New Jersey's Natural Resource Damages Initiative: Is the "Sleeping Giant" Waking Up?[dagger]

I.

INTRODUCTION

Claims to get back the value of lost use of natural resources to be paid to pollution, so-called "natural resource damages" or "NRD" have drawn out been called the "sleeping giant" of environmental liability.1 High profile NRD recoveries, similar as the nearly $1 billion NRD award against Exxon for the Exxon Valdez oil spill,2 have shown that NRD awards can reach giant proportions. However, not many NRD claims have been brought since they were first authorized through Congress in 1980,3 and industry came to believe that the giant was "asleep."4 That situation has changed in novel Jersey, where the Department of Environmental Protection ("NJDEP") has announced a major initiative to address more than 4000 claims5 and assemble up to $950 million6 in NRD from 66 corporations.7 This may well herald similar programs in other states.

The question of whether fresh Jersey's initiative marks the beginning of a nationwide run is important both to industry and its insurers for several reasons. First, NRD awards, while scarcely any can exceed the multi-million dollar take away from of cleanups.8 Second, NRD claims have the potential to revive "closed" environmental claims and undermine the finality of arrangements with policyholders for sites that have been the bring under rule of past coverage litigation. Finally, of recent origin Jersey is historically a trend-setting state upon environmental issues and other states may tread on the heels of suit if NJDEP is able to regain significant awards under its NRD initiative.

This article provides a brief overview and history of NRD claims and examines whether of recent origin Jersey's current NRD initiative is likely to be the start of a nationwide tend section II examines the history, legal bases and simple bodys of NRD claims, as well as several basic defense Section III discusses the treatment of NRD claims below established environmental coverage law and the result of NRD claims on previously go intoed settlements, releases and commutations between NRD defendants and their insurers. The final section assesses whether of recent origin Jersey's high profile NRD initiative signals the beginning of a nationwide incline

We conclude that the industry and insurers would be wise to monitor the progres of of recent origin Jersey's NRD initiative, but that there is no clear indication that other jurisdictions will go in the rear [i]or[/i] in the wake of New Jersey's lead. This is in part owed to the appointment of a novel NJDEP commissioner and NJDEP's promise to issue of recent origin NRD regulations for public remark The release of these regulations will likely be followed through extensive industry comment and, perhaps, litigation. Thus, fresh Jersey's NRD enforcement program is likely to be subjected to significant changes over the nearest year, and other jurisdictions will likely wait to diocese how successful New Jersey is at collecting NRD penalties before devoting resources to beef up their possess programs.

II.

THE HISTORY AND NATURE OF NATURAL RESOURCE DAMAGE CLAIMS

A. The conception of Natural Resource Damages

NRD are intended to compensate the public for the los or impairment of natural resources.9 Natural resource damages consist of: (1) require to be paid [i]or[/i] undergones of restoring or replacing injured resources to a pre-contamination "baseline" condition; (2) compensation to the public for the reduction or elimination of the resources from the time of initial injury until thorough restoration or replacement; and (3) any take away froms of the NRD assessment itself.10

An NRD claim is fundamentally different from a traditional cleanup action in that it try to finds to value and compensate for the los of "use" or "services" of a resource and not simply the cost of cleaning it up The valuing of "lost use" or "lost services" is a highly subjective exercise. Without the guidance of a market price, single can attempt to value the couple "active" and "passive" uses." "Active uses" include "consumptive" uses, of the like kind as drinking water, eating fish, and harvesting harvests "Non-consumptive" uses include activities like as swimming, hiking and camping.12 flat harder to estimate are the more abstract "passive" or non-use values of missing resources. They include the value of knowing that a resource exists (so-called "existence value") and the knowledge that a resource is available for the public's use, smooth if it is not used (the "resource" or "option value").13

The lack of a precise definition of what constitutes the "damage to" or "value of" a natural resource causes great belong to in the wake of of recent origin Jersey's NRD initiative. When a potentially responsible party ("PRP") receives a two-page "Notice of Intent to Initiate Litigation" from the novel Jersey Attorney General's Office, it cannot compute the size of the potential damages being sought PRP may be justified in believing that the canopy of heaven or more accurately the soil and water - as well as the value all of their actual and potential uses - are the limits.

B The Authority of Natural Resource Trustees above Trust Resources

Federal and state NRD claims are extensions of the for the use of all law "public trust doctrine," pursuant to which the management has the right to look for damages to resources to which no individual clutchs title. Such resources are supposeed to be held by the conduct in trust for citizens.14