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Mr. WILKINS. Oh, he is bitterly disappointed with this. I can guarantee it.

Senator DEWINE. The bad news for the panel is I am not done either.

Senator BIDEN. Thank you very much, Mr. Chairman, for my time.

Senator DEWINE. Mr. Eckel, let me try to respond, if I could, to your question of what you should tell the farmers whom you represent, and you cited one specific example, but, first of all, and I am speaking as this Senator from Ohio, you should not interpret, at least my questions, as indicating support or lack of support for this particular bill. I have had numerous discussions with farmers in Ohio. I think I am aware of the problem, so I think I understand that. I don't think, though, that the farmers that I represent in Ohio would be surprised if they found that this Senator approached this with a little bit of what I hope is healthy skepticism, and that skepticism comes from my, at least, initial analysis that this will be one more piece of legislation, one more law which will spawn a great deal of more litigation, more work for lawyers, more work for bureaucrats and, ultimately, more power for Federal courts. That is my problem with this bill, and that is what I am trying to work through here today or at least begin to work through.

Let me get back to a specific question that I asked earlier, and I am still, frankly, not satisfied with at least my understanding— I will state it this way-I am not satisfied with my understanding of what this bill would do, and I would, again, refer you to page 14, and I would again refer to how the calculation is made of the compensation.

"The difference between the fair market value of the property or a portion of the property affected by agency action before such property became the subject of the specific government regulation." I, again, will draw your attention to the term "subject of the specific government regulation."

Congress passes a bill, 1996. That bill clearly contemplates that some bureaucrat some day will issue regulations when they get around to it, and let's say in 1998 they get around to issuing some regulations, and then the year 2000, those regulations are actually applied by another group of bureaucrats to the specific case in point. At what point then, which of those three dates is the date when it became subject of the specific government regulation?

Mr. ADLER. Publication in the Federal Register. That is in the regulation.

Senator DEWINE. Publication in the Federal Register of the regulation, even though it was clearly-anybody who looked into this would know that eventually they are going to regulate, and they are probably going to regulate my property, and they are probably going to tell me, to take an extreme case, I can't do what I want to do. I can't do the specific act, whatever it is. They just haven't gotten around to it yet. Bureaucracy works slowly.

Mr. ADLER. The value of your land is going to fall. So, if anything, as a property owner, you are likely to get less compensation than if the date were set earlier.

Senator DEWINE. But this is a specific question. We are not on merits, and we are not on speculation. We are not on anything. I want to know. Your answer is it is the date it is published.

Mr. ADLER. Yes.

Mr. SAX. May I comment, Senator?

Senator DEWINE. Yes.

Mr. SAX. It seems to me that you have pointed to one of dozens or scores of difficulties and ambiguities in the law, which I think no one can say with certainty what the answer to this is, and I think one can predict with certainty that it is something that will be worked out in litigation. It will be one of the many things that will have to be litigated, as opposed to the notion that this is a kind of magic bullet bright-line standard. I think we could go through you pointed to one important problem-I think we could go through the bill and identify a very large number of these same uncertainties.

Senator DEWINE. Does everyone agree with the answer by Mr. Adler?

[No response.]

Senator DEWINE. Does anyone disagree, maybe, is a better way of saying it?

Mr. SAX. I think it is by no means clear.

Senator DEWINE. Anyone else?

[No response.]

Senator DEWINE. Just so I understand, Mr. Adler, the Government agency involved goes in, based on this regulation, and then applies it to me and someone else, a lower-level bureaucrat who goes in and makes a determination, “Oh, gee, this particular provision, which was based on a law that was passed before that, this particular provision applies to you, and now it means you can't do what you want to do on your property."

Mr. ADLER. Right. When the regulation is promulgated that makes it clear that land is affected, that is

Senator DEWINE. It is not clear. You have to interpret it. Someone is interpreting it. Somebody specifically is going out and looking at this property, if it is an environmental issue, doing some tests, et cetera, et cetera, and then making a judgment call, and then making a call which says, "This particular property owned by Mike DeWine comes under this regulation which was based on this law." So you are still saying that it is back to the promulgation of the actual regulation upon which that decision 2 years later is made, even though that decision 2 years later could have gone either way.

Mr. ADLER. The only qualification I would make is if, for example, there was a regulation that was clearly open-ended and expecting some later agency determination about what properties are particularly affected, then it might well be the agency's determination because the regulation would probably be written in such a way as that it doesn't affect the properties until such time as the agency makes that determination.

But, I think, these types of questions are questions that the courts often deal with, and I think that the question isSenator DEWINE. That is my fear.

Mr. ADLER. I think, if the question is that that is unclear, if that is a major problem with the bill, then all that would be necessary would be to include something to say, "Publication in the Federal Register" or to say, "The issuance of a particular permit denial or action." That type of fine-tuning of a bill is usually relatively easy. Senator DEWINE. I am to the moment you all have been waiting for, which is to read the closing procedural statement, as it is written here. Let me do that.

The Committee will hold the record open until Friday at 6 p.m. for anyone who would like to submit written testimony. Any Senator on the Committee who would like to submit written questions for any of our witnesses today must do so by 6 p.m. tonight. Please send them to the attention of Larry Block on Chairman Hatch's staff. The witnesses would be advised that any questions they receive they must respond to these by 6 p.m. on Tuesday, October 24th.

So, I guess, that legal brief isn't going to be too long. [Laughter.] Thank you all very much.

[Whereupon, at 1 p.m., the committee was adjourned.]

APPENDIX

QUESTIONS AND ANSWERS

RESPONSE TO QUESTION OF SENATOR DIANNE FEINSTEIN TO JONATHAN H. ADLER Question 1. In your examples of "victims" of regulatory takings, you mentioned only small landowners. This Administration is doing a lot to protect small landowners, and I urge it to do more.

But I think we need to recognize, in discussing takings issues, that land ownership in the U.S. is highly concentrated. The vast majority of private land is owned by a small percentage of landowners.

According to Professor C. Ford Runge, Agricultural Economist at the University of Minnesota, roughly 78 percent of private land in the U.S. is owned by less than 3 percent of landowners. According to USDA, of the 1,326 million acres of private land in the U.S., agriculture and timber interests occupy around 90 percent. According to Professor Runge, less than 5 percent of all farmers own a majority of all farmland, and less than 1 percent of all timber owners own nearly half of all U.S. timberland.

Small, residential property owners constitute about 75 percent of private landowners in the U.S., but only 3 percent of the land.

According to USDA, roughly 3 of U.S. private land is farmland. As a rule, large landowners have benefitted considerably from governmental actions (agricultural subsidies, water subsidies, highway construction, etc.)

Under a broad takings law, the government would increasingly be required to compensate landowners for any actions that decrease property values, while landowners are not required to compensate government for actions that increase their property values. (Any increase in property taxes is insignificant compared to benefits conferred by the government.)

I have a related point relating to size of landholdings-The Justice Department, in fact, has had very few ESA-related takings cases in its docket relative to takings cases in other areas. On most of the large farmland tracts, flyways can easily be preserved and endangered species protected. Furthermore, large landowners often have the ability to configure their physical structures in ways that can minimize impacts on wetlands or wildlife.

I would appreciate your response to these comments.

Answer 1. Senator Feinstein raises two salient points: (1) the relevance of the distribution of property ownership to takings compensation, and (2)the question of government conferred benefits to property owners.

(1) Who owns what amount of what land is simply irrelevant to the merits of S. 605 or any other takings compensation proposal. Whether the landowner is wealthy or destitute is irrelevant to the Constitutional and ethical issues of whether property rights deserve protection from excessive government regulation.

Any proposal that would provide different levels of protection to landowners with different amounts of land would be arbitrary. There is no basis to extend protections to a landowner with 9.8 acres, for instance, and not to one with 10.2 acres. An across-the-board protection of all property rights is a more equitable and appropriate response.

The Clinton Administration's efforts to reduce the impact of regulatory programs on small landowners may be well intentioned. However, they are ridden with loopholes and fail to provide small landowners with the sorts of protections that they need from excessive government regulation.

Senator Feinstein is absolutely correct to note that large landholders can often accommodate regulatory requirements with relative ease. This is why large land

owners and their representative trade associations have been far less adamant about passing a strong property rights bill than the grass-roots organizations.

In this context it is wise to remember that the benefits of private property accrue not only to the owners of private property but to all that benefit from the workings of the free enterprise system. Private property rights lie at the cornerstone of a free society. As the Nobel Laureate economist F.A. Hayek pointed out: "The system of private property is the most important guaranty of freedom, not only for those who own property, but scarcely less for those who do not."

(2) It is certainly true that the government provides benefits to citizens by building roads and bridges, providing police and fire protection, and so on. These sorts of public goods are provided for at public expense, as they are paid for through taxes and user fees for government services. The public might well benefit from the creation of wildlife refuges, wetland reserves, and wilderness areas as well, and these should be provided at public expense as well.

There is a fundamental distinction between government actions that incidentally affect land values—positively or negatively—and those that affect property values because they are directed at particular properties. When a government builds a highway, properties near the highway are likely to increase in value, while those alongside older thoroughfares may decline in value. Such changes in value occur with all economic activity, government or otherwise, and should simply not be a factor in discussions of regulatory takings. S. 605 in no way requires compensation for "any action" that decrease property values, but rather only those actions that deprive landowners of reasonable use of their property.

For the record, I would also like to note that government programs that confer particular, directed benefits to particular land owners or interests, such as farm subsidies, are a different matter. Professor Runge is correct to note that such subsidies produce distortions. CEI has long opposed such programs, and believe that the federal government should observe and protect the rights of farmers and all landowners equally, and provide none of them with special rights or subsidies.

RESPONSES TO QUESTIONS FROM SENATOR SPENCER ABRAHAM TO JONATHAN H. ADLER

Questions 1. Mr. Adler, defenders of the status quo in environmental regulation would have you believe that most if not all regulations bring about some public good. But it appears that current law actually creates strong incentives for anti-environmental behavior on the part of the regulated community. To cite one example, the fact of the matter is that, under current law, the very worst thing that can happen to a property owner qua property owner is to have his land declared to be habitat for an endangered species. For, in that event, the landowner is severely punished with land-use restrictions. As a result, current law gives landowners a very strong incentive to make sure their property is unattractive to endangered species. The upshot, as I see it, is that we now discourage people from developing their land in a manner that reserves its value as habitat for these species. Mr. Adler, would you agree that these disincentives exist under current law? Are you aware of any real-world examples of this phenomenon?

In your opinion, how would S. 605 change those incentives?

In summary, then, what would the effect of this bill be upon the quantity and quality of endangered-species habitat?

Answer 1. It is certainly true that current land-use regulations, such as those under the Endangered Species Act, often provide incentives against the practice of sound conservation. This is illustrated by the case of Ben Cone, the owner of 8,000 acres of timberland in North Carolina. Over the years Ben Cone has deliberately managed much of his land in such a way so to attract wildlife to his property. Mr. Cone has actively and intentionally created wildlife habitat. Through selective logging, long rotation cycles, and understory management, Mr. Cone has been very successful in these efforts, attracting many species to his land, from wild turkey and quail to black bear and deer.

Mr. Cone's good land stewardship has also provided habitat for the red-cockaded woodpecker, an endangered species. In response, the federal government has placed over 1,000 acres of his land off limits to logging, and the value of his land has been reduced by approximately $1.5 million. This has taught Mr. Cone a lesson: He should no longer manage his land in a way that attracts red-cockaded woodpeckers if he wants to be able to use it. Rather than allow trees to mature for at least 75 to 80 years before cutting them, as Mr. Cone used to, he now cuts them much earlier, as red-cockaded woodpeckers prefer older stands. Moreover, Mr. Cone has accelerated the rate of clearing on his land. It should also be noted that Mr. Cone re

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