in gasoline, we reduced the level of lead in the air by 98 percent and protected millions of children from permanent mental damage. In just the last two years, we have reduced toxic air pollution from chemical plants by 90 percent. We've protected the public and the environment from toxics, such as DDT. Industrial emissions of toxic chemicals have decreased, hundreds of toxic dumpsites have been cleaned up, and the creation of new hazardous sites has all but halted. Today's new cars use only a third as much gas and emit 90 percent less pollution. All across the country, big industries and small, now recognize that pollution control and prevention is part of doing business responsibly and critical to our nation's health and economic suc

cess.

Nevertheless, we need to protect these gains, and to recognize that many environmental problems still remain to be solved. With all the progress we've made, 40 per cent of our rivers and lakes are still not suitable for fishing or swimming;, more than 1000 warnings are in place, telling people not to eat the fish they catch in their local streams. Thirty million people in the U.S. get their drinking water from systems that do not meet public health standards. In Milwaukee, hundreds of thousands fell ill from contaminated drinking water, and 100 died. Asthma is on the rise, and 40 percent of the population still lives in areas where the air is dangerous to breathe. One in four Americans lives within a few miles of a toxic dump.

So much work remains to be done. Compensation bills would cripple EPA's efforts to address remaining problems, and threaten to undo the successes we have had. While not outwardly admitting this result, this legislation would fundamentally reexamine the most basic premises for tough and protective national environmental standards.

II. Problems With Automatic Compensation Bills

Our difference with proponents of compensation bills is not over the end, protecting private property rights and ensuring that the guarantees of the Fifth Amendment against uncompensated takings of private property are fully implemented, but with the means for doing so. I believe compensation bills do not allow us to strike the balance the Constitution provides between the needs to protect our nation's environment and to protect private property; instead, they force the false choice of doing one or the other as if the two were mutually exclusive. In reality, a healthy environment is critical to protection of property values, which depend in large measure on clean air, safe water, and the like. In the long run, compensation bills will seriously undermine environmental protection, and thus reduce protection for all private property, particularly for America's homeowners, nearly 95 percent of whom live on lots of five acres or less. Moreover, it is the genius of our constitutional system that we can protect both private property and vital public interests.

There are two principal compensation bills now under consideration. HR 925, passed by the House, has a purported compensation threshold of 20 percent, defines property to include land and water rights, and applies to federal action to protect wetlands and endangered species (and to certain federal water programs). Ŝ. 605, which is now before the Senate Judiciary Committee, has a purported 33 percent compensation threshold, and applies to any federal action (and some state actions) affecting any type of property.

Despite their differences, the bills are based on common, flawed assumptions that mean they will adversely affect property owners and the public. I will emphasize in particular four principal problems with compensation bills. First, they reject the Fifth Amendment effort to provide fairness to the property owner and the public, in favor of a one-size-fits-all mechanical formula that effectively creates an entitlement for property owners whenever certain conditions are met. Second, because they provide only narrow, nuisance-based exceptions to the compensation requirement, in many cases, they will force the government to choose between paying polluters not to pollute and tolerating activities that harm or threaten public health, safety or welfare. Third, they will undermine the careful balance Congress has struck in individual environmental statutes and needlessly complicate the regulatory process. Finally, they will create perverse incentives that will discourage cooperation between government and property owners to find constructive ways of protecting the environment while meeting the needs of property owners.

1. NO ATTEMPT AT FAIRNESS

The Fifth Amendment standard for compensation is fairness: whether, in light of all the circumstances, it is fair that a particular property owner should bear the cost of regulation, or whether that cost should be borne by the public as a whole. Compensation bills, however, reject this standard in favor of an extreme formula that

would pay out billions of taxpayer dollars without regard for whether compensation is fair to the public or the property owner.

The bills' most radical departure from the Constitution is in providing compensation solely on the basis of a mechanical formula purportedly assessing the economic impact of the regulatory action on the regulated property. This formula does not explicitly consider, among other important factors, the price the owner paid for a property, the expectations the owner had when acquiring the property, whether the use the owner proposes is reasonable under the circumstances, or whether the owner is able to earn a reasonable rate of return on the property. This could force EPA to spend huge sums for compensation, regardless of whether or not compensation is fair to the property owner or the public. It could even compensate property owners who continue using their property as they always have, for example for agriculture, while claiming compensation for regulation that prevents them from making some other more lucrative use, such as commercial development.

The focus on an "affected portion" of property also rejects any consideration of fairness. It would require compensating the owner of a 1000 acre parcel for regulation affecting a single acre wetland on that parcel if the wetland is claimed as the "affected portion." In many cases, owners who have suffered a minor loss will be able to "segment" their property, to establish a loss of 20 percent, 33 percent-or even 100 percent to a specific "portion," and the bills identify no limits to how small a portion can be considered. In practice, this will mean that virtually any federal regulation can trigger compensation.

A focus on the whole parcel, rather than just an affected portion, is necessary to ensure fairness. Thus, the owner of a large tract, some fraction of which has been subject to restrictions, is still likely to be able to make productive and profitable use of the land. Indeed, with adaptive and innovative modern techniques stimulated by local land use regulation, such as clustering of housing units to preserve open space, owners often end up with developments that are highly profitable and attractive to buyers, even though not every acre can be developed. Such owners should not be compensated.

Compensation bills are also unfair to taxpayers because they ignore the role of regulation in creating and protecting property value. They force the taxpaying public to compensate property owners when regulation limits changes in use that enhance value, but do nothing to assure the public a share of the benefits when government action-as it so often does in our complex society-increases property value by providing infrastructure and protecting public order, human health, and the quality of the environment. In addition, compensation bills effectively force the government, that is, the taxpayers, either to pay property owners for following the law or to refrain from enforcing the law. This will inevitably erode government's ability to use its regulatory authority to protect and enhance property values for all property owners.

S. 605, with its exceedingly broad reach, ignores other aspects of fairness as well. The bill's broad language opens the possibility that private parties can create or define property by forming "understandings," by invoking "custom" or "usage." This could mean, for example, that where permits are typically renewed, a property owner might invoke "custom" to claim a property interest in a renewal or where an activity has been tolerated in the past, owners might invoke "usage" to demand compensation for future restrictions on the activity. Even if such claims are ultimately rejected by the courts, the bill's vague and open-ended definition of property will create chaos and confusion in the meantime.

Equally radically, S. 605 also would pay property owners for economic impacts that have never been protected by the Fifth Amendment. Specifically, the bill could provide owners with compensation for "business losses." It is difficult to assess the impact or define the practical limits of the unprecedented suggestion that it is somehow the job of the government to insure against all "business losses."

A. A narrow exemption

2. NUISANCE

The compensation bills include specific exemptions that, because of their narrowness, ambiguity, or both, will not allow for adequate protection of human health, public safety, the environment, and other vital concerns. As a result, in many cases they would force the federal government to pay property owners to refrain from activity that is harmful to society, in some cases paying polluters not to pollute; this would seriously undermine effective environmental protection.

Both bills relieve government of the obligation to provide compensation when it regulates activities that constitute nuisances under estate common law principles. While this exemption sounds like a simple, straightforward way of avoiding com

pensation to persons engaging in activity that is harmful or socially unacceptable, it is anything but. In practice, the nuisance exception may not reach many such activities. This exemption goes to the heart of Congress' long-standing rationale for enacting federal health and environmental protections in the first instance to address problems that could not be adequately or uniformly addressed under state nuisance law.

For example, some courts have rejected state nuisance claims seeking to remedy the problems created by leaking landfills or underground storage tanks or activities on one property that caused flooding on a neighboring property even where these might be plainly covered by federal environmental legislation. The nuisance exception in these bills would typically apply only to actions that cause demonstrable immediate harm to specific property. Thus it may not reach actions whose health and safety risks are long-term, as is often the case with discharges of pollution into air, land, or water. Similarly, it may not cover actions whose principal threats to health and safety are cumulative, as where an individual use of a pesticide or discharge of a pollutant does not, by itself, cause significant harm, but the frequent repetition of the action has serious consequences.

Similarly, nuisance law may not fully protect those who might be particularly sensitive to the harmful health effects of pollution, including children, pregnant women, and the elderly. Further, it may not apply to actions whose harms are suspected but have not been conclusively documented, forcing the public, rather than the property owner, to bear the risk of any uncertainty. Finally, some critical public safety activities, such as interstate pollution, are governed solely by federal law, and thus would not be covered by a state nuisance law exemption. In addition, nuisance law is notoriously uncertain; far from establishing a bright-line standard, a nuisance test will make it more difficult for both regulators and property ,9wners to determine what actions can be regulated without compensation. Finally, since nuisance law varies from state to state, a state nuisance exemption could lead to major differences in the level of environmental protection from one state to another-and an intrusive look by federal assessors and federal courts at how state nuisance provisions should be interpreted for purposes of this legislation.

HR 925 also exempts regulation whose "primary-purpose * ✶✶ is to prevent an identifiable" "hazard to public health or safety; or damage to specific property." The "hazard" exemption is apparently meant to cover activities that would not come within the definition of nuisance. However, the exemption is worded in novel language whose meaning is unclear. Thus it may not apply to activities that will reduce or control a hazard but cannot "prevent" it entirely. It is also unclear at what point a long-term or cumulative risk constitutes an "identifiable" "hazard" or what constitutes "identifiable * ** damage to specific property."

Ultimately, the "hazard" exemption raises many of the same issues concerning cumulative and long-term impacts as nuisance law, and it seems more likely to create confusion and uncertainty than to remedy the limitations of nuisance law.

B. Compensation to prevent harmful activities

Particularly with S. 605, the limitations of the nuisance exemption could require EPA to compensate a wide variety of restrictions imposed to protect public health, safety, and the environment by controlling pollution.

For example, under S. 605, taxpayers could be forced to pay staggering sums to the owners of industrial sites to refrain from emitting damaging air pollutants. Title I of the Clean Air Act requires that major new sources of air pollutants wishing to locate in areas that are already in violation of air quality standards must obtain "offsets" of pollutants from other sources so that the total quantity of pollutants in the area does not rise. This increases the costs of operating facilities, and thus could give rise to claims under S. 605. Moreover, this restriction would be unlikely to fall within the nuisance exception because the effects of these pollutants are cumulative, long-term, and widely dispersed, and because their emission is tolerated under certain circumstances. Similarly, in order to control damaging acid rain, EPA requires "allowances" of sulfur dioxide emissions; EPA will reduce these allowances over time. Such pollution may be transported over large distances, cumulate the effects from many sources, and be influenced by complex weather patterns so any one activity may not alone be immediately damaging, or any one state's nuisance provisions may not suffice to be protective. Under similar reasoning, this program could give rise to compensation claims.

To protect the public, EPA also imposes requirements for accreditation, training, and notice for lead and asbestos removal. Businesses could seek compensation for the increased costs of worker training and more costly removal processes and any resulting reduction in profits, and home and apartment owners could claim that the notice requirement affects the marketability of their property. Because these pro

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grams address hazards that are primarily long-term, they might not come within the nuisance laws of some states. However, they provide protections vital to public health, especially for children, who are particularly vulnerable to the hazards posed by lead and asbestos.

EPA also imposes critical restrictions on uses of pesticides and similar products, in some cases with outright bans, such as for DDT, and sometimes by restricting use. Such restrictions arguably may reduce property value and trigger compensation claims. Moreover, because the principal effects of some of the regulated products are cumulative, such restrictions might not fall within an exemption based on state nuisance law.

Further, EPA sometimes imposes uniform national regulations to ensure an adequate margin of safety for the public. For example, to protect drinking water supplies, EPA requires the monitoring of groundwater near waste disposal facilities. If the monitors at a particular site established that no contamination had occurred, the operator of the facility could seek compensation for monitoring costs, using the evidence obtained from monitoring to demonstrate that, in fact, no nuisance existed. Finally, to ensure full protection to the public and a margin of safety, some statutes and regulations require use of the best available pollution control technology. However, even though achieving such standards is feasible, if it reduces the profitability of a property,,the owner could claim compensation and defeat a nuisance exemption if some other, less costly and effective standard would be adequate to avoid creating a common law nuisance.

Similarly, HR 925, even with its' "hazard" exemption, will require compensation to prevent activities that interfere with the important functions wetlands perform in protecting the public. Specifically, in their natural state, wetlands enhance the ability of watersheds to absorb water without harmful flooding, and filter a wide range of pollutants, including pesticides and chemical fertilizers, from entering groundwater used for, drinking. They also protect aquatic life, including fisheries on which many jobs may depend. It is ordinarily not possible to document with specificity the connection between a single wetland development activity and a specific instance of unusually severe flooding, degradation of drinking water, or lost productivity of a fishery (with resulting job losses). Thus, wetlands development often would not constitute a common law nuisance or a "hazard."

Nevertheless, wetland development activities have real consequences, not only for ecosystems in a general sense, but for very specific people whose safety and livelihoods depend on the ability of wetlands to continue performing their natural functions. At bottom, government does not engage in wetlands regulation to arbitrate between abstractions ("property rights" versus the "environment ") but among the differing needs and rights of various people, many of them property owners, who will be affected in a host of ways by wetlands activities. The problem with compensation bills, which their exemptions do not solve, is that they fail to recognize this arbitration function. Instead, they use a rigid formula that mechanically tilts the balance in favor of one type of citizen, property owners seeking to develop their property, with only the most narrow consideration of the needs of others whose health, safety, economic security, and well-being may depend on restraints on development. In reality, the only way to find the proper balance, to protect the rights of all Americans, is by looking at each proposal on its merits, as sound regulatory programs do, as the courts do in takings actions, but as automatic compensation formulas most emphatically fail to do.

3. DISRUPTION OF CRITICAL PROTECTIONS

Despite the care and balance Congress has struck with each of its pieces of environmental legislation, automatic compensation bills will disrupt existing regulatory programs by creating uncertainty, confusion, and instability. Ultimately, this will cause regulatory gridlock, creating problems not just, for federal and state regulators, but for the regulated community as well.

S. 605 appropriates the language of regulatory reform legislation to impose "decisional criteria" that would create a "supermandate" elevating private property concerns above all others. The legislation would prohibit EPA from enforcing any legislation which might require an "uncompensated taking" as defined by the act. This vague provision, coupled with a required "lookback" at all existing, regulations to redress any private property impacts, could serve as a bar to critical protections despite Congress' considered judgment that EPA is required to impose necessary and appropriate limitations on property use affecting others.

Providing automatic compensation under the bills, in addition to costing taxpayers billions, will drain EPA program budgets and significantly reduce EPA's ability to perform its mission of health and environmental protection, as mandated by Con

gress. Both bills direct, with varying degrees of specificity, that compensation payments be made out of funds appropriated for agency operations.

As a result, a large number of claims or a few large claims against a particular program could threaten the operation of that program. Thus, if, for example, the Clean Water Act Section 404 program or the pesticide licensing program exhausted appropriations by paying compensation claims, they could be forced to suspend operations. This may mean that no permits could be issued for use of wetland property or no licenses could be granted for use of new pesticides. More generally, to the extent an agency diverts resources from implementing a program to compensating property owners, it will have fewer resources to assist property owners, by providing them with information or processing permit applications.

Proponents assume compensation bills will cut-down regulation because regulators will feel the economic pain of paying claims. If this does occur, the Agency will effectively be compromising environmental protection for the entire public, in order to reduce regulation of the property of a few property owners. However, in many cases cutting back on regulation may not be a realistic option for the Agency because the environmental consequences of such cutbacks would be intolerable and because Congressional mandates may compel the Agency to act, and leave it without the discretion to refrain from acting. Finally, attempts to cut back on regulation may be subject to judicial challenge by citizens who believe the reduced regulation does not satisfy the Agency's legal obligations. The net result will be to create regulatory instability and uncertainty.

In addition, a vast compensation bureaucracy of appraisers, negotiators, arbitrators, and litigators will be needed to establish and administer a compensation and detailed assessment program. The costs of creating this new bureaucracy would also be borne by the Agency, presumably-coming out of its operating budget, which would further reduce money available to discharge its responsibilities for protecting health and the environment, including issuing permits.

In addition, the bill would also allow litigation to enforce its assessment and other prescriptive requirements at any time within six years of the challenged action. This will create enormous disruption and uncertainty, by fundamentally altering longstanding and carefully tailored "preclusive review" provisions in many environmental statutes.

For example, under the Resource Conservation and Recovery Act, any challenge to a final rulemaking must be filed in the Court of Appeals for the D.C. Circuit within 90 days of the publication of the final rule. 42 U.S.C. Section 6976. After that time, the legality of the rule cannot be challenged. Such provisions ensure that challenges to these regulations are heard swiftly, providing certainty to both regulators and regulated entities, including, the State agencies that adopt the federal regulations over time. S. 605 arguably would extend to six years the time for challenging an agency action.

A court action that invalidates a rule after many years can throw a whole program into chaos-the rule could already have been adopted by dozens of states, applied in numerous administrative and enforcement actions, incorporated in hundreds of permits throughout the nation, and used as the basis for additional, later regulations.

In addition, S. 605 includes a provision that could fundamentally and adversely reorder the carefully crafted relationship between the federal and State governments Congress has directed in the implementation of environmental programs. This provision would require the federal government to provide compensation for action by a State agency that: carries out or enforces a program required under federal law; is delegated administrative or substantive responsibility under a federal program; or receives federal funding to implement a state regulatory program. The impact of this liability scheme will be devastating to State/federal relationships in implementing federal and state environmental programs. Currently, in large part, State agencies administer the major environmental programs, including the Clean Water Act, the Clean Air Act, and RCRA. Consistent with the express intent of Congress in enacting these laws, EPA has developed strong partnerships with State governments and has, over time, delegated much of the day-to-day permitting, enforcement, inspection, and regulatory actions under these statutes to the States. The States also receive federal grants to administer these federal environmental programs and to develop state environmental programs.

Whether it be all of the state planning and pollution control requirements under the Clean Air Act's State Implementation Plans (SIPs) or the issuing of RCRA hazardous waste permits, EPA could no longer-under S. 605-leave the basic administration of federal environmental laws to the States. These day-to-day State actions are likely to diminish "property" values, as defined by this bill, and thus could create enormous financial liability for the federal government. Nor, for the same rea