[*PG459]NRD TRUSTEES: TO WHAT EXTENT ARE THEY TRULY TRUSTEES?

Laura Rowley*

Abstract:  Several federal environmental statutes have empowered the federal government to appoint executive branch agencies to act as trustees on behalf of the public to oversee the process of collecting damages from responsible parties, and restoring natural resources that have been damaged on public lands. This Note will focus on the question of whether these natural resource damages (NRD) trustees created by federal statute have a common law fiduciary duty to the public, some lesser obligation, or no fiduciary duty at all. This Note concludes that courts have not held executive branch NRD trustees to a common law fiduciary duty, but instead have granted them typical agency deference. Finally, this Note suggests that courts should hold NRD trustees to an enforceable fiduciary duty, similar to the one applied to government trustees under the Indian trust doctrine.

Introduction

Before the environmental movement of the 1970s, states had limited common law authority to recover damages for injury to public natural resources, and the federal government had to rely on explicit legislative mandates before taking action.1 In a provision of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA),2 Congress established the first scheme whereby federal and state governments could appoint trustees who would have the power to bring suit to collect damages from parties whose toxic waste injured natural resources on public land.3 The idea of recovering for natural resource damages (NRDs) is conceptually similar to the tort law doctrine of providing a sum of money to “make the victim whole again,” although here the victim is the environment rather than a pri[*PG460]vate party.4 Like tort, the concept involves the shifting of loss; since natural resource restoration is extremely expensive, the trustees must pursue damages so that taxpayers are not burdened with these expenses.5 Despite its similarity to prior existing doctrines of common law, the idea of recovering damages on behalf of the environment is also revolutionary because it incorporates the natural resources’ intrinsic worth.6 The marketplace economy, which assigns value to natural resources based on the economic worth they hold for humans, does not typically recognize their intrinsic worth.7 CERCLA’s requirement that NRD trustees use recovered funds to replace or restore the damaged natural resource to its “baseline condition as measured . . . [by] the injured resource’s physical, chemical, or biological properties or the services previously provided”8 demonstrates the statute recognizes that acceptable cleanup and recovery standards for humans may not be standards high enough for an ecosystem.9 It further recognizes that the value of natural resources should not always be quantified in human economic terms.10

Today, two more major federal statutes—the Clean Water Act (CWA)11 and the Oil Pollution Act (OPA)12—join CERCLA in allowing recovery of natural resource damages,13 and individual states are [*PG461]allowed to create their own NRD statutory schemes.14 The statutes allow appointed government entities15 to act as trustees to oversee the process of repairing damaged natural resources, which includes initial damage assessments, bringing suit against and collecting awards from potentially responsible parties (PRPs), and applying the recovered funds to restoration of the damaged natural resources.16 This scheme is complex. An understanding of its full meaning is frustrated by the fact that there is little case law in the area, and most cases that have been brought ended short of full litigation when parties agreed to a settlement.17 Many questions remain unanswered about the legal status of NRD trustees.18 This Note will focus on whether the executive branch NRD trustees created by federal statute have a common law fiduciary duty to the public, some lesser obligation, or none at all. Part I of this Note provides background on the CERCLA, CWA, and OPA NRD provisions; Part II discusses the roots of the NRD provisions; Part III provides an example of the federal government acting as trustee in another area of law—the Indian trust doctrine; Part IV explores past and current litigation based on statutory NRD provisions; and Part V determines that courts have granted NRD trustees agency deference, but suggests that courts should instead hold NRD trustees to a fiduciary duty similar to the one applied to government trustees under the Indian trust doctrine.

I.  A New Cause of Action: Natural Resource Damages

A.  The Three Economies

Most lawmakers are aware of and incorporate an understanding of the marketplace economy into the laws that they create.19 In the realm of environmental law and policy, however, laws based only on an understanding of the marketplace economy often will not be [*PG462]sufficient to achieve the goals of regulating behavior to maintain a healthy ecosystem.20 The marketplace economy has been slow to acknowledge a need for recovery of NRDs because natural resources are not easily quantified in terms of monetary value, and thus the marketplace economy undervalues or ignores them.21 It is necessary, therefore, to look beyond familiar market forces and to consider two other “economies” in order to explain the need for NRD recovery.22

The marketplace economy, while undoubtedly a sophisticated and intricate mechanism for dealing with the distribution of resources in our complex society, is limited because it takes for granted many natural resources that cannot be reduced to a monetary value.23 Scholars have recognized a “natural economy” that exists and operates alongside the marketplace economy, sometimes overlapping with it.24 The natural economy accounts for what happens in the physical world and values the biological and “geophysical systems that sustain dynamic planetary processes.”25 It overlaps with the marketplace economy when it supplies vital resources and services to humans.26 Much of what comprises the natural economy, however, lies outside the marketplace economy, which may account for why legal protection of natural resources has been slow to develop.27

A third economy, the “civic-societal economy,” incorporates the entire market economy but extends beyond traditional notions of goods and services that can be exchanged for money.28 While sometimes overlapping with the natural economy,29 it can best be described as “encompass[ing]the public, societal values, ethics, benefits and losses that cumulatively shape the full and long-term interests of society.”30 The health of the marketplace and civic-societal economies are often directly and substantially linked to the health of the natural [*PG463]economy, with its life-sustaining systems of “soil, water, air and living communities . . . [w]hen a resource system is derogated or destroyed, some enterprises may prosper greatly, but the society is likely to be far less well off.”31 Congress implicitly incorporated this idea into its creation of government trustees to protect and restore natural resources that have been damaged.32

B.  CERCLA, OPA, and CWA

While several federal statutes provide some legal authority to recover NRDs, CERCLA is the primary vehicle because it provides the most extensive legal framework for NRD recoveries.33 CERCLA  107 addresses liability for violators of the Act’s provisions.34 Specifically,  107(f) covers liability for damage to natural resources, and allows the United States government, any state government, and any Indian tribe to act on behalf of the public as trustee of the natural resources to recover for the damages.35 Under  107(f)(2), the President must designate federal officials to act as trustees, and the Governor of each state must designate state officials to act as trustees on behalf of the public.36

The natural resources covered by CERCLA include:

land, fish, wildlife, biota, air, water, ground water, drinking water supplies, and other resources belonging to, managed by, held in trust by, appertaining to, or otherwise controlled by the United States . . . , any State or local government, any Indian tribe, or, if such resources are subject to a trust restriction on alienation, any member of an Indian tribe.37

This definition excludes “purely private” property, yet makes clear that land does not have to be owned by the government to be covered [*PG464]by the statute.38 Instead, there must be a degree of government regulation, management or control over the land for it to be considered a natural resource within the meaning of the statute.39 Cases thus far have been brought to protect an aquifer,40 a state’s wildlife and sport fish,41 a stream and groundwater,42 and all drinking water sources within a state.43

The Oil Pollution Act and Clean Water Act both have a provision similar to CERCLA’s NRD provision.44 The CWA allows federal and state officials, as trustees, to sue on behalf of the public to recover “any costs or expenses incurred by the Federal Government or any state government in the restoration or replacement of natural resources damaged or destroyed as a result of oil or a hazardous substance” having been spilled into navigable waters.45 The CWA NRD provision is implemented by the Department of Interior (Interior) in the same manner as the CERCLA NRD provision, employing the same regulations.46

Enacted by Congress in 1990 in response to the Exxon Valdez oil spill, OPA is the most recent federal statute that allows for recovery of natural resource damages.47 Like CERCLA, the natural resource damages provision of OPA states that “the President, or the authorized representative of any state, Indian tribe, or foreign government, shall act on behalf of the public, Indian tribe, or foreign country as trustee of natural resources.”48 Despite the similarity, OPA’s natural resource damages provision improves upon CERCLA’s scheme in some [*PG465]significant ways.49 First, OPA allows trustees to use funds from the Oil Spill Liability Trust Fund to perform initial site assessments and file claims against PRPs.50 In contrast, CERCLA prohibits trustees from using Superfund money to fund initial assessments of sites for natural resource damages.51 This oversight has had the effect of placing trustees in the unfortunate position of being forced to settle with one or more PRPs in order to obtain sufficient funds to perform a site assessment.52 The dangers of this predicament are obvious—settling forecloses the possibility of filing suit against that PRP once the true extent of the damage it caused has been discovered.53 In fact, this lack of funding has often proved to be an insurmountable obstacle because agency budgets have historically authorized little or no funding for natural resource damage actions.54

The OPA NRD provision also differs from that of CERCLA in that the National Oceanic and Atmospheric Administration (NOAA), not Interior, promulgated its regulations and usually acts as the government trustee.55 NOAA filed lawsuits under CERLCA and OPA in Massachusetts, California, Washington, and Alaska, and its efforts have so far appeared to be more successful than those of Interior.56

Finally, there are other federal statutes that allow more limited claims for natural resource damages,57 and, in addition to the federal [*PG466]statutes, each state is free to develop its own statutory scheme for NRDs.58

C.  The Trustees’ Responsibilities

To establish the liability of a potentially responsible party (PRP) under CERCLA, a trustee must not only establish the same elements of a claim as for recovery of response costs,59 but also establish injury and causation.60 Establishing injury can be difficult where it is necessary to demonstrate a change in the resource’s baseline condition.61 Often, information on the baseline condition (before the release of the hazardous substance took place) is unavailable.62 The causation element is also problematic because the necessary standard is unsettled. For example, a Massachusetts federal district court held that a trustee need only demonstrate that the contaminant is a “contributing factor” to the injury,63 while a California federal district court held that the contaminant must be the “sole or substantially contributing factor” to the injury.64

It is clear, however, that despite any difficulties in the process of pursuing natural resource damages, Congress did intend for these cases to be brought.65 Moreover, there are fiduciary duties that restrict trustees’ discretion.66

D.  Trustees Have Conflicting Interests

With the exception of the federally recognized Indian tribes, NRD trustees are governmental entities, subject to the obligations [*PG467]that status confers.67 As a large administrative body, Interior cannot escape its involvement in other projects or its knowledge of other priorities that may affect its ability to put the needs of the NRD trust beneficiaries ahead of itself.68 While these other interests do not necessarily preclude Interior from fulfilling its fiduciary duty, if it indeed has one, these conflicts of interest may to lead to the following problems:

(1) using recovered damages inappropriately for restoration activities outside of the statutory requirements to restore, replace, and acquire equivalent natural resources; (2) abusing settlement authority to benefit PRPs for political reasons; (3) precluding private parties from compensation for a loss resulting from the damaged natural resource; (4) increasing assessment costs and fees to fund the trustee’s own office; (5) avoiding liability when the trustee is a PRP; and finally (6) increasing costs due to overlapping jurisdiction with other federal, state, and tribal trustees.69

In fact, many of these potential problems have actually come to pass, demonstrating the need for more clearly defined duties on the part of these government agencies when they act as trustees.70

II.  Roots of NRD Provisions: Common Law Trust and the Public Trust Doctrine

Neither a private entity nor a local government may bring CERCLA natural resource damage claims unless it has been appointed trustee by a state governor.71 Instead, the individual or local government must rely on a state or federal government entity to bring the claim.72 The public is in a position of vulnerability, relying on and placing its trust in the government to accomplish restoration of the damaged natural resources in which each member of the public has a stake. In short, CERCLA and the other federal statutes that allow for [*PG468]NRD trustees have created a trust relationship between the government and the public.73 This section will explore first the common law of private trusts, then provide a brief summary of the public trust doctrine, which some commentators have asserted is the root of the federal statutory NRD provisions.

A.  Common Law Trust

Generally, a trust is a device that allows a trustee to manage property for one or more beneficiaries.74 The theory of a trust relationship involves varying degrees of ownership on the part of trustees and beneficiaries.75 Neither owns the trust property to the exclusion of the other: “the trustee owns the legal interest and the beneficiary owns the equitable interest.”76 To create a trust at common law, a property owner transfers assets to a trustee, usually by means of a written document setting forth the terms of the trust.77 In order to create a trust, there must exist a settlor (property owner who created the trust), a trustee, and a beneficiary.78 A trustee may also be a beneficiary, but a valid trust must have at least one beneficiary who is not a trustee, under the theory that such a beneficiary would be willing to go to court to enforce the terms of the trust against any misconduct on the part of the trustee.79 There must also be a corpus (trust property),80 and intent on the part of the settlor to create a trust.81

A trust relationship between a trustee and beneficiary carries with it the highest fiduciary duty known at law.82 Trustees must be proactive in gathering and preserving assets,83 and making them productive.84 The “duty of loyalty” mandates that trustees put the interests of beneficiaries above their own—to a standard that is illustrated as [*PG469]being above reasonableness, but somewhat less than self-sacrifice.85 When investigating whether a trustee has abided by this duty of loyalty, a court looks both to the trustee’s actions and her state of mind.86

The duty of loyalty doctrine includes the “no further inquiry rule”: if a trustee has benefited in any way from a transaction made on behalf of the trust beneficiary, a court will conclude that there has been a breach of the duty of loyalty, regardless of whether the beneficiary has benefited, or will ultimately benefit, from the transaction.87 The only exceptions to this rule against self-dealing on the part of a trustee arise when the settlor of a trust has agreed to the particular action that would constitute self-dealing, or when all the beneficiaries of the trust agree to it after being fully informed of the action and its potential consequences.88

Other common law duties of trustees include the duty to earmark trust property89 and the duty not to co-mingle trust property with the trustee’s own property.90 Under the duty to earmark trust property, the trustee must keep copious notes and a paper trail of all investments of the corpus.91 The duty not to co-mingle is self-explanatory: the trustee must keep the trust corpus separate from his or her own property.92

Finally, trustees have a duty not to delegate.93 Historically, under the common law, a trustee had to handle personally all investments and other transactions made with the trust property.94 More recently, however, courts have approved delegation of tasks, so long as the delegation is done prudently.95 To prove that a task was delegated prudently, a trustee must show that he or she researched the selected agent; if the trustee makes a negligent delegation, he or she is liable for the resulting losses.96

[*PG470] If the basic common law trust principles were to apply to the NRD trustee provisions of the federal statutes, the Congress that passed the statute would be the settlor, or creator of the trust.97 The appointed federal or state government agency, or Indian tribe would be the trustee.98 The beneficiaries of the trust can be identified as members of the public, likely any United States citizen since natural resources are ignorant of state boundaries.99 The trust corpus would be the money recovered from responsible parties through litigation.100 The question remains, however, whether Congress intended these basic common law principles of trust to apply in the NRD provisions of CERCLA, CWA, and OPA.

B.  Public Trust Doctrine

Although it is unclear to what extent Congress intended common law trust principles to apply to NRD provisions, it is clear that the trustee provisions of CERCLA, CWA, and OPA find roots in the public trust doctrine.101 In the context of the public trust doctrine, trustees, which are generally states, are not impressed with fiduciary duties identical to those imposed by common law; states as trustees of natural resources are not held to the highest fiduciary duty known at law, since the public trust doctrine does not require absolute protection of all trust resources.102 Variations of the public trust are permissible, although a careful fiduciary balancing process is required of the government trustees.103 A legislature cannot simply override the public trust protection.104 Instead, courts require a substantive, rather than procedural, trust balance under traditional equity standards.105 In Paepke v. Building Commission,106 for example, the Illinois Supreme Court implied that a government wishing to alter public trust re[*PG471]sources bears the burden of showing that it has struck a balance between its trust obligations and other economic or legislative motives.107 The government, in its role as trustee, comes before the court as a fiduciary subject to special scrutiny, and less deserving of the deference given the government in its other capacities.108 The court then affords the public trust’s long-term legacy great weight, and any departure from such legacy would bear the burden of persuasion.109

The plain language and legislative history of CERCLA, CWA, and OPA NRD provisions imply that the meaning of the words “trust” and “trustee” derive from the concepts of state and federal public trust.110 Unfortunately, the statutes are silent regarding the definition of the trustees’ fiduciary duty, and it is not readily apparent whether Congress intended NRD trustees to be subject to the same standards as trustees under the public trust doctrine.111

III.  The Indian Trust Doctrine: An Example of Government as Trustee

The idea of the federal government serving as trustee for natural resource damages has not been fully explored in litigation,112 but there have been analogous situations in which the United States government has acted as trustee that could help shed light on the concept. One such situation is the federal government’s role as trustee on behalf of federally recognized Indian tribes, an enlightening scenario because Indian trust law is the closest cousin to the public trust doctrine, in which the NRD provisions are rooted.113 Furthermore, Indian trust law is a particularly good analogy to shed light on the role of NRD trustees because currently, environmental threats to tribal land bases are the most pressing issues under the doctrine.114 Indian litigants have successfully invoked the Indian trust doctrine to force the executive branch of the federal government to live up to its trust responsibility in matters such as considering Indian interests when allo[*PG472]cating water rights;115 cleaning up pollution on Indian reservations;116 protecting Indian lands against trespassers and infringing development;117 preventing improper conveyance of Indian lands;118 and compensating for natural resource mismanagement.119

The current status of the government’s Indian trust responsibility is certainly not one of a clear common law fiduciary duty.120 It does, however, find certain reference points in the common law.121 For example, defining the trust duty depends upon the branch of government against which the responsibility is being enforced; courts have been reluctant to hold that the trust duty constrains congressional action, and have even held that Congress has the power to terminate the Indian trust.122 This is because at common law, the settlor, or creator of the trust, has the power to alter and even end the trust, regardless of the impact on the beneficiary.123 So, “while courts recognize that Congress has a trust responsibility, they uniformly regard it as essentially a moral obligation, without justiciable standards for its enforcement.”124 Even though the Supreme Court established a standard that limits Congress’s power,125 the standard, similar to a rational basis review in constitutional law, is so loose that it effectively did little to change previous court opinions that set standards of great deference to Congress.126

The executive branch, on the other hand, would be the trustee in a common law trust paradigm, and consequently has been held to [*PG473]more than a mere moral obligation.127 In United States v. Mitchell,128 [hereinafter Mitchell II] the Supreme Court found that Indians could legally enforce a trust responsibility129 against the federal executive branch.130 This interpretation, though, was not the Supreme Court’s original conclusion.131 In an earlier version of Mitchell v. United States,132 [hereinafter Mitchell I] the Court had rejected a tribe’s claim for money damages under the General Allotment Act, reasoning that the Act “created only a limited trust relationship between the United States and the allottee that does not impose any duty upon the Government to manage timber resources.”133 On remand, the Court of Claims examined several timber management statutes apart from the General Allotment Act, and ruled that they imposed a fiduciary duty on the executive branch of the federal government.134

In Mitchell II, the Supreme Court agreed with the Court of Claim’s conclusion, and held that the federal government did have a fiduciary duty toward the Indians under the timber management statutes.135 It noted that the Quinault reservation had been allotted in trust to individual tribe members.136 The Tribe and its individual members had sued the federal government for mismanagement of forest resources on the reservation.137 The executive branch was implicated through Interior, which had been responsible for managing the forest resources.138

In its analysis, the Court applied a three-part test that addressed the issue of legislative intent to create a right and a remedy in regard to the Tribe’s collection of monetary damages for the government’s [*PG474]breach of its fiduciary duty.139 The three factors were: (1) a tribe must base its claim on a substantive right found in the Constitution or a federal statute, or created by the assumption of federal control over Indian property; (2) the claim must be for money damages; and (3) the claimant must demonstrate that the law creating the substantive right “can fairly be interpreted as mandating compensation by the Federal Government for the damage sustained.”140

The Court, applying the test to the Quinaults’ claim in Mitchell II, found that the Tribe had a substantive right based on both the timber statutes and the assumption of elaborate federal control.141 The Court found two sources of fiduciary duty: it first held that the executive branch must exercise fiduciary care when a trust relationship is clear from congressional enactments, and relied on the standards for federal management of Indian timber set out in the multiple timber management statutes and administrative regulations.142 Second, the Court found that a fiduciary relationship had necessarily arisen when the government assumed “such elaborate control over forests and property belonging to Indians.”143 The Court further held that Interior’s regulations, which were comprehensive and had been revised several times, imposed fiduciary duties upon the agency, as did the [*PG475]requirement that the Secretary of the Interior consider “the needs and best interests of the Indian owner and his heirs.”144

The Court in Mitchell II never explicitly stated on what substantive right the Tribe’s claim was based, but rather “implicitly stated a substantive right of Indians to be protected from an executive branch agency’s breach of its fiduciary duty.”145 The source of this fiduciary duty arose from the pervasive federal involvement in tribal forestry management; it did not seem to be inherent in the federal-tribal relationship.146 As for the Tribe’s entitlement to compensation for the government’s breach, the Court found that the statutes and regulations at issue could be fairly interpreted as mandating compensation because they clearly established fiduciary obligations on the part of the government in the management and operation of Indian lands and resources.147 Unlike the Mitchell I Court, which would have allowed compensation only where the law creating the substantive right expressly mandated it,148 the Mitchell II Court found an implied right of damages under the regulatory scheme based on precedents from the Court of Claims that allowed implied rights of action for Indians,149 and on an analogy to the common law of trusts.150

The Mitchell II decision does have some problematic features, including a lack of clarity in the scope of its holding.151 The Court seemingly created a rule of liability without manageable standards because it failed to set parameters on how extensive a statute must be in detailing governmental duties in order for a court to find a claim for money damages.152 Critics also find the holding problematic because of its reference to the Quinault’s lack of education, and because it [*PG476]relies on common law trust principles even though the Court has consistently found the federal-tribal trust relationship to be unique.153

Despite the confusion surrounding Mitchell II, the case demonstrates that common law principles of trust can apply when the federal government acts as trustee.154 Perhaps the most obvious indication that the federal government has a fiduciary duty in the realm of Indian trust law, and that the Indians have a right to enforce it, is the current “Indian Trust Suit,” Cobell v. Norton.155 As a result of Interior’s alleged mismanagement of Indian trust funds for years, 300,000 American Indians have sued the federal government for breach of its fiduciary duty.156 Were there no fiduciary duty on the part of the federal government, the plaintiffs in this case would not have a cause of action.157

IV.  Past and Current NRD Litigation

Very few cases have been litigated under the CERCLA, CWA, and OPA NRD provisions. Most of the controversy that has found its way into a courtroom has focused on the methodology the trustee used to perform damage assessment.158 This section looks at the history of courts’ decisions that have granted NRD trustees typical agency deference instead of holding them to a stricter fiduciary standard. It then examines one case where a court allowed an environmental group to intervene in NRD proceedings to prevent a settlement between the trustee and a PRP that was not in the public’s best interest.

A.  Courts Afford Great Deference to NRD Trustees

According to the language of CERCLA’s NRD provision, the government does have a duty to commence at least a damages assessment when there has been injury to natural resources: the President and Governor “shall designate” officials to act as trustees, and those officials “shall assess damages” to natural resources.159 The provision does not clarify whether the trustees have an obligation, in their fiduciary capacity, to pursue damages to restore natural resources, [*PG477]and whether the trustees have the option of settling with PRPs.160 Furthermore, the provision leaves unclear whether or not it is a violation of the trustees’ fiduciary duty not to take action beyond the point of assessing damages.161 CERCLA also fails to provide guidance for situations where reality conflicts with the statutory purpose—for example, when trustees simply do not have access to adequate funds to pay for an initial site assessment.162

1.  Cases Establish Deference to Trustees

If a government trustee plans to pursue damages after an initial site assessment, the question must be explored whether the trustee, such as Interior, has a duty to seek damages for restoration purposes, or whether it may pursue a cheaper alternative.163 When Interior originally promulgated rules governing NRD trustee action, it created a rule stating that trustees under the CERCLA NRD provision were allowed to seek recovery for the lesser of the cost of restoring the injured resource or the lost use value of the resource.164 However, the D.C. Circuit Court of Appeals held the rule invalid in Ohio v. United States Department of Interior.165 That court stated that the relevant CERCLA provisions demonstrated that “Congress established a distinct preference for restoration costs as the measure of recovery in [NRD] cases.”166 Before environmentalists could declare victory, though, the court went on to explain that Interior could sometimes take into account other factors.167 For example, when restoration is physically impossible or the cost is grossly disproportionate to the lost use value, Interior may seek damages for lost use value168 of the resources instead of restoration cost.169

[*PG478] Even though the Ohio court invalidated the “lesser of” rule, trustees are still left with plenty of choices in seeking damages for harm to natural resources, and in how to use the recovered funds.170 CERCLA allows for recovery of damages that shall be used “to restore, replace or acquire the equivalent of” the affected natural resources.171 In Kennecott Utah Copper Corporation v. United States Department of Interior,172 the D.C. Circuit Court of Appeals heard several challenges to Interior’s regulations concerning assessment of NRDs.173 Petitioner Montana argued that CERCLA requires trustees to prefer “restoration” and “rehabilitation” of natural resources over the “acquisition of equivalent resources” because the former result in a net benefit to the nation’s natural resources whereas acquiring equivalent resources simply transfers into public ownership uninjured resources that are comparable to the injured resources.174 Under Interior regulations, trustees are required to consider cost in implementing the most appropriate remedial strategy.175 The court concluded that Montana’s argument may have merit as policy, but that under Chevron U.S.A., Inc. v. Natural Resources Defense Council,176 Interior’s interpretation is permissible.177 The court found that Congress had not clearly expressed a preference for restoration/rehabilitation over replacement/acquisition.178 The court did not analyze Congress’s choice of the word “trustee,” and so did not consider whether to apply a fiduciary standard instead of the typical deference standard to agencies.179

[*PG479] In Puerto Rico v. SS Zoe Colocotroni,180 the First Circuit discussed the difference between restoration and replacement/acquisition.181 In Puerto Rico, an oil tanker ran aground on a reef three and a half miles off the south coast of Puerto Rico.182 In order to refloat the vessel, the captain ordered the crew to dump more than 5,000 tons of crude oil into the water.183 The court allowed the government to seek NRDs under a state statute analogous to the NRD provisions of the CWA.184 The First Circuit judges decided, in light of the NRD provisions of the CWA, that Congress had intended for NRD recovery instead of merely recovery for the loss of market value of the affected real estate.185 However, after examining the legislative history of the CWA’s NRD provisions, it went on to infer a reasonableness standard186 that should dictate a trustee’s determination of what type of restoration damages to seek.187 It explained that acquiring resources to offset the loss could include acquisition of comparable lands for public parks, or reforestation of a similar proximate site where the presence of oil would not pose the same hazard to ultimate success.188 It continued by stating that as with restoration damages, damages awarded for alternative measures should be reasonable and not grossly disproportionate to the harm caused.189 The Puerto Rico court’s interpretation might have moved beyond Congress’s intent by holding that funds could be [*PG480]spent on projects that have no direct relationship to the damaged resources, such as building public parks elsewhere.190

In sum, courts have decided that trustees should seek damages for restoration instead of lost use value, unless restoration would be impossible or the cost of restoration is grossly disproportionate to the lost use value of the resources.191 However, when a trustee pursues restoration damages, the trustee can decide, based on cost, whether to seek damages in an amount that can be used to attempt to restore the natural resources to their pre-damaged state, or to acquire the equivalent of the damaged natural resources by buying up land or by other means.192 As there are still relatively few cases concerning NRD trustees, it remains to be seen how broadly the term “acquiring the equivalent of” will be defined.193 It also remains to be seen how “grossly disproportionate” recovery costs have to be before trustees can recover for lost use value instead of restoration.194

A final factor in the equation, which may cause trustees to delay assessment and ultimately not to seek damages, is that under CERCLA, NRDs are residual to cleanup.195 Cleanup work by EPA or responsible parties could significantly restore injured natural resources to their pre-damaged condition, thus eliminating the need for trustees to step in at all.196 Even if the damage to natural resources is not completely or significantly restored by cleanup, common sense dictates that the trustees should not do a damage assessment until the remedial work has been completed, or the effects of the remedial work become apparent.197

Courts have interpreted the statutes to allow trustees a significant amount of discretion.198 It seems, at times, that they can consider the [*PG481]interests of those other than the public, the named beneficiary of the trust.199

2.  NRD Trustees in Practice

Ohio and Kennecott establish that money collected in NRD cases does not necessarily have to be applied directly to resource restoration, making the guidelines of expected behavior for a trustee fuzzy.200 For example, in 1991, a train derailed near Dunsmuir, California, spilling approximately nineteen thousand gallons of the herbicide metam sodium into the upper Sacramento River.201 A thirty-eight million dollar settlement, fourteen million of which had been obtained under CERCLA’s NRD provision, was deposited in the Canterra Trustee Council’s account.202 In 1995, the Canterra Trustee Council announced that it would use the money to develop natural resource restoration projects in other areas of the state, although projects affecting the upper Sacramento River would be given a higher priority.203 Apparently, no member of the public or any environmental organization assumed the role of a trust beneficiary, and therefore, no attempt was made to enjoin the Canterra Trustee Council from using the trust corpus in this manner.204

An example on a larger scale can be found in the case of the 1989 Exxon Valdez oil spill, where an oil tanker sliced into a submerged reef and spilled nearly eleven million gallons of crude oil into Prince William Sound off the coast of Alaska.205 Six NRD trustees represented the United States and the State of Alaska to bring suit under the CERCLA and CWA NRD provisions, garnering a nine hundred million dollar settlement from Exxon.206 Ten years later, it is apparent that not all the money was used for restoring damaged natural resources.207

[*PG482] The Exxon Valdez Oil Spill Trustee Council (Spill Trustee Council) has divided the funds into several categories.208 First, money must be used to reimburse federal and state governments for costs incurred prior to the settlement, and to reimburse Exxon for cleanup work that took place after the settlement.209 Next, the Spill Trustee Council has devoted 25.3% of its budget to research, monitoring and restoration.210 The largest portion of the budget, 60%, goes toward habitat protection, which the Spill Trustee Council accomplishes by providing funds to government agencies to acquire title or conservation easements on land important for its restoration value.211 The Spill Trustee Council has set aside 15.2% of its budget for a reserve fund that will support long-term restoration activities after Exxon supplies the final payment of the settlement in September 2001.212 Finally, 4.3% of the budget is devoted to science management, public information and administration.213

As in the case of the Canterra Trustee Council, no member of the public has attempted to challenge the Spill Trustee Council’s distribution of funds recovered under CERCLA and CWA NRD provisions. Even if trustees such as the Canterra Trustee Council and the Spill Trustee Council theoretically have a fiduciary duty to the public, their unchallenged decisions amount to their having virtually complete discretion.214 In the long run, this unchecked power could lead to abuse, which will be to the detriment of the already damaged natural resources.215 The following case, however, demonstrates that there is potential for the public, as beneficiary, to intervene in NRD litigation and enforce trustees’ fiduciary duty.

[*PG483]B.  In re Acushnet River & New Bedford Harbor

In In re Acushnet River & New Bedford Harbor: Proceedings re Alleged PCB Pollution,216 the United States and the Commonwealth of Massachusetts (the sovereigns) brought a claim, inter alia, under CERCLA  107 for damages to natural resources allegedly caused by the release of polychlorinated biphenyls (PCBs) into New Bedford Harbor.217 The proceeding involved an attempt to resolve the liability of one defendant, AVX Corporation, which allegedly caused the release of PCBs during its ownership and operation of a capacitor manufacturing plant adjacent to New Bedford Harbor.218 On March 4, 1987, the parties filed a settlement agreement of two million dollars and a proposed judgment approving the settlement.219 At that point, the National Wildlife Federation (the Federation), representing the interests of its members who lived in the New Bedford Harbor area, sought to intervene to contest the proposed settlement.220 Among other rights, the Federation wanted to brief and argue the appropriate measure of natural resource damages under CERCLA.221 The Federation believed that the sovereigns had adequately represented its interests until the announcement of the proposed settlement, at which point it believed the sovereigns had betrayed its interests by accepting such a low settlement figure.222 Although the sovereigns argued that their ultimate goal of cleaning up the harbor was consistent with that of the Federation, the court granted the Federation’s motion to intervene in order to promote the just and equitable adjudication of the legal questions before it.223

Undoubtedly, AVX was anxious to settle because under CERCLA, a judicially approved settlement entitled them to protection from contribution liability to non-settlors.224 The sovereigns had little incentive to make sure that the settlement was favorable because the [*PG484]settlement would only reduce the potential liability of others by the amount of the settlement.225 The court, therefore, had the important task of ensuring that the settlement was “fair, adequate, and reasonable, and consistent with the Constitution and the mandate of Congress” before granting its approval.226 The Federation argued that the proposed settlement violated the mandate of Congress because it violated the NRD settlement provision of CERCLA.227 The court held that, contrary to the Federation’s position, the Congressional mandate was satisfied because the CERCLA settlement provision does not require recovery of the full restoration and replacement of the injured natural resources.228 The court stated that it was not required to ensure that the sovereigns had negotiated the best deal possible, and that the settlement was “fair, reasonable, and in the public interest.”229 When the natural resource damages were later revealed to be close to seventy million dollars, therefore, nothing could be done.230 The court addressed the possibility that damages would later be revealed to be much higher than the settlement agreed upon, and stated that it was not disturbed by the fact that AVX may have caused the most pollution.231 Instead, the court took the position that AVX deserved a [*PG485]break for being the first to enter into settlement negotiations well in advance of the trial.232

Even though the Federation was not ultimately successful, the case is significant because the court implicitly recognized that members of the public, as beneficiaries, have a right to intervene in NRD proceedings in an attempt to force the NRD trustee to consider the public’s best interest.233

V.  Courts Should Find That NRD Trustees Have a Fiduciary Duty

The NRD provisions of CERCLA, CWA, and OPA are statutory causes of action, which means that their interpretation need not mirror common law precedents.234 A motivating force behind the CERCLA NRD provisions was Congress’s dissatisfaction with the common law’s inability to measure loss other than market value.235 Yet, when Congress created this revolutionary cause of action, it gave the power to bring NRD claims exclusively to state and federal trustees of natural resources who would act on behalf of the public, or to designated trustees of Indian tribes.236 In other words, Congress created a trust.237 Because the subject matter concerns natural resources that belong to all, this trust finds its roots in the public trust doctrine.238 Therefore, it would be logical to turn to public trust doctrine jurisprudence to interpret the CERCLA, CWA, and OPA NRD provisions. However, while the public trust doctrine is “a cornerstone of environmental and public lands law, [it] labors under an overriding ambiguity and obscurity that hinders its effective application.”239 It makes sense, then, to look also to Indian trust law, the public trust doctrine’s closest cousin, for guidance in how federal statutory NRD trustees should act.240

This section will first examine the problems with trying to hold NRD trustees to a fiduciary standard in light of the incomplete drafting of the statutory provisions and the current precedent granting [*PG486]deference to trustees. It then looks at the similarities between federal statutory NRD provisions and Indian trust law, and argues that courts should hold NRD trustees to a similar fiduciary duty to which the Mitchell II Court held federal executive branch Indian trustees.

A.  Difficulty in Identifying What Would Constitute a Breach of Fiduciary Duty: Inherent Ambiguities in the NRD Trustee System

Instead of holding federal statutory NRD trustees to a strict fiduciary duty, courts have granted them agency deference.241 One argument for imposing a fiduciary duty on NRD trustees, thereby eliminating this standard of deference, is to increase public accountability.242 Today, public accountability is severely lacking because the deference standard makes it nearly impossible to identify cases where trustees’ activities violate the bounds of the statutory authority under which they act. Ohio and Kennecott have blurred the lines in NRD cases concerning the meaning of natural resource restoration, leaving the door wide open for trustees to make decisions about restoration that may not live up to the public’s expectations.243 Of course, if a trustee used recovered funds to increase general government funds, without contributing a cent toward restoration, this would be a clear violation of its fiduciary duty and Congress’s intent.244 As soon as the trustee makes even the most minimal effort to restore, though, any further attempt to delineate the statutes invokes uncertainty.245

For example, the 1991 train wreck near Dunsmuir, California, that resulted in a chemical spill into the upper Sacramento River, put fourteen million dollars into the pockets of the Canterra Trustee Council to use for restoration.246 In 1995, the Canterra Trustee Council announced that it would use the money to develop natural resource restoration projects in other areas of the state, although projects affecting the upper Sacramento River would be given a higher priority.247 Here it can be argued that the Canterra Trustee Council’s actions fall under the permissible conduct of replacement/acquisition [*PG487]discussed in Puerto Rico.248 The Council could argue that restoration of the upper Sacramento River was not feasible, that restoration would result in harmful side effects, or that their efforts would be redundant or disproportionately expensive.249 If any of these arguments were valid, spending the trust money to restore losses in other areas would be a legally acceptable action.250

The best example of the futility in trying to identify where an NRD trustee has violated the bounds of the statutory authority, and thus violated its fiduciary duty, is found in the case of the 1989 Exxon Valdez oil spill.251 The Spill Trustee Council recovered nine hundred million dollars from the settlement of a suit under the CERCLA and CWA NRD provisions.252 Due to the magnitude of the disaster, the Spill Trustee Council used the money for a variety of purposes, but it is unclear whether all the uses were for the end result of natural resource restoration.253

There are several ways in which the Spill Trustee Council might have spent funds in violation of the statutes that allowed recovery.254 The Spill Trustee Council has funded several monitoring and research projects, including some that would normally be funded by agencies such as Alaska Department of Fish and Game.255 The Spill Trustee Council has also purchased 456,000 acres of land at a price higher than market value, believing that the acquisition would provide a degree of protection and public access otherwise not available.256 In addition, the Spill Trustee Council established a four and one half million dollar fund to restore and protect waterways across the United States, and spent over $26 million in support of the Alaska SeaLife Center.257

[*PG488] A closer look, however, reveals that these uses of funds arguably all fall within statutorily permissible uses.258 First, the land acquisitions were arguably a misuse of the settlement funds because the Spill Trustee Council paid too much for the land.259 While this may be so, it is important to distinguish the question of whether the Spill Trustee Council breached its fiduciary duty, if it has one, from whether it overstepped the bounds of the NRD statutory provisions. In the case of the latter, the Spill Trustee Council was comfortably within the letter of the law, based on the Puerto Rico court’s holding that acquisition of comparable lands is permissible, and possibly preferable to restoration in areas where ultimate success is uncertain.260 This, then, is an excellent example of where the public would be better served by the judiciary holding NRD trustees to a standard of fiduciary care instead of the traditional agency deference granted by the Puerto Rico and Kennecott courts.261 The trustees would have violated a fiduciary duty by paying too much for the land, and perhaps by acquiring the land at all.

Another gray area is the use of funds to restore and protect waterways across the United States. Technically, this use does not violate a statute because the money was a reimbursement to EPA for costs incurred during cleanup of the spill prior to settlement.262

Arguably, the Spill Trustee Council’s use of over twenty-six million dollars in support of the Alaska SeaLife Center263 is the one glaring example of money spent on purposes outside the confines of the CERCLA and CWA NRD provisions. However, before concluding that the Spill Trustee Council has violated its fiduciary duty as trustee, another explanation should be considered. The last sentence of CERCLA  107(f), “The measure of damages in any action . . . shall not be limited by the sums which can be used to restore or replace such resources,”264 means that trustees may recover more money than is actu[*PG489]ally needed to restore damaged natural resources.265 This portion of the statute allows NRD trustees to recover damages in an amount that exceeds the cost of restoring or replacing resources, thus recognizing that a trustee may “recover damages not only to restore an injured resource physically, but also to compensate the public for the lost use of resources during the interim period between the discharge of hazardous substances and the final implementation of a remedial plan.”266 Recovered damages under this portion of the statute are surplus to the cost of actual restoration and trustees can spend the extra money they collect without further Congressional authorization or appropriation.267 Thus, the Spill Trustee Council’s contribution toward the creation of the Alaska SeaLife Center might be justified as a use of excess funds recovered to compensate the public.268

The legal ambiguity that prevents a clear understanding of whether a trustee such as the Spill Trustee Council is exceeding the bounds of statutory authority and/or is violating its fiduciary duty to the public, also prevents observers from being able to discern whether the trustee itself seems to be acting under the belief that it has a fiduciary duty to the public. In sum, the CERCLA, CWA, and OPA NRD trustee provisions may have originally been drafted with intent for the trustees to have a fiduciary duty to the public. Along the way, though, courts seem to have lost sight of that goal, and granted federal executive branch NRD trustees deference instead of holding them to a stricter fiduciary duty.269

B.  Indian Trust Law Sheds Light

Despite the fact that courts have made it difficult to identify when an NRD trustee may have breached its fiduciary duty,270 it is not hard [*PG490]to imagine a situation in which such a case might arise. For example, a trustee could settle with a PRP for an amount obviously too low, or could refuse to spend any of the recovered funds on restoring damaged natural resources, instead using the money for other purposes.271 Two questions arise when considering such hypothetical situations. The first is whether a citizen could bring a lawsuit, or intervene in a lawsuit or settlement negotiations between the government trustee and PRPs, to force the government either to pursue a suit for NRDs or to prevent an inadequate settlement. The answer to this question seems to be affirmative, since the National Wildlife Federation did just that in the New Bedford Harbor case.272 The second question is whether a citizen can sue for damages under the theory that he has been harmed by the trustee’s breach of fiduciary duty. It may be that when Congress created NRD trustees, it did not intend the word trustee to carry the common law meaning,273 but instead meant it to mean something more symbolic. The case law where courts granted deference to agencies that act as trustees supports this notion.274 However, drawing a comparison to the area of Indian trust law275 reveals several factors that support finding some level of an enforceable fiduciary duty in regard to NRDs, a breach of which would support a private cause of action for damages.276

Mitchell II established that the United States was accountable in money damages for alleged breaches of trust in connection with its management of forest resources277 on allotted lands of the Quinault [*PG491]Indian Reservation.278 The timber statutes and regulations upon which the Indians relied clearly gave the government full responsibility to manage Indian resources and land for the Indians’ benefit.279 Therefore, the Court found that these timber statutes, despite the fact that they lack the words trust and trustee, constructively imposed a fiduciary duty on the executive branch trustee, and defined the contours of the United States’ fiduciary responsibilities.280 The Court also concluded that a fiduciary relationship necessarily arose because the government had assumed such elaborate control over forests and property belonging to the Indians.281 It noted that all of the necessary elements of a common law trust relationship were present: a trustee (the United States), a beneficiary (the Indian allottees), and a trust corpus (Indian timber, lands and funds).282 The Court went on to say,

Because the statutes and regulations at issue clearly establish a fiduciary obligation of the government in the management and operation of Indian lands and resources, they can fairly be interpreted as mandating compensation by the government for damages sustained. Given the existence of a trust relationship, it follows that the government should be liable in damages for a breach of its fiduciary duties. It is well established that a trustee is accountable in damages for breaches of trust. This Court and several other federal courts have consistently recognized that the existence of a trust relationship between the United States and an Indian or Indian tribe includes as a fundamental incident the right of an injured beneficiary to sue the trustee for damages resulting from a breach of trust.283

The Court disagreed with the government trustee’s argument that violations of its statutory duties could be remedied by prospective relief such as declaratory, injunctive, or mandamus relief.284 It held [*PG492]that such prospective remedies would be inadequate in this context for several reasons.285 The Indian allottees were not in a position to monitor federal management of their lands because many were uneducated, and most were absentee owners, with some not even knowing the exact location of their land.286 In addition, the Court factored in the reality that often, once the land has been mismanaged, the damage to the resources will have been so severe that prospective relief would be worthless.287

Much of the reasoning that led to the Court’s conclusion in Mitchell II is directly applicable to cases litigated under the NRD trustee provisions of CERCLA, CWA, and OPA.288 First, the idea that Congress gave full control over the resources on Indian lands to the executive branch is directly analogous to the NRD provisions of CERCLA, CWA and OPA.289 Just as individual Indians or Indian tribes were not able to assert control over the resources on their allotted land, members of the public are not permitted to bring suit for damages to natural resources.290 The Bureau of Indian Affairs (BIA) is the executive branch agency that exercises day-to-day supervision over land and resource development on tribal and allotted Indian lands.291 Federal statutes allow BIA involvement in nearly all phases of timber, mineral, agricultural, and range resource development.292 Sometimes, the BIA fails to perform its duties adequately, and the tribes have used the trust doctrine to hold the government to strict fiduciary responsibilities.293 By analogy, members of the public ought to be able to use the public trust doctrine or theories of common law trust to hold Interior and other executive branch NRD trustees to strict fiduciary responsibilities, and to collect damages when those duties go unfulfilled.

A second similarity between the timber statutes at issue in Mitchell II and the CERLA, CWA and OPA NRD provisions is the elaborate control over natural resources that all the statutes give the govern[*PG493]ment.294 The Court in Mitchell II found that the elaborate control over forests and property belonging to the Indians necessitated finding a fiduciary relationship.295 The same could be said of the government’s role in restoring natural resources—the decisions of how to restore and replace damaged resources, particularly in the wake of damage as devastating as that caused by the Exxon Valdez oil spill, are certainly exercises of elaborate control.296

Third, the Court’s explanation of the government’s control of Indian resources is something to consider in the realm of NRD trustees as well.297 Just as many Indians are absentee owners of their allotted land, many members of the public are not able to keep close tabs on damaged natural resources.298 The Mitchell II Court reasoned that a trusteeship would mean little if the Indian beneficiaries were required to supervise the day-to-day management of their estate by their trustee or else be precluded from recovery for mismanagement.299 Like absentee owners of Indian land allottees, members of the public rely on government trustees to oversee restoration and rehabilitation of resources that they value, but can not fix themselves.300 It is this vulnerability and reliance that should give rise to an enforceable fiduciary duty.

Of course, the reasoning that led to the conclusion in Mitchell II does not apply perfectly to the context of NRD trustees. For example, the Court also found an enforceable trust duty because many allottee land owners were uneducated.301 This argument does not apply to the case of NRD trustees because the class of beneficiaries (the public as a whole) could not be characterized as vulnerable in the sense that being “uneducated” implies.302 It is difficult to know how much emphasis the Court placed on this factor as opposed to others, and whether the Court would have reached the same conclusion if the government [*PG494]had mismanaged the resources of a tribe whose members could have been characterized as highly educated.303

Another problem is that the scope of the Court’s holding is unclear because the Court failed to state how extensive a statute must be in delineating governmental duties before it will state an enforceable claim for monetary damages.304 This makes it difficult to apply the reasoning of Mitchell II to other statutes. In addition, the Court’s integration of common law trust with Indian trust seems to conflict with its previously consistent position that the federal-tribal trust relationship is unique.305 Explicit statements concerning the one-of-a-kind trust relationship between the government and Indian tribes would discourage an attempt to draw an analogy between it and another area of government trust.

Finally, the Mitchell II Court’s finding of an implied right of action for damages under a federal statute is an inexplicable break from its previous jurisprudence on this topic, namely the Cort v. Ash306 test. The Court’s failure to distinguish Cort v. Ash in Mitchell II makes it impossible to predict which standard the Court would use to determine whether an implied right of action for damages exists in the NRD trustee provisions of CERCLA, CWA, and OPA.307

Conclusion

This Note does not conclude that Congress intended the principles of common law trust to apply to the NRD trustee provisions of CERCLA, CWA, and OPA. The Mitchell II Court correctly identified the presence of many elements of a common law trust in the relationship between the BIA and Indian tribes and individuals, including a trustee, a beneficiary, and trust corpus.308 However, another necessary element of a common law trust, overlooked by the Mitchell II majority but identified by the dissenters, is the manifestation of intent to create a trust.309 The question of whether Congress intended to create an enforceable trust is the key to understanding the proper approach to NRD litigation, but thus far remains unanswered. The statutes are silent with regard to any definition of the trustee’s fiduciary duties, and [*PG495]a court has yet to discuss the issue.310 The scant legislative history is not enough to infer the requisite intent on the part of Congress.

However, this Note does recognize that it would be beneficial for courts to find that federal executive branch NRD trustees operate within the confines of a legally enforceable trust duty. This fiduciary duty would force trustees, such as Interior, to perform their job better and more efficiently by allowing members of the public to bring suit to enforce that duty.

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