How Takings Legislation Could Improve Environmental Regulation

The conventional wisdom is wrong: Takings law and environmental regulation are not necessarily mortal adversaries. Clarifying and expanding the rights to compensation for property owners could actually improve environmental regulation, not "gut" it, as many commentators assume.(1) Strengthening rights of financial compensation for owners of property adversely affected by environmental regulation can improve the quality of environmental regulation by "regulating the regulators"--essentially creating incentives for government to design rules more carefully and maximize the environmental benefits of regulatory investments.(2) The second thesis is even more striking and counterintuitive: Stronger protection for property rights also may result in stronger environmental laws and regulations. By spreading the costs of environmental regulation over a larger segment of the population, takings legislation not only could increase distributional fairness but also may reduce political opposition to stronger environmental protection measures.(3) The conclusion that greater attention and sensitivity to the effects of environmental regulation on the rights of property owners could improve environmental protection efforts is based not only on theory(4) and preliminary findings in the empirical literature(5) but also on my experience as General Counsel of the United States Environmental Protection Agency (EPA) from 1989 to 1991.(6) During that period, an Executive Order(7) and the rising political power of the property rights movement(8) forced the EPA to pay more attention to takings considerations. Greater sensitivity to avoiding regulatory takings of private property, however, did not prevent us from pursuing any regulatory targets; rather, greater sensitivity to the effect that our regulations might have on property owners probably improved those regulations, both from an environmental standpoint and in terms of minimizing unnecessary burdens on property owners. Of course, much depends on how particular takings legislation is drafted; I would not support everything in the bills introduced in the 105th Congress.(9) Conceptually, however, legislation would be useful: (1) to require agencies to assess the consequences of their proposed regulatory actions on private property, (2) to clarify the "trigger" for what constitutes a compensable regulatory burden, and (3) to provide at least partial compensation for property owners burdened disproportionately by government regulation, even if the government action falls short of a constitutional taking.(10) The central issue in takings law is distributive justice: To what extent should society impose disproportionate burdens on particular members?(11) The resolution of this issue depends fundamentally on the level of burden that society expects others to bear, but that inquiry is a matter of legislative rather than adjudicative fact;(12) a central reason that the "takings muddle"(13) has proved so intractable in regulatory takings cases is that such questions of comprehensive social accounting cannot be answered well in the context of a single adjudication.(14) It is impossible, for example, for a court to determine as a matter of adjudicative fact whether the burden imposed by prohibiting farming in order to preserve a wetland is disproportionate to that imposed by drafting an eighteen year old into the army. The only immediate way out of the "takings muddle" is for the legislature to establish a compensation "trigger" that defines, at least implicitly, the level of burden that society expects its members to bear without being compensated.(15) Although legislation obviously would not bind the courts in constitutional adjudication, legislative findings as to what level of social burden is expected to be borne without compensation would be relevant to the constitutional inquiry, particularly if the legislative determination were grounded in empirical evidence of the burdens assumed routinely by other members of the community without compensation. …