Lofty Environmental Justice Goals versus Practical Implementation

A recent article in Law360 by Bill Wichert, (“Hexcel Faces Pollution Suit Over NJ Manufacturing Site” (April 4, 2022) highlights the role that environmental justice plays in claims for natural resource damages (NRDs) filed by the State of New Jersey.

The lead paragraph of Wichert’s article notes that the lawsuit cited “… the impact on the surrounding “overburdened community” of largely low-income and minority residents.” Mr. Wichert provides quotes from Acting New Jersey Attorney General Matthew J. Platkin that emphasizes the linkage between environmental justice and NRD actions and concludes that “addressing contamination in overburdened communities is a cornerstone of the state’s environmental justice efforts.”

Wichert goes on to quote DEP Commissioner Shawn LaTourette as stating that “Natural capital like our groundwater is always working for us; and the growth and success of our communities demands that we maintain the free public services that clean, healthy and equally accessible natural capital provides” and that “…when you pollute the environment, not only must you stop and clean up your pollution, you also must restore the natural resources and compensate the public for their loss.”

The juxtaposition of the concepts of environmental justice and natural capital is both interesting and important. According to LaTourette, the value of natural capital (such as the groundwater at issue in the Hexcel case) is increased when its bio-physical condition is improved as well as when it is more equally accessible. Presumably, such sources of value must be reflected when determining appropriate compensation for injuries to natural resources.

The apparent line of thought here is that 1) natural resources are forms of natural capital, 2) such capital is valuable to society, 3) at least one such value attaches to providing benefits to overburdened communities that suffer multiple sources of disadvantage (cumulative burdens), and 4) compensation for lost values will be sought via NRD claims against those deemed responsible for the pollution. It is instructive to unpack this a bit.

The idea of natural capital derives from a modern refinement of the classic economic textbook theory that production of socially-valued goods relies on input of labor, land, and capital. This formulation was developed when economies were largely agrarian, and economists were focused on modeling agricultural production. Land was fields for growing crops or grazing livestock, labor was a population of farm workers, and capital consisted of tools such as plows. The modern formulation notes that production of both goods and services derives from capital stocks of several forms: physical human-made capital (e.g., machines and infrastructure), human capital (people and their abilities), knowledge capital (technological knowhow for combining disparate elements to produce output), and natural capital (land broadly construed to include natural habitats like wetlands, sediments, forests and the organisms that rely on them, air, water, minerals, and so on).

In both classical and modern versions, capital consists of stocks of productive resources, while production and consumption are flow concepts – a rate over a period of time. The value of any capital stock is derived from the value of flow of services it provides, either to be enjoyed directly by people or in production of other valued goods and services. Therefore, in an NRD matter the value of groundwater as a capital stock is measured by the value of the services groundwater provides over time, discounted to the time of the claim using an appropriate discount rate.

By this well-accepted reasoning, the focus of NRD logically is not on the stocks of resources themselves, but rather the service they provide directly and indirectly to the public. In New Jersey’s view, the value of nature’s services is enhanced when they are more equally accessible to all rather than provided to a select few.

Following through the implications of the State’s line of thought so explicated, a first task of a NRD assessment is to determine how pollution caused an impairment of the services provided (directly or indirectly) by natural resources to various members of the population. A second task is to determine how the social value of those services to those people was reduced by pollution, while a third task is to specify how to provide equivalent social value in compensation for those reductions. In NRD cases, such compensation typically is provided in-kind by the enhancement of like services via resource restoration projects. Finally, when considering those public values to be recognized in NRDs, consideration should be given to environmental justice.

For insight into this latter source of value, the New Jersey Environmental Justice Law (cited in the Hexcel NRD claim) notes the existence of a large number of stressors in disadvantaged communities that collectively “impede the growth, stability, and long-term well-being” of individuals, and states that “…it is past time to for the State to correct this historic injustice.”

Therefore, a relevant question in NRD cases in New Jersey is the degree to which compensation provided enhances the quantity and/or bio-physical quality of services, as well as the fairness of their distribution across communities.

One difficulty with applying this approach to the NRD program is that the State does not specify how justice is to be considered, other than by identifying overburdened communities. The State’s Environmental Justice Mapping Tool shows communities as overburdened if at least 35% of residents are low income, 40% of residents who identify as minority, or 40% of residents have limited English proficiency. Lodi, where the Hexcel site resides, is identified as overburdened based on these criteria it is both low income and minority.

This mapping tool cannot be used to say how much worse off the public may be by virtue of the pollution it suffers, or how any particular compensatory actions will make the public whole. Indeed, the tool does not consider at all whether a community is disadvantaged with regard to equal accessibility to the natural capital that Tourette espouses. It simply is not designed to accomplish this task.

How then can the state determine that when implementing the NRD assessments, those disadvantaged will receive fair and equal treatment in matters affecting their environment, community, homes, health and quality of life (NJ Executive Order No. 23, April 20. 2018)? That is, how then can the state determine the magnitude of NRDs?

Although a topic for another day, I note in passing that this same logical difficulty applies to considering environmental justice in New Jersey’s permit approval process. This requires a finding that a new or expanded facility proposed in an overburdened community will not further disadvantage the community, or includes measures that avoid or eliminate adverse impacts. Demonstrating this with multiple environmental and other stressors would seem to require moving beyond the Mapping Tool to investigation of the amount of injustice with and without the proposed facility and whatever mitigation measures it offers.

One answer to these difficulties is to employ a measure of the magnitude of public well-being supported under baseline conditions, and compare this to well-being under conditions reflecting the combined impacts of an action or event and any mitigation or compensation with which it may be combined. In the case of NRD, the event is the effect on natural resource services from the release of pollution, and it is combined compensation in some particular form. In the case of permitting, the event is a new or expanded facility, which may be combined with mitigation measures to offset impacts. While this general approach is needed in some guise in any rational method for evaluating public actions, to be additionally responsive the State’s concerns for equal accessibility of the disadvantaged to natural capital, the measure of public wellbeing should incorporate a concern for justice.

The measure of wellbeing would incorporate concerns for justice if it responded positively to an increase in the degree of equality with which resources (of a given amount and quality) are allocated across members of the public.

Such measurement approaches are available in a vast published economic literature on the measurement of poverty and inequality developed over the past 100 years. [1] The available measures could be adapted to assessing new developments in overburdened communities, and have been adapted to the NRD context [],[]. Although the issue of environmental justice as applied in assessing NRDs for groundwater has not been specifically addressed to date, the basic theoretical and empirical tools are well developed.

The key insight embodied in the economic approach is that, all else equal, society values reductions in inequality. To the extent that injury to a natural resource and restoration to compensate for it either exacerbate or ameliorate inequality, a proper concern for environmental justice should recognize and embody these values in resource decision-making.

References

[1] For an overview, see Matthew Adler and Marc Fluerbaey, Eds. 2016. The Oxford Handbook of Well-Being and Public Policy, Oxford University Press, New York, NY.

[2] Tomasi. T. 2021 “Considering Environmental Justice in Natural Resource Damage Assessments: Injury to Recreation Resources.” Integral Economics White Paper 2021-1.

[3] Tomasi. T. 2021 “Considering Environmental Justice in Natural Resource Damage Assessments: Injury to Ecological Resources.” Integral Economics White Paper 2021-2