Regulatory Takings: Implementation of Executive Order on Government Actions Affecting Private Property Use
Released: 2003-10-09T00:00:00

Letter

Background

The just compensation clause of the Fifth Amendment states “nor shall private property be taken for public use, without just compensation.” Initially, this clause applied to the government’s exercise of its power of eminent domain. In eminent domain cases, the government invokes its eminent domain power by filing a condemnation action in court against a property owner to establish that the taking is for a public use or purpose, such as the construction of a road or school, and to have the amount of just compensation due the property owner determined by the court. In such cases, the government takes title to the property, providing the owner just compensation based on the fair market value of the property at the time of taking. In later years, Supreme Court decisions established that regulatory takings are subject to the just compensation clause as well. In contrast to the direct taking associated with eminent domain, regulatory takings arise from the consequences of government regulatory actions that affect private property. In these cases, the government does not take action to condemn the property or offer compensation. Instead, the government effectively takes the property by denying or limiting the owner’s planned use of the property, referred to as an inverse taking. An owner claiming that a government action has effected a taking and that compensation is owed must initiate suit against the government to obtain any compensation due.The court awards just compensation to the owner upon concluding that a taking has occurred.

In 1987, concerned with the number of pending regulatory takings lawsuits and with court decisions seen as increasing the exposure of the federal government to liability for such takings, the President’s Task Force on Regulatory Relief began drafting an executive order to direct executive branch agencies to more carefully consider the takings implications of their proposed regulations or other actions. According to a former Assistant Attorney General, this order was needed to protect public funds by minimizing government intrusion upon private property rights and to budget for the payment of just compensation when such intrusions were inevitable. The President issued this order, EO 12630, on March 15, 1988.

According to the EO, actions subject to its provisions include regulations, proposed regulations, proposed legislation, comments on proposed legislation, or other policy statements that, if implemented or enacted, could cause a taking of private property. Such actions may include rules and regulations that propose or implement licensing, permitting, or other conditions, requirements or limitations on private property use. The EO also enumerates agency actions that are not subject to the order, including the exercise of the power of eminent domain and law enforcement actions involving seizure, for violations of law, of property for forfeiture, or as evidence in criminal proceedings.

Among other things, the EO requires the U.S. Attorney General to issue guidelines to help agencies evaluate the takings implications of their proposed actions, and, as necessary, to update these guidelines to reflect fundamental changes in takings case law resulting from U.S. Supreme Court decisions. The Attorney General issued these guidelines on June 30, 1988, to establish a basic, uniform framework for federal agencies to use in their internal evaluations of the takings implications of administrative, regulatory, and legislative policies and actions. In addition, the guidelines discuss agency responsibilities for implementing the EO and the process for preparing agency-specific supplemental guidelines.

The Attorney General’s guidelines provide that agencies should assess the takings implications of their proposed actions to determine their potential for a compensable taking and that decision makers should consider other viable alternatives, when available, to meet statutorily required objectives while minimizing the potential impact on the public treasury. In cases where alternatives are not available, the potential takings implications are to be noted, such as in a notice of proposed rulemaking. The guidelines also state that takings implication assessments are internal, predecisional management aids and that they are not subject to judicial review. In addition, the form and manner of these assessments are left up to each agency.

The guidelines also include an appendix that provides detailed information regarding some of the case law surrounding consideration of whether a taking has occurred and the extent of any potential just compensation claim. For example, the appendix discusses the Penn Central Transportation Co. v. City of New Yorkcase in which the Supreme Court set out a list of three “influential factors” for determining whether an alleged regulatory taking should be compensated: (1) the economic impact of the government action, (2) the extent to which the government action interfered with reasonable investment-backed expectations, and (3) the “character” of the government action. However, the appendix provides a caveat that it is not intended to be an exhaustive account of relevant case law, adding that the consideration of the potential takings of an action as well as the applicable case law will normally require close consultation between agency program personnel and agency counsel.

In addition to requiring guidelines, the EO requires OMB to ensure that the policies of executive branch agencies are consistent with the EO’s principles, criteria, and requirements. For example, for proposed regulatory actions subject to OMB review, agencies are required to include a discussion summarizing the potential takings implications of these actions in their submissions to OMB. The EO also requires OMB to ensure that all takings awards levied against the agencies are properly accounted for in agencies’ budget submissions.

Despite the existence of the EO, some Members of Congress hold the view that the enforcement of the just compensation clause with respect to regulatory takings is inadequate and that statutory measures are needed to reduce the infringement on private property rights resulting from government regulation and to ensure compensation in the event of such infringement. For example, a variety of legislation has been proposed in Congress over the past 10 years to achieve those goals. In general, according to a study prepared by the Congressional Budget Office, these bills included measures that would (1) increase the requirements for analysis and reporting that federal agencies must meet before making decisions that could restrict the uses of private property, (2) relax the procedural requirements that must be satisfied before a federal court will hear the merits of a takings claim, and (3) require that the budget of an agency whose action triggers a regulatory compensation claim be the source of any compensation awarded. Although property rights advocates have supported these legislative initiatives, others, including some environmental groups, have questioned the need for legislation and voiced the view that the consideration of the takings potential of an agency action should not impede the government’s ability to protect the environment or provide other societal benefits.

Justice Has Not Updated Its 1988 Guidelines, but Has Issued Supplemental Guidelines for Three of the Four Agencies

Justice has not updated the general guidelines that it issued pursuant to the EO in June 1988 for evaluating the risk of and avoiding regulatory takings, but it has issued supplemental guidelines for three of the four agencies. Officials at Justice and two of the four agencies said that changes in takings case law related to Supreme Court decisions made since 1988 have not been significant enough to warrant a revision of the general guidelines. Justice officials also noted that because the guidelines provide a general framework for agencies to follow in implementing the EO, they do not require frequent revision. However, Interior and Agriculture officials said that it would be helpful to their staffs if Justice updated a summary of the key aspects of relevant case law contained in an appendix to the guidelines to reflect significant developments in the past 15 years. Similarly, some law professors and representatives of property rights groups noted that the body of relevant case law has evolved significantly over the past 15 years, requiring an update to the guidelines. Regarding supplemental guidelines, Justice has issued these guidelines for three of the four agencies, but has not done so for Agriculture. According to Justice and Agriculture officials, Agriculture’s supplemental guidelines went through several drafts in the early 1990s, but were never completed because the two agencies disagreed on issues such as how to assess the takings implications of changes in grazing and special use permits. However, Justice and Agriculture officials told us that Agriculture’s compliance with the EO has not been encumbered by the agency’s lack of supplemental guidelines.

Agency Officials and Other Experts Differ on the Need to Update the Guidelines to Reflect Changes in Takings Case Law

Agency officials and other experts differ on the need to update the Attorney General’s guidelines to reflect changes in regulatory takings case law since 1988. Justice officials said the guidelines have not been updated since 1988 because there have been no fundamental changes in regulatory takings case law, the EO’s criterion for an update. They said that the guidelines, as written, still cover the main issues in determining the risk of a regulatory taking and that subsequent Supreme Court decisions have not substantially changed this analysis. For example, these officials said the three-factor test outlined in the 1978 Penn Central case remains the most important guidance for analyzing the potential for a taking that is subject to just compensation. Justice officials also emphasized that the guidelines address only a general framework for agencies’ evaluations of the takings implications of their proposed actions and thus are not intended to be an up-to-date, comprehensive primer on all possible considerations. The guidelines state that the individual agencies must still conduct their own evaluations, including necessary legal research, when assessing the takings potential of a proposed regulation or action.

Two of the four agencies supported Justice’s position that the guidelines do not need to be updated. Officials at the other two agencies expressed the view that an appendix to the guidelines that summarizes key regulatory takings case law should be updated. Regarding agencies that supported Justice’s position, Corps of Engineers staff indicated that based on their review of relevant Supreme Court decisions since 1988, there has been no fundamental change in the criteria for assessing potential takings and thus no update to the Attorney General’s guidelines is necessary. Similarly, EPA staff said that some of the takings cases decided since 1988 gave the appearance that the Court was changing the three-pronged test set out in the Penn Central decision. However, these officials noted that more recent cases have returned to the Penn Central test, thereby removing the need for updating the Attorney General’s guidelines. In contrast, officials at Interior and Agriculture said that it would be helpful if Justice updated the summary of key takings cases contained in an appendix to the guidelines to reflect significant developments in case law over the past 15 years.

Other legal experts also said that the Attorney General’s guidelines should be updated, noting that regulatory takings case law has not remained static over the past 15 years. For example, a Congressional Research Service attorney who has written extensively on the issue of regulatory takings said that the guidelines should be updated to reflect more recent Supreme Court decisions. This attorney noted that while the EO does not define a “fundamental” change regarding the need for an update, a number of important cases have been decided since the guidelines were issued. For example, the attorney pointed to the Lucas v. South Carolina Coastal Council decision of 1992 concerning a state ban on the development of beachfront property. This attorney noted that this case laid out a categorical exception to the Penn Central test for regulations that deny a property owner all economically viable use of the owner’s lands. The attorney stated that Lucas made new law in clarifying when, notwithstanding a denial of all economically viable use, there is no taking.

Similarly, other legal experts concerned with the protection of private property rights said that there have been significant developments in regulatory takings case law since 1988. These experts also cited Lucas and other cases and said that these cases further develop and/or limit the application of the three-pronged test outlined in the Penn Central case. These experts said that the mere passage of time and the sheer number of regulatory takings cases concluded since 1988 argue for updating the guidelines.

In addition, one of these experts, a law professor who has written and lectured on the issue of regulatory takings, said that the level of specificity with which Justice prepared the original guidelines sets a precedent. This expert explained that there have been many important changes in regulatory takings case law since 1988 and that the guidelines should be updated to reflect these changes given the detailed manner in which the original guidelines were prepared.

At the same time, another legal expert, an attorney from an environmental research group, indicated that the guidelines might not require updating. In general, this attorney said that regulatory takings cases concluded since 1988 reaffirm the three-pronged test in the Penn Central case. According to this attorney, the Lucas case was initially thought to be more significant, but more recently it has been read and interpreted more narrowly by the courts and therefore does not constitute a fundamental change in the law.

Appendix II provides a summary of Supreme Court regulatory takings cases decided since 1988 that were cited as being important by officials we contacted or in the relevant literature and that may be appropriate for inclusion in the guidelines.

Justice Has Issued Supplemental Guidelines for Three of the Four Agencies

The Attorney General has issued supplemental guidelines required by the EO for three of the four agencies—the Corps of Engineers, EPA, and Interior. Although several attempts were made to draft supplemental guidelines for Agriculture in the early 1990s, the Attorney General did not finalize and issue these guidelines because of unresolved issues.However, Justice and Agriculture officials indicated that the latter agency’s lack of supplemental guidelines has not hindered its compliance with the EO.

The EO directed the Attorney General, in consultation with each executive branch agency, to issue supplemental guidelines for each agency as appropriate to the specific obligations of that agency. The Attorney General’s guidelines state that the supplement should prescribe implementing procedures that will aid the agency in administering its specific programs under the analytical and procedural framework presented in the EO and the Attorney General’s guidelines, including the preparation of takings implication assessments.

In general, for certain agency actions, the three agencies’ supplemental guidelines include specific categorical exclusions from the EO’s provisions. For example, Interior’s guidelines exclude its nonlegislative actions to which the affected property owners have consented; regulations or permits authorizing the taking, possession, transportation, or use of migratory birds or wildlife; biological opinions issued pursuant to the Endangered Species Act under certain conditions; listings of certain species under the Endangered Species Act; and denial of permits to import species into or export species from the United States. Similarly, the Corps of Engineers’ guidelines exclude its denials “without prejudice” (i.e., the applicant can apply again) of Clean Water Act section 404 permits, because these denials are not considered substantive decisions. In addition, EPA’s guidelines exclude its actions related to the transportation, storage, disposal, registration, distribution, and use of pesticides; protection of public water systems and underground sources of drinking water; control of emissions of air pollutants; disposal of hazardous, solid, and medical waste; and control of actual or threatened releases of hazardous substances or pollutants or contaminants.

The Attorney General has not issued supplemental guidelines for Agriculture because Justice and Agriculture could not reach agreement on how to assess the potential takings implications of the latter agency’s actions related to grazing and special use permits covering applicants’ use of public lands. In this regard, Agriculture officials said that because the agency issues, modifies, or denies literally thousands of grazing and special use permits every year, the agency was concerned about the resource implications of having to do a takings implication assessment in each case. In addition, in Agriculture’s view, the granting of a permit for the use of public lands does not convey “property rights” to the permit recipient, and thus agency actions to condition or deny such a permit do not constitute a potential taking. Accordingly, Agriculture argued that these permit actions should be excluded from the EO’s requirements or, if not, that the agency be allowed to do a generic takings implication assessment that would apply to multiple permits. Agriculture officials indicated that Justice officials did not agree with these suggestions, and the matter was never resolved. According to Agriculture officials, this lack of resolution resulted, in part, because of ongoing litigation against Agriculture alleging a taking related to the agency’s denial of a grazing permit and changing priorities related to the arrival of a new administration in 1993. Despite Agriculture’s lack of supplemental guidelines, agency officials said that their implementation of the EO and the Attorney General’s guidelines has not been encumbered. Justice officials agreed with this assessment.

Implementation of Key Provisions by the Four Agencies Has Changed Over the Life of the Executive Order

Although the EO’s requirements have not been amended or revoked since 1988, the four agencies’ implementation of some of its key provisions has changed over time because of subsequent guidance provided by OMB. For example, the agencies no longer prepare annual compilations of just compensation awards or account for these awards in their budget documents because OMB issued guidance in 1994 advising agencies that this information is no longer required. According to OMB, this information is not needed because the number and amount of these awards is small and the awards are paid from the Department of the Treasury’s Judgment Fund, rather than from the agencies’ appropriations. Each of the four agencies has designated an official—typically the chief counsel, general counsel, or solicitor—to be responsible for ensuring the agency’s compliance with the EO. Finally, the four agencies told us that they fully consider the potential takings implications of their planned regulatory actions, but provided us with limited documentary evidence to support this claim.

Agencies No Longer Prepare and Report Annual Compilations of Just Compensation Awards or Include Information on These Awards in Their Annual Budget Submissions

The EO requires each executive branch agency to submit annually to OMB and Justice an itemized compilation report of all just compensation awards entered against the United States for regulatory takings related to the agencies’ activities. The EO also requires that agencies include information on these awards in their annual budget submissions. However, at present, the agencies are not complying with these provisions because of guidance provided by OMB.

Regarding annual compilations of just compensation awards, OMB first provided guidance on the form and content of compilations in its Circular A-11, issued in June 1988. However, in a subsequent version of this circular issued in July 1994, OMB advised agencies that the submission of this information is no longer necessary. According to OMB officials, this information is not needed because just compensation awards or settlements related to regulatory takings cases do not affect agency budgets but are paid from the Department of the Treasury’s Judgment Fund. Furthermore, OMB and Justice officials said that because the number of just compensation awards and settlements paid by the federal government annually and the total dollar amount of these payments are relatively small, the overall budget implications for the government are small. Hence, these officials said the annual reporting of just compensation awards was unnecessary. OMB officials offered similar reasons for not requiring agencies to include information on just compensation awards in their annual budget documents.

Although OMB no longer requires agencies to comply with these EO provisions, the provisions remain in the EO. However, OMB and Justice officials noted that because the provisions of executive orders are not the equivalent of statutory requirements, not complying with these provisions does not have the same implications. Instead, executive orders are policy tools for the executive branch and are subject to changing interpretation and emphasis with each new administration. Furthermore, these officials said that the relative lack of regulatory takings cases and associated just compensation awards each year is an indication that the EO has succeeded in raising agencies’ awareness of the need to carefully consider the potential takings implications of their actions, even if subsequent OMB guidance has excused the agencies from some of the EO’s provisions.

The Four Agencies Have Designated Officials to Ensure the Agencies’ Implementation of the EO

Each of the four agencies has designated an official to be responsible for ensuring that the agency’s actions comply with the EO’s requirements. In general, the responsible official at each agency is the agency’s senior legal official. EPA’s and Interior’s supplemental guidelines specifically identify the designated official by title. Concerning Agriculture and the Corps of Engineers, we did not find written evidence of this designation, although agency officials assured us that their senior legal official fulfilled this role. Justice officials indicated that the designated official at each of the four agencies is effectively performing the compliance assurance and liaison functions required by the EO. However, as a practical matter, staff attorneys, in consultation with relevant program officials, determine the potential takings implications of an agency’s planned actions.

Agencies Report That They Fully Consider the Takings Implications of Their Planned Actions but Provided Little Evidence to Support This Claim

The four agencies said that they fully consider the potential takings implications of their planned regulatory actions, but provided us with limited documentary evidence to support this claim. Officials at each of the four agencies indicated that the requirements of the EO and the provisions of the Attorney General’s guidelines primarily guide their consideration of the takings potential of agency actions. Officials at the Corps of Engineers, EPA, and Interior also cited the Attorney General’s supplemental guidelines for each agency as being important, particularly for identifying agency-specific exclusions to the EO’s provisions. For example, EPA officials indicated that their agency performs relatively few takings implication assessments because most of its actions are excluded from the provisions of the EO, as enumerated in its guidelines. These officials explained that EPA’s program responsibilities generally do not include land management, and in past lawsuits alleging regulatory takings that involved EPA, another federal agency usually took the action giving rise to the takings claim, and EPA typically served as an advisor or consultant to that agency.

Officials at three of the agencies—Agriculture, the Corps of Engineers, and Interior—also said that their agency has provided relevant internal guidance. For example, an Agriculture internal regulation on rulemaking requires implementation of the EO, including the preparation of takings implication assessments, as appropriate. Similarly, the Corps’ Chief Counsel issued internal guidance in a memo that addresses legal analyses and takings implication assessments related to wetland and other permit decisions. For Interior, the agency’s departmental manual requires that it assess the potential takings implications of planned rulemakings before they are published in the Federal Register.

Agencies provided us a few written examples of takings implication assessments. Agency officials said that these assessments are not always documented in writing, and, because of the passage of time, those assessments that were put in writing may no longer be on file. They also noted that these assessments are internal, predecisional documents that generally are not subject to the Freedom of Information Act or judicial review; thus they are not typically retained in a central file for a rulemaking or other decision, and therefore they are difficult to locate. For example, the Corps of Engineer’s internal guidance memo states that takings implication assessments should be removed from the related administrative file once the agency has concluded a decision on a permit.

In addition, agency officials also noted that they do not maintain a master file of all takings implication assessments. For example, in many cases, attorneys assigned to field offices conduct these assessments. In these cases, agency officials said that headquarters staff may not have copies. Nevertheless, with the exception of EPA, each agency provided us with some examples of written takings implication assessments. These assessments varied in form and the level of detail included.

We also had difficulty independently verifying the four agencies’ preparation of takings implication assessments from the information contained in Federal Register notices related to their proposed and final rulemakings. Specifically, 375 notices mentioned the EO in 1989, 1997, and 2002, but relatively few provided an indication as to whether a takings implication assessment was done. Most of these rules included only a simple statement that the EO was considered and, in general, that there were no significant takings implications. In contrast, 50 specified that an assessment of the rule’s potential for takings implications was prepared, and of these, 10 noted that the rule had the potential for “significant” takings implications. Table 1 summarizes this information. In addition, appendix III provides more detailed information on these rules.

Given the limited amount of information available from the agencies or available from the Federal Register notices we reviewed, we could not fully assess the extent to which the EO’s requirements were fully considered by the agencies.

Few Awards of Just Compensation Were Made Against the Four Agencies for Takings Cases Concluded during Fiscal Years 2000 through 2002

According to Justice data, 44 regulatory takings cases brought against the four agencies were concluded during fiscal years 2000 through 2002. Of these cases, the courts decided in favor of the plaintiff in 2 cases, resulting in awards of just compensation totaling about $4.2 million. The Justice Department settled in 12 other cases, providing total payments of about $32.3 million. Of these 14 cases with awards or settlements payments, 10 related to actions of Interior, 3 to actions of the Corps of Engineers, and 1 to an action of Agriculture. However, the EO’s requirements for assessing the takings implications of planned regulatory actions applied to only 3 of these 14 cases. For the other 11 cases, the associated regulatory action either predated the EO’s issuance or the matter at hand was otherwise excluded from the EO’s provisions. Based on available evidence, we found that the relevant agency assessed the takings potential of its action in only 1 of the 3 cases subject to the EO’s requirements. As of the end of fiscal year 2002, Justice reported that 54 additional regulatory takings cases involving the four agencies were pending resolution.

Fourteen Takings Cases Concluded during Fiscal Years 2000 through 2002 Ended with Awards of Just Compensation or Settlement Payments

Fourteen of 44 regulatory takings cases involving the four agencies and concluded during fiscal years 2000 through 2002 resulted in government payments, according to Justice data. The U.S. Court of Federal Claims awarded payment of just compensation in 2 cases for a sum totaling about $4.2 million. Justice settled the remaining 12 cases, for a sum totaling about $32.3 million.In general, the cases settled were concluded with compromise agreements, including stipulated dismissals or settlement agreements, reached among the litigants and approved by the applicable court. In these cases, the agreement usually provides that the parties have agreed to end the case with a payment to the plaintiff, but no finding that a taking occurred. For example, in one case concluded in 2001 that alleged a taking of an oil and gas lease on federal land managed by Interior’s Bureau of Land Management, the litigants negotiated a stipulated dismissal that provided that a payment of $3 million be made to the plaintiffs. This payment was to cover all claims made by the plaintiffs in the case. However, the stipulated dismissal also provided that the final outcome should not be construed as an admission of liability by the United States government for a regulatory taking. In addition, the dismissal required that the plaintiffs surrender their interests in a portion of the lease. In the 2 cases with award payments, the court concluded that a taking had occurred and thus it awarded just compensation.

Of these 14 cases with awards or settlement payments, the 10 Interior cases generally dealt with permits related to mining claims on federal lands managed by that agency or matters related to granting access on public lands. For example, one case involving mining claims resulted in the plaintiff receiving a settlement of almost $4 million. In another case, involving the denial of preferred access to a lake on land managed by the agency, the plaintiff received a settlement of $100,000. The three Corps’ cases generally related to its denial or issuance with conditions of wetlands permits for private property. One of these cases, concerning the filling of a wetland in Florida, resulted in a settlement payment of $21 million, accounting for more than half of the total compensation awards and settlement payments related to the 14 cases. The single Agriculture case concerned the title to mineral rights in a national forest managed by the agency. The plaintiff received an award of $353,000 in this case. Table 2 provides a breakout by agency on the number of cases and the amount of the award or settlement involved. In addition, appendix IV provides detailed descriptions of the particulars for each case.

In addition to the cases concluded during fiscal years 2000 through 2002, Justice reported that an additional 54 regulatory takings cases involving the four agencies were still pending resolution at the end of fiscal year 2002.

Only Three of the Takings Cases Concluded with Awards of Just Compensation or Settlement Payments Were Subject to the EO

Based on information provided by the four agencies, only 3 of the 14 cases with payments were subject to the EO’s requirement to conduct a regulatory takings implication assessment. For the other 11 cases, the agency action involved either predated the EO’s issuance or was otherwise excluded from the EO’s requirements.

Of the three cases subject to the EO’s requirements, we found evidence that a regulatory takings implication assessment had been done in only one instance. In that case, the Corps of Engineers denied a wetlands permit sought by the plaintiff to fill wetlands on the plaintiff’s property in order to develop a commercial medical center. The plaintiff brought suit alleging a compensable taking had occurred. In its takings implication assessment, the Corps had concluded that the permit denial did not constitute a taking because the applicant was still free to use the property for other purposes that did not involve filling the wetland. Therefore, the Corps concluded that the permit denial did not deprive the plaintiff of all viable economic use of the property. However, the case ended with a stipulated dismissal and a payment of $880,000 to the plaintiff.

Agency Comments and Our Evaluation

We provided a draft of this report to Agriculture, the Corps of Engineers, EPA, Interior, Justice, and OMB for review and comment. With the exception of OMB, the agencies provided us with technical corrections and editorial comments that we have incorporated as appropriate. OMB indicated that it did not have any comments on the draft. In addition, two of the agencies, Agriculture and EPA, provided an overall reaction to the report. Agriculture indicated that the report provides a thorough and reasonable review of the issues regarding the EO’s implementation and that the agency does not disagree with the information presented. Similarly, EPA indicated that it generally agreed with the information provided in the report.

As agreed with your office, unless you publicly announce its contents earlier, we plan no further distribution of this report until 30 days after the date of this letter. We will send copies of this report to the Attorney General; the Secretary of Agriculture; the Secretary of the Army; the Administrator, Environmental Protection Agency; the Secretary of the Interior; the Director, Office of Management and Budget; and interested congressional committees. We will make copies available to others upon request. In addition, the report will be available at no charge on the GAO Web site at http://www.gao.gov.

If you have any questions concerning this report, I can be reached at 202- 512-3841 or mittala@gao.gov. Major contributors to this report are listed in appendix V.

Objectives, Scope, and Methodology

The Chairman of the House Subcommittee on the Constitution, Committee on the Judiciary, asked us to provide information on measures taken by the Department of Justice to implement certain provisions of Executive Order 12630 (EO) regarding regulatory takings of private property and the efforts of four agencies—the Department of Agriculture, U.S. Army Corps of Engineers, Environmental Protection Agency, and the Department of the Interior—to comply with the requirements of the EO. Specifically, the Chairman asked us to examine the extent to which (1) Justice has updated its guidelines to implement the EO to reflect changes in case law and issued supplemental guidelines for the four agencies, (2) the four agencies have complied with the specific provisions of the EO, and (3) awards of just compensation have been assessed against the four agencies by the courts for regulatory takings in recent years and, in these cases, whether the agencies assessed the potential takings implications of their actions before implementing them.

To report on the extent to which Justice has updated its guidelines and issued supplemental guidance for the four agencies, we obtained copies of these documents and interviewed knowledgeable agency officials. At Justice, these officials included attorneys in the agency’s Environment and Natural Resources Division. At the four agencies, these officials included attorneys in each agency’s legal office (i.e., Office of the Chief Counsel, General Counsel, or Solicitor). We also discussed these matters with officials of the Office and Management and Budget’s Office of Information and Regulatory Affairs. In addition, we conducted legal research and sought the opinions and reviewed the publications of other relevant individuals at the Congressional Research Service; private property rights groups, including the Defenders of Property Rights; environmental groups, including the Georgetown Environmental Law and Policy Institute; and law schools, as to whether changes in takings case law since 1988 warrant revisions to the guidelines. In the course of this work, we identified and summarized key regulatory takings cases heard before the Supreme Court that have been concluded since 1988. Our work may not have identified all such cases. Furthermore, we do not take a position as to whether these cases, individually or collectively, constitute a fundamental change in the body of regulatory takings case law that would trigger the need to update Justice’s guidelines.

To determine the extent of the four agencies’ compliance with specific provisions of the EO, we interviewed knowledgeable officials in the legal offices of these agencies and reviewed the documents they provided. These documents included written takings implication assessments of the takings potential of proposed regulatory actions. At each agency we requested examples of these assessments, although we did not ask the agencies to conduct an exhaustive search of their records for these assessments because the agencies generally expressed concerns about the time and resources such a search could require. In addition, the agencies indicated that assessments are not always written or, if written, are not always retained in official files. During the course of our work, we also asked for copies of written assessments associated with specific regulatory takings cases that were concluded with either a settlement or just compensation payment. In addition, we obtained copies of some additional takings implication assessments from Federal Register notices.

Furthermore, regarding the agencies’ compliance with specific provisions of the EO, we interviewed Justice and OMB Officials, as appropriate. We also reviewed OMB’s Circular A-11, Preparation and Submission of Budget Estimates, and discussed with OMB officials how the guidance in that circular has changed over time and affected the four agencies’ compliance with the EO. In addition, we reviewed 375 Federal Register notices of proposed and final regulatory actions published in 1989, 1997, and 2002 relating to the four agencies and referencing the EO to determine if and how the agencies documented their compliance with the EO. These years were selected judgmentally: 1989 represents the first full year under the EO, 1997 represents an intermediate year, and 2002 represents the most recent full year. These years also provide 1 year’s experience under each of the past three presidential administrations.

Finally, regarding awards of just compensation made against the agencies and, in these cases, whether the agencies had assessed the takings potential of their actions, we obtained from Justice a list of all takings cases related to the four agencies that were concluded during fiscal years 2000 through 2002. We initially sought this type of data for the full 15-year period since the EO’s issuance, but Justice officials indicated that the full set of data was not readily available and would be very labor intensive to provide. We then discussed these cases with relevant officials at the four agencies and analyzed documents they provided. In particular, we focused on cases in which just compensation awards or settlement payments were made, and, for these cases, whether the agencies had assessed the potential takings implications of their actions before implementing them. We also discussed the cases with the Clerk of the U.S. Court of Federal Claims and officials responsible for administering the Department of the Treasury’s Judgment Fund and reviewed documents they provided, in part, to verify the information on the cases with just compensation awards or settlement payments.

We conducted our work between October 2002 and September 2003 in accordance with generally accepted government auditing standards.

Summary of Significant Supreme Court Regulatory Takings Cases

This appendix summarizes regulatory takings cases decided by the U.S. Supreme Court since 1988, the year the EO was issued and the Attorney General promulgated guidelines related to the EO. These cases were cited as being important to the body of relevant case law by legal experts in our interviews with them or in various written products they prepared, including books, law review articles, reports, papers, speeches, or testimonies. The cases discussed are not intended to be an exhaustive list of all such cases. In addition, the appendix discusses certain cases that were decided prior to 1988 because they are referenced in some of the more recent cases discussed below or are cited elsewhere in this report.

Cases Decided After 1988

Tahoe-Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency, 535 U.S. 302 (2002)

Issue: Were two moratoria imposed by the Lake Tahoe Regional Planning Agency compensable takings?

Background: The Tahoe Regional Planning Agency issued two ordinances prohibiting all development on vacant lots within residential subdivisions in the Lake Tahoe Basin for a period of 32 months. A group of about 400 individual owners brought suit contending that the ordinances constituted compensable takings. (Subsequent to the landowners bringing suit in 1984, development moratoria continued to prohibit use of many of the parcels; however, the Supreme Court was only asked to address the 32- month moratoria.)

Decision: The Supreme Court held that the temporary moratorium on development was not a per se or categorical taking. Instead, the question of whether the Takings Clause of the Fifth Amendment requires compensation when the government enacts a temporary regulation denying a property owner any economic use of his property is to be decided by applying the factors of Penn Central rather than any categorical rule. The Court also stated that First English Evangelical Lutheran Church v. County of Los Angeles (discussed below) concerned the question of whether compensation is an appropriate remedy for a temporary taking, not whether or when such a taking has occurred.

Palazzolo v. Rhode Island, 533 U.S. 606 (2001)

Issue: Did state denials rejecting developer’s proposals to fill in or build on all or most of a lot, principally consisting of wetlands, cause a taking?

Background: A landowner made several applications to the state for a permit to fill 11 acres of wetlands, build 74 houses, or construct a private beach club. The state denied these applications, but informed him that he would be allowed to build at least one house on the property. The landowner estimated that the limitations imposed by the state equated to a 94 percent diminution in value of the property and brought suit, arguing for an extension of the Lucas v. South Carolina Coastal Council (Lucas) test (discussed below) to his situation.

Decision: The Supreme Court rejected extending Lucas to a situation where there had been less than a complete denial of the economically viable use of the property. The Court noted that the ability to build a house on the property was of significant worth. The Court remanded the case back to state court for evaluation under the Penn Central test. The Court also ruled that the acquisition of title after the effective date of the regulation that was the basis for the regulatory takings claim did not bar the claim.

City of Monterey v. Del Monte Dunes at Monterey, Ltd., 526 U.S. 687 (1999)

Issues: Was it proper to submit the determination of a city’s liability for a regulatory taking to a jury and did the rough-proportionality standard of Dolan v. City of Tigard (Dolan) (discussed below) apply to challenges based on denial of development?

Background: Del Monte Dunes and its predecessor landowner sought to develop an oceanfront parcel of land within the jurisdiction of the city of Monterey. The city, in a series of repeated rejections, denied proposals to develop the property, each time imposing more rigorous demands on the developers. The property owner brought a civil rights suit against the city alleging, among other things, that the rejections had effected a regulatory taking. The case was tried before a jury, which ruled in favor of Del Monte Dunes.

Decision: The Supreme Court ruled that the issues of whether the city’s repeated rejections of the property owner’s development proposals deprived the owner of all economically viable use of the owner’s property and whether the city’s decision to reject Del Monte Dunes’ development plan was reasonably related to a legitimate public purpose were factual questions for a jury to resolve. The Court also stated that the “rough proportionality” standard of Dolan did not apply. Dolan dealt with situations in which land-use decisions condition approval of development on the dedication of property to public use. The Court held that Dolan did not apply to the present case in which the landowner’s challenge was based on denial of development.

Suitum v. Tahoe Regional Planning Agency, 520 U.S. 725 (1997)

Issue: Was a landowner’s regulatory taking claim ripe for adjudication?

Background: A landowner claimed that the Tahoe Regional Planning Agency committed a regulatory taking when it determined that the landowner’s undeveloped residential lot near Lake Tahoe was ineligible for development. However, the planning agency had indicated that the landowner was entitled to receive certain “Transferable Development Rights” that she could sell to other landowners with the agency’s approval. The landowner did not seek those rights but instead brought an action for just compensation for the agency’s alleged taking of her property. In response, the planning agency claimed that the landowner’s takings claim was not ripe because she failed to apply to transfer her development rights, and thus, the amount of her takings claim could not be determined.

Decision: The Supreme Court ruled that the planning agency had made a final decision in determining that the landowner’s property was ineligible for development, and thus, her claim was ripe for adjudication. The Court reasoned that the valuation of the landowner’s transfer rights is simply an issue of fact about possible market prices and went to the issue of how much just compensation was owed, not whether there had been a taking. The Court discussed Agins v. City of Tiburon (discussed below), in which it held that because the owners who were challenging ordinances restricting the number of houses they could build on their property had not submitted a plan for development of their property, there was no concrete controversy regarding the application of the specific zoning provisions.

Dolan v. City of Tigard, 512 U.S. 374 (1994)

Issue: The Court stated that it granted certiorari to resolve a question left open by its decision in Nollan v. California Coastal Commission (discussed below): What is the required degree of connection between the exactions imposed by the city and the projected impacts of the proposed development?

Background: A landowner applied to the city of Tigard for a permit to redevelop her plumbing and electrical supply store site. As a condition of granting the landowner’s permit application, the city required the landowner to dedicate a portion of her property as a public greenway to minimize flooding and to dedicate an additional portion of her land as a pedestrian/bicycle pathway to reduce traffic congestion, in accordance with the city’s land use plan. The landowner challenged the dedication requirements on the grounds that they were not related to the proposed development and, therefore, constituted an uncompensated taking of her property under the Fifth Amendment.

Decision: The Supreme Court found that preventing flooding and reducing traffic congestion were legitimate public purposes and that there was a nexus between the conditions imposed by the city and these purposes. The Supreme Court then applied a “rough proportionality” test, stating that the city has the burden of establishing the constitutionality of its conditions by making an “individualized determination” that the conditions in question were proportional to the stated purposes. The Court ruled that the city’s dedication requirements constituted an uncompensated taking of the landowner’s property because the city had failed to show either the need for a public, as opposed to a private, greenway or that the additional number of vehicle and bicycle trips generated by the proposed development was reasonably related to the city’s requirement for a dedicated pedestrian/bicycle path.

Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992)

Issue: Is a government regulation of land that completely eliminates its economic use a compensable taking?

Background: A landowner bought two residential lots on a South Carolina barrier island, intending to build single-family homes. Subsequently, the state enacted a statute that barred him from erecting permanent habitable structures on the land. The landowner filed suit in state court, claiming that the law caused a taking of his property without just compensation. The South Carolina trial court found that the statute rendered the landowner’s parcel valueless, and awarded compensation. The South Carolina Supreme Court reversed the award of compensation, holding that, under previous U.S. Supreme Court cases, when a regulation is designed to prevent “harmful or noxious uses” of property akin to public nuisances, no compensation was due the landowner, regardless of the regulation’s effect on the property’s value.

Decision: The Court reversed the South Carolina Supreme Court’s decision, ruling that the state court erred in applying the “harmful or noxious” uses principle to decide this case. The Court stated that regulations that deny the property owner all “economically viable uses of his land” constitutes a per se, or categorical, regulatory taking that requires compensation, without inquiring into the public interest advanced in support of the restraint. However, the Court also noted that no taking has occurred if the state law simply makes explicit the limitations on land ownership already existing as a result of the background principles of a state’s law of property and nuisance. The Supreme Court remanded the case for the South Carolina court to determine whether these principles would have prohibited the landowner from building on his property.

Cases Decided Before 1988

Nollan v. California Coastal Commission, 483 U.S. 825 (1987)

Issue: Was there a nexus between the condition on the requested permit and a legitimate state government purpose of protecting the public view of a beach?

Background: The California Coastal Commission demanded a lateral public easement across the Nollans’ beachfront lot in exchange for a permit to demolish an existing bungalow and replace it with a three-bedroom house. The public easement was designed to connect two public beaches that were separated by the Nollan property. The Coastal Commission had asserted that the public easement condition was imposed to promote the legitimate state interest of diminishing the “blockage of the view of the ocean” caused by construction of the larger house.

Decision: The Court found that there had been a taking, as it found no “essential nexus” between the government’s purpose and its condition on construction that required the property owners to grant an easement allowing the public access to their beachfront. The Court ruled that while the Coastal Commission could have required that the Nollans provide a viewing spot on their property for passersby, there was no nexus between visual access to the ocean and a permit condition requiring lateral public access along the Nollans’ beachfront lot.

First English Evangelical Lutheran Church v. County of Los Angeles, 482 U.S. 304 (1987)

Issue: Did an interim ordinance prohibiting construction of any structures in a flood zone cause a temporary taking of property requiring compensation?

Background: A church purchased a 21-acre parcel of land located in a canyon along the banks of a river that is a natural drainage channel for a watershed area. The church operated a campground on the site. Flooding destroyed the campground and its buildings. In response to the flooding of the canyon, the County of Los Angeles adopted an interim ordinance that prohibited construction in an interim flood protection area, including the site on which the campground had stood. The church filed suit, seeking just compensation for loss of the use of the campground.

Decision: The Court ruled that even if a regulation that has been found to result in a taking is repealed or invalidated the government must pay just compensation for the interim period that the regulation was in effect.

Agins v. City of Tiburon, 447 U.S. 255 (1980)

Issue: Did a zoning ordinance limiting the number of houses that landowners could build on their property cause a taking?

Background: The landowners acquired 5 acres of unimproved land for residential development in Tiburon, California. Subsequently, the city adopted two ordinances that modified existing zoning requirements. The density restrictions under the ordinances permitted the landowners to build between one and five single-family residences on their 5-acre tract. The landowners did not seek approval to develop their land, and instead brought suit for just compensation. The complaint alleged that their land had greater value than other suburban property in California due to the scenic views, and that the ordinances destroyed the value of their property.

Decision: The Court held that the zoning ordinance on its face did not cause a taking. The court stated that the ordinance was rationally related to the legitimate public goal of open-space preservation, the ordinance benefits property owners as well as the public, and the landowners may still be able to build up to five houses on a lot. The Court also found that because the landowners had not submitted a plan for development of their property, there was no concrete controversy regarding the application of the specific zoning provisions.

Penn Central Transportation Co. v. City of New York, 438 U.S. 104 (1978)

Issue: Did the city’s use of a historic preservation ordinance to block construction of an office tower atop a designated historic landmark cause a taking?

Background: The Landmark Preservation Commission denied Penn Central permission to build a multistory office building above Grand Central Station in New York City. Penn Central alleged the regulation took its property.

Decision: The Court ruled that there had been no taking of property. In evaluating the case, the Court set forth a three-pronged test for determining whether a government regulation has resulted in a taking: (1) the character of the governmental actions; (2) the economic impact of the action on the property owner; and (3) the extent to which the regulation has interfered with the distinct, investment-backed expectations of the owner.

Pennsylvania Coal Co. v. Mahon, 260 U.S. 393 (1922)

Issue: Did a state law barring coal mining that might cause subsidence of overlying land result in a taking of private property in a case where the mineral estate owner is different from the surface estate owner?

Background: A coal company conveyed the surface ownership of its property and retained the right to remove coal from the subsurface. Subsequently, a state law was enacted, forbidding the mining of coal in such a way as to cause the subsidence of housing in situations where the surface and subsurface ownership belong to different parties. As a result, the coal company was unable to exercise its right to remove the coal.

Decision: The Court held that a taking occurred. The Court stated “while property may be regulated to a certain extent, if regulation goes too far it will be recognized as a taking.” The Court reasoned that the extent of the taking under the state law—abolishing the right to mine coal, which it deemed “a very valuable estate”—was great. Moreover, because the state law applied only where surface and subsurface land is in different ownership, it benefits a narrow private interest rather than a broad public one.

GAO Contacts and Staff Acknowledgments

GAO Contacts

Acknowledgments

In addition to the individuals named above, Doreen S. Feldman, James K. McDowell, Jonathan S. McMurray, John P. Scott, and Timothy W. Wexler made key contributions to this report. Kathleen A. Gilhooly and Lisa M. Wilson also made important contributions.

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