by COE. I have not established, and probably could not establish, any direct connec tion between what UDOT and COE had in mind for Wendell's property, and the fact that SCS "redetermined" the entire parcel to be wetlands, but I have my suspicions. Because of the wetland determination by the SCS, the COE on October 14,1994, asserted jurisdiction over Mr. Averett's property. (Letter attached as Exhibit D).

In any event, I appealed the wetland determination to the local SCS office, which referred it to the State Soil Conservationist, Mr. Philip Nelson. A copy of that appeal, including the record on appeal, is attached as Exhibit E. As might be expected, Mr. Nelson affirmed the original determination. What was totally unexpected is that Mr. Nelson, without any prior notice to me or Mr. Averett, and without any opportunity on our part to respond, solicited additional information from several agencies to confirm the decision that was being appealed. A copy of Mr. Nelson's decision is attached as Exhibit F.

I have now appealed to the National Office of the SCS (technically now its the NRCS) and a copy of that appeal is attached as Exhibit G.

I believe that reading the appeals, with the documentation attached, should fill in most of the gaps. In addition, the entire record, including photos and maps, could be examined or copied at the national office of the SCS in Washington, D.C. A copy of the acknowledgement of receipt of the appeal is attached (Exhibit H) for ref

erence.

The bottom line of all of this is that Mr. Averett had a parcel of ground which he sold on July 15, 1994 for $716,100. By the end of September, 1994, because of the wetland determination, the property was worth about $30,000. This whole affair has made Mr. Averett a nervous wreck, and it is clearly affecting his health. By the way, the buyer has now backed out of the deal.

Thank you,

ROBERT C. FILLERUP.

[EDITOR'S NOTE: Exhibits "A" through "H" are retained in committee files.]

PREPARED STATEMENT OF LON HENDERSON

I appreciate the opportunity you have given me to more fully explain Heritage Arts Foundation's conflicts with the United States Fish and Wildlife Service ("FWS") over the last several years. We believe that our experience provides compelling evidence of the need for prompt passage of S. 605. We very much appreciate Senator Hatch's willingness to co-sponsor this important legislation. Hopefully, S. 605 will pass as easily as the House version did in arch. What follows in this memorandum is a brief description of Heritage Arts foundation ("HAF ") and its disputes with FWS over application of the endangered Species Act to property owned or used by HAF.

HAF is a nonprofit corporation qualified under Section 501(c)(3) of the Internal Revenue Code HAF's primary purpose is to support the performing arts by provid ing facilities and other funding for arts education, artistic performances, and related community activities. HAF recently completed construction of the Tuacahn School and Performing Arts Center ("Tuacahn") on an 80-acre site near the City of Ivins in Washington County, Utah. Tuacahn cost over $18 million to construct, and includes an outdoor amphitheater and a complex of buildings and indoor stages where performing artists can be trained, rehearse, and perform. The funds for construction came almost exclusively from private donations.

Prior to commencing construction of Tuacahn, HAF commissioned a biological survey of the 80-acre construction site to determine whether there was evidence of ally species protected by the endangered Species Act. The primary target of this survey was desert tortoises. Desert tortoises are protected by the Endangered Species Act. See 16 U.S.C. §§ 1531-1544. They inhabit vast areas of the Southwestern United States, including parts of California, Nevada Arizona, and Southern Utah. There are an estimated 7,883 desert tortoises inhabiting Washington County, Utah alone. The biologist conducting the survey found no evidence of desert tortoises or other protected species at the construction site. However, during the construction of Tuacahn, HAF and FWS exchanged several letters concerning the potential risk of harm to desert tortoises due to HAF's use of a 14 mile unpaved access road which leads from Snaw Canyon_state Park Road to the Tuacahn site. That road is not owned or controlled by HAF.

As a result of those letters, HAF took steps to protect tortoises from harm during construction. Unfortunately, after about a year and a half of construction and use of the access road, two dead tortoises were found on the access road in May 1994. HAF promptly notified FWS after discovering each tortoise, Despite FWS' knowledge of HAF's use of the access road, FWS elected to vigorously prosecute HAF

under the Endangered Species Act. FWS divulged that it was prepared to completely shut down construction at Tuacahn, despite the millions of dollars in funds already expended and the possibility that construction would not resume for an indefinite time due to scheduling conflicts with the contractors working at the site. Indeed, as a result of FWS' actions, HAF was compelled to request the City of Ivins to shut down the access road to motorized traffic, which Ivins did. HAF was also forced to hire expensive legal counsel to advise it on how to proceed,

After months of intense negotiations, HAP and FWS entered into a court-approved Stipulated settlement. The settlement provided that, as restitution for the two dead tortoises, HAF would pay a $20,000 penalty and immediately prepare and submit an "incidental take permit" application to FWS despite the fact that a county-wide conservation plan was then pending with FWS which would have permitted incidental "takes" of desert tortoises along the access road, Until the "incidental Lake permit" is issued, HAF must disseminate flyers about desert tortoises to all users of the access road and retain a biologist to conduct additional biological surveys searching for signs of desert tortoises. The settlement also required installation of a special tortoise fence along the access road and employment of trained tortoise monitors to walk along the road to ensure that tortoises did not venture onto the road or become entangled in the fence. If a tortoise is found along the access road, HAF is required by the settlement to close the road and contact a FWS-approved biologist to investigate the incident at HAF's expense and make recommendations to avoid future mishaps.

After great cost, time, adverse publicity, and emotional anguish, HAF was permitted to resume construction and complete the Tuacahn facilities. Some have speculated that FWS chose to "single out" HAF for especially harsh treatment in order to force other Washington County land-owners into additional concessions to be written into the Washington County conservation plan. We have no hard evidence of this, but we do feel that our activities have been subjected to unusually close scrutiny by FWS.

For a time, HAF seriously considered pursuing this matter in court. We felt and continue to feel that FWS' proposed injunction, which would have shut down all use of the access road and would have effectively ended the dreams of many, would have constituted a regulatory "taking" of HAF's property by the federal government without just compensation as required by the Fifth Amendment. In our view, FWS' action, if successful, would have denied HAF economically viable use of its property, thereby requiring compensation. See Lucas v. South Carolina Coastal Council, 112 S. Ct. 2886 (1992).

However, due to the costs and time involved in fully pursuing such litigation, HAF elected instead to enter into the Stipulated Settlement described above. HAF had also been advised by legal counsel that such a court battle, even if waged, may not have been successful. As you may know, no property owner has ever successfully claimed that an application to the Endangered Species Act which reduces or eliminates the economic value or possible uses of private property constitutes a "taking" under the Fifth Amendment. See R. Meltz, "ESA & Private Property: Where the Wild Things Are: the Endangered Species Act and Private Property," 24 Envtl. L. 369, 385 (1994). Moreover, HAF feared a result as puzzling as that in Christy v. Hodel, 857 F.2d 1324 (9th Cir. 1988), in which a property owner, after losing 20 sheep to grizzly bears, shot one of the bears and was fined $2,500 by FWS for violating the Endangered Species Act.

Precisely because HAF felt so helpless to prevent a result which deemed manifestly and profoundly unjust, we fervently hope that S. 605 passes. If S. 605 would have been law during our confrontations with FWS, we would have had an avenue to pursue that would have guaranteed that our property rights would have been protected. I would be happy to discuss these matters further with you. Please feel free to call me at (801) 674-7100.

OCTOBER 18, 1995

PREPARED STATEMENT OF SENATOR DIANNE FEINSTEIN

Mr. Chairman, when we legislate in the area of property rights, we need to approach the responsibility with the sensitivity that the difficulty of the task deserves. Individual nights should be honored and protected. But our task also includes promoting public health, public safety, and protecting the environment.

I plan to give very serious consideration to the concerns of property owners when I look at the ways our various federal statutes are structured and enforced. But I oppose this bill, because I believe that it is an extreme and costly measure that would open the floodgates of litigation and cripple the federal government in its efforts to create safer and healthier communities for all its citizens.

A free-standing "takings" bill such as S. 605 represents the wrong approach to protecting the rights and interests of property owners in the United States. Many years of Supreme Court jurisprudence have shown us that takings questions should be resolved on a case-by-case basis. Landholdings are unique, statutory and regulatory programs differ in their purposes and application, and impacts on property owners vary widely. As even the most conservative Supreme Court Justices consistently have held, a balancing of several factors is required to determine when "fairness and justice" requires government compensation under the 5th Amendment.

In short, "one-size-fits-all" takings legislation such as S. 605 will stimulate speculative claims, create endless litigation, and cripple federal agencies.

The Clinton Administration already has begun to examine federal programs to better accommodate landowners, particularly small landowners. This Administra tion has made great strides in building more flexibility into the Endangered Species Act and the wetlands program of the Clean Water Act. I urge the Administration to continue on this path. If there are areas where the federal government has been overbearing, we need to study these cases. We need to gain a better understanding of the kinds of situations that give rise to valid takings claims, and to work to find solutions on a program-by-program basis. At the same time, we cannot tilt the scales entirely in favor of individual property owners-we cannot sacrifice programs that protect the health and safety of our communities.

I. WHO WILL PAY FOR S. 605

The bill requires that funds for a vastly-expanded number of takings judgments should be withdrawn from individual agency appropriations. Where will this money come from?

• Discretionary spending is scheduled to reach its lowest level as a percentage of GDP since World War II. The appropriations bills proposed by the current Congress would cut $441 billion from discretionary spending over the next seven

years.

• According to the Office of Management and Budget (OMB), “[s]ince the costs (of S. 605) would fall under PAYGO provisions of the Budget Enforcement Act, [expected costs for takings payments] could prompt a sequester of other mandatory programs, forcing automatic across-the-board cuts in medicare, veterans' readjustment benefits, various programs that provide grants to states, child support administration, farm income and price supports, agricultural export promotion, student loans, foster care and adoption assistance, and vocational rehabilitation."

Legislation such as S. 605 would have the effect of limiting still further the funds available for crucial governmental services. It will involve tradeoffs, substantial tradeoffs, to the extent that I am unwilling to endorse.

Furthermore, Federal takings legislation, if passed, would serve as a precedent for the enactment of similar legislation at the State and local levels.

Future State or local takings legislation could seriously undermine important planning tools such as zoning laws and setback requirements. County and municipal governments, already strapped for funds, would be forced to withdraw funding for other important programs.

It is no wonder that takings legislation like S. 605 is opposed by organizations such as the National League of Cities, the American Planning Association, the National Governors Association, the National Conference of State Legislatures, thirtythree State Attorneys General, the United States Conference of Mayors, the National Trust for Historic Preservation, the Consortium for Citizens with Disabilities, and the National Institute of Municipal Law Officers.

II. S. 605 WOULD JEOPARDIZE PUBLIC HEALTH, SAFETY, AND ENVIRONMENTAL LAWS, AND CERTAIN U.S. MILITARY OPERATIONS

I will give you some examples of the many important Federal programs that could be jeopardized by legislation such as S. 605.

In a letter to this Committee, the Secretary of Agriculture listed various USDA programs that could be undermined by S. 605, including USDA controls on the movement of plants and animals to eradicate pests and diseases.

In addition, because S. 605 would require USDA to pay for takings judgments out of its own appropriations, the Secretary noted that "programs funded as entitlements like the commodity price stabilization programs, would be open-ended sources of funding for compensation claims."

The Secretary of Health and Human Services, in a letter opposing S. 605, listed the following governmental functions that could be jeopardized by S. 605:

• recalls or seizures of adulterated or misbranded foods, drugs, and devices;

• injunctions against manufacturing or health care facilities for creating safety hazards;

• federal regulations raising the minimum quality standards for mammography facilities;

• federal regulations raising the standards of nursing homes for participation in Medicare and Medicaid,

Programs of the Department of Transportation (DOT) that could be threatened by S. 605 include:

• Federal Aviation Administration safety initiatives, including airworthiness directives prohibiting the operation of certain types of aircraft in unsafe conditions;

• Federal Highway Administration "out-of-service" orders requiring motor carriers to cease using vehicles that pose imminent hazards to safety;

• DOT facility compliance orders requiring the shut-down of liquid and gas pipelines until problems have been corrected.

According to the Department of Defense, S. 605 could hamper several kinds of military operations including:

Aircraft overflights;

• Efforts to keep waters navigable for the Navy, including disapproval of construction of certain piers, wharves, or bridges;

• Base closures.

Several important Federal programs already have been challenged as takings. Although the following cases, and a range of others, have lost in the courts, cases such as these would be likely to win under S. 605:

• A firearms importer challenged the Gun Control Act's provision banning the importation of assault rifles as a taking.

• A restaurant franchisee claimed that requirements of the Americans With Disabilities Act to provide bathroom facilities for the disabled constituted a taking. • A group of doctors challenged as a taking a Medicare program restriction on how much participating physicians could charge their patients.

III. S. 605 REPRESENTS THE WRONG APPROACH TO PROTECTING PROPERTY RIGHTS

(A) Overbroad definition of “property"

S. 605 defines property to include: real property, property defined by contract, including "rights to use and receive water," and "any interest understood to be property under common law."

• This could mean that California's recent Bay Delta accord, which took two decades to attain, would be threatened. The accord is a landmark agreement among major California water interests that adjusts the allocation of significant quantities of water to protect the resources of the San Francisco Bay. S. 605 could also hamper efforts to clean the Kesterson Reservoir in California's Central Valley. If the bill were to become law, the Bureau of Reclamation would have to compensate farmers when it reduced the volume of subsidized irrigation water in order to remedy serious pollution resulting from irrigation return flows. S. 605 also could require the Bureau of Reclamation to compensate landowners every time it reduced water flows in times of drought.

(b) Automatic "loss of value” test

S. 605 would employ an automatic “diminution in value” test to determine whether a taking has occurred. The Supreme Court traditionally has decided fairness questions by balancing individual interests with community values and needs. This includes consideration of the specific property interest at issue, the regulation's nature and economic impact, the property owner's legitimate expectations, and the public interest protected by the regulation.

S. 605 does not provide for balancing. Compensation would be provided solely on the basis of the economic impact of the regulatory action, without considering fairness--fairness to the community as well as the individual.

If the bill's diminution in value threshold is met, compensation must be paid, regardless of the price the owner paid for the property, the expectations the owner had when acquiring property, or whether the owner is able to earn a reasonable rate of return on the property.

And S. 605 would provide incentives for speculative claims. For example, a landowner with no intention to fill a wetland, or no intention to construct buildings on farmland property, could nevertheless bring a takings claim and win.

(c) Low threshold for takings claims

Under S. 605, a 33 percent reduction in value of any portion of the affected property would automatically trigger a taking. Because any regulation that restricted the use of property in any way would completely "take" some portion of the property, takings plaintiffs would win in nearly all cases.

Years of Supreme Court decisions have measured diminution in value by looking at the owner's property as a whole rather than the "affected portion" of the property. Where is a judge to draw the line in determining what constitutes the "affected portion?" How will a judge determine whether the value of an "affected portion" has been diminished by 33 percent? A pre-determined standard such as this is simply unworkable.

(d) Takings impact analysis, look-back and re-opener provisions

S. 605 would require all federal agencies to prepare a "taking impact analyses" (TIA) before issuing any regulation, policy, proposed legislation, or "related agency action" that is "likely" to result in a taking. This means that a TIA would be required for any agency action that is "likely" to result in a 33 percent reduction in the value of an affected portion of property. Legal challenges to a TIA would be permitted for 6 years after submission. Government actions therefore would be tied up in court, and agencies would incur the litigation costs.

S. 605 also would prohibit agencies from promulgating final rules if enforcement "could reasonably be construed" to require an uncompensated taking as defined

under the bill.

The bill also contains "look-back" or "re-opener" provisions, requiring agencies to review existing rules that "result in takings" under the Act.

This goes beyond protecting property rights. This is a formula for agency gridlock. S. 605 would prevent agencies from doing their jobs, jobs the American people have asked them to do.

(e) S. 605 would upset established Federal-State relationships and successful Fede eral-State partnerships

The bill creates Federal liability for State actions carried out as part of Federal regulatory programs, delegated by Federal regulatory programs, or carried out by State agencies receiving Federal funds in connection with a regulatory program. In other words, S. 605 could require the Federal government to pay for State actions, even in cases where it does not approve of such actions. This will encourage the Federal government to give the States less autonomy in the future, and will run counter to the states-rights goals of the current Congress.

IV. ADMINISTRATION EFFORTS TO PROTECT SMALL LANDOWNERS

As I noted earlier, the Clinton Administration already has proposed and/or implemented reforms under the ESA and Section 404 of the Clean Water Act to better accommodate small landowners. The Justice Department has been working on Alternative Dispute Resolution mechanisms to save property-owning plaintiffs from cumbersome litigation.

EPA's wetlands program modifications and proposals include:

• a proposed, simplified administrative appeals process which would allow landowners to appeal wetlands identifications and permit denials without costly and time-consuming court battles;