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CPRA Establishes a Natural Resource Damage Banking Program

S. Beaux Jones -  Posted on by Baldwin, Haspel, Burke & Mayer

The final regulations for Louisiana’s new Natural Resource Damage (NRD) Banking Program were published last week in the July edition of the Louisiana Register.[1] This program, which was originally authorized by Act 362 of the 2016 Louisiana Legislative Regular Session, is intended to “allow, encourage, and incentivize private investors to undertake restoration projects and generate restoration credits that responsible parties can purchase to fully or partially resolve [Natural Resource Damage] liabilities from oil spills under [the Oil Pollution Act of 1990] and [the Louisiana Oil Spill Prevention and Response Act of 1991.]”

The promulgation of these regulations marks the beginning of an entirely new state regulatory regime that seeks both to provide new opportunities for the resolution of oil spill liabilities for responsible parties while also leveraging private property and investment to complement ongoing coastal restoration efforts. Currently, restoration undertaken to resolve oil spill liability is done on a spill-by-spill, project-by-project basis. But the new banking program will allow for the purchase of credits to support larger restoration projects that will offer greater ecosystem benefits and reduce the inefficiencies and additional costs associated with piecemeal restoration projects. Furthermore, NRD restoration banks, at a minimum, must be consistent with the Louisiana Coastal Master Plan, and banks that are increments, add-ons, or enhancements of Master Plan projects are given preference. This helps ensure that future restoration in the coastal area will be more cohesive and impactful.

Under the new program, the Natural Resource Damage Assessment (NRDA) trustees retain the final authority over the appropriate restoration for natural resource injuries resulting from a particular oil spill, but the trustees will soon be able to propose and select the purchase of credits in an NRD bank to resolve liability. The regulations also instruct the Coastal Protection and Restoration Authority (CPRA) to convene a Banking Review Team (BRT) to facilitate and oversee the NRD Restoration Banking Program. This includes determining the eligibility of a proposed bank, reviewing future restoration plans, establishing restoration release credits, and monitoring the operation of the NRD restoration banks.

Landowners or restoration bank sponsors who wish to propose a NRD restoration bank must first investigate any potential effect on the rights of nearby landowners and then submit a prospectus to the BRT. The prospectus officially begins the process and the document must address the consistency or connection with the Coastal Master Plan, must contain an outline of all federal, state and local permits necessary to construct the bank, and a detailed scope of work for the proposed bank.[2] After review and comment by the BRT, the bank sponsor may elect to proceed with the preparation of a restoration bank plan[3] and restoration banking instrument.[4] The final two steps will be subject to public notice and comment in the Louisiana Register. Landowners and sponsors are not required to operate NRD restoration banks in isolation from mitigation banks approved by other regulatory programs, however, if they are authorized to sell other credits, the sponsor must notify the BRT of that fact and of future sales of credits.

Once a restoration bank has been established, restoration credits will be offered for purchase only “to reduce or resolve NRD liability for a specific release of oil if the application of the credits to that spill has been approved by the appropriate NRDA trustees.”[5] The cost of those credits will be negotiated by the responsible party and the restoration bank sponsor.

In addition to the potential coastal restoration benefits, the opportunities to expand and diversify existing mitigation banks and the opportunity for coastal landowners to monetize coastal property while protecting the coast, the new regulations will likely also benefit operators who inadvertently become responsible parties for an oil spill.

The NRD banking regulations are part of a larger trend seeking to expedite the oil spill recovery process and to maximize its benefits. In the April 20, 2017, edition of the Louisiana Register the CPRA also published a Notice of Intent to promulgate rules to establish an expedited compensation schedule for NRD that will be seamlessly integrated with the NRD banking system.[6] The combination of these regulations will take out much of the guess work for all entities involved and allow the oil spill restoration process to move more quickly. This will save time and money for both the responsible parties and the state, and will put NRD payments to work in large-scale restoration projects that are explicitly tied to the comprehensive, but grossly underfunded, Coastal Master Plan.

As of July 20, 2017, landowners and bank sponsors can submit prospectuses to CPRA for review. The compensation schedule regulations will likely be made final later in 2017. Although significant changes are being made to the back end of the oil spill response process, any person, entity, vessel or terminal facility who has knowledge of or is responsible for an unauthorized discharge of oil should still (1) immediately notify the National Response Center hotline at 1-800-424-8802, and (2) undertake all reasonable actions to abate, contain, and remove pollution from the discharge.

[1] La. Register, July 20, 2017, at pp. 1354-62.

[2] LAC 43:XXXI.114.

[3] LAC 43:XXXI.117.

[4] LAC 43:XXXI.119.

[5] LAC 43:XXXI.121.

[6] La. Register, April 20, 2017, at pp. 766-68.



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