Keynote Address

KEYNOTE ADDRESS

Roger J. Marzulla

Editors' Summary: Although NEPA requires the preparation of an EIS for every major federal action significantly affecting the environment, federal agencies often decide in particular cases that compliance with NEPA is satisfied by preparation of EAs. The decision not to prepare an EIS is usually based on a finding of no significant impact. When an agency's threshold NEPA decision is challenged in court, what is the appropriate standard of review? The federal courts of appeals answer this question in at least two different ways: some circuits use the "arbitrary and capricious" standard, while others inquire into the "reasonableness" of the agency's decision. Several courts have expressed doubt that there is any genuine distinction between the rival standards, and the Supreme Court has so far declined to settle the issue. The author of this Article surveys the federal case law on this question, exploring the approach of each circuit and taking issue with those who maintain that the difference between the standards is illusory. The vital difference, the author argues, is that courts using the reasonableness standard are more likely to substitute their own judgment for that of the agency, while courts adopting the arbitrary and capricious standard tend not to second-guess an agency's decision. Because he sees an important difference between these two approaches, the author urges the Supreme Court to grant certiorari to resolve the circuit split.

Roger J. Marzulla is Acting Assistant Attorney General, Land and Natural Resources Division, U.S. Department of Justice, Washington, DC.

[18 ELR 10350]

I am privileged to be able to address the interaction between real property and environmental law as both a government employee and a private citizen. Too often, we are inclined to burrow in to the provisions of CERCLA,¹ SARA,² the Clean Air Act,³ the Clean Water Act,⁴ RCRA⁵ and other environmental statutes without considering how they fit into the universe of the law. I am from the Justice Department's Land and Natural Resources Division, which litigates environmental and land management cases on behalf of a government that owns over one third of the land mass of the United States. The responsibility of being an owner of 750 million acres, many of which are the subject of transactions and, indeed, in litigation, is onerous. The Lands Division handles not only enforcement of the environmental statutes but also the defensive representation of clients whose handling of hazardous substances has sometimes been problematic: the Department of Energy with their nuclear weapons facilities, the Army and Air Force with their missile testing ranges and jet fuels, and the Navy with the remaining portions of nuclear reactors on decommissioned ships. With such problems, we must confront many of the same issues faced in the private sector.

I would also like to bring to the program the perspective provided by the Constitution. The Fifth Amendment's protection of private property against taking for public use without just compensation marked a radical departure from the medieval European system in which property was held "of the King." It was a dramatic break with tradition for our founding fathers to adopt Locke's notion that government derived its powers through a social contract requiring the consent of the governed, and Jefferson's concept of a limited government whose powers to take and inhibit the use of private property were significantly limited.

For the first 150 years of our history, property rights were fairly clear. Property, if taken at all, was generally taken by eminent domain, and the Fifth Amendment (which ultimately became applicable to the states under the Fourteenth Amendment) was easy to implement. Not until early in this century, when land use controls rose to prominence, did a clash arise between the traditional notions of absolute private property rights and the desire of the public to improve the environment, especially the urban environment in which many people now found themselves.

It is the fusion of the resulting regulatory scheme with traditional real property law, arising from the medieval period and making that great leap across the gulf into the protections of the Fifth Amendment, with which we now grapple and which this conference must address.

I am reminded of a case I had while still in private practice. It involved a rather wily gentleman whom we sued for fraud. He had become the close confidante of a family whom he had convinced to release a small fortune for investment in property elsewhere in the nation. Much of the property simply did not exist, we later discovered. So insidious were his efforts, however, that during the litigation the son of this defendant became engaged to my client's daughter, and the two of them were married. Although I was invited to the wedding, I was unable to attend. Frankly, I had visions of ushers saying: "Plaintiff's side or defendent's side?" Since then, I have sometimes wondered how that marriage worked out. I think it is a marriage of this sort, one between the traditional law of real property and the law of environmental protection, that we must examine, in this conference, to see how it is working out.

Every law student who studied real property law remembers Euclid v. Ambler Realty,⁶ in which the Supreme Court decided that land use control, in the form of a zoning law, was compatible with the Fifth Amendment to the Constitution. It was permissible to constrain an individual's use of his property for the public good. This ruling, however, was subject to the strictness of Pennsylvania Coal v. Mahon,⁷ where Justice Holmes wrote his oft-quoted observation that if a regulation went too far it could constitute a taking.

Euclid and Pennsylvania Coal have been reaffirmed as precedent by the Supreme Court in recent years in cases such as United States v. Riverside Bayview Homes,⁸ Florida Rock Industries v. United States⁹ in the Federal Circuit last year, and Keystone Bituminous Coal v. DeBenedictis,¹⁰ a case very similar to Pennsylvania Coal. All of these cases stand for a dual proposition: Regulation may become a taking if it goes too far, but environmental regulation, like land use controls, is entirely appropriate if kept within constitutional boundaries. It is within those boundaries that both the Congress and we as enforcers must work.

Two cases are of particular note this year. Nollan v. California Coastal Commission,¹¹ before the Supreme Court, involves a physical invasion — something the court has traditionally viewed as a taking under appropriate circumstances.¹² The Coastal Commission told Mr. Nollan that he can build a house on his lot within the Coast zone, but only [18 ELR 10351] if he dedicates to the public an easement for access to his beach frontage. In short, the Commission was requiring him to allow the public the use of his private property.

Judging from the arguments, the Court must wrestle with whether property owners must give up the largest in their bundle of sticks — the right to exclude others — as a condition of regulation that is environmental and indeed somewhat aesthetic in nature. This case will likely affect our approach to statutes, such as CERCLA, that deal not only with human health but also with the environment.

The second case of moment is Hendler v. United States.¹³ The Hendlers own land next to California's Stringfellow hazardous waste site. The U.S. government installed a groundwater monitoring well on their property, and the Hendlers filed suit, contending that the installation of this four-by-four-foot well constitutes a physical invasion of their property and therefore is a taking. Our defense concedes yes, it is a physical invasion, however it is permissible because it protects their property from the extension of the contaminated groundwater plume and therefore augments the public good. This may be the final frontier of marriage of environmental regulation with traditional property rights: the physical invasion of property for environmental purposes.

When talking about property rights we must recall that people, not property, have rights. When CERCLA or a new provision of SARA is challenged as causing a taking of property without due process, it is appropriate to focus, not on affected property, but on the rights of the individuals who own that property.

CERCLA does not speak in terms of limiting uses of property, but rather in terms of imposing liability on certain persons by reason of their relationship to waste material present on that property. It focuses on the liability of the owner of a facility, those who arrange for disposal upon the facility, and those who transport the waste to the facility. CERCLA is appropriately viewed, then, not as an impingement upon property ownership or as a strictly regulatory measure like land use controls, but as a sophisticated taxation system. Congress has made the choice in CERCLA, by providing not only the Superfund but also injunctive remedies, that the responsibility for cleaning up hazardous waste across this nation ought to rest upon those who in one way or another profited from, or otherwise helped to create, those sites.

One may quarrel with Congress's determination that hazardous waste sites should be cleaned up. Many people quarrel with the categories of persons on whom Congress has chosen to impose liability. One cannot quarrel, however, with Congress's decision that rather than tax the entire population of the United States to fund a public works program in which all of the money is put into a big pot and then spent to clean up the sites, the people who are somehow related to the creation of the waste should be sought out. That formulation is the principle behind the liability provisions of Superfund.

Later in this program, much will be said about the federal government's position on environmental cases in Bankruptcy Court. It should be noted that Congress did not grant to the government — in either CERCLA or SARA — any kind of "superlien." In our view, as we have argued to the Court, with regard to costs incurred by the government prior to the filing for bankruptcy, the government is an unsecured creditor like everyone else. We stand in line. We have also argued to the Bankruptcy Court, however, that if we are engaged in a removal action, we are entitled to compensation for the required expenditures. Whether it is something relatively simple, like putting up a chain link fence or posting guards to shoo children away, or whether it is something fairly sophisticated such as removing drums and conducting surface cleanups, these administrative expenses are necessary to preserve the estate, to avoid future liabilities and to limit potential losses.

In the future, when the waste site itself is an asset of the estate, we must resolve how to reconcile the need for a long-term remedial action geared to immediate health and safety concerns as well as to long-term environmental concerns with bankruptcy law. Section 121 of SARA requires us to consider many issues that conflict with the protection and enhancement of the bankruptcy estate.

During this program, we will also discuss lender liability. Congress decided to include in CERCLA an exception for persons holding title solely for the purpose of a security interest. We have taken the position — and I think it is justified by the theoretical foundation that I have set forth — that when a lender is a secured party foreclosing solely to eliminate his security and retire the original obligation, even though he may take title for a short time, the lender's exception applies to him.

By contrast, we have also taken the position that a lender is not privileged to become an owner and then to operate or hold a hazardous waste site indefinitely with impunity. Favored status does not apply to one who has gained title by foreclosure if that individual engages in activities that owners traditionally undertake. The distinction is whether the lender is acting to foreclose for the purpose of removing his money or to foreclose in order to obtain ownership of the property.

The innocent landowner provision of SARA is another noteworthy issue. It will likely be difficult for anyone to establish a position as an innocent landowner. To the extent one is able to establish innocent landowner status, that individual probably can establish a third-party defense under § 107(b)(3).¹⁴ However, given the due diligence required by SARA for innocent status, this defense will likely succeed only in the most narrow circumstances.

The innocent landowner provision, however, creates a standard of liability that I find troubling: apparently anyone who contracts to buy a parcel of real property is an owner for purposes of CERCLA unless that individual qualifies as an innocent landowner. Although we have not yet litigated under that section, I suspect that we will encounter it soon.

In closing, let me recall the parable of the two lawyers. In my version, one is an environmental enforcement lawyer, and the other, a representative of a potentially responsible party. They decide to take a walk in the woods to settle their differences. As they do so, they round a corner and are faced by the largest bear that either of them has ever seen. One of them drops his briefcase, which he'd brought along in case they reached a settlement, and takes to his heels. The other yells after him, "Are you crazy? You can't outrun a bear like that." The other lawyer looks back and says, "I [18 ELR 10352] don't have to outrun the bear, I just have to outrun you!"

It is that attitude that would be unproductive in the effort to join the two bodies of law. Real property law has ancient traditions and a revered place in the American legal constellation. At the same time, the environmental statutes and the concept of environmental protection have become quite as American as many of our other treasured legal principles.

We must strive for a confluence of these two concepts that will reconcile the inevitable differences that will appear. I hope that in our discussion of the burdens of environmental regulation on private property ownership and business transactions, we will keep in mind the necessity of protecting both our cherished American values and our environment.

1. Comprehensive Environmental Response, Compensation and Liability Act (Superfund), 42 U.S.C. §§ 9601-9657, ELR STAT. 41941-58.

2. Superfund Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499, 100 Stat. 1613 (1986).

3. 42 U.S.C. §§ 7401-7642, ELR STAT. 42201.

4. 33 U.S.C. §§ 1251 et seq.

5. Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901-6987, ELR STAT. 42001.

6. 272 U.S. 365 (1926).

7. 260 U.S. 393 (1922).

8. 106 S. Ct. 455 (1985).

9. 8 Cl. Ct. 160 (1985).

10. 107 S. Ct. 1232 (1987).

11. Which has since been decided and can be found at 107 S. Ct. 3141 (1987).

12. In Loretto v. Teleprompter Manhattan CATV Corp, 452 U.S. 417 (1982), the Court found that placing a two-feet-by-two-feet black box outside a large apartment building in New York City constituted a taking because it was a physical invasion.

13. 11 Cl. Ct. 91 (1986).

14. 42 U.S.C. § 9607(b)(3).