Changes Sought in Payment Rules for Oil Spill Damage : Environment: Instead of putting price tag on each acre or animal harmed, new Clinton Administration plan would require a comparable action to make up for the loss. Neither industry nor activists are satisfied.

A thousand or so sea birds die a slow death. Miles of popular beaches are closed to surfers and swimmers for weeks. Tiny shimmering grunion are killed en masse as they spawn.

This oil-slicked wasteland was long ago cleaned up, but the aftermath of the 1990 Huntington Beach spill--as well as the Exxon Valdez disaster in Alaska and other oil accidents from Santa Barbara to New Jersey--still resonates as officials mold a new policy guiding how the American people will be compensated for oil spills.

How should oil companies make amends for inflicting such intangible pain as a missed morning of surf or the death of a sea otter?

Federal officials have wrestled with formulating a fair compensation policy since 1990, and the latest twist comes in a controversial Clinton Administration proposal. The National Oceanic and Atmospheric Administration, which is seeking input on its proposal at a San Francisco public meeting today and Thursday, faces a court-ordered Dec. 31 deadline to adopt a final rule.

Because of concerns voiced largely by the oil industry, the Administration has scrapped its original policy that put a price tag on each animal, acre of wetland or day of recreation.

Under the earlier strategy, the government performed some unusual calculations based on public opinion polls: What is a day of swimming in the ocean or walking on the beach worth? What would people pay to save an otter or a pelican from dying in an oil slick?

The new damage assessment formula has a far different thrust: Don’t affix a value, just fix it.

For instance, if 20,000 beach-goers were turned away, the oil company responsible for the spill would boost access by that same number of people, perhaps by building a parking lot or walkway or widening a beach. If 10 sea otters died, the company would restore kelp or take some other step to increase surviving otters by 10.

“This approach is so vastly different from the way we’ve done it before,” said Linda Burlington, chief of the agency’s damage assessment team.

Federal economists and attorneys say the public would be more equitably and expeditiously compensated under the proposed policy. And the oil industry generally prefers the new technique as a less arbitrary way to pay the American people what they are due.

But environmentalists and some California oil spill experts worry that the proposal may lower damage settlements and insufficiently reimburse the public. They also say the policy seems so rigid that it could limit options for replacing the losses and bog down already lengthy legal battles.

“What this does is provide less money to the public after a spill, more delay in settling the damages, more procedural advantage to the polluters, and tougher standards for the government to define the injury,” said Warner Chabot of the environmental group Center for Marine Conservation in San Francisco.

Millions of dollars in damage assessment settlements--a record $1 billion in the case of the Exxon Valdez--are at stake in a major spill.

The philosophy behind the policies is that companies responsible for a spill should not just clean up the mess and pay emergency response bills. They also are liable for injury to wildlife and temporary loss of recreation when beaches and marinas are shut down.

Under the new strategy, state and federal agencies--acting as trustees--would team with the oil company to measure the losses, and then seek damages to provide services or resources of “the same type and quality” as those harmed.

In the Huntington Beach tanker spill--which dumped 400,000 gallons of crude into the ocean, closed beaches for five weeks and killed more than 1,000 birds--compensation could amount to a new parking lot or restroom and traps to ward off animals that prey on bird eggs. Only if no direct replacement is available can the trustees try to seek a comparable solution.

“The first thing you try to do is replace the same service that you lost,” Burlington said. “It has to be the same or comparable.”

The federal agency’s goal is to scale damages more fairly for companies that foot the bill while assuring that the public gets enough to fix or replace whatever was lost. Burlington said striking such a balance is what Congress intended in the Oil Pollution Act of 1990.

“It’s going to be more difficult for the trustees, but I think that’s what the statute calls for,” Burlington said. “If it’s too much [money], the person writing a check has a problem with it and if it’s too little, then the public has a problem with it, and we should be concerned about both of those.”

Oil company representatives say the new emphasis on replacing the losses is more judicious than the open-ended and subjective original strategy. Still, the industry faults the proposed rule on several fronts, including use of some untested economic methods to calculate damages and letting the government estimate injuries for some small spills.

“This is moving in the right direction, but there are still fundamental problems with the rule that have not been fixed,” said Arco senior attorney Neal Brody, who chairs an American Petroleum Institute committee on damage assessment. “The sentiment we support fully, but we don’t think this rule in any way achieves those objectives.”

The concept of finding a direct fix for exactly what hurt the public appeals to many environmentalists too. But they say the Administration’s proposed policy is too inflexible and limits the options available for reparation.

“In theory this sounds fine. It’s in practice that it will be trouble,” said Peter Lehner, a senior attorney with the Natural Resources Defense Council, an environmental group that sued the Administration last year to develop an oil spill damage assessment policy. “What we prefer is not tying the trustees’ hands so much,” he said. “I’m sympathetic to NOAA’s concern, but ultimately this rule goes too far.”

Pete Bontadelli, director of California’s Office of Oil Spill Prevention and Response, said the strategy appears to limit the recovery choices available to his agency.

“I am not comfortable that this gives us the ability at all times to address the full value of the range of impacts,” he said. “It appears to be an absolute locking-in to restoration of the habitat that is specifically impacted.”

Resource economist Pierre duVair of California’s oil spill office called the emphasis on direct replacement “a very inflexible and potentially inefficient approach to damage assessment.” Without first gauging how much people value the losses, “we’ll never know for sure that the public is fully compensated,” duVair said.

Some environmentalists say replacement, while perhaps recouping the literal loss, would fail to compensate for the psychic or aesthetic scars left by a spill as catastrophic as the 1969 oil rig blowout in Santa Barbara. For example, residents may value their lost beach days at millions of dollars, but a parking lot or walkway may cost a fraction of that.

Bontadelli also worries that bitter conflicts could emerge over the options, prolonging the legal feuds.

“But a lot of this may just be a problem of interpretation,” he said.

Calculating damages in oil spills has always been a complex, convoluted process that only a handful of economists and attorneys comprehend. Congress, in the wake of the Exxon Valdez disaster, adopted the Oil Pollution Act requiring the President to set a rule guiding the process.

The first version was unveiled by the Clinton Administration nearly two years ago. Under that policy, trustees set a dollar value mostly using public opinion surveys, including a controversial polling technique called contingent valuation recommended by two Nobel laureate economists.

But the oil companies were so vehemently opposed and so many state officials had trouble comprehending the rule that NOAA abandoned it. The new version still allows, but minimizes, the approach of placing a price tag on a beach day or a bird.