Natural Resource Damages for Groundwater:
Recent Trends in the Assessment of Liabilities

Increasing attention is being focused on groundwater contamination as a basis for NRD claims, especially by the states. An emerging recent trend from Trustees and their consultants is the use of highly simplified methods to estimate damages to groundwater. The ideas behind this trend were discussed in an article entitled Identifying, Scaling, and Evaluating Groundwater Restoration Projects as Compensation for Groundwater Injuries, by Diana Lane, Karen Carney and David Chapman in a recent issue of International Journal of Soil, Sediment, and Water.

The type of scaling approach has some advantages especially for use in an expedited settlement of a case, but also has some significant disadvantages, especially for larger, more complex cases.

The outline of the methods they proposed is as follows.

1) The magnitude of damages is equated to the cost of a groundwater restoration action that is “scaled” in magnitude such that the benefits provided by restoration offset the injuries alleged to have occurred;
2) Scaling takes place on a “water for water” basis using only physical properties of aquifers;
3) The scaling method first calculates a physical measure of the amount of water affected by the contamination (e.g. volume, flux, yield) – this is the “injury”; and then
4) A restoration action is selected, and the amount of restoration is calculated so as to affect a physical amount of water equal to that injured.

Implications
This type of “water-for-water” damage scaling provides simplicity and doesn’t require much data, but the disadvantage is that it doesn’t address the potential loss of services associated with groundwater, and the increase in such services from a restoration action. Groundwater services include current or future extraction and use of water for residential, commercial or agricultural purposes, as well as in-situ services such as prevention of subsidence or salt-water intrusion. Importantly, in an NRD case, the relevant service loss (if any) would be determined taking into account the effects of remedial and other response actions at the site. So, containment and treatment of a plume and provision of an alternate water supply to residents might mean little to no loss of drinking water services, even though the volume of water contaminated might be large.

It seldom is the case that a loss of service would scale proportionately with a physical measure such as a flux of water. Other things matter: whether the water serves many or few households, whether there is wellhead treatment and delivery of water to households, whether the ground water discharges to a stream and might affect aquatic resources or recreation, and so on. In effect, the water-for-water methods go directly from the fact of contamination to an amount of restoration, without addressing the vital intervening question of whether any services have been lost that need to be compensated.

The kinds of scaling approach advanced by the Trustees can lead to significant overstatement of damage.

As an example, in the South Valley case in New Mexico, the Trustees computed a volume of water affected, in the plume, adjacent to the plume, and underneath the plume (down 2000 feet) and then assumed that all this water was completely lost, essentially ignoring the on-going remedy. They then postulated restoration schemes such as building a storage reservoir to store a similar volume of water, or purchasing water rights to replace the supposedly lost water. A $4billion damage estimate resulted. These “water for water” approaches by-passed the consideration of groundwater services.

In reality, hydrology and water management institutions in New Mexico are such that the ability of water purveyors to extract and deliver water was unimpaired; constraints on pumping groundwater is Albuquerque derive from requirements to deliver…volume of water in storage. In fact, a replacement well was dug and the volume of pumping by the City was undiminished. Further, to avoid subsidence, drawdown is limited to a few hundred feet. Thus, the key service provided by the vast majority of volume of water down to 2000 feet is subsidence prevention, which is not impaired by contamination. Taking into account these service loss considerations, the actual damages equate to the cost of digging the replacement well, already paid for by the responsible parties. The case was dismissed on summary judgment, a decision upheld on appeal.

Summary
An important trend in damage assessment is states seeking damages for groundwater resources using highly simplified methods that to not address service losses. The result is a potential to overstate damages.

For more on the issue of using water-for-water scaling methods in groundwater cases, there is a more detailed version that is currently under review at the journal on the Lane, Carney and Chapman paper by Cardno Cardno ENTRIX economist Ted Tomasi.