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THE TAKINGS CLAUSE

THE TAKINGS CLAUSE

Sixty years ago, the Supreme Court stated that “the power over public lands thus entrusted to Congress is without limitations.”[1]  However, as subsequent decisions dictate, the federal government’s power to regulate non-federal lands under the Property Clause is not unlimited.[2]  For instance, while the Property Clause of the U.S. Constitution grants broad managerial, administrative and regulatory power to Congress regarding federal lands, it is not without the restrictions embedded in the Fifth Amendment.

The just compensation clause of the Fifth Amendment provides the basis for all regulatory takings claims.  It states that no person shall “be deprived of life, liberty or property, without due process of law, nor shall private property be taken for public use, without just compensation.”[3]

When the government condemns or physically appropriates property, the fact of a taking is typically obvious and undisputed.  However, when the landowner contends that a taking has occurred because a law or regulation imposes restrictions so severe that they are tantamount to a condemnation or appropriation, the assertion that it constitutes a taking is not self-evident, and the analysis becomes more complex.  In evaluating regulatory taking claims, a court must first establish whether the claimant has a legitimate “property interest”.[4]  Once the court has determined that a property interest exists, it must then determine whether a taking has occurred.

 

Regulatory Takings

The concept of regulatory takings can be traced back to early case law which used the legal theory of nuisance to establish that certain takings do not require compensation.  In J.C. Hadacheck v. C.E. Sebastian, the court held that government has no obligation to pay compensation for preventing a public nuisance.[5]  Courts have consistently held that when a per se public nuisance has been identified, a state’s police power may be exercised to abate that nuisance in order to protect society’s health, safety and welfare.[6]

In the famous 1922 case, Pennsylvania Coal Co. v. Mahon, Justice Holmes first recognized that the adoption of a regulation may constitute a taking.  Holmes stated that in determining whether a regulation goes too far so as to constitute a taking it is necessary to evaluate economic considerations. [7]  When the diminution in value of a property interest reaches a certain magnitude there must be an exercise of eminent domain and compensation to justify the act.[8]

The 1978 case, Penn Central Transp. Co v. New York City, presented a new test for regulatory takings.  Penn Central was argued as an applied challenge to the constitutionality of legislation requiring the preservation of landmarks.  Justice Brennan held that in determining whether a governmental action constitutes a taking, it is necessary to evaluate the significance of three factors:  (1) the economic impact of the regulation on the owner;  (2) the character of the governmental action;  (3) the extent to which the regulation interferes with the owner’s investment-backed expectations.[9]

Since Penn Central was decided, the Supreme Court has identified two categorical areas of takings.  In 1982, the Court in Loretto v. Teleprompter Manhattan CATV Corp. held that any permanent physical occupation of property authorized by the government is a per se taking, no matter how beneficial to the public.[10]  In the 1992 case, Lucas v. South Carolina Coastal Council, the Court held that any regulation which deprives all or substantially all of productive or economic value of land is a taking which requires compensation.[11]

 

Protection of the Wildlife Resource

The regulation of land adjacent to federal property is often done in the name of wildlife and habitat protection.  Fifth Amendment takings challenges to this type of legislation has increasingly become more difficult as legislators respond to the rapid development and encroachment into wetlands, forests and other open space.  As wildlife habitats become smaller, more condensed, and more regulated, new species are also being identified and classified as endangered.  While it is clearly in the public interest to protect wild animals, the extent to which private land may be taken for this purpose has been hotly litigated.

Due to the enactment of the Endangered Species Act (ESA), property owners have increasingly been subject to regulation which substantially restricts the individual use of their property when such use adversely affects an endangered plant or animal species.  Once a species is listed[12], the ESA is designed to curb violators by imposing both civil and criminal penalties.  Suits may be brought by federal agencies or by a private party.[13]  Challenges to the application of the ESA as violating the Takings Clause have been almost uniformly unsuccessful.[14]  That said, the ESA’s powerful ability to substantially restrict the use of private property has been both praised by environmentalists and loathed by property owners.

However, not all challenges to the ESA have resulted in negative outcomes for non-federal landowners.  In the recent decision of Tulare Lake Basin Water Storage District v. United States, the Court held that the U.S. government was liable to a group of irrigators in the amount of nearly $23 million for limiting their water rights in order to protect endangered salmon.[15]  In that case, county water agencies in California brought suit claiming that their contractually-conferred right to the use of water was taken from them when the government imposed water use restrictions under the ESA to protect the delta smelt and winter-run chinook salmon.

 

Protection of the Water Resource

In Thompson v. Enz, the court discussed a doctrine which affords those with riparian interests the core rights to those uses “absolutely necessary for the existence of the riparian proprietor and his family, such as to quench thirst and for household purposes.”[16]  From this, it is safe to infer that a taking may occur if those fundamental rights were taken away.  The nature of riparian ownership is such that the each owner shares rights to the whole lake, so long as his or her land touches the lake waters.[17]  This suggests that even if an owners interests exists due to a tiny portion touching the water, he is afforded those fundamental riparian rights which cannot be taken without compensation.

As firm as riparian rights may be, federal regulation of private riparian interests is extremely difficult to challenge as unconstitutional taking because the federal government’s ability to impose restrictions does not stem from its status as a fellow riparian proprietor but from its status as a sovereign.[18]  Further, the courts have a enormous leeway in justifying a regulation as reasonable to protect waterways.  There is no doubt that courts view restrictions as assisting in the protection of the wilderness character in riparian areas.  The Wilderness Act itself states that “wilderness” is defined as “an area where the earth and its community of life are untrammeled by man… retaining its primeval character and influence, without permanent improvements or human habitation.”[19]  Certainly, one could conclude that certain forms of mechanical transport, including sailboats or canoes should be excluded from riparian areas to preserve the “wilderness character” of the property.  Just as Congress’s authority may sometimes extend to purely private property in order to provide adequate protection of public property, so in this instance may federal regulations encompass shared property rights between the United States and private owners, at least to the extent that the regulations are designed to govern the portion of the water surface contained completely within the borders of government-owned land. This at a minimum is what the Property Clause allows–regulation to protect not only the government’s own riparian interest in the lake, but also its interest in the surrounding national wilderness.

 

 

Leases and Permits – the Timber, Mineral & Range Resources

When a landowner wishes to undertake certain activities on his property such as grazing, mining, timber or wetland development he often owns land adjacent to federal property; and the approval of federal permits or leases may be required before the landowner may proceed.   In the event that such wetland permit applications are denied or revoked by a federal agency, the landowner may file a regulatory takings claim against the government, alleging that the denial or revocation of the permit or lease imposes such a burdensome restriction on the landowner’s use of the property that the government has for all intents and purposes “taken” the landowner’s property.

The takings cases which involve this dispute usually involve a landowner who has purchased or invested time and/or money in a property with the expectation of utilizing the land in conjunction with the permit or lease.  In fact, the value of his property may have undeniably increased with the existence of the permit; and conversely, the value of the property may undeniably fall without the existence of the permit.

The first inquiry for the courts is to determine whether a valid property right exists in a permit or lease.  “Property” in the constitutional sense refers to the group of rights which the owner has with respect to the property.[20]  The question rests on whether the permit or lease is “one of the essential sticks in the bundle of rights that are commonly characterized as property.”[21]

Generally, courts have held that permits and leases are not rights in property, but licenses offered at the discretion of federal agencies.[22]  In Pankey Land and Cattle Co. v. Hardin, the court held that “although the permits are valuable to ranchers, they are not an interest protected by the Fifth Amendment against taking by the government who granted them with the understanding that they could be withdrawn … without payment of compensation.”[23]  Courts have also held that because a permit denial does not prevent all economically viable uses of the land, a taking does not automatically occur with every denial.[24]  A mere diminution in value due to an agency determination regarding the use of property is insufficient to establish a taking because, as Justice Holmes once stated, “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.”[25]

On the other hand, there have been cases where permit denials have given rise to successful takings claims.  In Vatalaro v. Department of Environmental Regulation, the court stated that “certainly the land is physically unchanged by a permit denial, yet the bundle of rights the owner had has been diminished.”[26]  The court also stated that the landowner has a right to own and enjoy the property as he intended.[27]  Since the landowner proved that his property could not be put to any other economically viable use absent the permit, the denial was held to be a compensable interest.[28]

This same argument failed in McKinley v. United States.  McKinley argued that reducing a grazing allowance by 44% had the effect of rendering his entire operation, including private property, useless.[29]  He asserted that the regulation was a taking because it affects the value of his associated base property which he holds in fee simple.[30]  The court did not doubt that the modification of appellant’s permit had a negative effect on the value of his property and the economic viability of his ranching operation, the value added to his property by his holding the permit was considered a “benefit and privilege bestowed by the government.”[31]  The court went on to hold that although permits are valuable to ranchers, they are not an interest protected by the Fifth Amendment.[32]  Rather, the government grants permits with the understanding that they could be withdrawn.[33]

Similar takings issues arise with mining permits.  Under the provisions of the General Mining Act of 1872, an individual may enter and explore public lands in search of valuable minerals.[34]  After valuable minerals are discovered, the claimant may file a mining claim, which if approved, entitles the claimant to the right of exclusive possession of that claim, as long as the requirements of the Mining Act are met.[35]  However, when a mining claimant has a unpatented mining claim, the primary title and paramount ownership of the land remains with the government.[36]  Courts reason that the government has a reversionary interest in the possessory right of the mining claimant, which it is entitled to protect against wasteful and unlawful uses.[37]

The situation changes a bit when a patent is actually issued.  The court in Clouser v. Espy suggested that a mining claimant may be able to bring a successful “takings clause challenge” when the validity of the patent has been established.[38]  Further, the court in Mountain States Legal Foundation v. Hodel, said that although the economic burden on the plaintiff is significant, it has not been contended that he has been deprived of the “economically viable use” of his land.[39]  These cases together suggest that one may be successful in a takings argument if both a patented mining claim exists, as well as a deprivation of all economically viable use.

 

The Recreation Resource

In Camfield, the government acted to force a private landowner to remove fences in order to afford access to federal property.  But what if the situation were reversed?  In Nelson v. United States, landowners were denied access to their property when the government closed a federally-owned road.   The court determined that there was no unconstitutional taking because the landowners had notice before they purchased the property that the government intended to close the access road. [40]  Thus, not even an easement by necessity was allowed.  Even though the government approved a Special Use Application for the landowners to build two or three cabins, it did not consider access as a factor.  Rather, the government reasoned that it was up to the landowner to gain access over other private property in the area.  The general rule derived from this case is that notice of future regulation can bar a takings claim.

There are several other recent cases upholding the potency of the recreational resource argument as a means to dismiss takings claims brought by adjacent property owners.  For example, the Grand Canyon is being negatively effected by smog coming from coal plants nearby which was allegedly contributing to the national park’s deterioration.[41]  The regulations which followed were upheld as necessary to protect the recreation resource of the park.[42]  Also, there are several noise pollution cases where the federal government was able to regulate boat engines on rivers flowing through national parks.[43]  In Block, it was concluded that motorized vehicles significantly interfered with “the use of the wilderness by canoeists, hikers, and skiers.”[44]  Thus, because the recreation resource has become so important to modern Americans, it has supplied the government with a powerful mechanism to avoid takings claims.



[1] United States v. San Francisco, 310 U.S. 16, 29 (1940) (emphasis added).

[2] Grand Lake Estates Homeowners Assn. v. Veneman, 340 F.Supp.2d 1162, 1167 (2004) (emphasis added).

[3] U.S. Const. amend. X, §1.

[4] Maritrans Inc. v. U.S., 342 F.3d. 1344, 1352 (Fed. Cir. 2003).

[5] 239 U.S. 394, 410-11 (1915).

[6] Id.

[7] 260 U.S. 393, 413 (1922).

[8] Id.

[9] 438 U.S. 104, 124 (1978).

[10] 458 U.S. 419, 434-35 (1982).

[11] 505 U.S. 1003, 1014-1019 (1992).

[12] See 16 U.S.C.A. §1532(6), stating that a species is listed when it is “in danger of extinction throughout all or a significant part of its range.”  See also, 16 U.S.C.A. §1533(b)(7), stating that under certain conditions, the Secretary also has the ability to treat an unlisted species as if it were listed.

[13] 16 U.S.C.A. §1540(g) provides for suits by private parties.  Citizens may sue to enjoin any person, including the United States or its agencies, from violating the ESA, or to compel the Secretary to enforce the ESA.

[14] Nancy Kubasek, “From the Environment,” Real Estate Law Journal, volume 32, number 4, (Spring 2004).

[15] Tulare Lake Basin Water Storage Dist. v. U.S., 2003 WL 23111365 (Ct. Fed. Cl. 2003).

[16] 154 N.W.2d 473, 483 (Mich. 1967).

[17] Stupak-Thrall v. United States, 70 F.3d 881, 883 (6th Cir. 1995).

[18] Stupak-Thrall v. United States, 70 F.3d 881 (6th Cir. 1995).

[19] 16 U.S.C. §1131(c).

[20] United States v. General Motors Corp., 323 U.S. 373, 378 (1945).

[21] Kaiser Aetna v. United States, 444 U.S. 164, 176 (1979).  See also, J.E. Penner, “The ‘Bundle of Rights” Picture of Property, 43 UCLA L. Rev. 711, 712 (1996).

[22] See, McKinley v. United States, 828 F.Supp. 888 (1993) which suggests that permits are not property interests, but are assets which are equitable interests.

[23] 427 F.2d 43, 44 (10th Cir.1970).

[24] United States v. Riverside Bayview Homes, Inc., 474 U.S. 121, 129 (1985).

[25] Pennsylvania Coal Co. v. Mahon, 260 U.S. 393, 413 (1922).

[26] 601 So.2d 1223, 1228 (1992).

[27] Id.

[28] Id.

[29] McKinley, 828 F.Supp.at 893.

[30] Id.

[31] Id.

[32] Id.

[33] Id.

[34] 30 U.S.C. § 22.

[35] See, Swanson v. Babbitt, 3 F.3d 1348, 1350 (9th Cir.1993) stating that a mining claimant has the right to exclusive possession of the surface resources within their claim for the purpose of mining if he has made a valid discovery.

[36] United States v. Rizzinelli, 182 F. 675, 681 (1910).

[37] Id.  at 684.

[38] 42 F.3d 1522, 1535 (9th Cir. 1994).

[39] 799 F.2d. 1423, 1429 (10th Cir. 1987).

[40] Nelson v. United States, 64 F.Supp.2d 1318, 1320 (1999).

[41] Grand Canyon Trust v. Tucson Elec. Power Co., 382 F.3d 1016 (2004).

[42] See, id.

[43] Minnesota v. Block, 660 F.2d 1240, 1249 (8th Cir. 1981).

[44] Id. at 1251.

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