Legislative Initiatives

Environmental Law & Property Rights Practice Group Newsletter - Volume 1, Issue 1, Fall 1996

December 1, 1996

Orrin Hatch

Despite the constitutional requirement for the protection of property rights, the America of the late twentieth century has witnessed an explosion of federal regulation of society that has jeopardized the private ownership of property with the consequent loss of individual liberty. Under current federal regulations, thousands of Americans have been denied the right to the quiet use and enjoyment of their private property. Arbitrary bureaucratic enforcement of federal and state regulatory programs has prevented Americans from building homes, plowing fields, repairing barns and fences, clearing brush and fire hazards, felling trees, and even removing refuse and pollutants, all on private property.

Fairness and simple justice demand that Americans owning property be entitled to the full use of their property. Ensuring compensation for regulatory takings is the first step toward restoring the fundamental right to own and use private property guaranteed by the Takings Clause of the Fifth Amendment to our Constitution. That is why legislation was proposed in the 104th Congress to protect private property owners from overzealous regulators.

In the House of Representatives, legislators introduced H.R. 925, the Private Property Protection Act. This Act was first introduced as H.R. 9, an important component of the Contract With America. Unlike the Senate bills, in which compensation is initially triggered by whether a taking occurs within the meaning of Supreme Court precedent, the H.R. 925 compensation provision is triggered in almost all situations where property owners' use of land or water rights has been diminished in value by twenty percent or more. Unlike the Senate bills, H.R. 925 is limited in scope to the administration of the Endangered Species Act and the wetlands preservation program under section 404 of the Clean Water Act, as well as several other environmental laws. The bill was voted favorably out of the House Judiciary Committee on February 16, 1995, and passed the House on March 3, 1995.

On the Senate side, former Majority Leader Robert Dole introduced S. 605, the Omnibus Property Rights Act, on March 23, 1995. Thirty-one Senators joined Senator Dole as original cosponsors. Subsequently, three Senators joined as cosponsors. The bill was referred to the Committee on the Judiciary. The Committee held three days of hearings on S. 605, polling the views of Senators, property owners, judges, executive officials, academics, lawyers, and property rights advocates. On December 21, 1995, a motion to favorably report S. 605 was approved 10-7 by the Judiciary Committee.

It is interesting to note the genesis of S. 605. At my urging, the four different approaches designed to protect private property from federal government intrusion, which were introduced separately by several Senators, were merged in a single bill. It was believed that the combination of these approaches would be far more efficacious in protecting private property than in just relying on a single strategy. This omnibus bill was the product of over a year and a half of work and countless drafts and represents the most comprehensive legislative mechanism to date to foster and protect the private ownership of property.

The first substantive title of the bill encompasses property rights litigation reform. This title establishes a distinct federal Fifth Amendment "takings" claim against federal agencies by aggrieved property owners, thus clarifying the sometimes incoherent and contradictory constitutional property rights case law. Property protected under this section encompasses all property defined by the common law, as well as under state and federal law. This title, unlike the House bill, is triggered when a taking, as defined by the Supreme Court, occurs. Moreover, it allows for compensation when the property, or "affected" portion of property, is reduced in value by 33 percent or more.

This title also contains a nuisance "exception" to compensation. It codifies that part of the 1992 Supreme Court decision in Lucas v. South Carolina Coastal Council, which held that restrictions on property use based on "background principles of the State's law of property and nuisance" need not be compensated. By adopting the Supreme Court's recent Lucas holding, S. 605 provides that only innocent property holders are to be compensated for government takings. Those that demonstrably misuse their property to pollute or to harm public health and safety are not entitled to compensation under the bill's nuisance provision.

Finally, this title also resolves the jurisdictional dispute between the federal district courts and the Court of Federal Claims over Fifth Amendment "takings" cases -- sometimes called the "Tucker Act shuffle" -- by granting each court concurrent jurisdiction.

A second title in essence codifies President Reagan's Executive Order 12630. Under this title, a federal agency must conduct a private property "taking impact analysis" before issuing or promulgating any policy, regulation, or related agency action which is likely to result in a taking of private property.

A third title establishes an agency administrative appellate and compensation procedure for takings of real property during enforcement and administration of both the Endangered Species Act and the wetlands preservation program under section 404 of the Clean Water Act. These Acts present special enforcement problems and an agency appellate and compensation procedure allows the agency and the aggrieved party the option to avoid litigation. A fourth title provides for alternative dispute resolution in arbitration proceedings.

The bill provides for a complete election of remedies. If a decision of an agency appeal is unreasonably delayed, an aggrieved party may drop the appeal and litigate according to the terms of the Act. These four titles, established by the Omnibus Property Rights Act, together function to provide the property owner with mechanisms to vindicate the fundamental constitutional right of private ownership of property, while instituting powerful internal incentives for federal agencies both to protect private property and include such protection in agency planning and regulating.

On July 16, 1996, a partially streamlined substitute to S. 605 was introduced as S. 1954. This version of the Omnibus Property Rights Act addressed many of the concerns of the original bill's critics, who argued that the bill was too broad and costly. Among other changes, the new bill: (1) narrowed the definition of property to include only real property, including fixtures on land, such as crops, timber, and mining interests, and water rights; (2) increased the threshold amount that property or a portion of property need be diminished in value before compensation for a taking be sought from 33 to 50 percent; and (3) exempted civil rights laws from the bill's purview, including those protecting persons with disabilities. Despite these modifications, the structure and design of the new bill remains the very same as the original Omnibus bill.

It is very significant that the nonpartisan Congressional Budget Office, after year-long research, concluded in a study dated March 8, 1996 that the incentives built into the more expansive original bill will encourage agencies to act more responsibly, that the administrative cost of the bill would remain quite small, and that compensation costs would remain even smaller. CBO noted that because all compensation would be paid out of appropriated agency funds, the Budget Act's pay-as-you-go procedures would not apply. Thus, the Omnibus bill is by law "budget neutral."

CBO found that the costs of the Omnibus bill will diminish to an insignificant level over time. This is predicated on the CBO finding that the Omnibus bill contains powerful incentives, which over time will reduce costs. These include: (1) the bill's bright line legal standards, which better enable agencies to avoid takings disputes; (2) the takings impact assessment requirement, which requires agencies to analyze the affect of proposed regulations on property rights; and (3) the requirement that compensation be paid from the agency's budget, which inevitably will act as a deterrent to unconstitutional and unlawful takings. Based on the extensive research and well-supported estimate from the CBO, the Omnibus bill should cost no more than $30 or $40 million a year for the first five years of implementation, thereafter diminishing to insignificant amounts.

On July 16 of this year, CBO concluded that the recent changes made to the Omnibus Property Rights Act would further reduce the costs of the bill. Specifically, CBO observed that these changes "would be likely to reduce the number of takings claims brought against the United States through either administrative appeals or lawsuits."

As of the date of the publication of this article, the Senate has not taken action on S. 1954, although it may do so before its adjournment this year. Nevertheless, H.R. 925, S. 605, and S. 1954, mark milestones in legislative attempts to address the takings issue.