GULF SPILL:

Damage assessment submerged in murky legal waters

POINTE A LA HACHE, La. -- On a bright spring day last week at the Pointe a la Hache harbor, Pablo Cervantes was working on his boat.

There wasn't a whole lot else to do.

Thanks to the aftermath of the Deepwater Horizon explosion and spill in the Gulf of Mexico last April 20, the oyster population that Cervantes relies upon is now decimated.

Before the spill, there would have been 30 boats at least coming in to this harbor on the Mississippi River Delta south of New Orleans at this time of year, fishermen said. On this particular day, three were spotted.

"I went fishing every day," Cervantes said, recalling April two years ago. "I don't do nothing right now."

The fate of the oyster beds -- who was to blame and how they will be restored -- is a complicated one that is just one illustration of how the process of quantifying the damage to the Gulf is ongoing and nowhere near over.

A year after the spill, the focus is on chronicling that ecological damage, which is determined by what is known as the Natural Resources Damage Assessment, or NRDA (pronounced nerd-a).

It is because of that process that scientists from the federal government, affected states and well operator BP PLC are currently scouring the Gulf for data.

The task is fraught with difficulty due to the unprecedented nature of the spill -- an estimated 4.9 million barrels that affected not just the shoreline but also the murky deepwater ecosystem up to 5,000 feet down.

"It's, of course, impossible to completely understand what the damage was," said Adam Babich, a professor at the Tulane Environmental Law Clinic in New Orleans.

And it will be "a long, long time" until the full ramifications are known, Babich added.

Legal landscape

Most of the headlines concerning the Deepwater Horizon spill have focused on the economic impact, both on the oystermen and others who live and work in the Gulf.

But the compensation fund administered by Washington, D.C., lawyer Kenneth Feinberg and the hundreds of lawsuits brought by individuals and businesses against BP and others, such as Transocean Ltd., which owned the rig, are just one part of a much bigger legal picture.

There is also the federal government's civil complaint, alleging violations of the Clean Water Act and other statutes, that could by itself lead to billions of dollars in damages. Then, there is an ongoing criminal investigation.

NRDA is a separate process altogether and comes with its own challenges.

It is easy enough to chronicle harm to the most visible victims of the spill, like pelicans and turtles, but not so simple to work out what happened deep down on the ocean floor, said Doug Rader, a scientist with the Environmental Defense Fund.

"The unseen damage to tiny and subsurface creatures -- perhaps even more important to the overall health of the Gulf -- will be a real challenge," Rader said. "All numbers may prove to be, at best, informed guesses, and contestable in court because they cannot be proven."

On the government side, the NRDA process is overseen by a number of trustees, including representatives of each affected state and one each from the Defense, Interior and Commerce departments.

Then there is BP, which is working alongside the government in collecting data, although most expect its scientists to reach different conclusions about what it all means.

The other companies involved in operating the well, including Transocean, are not directly involved.

A Transocean spokesman said that while the company "cares deeply about the restoration of the coastal environment," BP is "legally responsible for the contamination and environmental impacts caused by the oil discharged."

As for BP, its spokesman said the company is dedicated to "fulfilling its obligations" but is also "committed to ensuring that all of the parties involved bear their share of the burden."

At the moment, the scientists are still at the stage of gathering data. Later, that information will be used to come up with a restoration plan.

Right now, the sheer amount of data, the likelihood of government and BP scientists coming to differing conclusions, and the decades of bickering that it could lead to may seem insurmountable.

In reality, the desire on both sides to reach a settlement will take precedence, according to those familiar with the process.

The sooner there is a settlement, the sooner major restoration projects can proceed.

That is likely to mean that the NRDA process, while useful, may not be fully complete by the time the case ends.

Ultimately, it is lawyers who will drive the process, not scientists.

Lessons learned

Denny Takahashi-Kelso knows a little about oil spills.

When the Exxon Valdez tanker ran aground in Prince William Sound, he was one of the first on board.

At the time, he was Alaska's commissioner of environmental conservation, and for a brief period before leaving office had an important role in the NRDA process there.

Now he can be found in a temporary office in a New Orleans high-rise, where he leads the Gulf restoration project run by environmental nonprofit Ocean Conservancy.

He recalled in an interview last week that the emotions associated with the earlier spill hit him full force when he attended a meeting in New Orleans soon after the Deepwater Horizon incident.

"For me it was a smack in the face," Takahashi-Kelso said. "I knew a lot of what was coming and I knew it was going to be bad for them."

As befits someone with a law degree and doctorate in energy and resources, Takahashi-Kelso has thought hard about how the various legal battles will play out.

In the Exxon Valdez case, all the government claims, both civil and criminal, were settled two years after the spill.

Then, Exxon pled guilty to violations of the Clean Water Act and other statutes and was ordered to pay a $150 million fine. The company was only required to pay $25 million of that because the remaining $125 million was forgiven in light of its cleanup efforts. Exxon also paid $100 million in restitution.

For the natural resource damage, Exxon was required to pay $900 million, including $216 million for the cleanup and the damage assessment itself.

Like other experts, including those within the government, Takahashi-Kelso believes the Deepwater Horizon case will end up settling along similar lines, albeit with bigger numbers.

"If I were BP, I would want a global settlement," he said.

It is a view shared by Richard Stewart, who led the Justice Department's Environment and Natural Resources Division at the time of the Exxon Valdez case

It would be in everyone's long-term interests "to achieve a global settlement in order to resolve risk and avoid potentially immense litigation delay and expense," he said in testimony to the federal oil spill commission last year. "Most important," he said, "a global settlement could deliver restoration resources to the Gulf more rapidly."

BP and the Justice Department declined to comment on what kind of outcome is likely.

Takahashi-Kelso just hopes that enough data is collected as part of NRDA to be useful in figuring out the best ways to restore the Gulf.

"Don't cut it off too early," he said. "Don't settle too early."

If that happened, there is more chance of "unintended consequences" down the line.

Bob Haddad, who is in charge of the NRDA process at the National Oceanic and Atmospheric Administration, said in an interview that there will be pressure to settle quickly and noted that it is almost pointless to get hung up on details that could endanger the overall resolution of the case.

"We are never going to agree on the damages," Haddad said.

The NRDA trustees and BP will probably eventually agree on 75-80 percent of the damage, but the rest could be endlessly contested in court, at enormous cost, Haddad added.

"When we hit 80 percent, we put injury to one side and look at restoration," he said. "By doing that, we get over the hump and get great restoration projects."

The NRDA process will eventually stop when government lawyers at the Justice Department decide they have enough scientific data to give them leverage in settlement negotiations.

Ultimately, Takahashi-Kelso said, "it's a DOJ strategic call."

Contours of a settlement

Legal experts generally agree on what the contours of a settlement might look like, but there are numerous variables.

The biggest depends on whether Congress passes legislation that would direct the penalties that arise from Clean Water Act violations into a dedicated Gulf restoration fund. That could be crucial because of the numbers involved.

The Clean Water Act penalties alone could range from $5.4 billion, based on a minimum $1,100-per-barrel fine, to as much as $21.1 billion, or $4,300 per barrel, if the spill is deemed the result of "gross negligence."

But unless Congress intervenes, that money will not go directly to the Gulf, meaning that the NRDA part of the case would become much more important, because those funds would be earmarked for restoration only.

A bill that would dedicate funds for Gulf restoration was introduced in the Senate last week (E&E Daily, April 15).

There are also other ways DOJ's lawyers could structure a settlement so as much money as possible goes to restoration.

In the Exxon Valdez case, for example, the $100 million in restitution went to restoration projects.

DOJ could also ask BP and the other parties to agree to supplemental environmental projects as part of a settlement.

For the government, another essential part of a settlement would be the "reopener."

This is a clause that would allow the government to come back to the responsible parties at a later date if it became clear that there was a major environmental impact that was not obvious at the time of the settlement.

There was a reopener in the Exxon Valdez case that was worth up to $100 million, although Takahashi-Kelso described it as "not very effective" because it "set the bar too high" for the government to make it work.

Litigation over the Exxon Valdez reopener is still ongoing (Greenwire, March 3).

NOAA's Haddad, who previously worked as an industry consultant, said the reopener will be a crucial part of the discussion.

"If I were BP, I would want a narrow reopener. We may want a less narrowly focused reopener," Haddad said. "It's one of those things you want to craft carefully."

Ultimate responsibility

Back at the Pointe a la Hache harbor, Don Beshel, who owns a seafood wholesale operation and was formerly chairman of the Placquemines Parish Council, was admiring the new interior of Cervantes' boat.

Like others in the parish, he is conflicted over who was to blame for killing the oysters.

It is widely accepted that the direct cause was the Louisiana government's decision to release fresh water from the Mississippi River in an attempt to prevent the oil from reaching the shoreline.

It seemed to work in that regard, but oysters don't like fresh water.

BP has since said that it would not take responsibility for the damage to the oysters because it was not caused by the spill. "BP is not obligated to pay for such damage," the spokesman said.

The federal government, however, is "proceeding as if that was an injury resulting from the oil spill," according to NOAA's Haddad.

"I do think they went overboard," Beshel said of the freshwater release. On the other hand, he conceded, it is also true the oil was kept at bay.

After thinking it over, it seems clear to him where the ultimate responsibility lies.

"It's like dominoes," Beshel said. "The first domino causes the chain."

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