legislative history of the Clean Air Act and the Clean Water Act are explicit on that point. There are several reasons why nuisance law has proved inadequate to control matters such as widespread pollution. Many of those were expressed by Senator Biden, the technical requirements of nuisance law. There are many critical Federal activities that are not governed by nuisance, but are governed by Federal law, interstate matters and others. I see that my time has expired. Thank you. Statement of Joseph L. Sax Counselor to the Secretary U.S. Department of the Interior Before the Senate Judiciary Committee October 18, 1995 Mr. Chairman, and Members of the Committee: Thank you for the opportunity to testify today on proposed compensation legislation, and on the extent to which such proposals depart from the constitutional standard set by the United States Supreme Court over the course of our national history. I want to call particular attention to the nuisance defense, and its insufficiency, as well as its potential for generating protracted and costly litigation In this respect. I would like to call to your attention the recent testimony of Office of Management and Budget Director Alice Rivlin, before the Senate Environment and Public Works Committee, in which she estimated that the House-passed compensation bill (H.R. 9) would impose about $28 billion in new costs over seven years, and that S. 605, if enacted, would potentially cost several times that amount. S. 605 would require payment in countless instances where an owner would not be entitled to compensation under the Constitution, and it would require Government to pay much more when it does compensate. It does this by requiring payment when regulation diminishes the value of any portion of property below its most profitable use, regardless of the illegality of that use or of the property owner's reasonable expectations It would also allow recovery of lost business profits, a measure of recovery not permitted in compensation cases. S. 605 would thus grant windfalls to those who declare their intention to use their property in violation of federal law. For these and other reasons, letters previously sent to you from many Executive Branch Departments have expressed strong opposition to S. 605, and have stated that if that bill in its current form or any similar legislation is sent to the President, a veto will be recommended. This Administration is unqualifiedly committed to assuring protection of the rights of every property owner in accordance with the United States Constitution. I have therefore attached to my written statement a report on the administration of the Endangered Species Act from the Department of the Interior, detailing steps that have been taken to avoid untoward burdens on property owners. We believe that this approach, rather than radical legislative departures from constitutional standards, such as S. 605, is the appropriate way to meet the concerns and needs of property owners. I also have attached the annual report of the White House Interagency Wetlands Working Group detailing the Administration's commitment to meaningful wetlands reform. In testifying today, my primary concern is to dispel the misconception that S 605 does no more than to implement or reflect the private property protection embodied in the Fifth Amendment On the contrary, S. 605 embodies an explicit departure from the constitutional standard adopted by the Supreme Court, and incorporates a standard that has been repeatedly rejected by the Court as inappropriate. 3 10 11 For more than 150 years, and in dozens of cases, the Supreme Court has spoken with extraordinary consistency on the fundamental rights of property owners. These decisions include both 5th Amendment "takings" cases as well as those that have arisen under the rubrics of due process, and the obligation of contract. Justices in every era and of all stripes of opinion, stretching all the way from Justice Taney in the Charles River Bridge' case in 1837, to the first Justice Harlan in Mugler,2 and Justices Sutherland in Euclid, Stone in Miller v. Schoene, Holmes and Brandeis in Pennsylvania Coals and Holmes as well in Erie Railroad and Block,' Brennan in Penn Central, Stevens in Keystone, Scalia in Nollan1o and Lucas." Souter in Concrete Pipe, 12 and Rehnquist in Dolan,13 have sounded a consistent theme. While this is by no means the entire pantheon of cases and justices, it is strikingly illustrative of the singularity of view the Court has taken about the basic rights of property owners over virtually the whole of our nation's history. Taken together, this body of precedent offers the collective judgment of the Court as an institution, transcending particular differences among justices, and the particular circumstances of a specific moment in the nation's history. 8 9 13 The Court's consensus has focused largely on the very issues raised by the pending legislation, issues such as diminution of value, segmentation of property, the importance of expectations in determining compensability, the effects of nuisance law on regulatory authority, and the limitations of a single, supposed "bright-line" standard. The cornerstone of the Court's reasoning has been that each case must be considered on its own facts. The mechanical, one-size-fits-all language of S. 605, which mandates compensation when use of any "portion" of a property has been limited repudiates the Supreme Court's counsel to eschew set formulas and to recognize that the requirements of fairness can only be determined in the setting of a particular factual inquiry. S. 605 radically departs from and misapprehends the Constitutional approach in the way it addresses the following subjects: 1 2 Charles River Bridge v. Warren Bridge, 36 U.S. 341 (1837). Supra. 3 Village of Euclid v. Ambler Realty Co., 272 U.S. 365 (1926). 4 276 U.S. 272 (1928). 5 6 Pennsylvania Coal Co. v. Mahon, 260 U.S. 393 (1926). Erie Railway Co. v. Board of Public Utility Commissioners, 254 U.S. 394 (1921). 8 9 Penn Central Transp. Co. v. New York City, 438 U.S. 104 (1978). Keystone Bituminous Coal Ass'n v. DeBenedictis, 480 U.S. 470 (1987). 10 11 Nollan v. California Coastal Comm'n, 483 U.S. 825 (1987). Lucas v. South Carolina Coastal Council, 112 S.Ct. 2886 (1992). 12 Concrete Pipe & Products of California v. Construction Laborers Pension Trust for Southern California, 113 S.Ct. 2264 (1993). 13 Dolan v. City of Tigard, 114 S.Ct. 2309 (1994). 1. The Proposition that diminution in value alone--short of loss of all economic viability-is a key to compensation. Bills that provide compensation based solely on reduction in value represent a departure from the Constitutional standard. Only two years ago, the Supreme Court unanimously stated that "our cases have long established that mere diminution in the value of property, however serious, is insufficient to demonstrate a taking."" This reflects the Court's unwavering recognition that, while the extent of a reduction in value is relevant to determining whether an action works a taking, it is almost never decisive. Under S. 605's mechanical approach, when a portion of property value can be shown to be reduced by 33%, an owner is automatically entitled to compensation (subject only to sharply limited defenses). It does not require consideration of the owner's reasonable expectations, or whether the owner can continue to earn a reasonable return from the property with the use restriction. It does not consider the impact of the proposed use on neighboring property owners or on the public at large. It may even encourage owners to seek approval for potentially lucrative uses they have no intention of undertaking. It does not even require the proposed use to be a legal one. The mechanical formula in S. 605 also may allow claims that effectively turn a public subsidy into a compensable property right. One such example is illustrated by the Federal reclamation program. If the government orders individuals receiving water from a Federal reclamation project to stop practices that cause excessive runoff and resulting water pollution, S. 605 could be read to obligate the government to pay the water users the fair market value of the water, rather than its actual cost. Where users receive Federal reclamation water at subsidized rates, and the difference between subsidized and fair market rates is large, a substantial windfall should result. Notably, in some states, state laws expressly provide that such activity is not a nuisance, private or public. 2. An invitation to segment property, both by percentage diminution standards and by directing compensation to the "portion" of property affected by regulation. In assessing the fairness of regulatory burdens on property, the Court has consistently examined the property as a whole, rather than segmenting it into smaller parts. The entire Court joined Justice Souter's recent reminder that "a claimant's parcel of property [can]not be divided into what was taken and what was left for the purpose of demonstrating the taking of the former to be complete and hence compensable ... [T]he relevant question is whether the property taken is all, or only a portion of the parcel in question." Even more recently, Chief Justice Rehnquist, writing for a majority, indicated there could be "no argument" to support a claim that a property owner has been denied all use of one portion of her property when she "operates a retail store on [another portion of] the lot."16 #15 A focus on the whole parcel, rather than just an affected portion, ensures fairness. Regulation that limits the use of part of a property, such as setback requirements, is almost universally accepted as fair to both the public and to property Owners. Similarly, the owner of a large tract, some fraction of which has been subject to restrictions, is still likely to be able to make a productive and profitable use of the land. Indeed, with adaptive and innovative modern techniques stimulated by local land use regulation, such as clustering of housing units to preserve open space, owners often end up with developments that are highly profitable and attractive to buyers even though not every acre can be developed. Instead of recognizing these facts, S. 605 ignores them, and, in the process, encourages owners to "game the system" by rearranging ownership patterns and segmenting parcels to maximize claims, with compensation essentially from the first fractional loss, however smal!. The "affected portion" standard for compensation ir: S 605 and similar bills would generate claims even for very small impacts upon property. Where the affected portion of 100-acre tract may be just a one-acre segment of a 100-acre tract (and that is an example that was given during hearings on a similar bill in the House of Representatives), the portion in question is 1/3 of 1% of the whole. 3. The omission of reasonable_expectations as a factor that undermines the significance of fairness as a standard for measuring property rights As Justice Sutherland remarked in a celebrated passage in the Euclid case, some 70 years ago: Regulations, the wisdom, necessity, and validity of which, as applied to existing conditions, are so apparent they are now uniformly sustained, a century ago, or even half a century ago, probably would have been rejected as arbitrary and oppressive... While the meaning of Constitutional guaranties never varies, the scope of their application must expand or contract to meet the new and different conditions which are constantly coming within the field of their operation. In a changing world, it is impossible that it should be otherwise 1" The Supreme Court has consistently recognized the importance of a property owner's expectations in determining whether a regulation effects a taking of property. The Court has unanimously ruled that, when government acts consistently with an owner's reasonable, investment-backed expectations, there is no taking.1o More generally, the Court has followed the reasoning in Euclid and recognized that regulation of property is a fact of modern life, which informs the expectations of property owners when they invest in property. Very recently Justice Souter, writing for the entire Court, reiterated that "those who do business in {a} regulated field cannot object if the legislative scheme is buttressed by subsequent amendments to achieve the legislative end." This echoed Justice Scalia's recognition that a "property owner necessarily expects the use of his property to be restricted, from time to time, by various measures newly enacted by the State in legitimate exercise of its police powers." 1120 4. The effort to exalt ruisance into an all-embracing and exclusive defense to compensation. Compensation bills contain narrow exemptions which would avoid a duty to compensate if the regulated use constitutes a nuisance. 21 However, the Court has expressly rejected a takings standard that required a determination of whether regulated activity was "a nuisance according to the common law."22 Further, because so much conduct falls outside the scope of the nuisance doctrine, the Court has routinely allowed regulation for conduct that was not a nuisance--such as destruction of diseased trees, 23 liquor prohibition.24 and conventional urban zoning 25 Neither common law nuisance, nor the novel formulations in the House-passed bill provide the public with adequate protection. 26 29 27 30 Many environmentally harmful activities, now regulated by Federal law, are not nuisances in at least some states, among them the following: flooding caused by filling of adjacent property," hazardous waste contamination of property.28 groundwater contamination, asbestos removal, and contamination of a creek by a leaking landfill.31 State nuisance law was never intended, and has never served, as complete protection from all human health risks and other threats to public welfare. Indeed, the reason federal environmental laws were enacted in the first place was to address 21 The House-passed bill (H.R. 925) contains some additional exemptions, as for actions whose primary purpose is to prevent "identifiable" damages to "specific" properties, or an "identifiable hazard to public health or safety, the scope of which is uncertain and undefined. 26 Attached to this statement is a memorandum prepared in the Department of the Interior that discusses the scope of the nuisance exceptions in H.R. 925 and S. 605. 27 Johnson v. Whitten, 384 A.2d 698, 700-01 (Me. 1978). 28 American Glue and Resin, Inc. v. Air Products & Chemicals, Inc., 835 F.Supp. 36, 48-49 (D. Mass. 1993). 29 Cereghino v. Boeing Co., 826 F.Supp. 1243, 1247 (D. Or. 1993). 30 City of Manchester v. National Gypsum Co., 637 F.Supp. 646, 656 (D.R.I. 1986). 31 O'Leary v. Moyer's Landfill, Inc., 523 F.Supp. 642, 657-58 (E.D. Penn. 1981). |