Senator BIDEN. So if it is a nuisance, then you are able to do it, but how about if it is not even a nuisance? If it is a nuisance, the government can do it; it can stop it. But what happens if it is not even a nuisance? We just say, hey, we don't like the color that is coming out of that smoke stack. The point I am making here is this gets you into a taking. You can take someone's property by requiring them to take certain actions to meet a government regulation. Ms. MARZULLA. Well, Senator, I think you are right. I agree with

you.

Mr. LUDWISZEWSKI. Sure, you can. We have talked about the SO2 hypothetical. Let me give you a different hypothetical. Let's take a traditional 404 wetlands area hypothetical where

Senator BIDEN. Wetlands are easy because wetlands relate to everything everybody knows.

Mr. LUDWISZEWSKI. Well, let me

Senator BIDEN. I would be happy to do it, but I want you to compare apples and apples. That is a piece of land. You say you can't use this piece of land. We can walk out, we can step on it, we can identify it, and the farmer or the business owner or the property owner can say, look, that makes up over a third of my land; what you are doing is you are depriving me of my property right to use that land. I understand that.

Mr. LUDWISZEWSKI. That is the distinction I am trying to make. In the second hypothetical, there is a vested property right. Someone owns the land. In the first hypothetical, there is no vested property right emit SO2. I mean, you can change, perhaps, that first hypothetical.

Senator BIDEN. I hope the rest of your team agrees with that.

Mr. MARZULLA. You know, Senator, it seems to me that we don't disagree nearly as much as you may have thought when you walked in the door. You may find that your greater disagreement is with Mr. Schmidt. The Justice Department, as you may or may not know, filed a brief saying that Ms. Dolan, for example, in the Supreme Court last year shouldn't have won, that it was OK. Senator BIDEN. I understand that.

Mr. MARZULLA. They have defended the wetlands cases that Nancie referred to.

Senator BIDEN. I don't represent Ms. Dolan. I represent the State of Delaware, and as a Senator from the State of Delaware I have been arguing with the Federal Government over wetlands legislation for 6 years. I disagree with the Federal Government's judgment on wetlands legislation. What I am trying to find out is the extent to which this affects existing environmental legislation beyond wetlands.

Mr. MARZULLA. And endangered species and Superfund.

Senator BIDEN. That is what you want to figure out. I am just trying to get them one at a time.

Mr. MARZULLA. Right. What I am saying is that is what this bill is aimed at. That is why you may be surprised to find that this bill isn't aimed at and isn't sponsored by and isn't somehow the product of the industries that you have talked about.

Senator BIDEN. I am not saying it is. Don't put words in my mouth any more than I put them into yours about what my purpose is in asking these questions. My purpose in asking the ques

tions is if the Clean Water Act and the Clean Air Act require you to expend dollars that exceed a third of the value of your company, does it get you into this legislation. That is my question.

Even though you don't like my hypotheticals, they are literally the ones that we deal with everyday. We deal with whether or not a drug company can, in fact, market a product that the FDA says, no, we haven't proved beyond a reasonable doubt that that is harmful to the public, but we don't think you are ready for it. I come back and say, look, I am going out of business if you don't let me get this on the market; I have invested $25 million. This really happens. I have invested $25 million and you won't let me market it; for 10 years you have had this before you and now I am going bankrupt; my creditors say come in; you have to compensate me for that money I invested.

That is not a wacko hypothetical. That is real, and I am asking you whether it falls within the purview of this act. You are telling me it doesn't. I don't see how it doesn't.

Mr. MARZULLA. I don't think that the hypothetical you have given us now is quite the same as the others.

Senator BIDEN. Well, does that one fall within it?

Mr. MARZULLA. If the Government-there are several principles in operation here. Obviously, the Administrative Procedure Act deals with this issue. It deals with unreasonable delay. If the drug company-and here is the analogy to the wetland case if that drug company went to Federal district court and the Federal district court said, yes, there has been an unreasonable delay, there is no reason for the FDA to do what it is doing, and it issued an order and the FDA still didn't do anything about it and the business went down the drain and that business owner were left entirely penniless simply by reason of

Senator BIDEN. A regulation.

Mr. MARZULLA [continuing]. A regulatory delay that had no purpose whatever, then I think you would have a takings case.

Senator BIDEN. No, no. The regulatory delay-the FDA would argue, as they always do, that there is not sufficient proof that you have given me, drug manufacturer, that this isn't going to harm people.

Mr. MARZULLA. Right, and the court would have to decide that under the Administrative Procedure Act. I am suggesting that the takings case occurs only if the drug manufacturer can bear the burden of proving in court that the FDA is wrong.

Senator BIDEN. Well, I don't think that is the reading of this statute. I don't think that is true, but I am not going to get any further. I thank you for your indulgence, Mr. Chairman. I have no further questions. I wish you would all read the statute again, and if it passes I hope you are right and I am wrong. But you know I am right and it will be wrong.

The CHAIRMAN. Well, we all have confidence in Senator Biden. We want to thank each of you for coming. This has been a particularly stimulating panel and we appreciate having you here. Judge, welcome to the committee. We think very highly of you and appreciate the work you do everyday down there.

Judge SMITH. Well, I thank, Mr. Chairman, both you and Senator Biden. I hope in the last 10 years I haven't disappointed the

judgment that you both made of sending me to the bench. I would ask Senator Biden as a personal matter to give my best to my former colleagues at a great law school, and particularly Bill Quillan.

Senator BIDEN. I will, judge.

The CHAIRMAN. That is great.

Judge SMITH. Thank you both.

The CHAIRMAN. Thank you so much. We appreciate the efforts you have made.

Our last two witnesses will be Professor Carol Rose and Mr. John Chaconas. Professor Rose comes from the Yale Law School, and Mr. Chaconas comes from St. Amant, LA.

We will take you first, Professor Rose, and we would like you to summarize. I needed to leave, really, an hour ago. We would like you to summarize, if you could, in 5 minutes or less, and hopefully we can complete this hearing in a few more minutes.

PANEL CONSISTING OF CAROL M. ROSE, PROFESSOR OF LAW AND ORGANIZATION, YALE LAW SCHOOL, NEW HAVEN, CT; AND JOHN J. CHACONAS, ST. AMANT, LA

STATEMENT OF CAROL M. ROSE

Ms. ROSE. Thank you, Senator. I will do my best to do that.
The CHAIRMAN. Thank you so much.

Ms. ROSE. I should say who I am. I am Carol Rose. I am a teacher of property and environmental law and some natural resources at Yale. I also want to say that I am a very committed proponent of property rights. I guess I should mention I was a law student at the University of Chicago and I was a student of Richard Epstein's, so I know well his views.

I want to talk to you about the tradition of property rights in American law, and I also want to talk to you about why I think that the takings proposals that are up now seem to disrupt that tradition. I don't think it is a surprise that our history has a very strong tradition of property rights and protecting individual property rights. This is really essential to a free enterprise system, and I don't think there is any question about that.

Our legal system, however, also has a very strong tradition in defense of public rights and what were explicitly called public rights in the 19th century. These public rights concern resources that have wide and diffuse impacts and are not very easily reduced to private property, but are still nevertheless very important to large numbers of people. Traditionally, they include air, water, waterways, and wildlife stocks.

Public rights act as a restraint on private uses of property, and that is because private land owners when they are using their property also use resources in common with other people. Some of these are very simple. When you burn trash, the smoke affects your neighbors' air. You may be able to work this out in your neighborhood. You probably can. Nevertheless, your use of your land is affecting other people's property as well.

When you burn sulphur, as you were mentioning, Senator Biden, the emissions from your plant may affect land quality and timber resources 1,000 miles away. When you fill riparian land, you may

alter a water body and you may alter the water flow that disrupts your downstream neighbors, as I think Mr. Chaconas is going to talk to us about, and you may disrupt uses of others much further away.

Those common uses, as it were, piggybacked on to private ownership, don't matter very much if there are only a few of them and if the underlying resource is very large and can correct the problems. But if a lot of people do the same thing, they can use up or destroy all of the common resources, and those common resources are valuable to everybody.

In the American legal tradition, that is the occasion for the active assertion of public rights. What that means is that the public, through legislators, restrains individual uses of common resources so that they are not damaged for everybody. That is why as long ago as the 13th century, London restricted the burning of coal, so that the people could breathe the air within that city. That is why American legislatures in the 19th century started restricting hunting and fishing in wildlife stocks that were becoming depleted. That is why those same legislatures took some at least halting steps to try to control air and water pollution.

Now, those assertions of public rights are not necessarily occasions for compensation, and they have not been in American law. The fact that land owners and others have been using common resources does not give them any permanent rights to continue. There is case law on that. I think the major example is Hadacheck v. Sebastian, a 1915 case about air pollution.

Nevertheless, there are sometimes reasons for compensation. Those are usually cases where a legislative action disturbs an owner's reliance and settled expectations. Takings jurisprudence usually concerns that kind of case, those cases of reliance, and that is why courts look for investment-backed expectations. That is also why those issues are so fact-specific.

There are a lot of variations in owners' reliance. There are a lot of variations in the owner's commitment of resources, and there are also great variations in the reasonableness of their reliance, given background, law, and custom. But the basic idea in takings jurisprudence is to secure fairness to individual owners, while at the same time preserving the general public's ability to manage diffuse resources and avoid what is often called the tragedy of the com

mons.

My own view is that takings legislation of the sort that we are seeing can disrupt this kind of delicate balance. The compensation requirements that are spelled out in these proposals are far beyond constitutional requirements, as other witnesses have said, and they are actually much greater than owners have any reason to expect. Insofar as this legislation discourages assertions of public rights, it recreates a tragedy of the commons, allowing holders of land to use that land holding as an access to use up much wider resources more or less at will.

Finally, I think there is a more subtle point. Property regimes depend a great deal on respect for the rights of others, and that includes respect for the rights of the public as well. The Wall Street Journal had an article on Tuesday that suggests how much these

proposals are already encouraging what I think most of us would think of as private overreaching against the public.

Water subsidy holders are saying that they have permanent rights. Grazing permit holders are saying the same thing. Miners, who have already been heavily subsidized, claim that their property is being taken because they were not regulated and now have cleanup costs. The International House of Pancakes' example about the ADA was brought up earlier.

These are assertions of special entitlement that don't just disrupt environmental law, which we all know is at stake here. They also disrupt the free enterprise system. The object of a free enterprise system is not simply to enhance private wealth. It is, rather, to enhance the sum of private and collective wealth, things that we own individually taken together with the things that we enjoy in common. Those are both essential in a free enterprise system and they require respect for public rights as well as private.

I will be glad to take questions.

[The prepared statement of Ms. Rose follows:]

PREPARED STATEMENT OF CAROL M. ROSE

MR. CHAIRMAN AND DISTINGUISHED MEMBERS OF THE COMMITTEE: My name is Carol Rose. I teach at the Yale Law School; my subjects are property, environmental law, and a variety of areas related to natural resources, particularly in their historical context.

I would like to begin by thanking the members of the committee for this oppor tunity to speak to you today about proposed legislation on "takings" issues.

My testimony today is aimed at clarifying some property concepts relating to takings jurisprudence. I will concentrate on the common-law and historical legal principles relating to these issues.

Briefly, my position is that historic Anglo-American legal principles recognized the importance of private property rights, but also recognized what were called "public rights," particularly in resources that are not easily turned into private propertyair, water and fish and wildlife stocks. Takings law has been aimed essentially at balancing private and public rights, and it is principally a judicial function. I believe, however, that there are important ways, in which legislatures can use new forms of private property in order to further both private and public rights, especially in relationship to the environment.

1. Private property rights are essential in a free-enterprises regime. Property's importance for capitalism has been recognized at least since Locke, and later Blackstone. An owner must have reasonable secure expectations of continued ownership if he or she is going to expend efforts to improve resources. Similarly, reasonably secure definitions of property are essential to trade, since trading partners must know who has what in order for their trades to mean anything. These elementary building blocks of capitalism-encouragement to labor and trade-are important reasons for security of property, and they are very widely recognized in the common law of property.

2. Property rights need to be reasonably secure, but their content can change with changing conditions. Property rights in traditional law have never had fixed characteristics that apply under all conditions and for all time. Indeed, it would be undesirable and probably impossible for property rights to have such fixed definitions. This is a point that is recognized even by such libertarian writers as Richard Epstein. 1

Since it is costly to establish property rights, there is no point in doing so until the need becomes clear. Both Locke and Blackstone gave narrative versions of the origins of property rights. In these narratives, people did not bother to assert property rights when natural foodstuffs were plentiful, but only defined property rights when the relevant resources became more scarce. This is in fact a typical pattern in common law property rights; for example, grazing rights were only very loosely defined in the early years of Western settlement, but they became much more

1 Richard Epstein, Private and Common Property, in Property Rights 17, 41 (1994).