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[House Report 106-1011]
[From the U.S. Government Publishing Office]

106th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                    106-1011

======================================================================

 
                 LANDOWNERS EQUAL TREATMENT ACT OF 1999

                                _______
                                

October 26, 2000.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

  Mr. Young of Alaska, from the Committee on Resources, submitted the 
                               following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                        [To accompany H.R. 1142]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Resources, to whom was referred the bill 
(H.R. 1142) to ensure that landowners receive treatment equal 
to that provided to the Federal Government when property must 
be used, having considered the same, report favorably thereon 
without amendment and recommend that the bill do pass.

                          Purpose of the Bill

     The purpose of H.R. 1142 is to ensure that landowners 
receive treatment equal to that provided to the Federal 
Government when property must be used.

                  Background and Need for Legislation

     In September 1998, the U.S. Fish and Wildlife Service 
(FWS) and the Minneapolis-St. Paul Airport Commission signed an 
agreement under which FWS would receive $26 million in 
compensation for the use of National Wildlife Refuge lands by 
the Airport Commission. The Minneapolis-St. Paul Airport 
proposed to expand a runway very near the Minnesota Valley 
National Wildlife Refuge, which is administered by the FWS. The 
new runway was expected to result in 5,620 monthly overflights 
over a portion of the Refuge between 500 and 2,000 feet above 
ground level. The FWS concluded that these overflights were a 
``use'' of Refuge lands and therefore, triggered the provisions 
of Section 4(f) of the Department of Transportation Act of 1966 
(49 U.S.C. 303). This law provides that the Secretary of 
Transportation may not approve a project that requires the use 
of any publicly owned land (such as a public park, recreation 
area, wildlife and waterfowl refuge or historic site of 
national, state, or local significance) unless there are no 
feasible and prudent alternatives to the use of such land and 
unless the project includes all possible planning to minimize 
harm resulting from the use.
     After conducting a Section 4(f) evaluation, as well as an 
environmental impact analysis under National Environmental 
Policy Act (NEPA), the Federal Aviation Administration (FAA) 
determined that ``the MSP (Minneapolis-St. Paul) Airport 
expansion will require the . . . constructive use of land from 
a wildlife refuge''. According to the FAA, ``A `constructive 
use' can occur when proximity effects, such as noise, adversely 
affect the normal activity or aesthetic value of an eligible 
Section 4(f) property even though there may be no direct 
physical effect involving construction of transportation 
facilities.'' According to FAA regulations, ``Substantial 
impairment would occur only when the protected activities, 
features or attributes of the resource are substantially 
diminished.'' 23 CFR 771.135 (p)(2), 56 Federal Register 13273. 
Apparently, the FAA's finding of a ``constructive use'' led to 
the conclusion that the FWS was entitled to compensation or 
mitigation for that use although there was never any physical 
invasion of the property.
     Section 4(f) is a statement of policy to avoid unnecessary 
impacts on important public lands providing wildlife, 
recreation, and historic benefits. As noted earlier, the 
Secretary of Transportation shall only authorize such projects 
if ``(1) there is no prudent and feasible alternative to using 
that land and (2) the program or project includes all possible 
planning to minimize harm to the park, recreation area, 
wildlife and waterfowl refuge, or historic site resulting from 
the use.'' The statute does not require payment of 
compensation.
     However, the requirement for compensation for private 
property taken for a public use is enshrined in the U.S. 
Constitution in the Fifth Amendment, and according to the 
United States Supreme Court is a fundamental constitutional and 
civil right that protects each and every American citizen. 
Therefore, unlike the guarantee to private landowners, the 
compensation provided for the ``use'' of the Minnesota Valley 
National Wildlife Refuge was the result of negotiation and 
agreement, and not based on the Constitution, a statutory 
mandate, a regulation, or case law.
    The Fifth Amendment of the United States Constitution, 
often referred to as the ``takings'' clause, provides ``Nor 
shall private property be taken for public use, without just 
compensation''. This constitutional protection for the private 
property rights of citizens has been made applicable to the 
states through the Fourteenth Amendment to the Constitution. In 
addition, many states have an identical or similar state 
``takings'' clause in their state constitutions. The Fifth 
Amendment is a floor, not a ceiling, in its protection of 
property rights.
    Not every action by government affecting private property 
results in a ``taking'' under the Fifth Amendment. However, 
Congress may and has provided by statute for compensation when 
property must be used by the government, even in some areas 
that might not rise to the level of a Constitutionally defined 
``taking''.
    One of the principal purposes of the Fifth Amendment is 
``to bar 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.'' Armstrong v. United States, 
364 U.S. 40, 49, 80 S.Ct. 1563, 1569, 4 L.Ed.2d 1554 (1960).
    However, some legal scholars have noted the confused and 
paradoxical condition of current takings'' case law. Law 
Professor Jeb Rubenfeld stated at the outset in his 1993 Yale 
Law Review Article entitled ``Usings'' (102Yale L.J. 1077), 
``For a long time, there has been no Just Compensation Clause 
in constitutional law. Three words, `for public use', have been 
cut away from it, treated as if they prescribed a distinct 
command of their own. Instead of the Just Compensation Clause 
as written, we have a Taking Clause engulfed in confusion and a 
Public Use Clause of nearly complete insignificance.'' 
Professor Rubenfeld's solution to the lack of coherent case law 
is a Fifth Amendment jurisprudence based on whether there is a 
``using'' rather than a taking.
    This legislation would provide for a statutory right of 
compensation under the Endangered Species Act (ESA) when 
property is used by the public for the protection of publicly-
owned wildlife. The Endangered Species Act is a federal law 
that has frequently resulted in the use of privately-owned 
property for the purpose of providing habitat for publicly-
owned wildlife. This is a concept propounded by the government 
itself when its property is used, and therefore, is an 
appropriate concept for application to Constitutionally-
protected rights guaranteed to private citizens.
    The ESA uses private property to ``protect'' the habitat of 
endangered or threatened species. Most of this habitat is 
privately-owned property. The ESA prohibits the ``take'' of a 
member of any species which is listed under the ESA as 
endangered or threatened. The word ``take'' is further defined 
in Section 9 of the ESA to mean ``to harass, harm, pursue, 
hunt, shoot, wound, kill, trap, capture, or collect, or to 
attempt to engage in any such conduct.'' FWS regulations 
further interpret the term ``harm'' to include the modification 
of ``habitat'' (land or water) that impairs breeding, feeding, 
and sheltering. It should be noted that the ESA does not define 
the term ``habitat'' and therefore, this applies to any area 
where the species might be found, including privately-owned 
property. The Supreme Court in Sweethome v. Babbitt, 115 S.Ct. 
2407 (1995), upheld the FWS interpretation of the term ``take'' 
to include the authority to control the use of private land 
that might provide habitat for endangered or threatened 
species.
    Violation of the ESA, including the ``take'' prohibition, 
may result in both civil and criminal penalties. Section 11 of 
the ESA establishes penalties and enforcement procedures. Civil 
penalties can range from $500 to $25,000. Criminal fines can 
range from $25,000 to $50,000 and prison sentences can range 
between six months to one year. In addition, any equipment, 
tools, or property used in violating the ESA may be seized by 
the federal government and forfeited.
    Ordinarily the federal government brings suit or presses 
charges against citizens who violate the ESA. However, the ESA 
also authorizes private citizens to sue to enforce the 
provisions of the ESA through the use of citizen suits. ``Any 
citizen'' may sue the government and other private citizens, 
including private property owners, whom they believe to be in 
violation of the ESA. The court may award the citizen bringing 
the suit the costs of litigation, including reasonable attorney 
and expert witness fees, when the judge determines the award to 
be appropriate. If the suit is against a private property 
owner, the private owner must pay for attorneys fees and court 
costs of the suing party.
    Congress may enact laws to require the further protection 
of private property over and above the minimal standards 
created in the U.S. Constitution. H.R. 1142 does not purport to 
define the term ``take'' as provided in the Fifth Amendment. It 
does, however, require the same standard of care that the FWS 
requires when its property is impacted by decisions of other 
federal agencies. It first requires the effort to avoid impacts 
and minimize impacts on private property, and then to 
compensate for impacts created pursuant to implementing the 
ESA. It is unfortunate that the courts have not thus far been 
able to devise adequate remedies for the protection of private 
property rights. However, that is the appropriate role of 
Congress.
    H.R. 1142 will insure that the basic Constitutional rights 
of private property owners are protected, while encouraging the 
federal government to continue efforts to work cooperatively 
with landowners to provide habitat for wildlife. It will give 
private landowners the same protections as were enjoyed by the 
federal government in the case involving the Minnesota Valley 
National Wildlife Refuge.

                            Committee Action

    H.R. 1142 was introduced on March 17, 1999, by Congressman 
Don Young (R-AK). The bill was referred to the Committee on 
Resources. On April 14, 1999, the Committee held a hearing on 
the bill. On June 21, 2000, the Full Committee met to mark up 
the bill. No amendments were offered and the bill was then 
ordered favorably reported to the House of Representatives by a 
vote of 27 to 11, as follows:

                      Section-by-Section Analysis

Section 1. Short title

    Section 1 sets forth the short title of the bill as the 
``Landowners Equal Treatment Act of 1999''.

Section 2. Findings and purpose

    Section 2 sets forth the findings and purposes of the bill, 
explaining that it is patterned after the proposal by the FWS 
for compensation for the loss of use of FWS property resulting 
from ``constructive use'' of the property. The definition of 
``use'', developed by the U.S. Department of Transportation, is 
applied to use of private property, as are the examples of what 
would constitute a constructive use.

Section 3. Minimizing impacts on private property

    This section adds a new section 19 to the ESA, but makes no 
other amendments to the existing law.
    Section 3 sets forth the general principle that in 
implementing the ESA, agencies shall make every effort to 
avoid, minimize, or mitigate impacts on private property that 
result in federal use of the property as a result of the agency 
action. An agency shall not take action that results in a 
federal use of private property under the ESA unless the 
agency: (1) obtains the written permission of the private 
property owner; (2) negotiates a voluntary agreement 
authorizing the proposed use; or (3) pays compensation in 
accordance with this new section. Thereafter, if the use cannot 
be avoided and the owner does not consent, the owner is to be 
paid the fair market value of the portion of the property 
affected by the use for the duration of the use. A property 
owner is required to make a written request for compensation to 
the agency implementing the agency action. An agreement may be 
negotiated which may be for transfer of title or an agreement 
to limit the time of the federal use. If an agreement cannot be 
reached, the property owner may elect binding arbitration 
(under the Federal Arbitration Act) or seek compensation 
through a lawsuit. A lawsuit could be brought under the ESA 
citizen suit section, which allows for attorneys fees and 
costs. Payment of compensation would come from federal 
appropriation for the agency which took the action resulting in 
the use of the private property.
    Agencies are required to give notice to property owners of 
their rights under this section to seek compensation. This new 
section is not intended to preclude any other cause of action a 
property owner might have under any other applicable law nor 
would it allow an activity that is prohibited by some other 
law.
    The section contains the following definitions:
    ``Federal use'' of private property means any action under 
the ESA to (1) permanently incorporate private property into a 
federal facility; (2) place private property under the control 
of the Secretary of the Interior or the Secretary of Commerce 
(who implement the ESA); or (3) temporarily occupy private 
property in a manner that is adverse to the constitutional 
right of the owner of the property against taking of the 
property by the federal government;
    In addition, ``Federal use'' includes any ``constructive 
use'' of non-Federal property. The term ``constructive use'' 
means any action under the ESA that results in: (1) substantial 
diminution in the normal or reasonably expected uses of private 
property; (2) a reduction in the fair market value of private 
property of 25 percent or more; or (3) in the case of the right 
to receive water, any diminution in the quantity of water 
received or available for use.
    Certain actions taken under the ESA meet the criteria for a 
``federal use'', including: (1) prohibiting private property 
owners from using their property in order to use the property 
as habitat for an endangered species or threatened species; (2) 
a designation of non-federal property as critical habitat 
without the permission of the private property owner; (3) the 
denial of a permit that results in the loss of the ability to 
use private property in order to provide habitat for listed 
wildlife or plants; (4) an ESA section 7 consultation that 
would result in restriction on the use of private property; and 
(5) the imposition by a third party governmental entity of a 
restriction as a condition of some benefit that, if taken 
directly by the federal agency, would constitute a federal use 
of private property, unless the governmental entity has some 
other legal basis for imposing the limitation or restriction. 
This last action could include, for example, forcing states and 
local governments to restrict property as a condition of a 
state grant or other authorization.
    ``Fair market value'' is the most probable price at which 
property would change hands, in a competitive and open market 
under all conditions requisite to fair sale.

            Committee Oversight Findings and Recommendations

    Regarding clause 2(b)(1) of rule X and clause 3(c)(1) of 
rule XIII of the Rules of the House of Representatives, the 
Committee on Resources' oversight findings and recommendations 
are reflected in the body of this report.

                   Constitutional Authority Statement

    Article I, section 8 of the Constitution of the United 
States grants Congress the authority to enact this bill.

                    Compliance With House Rule XIII

    1. Cost of Legislation. Clause 3(d)(2) of rule XIII of the 
Rules of the House of Representatives requires an estimate and 
a comparison by the Committee of the costs which would be 
incurred in carrying out this bill. However, clause 3(d)(3)(B) 
of that Rule provides that this requirement does not apply when 
the Committee has included in its report a timely submitted 
cost estimate of the bill prepared by the Director of the 
Congressional Budget Office under section 402 of the 
Congressional Budget Act of 1974.
    2. Congressional Budget Act. As required by clause 3(c)(2) 
of Rule XIII of the Rules of the House of Representatives and 
section 308(a) of the Congressional Budget Act of 1974, this 
bill does not contain any new budget authority, spending 
authority, credit authority, or an increase or decrease in 
revenues or tax expenditures.
    3. Government Reform Oversight Findings. Under clause 
3(c)(4) of Rule XIII of the Rules of the House of 
Representatives, the Committee has received no report of 
oversight findings and recommendations from the Committee on 
Government Reform on this bill.
    4. Congressional Budget Office Cost Estimate. Under clause 
3(c)(3) of Rule XIII of the Rules of the House of 
Representatives and section 403 of the Congressional Budget Act 
of 1974, the Committee has received the following cost estimate 
for this bill from the Director of the Congressional Budget 
Office:

                                     U.S. Congress,
                               Congressional Budget Office,
                                Washington, DC, September 12, 2000.
Hon. Don Young,
Chairman, Committee on Resources,
U.S. House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 1142, the 
Landowners Equal Treatment Act of 1999.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Deborah Reis.
            Sincerely,
                                          Barry B. Anderson
                                    (For Dan L. Crippen, Director).
    Enclosure.

H.R. 1142--Landowners Equal Treatment Act of 1999

    Summary: H.R. 1142 would address the protection of property 
rights that may be affected by federal actions taken under the 
Endangered Species Act (ESA). Specifically, the bill would 
require the government to compensate property owners whose use 
of any portion of their land or water rights has been limited 
by regulatory actions to implement the ESA. The bill would 
require that any compensation owed to a property owner as a 
result of enacting this legislation must be paid from funds 
appropriated to the agency that caused the limitation to 
property owners.
    Implementing H.R. 1142 would involve both administrative 
expenses and compensation payments, both of which would be 
spent primarily by the U.S. Fish and Wildlife Service (USFWS), 
which is the primary agency charged with carrying out the ESA.
    CBO estimates that in the first few years following 
enactment, the USFWS would spend $5 million to $10 million 
annually to develop and implement the administrative procedures 
necessary to carry out the bill's compensation provisions. We 
expect that administrative costs would fall to $2 million or $3 
million a year thereafter.
    We estimate that the USFWS also would make some payments of 
compensation, but this cost is highly uncertain and would 
depend on how property owners and the agency would react to the 
legislation and how the legislation would be interpreted by the 
Administration and the courts. While CBO is not able to provide 
any precise estimate of compensation costs, we expect that 
aggregate payments of compensation would be less than the 
administrative costs in the first few years after enactment, 
because (1) The bill's requirement that the USFWS pay 
compensation from its own appropriations would probably reduce 
the number of agency actions that affect property values, (2) 
many initial claims would probably be ineligible for 
compensation, and (3) those initial claims that are paid are 
likely to be small.
    In any case, both administrative expenses and compensation 
costs to implement this legislation would depend on the 
appropriation of the necessary amount. Enactment of the bill 
would not affect direct spending or receipts; therefore, pay-
as-you-go procedures would not apply.
    H.R. 1142 contains no private-sector or intergovernmental 
mandates as defined in the Unfunded Mandates Reform Act (UMRA) 
and would impose no costs on state, local, or tribal 
governments.
    Major Provisions: H.R. 1142 would direct federal agencies 
that carry out the ESA to avoid, minimize, or mitigate the 
impacts that their actions have on nonfederal property (that 
is, any property not owned by the federal government, which 
would include state and local holdings). Under H.R. 1142, an 
agency could not implement the ESA in such a way that would 
result in a federal use of nonfederal property unless the 
agency obtains written permission from the landowner, 
negotiates an agreement authorizing the use, or pays 
compensation.
    The bill defines federal use of property to include both 
direct actions (such as incorporating nonfederal property into 
a federal facility) and indirect actions (such as declaring 
private property to be critical habitat for a species or 
denying a federal permit necessary for certain uses of private 
land). Indirect use, which is referred to by the bill as 
``constructive use,'' would have to be paid for by the federal 
government if it would result in a substantial diminution in 
the normal use of property, a loss in property value of 25 
percent or more, or any reduction in the quantity of water 
available (in cases involving water rights).
    The procedure for requesting compensation for the federal 
use of private property under the ESA is set out generally in 
section 3 of the legislation. A property owner seeking 
compensation would first make a written request to the agency. 
If the agency and the property owner can agree on compensation, 
the agency would pay the negotiated amount. If, after 180 days, 
the parties cannot agree on compensation, the owner may seek 
resolution through binding arbitration or a civil suit. Awards 
resulting from arbitration or litigation would include 
attorneys' fees and related costs such as appraisal expenses. 
Court awards would include interest calculated from the 
beginning of the federal action.
    Estimated Cost to the Federal Government: CBO estimates 
that the USFWS would spend $5 million to $10 million annually 
to develop and implement the administrative procedures 
necessary to carry out the bill's compensation provisions. We 
expect that administrative costs would fall to $2 million or $3 
million a year thereafter. CBO cannot estimate the amount of 
compensation that the agency may have to pay to property owners 
under this bill, but we expect that such payments would be less 
than the administrative costs in the first few years after 
enactment. Both administrative expenses and the payment of 
compensation to property owners would be subject to the 
appropriation of the necessary amounts.
    Basis of Estimate: CBO expects that enacting H.R. 1142 
would result in a great number of requests for compensation by 
property owners, particularly those affected by previous USFWS 
regulatory actions. CBO believes that the majority of such 
claims would stem from the creation of an administrative forum, 
which would provide most property owners with a cost-effective 
way to seek compensation. We expect that the vast majority of 
claims made under H.R. 1142 would begin and end 
administratively, and that relatively few claims would be 
pursued further.
    Civil court suits for compensation brought against the 
United States might also increase--especially since so few are 
made under existing law--but we expect that any increase in 
litigation would be small and would involve large monetary 
claims that might have been brought anyway under existing law.
    Responding to the new requests for compensation would 
involve two types of federal expenditures: administrative 
expenses incurred by the USFWS to process claims and permit 
requests, and the payments themselves.
    Administrative Expenses: Assuming appropriation of the 
necessary amounts, CBO estimates that the USFWS would spend $5 
million to $10 million a year over the next two or three years 
to implement an administrative program to process compensation 
requests related to previous agency actions. After this period, 
ongoing administrative expenses would probably fall to $2 
million or $3 million a year to consider compensation related 
to new agency actions.
    Previous Agency Actions: CBO expects that property owners 
affected by past USFWS actions including previous designations 
of critical habitat, would apply for compensation even though 
they would probably not receive notification of the bill's 
compensation provisions from the agency (the notifications 
required under the bill would apparently not apply to past 
agency actions, but we expect that would stop landowners from 
seeking compensation). What would happen after such 
applications are made is uncertain. Although we expect the 
USFWS to reject such claims (because they involve actions taken 
before enactment), each would still require some minimal 
expense to process.
     Once the claims relating to previous USFWS actions have 
been processed and rejected, we expect some landowners would 
probably apply for incidental take permits (which are permits 
to develop any land subject to ESA regulations) to receive a 
rejection that could then form the basis of another request for 
compensation. CBO expects that relatively few landowners would 
employ this strategy, however, because incidental take permits 
are expensive and time consuming for the average small 
landowner to pursue.
     Depending on how quickly claims and permit applications 
arrive and what priority the USFWS gives them, processing 
requests related to previous actions under the ESA would add $3 
million to $7 million annually to the cost of the endangered 
species program over the next few years.
     New Agency Actions: CBO expects that the USFWS would take 
steps to mitigate the effects of its actions to implement the 
ESA on property owners, as mandated by the bill. Nevertheless, 
we expect that the agency would continue to receive a number of 
claims each year, particularly claims involving losses due to 
designation of critical habitat. Whether those claims result in 
the payment of compensation or not, we estimate that processing 
such requests would cost $2 million or $3 million annually.
     Payments of Compensation: H.R. 1142 would establish a new 
cause of action in the ESA for property owners whose property 
is affected by federal regulatory actions. Instead of asserting 
that their property has been taken in violation of the fifth 
amendment of the Constitution (as they must under current law), 
property owners could seek compensation for federal use of 
their property under this new statutory process.
     In addition to this fundamental change, the provisions of 
the bill would change current law in two important ways that 
could affect how property owners seek, and how federal agencies 
pay, compensation. First, the bill would provide an 
administrative forum for seeking compensation as an alternative 
to litigation. Second, the bill would delineate specific 
standards and definitions to be used in determining when and 
what the government owes when its actions affect the use of 
nonfederal property.
     Compensation under Current Law: Under existing law, 
persons who wish to seek compensation for property that they 
believe has been adversely affected by a government action 
usually must do so through litigation--generally in the United 
States Court of Claims.
     The process is time-consuming and expensive. Property 
owners who bring suit in the Claims Court typically wait at 
least two years before their cases are heard. Decisions 
unfavorable to the government have been rare in the past 
because of the high loss thresholds required before the courts 
will award compensation. Property owners who pursue such cases 
can expect the government to appeal unfavorable decisions, 
which often adds years to the process. Because the costs of 
waging a protracted court battle are greater than most property 
owners can afford, relatively few compensation claims are 
brought against the United States (although there has been a 
steady increase in the last decade). Those cases that are 
brought typically involve relatively large claims ($100,000 to 
more than $100 million) and are usually brought by corporations 
or other large property owners. Such claims can require more 
than a decade to resolve. As a result, the few awards that are 
paid often include more for interest and the reimbursement of 
litigation costs than for compensation.
     Compensation under H.R. 1142: The most immediate effects 
of the legislation would stem from the creation of an 
administrative forum for property owners to seek compensation. 
This provision would make it much easier for private property 
owners to seek compensation. Typically, persons affected by 
endangered species regulations are small landowners who often 
cannot afford to sue the federal government or who would not 
expect to receive enough compensation to justify the 
substantial expense of attorneys and experts. Thus, without the 
administrative claims process created by the bill, most of 
these people would not be able to take advantage of the 25-
percent loss threshold or other standards established by the 
bill that might increase a landowner's chance of prevailing 
against the government.
     Creating an administrative forum would affect primarily 
small claims. Although the number of administrative claims 
could be quite large at first, CBO expects that relatively few 
would result in payment because:
           The USFWS would probably reject a large 
        portion of early claims (such as those involving agency 
        actions prior to the bill's enactment) by deeming them 
        to be outside the scope of the bill;
           The agency would probably argue that some 
        actions, such as designations of critical habitat, are 
        not imposed on specific properties and therefore do not 
        cause any real restrictions on the ability to use 
        individual parcels. To seek compensation for such 
        actions, a property owner would then either have to 
        file for an incidental take permit and receive a 
        rejection or sue the USFWS for compensation;
           Many typical USFWS actions, such as 
        regulating the use of pesticides, might not 
        substantially diminish the normal or reasonably 
        expected uses of the property or reduce its value by 25 
        percent or more, or
           The requirements that compensation payments 
        be made from agency appropriations would cause the 
        USFWS to try to resolve as many claims as possible 
        without having to pay any compensation--for example, by 
        reversing or modifying permit decisions or enforcement 
        actions, by processing permit applications more 
        quickly, and by working more closely with landowners to 
        negotiate permit conditions.
    Further, we estimate that any compensation payments 
eventually made through the administrative process would 
involve relatively small amounts (often as little as a few 
thousand dollars), largely because the vast majority of claims 
would likely involve small parcels of land or some minor 
fraction (``affected portion'') of larger tracts. In addition, 
under the bill the government would only be responsible for 
paying the diminution of value, which would most often involve 
very minor amounts, rather than the value of the entire 
affected property (as is usually the case under current law).
    CBO expects that enacting H.R. 1142 also would result in an 
increase in civil litigation, at least in the short run, 
because the new 25-percent loss threshold and other provisions 
would almost certainly induce more property owners to seek 
compensation. Because property owners would first have to 
overcome the costly administrative hurdle of seeking and being 
denied an incidental take permit, most such lawsuits would 
involve larger, more complicated claims (those over $1 
million). Even if the government would ultimately lose more 
lawsuits as a result of the legislation, additional 
compensation costs would probably be minimal in the 2001-2005 
period because claims would take several years to resolve. 
Large claims brought under the bill would still involve many of 
the same factors that prolong litigation under existing law, 
including a lengthy discovery period, court delays, and 
valuation disputes. Moreover, in the early years many new 
claims would likely involve conflicting interpretations of the 
statute that could take a number of years to resolve through 
the judicial process.
    The effect of H.R. 1142 on federal compensation costs in 
later years would depend on the outcome of this process and is 
very difficult to predict. On the one hand, it is likely that 
the legislation would cause property owners to bring--and 
possibly win--more suits than in the past. On the other hand, 
while we expect the USFWS to deny most claims, we cannot 
predict the response of property owners or the courts. Neither 
can we predict how the courts will resolve some of the more 
complicated issues such as those related to the determination 
of critical habitat, diminution in ``normal use,'' or 
valuation. Moreover, the requirement that agencies pay all 
compensation awards, including interest and reimbursement of 
costs, from their operating budgets could have the effect of 
limiting potential costs under this legislation because this 
requirement would encourage the USFWS to avoid actions that 
would cause property owners to seek compensation.
    Pay-as-You-Go Considerations: None.
    Intergovernmental and Private-Sector Impact: H.R. 1142 
contains no intergovernmental or private-sector mandates as 
defined in UMRA and would impose no costs on state, local, or 
tribal governments.
    Estimate Prepared by: Federal Costs: Deborah Reis. Impact 
on State, Local, and Tribal Governments: Marjorie Miller. 
Impact on the Private Sector: Natalie Tawil.
    Estimate Approved by: Peter H. Fontaine, Deputy Assistant 
Director for Budget Analysis.

                    Compliance With Public Law 104-4

    This bill contains no unfunded mandates.

                Preemption of State, Local or Tribal Law

    This bill is not intended to preempt any State, local or 
tribal law.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (new matter is 
printed in italic and existing law in which no change is 
proposed is shown in roman):

            SECTION 19 OF THE ENDANGERED SPECIES ACT OF 1973

                 minimizing impacts on private property

  Sec. 19. (a) In General.--In implementing this Act, the head 
of an agency shall make every possible effort to avoid, 
minimize, or mitigate impacts on non-Federal property that 
result in Federal use of the property as a direct result of the 
action of the agency head under this Act or in furtherance of 
the purposes of this Act. An agency shall not take action that 
results in a Federal use of non-Federal property under this Act 
unless the agency--
          (1) obtains the written permission of its owner;
          (2) negotiates a voluntary agreement authorizing that 
        use; or
          (3) pays compensation in accordance with this 
        section.
  (b) Compensation for Federal Use of Non-Federal Property.--An 
agency that takes action under this Act or in furtherance of 
the purposes of this Act that results in a Federal use of non-
Federal property or any portion of non-Federal property without 
the written consent of the owner of the property shall 
compensate the owner for the fair market value of the Federal 
use of the property or portion. Compensation paid shall reflect 
the duration of the Federal use as necessary to achieve the 
purposes of this Act.
  (c) Request of Owner.--An owner of non-Federal property 
seeking compensation under this section shall make a written 
request for compensation to the agency implementing the agency 
action resulting in the Federal use of property. The request 
shall, at a minimum, identify the affected portion of the 
property, the nature of the Federal use of non-Federal property 
for which the compensation is sought, and the amount of 
compensation sought.
  (d) Negotiations.--The agency may negotiate with the owner to 
reach agreement on the amount of the compensation under this 
section, the terms of any agreement for payment, and the terms 
of any Federal use of non-Federal property for which 
compensation is paid. If such an agreement is reached, the 
agency shall within 6 months pay the owner the amount agreed 
upon. An agreement under this section may include a transfer of 
title or an agreement to limit the period of time of the 
Federal use of non-Federal property.
  (e) Choice of Remedies.--If, not later than 180 days after 
the written request is made, the parties have not reached an 
agreement on compensation, the owner of the property may elect 
binding arbitration or seek compensation due under this section 
in a civil action.
  (f) Arbitration.--The procedures that govern the arbitration 
shall, as nearly as practicable, be those established under 
title 9, United States Code, for arbitration proceedings to 
which that title applies. An award made in such arbitration 
shall include a reasonable attorney's fee and other arbitration 
costs, including appraisal fees. The agency shall promptly pay 
any award made to the owner.
  (g) Civil Actions.--A civil action to enforce this section 
may be filed under section 11(g). An owner who prevails in a 
civil action against the agency pursuant to this section shall 
be entitled to, and the agency shall be liable for, the amount 
of compensation awarded plus reasonable attorney's fees and 
other litigation costs, including appraisal fees. The court 
shall award interest on the amount of any compensation from the 
time of the Federal use of non-Federal property.
  (h) Source of Payments.--Any payment made under this section 
to an owner of property and any judgment obtained by an owner 
of property in a civil action under this section shall, 
notwithstanding any other provision of law, be made from the 
annual appropriation of the agency that took the agency action 
giving rise to the payment or civil action. If the agency 
action resulted from a requirement imposed by another agency, 
then the agency making the payment or satisfying the judgment 
may seek partial or complete reimbursement from the 
appropriated funds of the other agency. For this purpose, the 
head of the agency concerned may transfer or reprogram any 
appropriated funds available to the agency. If insufficient 
funds exist for the payment or to satisfy the judgment, it 
shall be the duty of the head of the agency to seek the 
appropriation of such funds for the next fiscal year.
  (i) Availability of Appropriations.--Notwithstanding any 
other provision of law, any obligation of the United States to 
make any payment under this section shall be subject to the 
availability of appropriations.
  (j) Duty of Notice to Owners.--An agency may not take any 
action that is a Federal use of non-Federal property unless the 
agency has given 30 days notice to each owner of the property 
directly affected explaining their rights under this section 
and either obtaining their permission for the Federal use or 
providing the procedures for obtaining any compensation that 
may be available under this section.
  (k) Rules of Construction.--The following rules of 
construction shall apply to this Act:
          (1) Other rights preserved.--Nothing in this Act 
        shall be construed to limit any right to compensation 
        that exists under the Constitution or under other laws.
          (2) Extent of federal authority.--Payment of 
        compensation under this section (other than when 
        property is bought by the Federal Government at the 
        option of the owner) shall not confer any rights on the 
        Federal Government other than the Federal use of non-
        Federal property agreed to so that the agency action 
        may achieve the species conservation purposes of this 
        Act.
  (l) Definitions.--For the purposes of this section:
          (1) Agency.--The term ``agency'' has the meaning 
        given that term in section 551 of title 5, United 
        States Code.
          (2) Federal use.--(A) The term ``Federal use'' 
        means--
                  (i) any action under this Act to--
                          (I) permanently incorporate non-
                        Federal property into a Federal 
                        facility;
                          (II) place non-Federal property under 
                        the control of the Secretary; or
                          (III) temporarily occupy non-Federal 
                        property in a manner that is adverse to 
                        the constitutional right of the owner 
                        of the property against taking of the 
                        property by the Federal Government; and
                  (ii) any constructive use of non-Federal 
                property.
          (B) In this paragraph the term ``constructive use'' 
        means any action described in subparagraph (C) taken 
        under this Act that results in--
                  (i) substantial diminution in the normal or 
                reasonably expected uses of non-Federal 
                property;
                  (ii) a reduction in the fair market value of 
                non-Federal property of 25 percent or more; or
                  (iii) in the case of the right to receive 
                water, any diminution in the quantity of water 
                received or available for use.
          (C) The actions referred to in subparagraph (B) are 
        the following:
                  (i) The imposition or enforcement of a 
                prohibition of use of non-Federal property the 
                purpose of which is to provide or retain 
                habitat for any species of wildlife or plant 
                determined to be an endangered species or 
                threatened species.
                  (ii) A designation of non-Federal property as 
                critical habitat under this Act.
                  (iii) The denial of a permit under section 10 
                that results in the loss of the ability to use 
                non-Federal property in order to provide 
                habitat for wildlife or plants.
                  (iv) An agency action pursuant to a 
                reasonable and prudent alternative suggested by 
                the Secretary under section 7, that would cause 
                an agency to restrict the use of non-Federal 
                property.
                  (v) The imposition by any governmental entity 
                of a limitation or restriction on an otherwise 
                permissible use of non-Federal property by the 
                owner of the property, as a condition of a 
                Federal agency providing any land, money, 
                permit, or other benefit to the governmental 
                entity, if imposition of the limitation or 
                restriction by the agency directly would 
                constitute a Federal use of non-Federal 
                property under the other provisions of this 
                paragraph, unless the governmental entity has 
                some other legal basis for imposing the 
                limitation or restriction.
          (3) Fair market value.--The term ``fair market 
        value'' means the most probable price at which property 
        or a right to use property would change hands, in a 
        competitive and open market under all conditions 
        requisite to fair sale, between a willing buyer and 
        willing seller, neither being under any compulsion to 
        buy or sell and both having reasonable knowledge of 
        relevant facts, and without regard to the presence of 
        any species protected under this Act. With respect to a 
        right to use property, fair market value shall be 
        determined on or immediately before the exercise of the 
        right.
          (4) Law of the state.--The term ``law of the State'' 
        includes the law of a political subdivision of a State.
          (5) Non-federal property.--The term ``non-Federal 
        property'' means property which is owned by a person 
        other than any Federal entity of government.
          (6) Property.--The term ``property'' means land, an 
        interest in land, the right to use or receive water, 
        and any personal property, as defined under the law of 
        the State.

                            DISSENTING VIEWS

    This is a bill promoted by special interests engaged in a 
backdoor attack on the Endangered Species Act (ESA), and who 
want to rewrite the 5th Amendment to the Constitution to 
require that government pay people to comply with environmental 
laws.
    The bill amends the ESA to require compensation for the 
``federal or constructive use'' of non-federal property in 
furtherance of the requirements of the Act. The legislation 
claims to establish a requirement to compensate private 
property owners when the use of their land is restricted by the 
Endangered Species Act that is as ``equitable as the 
compensation afforded to Federal agencies'' when their land is 
subject to constructive use under Section 4(f) of the 
Department of Transportation Act (DOT) of 1966. In reality, 
this is not the case, as Section 4(f) is not a compensation 
law. Moreover, according to the Department of Justice, while 
this legislation is characterized as a protection of basic 
constitutional property rights under the 5th Amendment, it 
actually establishes a new entitlement program for property 
owners that ignores long-established jurisprudence under the 
5th Amendment and replaces it with an inflexible compensation 
scheme (see attached letter from the Department of Justice for 
more details).
    H.R. 1142: In an effort to appear similar to Section 4(f), 
the bill requires any federal agency that is implementing 
provisions of the ESA to avoid, minimize, or mitigate impacts 
on non-federal property that result in Federal use of the 
property as a direct result of the ``action'' of the agency 
under the ESA or in furtherance of the purposes of the ESA. 
This is where the similarity ends, however, as the bill then 
mandates that an agency shall ``not take an action that results 
in a Federal use of non-Federal property'' under the ESA 
without the voluntary agreement and written permission of the 
property owner or unless the agency pays compensation for the 
fair market value of the ``Federal use of the property or 
portion''. Section 4(f) contains no such mandate.
    Federal use of property is defined as any action to 
permanently incorporate non-Federal property into a Federal 
facility; place non-Federal property under the control of the 
Secretary; or temporarily occupy non-Federal property in a 
manner that is adverse to the constitutional right of the owner 
against taking of property by the federal government; and 
finally any ``constructive use'' of non-Federal property.
    Constructive use is defined as ``actions'' taken by a 
Federal agency on non-Federal property under the ESA to protect 
species, including the imposition or enforcement of a 
prohibition of use of property, the designation of property as 
critical habitat, the denial of an incidental take permit 
(Section 10 permit) to that results in the loss of use of 
property, any agency action under Section 7 (interagency 
consultation section) that causes the agency to restrict the 
use of property, when the action results in substantial 
diminution in the normal or reasonably expected uses of non-
Federal property; a reduction in the fair market values of non-
Federal property of 25% or more; or in the case of the right to 
receive water, any diminution in the quantity of water received 
or available for use.
    Section 4(f) vs. 1142: Section 4(f) of the DOT Act of 1966 
(49 U.S.C. Sec. 303) provides special protection for publicly 
owned parks, recreations areas, wildlife and waterfowl refuges, 
and significant historic sites from the development of 
transportation projects. Under Section 4(f), DOT may approve 
the use of the protected resources for a transportation project 
only if there is no feasible and prudent alternative available 
to the use of the land, and the transportation project includes 
all possible planning to minimize harm resulting from the use. 
Implementation of 4(f) has been interpreted in their 
regulations to apply not only to the acquisition of an interest 
in land, but also to situations where serious impacts result in 
``constructive use'' of land when a transportation project is 
constructed near, but not actually on Section 4(f) lands and 
the proximity of the project may impact the land sufficiently 
to constitute a substantial impairment of the activities, 
features, or attributes of the resource.
    In the case of the Minneapolis-St. Paul airport expansion, 
which the majority uses as an example of why this bill is 
warranted, it was found that the expansion of a runway would 
constitute a ``constructive use'' of an adjoining National 
Wildlife Refuge and that some form of mitigation was required 
pursuant to Section 4(f). However, while a monetary 
compensation agreement was reached in the airport case to fund 
the required mitigation, Section 4(f) does not require, nor 
does it generally provide, monetary compensation in case where 
constructive or other uses are found. H.R. 1142, on the other 
hand, mandates the compensation of private property owners for 
any requirements to protect species under the ESA. In addition, 
the statutory threshold for compensation established in the 
bill is independent of, and contradictory to, the Constitution.
    Constitutional Rights vs. H.R. 1142: H.R. 1142 asserts, 
correctly, that the Federal Government enjoys no right under 
the Constitution, as private property owners do, to 
compensation for use of Federal agency property for other 
federal purposes. In fact, Congress may have afforded some 
measure of protection to certain federal lands under Section 
4(f) because they are not protected by the 5th Amendment, and 
this is the point. The Fifth Amendment of the Constitution 
prohibits the government from taking private property for 
public use without compensation.
    In the 25 year history of the ESA, however, courts have 
decided only four Fifth Amendment ``takings'' cases on the 
merits, all of which found that the ESA did not take private 
property. Moreover, recent Supreme Court decisions have 
established that mere diminution in the value of property (such 
as the 25% threshold set in the bill) resulting from 
regulation, however serious, is insufficient to demonstrate a 
taking. (Concrete Pipe, 508 U.S. at 645). In another unanimous 
ruling, the Court held that ``the requirement of a permit 
before engaging in certain uses of his or her property does not 
itself ``take'' the property in any sense. * * * Moreover, even 
if the permit is denied, there may be other viable uses.'' 
(U.S. v. Riverside Bayview Homes, 474 U.S. 121, 126-127 
(1985)). H.R. 1142, however, would mandate compensation for 
landowners who are denied a Section 10 incidental take permit 
for a specific use of property under the ESA regardless of the 
reason that the permit is denied and despite the fact that 
other uses of the property may be available.
    In addition, recent Supreme Court rulings that have found, 
for the purposes of analyzing whether a taking has occurred, 
the property must be viewed as a whole. Moreover, the Supreme 
Court has not said that the 25% diminution in value (as 
specified in the bill) is the threshold limit to establish a 
taking.
    In fact, rulings such as Lucas v. South Carolina Coastal 
Council (112 S. Ct. 2886 (1992)) would seem to indicate that 
the threshold is much higher (The Court found that ``where 
regulation denies all economically beneficial or productive use 
of land'' a taking has occurred.) Yet, the bill does not 
establish that the whole property must be looked at to 
determine if a diminution in value has occurred. Nor does it 
specify who determines what the loss of value actually is.
    Impacts on agency activities: H.R. 1142 requires that the 
compensation required to be paid to private property owners 
must come from the funds appropriated to the agency. 
Compensation must also be paid before any agency action can go 
forward which contradicts the Supreme Court ruling which found 
that the 5th Amendment does not require compensation be paid in 
advance or even contemporaneously with a taking (Presault v. 
I.C.C., 110 S. Ct. 914 (1990)).
    Given that the Fish and Wildlife Service (FWS) and the 
National Marine Fisheries Service (NMFS) are the agencies with 
primary responsibility for implementing the Act, and given that 
this legislation is so broad in scope that virtually any 
regulation they impose with respect to the ESA would require 
compensation, the majority of payments would come from, and 
cripple, their appropriated budgets.
    Two outcomes are possible. One, the FWS and NMFS will spend 
so much of their appropriated funds compensating property 
owners that they will not have sufficient funds to implement 
the ESA or any of their other mandated responsibilities. While 
this may be the intent of the bill, it could have the 
unintended consequence of penalizing property owners that wish 
to move forward with projects on their land in compliance with 
the law. If no monies are available for consultations or 
granting of Section 10 permits, but they are still required by 
the law, then activities that are conducted without them will 
be in violation of the ESA and subject to civil or criminal 
penalties. Moreover,the Agencies will be unable to fulfill 
their responsibilities related to refuge and fisheries 
management as well as a whole host of other responsibilities.
    The other possibility that was proposed by compensation 
proponents during the debate over S. 605 and other similar 
taking compensation bills in the 104th Congress, is that the 
agencies will simply limit the number of regulations and 
requirements that they promulgate and enforce that would 
necessitate compensation, thereby limiting the amount of 
appropriated funds that will have to be spent for this purpose. 
In other words, the threat of requiring compensation will cause 
agencies to change their behavior. The ability to alter agency 
behavior, however, is dependent upon the flexibility of the 
law, in this case the ESA and the interpretation of that law by 
the courts.
    With respect to the ESA, the requirements for listings, 
consultations, permits, habitat designations, and other 
restrictions are fairly detailed in the law itself, however, so 
the agencies will be required to carry out these measures 
despite the potential for compensation claims that will occur 
as a result of this legislation. In fact, in many cases where 
the FWS has delayed listings, or the designation of critical 
habitat for example, Courts have ruled that the listings and 
designations must go forward when the science dictates their 
necessity. It is unlikely a new requirement for compensation is 
going to alter the Court's interpretation of the requirement of 
the law, or that agencies will be able to significantly alter 
their implementation of the law in such a way as to minimize 
compensation claims.
    Compensation Formula: Finally, the requirement that the 
bill compensate private property owners regardless of their 
investment backed expectations and based on a fair market value 
price that cannot take into account the existence of endangered 
species on the property, contradicts Supreme Court Rulings 
(Penn Central Transportation Co. v. NYC, 438 US 104 (1978)) and 
could likely result in windfall profits at the expense of the 
taxpayer. Under this bill, an individual could purchase 
property, knowing it had endangered species on it and that it 
may have restrictions on development, and pay the price set by 
the market that took into consideration the existence of such 
species. Then, the property owner could seek a permit to 
develop the property, and when such permit was denied, exact 
compensation despite his investment backed expectation. 
Moreover, the ``fair market'' value price that the government 
would be required to pay would be calculated as if no species 
occurred on the property, despite the fact that the price paid 
took this into consideration.
    In short, this legislation, is not intended to protecting 
property owners' constitutional rights, nor is it about 
providing compensation that is ``as equitable as the 
compensation afforded to Federal agencies'' under Section 4(f) 
as the bill claims. Instead, the bill establishes new rights 
and a new basis for compensation that have no relationship to 
the requirements of Section 4(f); rights and compensation that 
are above and beyond what the Supreme Court has ruled are 
warranted under the Constitution; and rights that are not 
enjoyed by private property owners regulated under any other 
law.
    Clearly, the goal of this bill is to tie the hands of the 
Fish and Wildlife Service and other agencies responsible for 
implementing the ESA and ensure they will be unable to do so. 
While responsible ESA reform legislation could and should be 
brought before the House, the Majority has chosen not to do so. 
Instead of developing ESA amendments on which a bipartisan 
consensus could be formed, they have insisted on moving 
divisive, expensive, and controversial bills, such as this one, 
which may score ideological points with a handful of extreme 
constituencies, but will not become law.

                                                     George Miller.

                                
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