Natural resource damage assessment: speculations about a missing perspective. (Speculations)

I. INTRODUCTION

Literature on the economics of natural resource damage assessment has been growing rapidly, fueled by controversies surrounding the methods used to estimate damages. The appropriate use of the contingent valuation (CV) method and the estimation of nonuse (or "passive" use) values have been the subject of much debate. Even though a great deal is being learned, fundamental questions are being neglected. This speculations article provides perspective for recent and prospective literature.

The need for perspective arises because incentives exist for particular questions and issues to be emphasized. The 1989 Exxon Valdez oil spill, and subsequent litigation, brought very large sums of money into natural resource economics, and redirected the focus of much effort and research. The skills and services of economists and others capable of evaluating and using particular assessment techniques have come to be of value to those affected by the spill, including private firms and government agencies. Preoccupation with these techniques, however, may result in the neglect of other important issues. Three questions provide focus for the following speculations: (i) why are we doing natural resource damage assessment? (ii) are passive-use values ubiquitous? and (iii) can the contingent valuation method capture biological reality?

II. WHY ARE WE DOING THIS?

The obvious answer to this question is because the law says we must. On the assumption economic analysis may guide and shape policy as well as make existing policy work well, it is appropriate that some characteristics of the current (evolving) policy be noted.

The Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) of 1980, and its 1986 amendments, requires that trustees of natural resources (government agencies) be compensated for damages from hazardous substances released into the environment. In 1990, the Oil Pollution Act (OPA) extended natural resource damage liability to oil spills (petroleum products are not defined as a hazardous substance under CERCLA). Together, CERCLA and OPA form the legislative basis for natural resource damage assessment and compensatory liability. To this base, administrative rulemaking and judicial interpretation are added; the former implementing the legislative mandate, the latter arbitrating disputes. This process is likely to continue to evolve for some time.

Administrative rules under CERCLA were first promulgated in 1986, challenged in the courts, and since redrafted in a 1991 Notice of Proposed Rulemaking (NPR) by the Department of the Interior (DOI). Pursuant to the OPA of 1990, the National Oceanic and Atmospheric Administration (NOAA) will also promulgate damage assessment and liability regulations for oil spills. There is the expectation, at least, that DOI and NOAA rulemaking will develop in parallel (e.g., Taylor 1993).