• Suppose the Army Corps of Engineers denies a developer a fill permit under section 404 of the Clean Water Act because such development by the applicant and other nearby landowners would increase the risk of flooding of neighboring homes. Unless the Corps could bear the difficult burden of showing that the development would constitute a nuisance under applicable state law, compensation could be required.

• Suppose the Coast Guard establishes a phase-out schedule of single hull tankers; or suppose the Federal Aviation Administration orders airlines to suspend use of certain commercial aircraft that raise serious safety concerns; or suppose the Federal Highway Administration issues out-of-service orders to motor carriers directing them to cease using vehicles or drivers that pose an imminent hazard to safety. The bill raises the possibility that the taxpayers would have to compensate affected corporations for economic losses where they have been directed by the government to cease operating unsafe equipment to protect the public.

These are just a few examples of the problems the "one-size-fits-all" approach of these compensation proposals raises. It is worth noting that most of these examples reflect actual situations in which property owners challenged government conduct as constituting "takings" entitling them to compensation. In each case, the court, often after noting the public benefit derived from the government action, concluded that there had been no taking of property. If S. 605 becomes law, a different outcome in those cases may well be the result. Other examples of potentially compensable agencies actions under the bill can be found in an article published earlier this week in a national newspaper, which reported that a Nevada rancher is claiming that the government has "taken" his property by failing to prevent wildlife from drinking water and eating grass on public lands where the rancher has a grazing permit, and that California agribusiness operations who receive water from a federal irrigation project are hoping that bills like S. 605 will allow them to obtain compensation for reductions in federal water subsidies.

Opposition to Compensation Bills. It is because of these far-reaching and ill-conceived consequences that the Administration is in good company in opposing these bills. The National Conference of State Legislatures, the Western State Land Commissioners Association, and the National League of Cities have opposed compensation bills of this kind. Religious groups, consumer groups, civil rights groups, labor groups, hunting and fishing organizations, local planning groups, environmental organizations, and others are on record as opposing compensation legislation. More than 30 State Attorneys General recently wrote the Congress to oppose takings legislation that goes beyond what the Constitution requires. On the other hand, the corporate trade associations and many other organizations that support compensation bills like S. 605 do not purport to represent the interests of most Americans. Activity in the States is particularly instructive. More than 34 state legislatures have considered and declined to adopt takings bills. The New Hampshire and Arkansas legislatures rejected takings bills in the last few weeks. Just a few months ago, the citizens of Arizona voted down by a 60 to 40 margin a process-oriented takings bill subject to many of the same criticisms as the compensation bills before the Congress. States are concerned that compensation bills would cost taxpayers dearly and eviscerate local zoning ordinances, and that family neighborhoods would be invaded by pornography shops, smoke-stack industries, feedlots, and other commercial enterprises. The Administration shares these States' concerns that compensation schemes would bust the budget, create unjust windfalls, and curtail vital protections. Indeed, some of the federal compensation bills, including S. 605, would subject various State and local actions to the compensation requirement, raising significant implications for state-federal working relationships.

Conclusion. The Administration supports and values the private property rights of all property owners as provided for in the Constitution. We must find ways, however, to ensure that individual property rights are protected in a manner that does not threaten the property rights of others, does not create more red tape, more litigation, a heavier tax burden on most Americans, and does not undercut the protection of human health, public safety, the environment, civil rights, worker safety, and other values important to the American people. S. 605 and other automatic compensation bills fail in each of these respects. As a result, the Attorney General would recommend to the President that he veto any such proposal that reaches his desk.

III. A BETTER APPROACH TO PROTECTING PROPERTY RIGHTS

The broad-based compensation packages currently pending in Congress are not the answer to the horror stories that I know all of you have heard and may well hear from other panelists today. Rather, we believe the answer lies in crafting specific solutions to specific problems. If federal programs are treating some individuals unfairly, we should fix those programs.

As part of our efforts to reinvent government, the Administration has reformed specific federal programs to reduce burdens on small landowners and others. Many individuals and small businesses are already allowed to fill portions of certain wetlands without needing to get an individual permit. Three new initiatives announced on March 6, 1995, will give small landowners even greater flexibility. First, landowners will be allowed to affect up to one half acre of wetlands to construct a singlefamily home and attendant features such as a garage or driveway. The second initiative clarifies the flexibility available to persons seeking to construct or expand homes, farm buildings, and small business facilities where the impacts are up to two acres. Third, the Administration proposed new guidance that will expedite the process used to approve wet land mitigation banking, which will allow more development projects to go forward more quickly. In addition, the Army Corps of Engineers is reforming its wetlands program to make the permit application process cheaper and faster. These reforms will substantially reduce or eliminate the burden for small landowners in many cases.

At the Interior Department, Secretary Babbitt has already implemented several changes to the endangered species program to benefit landowners. For the first time ever, the Interior Department has proposed significant exemptions for small landowners. Under this new policy, activities that affect five acres or less and activities on land occupied by a single household and being used for residential purposes would be presumed to have only a negligible adverse effect on threatened species. Thus, under most circumstances, these tracts would be exempted from regulation under the Endangered Species Act for threatened species. The Interior Department has also announced an increased role for the States in ESA implementation, and new proposals to strengthen the use of sound and objective science. Under a new "No Surprises" policy, property owners who agree to help protect endangered species on their property are assured their obligations will not change even if the needs of the species change over time. And under a comprehensive plan for the protection of the Northern Spotted Owl, the Fish and Wildlife Service proposed a regulation that would generally exempt landowners in Washington and California owning less than 80 acres of forest land from certain regulations under the ESA associated with the Northern Spotted owl.

Proponents of statutory compensation schemes have argued that they are necessary because it is difficult and time-consuming to litigate a constitutional takings claim in federal court. We note that a property owner who successfully litigates a takings claim is already entitled to recover attorneys fees, litigation costs, and interest from the date of the taking, a powerful aid to vindicating meritorious claims. The Justice Department is also committed to working with the courts on approaches to ensure that takings claims may be resolved quickly and efficiently, including the use of alternative dispute resolution techniques. Again, we believe that solutions that focus on the specific issues of concern are preferable to a rigid, one-size-fitsall compensation scheme.

IV. THE PROVISIONS GRANTING THE COURT OF FEDERAL CLAIMS EQUITABLE POWERS
AND REPEALING 28 U.S.C. 1500 ARE UNNECESSARY AND UNWISE

We are greatly troubled by the provisions in S. 605 that essentially discard the important distinctions between the Court of Federal Claims, an Article I court created by statute, and the district courts, Article III courts whose judges are lifetenured. For example, section 205 of the proposal would expand the jurisdiction of the Court of Federal Claims by giving it the authority to invalidate acts of Congress that adversely affect private property rights, the authority to decide all claims against the United States for monetary relief including those concerning the proper interpretation of statutes and regulations that are currently determined by district courts, the authority to grant injunctive and declaratory relief when appropriate in any case within its jurisdiction, and the authority to consider related claims brought under the Federal Torts Claims Act (FTCA). At the same time, the proposal would expand the jurisdiction of the district courts by giving those courts concurrent jurisdiction with the Court of Federal Claims over claims for monetary relief under the legislation. The proposal makes clear that "the plaintiff shall have the election of the court in which to file a claim for relief."

We should always be careful when we manipulate the jurisdiction of our courts, particularly when the jurisdiction of statutory courts such as the Court of Federal Claims are enhanced to the detriment of Article III courts. It is difficult to predict what the many consequences of such actions will be. However, we do know that these changes will give an Article I court the power for the first time to invalidate the actions of Congress. The power of invalidation is so great and raises such fundamental questions about the structure of the federal government that it has been traditionally reserved for Article III courts.

We also know that these changes would significantly blur the distinctions between the Court of Federal Claims and the district courts and, as a result, ignore the historical purpose and functions of the Court of Federal Claims. That Court was established by Congress pursuant to Article I of the Constitution to eliminate the need for Congress itself to consider private bills for monetary relief. Its function has been to provide a centralized forum-with expertise in specialized issues arising under federal law-to grant adequate relief at law for certain types of claims against the United States. As a result, the Court of Federal Claims has the authority to grant injunctive and declaratory relief in only very narrow circumstances. The proposed expansion of that Court's powers to grant such relief and to consider questions of state law pursuant to ancillary FTCA claims would fundamentally change the nature of that Court and its relationship to the district courts.

We are also opposed to the repeal of 28 U.S.C. § 1500, which bars the Court of Federal Claims from hearing any claim as to which the plaintiff already has a claim pending in another court. First, there is no need to repeal that section. According to the bill, repeal is necessary as current law "forces a property owner to elect between equitable relief in the district court and monetary relief (the value of the property taken) in the United States Court of Federal Claims." That is no longer the law. Loveladies Harbor v. United States, 27 F.3d 1545 (Fed. Cir. 1994). Second, the repeal of § 1500 would create opportunities for savvy litigators to manipulate the courts in bringing not just takings claims but all claims over which the Court of Federal Claims has jurisdiction. For example, if § 1500 were repealed, a plaintiff would be able to begin litigating aspects of a contract claim in district court and subsequently initiate a suit before the Court of Federal Claims in an effort to find the most sympathetic forum and to stretch the government's litigation resources. While the government presumably would have the right to transfer the cases and consolidate them in one forum, the government might not learn until well into the litigation that a complaint filed in the district court involved the same dispute as a complaint filed in the Court of Federal Claims due to the minimal requirements of notice pleading. The government's ability to identify related actions would be further limited by the sheer volume of civil litigation involving the United States.

V. THE TAKING IMPACT ANALYSIS REQUIREMENT IN TITLE IV WOULD CREATE MASSIVE AND COSTLY BUREAUCRATIC RED TAPE AT THE EXPENSE OF IMPORTANT PROTECTIONS Section 403(a)(1)(B) of the bill would require all agencies to complete a private property taking impact analysis (TIA) before issuing "any policy, regulation, proposed legislation, or related agency action which is likely to result in a taking of private property." The Administration firmly believes that government officials should evaluate the potential consequences of proposed actions on private property. Indeed, we consulted with the Senate last year on a similar requirement during its work on the Safe Drinking Water Act, and we hope to continue to work with Members who are interested in this issue.

Because S. 605 establishes such a broad definition of "taking," however, Title IV would impose an enormous, unnecessary, and untenable paperwork burden on many aspects of government operations. This inflexible and unnecessary bureaucratic burden would apply to all kinds of government efforts to protect public safety, human health, and other aspects of the public good. The bill would severely undermine these efforts by imposing an incalculable paperwork burden. At a time when the Administration is reinventing government to make it more streamlined and efficient, Title IV would result in paralysis by analysis and generate a vast amount of unnecessary red tape.

The specific requirements of section 404 are also disturbing. Among other things, it would require agencies to reduce actions that are compensable under the Act to "the maximum extent possible within existing statutory requirements." By elevating property impact above all other legitimate goals and objectives, section 404 would inevitably lead to less effective implementation of any federal protections that affect property rights.

The bill's enforcement mechanisms are unclear, but section 406 of the bill suggests that actions could be filed in federal courts to enforce the TIA requirement.

Opponents of any government action would use legal challenges under the bill to delay or defeat the action by challenging whether an analysis must be done, whether every person with an interest received notice, and whether the analysis is adequate. Such litigation would result in an enormous additional burden on the courts' already overburdened docket.

VI. CONCLUSION

The Administration strongly supports private property rights. S. 605, however, represents a radical departure from our constitutional traditions and our civic responsibilities. It would impose an enormous fiscal burden on the American taxpayer, generate unjust windfalls for large landowners, create huge and unnecessary bureaucracies and countless lawsuits, and undermine the protection of human health, public safety, the environment, worker safety, civil rights, and other vital interests important to the American people. As a result, it would hurt the overwhelming majority of American property owners, middle-class homeowners, by eroding the value of their homes and land.

The Administration would like to work with the Congress to find ways to further reduce the burden of regulatory programs on American property owners. S. 605, however, is a ham-fisted, scattershot approach that would impair the government's ability to carry out essential functions and would impose a tremendous cost on the pocketbooks of middle-class Americans. Accordingly, the Attorney General will recommend a veto if S. 605 or any similar automatic compensation scheme or compensation entitlement program were to pass.

The CHAIRMAN. Our next witnesses will be Judge Loren Smith, the chief judge of the Federal Claims Court, who will discuss the technical jurisdictional issues which the bill resolves. The witness after Judge Smith will be Nancie Marzulla, who is president of Defenders of Property Rights. She has worked closely with us in merging the smaller bills into the omnibus bill. She is also an attorney and is familiar with the bill and I think could add a lot to this. I have a lot of respect for Nancie Marzulla.

I was going to have Roger come to the table, too, if we can make room for Roger, because Roger is a noted expert in this area and if he wants to make some comments, we will be happy to listen to him while he is here.

Our final witness on this panel will be Ray Ludwiszewski, who is the former general counsel of the Environmental Protection Agency during the Bush administration. Mr. Ludwiszewski is currently with the firm of Gibson, Dunn and Crutcher, and is very familiar with both the field of takings law and the bill itself. So we will be interested in what Mr. Ludwiszewski has to say as well.

So let's turn to you, Judge Smith, and we will look at the jurisdictional matters.

PANEL CONSISTING OF LOREN A. SMITH, CHIEF JUDGE, U.S. COURT OF FEDERAL CLAIMS, WASHINGTON, DC; NANCIE G. MARZULLA, PRESIDENT AND CHIEF LEGAL COUNSEL, DEFENDERS OF PROPERTY RIGHTS, WASHINGTON, DC, ACCOMPANIED BY ROGER MARZULLA; AND RAYMOND B. LUDWISZEWSKI, FORMER GENERAL COUNSEL, U.S. ENVIRONMENTAL PROTECTION AGENCY, WASHINGTON, DC

STATEMENT OF JUDGE LOREN A. SMITH

Judge SMITH. Thank you, Mr. Chairman. It only a little change in the name of my friend, John Schmidt. So we had Schmidt and now we have moved to Smith. It is very good to be here, and I thank the committee for the opportunity to testify on section 205 of the bill dealing with jurisdiction.

Senator BIDEN. Good to see you, judge. When are you coming home?

Judge SMITH. Well, I wanted to say, Senator, that one of the things I really am happy to be here. Senator Biden was my Senator. miss Delaware. As I think George Washington said, it is a gem of a State, the Diamond State. I also greatly appreciated, when I was confirmed 10 years ago, that you were the first Senator who sent me a note congratulating me and giving me your support, and that has meant a lot to me, Senator.

Senator BIDEN. Things have gone downhill for your old law school since then. You are no longer teaching there and I am, and they sorely miss you and need you.

Judge SMITH. That is a good asset for the school. I know, also, a mutual friend of ours, Bill Quillan, is now teaching there. He is one of the great scholars and judges whom I know. So it is good to be here, and I also want to thank Senator Grassley for the great support he and Senator Heflin have given the court in our jurisdictional changes.

I will summarize my statement, if that is all right, rather than read the statement into the record.

In coming here this morning, I looked at the stone wall that is in front of the Court of Federal Claims and Court of Appeals, and on it is carved Abraham Lincoln's admonition that it is as much the duty of the government to render prompt justice against itself as it is to render justice among its citizens.

The bill-and, again, I think it would be inappropriate for me as a judge to comment on the substantive bill. That is a matter that the political branches, our President and our Congress, should decide, and therefore the judiciary really has its constitutional mission of taking the acts of Congress and interpreting them and applying them to specific facts. So I will just focus on the provisions of section 205 that I believe will make litigation at the Court of Federal Claims and at the U.S. district courts more efficient and more effective in the area of taking litigation and other litigation. There are four specific areas that I will briefly comment on and then, of course, be open to any questions the committee may have. The provision for concurrent jurisdiction between the U.S. Court of Federal Claims and the U.S. district courts in all taking matters would avoid the problem that now is seen as a central problem by taking litigants, and I think it is also a problem to the U.S. Government in that it raises the cost of litigation and raises the uncertainty in this area of law, of the litigant first having to litigate the claim to whether they can use the property in a U.S. district court under the APA deciding whether the action denying, for example, a 404 permit is arbitrary and capricious.

After going through that whole process, which may take several years through appeal, if the litigant then loses and finds that the agency action was not arbitrary and capricious, they still may have a taking and they still start all over again now in the Court of Federal Claims, which again is a long process.

In addition, there is risk imposed by section 1500. If they make the wrong choice or they try to do both pieces of litigation together, they may be dismissed. If they make the wrong legal analysis and conclude it is a taking and go to the Court of Federal Claims rather