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Volume 34, Issue 11 — November 2012


Foreign-Investor Protection and the Environment: A NAFTA Chapter 11 Update

by Robert Meltz

Imagine you run a Canadian company that mines precious metals. Your company owns a U.S. subsidiary that holds unpatented mining claims on federal lands known as the California Desert Conservation Area. You're optimistic that the U.S. government will approve your proposal to build and operate an open-pit, cyanide gold mine there because the Secretary of the Interior, Gale Norton, has just rescinded the denial of her predecessor, Bruce Babbitt--though she hasn't granted approval as yet.

But you have a second hurdle. In December 2002, the California State Mining and Geology Board, at the urging of Gov. Gray Davis, adopted an emergency regulation requiring the backfilling of all mining pits, followed by grading to restore approximate original contour. A few months later, the governor signed into law a bill making these requirements permanent, stating that it "essentially stops" your mine. Indeed, the new law is limited to projects located within a mile of a Native American sacred site, which just happens to describe your proposed project. You believe that the backfilling and contouring requirements are extraordinary for metallic mineral mines, and that they completely destroy the value of your mining claims.

You seek legal redress. But you reject the usual course: a "taking" action under the California or federal constitution against the state of California. Counsel has advised that it may be easier to get compensation under the North American Free Trade Agreement (NAFTA) pursuant to the binding arbitration it offers for "investor-state" disputes. You give the go-ahead for such a NAFTA claim, bypassing the domestic courts entirely. The claim asserts that the United States, by the actions of California, violated NAFTA's guarantee of "fair and equitable treatment" and its prohibition against direct or indirect expropriation without compensation.

Anti-regulation Under the Guise of Rational Regulation: The Bush Administration's Approaches to Valuing Human Lives in Environmental Cost-Benefit Analyses

by Richard L. Revesz and Laura J. Lowenstein

The primary benefit of many important environmental regulations, as determined by the dollar value assigned by cost-benefit analysis, is the human lives that are saved. Thus, the methodology used to determine the value assigned to the lives that would be saved by an environmental program is central to the determination of whether such a program is justifiable on cost-benefit grounds. In 2000, the U.S. Environmental Protection Agency (EPA) published guidelines that set forth the primary means by which it would value human lives, and determined that each life should be valued at $6.3 million (in year-2000 dollars).

The use of this $6.3 million figure for the valuation of a human life is being challenged by the current Administration. Through the inclusion of alternative benefit calculations in recent environmental cost-benefit analyses, the Administration has introduced four questionable techniques that inappropriately lower the value assigned to human lives. Following public outcry, the Administration suspended using techniques that undervalued the lives of the elderly relative to those of younger individuals, but it continued to employ other techniques that undervalue all lives, regardless of age. This anti-regulatory approach systematically underestimates the health benefits of environmental regulations.

This Article analyzes the flaws in the Administration's techniques, showing that they are inconsistent with sound economic theory. Cost-benefit analysis currently enjoys considerable support in political and academic circles. It is therefore critically important that the methodology be used in a way that makes regulation more rational, not unjustifiably lax. I. Introduction Cost-benefit analysis has become an important and widely applied tool for evaluating environmental regulations. The practice of reviewing regulations on cost-benefit grounds has enjoyed bipartisan support during the last four administrations. Indeed, President William J. Clinton's Executive Order No. 12286, which mandates cost-benefit analysis for all major regulations, was preceded by a similar order promulgated 12 years earlier by President Ronald Reagan.

Fuel Efficiency: The Disconnect Between Environmental Policy and Tax Policy

by John J. Marciano

Increasingly, the U.S. government is realizing the importance of self-reliance. With international security threats rising, energy independence has become increasingly significant. However, freeing the United States from energy dependence may have its drawbacks. Specifically, environmental impacts reign high in priority when discussing revamping the categories and volume of energy use.


Hybrid vehicles, alternative fuel vehicles, and fuel cell vehicles (hybrid-type vehicles) have been cited as significant tools, which could be used to combat the current energy entanglement while at the same time remaining conscious of, and accountable to, environmental risks. The National Energy Policy Development Group concluded that "[w]ith forward-looking leadership and sensible policies, we can meet our future energy demands and promote energy conservation, and do so in environmentally responsible ways that set a standard for the world." Through President George W. Bush's commitment to energy security and environmental protection, the U.S. Congress and the states have attempted to use hybrid-type vehicles to their full advantage via tax credits and other incentives.


Nevertheless, continuity in environmental policy and stability in tax policy have suffered because the overall plan for energy independence has followed a disheveled path. Competing agendas have counteracted the intended effectiveness of tax credit and incentive programs for energy efficiency.


This Article will discuss the above tax credits and incentives and attempt to demonstrate how they have been and continue to be ineffective due to policy disruptions via congressional and executive inaction, nominal action, and competing policies. Part I of the Article will discuss the general principles behind American environmental policy and environmental policy as a whole. Part II will discuss tax policy within the United States and its potential impact on social, economic, and consumer demand. Part III will discuss hybrid vehicles, alternative fuel vehicles, fuel cell vehicles, and fuel economy within the U.S. tax and environmental agendas. Part IV will attempt to show how the interplay between the current tax scheme and the environmental and energy goals within the United States hinders the development and success of each. Finally, Part V will conclude that the current and proposed energy programs of the United States disregard fundamental environmental and tax policy norms, which make them ineffective.


The Public Use Requirement and Doctrinal Renewal

by Steven J. Eagle

For a generation, our view of the scope of government's eminent domain power has been framed by three cases, Berman v. Parker, Hawaii Housing Authority v. Midkiff, and Poletown Neighborhood Council v. City of Detroit.

In Berman, the U.S. Supreme Court held that the use of eminent domain to alleviate urban blight could encompass the condemnation of nonblighted commercial structures within the blighted area. Having concluded that slum clearance was a legitimate governmental purpose, the Court accorded the legislature extraordinary latitude in achieving it. Furthermore, the Court swept aside constitutional objections to the use of eminent domain for beautification as well as for slum eradication, and to governmental acquisition of parcels with the intent of reconveying them to profit-seeking redevelopers. "Once the object is within the authority of [the U.S.] Congress, the right to realize it through the exercise of eminent domain is clear. For the power of eminent domain is merely the means to the end."

In Midkiff, the Court upheld a Hawaiian land reform statute that would permit underlying fee titles to be condemned at the behest of their respective ground lessees, with subsequent reconveyance to the lessees. The Court declared: "The 'public use' requirement is . . . coterminous with the scope of a sovereign's police powers." In Poletown, the Michigan Supreme Court upheld as a public use the condemnation of an entire ethnic neighborhood for demolition and replacement by a General Motors (GM) Corporation assembly plant. The court declared: "The power of eminent domain is to be used in this instance primarily to accomplish the essential public purposes of alleviating unemployment and revitalizing the economic base of the community. The benefit to a private interest is merely incidental."

Blowing Snow: The National Park Service's Disregard for Science, Law, and Public Opinion in Regulating Snowmobiling in Yellowstone National Park

by Joanna M. Hooper

[Off-road vehicles] are domineering, exclusive, destructive and costly; it is they and their operators who would deny the enjoyment of the backcountry to the rest of us. About 98% of the land surface of the contiguous USA already belongs to heavy metal and heavy equipment. Let us save the 2%--that saving remnant. --Edward Abbey

If future generations are to remember us with gratitude rather than contempt, we must leave them something more than the miracles of our technology. We must leave them a glimpse of the world as it was in the beginning, not just after we got through with it. --President Lyndon B. Johnson, upon signing the Wilderness Act of 1964

Snowmobiles were first allowed in Yellowstone National Park in 1963. Five years later, the National Park Service (NPS or Park Service), responding to growing public concern about the effects of snowmobiling on park resources, implemented the park's first official winter use policy. Winter use of the park, including snowmobiling, increased dramatically during the three decades following the Park Service's 1971 decision to groom snow-covered roads for passage by oversnow vehicles. Winter use doubled between 1983 and 1993, increasing from 40, winter visitors to 140,000. Today, there are over 180 miles of groomed trails within the park and, on peak days, as many as 1, snowmobiles entering. As the popularity of snowmobiling has increased, so has the snowmobiling public's desire for bigger, faster, and more powerful machines, and technology has evolved accordingly. This seemingly insatiable quest reflects the American public's general fascination with all things super-sized and motorized, and has created supersized noise and air pollution problems as well as significant threats to wildlife. As a result, Yellowstone has made the National Park Conservation Association's annual list of 10 Most Endangered National Parks every year since 1999 (the list is only six years old).

The U.S. Supreme Court's Decision in South Florida Water Management District v. Miccosukee Tribe of Indians: Leaving the Scope of Regulation Under the Clean Water Act in "Murky Waters"

by Lawrence R. Liebesman

In an 8-to-1 decision authored by Justice Sandra Day O'Connor, the U.S. Supreme Court reversed the U.S. Court of Appeals for the Eleventh Circuit's decision that the South Florida Water Management District's (District's) operation of a pumping station required a national pollutant discharge elimination system (NPDES) permit because pollutants transferred from a canal to a water conservation area would not have occurred but for the operation of the pump. However, as discussed below, the Court left unresolved several key issues regarding the Clean Water Act (CWA) permit program that must await future resolution by the courts.