Unit Co-Ordinator - Frances Hannah

International Marine Pollution Law LWN 084 Semester 2, 2000 Unit Co-ordinator - Frances Hannah

COMPENSATION FOR NON-ECONOMIC ECOLOGICAL DAMAGE UNDER THE INTERNATIONAL OIL POLLUTION REGIME: THE ENVIRONMENTAL BOTTOM LINE?

Robert Stevenson Student No: N 00589896

This paper is submitted in partial fulfilment of the requirements for the degree of Master of Laws (Environmental Resources Law) at Queensland University of Technology. Index ______Introduction 3

The International and United States Regimes 3 The International Regime 3 Overview 3 Ecological damage 4 The United States Regime 5 Overview 5 Ecological damage 5

Practical issues 8 Arguments for ecological damages 8 The environmental bottom line 8 Completeness 8 Deterrence 9 Arguments against ecological damages 9 Arbitrary nature 9 Lack of certainty 9 No practical application 10

Bases for recovery of ecological damages 10 Anthropological view 10 Overview 10 The concept of the public trust 11 Criticism of the public trust doctrine 11 The Conventions and the OPA 11 Ecological view 12 Overview 12 Darwinian theory 12 Transcendence and immanence 13 An evolving environmental ethic 13

Matters for measurement 14 Existing possibilities 14 Market valuation 14 Restoration and replacement 14 Behavioural use valuation 15 Contingent valuation 15 A different way – damage schedules 16

Trustees 17

Conclusions 18

Bibliography 19 ______Introduction

2 A large oil tanker runs onto the Great Barrier Reef near Cairns in cyclonic conditions. It breaks in two and its cargo of oil blankets the coastal reefs and the pristine beaches and estuaries for hundreds of kilometres. The entire ecosystem of the area is damaged from the loss of stretches of coral, fish, dugongs, seagrass beds, mangroves and fish breeding areas. The public of Queensland, Australia and probably most of the rest of the world are understandably outraged. Under the international regime to which Australia is a signatory, the owners of the tanker will be responsible for clean up measures and measures to reinstate the environment such as replanting mangroves and seagrass beds. They will also be responsible for economic losses such as those incurred by operators of tours to the reef.

They will not be responsible for the loss of use of the reef incurred by the general public, nor for the more indefinable sense of loss suffered by members of the public who have never visited the reef but value its existence. They will most certainly not be responsible for the damage to the area as an intrinsic part of the environment, quite separate from any human values. This paper suggests that provision should be made in the international regime for these “ecological” damages. 1 It might be said that these matters cannot be quantified, or are merely speculative. This would be to ignore the “environmental bottom line” that we need to do more to preserve the environment if we are to ensure our long term survival.

The current position under the international regime will be contrasted with the domestic United States legislation which incorporates ecological damages, albeit from a purely human viewpoint. Pragmatic and theoretical reasons for including provision for ecological damages in the international regime for oil pollution will be explored. The first theoretical basis recognises that humans value the environment and rely on it in more than a purely economic sense. The second involves a readjustment of our role in the world to being one part of an entire ecosystem. Alternatives for attaching economic value to ecological damage will be explored. Finally, the use of trustees to recover these damages is considered.

The International and United States Regimes

The International Regime

Overview

The Convention on Civil Liability for Oil Pollution Damage and the Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage were adopted by the International Maritime Organisation in 1992 to replace earlier treaties of the same names concluded in 1969 and 1971 respectively.2 These Conventions, known as the 1992 Civil Liability Convention and the 1992 Fund Convention (“Conventions”), entered into force on 30 May 1996. They constitute an exclusive international regime in relation to marine pollution caused by oil tankers.3 They incorporate a modern commercial, insurance based system of compensation for damage which is not common in international environmental law. Their existence can be traced to the aftermath of the Torrey Canyon incident where the lack of a common legal regime resulted in long delays in obtaining arguably inadequate compensation.4

1 The term “ecological” rather than “natural resource” damage will be used throughout this paper whenever possible. 2 P W Birnie and A E Boyle, Basic Documents on International Law and the Environment (Oxford University Press, 1995) 91. 3 Although it should be noted the Conventions apply only to spills of persistent oil and they do not preclude victims from claiming compensation outside the Conventions from persons other than the owner, their servants or agents. 4 M Jacobsson, ‘The International Conventions on Liability and Compensation for Oil Pollution Damage and the activities of the International Oil Pollution Compensation Fund’ in C M De La Rue

3 The Conventions apply exclusively to pollution damage caused in the territory, including the territorial sea, and the exclusive economic zone of a contracting state.5 The main elements of the Civil Liability Convention are: 1. a requirement for shipowners to carry compulsory liability insurance;6 2. the imposition of strict liability for damage on the shipowner;7 3. ceilings on liability;8 and 4. limitations periods for claims.9

The Fund Convention complements the Liability Convention by: 1. providing for supplementary compensation where protection offered by the Civil Liability Convention is inadequate;10 and 2. establishing an intergovernmental organisation called the International Oil Pollution Compensation Fund to administer the system of compensation (“Fund”).

Ecological damage

In their original form, the Conventions relevantly provided that:

““Pollution damage” means loss or damage caused outside the ship carrying oil by contamination resulting from the escape or discharge of oil from the ship . . . .”11

This definition was clearly capable of broad interpretation. A claim for compensation for ecological damage was first made by the government of the USSR in the Antonio Gramsci incident.12 The amount claimed for ecological damage had been calculated according to a mathematical formula laid down in USSR regulation which involved a sum per cubic metre of water affected.13 The Fund rejected payment of compensation calculated on this basis. The same questions arose in the Patmos14 and the Haven.15 Both these claims were settled by the Fund without a court pronouncing on the issue. The issue was also dealt with around the same time by the American courts in the SS Zoe Colocotroni16. There, the Court held that the appropriate standard for determining damages where a claim for ecological damage was made was the cost to restore or rehabilitate the environment to its pre-existing condition, or as close thereto as was feasible without grossly disproportionate expenditure.17

(ed), Liability for damage to the marine environment (Lloyd’s of London Press, 1993) 40. 5 Article II Civil Liability Convention. 6 Article VII Civil Liability Convention. 7 Article III(1) Civil Liability Convention, subject to limited exceptions. 8 Article V Civil Liability Convention, except in the case where damage is caused intentionally or recklessly and where foreseeable. 9 Under Article VIII of the Civil Liability Convention, there is a three year limitation on compensation claims and six years for all other types of claims from the date when the damage occurred. 10 Article 2(1)(a) Fund Convention. This additional compensation is funded by industry, primarily the cargo owners. The Fund Convention operates as a mutual insurer funded by oil-importing states or contracting parties to the convention. 11 D J Wilkinson, ‘Moving the boundaries of compensable environmental damage caused by marine oil spills: the effect of two new international protocols’ (1993) Journal of Environmental Law 71 at 83. 12 Jacobsson (n4), 52. 13 Wilkinson (n11), 83. 14 Patmos case (Messina Ct. App. 1989) referred to in F O Vicuna, ‘Responsibility and Liability for Environmental Damage Under International Law: Issues and Trends’ (1998) 10 Geo. Int’l Envtl. L. Rev. 279 at 298. 15 Id. 16 Commonwealth of Puerto Rico v. The SS Zoe Colocotroni, 628 F.2d 652, 1981AMC2185 (1st Cir 1980), cert. denied 450 U.S. 912 (1981) referred to in M Jacobsson and N Trotz, ‘The Definition of Pollution Damage in the 1984 Protocols to the 1969 Civil Liability Convention and the 1971 Fund Convention’ (1986) 17 Journal of Maritime Law and Commerce 467 at 479. 17 Ibid at 480.

4 In view of these claims, the Fund Assembly unanimously adopted a resolution in 1980 stating that “the assessment of compensation to be paid by the IOPC Fund is not to be made on the basis of an abstract quantification of damage calculated in accordance with theoretical models”.18 This interpretation of the definition was formalised in the Conventions by the 1984 Protocol and was carried over to the 1992 Conventions.19 The definition now specifically limits compensation for impairment of the environment, other than loss of profit, to “costs of reasonable measures of reinstatement actually undertaken or to be undertaken.” 20 The definition makes it clear that compensation cannot be assessed on the basis of an abstract quantification. The definition is far more limiting than provisions on compensable damage in many national legal systems and in particular that under the United States regime.21

The United States Regime

Overview

The Oil Pollution Act 1990 (US)22 (“OPA”) is in many respects similar to the international model.23 It was enacted in the wake of the Exxon Valdez debacle, which exposed the lack of effective domestic legislation. It is a more comprehensive system than that which exists under the Conventions.24 Congress decided not to ratify the Conventions because the scope of damages allowed was considered to be too limited and the damages ceilings too low.25 The goal of the OPA is to make the environment and public whole for injuries to natural resources and services resulting from incidents involving a discharge or substantial threat of a discharge of oil.26 It applies to a broader class of pollution incidents than the Conventions and imposes strict liability on the operator and bareboat charterer of a vessel as well as the owner. However, the most significant difference between the two regimes is OPA’s provision for ecological (called “natural resource” in the OPA) damage claims arising out of oil spills.

Ecological damage

The OPA represents the latest refinement of the concept of compensation for ecological damage in American law.27 Responsible parties are liable for removal costs and damages specified by the OPA.28 Damages to the environment constitute a class of damages defined as “damages for injury to, destruction of, loss of, or loss of use of, natural resources, including the reasonable costs of assessing the damage, which shall be recoverable by a United States trustee, a State trustee, an Indian tribe trustee, or a foreign trustee.” 29 Natural resources are broadly defined.30

18 Jacobsson (n4), 52. 19 Jacobsson (n4), 54. 20 Article I, paragraph 6 Liability Convention. 21 Z Brodecki, ‘New Definition of Pollution Damage’ (1985) Lloyd’s Mar. & Comm. L.Q. 382 at 387. 22 33 U.S.C. 2701. 23 Although it is not exclusive in that it does not cover the field and state laws still apply. 24 Potential liability is not limited to the shipowner or cargo owner. 25 W F Dougherty, ‘Natural Resource Damages under the Oil Pollution Act of 1990’ Conference paper presented to the Maritime Law Association Annual Conference, Leura, New South Wales, July 1994 2. 26 Oil Pollution Act 1990 (US) Regulations, 15 CFR 990.10. 27 It has been preceded by the Trans-Alaska Pipeline Authorisation Act of 1973, the Deepwater Port Act of 1974, the Clean Water Act amendments of 1977 and , the Comprehensive Environmental Response, Compensation and Liability Act 1990 (CERCLA). See P M Manus, ‘Natural Resource Damages from Rachel Carson’s Perspective: A Rite of Spring in American Environmentalism’ (1996) 37 Wm and Mary L. Rev. 381 at 424. 28 s.2702 Oil Pollution Act 1990 (US). 29 s.2702(b)(2)(A) Oil Pollution Act 1990 (US). 30 s.2701(20) Oil Pollution Act 1990 (US).

5 The natural resources for which damages are able to be recovered are those “belonging to, managed by, controlled by, or appertaining to” those trustees.31 In a practical sense, any conceivable natural resource affected by an oil spill could be the subject of a natural resource damage claim by some governmental or tribal agency.32 Awards of natural resource damages under OPA can be used only to reimburse assessment costs and to restore, rehabilitate, replace or acquire the equivalent of injured resources.33 The measure of natural resource damages is defined to be: 1. the cost of restoring, rehabilitating, replacing, or acquiring the equivalent of, the damaged natural resources; 2. the diminution in value of those natural resources pending restoration; plus 3. the reasonable cost of assessing those damages.34

It is suggested that both human and ecological values are envisioned to be the subject of compensation under the legislation. In defining the class of natural resource damage, broad language is used which would encompass both sets of values. Whilst the measure of damages specifically addresses restoration rather than compensation, it is suggested that any diminution in value pending restoration would be reflected in ecological damages.

However, this is not the way the legislation has been implemented. Provision is made in the OPA for regulations for the assessment of natural resource damages.35 The U.S. Department of Commerce, acting through the National Oceanic and Atmospheric Administration (NOAA), has issued final regulations providing an approach that trustees may use when conducting Natural Resource Damage Assessments (NRDA) under the OPA.36 The regulations clarify that the only form of ecological damage envisioned is that relating to human values. The definition of “Value” in the regulations is:

“the maximum amount of goods, services, or money an individual is willing to give up to obtain a specific good or service, or the minimum amount of goods, services, or money an individual is willing to accept to forgo a specific good or service. The total value of a natural resource or service includes the value individuals derive from direct use of the natural resource, for example, swimming, boating, hunting, or bird watching, as well as the value individuals derive from knowing a natural resource will be available for future generations.”37

The first part of the definition anticipates valuation by a contingent method. The second part refers to direct and passive use human values. A direct use value would be the loss to people who regularly use an area for recreational fishing. A passive use value would be the value individuals place upon the existence of an area, even if they never plan to make active use of it.38 This may or may not include the spiritual value of an area to indigenous people. Whilst

31 Id. 32 J L Nicoll, ‘Marine Pollution and Natural Resource Damages: The Multi-Million Dollar Damage Award and Beyond’ (1993) 5 U.S.F. Mar. L.J. 323 at 329 33 s.2712(a)(2) Oil Pollution Act 1990 (US). 34 s.2706(d) Oil Pollution Act 1990 (US). 35 s.2706(e) Oil Pollution Act 1990 (US). 36 Oil Pollution Act 1990 (US) Regulations 15 CFR 990 which became effective on 5 February, 1996. The regulations were promulgated in light of Ohio v. U.S. Department of the Interior 880 F. 2d 432 (D.C. Cir. 1989) in which the Court of Appeals for the District of Colombia held in respect of similar regulations that the measure of damages should reflect restoration costs and that market value is only one of many factors to be considered when assessing damages. See D M Stager, ‘From Kepone to Exxon Valdez Oil and Beyond: An Overview of Natural Resource Damage Assessment’ (1995) 29 U. Rich. L. Rev. 751 at 753. 37 Oil Pollution Act 1990 (US) Regulations 15 CFR 990.30. 38 General Electric Company & Ors v. United States Department of Commerce, National Oceanic and Atmospheric Administration (17/11/97) http://mercury.11.georgetown.edu/Fed-Ct/cadc.html 21/10/00.

6 the definition does not purport to be exhaustive, it is suggested that ecological values would not be within its compass.

The regulations reflect the NOAA’s determination to accomplish OPA’s goals through a restoration-based approach, focusing not merely on assessing environmental damages, but rather on developing and implementing plans for restoring and rehabilitating damaged resources or services.39 Apart from the inference of contingent valuation referred to above, the regulations do not provide specific procedures for quantifying injury, the rationale being to permit trustees to select any procedure deemed appropriate for the circumstances of the incident.40 The U.S. Court of Appeals for the D.C. Circuit rejected industry claims that contingent valuation was so inherently unreliable that the NOAA should have explicitly prohibited its use.41 The Court also verified that Congress clearly authorised trustees to recover passive use values for the loss of benefits associated with natural resources, independent of any direct use.42

The scope for ecological damages under OPA represents a significant expansion of common law principles.43 At common law, damages to property were frequently limited to the lesser of the diminution of the market value of the property or the cost of its restoration. This was originally thought to promote economic efficiency by encouraging an optimal level of restoration.44 In enacting the ecological damage provisions, Congress recognised that in addition to the expense of restoring the environment, the public would lose the use and enjoyment of the resources between the time of injury and time of recovery or restoration. 45 This is a wider view than has been taken at the international level. However, whilst the wording of the OPA could be construed to include damages for ecological values, the regulations make it clear that such damages are to be restricted to human values.

Practical issues Arguments for ecological damages

The environmental bottom line

It is suggested that there are two practical reasons for the extension of the international regime to include compensation for non-economic ecological damage. These are part of what has been termed the “environmental bottom line”. The environmental bottom line is that if humans do not do more to understand and protect our environment, then we run the risk of one day facing the collapse of the ecosystem we call Planet Earth. Marine oil pollution is one part of that environmental bottom line.

Completeness

It is suggested that both the international regime, and to a lesser extent, the American regime are not complete systems of compensation for marine oil pollution damage. A ready analogy 39 General Electric Company & Ors v. United States Department of Commerce, National Oceanic and Atmospheric Administration (17/11/97) http://mercury.11.georgetown.edu/Fed-Ct/cadc.html 21/10/00. 40 Oil Pollution Act 1990 (US) Regulations, 15 CFR 990.27 referred to in C B Anderson, ‘Damage to Natural Resources and the Costs of Restoration’ (1997) 72 Tul. L. Rev. 417 at 474. 41 http://www.publicaffairs.noaa.gov/pr97/nov97/noaa97-75.html 21/10/00. 42 http://www.publicaffairs.noaa.gov/pr97/nov97/noaa97-75.html 21/10/00. 43 Nicoll (n32), 333. 44 Nicoll (n32), 333. 45 Nicoll (n32), 337.

7 can be found in the law of torts. Let us suppose that instead of a physical injury occurring to an ecosystem such as the reef, an injury occurred to a personal possession such as a motor vehicle or to our person, for instance in a motor vehicle accident. In the case of the motor vehicle, we would be able to claim a component for the loss of use of that vehicle as well as for the repair costs. Admittedly, we would not be able to claim for the emotional injury we might suffer and nor would there be any component for the value of the damage to the intrinsic nature of the motor vehicle. This might be explained on the basis that full restoration is normally available in a speedy manner.

In the case of damage to ourself however, we would be able to claim for the loss of active use of our body as well as damage to its intrinsic value in the form of economic loss and pain and suffering and loss of amenity.46 In the law of personal injury at least, the law has found ways to address non-economic loss. Similarly, in the law of nervous shock, the law has found a way to compensate us for the shock we suffer when an injury occurs to someone else to whom we have an attachment.

However, because the environment we are speaking of is not the property of any one person and nor is it part of our person, it is not eligible for damage compensation. The environment is often said to be “priceless”. However, it is paradoxically “worthless” when an injury occurs to it.47 The reason usually put forward is that damage to the environment cannot be quantified. However, the result is that we are literally abandoning the environment to its fate.48 It is suggested that non-economic ecological damage to human and ecological values deserves to be compensated because it is right and offers complete compensation in principle. However, in the context of the environmental bottom line, the need is more imperative. It offers a way of financing further study of the effects of marine oil pollution both in respect of specific incidents and more broadly.

Deterrence

The “polluter pays” principle has become an accepted way of internalising the cost of pollution incidents to the entity responsible for the pollution rather than externalising the cost to the general population. The Conventions stop short of using liability to penalise damage to the environment which cannot be reinstated, or quantified in terms of property loss or loss of profits. To this extent the true environmental costs of marine oil pollution continue to be borne by the community as a whole, and not by the polluter.49

Deterrence might be thought of as the flipside of completeness of compensation. It is suggested that deterrence theory will only work if a party knows that if an accident occurs, they will have to shoulder all the responsibility for the damage and not just that which is readily identifiable or quantifiable. It is suggested that the international regime currently lacks this character.

Arguments against ecological damages

The drafters of the Conventions were clearly keen to ensure that ecological damage should not be covered under the international regime. Three major reasons have been enunciated in

46 See discussion in ‘CMI Colloquium on Environmental Damage Assessment: Discussion Paper’ in C M De La Rue (ed), Liability for damage to the marine environment (Lloyd’s of London Press, 1993) 259. 47 M Remond-Gouilloud, ‘The Future of the Compensation System as established by International Convention’ in C M De La Rue (ed), Liability for damage to the marine environment (Lloyd’s of London Press, 1993) 92-93. 48 Id. 49 P W Birnie and A E Boyle, International Law and the Environment (Oxford University Press, 1992) 296.

8 the literature. It is suggested that these arguments amount to procedural difficulties in the implementation of a system of ecological damages, rather than substantive reasons in principle. Practical difficulties, while an obstacle in the short term, usually are not insurmountable in the longer term.

Arbitrary nature

The director of the Fund, Mans Jacobsson, has expressed the view that any assessment of ecological damage to the marine environment in monetary terms would require sweeping assumptions regarding relationships between different components of the environment and economic values. 50 However, there is no expansion on what is meant by this statement. He seems to be saying that it is difficult to put economic value on particular environmental damage. Indeed, this is the case. However, on Jacobsson’s view, if reinstatement measures were unsuccessful, then the environment would be left to its fate in a damaged state.

It is accepted that any calculation of ecological damage in monetary terms will by necessity be arbitrary to some extent. However, it does not necessarily follow, as Jacobsson postulates, that it is therefore inappropriate to admit claims for compensation following damage to unexploited natural resources which have no owner.51 Analogy has already been drawn with the law of torts. In the law of contract, liquidated damages clauses are often used where damage will be difficult to quantify. Would it not be better to recognise the imperative for improvement and start taking small steps towards a system that does address ecological damage?

Lack of certainty

It is argued that advantages exist in knowing in advance exactly what obligations liable parties may have, their limitations, the exemptions from which they may benefit, and the exclusions of liability arising through legal channels.52 The benefit of the current international system is that it offers finite liability. In a practical sense, this means that insurance risks can be calculated with some certainty which results in affordable premiums.

If contingent valuation were the only means to be used to measure ecological damage, then this argument may have some force. It is accepted that some measure of certainty is necessary for a compensation regime to be effective. However, it is suggested that these benefits can be retained under a system which allows claims for ecological damage. There is no reason why finite limits to liability cannot be retained, even if at a higher level than present. It would certainly enable companies and insurers to factor these items into their operational costs. The desirable effect may be to increase insurance premiums for those insureds with a poor track record in pollution.

No practical application

It is argued that any monetary damages recovered for this head of damage are unlikely to be spent on actual clean up and restoration of the environment affected by a spill, or in compensating claimants for any tangible loss, since these would be paid for in any event.53 This argument presupposes that the only useful way of utilising ecological damage funds is to clean up and restore the subject environment. It is suggested that such funds could be employed in longer term studies of the effects of oil pollution on the environment both generally and particularly in relation to the particular subject site. Such funds could also be

50 Jacobsson (n4), 53. 51 Jacobsson (n4), 53. 52 Remond-Gouilloud (n47), 85. 53‘CMI Colloquium on Environmental Damage Assessment: Discussion Paper’ in C M De La Rue (ed), Liability for damage to the marine environment (Lloyd’s of London Press, 1993) 259.

9 available for use in physical restoration work in the longer term, beyond the time frame of normal clean up and reinstatement measures. Environmental damage caused by marine oil pollution may linger for decades or even grow worse as time goes on. Years may pass before scientists accurately assess the overall damage incurred. For instance, five years after the Exxon Valdez incident, scientists were only beginning to study the spill’s long term effects.54

It is suggested that there are good pragmatic reasons for providing for the recovery of ecological damages under the Conventions. Theoretical justification can be found from an anthropological view and an ecological view.

Bases for recovery of ecological damages

Anthropological view

Overview

It is suggested that compensation for ecological damage is justified on the basis that it is a non-economic loss to us all. It is a reflection of the value to us of a damaged area beyond the mere cost of reinstatement. This approach reflects the basis for the inclusion of human direct and passive use losses in the United States regime. It is a purely anthropological view. Central to this approach is acceptance that the areas affected by oil pollution belong to all people. This represents an extension of traditional property paradigms.

The concept of the public trust

In his statement of Roman law principles, Justinian declared that air, running water, the sea and its shores were the common property of all with attendant communal rights.55 The doctrine was at least partially incorporated into the common law of England in a modified form. The common law recognised that the sea and its shores belonged to the public at large. However, traditionally legal action was only able to be taken by individuals whose property rights were affected in some way. The doctrine has been used sparingly by the courts of the United Kingdom.56 However, as evolved in the United States the doctrine represents a fundamental principle for the governance of air, water and land.57

Natural suitability for common use together with scarcity may explain why courts view natural resources, such as navigable bays, as public assets, and why the state is seen to have a duty to acknowledge and protect public property rights that will permit community access to these resources. 58 Certainly, navigable waters and foreshores have long been accepted in the United States as being subject to the public trust doctrine. Rodgers goes further and argues that it is plausible to read the public trust servitude as reaching all natural resources and subjecting them to a strongly protective use regime.59 He suggests that the public trust doctrine is perhaps the strongest contemporary expression of the idea that the legal rights of 54 D M Stager, ‘From Kepone to Exxon Valdez Oil and Beyond: An Overview of Natural Resource Damage Assessment’ (1995) 29 U. Rich. L. Rev. 751 at 778. 55 R J Lazarus, ‘Changing Conceptions of Property and Sovereignty in Natural Resources: Questioning the Public Trust Doctrine’ (1986) 71 Iowa L. Rev. 631 at 633-634. 56 D E Fisher, Environmental Law: Text and Materials (Law Book Company Ltd, 1993) 198-199. 57 J Sax, ‘The Limits of Private Rights in Public Waters’ (1989) 19 Environmental Law 473 at 479. 58 H C Dunning, ‘The Public Trust: A Fundamental Doctrine of American Property Law’ (1989) 19 Environmental Law 515 at 523. 59 W H Rodgers, ‘Bringing People Back: Toward A Comprehensive Theory of Taking in Natural Resources Law’ (1982) 10 Ecology Law Quarterly 205 at 239.

10 nature and of future generations are enforceable against contemporary users.60 This may be a gloss on the historical role of the doctrine. However, it is suggested there is no reason why suitability for common use and scarcity cannot form an ecological basis for the doctrine’s application.

Criticism of the public trust doctrine

The doctrine is not without its critics. Professor Lazarus considers the doctrine to be a legal fiction designed to combat the insufficiencies of the law in past times, which is no longer useful. 61 He argues that the thrust of recent developments in environmental and natural resources law has been to replace already eroding notions of private property rights in natural resources and in effect create public property regimes in common resources. 62 This may be so in a practical sense. However, it is suggested that even legislated regimes have their roots in the concept that the state holds certain common resources on behalf of and in trust for the people. It is suggested that premising natural resources law solely on continuing regulatory authority is too narrow a view, and has the effect of placing too much decision making power in the sovereign authority, however constituted.

The Conventions and the OPA

It is suggested that the international and United States systems are largely based on the traditional private property paradigm. In both instances, the starting point is that compensation is payable for the physical or economic damage to persons or their property. However, the international regime goes further than this, if only in a limited way. It allows recovery for the cost of “reasonable” measures to reinstate the environment actually undertaken or to be undertaken. This second limb it is suggested implicitly recognises the human interest in the broader environment beyond the restriction of the traditional property paradigm.

Where the international and United States regimes part is the ability to seek compensation for human use values. It is suggested that these rights of use reflect the public property nature of the areas generally subject to marine oil pollution. One of the strongest foundations for this public property regime is the doctrine of the public trust. This is certainly the case in respect of land territory, territorial sea and the seabed and subsoil of the territorial sea of each state. 63 It is suggested that this foundation would extend to exclusive economic zones in which a state has certain rights of sovereignty, not equivalent to ownership.64

Ecological view

Overview

And God said, Let us make man in our own image, after our own likeness: and let him have dominion over the fish of the sea . . . and over all the earth .. .65

60 Ibid at 239-240. 61 Lazarus (n55), 657-658. 62 Lazarus (n55), 693. 63 I Brownlie, Principles of Public International Law (4th edn, Oxford University Press, 1990) 107. 64 Such rights generally relate to exploration, exploitation, conservation and management of natural resources. See Article 56, paragraph I of the Law of the Sea Convention 1982 referred to in Brownlie (n63), 209-210. 65 Genesis 1-26 referred to in D W Abecassis and R L Jarashow, Oil Pollution from Ships: International, United Kingdom and United States Law and Practice (2nd edn, Stevens & Sons, 1985) (iv).

11 The second approach represents a move away from the biblical concept that humans have dominion over all things on this planet. Our anthropocentric ethics value the natural world as a resource to be manipulated at will for human benefit only. Most environmental legislation protects nature not for its own sake but in order to preserve its potential value for man. 66 This alternative approach recognises that humans are part of an ecosystem upon which we rely for our survival and which has an existence and importance in a deeper sense than human values alone. It has as its root that all living things, all species, all ecosystems and possibly all things in the entire universe have inherent value independent of their use by human beings.

Darwinian theory

In his seminal article, Professor Stone suggests giving rights to nature as a means of addressing environmental degradation.67 On the one hand, Stone holds Darwin responsible for our present state of affairs saying that it was Darwin’s views that gave moral approbation to struggle, conquest and domination.68 However, he also uses Darwin to demonstrate that “the history of man’s moral development has been a continual extension in the range of objects receiving his social instincts and sympathies”. He argues that the next logical extension of human sympathies is toward the animate and inanimate “objects” of the environment. Whilst this might be thought to have anthropological overtones, it is suggested that the implicit basis for Stone’s justification for giving the environment “rights” is the ecological presumption of interdependence between all living and non-living things.69

Professor Emond takes a different tack. He argues that Darwin’s theory of natural selection does not result in domination, control and mastery of the environment and those within it. 70 Rather, he suggests it has the purpose of adapting the structure of each individual for the benefit of the whole community and the whole community profits by the selected change. Further, Darwin describes how struggle is replaced by co-operation which in turn results in the development of intellectual and moral facilities which secure the best conditions for survival. The starting point for Emond is also the recognition that people are no more and no less than an integral part of the environment.71

Transcendence and immanence

Professor Tribe suggests that the basis for our current environmental crisis can be found in the biblical concept of a dichotomy between humans and nature.72 The idea that we have a continuing existence outside the created world and stand apart from our environment is rooted deep within the theological concept of transcendence.73 However, at least theological tradition inferred some obligation toward nature. With the fall of theology’s role in modern society has come the rise of reason based on science alone, which Tribe characterises as “calculation without content”.74 He suggests that we have lost the benefit of divine guidance 66 L H Tribe, ‘Ways Not To Think About Plastic Trees: New Foundations for Environmental Law’ (1974) 83 Yale L.J. 1315 at 1325. 67 C D Stone, ‘Should Trees Have Standing? – Toward Legal Rights For Natural Objects’ (1972) 45 Southern California Law Review 451. 68 Ibid at 494. 69 D B Hunter, ‘An Ecological Perspective on Property: A Call for Judicial Protection of the Public’s Interest in Environmentally Critical Resources’ (1988) 12 Harv. Envtl. L. Rev. 311 at 313. Also see K K Baker, ‘Consorting with Forests: Rethinking Our Relationship to Natural Resources and How we should value their loss’ (1995) 22 Ecology L.Q. 677. 70 D P Emond, ‘Co-Operation in Nature: A New Foundation for Environmental Law’ (1984) 22 Osgoode Hall Law Journal 323 at 343-344. 71 Id. 72 Tribe (n66), 1333 referring to L White, ‘The Historical Roots of Our Ecologic Crisis’ (1967) 155 Science 1203-1205. 73 Tribe (n66), 1332. 74 Tribe (n66), 1334.

12 and moral constraint that originally constrained our actions.75 However, he does not see the current movement toward valuing nature for its own sake as the answer. He characterises this movement as one towards immanence, a recognition of the sacred nature of the natural. 76 He suggests that at its extreme this would represent a return to the religious tradition that preceded transcendence in the form of pagan animism.77

An evolving environmental ethic

Tribe instead harks back to Aristotle and Plato in offering a solution. He suggests that the highest purpose of human reason is to evolve a comprehensive understanding of our place in the universe.78 This involves recognition of an environmental ethic and synthesising the concepts of transcendence and immanence through evolving processes of interaction and change.79 He suggests that as a minimum, we must begin to extricate ourselves from the conceptually oppressive sphere of human want satisfaction, by encouraging the elaboration of perceived obligations to plant and animal life and to objects of beauty in terms that do not falsify such perceptions from the very beginning by insistent reference to human interests. 80 Whilst not framed in Darwinian theory, this concept is certainly compatible with the ideas of Stone and Emond. It offers a solid basis for recognition of pure ecological values in the compensation regime for marine oil pollution.

Matters for measurement

Existing possibilities

How then to put a value on the invaluable? The fundamental problem is that of putting economic values on non-economic human and intrinsic values. However, we must of necessity assign some monetary value of significance to these values because that is the only value which can be translated into economic terms and upon which systems of compensation generally rely.81 Money can be used to utilise means to remedy environmental damage and deter subsequent environmentally unsound behaviour.82 The four leading existing procedures for valuing natural resource damages are considered.

Market valuation

Market valuation measures ecological damage based on the market price for the damaged commodity.83 Lost profits, decreased property values, decreased rental values of land, lost business opportunities and replacement values are all standard means of measuring damages according to market valuation.84 Market valuation has a number of benefits. It is generally quick and relatively easy to measure losses by this means which makes it a convenient tool.85 It is also reliable because it uses measures reflecting the actual behaviour of buyers and sellers in the marketplace. However, market valuation fails to reflect non economic human or

75 Tribe (n66), 1334. 76 Tribe (n66), 1336. 77 Tribe (n66), 1337. 78 Tribe (n66), 1327-1328. 79 Tribe (n66), 1338. 80 Tribe (n66), 1341. 81 It is not suggested that restorative justice techniques, such as apologising to the environment, are suitable in the context under discussion. 82 Stager (n54), 773. 83 M W Jones, ‘Natural Resource Damage Assessments for Oil Spills: Policy Considerations Underlying the Evolution of the Department of the Interior’s Regulations’ (1990) Villanova Environmental Law Journal 491 at 503. 84 Id. 85 Ibid at 514-516.

13 intrinsic values of natural resources. Valuations using this means are accordingly more likely to understate ecological damages.86

Restoration and replacement

Strictly speaking, restoration and replacement are not means of valuing natural resources but rather programs of action.87 The international regime provides for “reasonable” measures of reinstatement. However, this does not allow for situations of total loss. It is conceded that not all incidents will involve total loss of environment. However, restoration and replacement do not measure the non-economic human and ecological values lost during restoration, nor any residual loss. To use the tortious analogy, these mechanisms are similar to the concept of special damages in that they are the cost of physical measures taken to remedy or mitigate the damage caused. They do not provide compensation for the fact of the damage.

Replacement is generally a feasible alternative to restoration where there is total loss or where restoration is too expensive or ineffective.88 For example, if a national park was damaged beyond repair, the government could purchase a comparable site and transform it into a national park. However, this does not recognise that many ecological resources do not have close substitutes. One such example would be the Great Barrier Reef. It also downgrades the importance attached to destruction of natural resources as long as comparable resources exist elsewhere.89 It is questionable whether replacement would constitute a reasonable measure of reinstatement under the international regime.

Behavioural Use valuation

This method takes direct human use values into account. Use values measure actual behaviour, rather than attitudes, and therefore offer some certainty in ascertaining damages. 90 Its great advantage over the first two mechanisms is that it recognises that not all ecological damage is reflected in the open market. For example, although some endangered species are not valued in the economic marketplace, our society has determined that their continued existence possesses a value of sufficient importance to warrant strong protective measures. 91 This method creates its own artificial market through use of techniques such as the travel cost method, the hedonic price method and the unit day value method. These measures determine “shadow prices” for non market resources which reflect amounts that users would spend to use a particular resource. However, these methods do not take into account passive use and ecological values.92

Contingent valuation

This method is currently the only method available for estimating passive use values.93 These values may take the form of: 1. option values (retaining the option of future use); 2. vicarious values (recognition that something can be valued even if it is never visited); and 3. intertemporal values (the ability to pass something on to future generations even if it is not intended to use it presently).94

86 Ibid at 517. 87 F B Cross, ‘Natural Resource Damage Valuation’ (1989) 42 Vanderbilt Law Review 269 at 298. 88 Ibid at 301. 89 Ibid at 302. 90 Ibid at 282. 91 Jones (n83), 503. 92 Jones (n83), 518. 93 Jones (n83), 519. 94 Cross (n87), 285-286.

14 Contingent valuation measures the passive uses of the environment by using public opinion polls in which people are asked how much they would pay to preserve or protect a particular resource. The dollar amounts are then multiplied by the number of people potentially affected by an oil spill. By assigning economic values to passive uses, the surveys determine what value the public places on particular natural resources. Trustees can then use the converted passive values in their damage calculations when seeking compensation from responsible parties.95

It has been found to be roughly consistent with behavioural use methods as a damage assessment measurement technique.96 It can assume major importance in valuing damage to those areas not subject to active use values. Because the Alaskan wilderness affected by the Exxon Valdez spill was largely recreational and non commercial, passive use values comprised a large portion of the damages in that case. 97 However, it has been the subject of strident criticism by industry. Several issues exist which need to be taken into account when considering this method of valuation: 1. the possibility of skewed responses to surveys. It is possible that attitudes conveyed in response to a survey may not correlate with actual behaviour;98 2. survey results may be radically altered due to simple changes in question phraseology;99 3. the extent of knowledge of the survey designers;100 4. the phenomenon of “embedding”. Studies have found that individuals tend to place nearly identical values on greatly differing quantities of ecological loss; 5. reliance on survey methodology renders doubtful the scientific validity of contingent valuation.

However, the major issue that exists with contingent valuation is that of hypotheticality. 101 It seeks to measure something, the non use value of a natural resource, that cannot ever be quantified in monetary terms, no matter how precise the measurement technique.102 However, according to its supporters, contingent valuation “can produce estimates reliable enough to be a starting point for a judicial process of damage assessment”.103 It might also be suggested that any evidentiary flaws are a far lesser evil than the law’s continued ignorance of non-use values.104 Certainly, contingent valuation perpetrates no greater upset in evidentiary law than tort laws method for measuring pain and suffering damages.

A different way - damage schedules

It almost goes without saying that there is no method of valuing pure ecological loss in any economically quantifiable way. The tools of analysis which currently exist are simply too blunt to be of great use in this regard.105 Nature’s complex interrelationships are not fully understood. Heyde suggests that in view of the inadequacies of contingent valuation, a better

95 Stager (n54), 775. 96 Jones (n83), 519. 97 Stager (n54), 778. 98 Jones (n83), 519. 99 P M Manus, ‘Natural Resource Damages from Rachel Carson’s Perspective: A Rite of Spring in American Environmentalism’ (1996) 37 Wm and Mary L. Rev. 381 at 449-450. 100 Stager (n54), 777. In this regard, a NOAA panel of experts has produced a set of guidelines for designing an ideal survey. 101 F B Cross, ‘Restoring Restoration for Natural Resource Damages’ (1993) 24 U. Tol. L. Rev. 319 at 330. 102 J M Heyde, ‘Is Contingent Valuation Worth the Trouble?’ (1995) U. Chi. L. Rev. 331 at 350. 103 Stager (n54), 775. 104 Manus (n99), 449-450. 105 Tribe (n66), 1320.

15 alternative could be to base damage assessments on a pre-established fixed schedule of loss values, called a damage schedule.106 Damage schedules would provide predictability and enforceability by specifying in advance the payments that will be required in the event of a loss, rather than waiting until the damage has taken place.107 It would also provide a greater deterrence incentive for the actions of others.108

The concept is similar in character to liquidated damages clauses where it is difficult or expensive to determine the actual value of the losses.109 Standardised damage assessments for non-pecuniary losses are hardly new, nor are the issues unique to environmental valuations. 110 Workers compensation schedules exist which vary with the severity of the injury. Other tortious areas such as motor vehicle personal injury are being capped through statutory compensation schemes.

The benefit of such a method is that it gets away from trying to measure non-economic ecological damage in purely economic terms. It involves the concept of comparability rather than commensurability.111 Damage schedules can reflect people’s judgments of the relative importance of different losses, without requiring them to assign monetary values directly to the losses.112 The amounts in the damage schedule could vary over a limited number of damage scenarios. A combination of the existing methods of valuation could be used to arrive at schedules. Given that it is proposed that damages for non-economic values be used partly for research purposes, it is possible for the schedule to evolve in accordance with our increased understanding of ecological damage. Eventually, it is to be hoped that our understanding reaches a point where the schedule becomes unnecessary and ecological damage can be measured with more certainty than is currently the case.

Trustees

It is suggested that the trustee model used by the OPA is also suitable for use at the international level. The principle of states acting as trustees has common law precedent in the public trust doctrine and that of parens patriae. We have already seen that the public trust doctrine supports state recovery of ecological damage claims on the theory that the government holds public resources in trust for its citizens. The doctrine of parens patriae is an alternative model that provides the state with the right to sue where no individual state citizen has standing to bring a cause of action.113

The appointment of multiple trustees is possible under the OPA which creates the potential for overlapping jurisdiction by federal, state and tribal governments over the same resources. Congress anticipated this situation and has said that in such instances, trustees should exercise joint management or control of the shared resources.114 OPA also prohibits double recovery by two trustees for the same damage.

The international regime operates on the basis that the state concerned carries out clean up work. The Fund then considers a claim by the state for reimbursement. There is no reason why states could not be appointed trustee in relation to incidents occurring within their jurisdiction. From a human perspective, trustees sue on behalf of the public as trustee for

106 Heyde (n54), 353. 107 Heyde (n54), 353. 108 Heyde (n54), 353. 109 M B Rutherford, J L Knetsch and T C Brown, ‘Assessing Environmental Losses: Judgments of Importance and Damage Schedules’ (1998) 22 Harvard Environmental Law Review 51 at 53. 110 Ibid at 72. 111 Ibid at 71. 112 Ibid at 53. 113 Jones (n83), 496. 114 Nicoll (n32), 333.

16 ecological resources that are held in trust by the sovereign for the benefit of the public. 115 From an ecological perspective, they sue as guardian of the environment as a whole. It is suggested this would be a relatively simple matter to implement in practical terms. There is perhaps no reason why, in the future, trustee status could not be extended to significant community groups, or even individuals. Conclusions

The international regime for compensation for oil pollution is in many respects a model for other aspects of the environment. However, it is suggested that it could be improved by the inclusion of compensation for non-economic ecological damage, comprising both human values and pure ecological values. The domestic regime of the United States follows the same basic model as the Conventions but is more comprehensive in its coverage. The strict provisions of the OPA are wide enough to cover recovery of compensation for damage to both non-economic human and ecological values. However, the regulations implementing the OPA concentrate on human direct and passive use values only.

To be truly effective, it is suggested that recovery must capture the full value of the harm done to the environment. The arguments raised against recovery of ecological damages are, it is suggested, of a procedural nature only and are capable of being resolved. The anthropological basis for ecological damages is the public nature of the areas normally subject to marine oil pollution. These areas are held for the public in trust by the state, which has a duty to protect these areas from harm. The ecological basis recognises that humans are part of an ecosystem which has a broader significance beyond human existence.

Traditional methods of valuation are inapposite for placing value on non-economic ecological values. Contingent valuation, the only method which attempts to measure human passive use values, suffers from problems of hypotheticality which are unlikely to gain it widespread acceptance for the foreseeable future. It is suggested that our tools of analysis are limited for things which inherently do not have an easily calculable monetary value. This is likely to be the case for some time to come. It is suggested that a damage schedule for non-economic ecological damage offers an interim solution. Such a schedule will offer fixed sums of compensation for non-economic ecological damage depending on broad categories of severity of damage. A suite of measures can be used to arrive at these figures, which can be refined with experience and the development of our knowledge of the full impacts of marine oil pollution. Lastly, it is suggested that the appointment of trustees to act on behalf of the public as a whole and as a guardian of the environment would be an appropriate method to facilitate ecological damage claims.

The Conventions constitute a robust commercial regime for the compensation of marine oil pollution damage. They already go some way to addressing environmental damage and degradation caused by marine oil pollution. It is suggested that improvement can be made to the effectiveness of the regime by implementing a system under the Conventions to facilitate ecological damage claims. Such an improvement would be a significant step towards achieving the “environmental bottom line”.

115 Baker (n69), 683.

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