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[The prepared statements of Alice Rivlin, Michael Davis, Gary S. Guzy and John R. Schmidt are located in the appendix of October 18, 1995.) Senator THURMOND. Thank you very much. Mr. Adler?

STATEMENT OF JONATHAN H. ADLER Mr. ADLER. Thank you, Mr. Chairman, for the opportunity to present testimony before this Committee on this very important issue. My name is Jonathan Adler. I am director of Environmental Studies at the Competitive Enterprise Institute, a nonprofit, nonpartisan public policy institute here in Washington, DC.

Mr. Chairman, Americans believe very deeply in their right to private property. While polls consistently show that Americans care about environmental protection and want to see the environ-ment protected, those very same polls show that a majority of Americans support compensation for landowners, when their land is devalued due to environmental regulations.

Public good should be provided at public, not private, expense. This is the rule for most nonenvironmental public goods such as military bases and highways. On the other hand, public goods, like wetland preserves and wildlife refuges, are created by bureaucratic edicts that deny property owners the use of their land.

If the public wants to protect species habitat or an ancient stand of trees for some broad environmental value, it should be able to, but the public should be willing to pay for it. The costs should not be imposed on whomever is unfortunate enough to hold title to a coveted piece of land.

As the Supreme Court held in Armstrong v. The United States, the takings clause, “* * * was designed to bar government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole." I believe that 605 would go a long way in invigorating that principle, particularly in ways that the Supreme Court has not.

More importantly, arguments over the potential costs of takings compensation requirement obscure the more fundamental issue. Land use regulations inevitably entail costs. The real issue is who should bear those costs. Costs of excessive land use controls are borne by the Federal regulatory agencies themselves, as is called for under S. 605. Agencies will have a tremendous new incentive. to consider the costs of their regulatory edicts, as well as more costeffective alternatives to command and control regulation.

Nonregulatory approaches to wetlands protection, for example, can be less than one one-hundredth of the cost of Federal regulations in protecting wetlands. Enactment of S. 605 would encourage the EPA and the Army Corps of Engineers to consider such alternative approaches.

Earlier today there was mention of the recent Nobel prize winners in science. I think it is important to also remember the Nobel prize winners in economics, which is Professor James Buchanan at George Mason University, who pointed out that incentives to public agencies matter in their behavior. If the public agencies are not given incentives to consider the cost of their rules, they will not do so. This bill would force them to consider those incentives, and that

would be to the benefit of Environmental Protection and to private property owners.

Environmental argument made against takings compensation proposals like S. 605 is that paying compensation for regulatory takings will amount to paying polluters not to pollute. This represents a fundamental misunderstanding of the nature of property rights and the proper role of government in protecting them. Moreover, it misrepresents the nature of the proposal before this committee.

Compensation should be paid when the Federal Government acts so as to deprive a property owner of a right to use and enjoy that property. Property rights properly understood do not include the right to injure or harm the person or property of another. This principle is grounded in the common law.

S. 605 embodies this principle. Section 204(d)(1) explicitly spells out a nuisance exception to the payment of compensation by the Federal Government. The language in this section is clearly modeled on the language of the Supreme Court's Lucas decision. When the Government limits or prohibits the use of property that is likely to harm another person or property, it does not deprive the owner of a property right. However, should the Government limit the use of property for some other purpose, such as the provision of wildlife habit or some other public good that we all benefit from equally, compensation should be paid. The difference is the nature of the Government action in question. This should determine whether or not compensation is due, not the level of the devaluation experienced by the landowner.

Regrettably, S. 605 does not require compensation if the property owner does not suffer a sufficient economic loss. From dealing with lots of grassroots groups, I know this is a real concern that they have, and 33 percent, in their view, is a compromise. I believe for those who believe in property rights, 33 percent threshold is a compromise. It is the equivalent of saying that a burglar has not committed a crime if he only takes some percentage of the money in your wallet and leaves the rest.

Finally, Mr. Chairman, it is important to recognize that regulatory takings themselves can have negative environmental impacts. Takings often discourage individuals from taking steps to improve habit and environmental amenities due to the threat of regulation.

Senator Chafee, who was here earlier, has seen this firsthand when he visited the farm of Mr. Ben Cone in North Carolina earlier this year and saw firsthand how careful conservation practices were destroyed as a result of regulatory takings.

It is my understanding that Mr. Cone has, indeed, filed a takings claim in Federal court in the U.S. Claims Court, and I would argue and believe that Mr. Cone will be successful if he goes through with his suit. Mr. Cone is a wealthy landowner. He has the resources to pay for such a suit. Most landowners do not. This bill would expand their ability to seek justice in court.

Property rights are important for both economic and environmental reasons, Mr. Chairman. It must be protected from both government regulation and private malfeasance. Compensating landowners when they are deprived of the reasonable use of their land will not produce environmental catastrophe. In many cases, it will actually eliminate the negative environmental incentives created by improperly conceived government regulations.

Thank you, Mr. Chairman. I would be happy to answer any questions that you might have.

[The prepared statement of Mr. Adler follows:)

PREPARED STATEMENT OF JONATHAN H. ADLER Thank you Mr. Chairman for the opportunity to present testimony before this Committee. My name is Jonathan Adler, and I am director of environmental studies at the Competitive Enterprise Institute in Washington, D.C. CEI is a non-profit, non-partisan research and advocacy institute dedicated to the principles of free enterprise and limited government. CEI's work includes efforts to advance the public understanding of the hidden costs of government overregulation and to research and promote free market approaches to policy issues.

CEI has long been involved in the property rights debate. CEI analysts have analyzed the impact of regulatory takings on private landowners, as well as the envi. ronmental implications of different property rights regimes. In January, CEI published a Property Rights Reader of essays by CEI analysts and associates on property rights and related subjects. CEI also engages in direct legal action where necessary, and has represented victims of takings in court. Most recently, CEI filed an amicus curiae brief in the case of Babbitt v. Sweet Home before the U.S. Supreme Court.

In my testimony I will focus on the issue of property rights and regulatory takings with a particular focus on the implications of current legislative proposals on envi. ronmental protection.

INTRODUCTION The growth of federal land use regulation over the past two decades has sparked a strong grass roots opposition. While polls seem to indicate broad public support for current environmental laws, those same polls show strong public sentiment in favor of compensation for regulatory takings. A May 1995 Roper Starch Poll found that two-thirds of Americans believe landowners should be compensated when wetlands regulations or endangered species protections devalue their land. Only 26 percent opposed compensation.

Much of the debate over property rights and whether the federal government should compensate the victims of regulatory takings is focused in the environmental arena. For two decades, federal land-use control has been the dominant means of achieving many environmental objectives. As a result, the federal government has denied countless landowners the reasonable use of their land in the name of envi. ronmental protection; property owners are finding their land effectively taken from them without compensation. Two federal laws, in particular, have been the focus of the debate over

compensation for regulatory takings: the Endangered Species Act (ESA) and Section 404 of the Clean Water Act (CWA), the source of regulations limiting the development of wetlands. However it would be a mistake to believe that these are the only two federal laws that unduly limit the use of private land. In New Hampshire, for example, grass roots property rights activism centered on opposition to the designation of a wild and scenic" river. Any bill that seeks to protect the property rights of Ameri. cans must cover all federal laws that deprive landowners of the reasonable use of their land. There is no principled basis upon which to pick and choose which laws, environmental or otherwise, should be covered.

The primary reason that current approaches to environmental protection engender conflict and opposition is that they trample on the property rights of individual Americans, often bankrupting them in the process. Under current environmental laws individual Americans have been prevented from building homes, plowing fields, filling ditches, felling trees, clearing brush, and repairing fences, all on private land. The federal government has even barred private landowners from clearing firebreaks to protect their homes from fire hazards. In Riverside County, California, for instance, the Fish and Wildlife Service informed Cindy Domenigoni on July 1, 1992 that clearing a firebreak would constitute a "harm to the endangered Stephens' kangaroo rat and was "not authorized.” A similar notice was sent to Michael F. Rowe on June 5, 1992, which included the admonition that discing to clear a firebreak could make him subject to "both State and Federal prosecution." 1 In the subsequent fires, 29 homes in Riverside County burned to the ground.

Interior Secretary Bruce Babbitt, at times, has been forthright in declaring the broad scope of property regulation under current environmental law. In a 1993 speech before the Society of Environmental Journalists, the Secretary sought to explain the proliferation of ESA horror stories thusly: “when a species is listed, there is a freeze across all of its habitat for two to three years while we construct a habitat conservation plan which will later free up the land.” 2 Whether the land is eventually freed up or not, productive use of lands declared to be habitat for endangered species is halted under the ESA, whether such actions could harm the public's purported interest in wildlife or not. In this manner, the federal government effectively condemns an easement across private land to create a wildlife refuge, albeit temporarily in some instances, without paying just compensation.

This policy cannot but have significant effect on property owners around the nation. According to the General Accounting Office, over 75 percent of those species currently listed under the ESA rely upon private land for some or all of their habitat.3 In the case of wetlands, approximately three-fourths of the lands that meet the federal government's definition are on private land. Thus, as long as the federal government continues to rely upon regulation to conserve these resources, conflicts with private landowners are inevitable. Indeed, even staunch opponents of takings com: pensation, such as the National Wildlife Federation, have implicitly acknowledged this fact, calling for reforms that make environmental laws "more workable for private landowners." 4 The Clinton administration has also marginally altered the application of these laws so as to blunt their impact on private parties, particularly small landowners. If current environmental laws did not impinge upon the rights of landowners, such improvements would not be necessary.

Think of what the government is doing in another manner. Under current law, it is illegal to harm a homeless person, as it should be. However, property owners are not required to cede their homes or backyards in order to provide homeless shelters. If a homeless person finds his or her way onto an individual's private property, the owner does not have to forfeit use of that property and let that homeless person remain. Should the government wish to turn an individual's property into a homeless shelter, then it would have to compensate the owner. However, should endangered wildlife settle on someone's property, then the situation is entirely different. Under the Endangered Species Act, as recently upheld by the Supreme Court in Babbitt v. Sweet Home, the landowner can be forced to give up use of the land to provide species habitat, and no compensation is paid. Few but the most ardent envi. ronmentalists can view this situation as just.

Under present law, public costs that should be borne by all are foisted upon those landowners unfortunate enough to own the exact parcels of land that the govern. ment covets for environmental purposes. Irrespective of whether federal courts currently hold such actions to be Constitutional without compensation, they are neither fair nor just. It is imperative that Congress restore protections for private property that the Courts have failed to consistently uphold.

PUBLIC GOODS VS. PRIVATE COSTS If the protection of property rights entailed compensating landowners each and every time a government action conceivably impacted the value of their lands, envi. ronmental and budgetary concerns would be justified. Under such a scenario, it would certainly be possible for a corporation to demand compensation when prevented from injecting toxins into neighboring groundwater, fouling the air of a local community, or creating an imminent and identifiable threat to nearby land owners. However, this is not what protecting private property rights is about, nor is it an accurate description of S. 605.

Indeed, the current controversy over property rights is not about government pollution control efforts or federal protection of public health and safety. The many thousands of groups and individuals that make up the property rights movement are not rebelling against government attempts to protect their neighbors. They are rebelling against federal government regulations, largely environmental, that re

Copies of these letters and additional FWS correspondence are contained in Ike C. Sugg, "Rats, Lies, and the GAO,” Competitive Enterprise Institute, August 1994. 2 This

speech was published as Bruce Babbitt, “The Triumph of the Blind Texas Salamander and Other Tales from the Endangered Species Act,” E Magazine, March April 1994.

U.S. General Accounting Office, Endangered Species Act: Information on Species Protection on Nonfederal Lands, GAO/RCED_95–16 (December 20,1994).

* National Wildlife Federation, "The Endangered Species Act: Finding Common Ground," Octo ber 1994.

strict the reasonable use of private land, such as building homes and planting crops. Most "takings" cases arise not when public health is at risk, but when the rights of landowners are suppressed by the federal government for non-essential purposes.

Groups opposing compensation for regulatory takings typically argue that federal environmental laws do not take private land, and that requiring compensation for regulatory takings would impose an extreme financial burden upon the federal government. These two arguments are contradictory, and takings opponents cannot have it both ways. Either property rights are not being violated, and a takings compensation requirement would be a superfluous enactment, or violations are rampant, and substantial amounts would have to be paid in compensation. Only one of these arguments can be true.

The administration has implicitly acknowledged that the latter is more likely to be the case. In a June 7 letter to Senate Judiciary Committee Chairman Orrin Hatch, White House Office of Management and Budget director Alice Rivlin claimed that the bill before this committee, s. 605 would be tremendously expensive, surpassing the $28 billion price tag placed on the House bill, H.R. 925. For the federal government to be exposed to such financial claims, federal regulations must be in. fringing upon the rights of landowners on an unprecedented scale. How else could it be exposed to such exorbitant liability?

Either way, arguments over the potential cost of a takings compensation requirement obscure the more fundamental issue. Land-use regulations inevitably entail costs. The real issue is who should bear those costs. As James Huffman, Dean of the Northwestern School of Law at Lewis and Clark College notes:

The pervasive notion that society can avoid the costs of public action if government can avoid compensating for property affected is simple self-deception. The costs of government action will be borne by someone. The compensation requirement, like a rule of liability, simply determines who that

someone is. Under current policy, “public goods” such as military bases and highways are created by purchasing lands from private owners. On the other hand, “public goods” like wetland preserves and wildlife refuges are created by bureaucratic edicts that deny property owners the use of their land. This is not how it should be. If the public wants to protect the habitat of an endangered species or preserve an ancient stand of trees for some aesthetic, spiritual, or broad "environmental" value, then the public should be willing to pay for it, just as it pays for other “public goods.” The costs should not be imposed on whoever is unfortunate enough to hold title to a coveted piece of land.

WHAT LOSSES ARE COMPENSABLE As the Supreme Court held in Armstrong v. United States, the Constitutional prohibition on uncompensated takings "was designed to bar government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.” 6 Similarly, in the recent case of Whimsy Benefits v. United States, a successfully litigated takings claim against the federal government, the U.S. Claims Court reminded us that:

If the Fifth Amendment is to have any force, courts must determine when and whether government's actions destroy the rights in property that are

an essential component of ordered liberty. S. 605, on the whole, embodies this philosophy and seeks to clarify Congress' opinion as to how federal courts should make these determinations.

S. 605's greatest defect with regard to compensation is its monetary threshold. Just as it should not matter under what statute a regulatory taking occurs, it should also not matter how much a landowner suffers economically as a result. The issue before a court or administrative agency should simply be whether a property right has been taken. When such a taking occurs, compensation should be paid, no matter how large or small. By the same token, when the government uses its legitimate authority to prevent a landowner from harming another, it matters not if that landowner is left destitute.

6 James Huffman, “Avoiding the Takings Clause through the Myth of Public Rights: The Public Trust Doctrine and Reserved Rights Doctrine at Work,” Journal of Land Use and Environnmental Law, Fall 1987, p. 173 n9.

6364 U.S. 40, 49 (1960).
7 Whitney Benefits, Inc. v. U.S. 18 Cl. Ct. 394, 399 (1989).

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