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WASHINGTON, DC. The committee met, pursuant to notice, at 10:01 a.m., in room 226, Senate Dirksen Office Building, Hon. Orrin G. Hatch (chairman of the committee), presiding.

Also present: Senators Thurmond, DeWine, Biden, and Simon.


SENATOR FROM THE STATE OF UTAH The CHAIRMAN. I want to welcome everyone here to this third hearing on S. 605, the Omnibus Property Rights Act of 1995. The theme of this hearing is the effect of the modern day regulatory state on the traditional notions of private property rights. More specifically, we will explore today how federal regulations, particularly environmental regulations, impact the private ownership of property. This impact is very real for the citizens of my home State of Utah and for each of the several States.

In recent decades, America has witnessed an explosion of Federal regulation of society that jeopardizes the private ownership of property with the consequent loss of individual liberty. Today, excesses in government planning and land use regulation threaten to seriously undermine the free market and the individual's use of private property, even when such use does not demonstrably harm a neighbor's property. In other words, excesses in land use regulations collectivize property by prohibiting the owners of their property the ability to use productively their property.

S. 605 was written to fulfill the promise of the fifth amendment that no property shall be taken by the Government except for public use and with just compensation to the property owner. This bill is a moderate measure designed to balance the public's need to protect the environment against the equally important need to protect private property rights. It codifies recent Supreme Court decisions and clarifies the meanings of sometimes confusing case law. Thus, "bright-line” standards are created that will guide the Federal agencies as to what constitutes a taking. This will aid the agencies in avoiding the promulgation of rules that will result in the need to compensate property owners. S. 605 in no way prevents the Government from promulgating regulations designed to protect public health, safety and welfare. What it does do is to assure, as required


by the Constitution, that just compensation be paid when the Government "takes” a property interest.

One of the myths that has been raised by opponents of this bill is that the bill pays polluters not to pollute. Put simply, this is nonsense. The common law has for untold generations recognized that the very definition of property did not include the use of property in a manner that directly interferes with others' property interests or in a way that damages public health, safety and order. This conception has been codified in the bill as a nuisance exception whereby no compensation may be paid if the Government demonstrates that the use of private property would constitute a private or public nuisance at common law. The nuisance exception is broad enough to cover all governmental bans on pollution. No one has the right to pollute the environment. We have excellent witnesses who will address this nuisance issue.

I am also pleased to announce the very significant news that the Congressional Budget Office has just completed a study of the costs to the Federal agencies of implementing S. 605. Released yesterday, this study first concluded that costs due to increased litigation under title II of the bill would not be substantial because large claims are already litigated under the Tucker Act and the majority of new lawsuits would involve relatively small claims. Moreover, litigation costs would deter many small claims.

Secondly, CBO also found that administrative compensation costs incurred under title V of the bill will, in the short run, increase due to the increase in small claims made possible by the bill. CBO estimated these cost would, but only in the short run, amount to between $30 million to $40 million annually. This is a far cry from the tens of billions of dollars estimated by the White House.

Finally, CBO opined that the reason compensation and administrative costs will decrease over time is that enactment of the bill would encourage agencies to avoid taking actions that would cause property owners to seek compensation. The fact that the bill draws “bright-line" standards as to what constitutes a taking, requires agencies to conduct impact analyses before regulating private property, and mandates that compensation be paid out of agency appropriations, was crucial to CBO in its estimation. This is the purpose, after all, of any property rights measure the prevention of future violations of property rights.

I regret that I, personally, will not be able to stay for today's hearings. I am very grateful for Senator Thurmond's willingness to conduct these hearings because I have to be at some other mandatory meetings.

We have three distinguished Senators who will be making statements and five witnesses, who I am confident will discuss the issues thoroughly, but the schedule of the Senate being what it is, these other meetings will keep me from this one. So I am very grateful to Senator Thurmond and Senator Biden for being willing to go through with these hearings, and I will turn the gavel over to him.

But, first, we will turn to the distinguished Democratic leader on the Committee.


FROM THE STATE OF DELAWARE Senator BIDEN. I thank you very much, Senator. I have an opening statement that will take a little bit of time, and I would ask unanimous consent that it be able to be put in the record so I don't take all of the time of my colleagues and the witnesses.

The CHAIRMAN. Without objection, so ordered.

Senator BIDEN. Let me say this is a very important hearing. I think that the vast majority of Americans have no notion of what this is all about and its potential consequences. It is staggering in its proportions. This is a fundamental debate about the takings clause of the fifth amendment and how it is to be interpreted, and it is something that I have had a great interest in for the last 8 years. The Chicago School of Law and Economics has made it one of the essential elements of their way, in my view, of turning the takings clause of the 15th amendment into the same tool that the liberty clause of the 14th amendment was used back in the teens, and the 1920's and the 1930's. It is of that broad of scope and consequence.

Let me say, as well, that I think that one of the things, and I put this in an overall context here, there has been an unrelenting, in my view, assault on the middle class in this country for a longtime, much of it unintended. This is one of those assaults, in my view. In the face of protecting property rights, this will have a staggering impact upon the average middle class taxpayer if, in fact, this law were to become law, this proposal.

There are a number of amendments in this bill, a number of sections, that I am going to be asking about, and my opening statement speaks to it. But let me just speak to the blanket response that comes from my friends and supporters who support this approach, and that is changing the constitutional jurisprudence of the takings clause interpretation is, in fact, nothing really new because we have this common law nuisance standard out there, and that if you are going to hurt somebody else's property by the way in which you use your property, there is this all-encompassing, longstanding protection out there that has been around and developing for over 800 years, and that is exactly what it is. The only protection left will be the common law jurisprudence State by State based upon the concept of nuisance.

As explained by my friend from Utah, a nuisance is anything that hurts somebody else and, therefore, if you are going to do something bad with your property, then the Government can stop you from doing it and not have to compensate you. That sounds fine on its face, except, hopefully, we are going to hear from people who have an expertise in the law in the Constitution today, and I will challenge them to tell me how that interpretation is accurate.

For example, the takings clause, and most people don't even know what we are talking about when we talk about the takings clause. Every American, if you ask them, “By the way, do you want government to be able to take your property and not pay you for it?” the universal response from me and everyone else is, "Absolutely not. If they are going to take my property, I want to get paid for it.”

To oversimplify it, in the interest of time, the way in which the courts historically have looked at the takings clause of the fifth amendment is, hey, look, if you are going to take somebody's property, it better be for, first of all you have got to establish it is for an overall public purpose. You can't take my property and just give it to Senator Thurmond because you like Senator Thurmond better than you like me. You have got to prove it is for the common good. You are taking it for some better reason that is going to benefit the whole society.

The second thing it basically said was, but if, in taking my property; that is, making me pay money to do something with my property to stop some actions occurring beyond my property, or if, in fact, you are taking my property by telling me, for example, I cannot build a seven-story building in the middle of a neighborhood that says there is zoning and only allows no buildings over 5,000 square feet, that fell under the rubric of the police power, where the Government has the right to come forward and say, “Look, we have a right to protect the public health and safety," and I hope the press is listening to this, too, because, in fact, the way the press looks at this, understandably, is like the rest of us. They are not experts in constitutional law, most of them. Some who cover this will be.

But it has been the basic police power. So the court has said, look, when you come along and you are restricting the use of someone's property, if it is for the public health and safety and the good of folks out there, then the court will give wide deference to the leg. islative body and governmental body that sets out the standard.

For example, if you say in the middle of your residential neighborhood you can't build a 20-story building, the reason you can't build a 20-story building is not just for aesthetic reasons. It will increase traffic. It will create sewer problems. It may cause kids to get hit on bicycles because of the traffic pattern in the neighborhood. It may cause a whole range of other things.

The court does not require, at this point, any State or the Federal Government to quantify and prove a direct injury to somebody else. It says, “As long as there is a reasonable basis for this standard, we are not going to, basically, second guess it.”.

What this will do is fundamentally change that jurisprudence in every way, fundamentally change that jurisprudence. Now let me just give you, in summation here, a little bit of what nuisance law is about. The nuisance law, generally, covers immediate demonstrable harm, rarely addresses actions whose health and safety risks are long term, so it might very well not be a nuisance to discharge toxins into the water or air because they don't cause identifiable harm to an individual tomorrow. The damage will occur over a few years. That doesn't meet the requirement in this law that it is a nuisance.

Similarly, nuisance law does not address problems of cumulative harm, where, say, many low-level pollutants create a harm that none alone would cause. Also, a nuisance, generally, must be substantial and continuing, making nuisance laws often inapplicable to one-time intermittent pollution. Nuisance law does not protect the particularly sensitive, such as pregnant women, children, senior

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