott Bay Waterfront
Recontamination Study was completed.  This study will form the basis
of an effort to remediate the contaminated sediments.  In addition,
the panel had screened all possible habitat restoration sites and was
acquiring the properties.  As of December 1995, the panel was
investigating sites for sediment remediation efforts. 


--------------------
\14 PCBs, when released in the environment, decompose very slowly and
can accumulate in plant, animal, and human tissue.  Laboratory tests
show that they cause cancer in rats and mice and have adverse effects
on fish and wildlife.  PCBs, which were used primarily in electrical
equipment, are now generally banned from use in the United States. 


   "MONTROSE" OFFSHORE LOS ANGELES
   COUNTY, CALIFORNIA
--------------------------------------------------------- Appendix I:2

Approximately 2,000 metric tons of DDT and PCBs were discharged into
the southern California marine environment by various industrial
companies through the local county sewer system.  (See fig.  I.2.)
The state of California issued a health advisory against the
consumption of fish from the area because of dangerous concentrations
of DDT and PCBs, and a commercial fishery was closed.  In June 1990,
the Department of Justice (Justice) filed a claim, collectively
referred to as "Montrose," on behalf of NOAA and Interior against the
10 responsible parties, for injuries to natural resources caused by
discharges of DDT and PCBs into the marine environment.  In May 1992,
the federal and state trustees settled one case with some responsible
parties for $12 million. 

   Figure I.2:  "Montrose"
   Offshore Los Angeles County,
   California

   (See figure in printed
   edition.)

In March 1995, a federal court of appeals overturned a second $42.2
million settlement between the trustees and the Los Angeles County
sanitation district and municipalities and sent the settlement back
to the federal district court for reconsideration.  As of December
1995, this decision was still under litigation. 

In the meantime, according to Interior officials, the trustees are
proceeding with the preliminary restoration plan.  They anticipate
modifying the plan as remediation actions are completed or more
settlements are obtained.  According to Justice officials, these
future settlements may be substantial. 

For the case that has been settled for $12 million, $8.1 million has
been collected, $1.4 million of which has been disbursed.  The money
was used to reimburse some of the trustees' past damage assessment
costs. 


   NEW BEDFORD HARBOR,
   MASSACHUSETTS
--------------------------------------------------------- Appendix I:3

The New Bedford Harbor case was one of the first natural resource
damage cases filed under the Comprehensive Environmental Response,
Compensation, and Liability Act (CERCLA).  Located on the Achushnet
River, near Buzzards Bay, Massachusetts, the harbor has long been
used by the fishing, shipping, and manufacturing industries.  (See
fig.  I.3.) After studies during the 1970s found high levels of PCBs
and heavy metals in the harbor's fish and shellfish, several fishing
areas were closed.  By the end of 1992, the federal and state
trustees had reached a $20.2 million settlement with five companies
to cover the costs of the natural resource damage assessment and
restoration.  The companies had also agreed to an $88 million
Superfund cleanup settlement with the Environmental Protection Agency
(EPA) and the state.  The nature of the natural resource restoration
work is contingent upon the scope of the cleanup remedy that EPA
selects for the outer harbor.  Restoration projects under
consideration by the trustees include, but are not limited to,
improving anadromous fish runs, reestablishing seagrass beds,
creating wetlands, and constructing artificial reefs. 

   Figure I.3:  New Bedford
   Harbor, Massachusetts

   (See figure in printed
   edition.)

As of July 1995, all of the $20.2 million settlement had been
collected and $0.5 million had been disbursed for restoration
planning.  According to NOAA officials, restoration planning has been
delayed because of the uncertainty over EPA's cleanup plans.  EPA's
record of decision for the cleanup and disposal of the most
contaminated sediments had to be renegotiated when the community
opposed the incineration of contaminated sediments.  The community's
challenge led to a delay in planning and cleaning the remaining
contaminated sediments.  Nevertheless, the trustees are going forward
with the restoration plan, which they say can be modified if EPA's
actions interfere with the trustees' restoration activities.  As of
December 1995, the trustees had asked the public to suggest ideas for
restoration.  These ideas are expected to be rank-ordered and
included as alternatives in the restoration plan, which the trustees
expect to release for public comment by the summer of 1996. 


   COMMENCEMENT BAY/TACOMA,
   WASHINGTON
--------------------------------------------------------- Appendix I:4

Commencement Bay is an estuarine bay located in the southern part of
Puget Sound in Tacoma, Washington.  (See fig.  I.4.)
Industrialization and urban development have severely degraded
natural habitats in the bay by introducing a variety of hazardous
substances into the surface water and groundwater and the sediments
of the bay area.  Much of the bay's nearshore area is a federal
Superfund site.  Federal, state, and tribal trustees negotiated a
natural resource damage settlement with the Port of Tacoma (Oct. 
1993) and the Simpson Tacoma Kraft Company (Dec.  1991)--both of
which contributed to natural resource losses--for a total of about
$13 million.  Moneys from the settlement will be used to restore,
replace, or acquire equivalent components of the historical
ecosystem, including vegetated shallows, mudflats, tidal marshes and
creeks, off-channel sloughs and lagoons, naturalized stream channels,
and adjacent upland buffer areas. 

   Figure I.4:  Commencement
   Bay/Tacoma, Washington

   (See figure in printed
   edition.)

Of the $13.3 million settlement, $2.6 million had been collected and
about $1.0 million had been disbursed as of July 1995.  The
disbursements have been primarily to the trustees to reimburse their
expenditures for past damage assessment activities and to develop the
baywide restoration plan.  In addition, as part of the settlement,
one of the responsible parties agreed to conduct a pilot restoration
project to convert upland industrial property into wildlife habitat. 
The results of the pilot project will be used to develop the baywide
restoration plan.  Although this project was only 1.5 months old at
the time of our visit in July 1995, local Interior officials had
already noted a 10-percent increase in wildlife populations. 

The Commencement Bay trustees are attempting to assess the natural
resource damage and plan the restoration while EPA is still cleaning
the site.  In addition, not all parties have settled.  For example,
according to a NOAA official, one of the largest potential sources of
pollution is a smelting plant that is currently negotiating its
responsibility for Superfund cleanup activities with EPA.  The
cleanup may not be completed for another 5 years.  The trustees are
continuing to discuss settlements with other responsible parties and
reported in December 1995 that they were actively negotiating
settlements with three different sets of parties.  Justice officials
believe that future settlements may be substantial. 

Because other natural resource damage settlements are not expected
for several more years, the trustees are developing a baywide
restoration plan that can be implemented as sediments are remediated
and/or funds become available.  As of December 1995, this plan was in
draft, and the trustees expected to circulate it for public comment
in the spring of 1996. 


   CANTARA LOOP TRAIN DERAILMENT,
   DUNSMUIR, CALIFORNIA
--------------------------------------------------------- Appendix I:5

In July 1991, a train derailed on a stretch of track known as the
"Cantara Loop" near Dunsmuir, California.  (See fig.  I.5.) The
derailment spilled approximately 19,000 gallons of the herbicide
metam sodium into the upper Sacramento River.  The spill destroyed
all aquatic life along a 42-mile stretch of the river and caused
extensive injuries to a native trout fishery as well as to the
river's ecosystem.  A claim for natural resource damages was filed by
the state of California and Justice. 

   Figure I.5:  Cantara Loop,
   California

   (See figure in printed
   edition.)

The responsible parties settled with California and Justice--on
behalf of Interior, the U.S.  Department of Agriculture, and EPA--for
$38 million in 1994, using CERCLA and other federal and state laws. 
According to a senior attorney at Justice overseeing the settlement,
the $38 million included $14 million under CERCLA's natural resource
damage provisions, $5 million under CERCLA's emergency restoration
provisions,\15 and $19 million under the Clean Water Act, other parts
of CERCLA, and various California state laws.  The settlement created
the Cantara Trustee Council consisting of five voting members--four
from California state agencies and one from the Fish and Wildlife
Service representing Interior. 

According to Justice officials, as of July 1995, none of the $14
million recovered under CERCLA's natural resource damage provisions
had been deposited into the trustee account, and therefore none had
been disbursed.  Although, according to the official in charge of the
restoration in California's Department of Fish and Game, $16 million
of the total $38 million Cantara Loop settlement had been collected
by July 1995, these funds were frozen by the court pending the
resolution of an additional lawsuit filed by environmental
organizations seeking a greater role in the restoration.  In November
1995, the plaintiffs in the suit settled their complaints, and the
funds will be made available to the trustees early in 1996. 

The Cantara Trustee Council met for the first time in November 1995. 
According to the Cantara program supervisor with the California
Department of Fish and Game, as of December 1995, most elements of
the Sacramento River ecosystem are recovering without any further
special restoration efforts.\16 In November 1995, the Council
announced that it would use the $14 million to fund grants for
restoration projects rather than develop an in-house restoration
program.  According to terms agreed upon by the Council, projects
that directly affect the upper Sacramento River ecosystem will
receive a higher weighted score.  However, the trustees may use the
money to develop natural resource restoration projects in other areas
of the state.  The Council plans to choose the project(s) in March
1996 and begin implementation in April 1996. 


--------------------
\15 After the spill and before the settlement, California used its
own budget for emergency monitoring and restoration actions, such as
reestablishing the native rainbow trout population.  According to the
settlement, $5 million will be deposited in California's Department
of Fish and Game's Cantara Restoration and Monitoring Account to
reimburse these emergency response efforts. 

\16 According to the Cantara program supervisor, there were between
7,500 and 8,000 rainbow trout per mile in the upper Sacramento River
before the spill.  Currently, there are 4,400 trout per mile, up from
3,400 in 1994. 


AN APPLICATION OF THE TYPE A
PROCEDURE
========================================================== Appendix II

As of July 1995, NOAA, the primary federal trustee for natural
resources in coastal waters, had used the type A procedure once in
settling a natural resource damage claim under CERCLA.  This case
involved a ship's loss of 21 shipping containers, four of which held
25-gallon drums of arsenic trioxide, a highly poisonous metal oxide
that is used as an insecticide, herbicide, and wood preservative.  A
single dose, the size of an aspirin, is lethal to humans. 

The incident occurred in January 1992 off the coast of New Jersey in
an area that is used for commercial and recreational fishing. 
Although sampling ultimately showed only background levels of arsenic
in the water and sediment, a 16-square-mile area was closed to all
fishing activities for 180 days because of the potential for seafood
contamination.  NOAA, as the federal trustee, concluded that the
evidence of injury to its trust resources was not sufficient to
warrant a claim for biological injuries.  However, the agency
determined that it did have a claim for the fishery's closure.  To
value this claim, NOAA entered data into the type A model about the
extent and duration of the fishery's closure.  The result was a claim
of approximately $280,000 for the lost harvest of fish and shellfish
from this area.  NOAA and the responsible party settled the case for
$205,000, which included reimbursement of the assessment's cost.\17


--------------------
\17 The ship's owner also spent approximately $5 million to search
for and try to recover the drums of arsenic trioxide and other
materials. 


AN APPLICATION OF THE TYPE B
PROCEDURE
========================================================= Appendix III

The complexity of the type B damage assessment procedure is
illustrated by the state of Idaho's actions in 1983 at the inactive
Blackbird Mine site, located on national forest lands within the
state.  The federal claims were filed by Justice in 1993 on behalf of
NOAA, the Forest Service, and EPA.  Copper, cobalt, and other heavy
metals from mining activities at this site have extensively
contaminated groundwater and surface water, including 26 miles of the
Panther Creek, a tributary of the Salmon River.  To perform the
assessment, the trustees conducted a series of technical and economic
studies to determine the extent of the injury to natural resources,
quantify the damages, and develop a plan to restore the injured
resources.  For example, NOAA commissioned an expert study to
identify the effects of the mine's contamination on the sediments and
small animals in the streambeds of the Panther Creek watershed.  Part
of this study involved taking samples at 16 sites to show the
conditions both upstream and downstream of the contamination.  The
agency also paid consultants to study injuries to fish.  These
studies found toxic responses (including death) when salmon were
exposed to water quality conditions similar to those found at the
site.  The trustees settled the case in September 1995.  Although
this settlement is valued at more than $60 million dollars, the only
cash payment required from the potentially responsible party (PRP) is
approximately $8 million for restoration and reimbursement of past
damage assessment costs.  The remainder of the settlement is the
value of the PRP's in-kind cleanup and restoration work.  The largest
portion of the in-kind work is the agreement that the PRP will
restore the water quality to support all life stages of the salmon by
the year 2002--valued at about $57 million by the trustees. 


OBJECTIVES, SCOPE, AND METHODOLOGY
========================================================== Appendix IV

To determine the number of future federal natural resource damage
claims, we interviewed officials at Interior and NOAA.  After we
discovered that this information was not readily available, Interior
offered to survey the agency's regional offices in order to estimate
this number.  From the survey, Interior developed a list of sites
that it believes may have claims ranging from $5 million to $50
million and over $50 million.  NOAA and Justice then reviewed this
list for possible overlaps and/or omissions.  In addition, we
interviewed the Chief of the Mining Section in EPA's Office of Solid
Waste and representatives of the Western Governors Association, the
National Association of Attorneys General, and the Mineral Policy
Center. 

To obtain information on how settlement dollars are being collected
and spent, we focused on the top five CERCLA settlements involving
federal agencies, since they accounted for nearly 80 percent of the
settlement dollars that Justice had identified as of April 1995.\18
This approach emphasizes larger and possibly more complicated and
time-consuming restorations.  However, since the information on the
smaller settlements resides predominantly with Interior, whose
operations are decentralized over numerous field offices, we decided
to concentrate our efforts more cost-efficiently on the largest
settlements.\19

NOAA, as the lead trustee for four of the five settlements, provided
the financial backup records, disbursement request forms, consent
decrees, and memorandums of agreement for these settlements.  For the
fifth settlement, Cantara Loop, which was led by the state of
California, the California Department of Fish and Game and the
California Attorney General's Office provided information on the
status of the settlement and restoration activities.  We interviewed
both headquarters and field office trustees for the five sites.  We
visited Elliott Bay in Seattle, and Commencement Bay in Tacoma,
Washington.  To obtain the most up-to-date information, we contacted
the lead trustees in the field at the five sites as late in the data
collection phase of this study as possible.  Therefore, all
restoration activities are reported as of December 1995. 

In identifying the approaches the trustees used to develop their
natural resource damage claims, we reviewed the regulations for
implementing CERCLA as well as other documents for developing damage
claims.  Interior and NOAA briefed us on their methods and explained
how they had developed the claims for four sites.  We also reviewed
the documents related to these cases. 



(See figure in printed edition.)Appendix V

--------------------
\18 The compilation of all natural resource damage settlements was a
time-consuming, one-time effort on the part of Justice, which
required subsequent reviews by NOAA and Interior to reach a
consensus.  These data are not centrally stored.  Therefore, all
references to the total number of natural resource damage settlements
are current as of April 1995. 

\19 The financial data are not centrally located and therefore can
not be readily updated.  All data related to the collection and
disbursement of funds are current as of July 1995, when the trustees
consolidated the information from various field accounts. 


COMMENTS FROM THE DEPARTMENT OF
THE INTERIOR
========================================================== Appendix IV



(See figure in printed edition.)




(See figure in printed edition.)Appendix VI
COMMENTS FROM THE DEPARTMENT OF
COMMERCE
========================================================== Appendix IV



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)




(See figure in printed edition.)Appendix VII
COMMENTS FROM THE DEPARTMENT OF
JUSTICE
========================================================== Appendix IV



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)


MAJOR CONTRIBUTORS TO THIS REPORT
======================================================== Appendix VIII

RESOURCES, COMMUNITY, AND ECONOMIC
DEVELOPMENT DIVISION, WASHINGTON,
D.C. 

Stanley J.  Czerwinski, Associate Director
James F.  Donaghy, Assistant Director
Karen L.  Kemper, Evaluator-in-Charge
Cathy L.  Helm, Advisor

CHICAGO FIELD OFFICE

Stewart O.  Seman, Senior Evaluator


*** End of document. ***