Property Rights Legislation: A Survey of Federal and State Assessment and Compensation Measures

David Coursen

Editors' Summary: In recent years, vindication of private-property rights has been the rallying cry of various citizen groups and politicianswho believe that certain regulatory restrictions—especially environmental protection measures—have "gone too far" and that the Fifth Amendment is an insufficient safeguard of private-property rights. Federal, state, and local lawmakers have begun to respond with measures that require governments to assess a regulation's potential to effect a "taking" of private property, and/or to compensate real property owners who are adversely affected by such regulation. This Article surveys current proposals at the federal level and recently enacted laws at the state level avowedly designed to safeguard private-property rights. After providing an overview of the bases for property rights legislation, the Article discusses in detail specific legislative proposals in the Senate and House of Representatives—S. 605 and H.R. 925. Next, the Article highlights numerous state compensation, assessment, and hybrid laws. It then compares the main features of such laws with the federal bills. The Article concludes that the value of any property rights legislation depends on its ability to ensure a fair and just result for society as a whole, not just for the individual property owner.

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Introduction: Changing Views of Property Rights

Historically, property rights have been a critical element of America's political, economic, and social structure. Important as such rights are, however, they have never been treated as absolute, but instead are limited by, among other things, the government's power to restrict their exercise through regulation. This reflects a recognition that a measure of regulation is both necessary and appropriate to address the effects that any particular use on one piece of property has on other property and on society as a whole. Some property owners, however, now argue that governmental regulation has expanded to the point where it imposes excessive restraints on property use.

One way of addressing this perceived development is to change the regulatory programs—such as environmental protection measures—responsible for the purported excesses. An alternative approach, however, is legislation variously labeled "property," "property rights," or "takings" legislation. Instead of directly changing regulatory programs, such legislation imposes constraints—typically institutional or financial—on the implementation of regulatory programs. This Article surveys current developments in property rights legislation at the federal and state levels, and discusses the underlying assumptions, intended purpose, and potential ramifications of these measures.

Background: Overview of Property Legislation

Takings legislation implicitly assumes that the Fifth Amendment to the U.S. Constitution, as currently understood and implemented, does not adequately protect private-property rights. First, it can be expensive and time-consuming to litigate a Fifth Amendment taking claim. Second, proponents of takings legislation argue, interpretations of the Fifth Amendment that courts have developed over the last two centuries have been unreasonably narrow, and accord excessive deference to governmental regulation. A correct interpretation—legislatively implemented, if necessary—would significantly limit the government's power to regulate property without paying just compensation.

Assessment and Relief/Compensation Laws

The first proposals for property legislation, which were offered at the federal level in the early 1990s,¹ have spawned a host of state and other federal bills. Despite their common ancestry, however, these legislative proposals have evolved into a variety of forms.

The twin assumptions of legislation—that property regulation is excessive and that the Fifth Amendment does not adequately protect property—are partially reflected in the two principal types of legislation. The first ("assessment") approach is to require the government, in deciding whether to regulate in the first instance, to give special consideration to the effects of proposed actions on property rights. The second ("relief" or "compensation") approach creates a statutory remedy, separate and apart from any constitutional remedy, for regulation that interferes with property rights [26 ELR 10240] beyond specified limits. The two approaches are not mutually exclusive, and are often combined.

Assessment laws typically vary along a continuum as to both their specificity and their rigor. All such laws require an analysis of proposed actions to assess their takings risks or their impacts on property use. In addition, some laws may have the effect, to varying degrees, of encouraging or requiring that regulators reconsider or alter proposed actions that are likely to have specified impacts.²

Relief laws vary both as to the standards claimants must meet to obtain relief and the form such relief will take. Typically, relief is provided when a regulation has a particular, clearly defined impact on property use, and it can take the form of mandatory compensation or invalidation of the offending regulation.

In either case property owners are relieved from the effects of a regulation that is otherwise constitutionally permissible and legally authorized, based solely on the regulation's impact on regulated property. This effectively shifts the focus from the need for regulation—the burdens that the regulated conduct imposes on other properties and on society as a whole—and onto the burdens that the regulation itself imposes. Thus, the impact of a regulation becomes the ultimate measure of its appropriateness: when the impact is sufficient, the government must either pay for, or refrain from, implementing the regulation to protect societal interests. This explicitly treats individual property rights as absolutes to which community rights must give way. It implicitly assumes either that the government cannot be trusted to function as an honest arbitrator among competing uses of differing properties or that the impacts of the use of any particular property on neighboring properties and the public at large ordinarily are not legitimate governmental concerns.

The Nuisance Exemption

Property legislation typically qualifies this approach by allowing limited exemptions for governmental regulation of property uses that constitute nuisances. This rejects the traditional assumption that the government's ability to regulate appropriately to protect the public extends beyond actions that rise to the level of a nuisance. Indeed, many types of governmental regulation, such as zoning, may limit property uses that do not constitute common-law nuisances, and hence would fall outside a nuisance exemption.

The use of a nuisance standard assumes, at least implicitly, that nuisance law is an effective mechanism for clearly identifying activities that society cannot properly be forced to tolerate. In fact, however, the law of nuisance, which originally developed to address disputes between property owners or private actions that interfere with public rights, may not be an adequate screening mechanism for identifying unacceptable property uses. Depending on how it is implemented, a nuisance exemption may be so narrow that it will not reach some serious harms, so fact-specific it will not provide a "bright-line" standard, or so broad and malleable it will provide little protection to property owners.

Nuisance law is notorious for its vagueness and imprecision, and can often be narrow, highly technical, and limited and uncertain in its application.³ Its focus on one specific property's impacts on other specific properties may make it ill-equipped to address the cumulative impacts from frequently repeated actions, each individually having relatively limited impact.⁴ Further, the applicability of nuisance law may be highly variable in that the same activity that would constitute a nuisance in some circumstances may not do so in others. This occurs because a nuisance determination involves a detailed, fact-specific analysis that requires the balancing of various factors not unlike those that the U.S. Supreme Court has weighed in its takings jurisprudence, as described below.⁵ Indeed, it was these and other limitations in nuisance law that originally led state and federal governments to enact regulatory statutes to provide greater certainty and more effective protection of important societal values such as environmental quality.⁶

Conversely, however, if the exemptions in property laws could be invoked by the simple expedient of designating an activity a "public nuisance," a nuisance exemption could quickly swallow the law.⁷ This would leave the government with unfettered discretion to regulate without compensation.

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The Constitutional Framework for Establishing a Taking

The starting point for any discussion of specific takings legislation is the constitutitonal jurisprudence. The Takings Clause of the Fifth Amendment prohibits the taking of private property for public use without just compensation,⁸ and, thus, "bar[s] government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole."⁹ The Takings Clause had been applied only to physical takings until 1922,¹⁰ when the Supreme Court first recognized that regulation could also effect a taking if it went "too far."¹¹ In the seven decades since, the Court has addressed taking claims in over 60 cases.¹²

In developing its takings jurisprudence, the Court has concluded that, with very limited exceptions, it is neither fair nor practical to apply precise, rigid formulas in determining whether regulation crosses the line and goes "too far." Instead, the Court examines all the relevant factors regarding a regulation and decides whether the property owner has been so unfairly surprised as to require compensation. This typically involves a fact-specific analysis that balances the competing claims of society and the property owner by examining such factors as the nature of the regulatory action, its economic impact, and its effect on the reasonable, investment-backed expectations of the property owner.¹³ Consistent with the Court's view that fairness and justice cannot be reduced to a simple formula, ordinarily no single factor is dispositive.

Legislative proposals reflect an impatience with this fact-specific approach and the uncertainty it produces, as well as with the deference that courts have generally accorded state regulatory actions challenged as takings.¹⁴ Thus, legislative proposals may attempt to establish standards for compensation that are both clearer and more favorable to property owners than is the constitutional standard. Such proposals generally do not provide for balancing various factors, but instead mandate compensation when regulation has some specified impact.¹⁵ This approach assumes that legislation can develop what the Supreme Court has not: a bright-line formula (presumably consistent with fairness and justice) for determining when the impact of a regulation is compensable.

Legislative proposals typically diverge most acutely from the Supreme Court's jurisprudence with regard to the relationship between compensation and the reasonable, investment-backed expectations of property owners. Although the courts have placed increasing emphasis on landowners' expectations in addressing taking claims,¹⁶ most legislative proposals do not explicitly refer to expectations at all. The approach relief bills take to nuisance law also represents a departure from takings jurisprudence.¹⁷ Moreover, as suggested above, there appears to be a fundamental tension between a compensation standard that provides clarity and one based in part on nuisance.

Specific Legislative Proposals

Thus far, property legislation has been debated but not enacted at the federal level, and has been proposed in some [26 ELR 10242] form in virtually every state. Twenty states have enacted property laws, most in the form of mandates requiring regulators to assess the likely impacts of regulations on private property.¹⁸ Seven states provide property owners with relief from the burdens of regulation, usually in limited circumstances.¹⁹ State relief laws typically mitigate the potential fiscal burdens of mandatory compensation by giving regulators the option of setting aside regulatory restrictions rather than paying full compensation.

Federal Legislation

S. 605: The Omnibus Property Rights Act of 1995

The omnibus Senate property bill, S. 605,²⁰ is singularly comprehensive, embraces both the assessment and relief approaches, and touches on most of the issues relevant to property legislation. As such, for both illustrative and analytical purposes it will be examined in particular detail. In a nutshell, the bill mandates compensation for regulation that negatively affects the value of any portion of property by 33 percent and requires assessments of proposed governmental actions. In addition, it revises federal court jurisdiction over takings claims and imposes special limitations on the implementation of two specific environmental laws—the Endangered Species Act (ESA)²¹ and the portion of the Federal Water Pollution Control Act (FWPCA)²² regulating wetlands.

[] Titles I-III: Omnibus Compensation

. Findings. S. 605 begins with a number of findings, three of which are particularly illuminating as to its intent: (1) that property owners have been unfairly required to bear burdens that should be borne by the public at large;²³ (2) that the federal government has been guilty of "overzealous regulation";²⁴ and (3) that the common-law approach to "vindicating property rights under the Fifth Amendment … has been ineffective … [creating] a need for Congress to clarify the law and provide an effective remedy."²⁵ In addition, a stated purpose of the bill is to "rectify the constitutional imbalance between the federal government and the states."²⁶

. Definitions and Scope. S. 605 defines governmental action broadly.²⁷ Thus, a taking can occur when a general restriction is imposed, for example by statute or regulation, or when a specific decision limits use of a particular property, for example when a permit is either denied or granted with conditions that limit use.

The bill's general definition of property encompasses "all property protected under the Fifth Amendment, any applicable federal or state law, or this Act,"²⁸ a standard that appears to extend to interests that the Fifth Amendment does not protect. The specific provisions of the property definition are exceedingly broad and include not only land, but all types of personal and intangible property;²⁹ by comparison, nearly all other takings bills apply only to land and related interests. S. 605 also extends to a right to "use … or … receive water,"³⁰ and to interests "understood" as property "based on custom, usage, common law, or mutually reinforcing understandings sufficiently well-grounded in law to back a claim of interest."³¹

The bill requires federal payment for state actions taken to implement or enforce federally delegated or mandated programs, or where a state "receives federal funds in connection with a regulatory program established by a state."³² This could apply to many state actions linked to federal programs, possibly creating expansive federal liability and, thus, discouraging federal approval or funding of state programs.

S. 605 has four compensation triggers, the most important of which provides compensation when any regulatory action causes a 33 percent loss in the value of any portion of property.³³ The focus on a "portion" of property, while typical of property legislation, represents a significant departure from the Fifth Amendment standard.³⁴ This would [26 ELR 10243] apparently allow the owner of a 1,000-acre parcel to claim compensation if the regulation affects only 1 acre. Moreover, to establish a 33 percent loss—or even a 100 percent loss—artful owners may be able to segment property to a specific "portion," particularly if there are no limits on how small a portion can be considered.

This change is particularly significant because laws that limit uses of a part of property, such as setback requirements and height limitations, are an integral and important part of land use planning. Payment of compensation for the effects of regulation on a portion of property could undercut the effectiveness of such measures.

In addition to requiring compensation for actions meeting the 33 percent threshold, the bill also includes standards for establishing a taking apparently articulated to resemble the constitutional standards applied in three significant Supreme Court decisions. To varying degrees, each formulation arguably goes beyond the standard announced in the relevant decision,³⁵ generally in a way that makes it easier to establish a taking. The bill also assigns burdens of proof.³⁶

No payment is required if the action regulated would constitute "a nuisance as commonly understood and defined by background principles of nuisance and property law, as understood within the state in which the property is situated," with the burden of proof on the federal government "to establish that the … use of the property is a nuisance."³⁷ Imposing the burden of proof on the government to justify each application of every regulation represents a profound departure from traditional regulatory practice.³⁸ Moreover, as suggested above, there may be significant uncertainty as to the applicability of the nuisance exemption to a given case, particularly as to whether the exemption reaches certain actions that have seriously adverse impacts on society.

The bill provides that the federal government "shall take title to the property interest for which [it] pays a claim."³⁹ Moreover, compensation payments must be paid "out of currently available appropriations supporting the activities giving rise to the claims for compensation."⁴⁰

. Jurisdiction. "Notwithstanding any other provision of law and … the issues involved," the bill gives both district courts and the Court of Federal Claims (Claims Court) concurrent jurisdiction over claims for compensation and "claims seeking invalidation of … any regulation of an agency … affecting private property rights."⁴¹ This alters existing law, under which federal district courts have exclusive jurisdiction to review governmental regulatory decisions, but cannot award just compensation of more than $ 10,000 for a taking,⁴² and the Claims Court has exclusive jurisdiction to award compensation exceeding $ 10,000, but generally cannot review regulatory decisions.⁴³ A typical takings claimant first seeks to overturn an agency action restricting a property, and, failing that, seeks just compensation for a taking. This requires successive litigation in two different courts. S. 605 changes this by allowing a plaintiff to maintain a single action—seeking invalidation or compensation—in either court.

The bill's proposed change in jurisdiction raises two issues. The first is the appropriateness of giving the Claims Court—which is not a court established under Article III of the Constitution, but an administrative body created under Article I, with judges serving for limited terms⁴⁴ —the authority to invalidate acts of Congress and actions by regulatory agencies. There is some question whether this is prudent—or even constitutional.

In addition, S. 605 apparently undercuts "preclusive review" [26 ELR 10244] provisions in many statutes, which carefully specify both the timing and venue for any challenges to regulations under those statutes.⁴⁵ These provisions ensure prompt, authoritative, and final determinations of a regulation's validity by a court experienced in complex administrative law issues. The bill's provision would allow litigants to circumvent that process at any time within six years of a rule's promulgation, in a court of the litigant's choice, by simply arguing that the regulation affects property rights—as virtually any regulation is likely to do.

. Limitations Period/Prospective Effect. The bill requires that actions be brought under Title II within six years of the date of the alleged taking,⁴⁶ and provides litigation costs to "prevailing" plaintiffs.⁴⁷ The bill "applies to any agency action that occurs" after its enactment.⁴⁸ This provision could preclude claims based on regulations already in place. Under the bill's definitions, however, an "action" may occur long after the imposition of a regulation, for example, when an agency makes—or reconsiders—a decision on a permit request or commences an enforcement action. An owner might therefore be able to trigger an action by applying or re-applying for a permit, for example.⁴⁹

If all affected parties consent, a compensation claim can be submitted to arbitration. The arbitrator's decision is appealable.⁵⁰

[] Title IV: Assessment. The bill requires that an agency complete a publicly disclosed⁵¹ takings analysis before "issuing or promulgating" a policy, proposed or final regulation, or "related agency action" that is "likely to result in a taking" as defined under the bill.⁵² This requirement applies, with certain exceptions,⁵³ to any action or inaction that "adversely affects private property rights."⁵⁴ Arguably, this could require analyses of most agency activities.⁵⁵ Each analysis must be based on current information⁵⁶ and must assess the likelihood of a taking, estimate the likely amount of any compensation, and identify alternative actions that "would achieve the intended purposes of the agency action and lessen the likelihood that a taking of private property will occur."⁵⁷

Agencies must review all existing regulations, identifying those that could lead to compensation under the standards of the bill and modifying such regulations "to the maximum extent possible within existing statutory requirements" in order to reduce the likelihood of compensation exposure.⁵⁸ This will likely require substantial revisions of large numbers of regulations, since almost any regulation could have an effect that would meet the bill's compensation threshold under some conceivable circumstances. Moreover, the requirement that the principal goal of the revised regulations be to minimize takings, rather than to ensure an effective program, does not appear to permit an agency to weigh costs and benefits by comparing the reduction in property impact with the effect on program implementation. In addition, agencies must submit to Congress "a detailed list of statutory changes that are necessary to meet fully the purposes of" S. 605.⁵⁹ The bill allows litigation "to enforce the provisions of" Title IV, so long as any actions are commenced within six years of the challenged regulatory action.⁶⁰

[] Title V: Wetlands and Endangered Species. Title V establishes an administrative compensation process for regulatory actions⁶¹ that would trigger compensation under the standards [26 ELR 10245] of Title II. Title V applies only to interests in land or water that are affected by governmental actions under the ESA and the FWPCA § 404 program, which covers wetlands.⁶²

The bill directs agencies implementing the ESA and FWPCA § 404 programs to "comply with applicable state and tribal government laws" relating to property and privacy.⁶³ In certain circumstances, this could effectively subordinate federal law to existing state or tribal laws, or to newly enacted laws—arguably even a new law with the avowed purpose of curtailing or preventing the implementation of the ESA or FWPCA § 404. The bill also directs that agencies implement the ESA and FWPCA § 404 "in a manner that has the least impact on private property owners' constitutional and other legal rights."⁶⁴ This appears to modify both statutes, making minimal impact on property, rather than optimum species or wetlands protection, the principal goal of implementation.

The bill requires agencies administering the ESA and FWPCA § 404 to "develop and implement regulations for ensuring that the constitutional and other legal rights of private property owners are protected when the agency head … participates … in the making of any final decision that restricts the use of private property."⁶⁵ The agencies must also develop regulations for administrative appeals of specified agency actions under the ESA and FWPCA § 404. These appeals must be heard by someone other than the person who made the challenged decision, and must be conducted at a location "in the vicinity of" the affected property.⁶⁶

The bill, without qualification, prohibits an agency from entering property to collect information without the written consent of the owner, and requires that any information collected be made available to the property owner.⁶⁷ No information can be used to enforce the ESA or FWPCA § 404 without a determination that it is accurate and that the owner has had an opportunity to dispute its accuracy.⁶⁸ These restrictions could significantly affect enforcement of both laws. For example, it is unclear whether an owner could simply refuse access in the face of a warrant or court order. At a minimum, an owner viewing the agency's information would effectively be able to "preview" a possible enforcement case.

The bill authorizes any property owner "entitled to receive compensation in accordance with the standards set forth in Section 204" to request compensation from the agency within 90 days of a final decision restricting property use.⁶⁹ Within 180 days of a request from an eligible claimant, the agency must offer to purchase the property for its fair market value free of the regulatory restriction and to compensate the owner for the reduction in value due to the restriction.⁷⁰ An owner can accept either offer or reject both offers and either submit the claim to binding arbitration or litigate the claim.⁷¹ Compensation payments are to come from "currently available appropriations supporting the activities giving rise to the claim."⁷²

[] Potential Issues for Litigation. Many aspects of S. 605 could generate litigation, which would fall into three basic categories. First, the bill's sponsors envision litigation as a means of ensuring its effective implementation. This would include claims for compensation and challenges to agency assessments. A second type of litigation would arise from provisions that are genuinely ambiguous as to their meaning and scope, including definitions of novel terms used in the bill. Finally, as suggested above,⁷³ there are several provisions that arguably could be read to produce consequences that would go beyond the apparent intent of the bill's proponents. The novelty of some of the assumptions and approaches in S. 605—and other property bills—could increase the likelihood of litigation to address these unanticipated consequences. Because S. 605 provides a basis for claiming monetary benefits from the federal government, past experience suggests that claimants will exercise substantial creativity in attempting to obtain benefits.

A few examples of complicated and novel factual and legal questions that the bill may raise include:

. What is an "affected portion of … property"?

. When has a law been administered "in a manner that has the least impact on private property owners' … legal rights"?

. What is a "right to receive water," as compared to a "water right" as understood in ordinary water-law parlance?

. What constitutes "a nuisance as commonly understood and defined by background principles of nuisance and property law, as understood within the State in which the property is situated"?

. When does agency action "comply with applicable state and tribal government laws … relating to private property rights and privacy"?

. What are "custom" and "usage" and when do they become sufficiently well-established to create property rights under the bill?

. What is the status of claims based on an activity sanctioned by custom or usage but not recognized—or even prohibited—by state law? and

. What sorts of "understandings" are "mutually reinforcing" and "sufficiently well-grounded in law to back a claim of interest"?

Litigation under the bill's assessment provisions could address a wide range of claims and issues arising from virtually any action or decision made in an attempt to comply with these provisions, such as:

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a decision whether to undertake an analysis;

. the reliability of the information supporting an analysis;

. the accuracy of the estimates or legal conclusions of an analysis;

. the adequacy of an agency's consideration of alternatives to a proposed action;

. agency compliance with reporting and public notification requirements; and

. the adequacy of an agency's review of its regulations and its recommendations to Congress for legislative changes.

Moreover, such litigation could delay or invalidate agency action based solely on asserted noncompliance with Title IV, even if the action itself did not affect property rights.

H.R. 925: The Private Property Protection Act of 1995

H.R. 925⁷⁴ mandates compensation when agency action under the ESA, FWPCA § 404, Swampbuster and Sodbuster programs,⁷⁵ or certain federal programs supplying water under contract (often at subsidized rates)⁷⁶ results in a 20 percent drop⁷⁷ in the value of an affected portion of land or a right to use or receive water. Compensation is not required: (1) when a use would constitute a nuisance under state law or is prohibited under local zoning laws; and (2) when a restriction prevents "identifiable" damage to "specific" property or a "hazard" to public health or safety, or implements the federal navigational servitude.⁷⁸ If the owner and agency cannot negotiate compensation, the owner may either request binding arbitration or litigate.⁷⁹ Compensation must be paid from appropriated funds.⁸⁰ When the loss in value exceeds 50 percent, the owner may compel the federal government to buy the affected portion of the property.⁸¹

An owner must claim benefits within 180 days of receiving "actual notice" of "an agency rule, order, license, sanction, relief, or the equivalent or denial thereof, or failure to act."⁸² The bill's "hazard" exemption reflects an apparent effort to address some of the limitations of its nuisance exemption. However, the hazard exemption is narrowly drawn: the "primary" purpose of the action must be to "prevent" an "identifiable hazard" to "public" health or safety or "damage" to "specific" property other than that being regulated.⁸³ This exception seems likely to reach some actions that fall outside nuisance law. However, the bill's novel terminology will need interpretation, which will likely require extensive—possibly protracted—litigation. Moreover, it would appear that this exception might not extend to the following: actions to curtail, but not prevent, a harm; dangers not serious enough to constitute "hazards" or well-enough understood to be "identifiable"; when the harm threatens a few private individuals, rather than the "public" at large; or actions of a type that may cause serious property damage when it is not possible to identify the "specific" property at risk.

Like S. 605, H.R. 925 provides that compensation payments are to be made from the agency's annual appropriation, and provides that when one agency's liability results from a requirement imposed by another agency, the liable agency may seek reimbursement from the appropriated funds of the other agency.⁸⁴ The bill also appears to authorize reprogramming of funds for payment purposes.

When the owner and the agency cannot agree on compensation, the owner may elect either to submit the matter to "binding" arbitration or to file a civil action for compensation.⁸⁵ An arbitration award must include, and a claimant who prevails in a civil action is entitled to, reasonable attorneys fees and arbitration or litigation costs, including appraisal fees.⁸⁶

Status of Pending Federal Legislation

As of this writing, S. 605, which is long, detailed, and comprehensive, has been voted out of the Judiciary Committee. H.R. 925, which is relatively succinct, passed the House as a free-standing bill, and was immediately passed a second time as Division B of H.R. 9.⁸⁷ In addition, provisions somewhat similar to H.R. 925 are included in proposed amendments to the ESA in H.R. 2275⁸⁸ and S. 1364,⁸⁹ and in the FWPCA Amendments passed by the House in H.R. 961.⁹⁰

State Laws

Although Texas and Florida have enacted the most sweeping state laws in the nation, in the state of Washington, an even more expansive proposal was offered, extensively debated, and ultimately rejected by the voters in a referendum. Despite its rejection, the Washington State proposal is significant both in terms of its breadth and because most observers believe that it will resurface in some form. In addition, despite its extreme textual brevity, it is easily the broadest [26 ELR 10247] state proposal and, in that sense, represents a state analogue to the broadest federal proposal, S. 605.

Relief/Compensation Laws

[]The Most Sweeping Measures

. Washington. In 1991, Washington⁹¹ passed the first takings law in the nation, a relatively general assessment law. More recently, the state became a focal point for the property rights debate, as it considered the nation's most sweeping compensation and assessment proposal. Uniquely, the Washington proposal mandated compensation for any loss in value, with no numerical threshold, to any portion of an interest in land; a water right; or "crops, forest products, or resources capable of being harvested or extracted."⁹² It applied to all state, county, and local governmental actions regulating property "for public benefit."⁹³ When a local government imposed a restriction as a result of a state mandate, the state was responsible for compensation. No compensation was required for restricting actions that would create a "public nuisance."⁹⁴ Payment of compensation was required within three months of the offending regulation's adoption.

No regulation could be implemented without a formal analysis of its total economic impact on private property, the need for the regulation, and consideration of alternatives. Regulations enacted in light of an assessment would be required to have "the least possible impact on private property [that] still accomplishes the necessary public purpose."⁹⁵ Finally, any provision of the act could be judicially enforced by "any owner of property subject to the jurisdiction" of the government imposing the regulation⁹⁶ —apparently without regard to whether the owner would be directly affected by the regulation.

This proposal originated as an initiative measure adopted by the legislature that would have become law without the governor's signature. Opponents collected enough signatures to force a referendum election on the proposal, which was defeated in the November 1995 election by a margin of roughly 3 to 2.

. Florida⁹⁷ has an extremely elaborate law that provides compensation "when a new law, rule, regulation, or ordinance of the state or a political entity in the state, as applied, unfairly affects real property."⁹⁸ Uniquely, this law has no numerical threshold, providing instead for compensation when regulation imposes an "inordinate burden" on either an existing use or a specific proposed use to which an owner can establish a vested right.⁹⁹ To qualify for compensation, a proposed use must be reasonably foreseeable, nonspeculative, suitable to the property at issue, and compatible with adjacent land uses.

A regulation imposes an inordinate burden when it prevents the property owner from attaining some reasonable, investment-backed expectation for a property "as a whole," and imposes a disproportionate burden on the owner for the good of the public.¹⁰⁰ In determining whether a burden is unfair, the law requires consideration of the history of the property and its purchase, the property's characteristics, applicable regulatory restrictions, the owner's expectations, the regulation's purpose, and regulatory treatment of similar properties. The law also provides some rights to owners of contiguous property who may be affected by a proposed use on another owner's land. An inordinate burden is not created by temporary use restrictions or restrictions designed to abate or prevent a nuisance. Any action for compensation must be commenced within one year of the regulatory action, and claims may only be based on laws enacted after 1995.

One hundred eighty days before filing an action for compensation, an owner must present a written claim to the government, which must then make a written settlement offer, which can include no change to the proposal. If the parties reach a tentative agreement that departs from otherwise applicable legal requirements, the agreement can be implemented only if a court determines that it will "protect the public interest served by the statute at issue."¹⁰¹

If there is litigation, the court apportions responsibility for any action in which more than one level of government is involved, a jury determines whether a burden is inordinate and the amount of compensation, and compensation is not allowed for business losses. A prevailing plaintiff is entitled to prejudgment interest and costs, with costs to the government if it prevails and the plaintiff had rejected a reasonable settlement.¹⁰² On payment of compensation, the government acquires a property right in the affected property.

The law contains an unusual provision acknowledging that it "provides a cause of action for governmental actions that may not rise to the level of a taking" under the state or federal constitutions.¹⁰³ Although other property laws authorize compensation that is not constitutionally mandated, this fact is seldom acknowledged so explicitly.

A property owner may file a request for relief with a special master, who will attempt to mediate. This suspends the limitations period for commencing an action to litigate a compensation claim.

. Texas¹⁰⁴ provides that a landowner can obtain relief from [26 ELR 10248] regulations that restrict property use and cause a 25 percent drop in the market value of the affected portion of the property. Compensation is required only if the state elects to continue to apply the regulatory restriction to the property at issue; otherwise, the remedy is invalidation of the restriction. Compensation payments come from funds appropriated to the agency imposing the regulation.

Although the law will be extended in 1997 to cover actions by counties, it excludes most actions by municipalities. It also excludes: actions to address a nuisance or to prevent "a grave and immediate threat to life or property";¹⁰⁵ some floodplain and sewage regulation; actions to prevent waste of oil or water, or to regulate water safety or hunting or fishing; and actions "taken in response to a real and substantial threat to public health and safety … designed to significantly advance the health and safety purpose … [that] does not impose a greater burden than is necessary to achieve the health and safety purpose."¹⁰⁶

An action to determine whether a regulatory action works a taking under this law must be commenced within 180 days after the owner knew or should have known that the challenged action restricted property use. Whether a taking occurred and the amount of any compensation due are both questions of fact. Costs are awarded to the prevailing party.

The state attorney general must publish guidelines to assist governmental entities in identifying actions that may result in takings. Agencies must give advance notice of their intent to take actions subject to this law, and prepare publicly available assessments of proposed actions. Such assessments must analyze the action in some detail, describing its purpose, how it achieves that purpose, the burdens it imposes on property, and the likelihood that it will work a taking, and must analyze alternatives to the action. A governmental action is invalid if a required assessment was not prepared, and any affected owner can bring suit to invalidate the action. The law generally applies only to governmental actions, including enforcement actions, proposed or taken after September 1, 1995. Finally, property appraisals for purposes of assessing taxes must consider the effect of governmental action on property value.

[] Actions Affecting Agricultural and/or Forestry Land

. Louisiana¹⁰⁷ mandates compensation by the state and most political subdivisions¹⁰⁸ for a 20 percent drop in the value of any "affected portion" of any parcel of agricultural or forestry land, "or the property rights thereto for agricultural [or forestry] purposes."¹⁰⁹ No compensation is required for actions "to prohibit activities that are harmful to the public safety and health";¹¹⁰ for uses already prohibited by law; or for actions intended to regulate, promote, protect, or advance agriculture.¹¹¹

Governments must prepare written assessments of actions likely to result in a diminution of the value of agricultural or forestry property, addressing the purpose and nature of the governmental action, its interference with agricultural or forestry uses, alternatives to the action, and the cost and source of compensation. Commissioners of agriculture and forestry promulgate guidelines for doing assessments.

A property owner can litigate to determine if a regulatory action caused the requisite reduction in the property's value for agricultural or forestry uses, with the right to a trial by jury; mediation is encouraged. An owner who prevails can recover compensation for the reduction in value or can convey the property and recover the full value the property would have if it were free of the restriction. Costs go to the prevailing party. The government also has the option of rescinding a restriction and paying for "damages" caused by its application while it was in effect.

. Mississippi¹¹² has a similar, much less detailed law, with no assessment provisions. The relief threshold is 40 percent for any action that prohibits or severely limits an owner's ability to conduct forestry or agricultural activities, with exceptions for public nuisances or uses "harmful to the public health and safety."¹¹³

It is arguable that in either Louisiana or Mississippi an owner can only recover for an action that reduces the land's value for forestry or agricultural uses, rather than for any other drop in value.

. Oregon¹¹⁴ requires formal assessments of proposed rules that would change standards for forestry practices, and invalidates any forestry regulation that causes a 10 percent reduction in the value of a prospective parcel, taken as a whole.¹¹⁵ The relief provisions of this law, which are repealed on July 1, 1997,¹¹⁶ appear to preclude most regulation of logging on private land. A previously vetoed bill had mandated compensation for any reduction in value exceeding 10 percent or $ 10,000 from "ecotakes"—restrictions on most scenic areas, natural areas, open spaces, and outdoor recreation areas.¹¹⁷

[] Other Relief Laws. Colorado¹¹⁸ prohibits the implementation of regulatory restrictions once a site-specific development plan for a project has been formally approved. Arizona¹¹⁹ protects nonconforming uses in outdoor advertising.

Assessment Laws

The assessment concept has its genesis in President Reagan's 1988 Executive Order (Exec. Order) 12630,¹²⁰ which [26 ELR 10249] directs federal agencies to assess the likelihood that their proposed actions will cause takings of private property. The first proposals for federal legislation, introduced in prior Congresses, essentially would have codified Exec. Order 12630, for example by precluding an agency from issuing regulations unless the U.S. Department of Justice certified that agency's compliance with the order.¹²¹ To a large degree the assessment approach has been superseded at the federal level by mandatory compensation (although, as noted above, S.605 contains assessment requirements). Assessment has, however, dominated the legislative debate in the states.

An overwhelming majority of the states that have formally adopted property legislation have embraced the assessment approach in some form. Since 1991, 14 states in addition to Louisiana, Oregon, and Texas have enacted some type of assessment law: Delaware, Idaho, Indiana, Kansas, Missouri, Montana, North Dakota, Tennessee, Utah, Virginia, Washington, West Virginia, and Wyoming. In 1992, Arizona enacted a relatively broad assessment law,¹²² which was submitted to a referendum in November 1994 and rejected by a 60 percent majority. In addition, California,¹²³ Colorado,¹²⁴ and Nebraska¹²⁵ have executive orders requiring assessments of certain takings risks of some regulatory actions.

Assessment laws vary widely as to the detail and formality of the assessment, the range of actions that must be assessed, the extent to which an assessment is public and judicially reviewable, and the consequences of failure to conduct an adequate assessment.

[] Narrow Assessment Laws

. Delaware¹²⁶ requires the state attorney general to review all rules or regulations to assess their potential to result in a taking. This law is quite short, containing few details.

. Indiana¹²⁷ provides that the state attorney general's review of the legality of prospective rules must also specifically consider whether the adopted rule may constitute an uncompensated taking.

. Missouri¹²⁸ requires an assessment of whether a rule works a facial taking.¹²⁹ This law is not detailed, and is effective only until September 1, 1997.

. Virginia¹³⁰ provides that the regulatory impact analysis required for a proposed regulation must also assess the impact of the regulation on the use and value of private property.

[] More Detailed Assessments

. Idaho¹³¹ requires the state attorney general to establish a process to assist state and local governments in evaluating proposed actions to avoid unconstitutional takings. Assessments are protected by attorney-client privilege, and are not judicially reviewable.

. Tennessee¹³² directs the state attorney general to develop guidelines to assist in identifying and evaluating governmental actions that may result in takings.

. Washington¹³³ requires the state attorney general to establish a process for evaluating governmental actions.

. West Virginia¹³⁴ mandates that the state Division of Environmental Protection prepare a formal assessment of any action likely to deprive an owner of either a fee-simple interest in, or all productive use of, a property.¹³⁵

[] Relatively Comprehensive Assessments

. Kansas¹³⁶ mandates takings assessments, with a fairly detailed assessment process that is loosely modeled on Exec. Order 12630.

. Montana¹³⁷ requires assessments by state agencies, using guidelines developed by the state attorney general. The process is loosely modeled on Exec. Order 12630. In addition, the Montana Environmental Policy Act has been amended to require consideration of the private-property impacts of governmental actions.¹³⁸

. Utah¹³⁹ mandates that the state and its political subdivisions follow an assessment process closely modeled on Exec. Order 12630. This law is relatively detailed.

. Wyoming¹⁴⁰ requires a formal analysis of proposed governmental actions that is modeled on Exec. Order 12630.

Hybrid Legislation

[] North Dakota. North Dakota¹⁴¹ requires a relatively broad assessment of the takings implications of proposed rules. The law does not expressly address compensation and is, in most respects, a fairly typical assessment bill. However, the law's provision defining action that reduces the value of real property by more than 50 percent as a taking could arguably be construed to require payment of compensation when this standard is met. Nevertheless, this possibility is likely moot because the law exempts from this definition of a taking any action that "substantially advances legitimate state interests, does not deny an owner economically viable use of the owner's land, or is in [26 ELR 10250] accordance with applicable state or federal law."¹⁴² As a result, it is difficult to identify a case in which an action would work a compensable taking under the state standard but would not meet the constitutional threshold.

Miscellaneous Legislative Activity

Three states have opted, at one time or another, to study property rights: Maine and Rhode Island currently have study commissions; Virginia, which enacted an assessment law in 1995, previously had a study commission. Arizona has created a property rights ombudsman.¹⁴³

Comparisons of State With Federal Legislation¹⁴⁴

The debate on federal legislative proposals has tended to highlight several specific issues. The approaches states have taken to two of these issues—the range of regulations covered and the numerical threshold for compensation—are generally evident on the faces of the laws. Other significant issues requiring elaboration include: (1) the fiscal implications of mandatory compensation; (2) the availability of compensation for an "affected portion" of property; (3) the extent to which claims can be based on existing, rather than merely prospective, regulations; and (4) the range and plausibility of potential claimed uses.

Avoidance of Mandatory Compensation

States have been extremely cautious in subjecting themselves to financial exposure for mandatory compensation. Although proponents of federal legislation argue that changes in regulatory behavior could obviate any financial exposure,¹⁴⁵ compensation would likely be substantial in the absence of such changes. For example, detailed estimates of compensation costs under the Washington law ranged from $ 3.8 billion to more than $ 11 billion.¹⁴⁶ The Office of Management and Budget has estimated potential claims under H.R. 925 as $ 28 billion over seven years, with potential claims under S. 605 several times higher.¹⁴⁷

Possibly for this reason even the handful of states that allow relief from regulation generally afford the state the option of setting aside the regulation as applied to the affected property, rather than paying compensation for a permanent taking.¹⁴⁸ Invalidation, of course, deprives the public of whatever protection enforcement of the regulation would provide. Indeed, invalidating a law solely because of its impact on a regulated party is analogous to waiving the application of laws regulating insider securities trading due to the amount of profit that could be realized by violating the law.

Several laws encourage or compel property owners to negotiate over regulation. The Florida law is particularly forthright in this regard, and actually provides that a property owner and a regulator may agree on a settlement that can only be implemented by waiving an otherwise applicable regulatory standard.¹⁴⁹ Such agreements, however, can only be implemented if a court makes the (traditionally legislative) determination that such a violation is not contrary to the public interest.

"Affected Portion"

Most laws and proposals allow a claimant to focus on the "portion" of property affected by regulation. As indicated above,¹⁵⁰ with creativity, the effects of most regulation can be isolated on some "portion" of property. Oregon has attempted to prevent strategic behavior to manipulate what portion is affected by regulation,¹⁵¹ and Florida expressly follows the traditional constitutional approach of focusing on the impact of regulation on property as a whole.¹⁵²

Moreover, the term "portion" itself can be ambiguous. Although it obviously refers to a physical segment of land, it may also refer, for example, to any legal right to a particular use of a property. Thus, even if property could be used for residential development, a limitation on commercial development might have a significant effect on the "right" to commercial development, which arguably could be characterized as a separate "portion" of property. In practice, the distinction between physical and legal segmentation may be elusive.¹⁵³ If both types of segmentation are allowable, it seems likely that virtually any regulatory restriction could be compensable.

Prospective Application

One area of particular uncertainty is the extent to which compensation bills can be applied to prior governmental action.

The Oregon and Florida laws, for example, appear to permit application only to future-enacted regulations.¹⁵⁴ To illustrate the difficulty of this issue, the Texas law also applies prospectively, but extends to the enforcement as well as the imposition of a regulation.¹⁵⁵ As with federal bills having similar provisions, this may allow a claim based on future implementation of an existing law or regulation, such as an action to enforce the regulation; at the extreme, this could even be triggered by an enforcement action in response to a claimant property owner's violation of existing requirements.

Plausibility of Potential Claimed Uses

Most proposals and laws mandate compensation based on the "loss" from governmental regulation, calculated based on the difference between the market value of the property if it is subject to the regulation and the value it would have without the regulation. This allows each property owner to claim that, but for the regulation, the property could be put to the most lucrative use conceivable—whether or not the owner has any present intention of engaging in that use. Thus, if an area could support only a single commercial center, each of a dozen owners of property restricted from commercial use might claim losses based on denial of that type of use. Florida's law attempts to impose some limits on the range of potential uses available to a claimant by restricting claims to uses that are foreseeable, suitable to the property at issue, and compatible with neighboring uses.¹⁵⁶

Conclusion: Benefits, Burdens, and Fairness

The overarching question that the property rights debate poses for each state and the federal government is the place of the individual property owner in society. The constitutional approach provides substantial latitude to regulators, recognizing that regulation is necessary to the orderly functioning of society and government, and, ultimately, to the well-being of all property owners.

Property legislation assumes that property owners have a right to change existing uses and conditions on their property as they see fit. This effectively imposes on the government the burden of justifying each regulatory restriction as applied to each property, for example by establishing that a particular use constitutes a nuisance.

Under the traditional approach, when a property owner seeks to alter an existing condition, the government has assumed the role of arbiter, with broad latitude to regulate to ensure fair treatment and adequate protection for all owners. This is true whenever a proposed use could disrupt the needs and expectations of neighboring landowners, whether or not that use rises to the level of a nuisance. This practice reflects the fact that all owners acquire property with the understanding that the government will assume such a role, imposing some limits on the uses that can be made of each property and neighboring properties. Thus, it may be problematic to depart from the established approach and focus exclusively on the burdens of governmental action in the form of regulation, as property legislation tends to do, without giving full consideration to the net effects—positive as well as negative—of governmental action relating to property.

Fairness requires recognition that the political community makes meaningful ownership and use of property possible by ordering relations among its members. Besides fostering orderly economic activity and growth by imposing a measure of public stability, governmental action provides infrastructure and enhances and protects property value in a wide variety of other ways. As a result, a significant part of the value of private property derives from the massive social and governmental investments that have been made in the organized community. Government, however, imposes no upper limits on the value of the benefits an individual can derive from governmental action. In exchange for the benefits of living in an ordered society based on law, it seems fair that property owners be expected to accept limits and burdens that the government imposes on its citizens in order to allow society to function.

It is in recognition of these principles, in particular, that the Supreme Court's carefully developed takings jurisprudence balances public and private rights. The ultimate goal of this traditional approach has been to arrive at a result, in each instance, that serves the interests of fairness and justice. The ultimate measure of the value of any legislation will be its ability to serve those interests as well.

Mr. Coursen is Attorney-Advisor in the Office of General Counsel at the U.S. Environmental Protection Agency (EPA). The views expressed are the author's and do not necessarily reflect those of EPA.

1. E.g., The Private Property Rights Act of 1991, S. 50, 102d Cong., 1st Sess. (1991) [hereinafter S. 50].

2. See, e.g., S. 605, 104th Cong., 1st Sess. § 404(a) (1995) [hereinafter S. 605] (prohibiting promulgation of a rule likely to "require an uncompensated taking of private property"); id. § 404(b)(1) (requiring repromulgation of regulations likely to result in takings so as to "reduce such takings … to the maximum extent possible within existing statutory frameworks"). S. 605 is discussed in detail infra.

3. There is perhaps no more impenetrable jungle in the entire

law than that which surrounds the word "nuisance." It has meant all things to all people, and … there is general agreement that it is incapable of any exact or comprehensive definition. Few terms have afforded so excellent an illustration of the familiar tendency … to seize upon a catchword as a substitute for any analysis of a problem.

W. PAGE KEETON ET AL., PROSSER AND KEETON ON THE LAW OF TORTS § 86, at 616-17 (5th ed. 1984).

4. See, e.g., id. § 52, at 347. ("Certain results, by their very nature, are obviously incapable of any reasonable or practical division. Death is such a result, and so is … any single wound."). When it is possible to apportion responsibility for the cumulative impacts of nuisances, courts have attempted to do so, but most examples of this appear to have occurred one-half a century ago. Id. § 52, at 349; see also id. § 88B, at 634 and cases cited therein. Indeed, this approach seems more suited to cases in which a finite number of persons are joint tortfeasors than to those in which a diverse range of actors have contributed to a widespread problem, as is the case with much modern pollution, such as air pollution in Los Angeles.

5. See infra notes 8-17 and accompanying text. In Lucas v. South Carolina Coastal Council, the Court identified the host of factors that may be relevant to such an analysis:

among other things, the degree of harm to public lands and resources, or adjacent private property, posed by the claimant's proposed activities, … the social value of the claimant's activities and their suitability to the locality in question, … and the relative ease with which the alleged harm can be avoided through measures taken by the claimant and the government (or adjacent private landowners) alike ….

Id., 112 S. Ct. 2886, 2901, 22 ELR 21104, 21111 (1992). Arguably, a careful analysis of these factors would balance the equities of a particular case, addressing the nature and economic impact of the regulation and its effect on the reasonable, investment-backed expectations of the property owner, the factors courts look to in traditional takings analyses.

6. See, e.g., John A. Humbach, Evolving Thresholds of Nuisance and the Takings Clause, 18 COLUM. J. ENVTL. L. 1, 7 n.34 (1993).

7. The definition of public nuisance is virtually open-ended. A public nuisance can be any act that significantly interferes with public health, safety, or convenience. RESTATEMENT (SECOND) OF TORTS § 821B(2)(a) (1979). If this could be redefined by the legislature at will, "the natural tendency of human nature [would be] to extend the qualification more and more until at last private property disappeared." Pennsylvania Coal Co. v. Mahon, 260 U.S. 393, 415 (1922).

8. U.S. CONST. amend. V.

9. Armstrong v. United States, 364 U.S. 40, 49 (1960).

10. Lucas v. South Carolina Coastal Council, 112 S. Ct. 2886, 2892, 22 ELR 21104, 21107.

11. Pennsylvania Coal, 260 U.S. at 415.

12. See Robert Meltz, Takings Decisions of the U.S. Supreme Court: A Chronology, Congressional Research Service Report No. 93-164A (rev. Jan. 27, 1993).

13. See Lucas, 112 S. Ct. at 2893, 22 ELR at 21107 (citing Penn Cent. Transp. Co. v. City of New York, 438 U.S. 104, 8 ELR 20528 (1978)).

14. The Supreme Court has identified both equitable and functional reasons for this deferential view. The equitable rationale is that most regulation "'adjust[s] the benefits and burdens of economic life' … in a manner that" produces reciprocal benefits for "everyone concerned." Lucas, 112 S. Ct. at 2894, 22 ELR at 21108 (citations omitted). The functional rationale is that "government could hardly go on if to some extent values incident to property could not be diminished without paying for every such change in the general law." Id. (quoting Pennsylvania Coal, 260 U.S. at 413).

15. See infra note 99 and accompanying text.

16. Reasonable, investment-backed expectations have always played a critical role in takings analysis. Thus, the lack of a reasonable basis for expecting that the government would not take the action it did can defeat a taking claim without reference to any other factors. See Ruckelshaus v. Monsanto Co., 467 U.S. 986, 14 ELR 20539 (1984). Moreover, the Court has long recognized that "those who do business in [a] regulated field cannot object if the legislative scheme is buttressed by subsequent amendments to achieve the legislative end." Concrete Pipe & Prods. of Cal., Inc. v. Construction Laborers Pension Trust for S. Cal., 113 S. Ct. 2264, 2291 (1993).

The Court's reasoning in Lucas assumes the centrality of expectations to takings analysis. Thus, no taking occurs when a "proscribed use was not part of [an owner's] title to begin with," as is the case when "background principles of nuisance and property law … prohibit the uses [the property owner] now intends in the circumstances in which the property is presently found." Lucas, 112 S. Ct. at 2899, 2901-02, 22 ELR at 21110-11. Even more emphatically, "in the case of personal property, by reason of the state's traditionally high degree of control over commercial dealings, [a property owner] ought to be aware of the possibility that new regulation might even render [the owner's] property economically worthless," without requiring compensation. Id. at 2899, 22 ELR at 21110. The Court has also emphasized that this approach is fully consistent with existing jurisprudence: "This recognition that the Takings Clause does not require compensation when an owner is barred from putting land to a use that is proscribed by … 'existing rules or understandings' is surely unexceptional." Id. at 2901, 22 ELR at 21111.

The focus on expectations is even more explicit in recent federal intermediate appellate decisions. See, e.g., Cal-Almond, Inc. v. United States, 73 F.3d 381 (Fed. Cir. 1995); Branch v. United States, 69 F.3d 1571 (Fed. Cir. 1995); 767 Third Ave. Assocs. v. United States, 48 F.3d 1575 (Fed. Cir. 1995); M&J Coal Co. v. United States, 47 F.3d 1148, 25 ELR 20600 (Fed. Cir. 1995) (all rejecting takings claims based on broad governmental regulation of property, because of claimants' lack of reasonable expectation of freedom from property regulation).

17. The Supreme Court follows a dual approach. Certain governmental actions—those that effect permanent physical occupations or preclude all use of property—constitute "categorical" takings. With such actions, the importance of the governmental purpose is irrelevant, and compensation can only be avoided when the regulation does no more than implement some preexisting limitation on the owner's property rights. Property uses that could be enjoined under state nuisance law are subject to such a limitation, and, thus, can never support compensation—even based on a categorical claim. See Lucas, 112 S. Ct. at 2894-902, 22 ELR at 21107-11.

Claims not qualifying for categorical treatment are analyzed under the traditional balancing approach. Id. at 2895 n.8, 22 ELR at 21108 n.8. In conducting a traditional takings inquiry, the Court has consistently "recognized that the nature of the state's interest in the regulation is a critical factor in determining whether a taking has occurred, and thus whether compensation is required." Keystone Bituminous Coal Ass'n v. DeBenedictis, 480 U.S. 470, 488, 17 ELR 20440, 20444 (1987). Moreover, the relevance of the governmental interest does not depend on whether the regulated action would "constitute a nuisance according to the common law, or whether [it could] be so declared by statute." Id. at 490, 17 ELR at 20445 (quoting Miller v. Schoene, 276 U.S. 272, 280 (1928)).

18. See infra notes 120-42 and accompanying text.

19. See infra notes 97-119 and accompanying text.

20. S. 605, supra note 2.

21. 16 U.S.C. §§ 1531-1544, ELR STAT. ESA §§ 2-18.

22. 33 U.S.C. §§ 1251-1387, ELR STAT. FWPCA §§ 101-607.

23. S. 605, supra note 2, § 101(5).

24. Id. § 101(6).

25. Id. § 101(7).

26. Id. § 202(3).

27. Agency action under Title II is "any action, inaction, or decision taken by an agency … that at the time [it is taken] … adversely affects private property rights." Id. § 203(2). For another, different definition of agency action in the bill, see note 61 infra.

28. Id. § 203(5).

29. In addition to the interests discussed infra this note, this definition expressly includes a wide range of estates in land and other interests in real property, including liens and security interests, id. § 203(5)(A), and "rents, issues, and profits of land, including minerals, timber, fodder, crops, oil and gas, coal, or geothermal energy." Id. § 203(5)(C).

The bill also includes:

property rights provided by, or memorialized in, a contract, except that such rights shall not be construed … to prevent the United States from prohibiting the formation of contracts deemed to harm the public welfare or to prevent the execution of contracts for … national security reasons … or … exigencies that present immediate or reasonably foreseeable threats or injuries to life or property.

Id. § 203(5)(D). By negative implication, this language could require compensation for any regulation that has the effect of interfering with the execution of any term of an existing contract when the "exigency" exception of subsection (D) is not met. This would essentially place the terms of most contracts covering property rights beyond the government's regulatory power unless the government pays for the effects of the regulation.

30. Id. § 203(5)(B). Property rights in water under state law typically recognize a right to make beneficial use of, but not to receive, water. The effects of a federal statute protecting interests in water not recognized under state law are unclear.

31. Id. § 203(5)(F). This definition is based on the standard the court used in Nixon v. United States, 978 F.2d 1269 (D.C. Cir. 1992) (holding former President entitled to compensation for taking of property as result of legislatively imposed restrictions on access to, and control over, his personal papers). Nevertheless, the bill's language appears to be exceedingly vague and difficult to interpret, or to limit. For example, under a broad reading, someone who had been engaging in lucrative but legally prohibited activity for some time might argue that any effort to enforce the prohibition was contrary to "custom" or "usage" and, thus, compensable.

32. S. 605, supra note 2, § 203(6).

33. Id. § 204(a)(2)(D).

34. "[A] claimant's parcel of property [can]not be divided into what was taken and what was left for the purpose of demonstrating the taking of the former to be complete and hence compensable …. The relevant question … is whether the property taken is all, or only a portion of the parcel in question." Concrete Pipe & Prods. of Cal., Inc. v. Construction Laborers Pension Trust for S. Cal., 113 S. Ct. 2264, 2290 (1993). See also Dolan v. City of Tigard, 114 S. Ct. 2309, 2314, 24 ELR 21083, 21084 (1994) (discussing zoning requirement for open space without suggesting that area required to be left undeveloped has been taken); id. at 2316 & n.6, 24 ELR at 21085 & n.6 (discussing impact of governmental action on entire parcel, not just affected portion).

35. S. 605, supra note 2, § 204(a)(1)(A)-(C). The bill allows compensation when the "action does not substantially advance the stated governmental interest to be achieved by the legislation or regulation" authorizing the action. Id. § 204(a)(2)(A). This resembles the test articulated in Nollan v. California Coastal Comm'n, 483 U.S. 825, 17 ELR 20918 (1987), except that the limitation that the interest must be "stated" is not included in Nollan's formulation.

The bill also allows compensation when the "action exacts or affects the owner's … right to use the property … as a condition for the granting of a permit … without a rough proportionality between the stated need for the required dedication and the impact of the proposed use of the property." S. 605, supra note 2, at § 204(a)(1)(B). This extends to all permit decisions the standard the Supreme Court applied in Dolan to regulations exacting physical donations of property in exchange for development permits. In addition, the provision mandating compensation when action "affects" property is unique to the bill.

Finally, the bill allows compensation for regulation that "results in the … owner being deprived … of all or substantially all economically beneficial or productive use of the property or that part of the property affected by the action without a showing that such deprivation inheres in the title itself." Id. § 204(a)(1)(C). This resembles the standard in Lucas v. South Carolina Coastal Council, 112 S. Ct. 2886, 22 ELR 21104 (1992), except that Lucas applied to a denial of "all"—not "substantially all"—use of the regulated property. Moreover, as noted supra note 34, takings analysis treats property as a whole, not in portions. See also Memorandum from Congressional Research Service, American Law Division, to Peter Jaffe, Senate Committee on the Judiciary, Comparison of the Compensation Threshold in S. 605 (Title II) with That in the Takings Clause of the Fifth Amendment (Feb. 1, 1996).

36. S. 605, supra note 2, § 204(c).

37. Id. § 204(d)(1). The bill does not address the standard of proof needed to meet this burden.

38. Traditionally, the effect of an activity is assessed by democratically elected legislatures, which define socially acceptable conduct and determine whether, when, and to what extent to regulate such conduct. In some cases, entire classes of activities are prohibited in all circumstances. In other cases, an activity that is generally harmful can be allowed in certain circumstances, but the burden is on the property owner to demonstrate that the activity will not be harmful. See, e.g., 33 U.S.C. § 1311(g)(4)(E), ELR STAT. FWPCA § 301(g)(4)(E) (mandating that the burden of proof for making the determination required to modify a restriction on the discharge of a pollutant under the FWPCA be on the property owner seeking the modification).

Shifting the burden of proof would effectively eliminate any deference to legislative policy decisions. Instead, courts would function as "super-legislatures," undertaking fact-specific analyses of every restriction of conduct that under some conceivable set of circumstances might not cause the requisite harm. Thus, for example, every application of every environmental regulation under every program would be subject to case-by-case scrutiny, with the benefit of doubt as to the need for regulation going to the person seeking to violate it.

39. S. 605, supra note 2, § 204(e).

40. Id. § 204(f).

41. Id. § 205.

42. See 28 U.S.C. § 1346.

43. See id. § 1491. District courts and the Claims Court have concurrent jurisdiction for claims not exceeding $ 10,000. Id. § 1346.

44. See id. §§ 171-72.

45. See, e.g., 15 U.S.C. § 2618, ELR STAT. TSCA § 19 ("exclusive jurisdiction of any action to obtain judicial review" of regulations under Toxic Substances Control Act vested in U.S. Courts of Appeals; challenges must be filed within 60 days of promulgation of rule); 33 U.S.C. § 1369(b), ELR STAT. FWPCA § 509(b) (certain regulations under the FWPCA must be challenged in Court of Appeals within 120 days of issuance; actions subject to review under this provision cannot be challenged "in any civil or criminal proceeding for enforcement"); 42 U.S.C. § 300j-7, ELR STAT. SDWA § 1433 (certain regulations under Safe Drinking Water Act can only be challenged in D.C. Circuit Court of Appeals; others only in appropriate Courts of Appeal; challenges must be filed within 45 days of issuance of rule; actions with respect to which review could have been obtained under this section "shall not be subject to judicial review in any civil or criminal proceeding for enforcement or … to enjoin enforcement"); id. § 6976, ELR STAT. RCRA § 7006 (challenge to any regulation under Resource Conservation and Recovery Act must be filed in D.C. Circuit within 90 days of issuance of regulation; action that could have been reviewed under this section "shall not be subject to judicial review in civil or criminal proceedings for enforcement"); id. § 7607(b), ELR STAT. CAA § 307(b) (Clean Air Act regulations must be challenged within 60 days of issuance, with review of some regulations in D.C. Circuit, others in appropriate Court of Appeals; such regulations cannot be challenged in subsequent enforcement action); id. § 9613(a), ELR STAT. CERCLA § 113(a) (regulations under Comprehensive Environmental Response, Compensation, and Liability Act must be challenged in D.C. Circuit within 90 days of issuance; cannot be subsequently challenged in enforcement actions).

46. S. 605, supra note 2, § 206.

47. Id. § 207.

48. Id. § 209.

49. See also id. § 404(b)(1), which requires agencies to "review, and, where appropriate, re-promulgate all regulations that result in takings under this Act." In many cases, this may require new agency "action."

Arguably, however, the market value of a property should reflect the impact of any regulation affecting that property. This could make it difficult for an owner to establish that any new "action" reduces the property's fair market value by the requisite amount, or meets any of the bill's other standards for a taking. In practice, the market may not always fully reflect the impact of regulation on property use. See Florida Rock Indus. v. United States, 21 Cl. Ct. 161, 20 ELR 21201 (Cl. Ct. 1990), vacated & remanded, 18 F.3d 1560, 24 ELR 21036 (Fed. Cir. 1994).

50. S. 605, supra note 2, § 301.

51. Id. § 403(b), (c).

52. Id. § 403(a)(1)(B).

53. Id. § 403(a)(2). For the most part, these exceptions are based on the exceptions identified in § 2(c) of Executive Order (Exec. Order) 12630, "Governmental Actions and Interference with Constitutionally Protected Property Rights." 53 Fed. Reg. 8859, ELR ADMIN. MAT. II 45037 (Mar. 18, 1988) [hereinafter Exec. Order 12630].

54. S. 605, supra note 2, § 203(2).

55. This requirement applies to any "policy, regulation, proposed legislation, or related agency action." Id. § 403(a)(1)(B). The breadth of this requirement appears to depend on how expansively "related agency action" is construed; while a relatively limited range of activities can plausibly be characterized as policies, regulations, or legislation, virtually any activity might be "related" in some sense to a policy, regulation, or law.

56. Id. § 403(d).

57. Id. § 403(a)(3).

58. Id. § 404(b)(1).

59. Id. § 404(b)(3).

60. Id. § 406; see also id. § 403(d) (presumptions applicable in a "judicial proceeding").

61. Somewhat confusingly, the bill has two different definitions of "action." As noted supra note 27 and accompanying text, Title II defines "action" as "any action, inaction, or decision taken by an agency … that at the time of such action … adversely affects private property rights." Id. § 203(2). By contrast, Title V adopts the definition of "action" at 5 U.S.C. § 551(13), which includes "the whole or part of an agency rule, order, license, sanction, relief, or the equivalent or denial thereof, or failure to act." S. 605, supra note 2, § 502(6). It is unclear why two different definitions are used.

62. In somewhat of an anomaly, Title V's definition of a "private property owner" excludes any employee of the federal government, whether or not the employee has a role in implementing regulatory programs. A private-property owner is a "non-federal person," which is in turn defined as "a person other than an officer, employee, [or] agent … of … the federal government." Id. § 502(3), (4).

63. Id. § 503(a)(1).

64. Id. § 503(a)(2).

65. Id. § 503(b).

66. Id. §§ 506, 507.

67. Id. § 504(a).

68. Id. § 505.

69. Id. § 508(a), (b).

70. Id. § 508(c).

71. Id. § 508(d).

72. Id. § 508(e).

73. See, e.g., supra note 45 and accompanying text.

74. H.R. 925, 104th Cong., 1st Sess. (1995) [hereinafter H.R. 925]. H.R. 925 was originally passed on March 3, 1995 as The Private Property Protection Act of 1995, and re-passed the same day as H.R. 9, Division B, part of the Job Creation and Wage Enhancement Act, a Contract With America Bill.

75. These agricultural subsidy programs protecting wetlands were established in the resource conservation provisions of The Food Security Act of 1985, as amended by the Agriculture Conservation and Trade Act of 1990, codified at 16 U.S.C. §§ 3801-3862.

76. The Reclamation Acts, 43 U.S.C. §§ 371 et seq.; Federal Land Policy and Management Act, 43 U.S.C. §§ 1701-1784; Section 6 of the Forest and Rangeland Renewable Resources Planning Act of 1974, 16 U.S.C. § 1604. The bill specifies that governmental actions under these laws can only give rise to compensation claims as to an owner's right to use or receive water.

77. The 20 percent compensation threshold, covering any portion of property, is low enough that it may be hard to determine if a particular purported drop is the result of market fluctuation, agency action, or a difference of opinion among appraisers.

78. H.R. 925, supra note 74, § 5.

79. Id. § 6(a)-(e).

80. Id. § 6(f).

81. Id. § 3(a).

82. Id. § 9(3).

83. Id. § 5(a).

84. Id. § 6(f).

85. Id. § 6(d).

86. Id. § 6(d)-(e).

87. See supra note 74.

88. H.R. 2275, 104th Cong., 1st Sess. (1995).

89. S. 1364, 104th Cong., 1st Sess. (1995).

90. H.R. 961, 104th Cong., 1st Sess. (1995).

91. WASH. REV. CODE § 36.70A.370 (1991).

92. Ch. 98, 1995 Wash. Legis. Serv. 261, § 6(3)(d)(West)(repealed by referendum Nov. 7, 1995).

93. Id. § 4(a).

94. Id. § 4(b).

95. Id. § 3.

96. Id. § 7.

97. The Bert J. Harris Jr., Private Property Protection Act, ch. 181, 1995 Fla. Sess. Law Serv. 1311 (West) [hereinafter Harris Act].

98. Id. § 1(1).

99. Arguably, a compensation standard that attempts to assess fairness through case-by-case analysis also creates variability and uncertainty, both of which are inimical to the underlying goals of relief legislation. Recent Legislation, Land Use Regulation, Compensation Statutes, Florida Creates Cause of Action for Compensation of Property Owners When Regulation Imposes "Inordinate Burden," 109 HARV. L. REV. 542 (1995). Moreover, a standard providing compensation for regulation imposing an "inordinate burden" has been criticized because "it fosters socialinefficiency and frustrates the general economic rationale for government compensation." Id. at 546.

100. Harris Act, supra note 97, § 1(3)(e).

101. Id. § 1(4)(d)2.

102. Id. § 1(6). This limited "loser pays" provision differs from the approach in federal legislation, which provides costs to successful claimants but imposes no burdens or responsibilities on unsuccessful claimants.

103. Id. § 1(9).

104. Private Real Property Rights Preservation Act, ch. 517, 1995 Tex. Sess. Law Serv. 3266 (Vernon) (to be codified at TEX. GOV'T CODE ANN. §§ 2007 et seq. (West)).

105. Id. § 2007.003(b)(6), (7).

106. Id. § 2007.003(b)(9)-(11), (13).

107. Act of June 15, 1995, No. 302, 1995 La. Sess. Law Serv. 344 (West) (to be codified at LA. REV. STAT. ANN. §§ 3:3601, :3608-12, :3621-24 (West)).

108. The definition of "governmental entity" excludes local governmental subdivisions with populations exceeding 425,000. Id. § 3:3602(13)(b). This would exempt the city of New Orleans from the obligation to pay compensation under this law.

109. Id. §§ 3:3602(11) (agriculture), :3622(6) (forestry).

110. Id. §§ 3:3602(12)(h) (agriculture), :3622(3)(b)(forestry).

111. Id. § 3:3612C.

112. Mississippi Forestry Activity Act of 1994, MISS. CODE ANN. §§ 49-33-1 to -19 (timber provisions). The Act was amended in 1995 to include agriculture provisions.

113. Id. § 49-33-7.

114. 1995 Or. Laws 1st Spec. Sess. ch. 3, §§ 39m-q (provisions addressing light rail) [hereinafter Or. Light Rail Provisions].

115. No relief is available to a claimant if the state forester, to whom claims are addressed, determines that the parcel has been configured for the primary purpose of qualifying for relief under this law. Id. § 39o(f)(3).

116. Id. § 39q.

117. S.B. 600, 68th Or. Leg. Assembly, Reg. Sess. (vetoed July 13, 1995).

118. 1995 Colo. Legis. Serv. 126 (West).

119. 1994 Ariz. Legis. Serv. ch. 111 (West).

120. Exec. Order 12630, supra note 53.

121. See, e.g., S. 50, supra note 1.

122. 1992 Ariz. Legis. Serv. 107.

123. Cal. Exec. Order No. D-78-89 (1989).

124. Colo. Exec. Order No. D-0152-89 (1989).

125. Neb. Exec. Order No. 95-9 (1995).

126. DEL. CODE ANN. tit. 29, § 605.

127. IND. CODE § 4-22-2-32.

128. MO. ANN. STAT. §§ 536.017-018 (Vernon).

129. The standard for a "facial" taking is whether the mere enactment of the legislation or regulation works a taking. It is more difficult to demonstrate this than to establish that a regulation "as applied" to a specific property works a taking. See, e.g., Keystone Bituminous Coal Ass'n v. DeBenedictis, 480 U.S. 470, 493-95, 17 ELR 20440, 20446-47 (1987).

130. 1995 Va. Acts 677.

131. IDAHO CODE §§ 67-8001 to -8008; 1995 Idaho Sess. Laws 181; 1995 Idaho Sess. Laws 182.

132. TENN. CODE ANN. §§ 12-1-201 to -203.

133. WASH. REV. CODE § 36.70A.370.

134. W. VA. CODE §§ 22-1A-1 to -6.

135. Either finding would likely suggest a taking. See Lucas v. South Carolina Coastal Council, 112 S. Ct. 2886, 2892-94, 22 ELR 21104, 21107 (1992).

136. 1995 Kan. Sess. Laws ch. 170.

137. MONT. CODE ANN. §§ 75-1-102, -103, -201.

138. 1995 Mont. Laws ch. 352.

139. UTAH CODE ANN. §§ 63-90-1 et seq.

140. WYO. STAT. §§ 9-5-301 to -305.

141. 1995 N.D. Laws ch. 312.

142. Id. § 3.

143. 1994 Ariz. Legis. Serv. 277.

144. In a sense, it is somewhat misleading to compare legislative proposals, such as S.605 or H.R. 925, which have been offered but not enacted, with legislation that has formally become law. The negotiation process that often is required to secure enactment of a particular bill is likely to moderate, qualify, and/or limit the original proposal. Certainly the extensive negotiation process outlined in the Florida law, see Florida Land Use and Environmental Dispute Resolution Act, ch. 181, 1995 Fla. Sess. Law Serv. 1311, § 2(1)-(30) (West), or the special exclusion for New Orleans in the Louisiana law, see supra note 108, both of which appear to be the result of legislative negotiation, have no equivalents in the federal proposals.

145. See, e.g., Congressional Budget Estimate of S. 605, at 3 (Oct. 17, 1995) (stating that agencies would "resolve as many claims as possible without paying any compensation … by reversing or modifying permit decisions or enforcement actions").

The assumption that changes in regulatory behavior would be enough to avoid most compensation claims rests on a profound misapprehension of the nature and operation of regulatory programs. Regulatory statutes often establish standards of legally permissible property use, typically by prohibiting certain activities without a permit and setting standards that must be met in order to obtain a permit. Unless those statutory standards are met, it would be unlawful for an agency to permit an activity, regardless of the economic impact of a permit denial.

For example, under the Endangered Species Act (ESA), determinations as to whether species are endangered or threatened must be made "solely on the basis of the best scientific and commercial data," without regard to economic or other impacts. 16 U.S.C. § 1533(b)(1), ELR STAT. ESA § 4(b)(1). Once a species is listed, it becomes unlawful to carry out actions the statute identifies as injurious to species. Id. § 1538, ELR STAT. ESA § 9. Furthermore, citizens can commence civil suits to enjoin violations of the Act, or to compel the Secretary of the Interior to enforce the Act. Id. § 1540(g), ELR STAT. ESA § 11(g).

The ESA is not unique in this regard. Under the Resource Conservation and Recovery Act, for example, regulations governing hazardous waste management must provide the level of protection "necessary to protect human health and the environment," without regard to economic considerations. 42 U.S.C. §§ 6922-24, ELR STAT. RCRA §§ 3002-04. Even where a statute does authorize consideration of costs, such costs generally cannot be the sole or principal criterion for decision. See, e.g., 42 U.S.C. § 9621(b), ELR STAT. CERCLA § 121(b) (cost effectiveness only one criterion for remedy selection).

Only Congress can modify statutory standards; regulatory standards can only be changed through formal regulatory amendments, with public notice and opportunity for comment, and judicial review. Indeed, S.605 expressly acknowledges the existence of legal constraints on the extent to which agencies can cut back on regulations. See S. 605, supra note 2, §§ 404(b)(1), 503(a)(1) (directing that federal regulations be revised to reduce most regulatory impacts on property "to the maximum extent" possible within existing statutory constraints).

146. Institute for Public Policy and Management, University of Washington, Referendum 48—Economic Impact of the Property Rights Initiative (Oct. 20, 1995); Neal Pierce, Takings—The Comings and Goings, 28 NAT'L J. 37 (1996).

147. See Letter from Alice Rivlin, Director, Office of Management and Budget, to Hon. Orin Hatch, Chairman, Senate Committee on the Judiciary (June 7, 1995).

148. States differ as to the availability of compensation for the time the regulation was in place. No state provides the precise equivalent of the constitutional remedy of just compensation for a "temporary taking," see First English Evangelical Lutheran Church of Glendale v. County of Los Angeles, 482 U.S. 304, 17 ELR 20787 (1987). Florida defines temporary restrictions as not compensable. Harris Act, supra note 97, § 1(e). Texas specifies that a prevailing property owner "is only entitled to, and the governmental entity is only liable for, invalidation of the governmental action." TEX. GOV'T CODE ANN. § 2007.023(b). Mississippi and Louisiana provide that if a regulation is rescinded, a property owner can receive payment for "damages" incurred while the regulation was in effect. MISS. CODE ANN. § 49-33-9(2); LA. REV. STAT. ANN. §§ 3:3610F (agriculture), 3:3623E (timber). Arguably, this could be broader than just compensation because it could include consequential damages, such as business losses, which are not compensable under the Fifth Amendment or in eminent domain proceedings.

149. Harris Act, supra note 97, § 1(5)(d).

150. See discussion following note 34 supra.

151. Or. Light Rail Provisions, supra note 114, § 39o(f)(3) (no relief on determination that parcel was configured in order to qualify for relief).

152. Harris Act, supra note 97, § 1(3)(e) (assessing burden on "property as a whole").

153. See Lucas v. South Carolina Coastal Council, 112 S. Ct. 2886, 2894 n.7, 22 ELR 21104, 21107-08 n.7 (1992) (discussion that begins by addressing physical segmentation, concludes by raising question "whether and to what degree the state's law has accorded legal recognition and protection to [a] particular interest in land" (emphasis added)).

154. Or. Light Rail Provisions, supra note 114, § 39o(1)(a); Harris Act, supra note 97, § 1(12).

155. TEX. GOV'T CODE ANN. § 2007.003(a).

156. Harris Act, supra note 97, § 1(3)(b).