Friday, October 5, 2012
Yesterday I noted that the U.S. Supreme Court was set to consider a cert petition in the “exaction” takings case of Koontz v. St. John’s River Water Management District. Today, the Court granted that petition, which the Pacific Legal Foundation had filed on behalf of Coy Koontz this past spring.
The Koontz case raises two important questions: (1) whether the Nollan/Dolan test applies to exactions beyond those that require public occupation of private lands; and (2) whether the Nollan/Dolan test is applicable at the point in time when an exaction is merely proposed. Drawing from several of my earlier posts on Koontz (available here and here), below I will attempt to provide a primer on the facts and the issues at stake.
Local governments routinely attach conditions, or “exactions,” to development permits in an effort to address the environmental and infrastructural impacts of individual projects. However, presumably to protect landowners from exactions that are either unrelated or disproportionate to the problems caused by their proposed development, the U.S. Supreme Court curtailed the exercise of this power in its conveniently rhyming Nollan and Dolan decisions by establishing a constitutional takings framework unique to exaction disputes. Under this peculiar framework, it is the government—as the defendant— who has the burden of proving that the exaction bears both an “essential nexus” to and “rough proportionality” with the development’s impacts.
Here, Mr. Koontz hoped to construct a shopping mall on his 14.2-acre lot, and sought permission from the Water Management District to dredge and fill wetlands within that lot that were part of a designated riparian habitat protection zone. While the Water Management District apparently could have exercised its authority to deny this request, it instead identified several possible exactions that, if accepted by Koontz, could allow for the development to proceed. Koontz, however, refused these proposals, and the government ultimately denied the development request outright. At the appellate level, Koontz prevailed on the theory that the Nollan/Dolan test (1) applies to exactions beyond those that require public occupation of private lands, and (2) is applicable at the point in time when an exaction is merely proposed.
The Florida Supreme Court reversed. On the first issue, the court sided with a considerable majority of the many state and lower federal courts that have addressed the question of whether the Nollan/Dolan test applies to exactions beyond those that require public occupation of private lands by answering this question in the negative. Still, select courts have answered the question in the affirmative, even in the face of arguably contrary dictum in the U.S. Supreme Court’s unanimous opinion in Lingle v. Chevron in 2005.
The second issue seemingly has not been addressed in the lower courts at near the same depth as the first. Nearly all of the many lower court applications of the Nollan/Dolan test have addressed final permit approvals, leaving the Florida Supreme Court with few cases on which to draw. Indeed, prior to Koontz, it appears that in only three instances—one federal district court opinion (William J. Jones Insurance Trust v. City of Fort Smith, 731 F. Supp. 912 (W.D. Ark. 1990)), one federal circuit court opinion (Goss v. City of Little Rock, 151 F.3d 861 (8th Cir. 1998)), and in a decade-old dissent from a denial of certiorari authored by Justice Scalia and joined by Justices Kennedy and Thomas (Lambert v. City & Cnty. of San Francisco, 120 S. Ct. 1549 (2000))—did members of the judiciary assert that a proposed exaction could, in and of itself, implicate the Takings Clause. [There arguably may be select other cases, such as City of Carrollton v. RIHR, Inc. 308 S.W.3d 444 (Tex. App. Dallas 2010), that fit the bill, as well.] Across these cases, the opinions provide thin and contradictory guidance on the complex questions surrounding whether such a novel claim presents a legitimate takings issue.
The Florida Supreme Court ultimately decided in Koontz that proposed exactions are not subject to the Nollan/Dolan test. I found it somewhat surprising that the Court did little to confront the rationale set out in any of the few preceding cases on the topic, even though, of course, none were binding upon it. And it was even more surprising that the Court dedicated only two pages of its opinion to this imposed-versus-proposed issue, and provided little justification for its conclusion. The Court said only that applying the Nollan/Dolan test to proposed exactions would prompt local governments to issue more outright denials “rather than risk the crushing costs of litigation.”
One might contend that applying the same tests to all conceivable exactions, whether they are proposed prior to an outright permit denial or imposed in a final development approval, makes sense. Otherwise, this argument might suggest, property owners would be beholden to the government’s extortionate exaction propositions, lest they side with the empty alternative of an absolute development prohibition. There is an instinctive appeal to the argument (which presumably must be grounded in the quite murky jurisprudence surrounding the “unconstitutional conditions” doctrine) that the denial of an application based on refusal to comply with an exaction demanded by the government is indistinct from a permit conditioned on that exaction. In a brief post on The Volokh Conspiracy this afternoon, Ilya Somin (George Mason) offers support for this type of approach.
However, there are at least three reasons to suggest that the above approach is inapt. First, where a proposed exaction is refused or withdrawn, it seems that no property interest has been "taken" from the applicant that can be protected by the Takings Clause. Second, judicial speculation on hypothetical exactions and their hypothetical economic impacts poses a wholly unmanageable system that could require courts to review countless cases that do not present actual controversies (and, in the process, further complicate the line separating due process and takings review). Third, and arguably most importantly as a matter of legal policy, burdening governmental entities with possible takings liability for statements made during pre-decisional negotiation sessions will place a chilling effect on regulator-landowner coordination.
I expound on the above ideas in this pre-Florida-Supreme-Court article. In addition, Mark Fenster (Florida) authored a very interesting post-Florida-Supreme-Court essay on the topic. Please stay tuned to the Environmental Law Professors Blog for updates on this latest takings case headed to the U.S. Supreme Court.
-Tim Mulvaney (firstname.lastname@example.org)
Thursday, October 4, 2012
Yesterday, the U.S. Supreme Court heard oral argument in just its second takings case of the past seven years, Arkansas Game & Fish Commission v. U.S., which involves the alleged taking of a flowage easement. Tomorrow, the Court will discuss a cert petition in the “exaction” takings case of Koontz v. St. Johns River Water Management District, a petition the Court originally slated for its September 24 conference but re-listed for its October 5 conference. The matters are addressed in turn below.
Arkansas Game & Fish Commission v. U.S.
As discussed in an earlier post here, the first case involves the Arkansas Game & Fish Commission’s allegation that the U.S. Army Corps of Engineers deviated from its original management plan detailing how and when water would be released from the Clearwater Dam on the Black River. In doing so, the Commission asserts that the Army Corps unconstitutionally “took” a property interest—a flowage easement—by temporarily flooding part of the Commission’s wildlife and hunting reserve for more days per year from 1993-1999 than conceived of in the original 1953 water control plan, which, in the process, damaged state-owned bottomland hardwood timber. Reversing a $5.8 million takings award, a 2-1 panel of the U.S. Court of Appeals for the Federal Circuit held that U.S. Supreme Court precedent asserts that only an “actual, permanent invasion of land” rises to the level of a taking, and that temporary injuries are more appropriately addressed under tort law. Interestingly, the Commission, by a 4-3 vote, rejected a $13 million offer from the Obama Administration to settle the matter six weeks prior to oral argument before the U.S. Supreme Court.
Both Ilya Somin on the Volokh Conspiracy and Lawrence Hurley on E&E generally found the Justices sympathetic to the Commission’s position. However, one certainly could argue that Deputy Solicitor General Edwin Kneedler held his own amidst some admittedly difficult questioning. Kneedler explained that the federal government was invited to construct the dam and control water flow because of serious natural flooding and the releases done in the case were performed to protect riverfront farmers. In this sense, given that landowners, of course, are not entitled to takings compensation when their land is naturally flooded, it is difficult to say that they are entitled to compensation for federal acts that are part of a comprehensive plan to control that natural flooding. The oral argument transcript is available here.
Among many other interesting takings issues surrounding this case, a particularly mysterious one involves the lower federal courts' lack of attention to a threshold question in takings suits: is there an interest that should be considered “property” for constitutional takings purposes? The U.S. Supreme Court at least routinely has purported to follow a positivist approach to defining property in takings cases. Under such an approach, it presumably must be relevant whether Arkansas statutory or common law provides the Commission with a protected interest in a certain water flow in the first place, though we will have to wait for the Court's decision to see for sure.
Koontz v. St. Johns River Water Management District
As discussed in an earlier post here, the second case involves a permit applicant who sought to dredge and fill wetlands that were part of a designated riparian habitat protection zone. While the Water Management District presumably could have exercised its authority to deny this request, it instead identified several possible exactions that, if accepted by the applicant, could allow for the development to proceed. The applicant, however, refused these proposals, and the government ultimately denied the development request outright. While the appellate court sided with the applicant on the theory that the government had proposed exactions that amounted to an unconstitutional taking for which compensation is due, the Florida Supreme Court reversed.
Two decades ago, the U.S. declared in Nollan and Dolan that the government—as the defendant— has the burden of proving that a land use exaction bears both an "essential nexus" to and "rough proportionality" with the development’s impacts to avoid takings liability. Koontz raises two questions on which lower courts thus far have splintered: (1) whether the Nollan/Dolan test applies to exactions beyond those that require public occupation of private lands; and (2) whether the Nollan/Dolan test is applicable at the point in time when an exaction is merely proposed.
Over at SCOTUSBlog, John Elwood reports that, as the dust settles from last week’s September 24 Conference (the first and, by far, the longest conference of the Supreme Court's term), Koontz sits as one of just eleven of the many hundred petitions considered at that Conference that the Court re-listed for tomorrow’s October 5 Conference. According to Elwood, such a re-listing “is usually a sign that the Court is taking a closer look at the case.” SCOTUSBlog has not included Koontz on its “Petitions We’re Watching” page, and, of course, the chances of the Supreme Court granting cert in any case are exceedingly small. Nonetheless, many issues surrounding the U.S. Supreme Court’s exaction takings jurisprudence remain outstanding, and it is at least conceivable that Koontz could serve as a vehicle to provide some sense of clarity to the field.
Stay tuned to the Environmental Law Professors Blog for any developments in these important cases.
-Tim Mulvaney (email@example.com)
Tuesday, October 2, 2012
The Indian Supreme Court issued an interesting advisory opinion last week on the question whether the government could allocate natural resources only through auctions. It's answer? No. What makes the opinion important is not only the legal implications, but the time and context--a time when the Indian government's allocation of natural resources, including, most recently, coal blocks, is being questioned. Let me begin with some background to the decision and then explain the opinion of the Supreme Court clarifying the issue.
In Center for Public Interest Litigation and Others v. Union of India, petitioners challenged the Indian government's allocation of 2G spectrum bandwidth to telecom operators on the ground that the government's failure to auction the bandwidth had cost state coffers millions of dollars loss according to a report of the Comptroller Auditor-General of India (CAG) . Specifically, they claimed that by allocating the bandwidth to telecom companies on a first come, first serve basis, the telecom ministry had acted in an arbitrary and non-transparent manner, violated Article 14 of the Indian consitution, which provides for equality before the law, and acted contrary to the public interest. The Supreme Court agreed with the petitioners and held as follows:
1. It recognized that bandwidth was renewable natural resource that was vested in the state or "the people."
2. That under the public trust doctrine, which this court had recognized in earlier cases, the government had a mandate to use and allocate the natural resources in the public interest, and did not have absolute discretion in deciding how to distribute the resources.
3. That under Article 14, the government decision should be based on "sound, transparent, discernable, and well-defined policy."
4. That the administrative procedure and recommendation to issue telecom licenses on a first come, first serve basis was flawed since it enabled anyone with information to receive the bandwidth.
5. That the licenses had to be revoked and re-issued in accordance with consitutional law and other legal requirements.
6. That a "duly publicised auction conducted in a fairly and impartially" was "perhaps" the best way to allocate scarce resources.
7. It therefore ordered the ministry to cancel the licenses and re-allocate them legally.
Following the decision, the new President of India, formerly the Minister of Finance (2009-2012), Pranab Mukherjee, sought advisory opinion to clarify its decision in the 2G spectrum case (discussed above). One of several questions raised was whether an auction was the only way in which the government could allocate natural resources. In Re: Special Reference No. 1 of 2012, the Indian Supreme Court opined as follows, on that question.
1. That the suggestion that auction was "perhaps" the best method to allocate resources was limited to the question on hand in the case, i.e. 2G bandwidth, and extending it beyond would result in nullifying several other laws allocating various natural resources.
2. There was no constitutional mandate under Article 14 to allocate all natural resources by auction.
3. The public trust doctrine could be applied beyond environmental protection cases to the extent that it was enabled "high judicial scrutiny," an issue that could be addressed under Article 14, as well.
4. That the duty equality requirement imposed on the State could not interpreted to mean that under Article 14 the only legal means to allocate natural resources was through an auction.
5. That such an interpretation would imply that revenue maximization (via auction) could be equated to common good, whereas the two could constitute different goals. That distributing natural resources to the highest bidder could run contrary to the common good.
6. That some natural resource use, involving high risk investments would not attract bidders if the only means of allocating them was via auctions. In those cases the government would have to provide incentives to catalyze investment in natural resources.
7. That fear of potential abuse if auction was not a mandated method of allocation was not a legal ground for disallowing other means of distribution.
8. That since the allocation of natural resources was a matter of economic policy, the judiciary did not have the authority to dictate any one means of distribution as the preferred one; "auction as a mode [of distribution] [could not] be conferred the status of a constitutional principle."
9. Nevertheless, policy decisions such as natural resource allocation were subject to Article 14 mandate when alienation for commercial, profit-driven purposes were made in an arbitrary manner.
The opinion of the court is interesting, because it recognizes that the government has the executive prerogative to make appropriate policy decisions in promoting the common good. Perhaps, what is most important is the umbrella it provides to policies that may promote a particular policy good, say the exploitation of a resource. It would certainly be legally indefensible to prescribe any one mode of allocating natural resources. But, the court does not provide in this opinion a means for balancing common good, except to observe that arbitrary decisions will be subject to judicial scrutiny.
In this context, consider the allocation of coal blocks. According to a CAG report, the allocation cost millions of dollars in revenue. Yet, the government contended that such allocation was necessary to help mine coal in some remote areas. To be sure, some reports regarding the potential illegitimacy of the allcoation are yet to be confirmed. Taking available reports on the face value and applying the Supreme Court's interpretation, one could argue that unless the decision of the government was arbitrary, the allocations are legal and that they may well serve the common good even if they do not maximize public wealth.This is an important decision. If the allocation of natural resources are not considered to be a public good from a profit-maximizaiton perspective, especially when they may allocated to private companies that stand to profit from such allocation, how does one define common good?
Monday, October 1, 2012
The natural gas industry has generally supported state regulation of fracturing, as I discussed in a post several weeks ago. Whether one views this as part of a broader "states' rights" approach grounded in federalism theory or a belief that state regulation is adequate and/or less burdensome than a federal approach, its repercussions are beginning to emerge. The New York Times reports that the Cuomo administration has ordered the initiation of a new environmental study of high-volume fracturing in the state, which the Times characterizes as restarting the regulatory process. This follows a lengthy environmental impact statement already prepared by the state's Department of Environmental Conservation. As the Times reports, this is an unusual display of the strength of grassroots action. While it appears that many New Yorkers oppose fracturing (also called fracing, fracking, or hydrofracking), some landowners in the state could make millions from leases. New York's actions, in short, are an unusual example of a state's willingness to fully consider the negative effects of an industrial process that could send large amounts of revenue into the state. Cuomo's action to further delay high-volume fracturing in the state follows an earlier proposal to allow fracturing only in economically-struggling counties near the Pennsylvania border that express support for shale gas development.
New York is not the only state that has taken a more cautious approach to shale gas development and fracturing. As that state looks to Pennsylvania--which has rushed ahead with this development--for potential pitfalls, Maryland and Delaware, too, have expressed concerns. In a letter, Delaware's Governor Jack Markell worried that fracturing regulations proposed by the Delaware River Basin Commission for gas development within its watershed were inadequate, and he indicated that he would vote against them. Maryland, in turn, formed an advisory commission to determine "whether and how gas production from the Marcellus shale in Maryland can be accomplished without unacceptable risks of adverse impacts to public health, safety, the environment and natural resources."
Despite New York's general ability to delay fracturing within its boundaries under its Environmental Quality Review Act, it faces other shale gas-related jurisdictional battles within its territory. A federal judge recently dismissed its complaint against federal members of the Delaware River Basin Commission and agencies associated with that Commission. New York had argued that a federal environmental review under the National Environmental Policy Act was required before the DRBC could finalize its draft regulations for gas development within the watershed. Although New York failed in its efforts to require further environmental study prior to the finalization of these regulations, it is not clear what will happen with the regulations, which require a vote of the Commission's state members (including Delaware, New Jersey, New York, and Pennsylvania) and its federal representative in order to be finalized. The proposed regional regulations rely substantially on the states for implementation, and New York could both oppose the passage of the regulations and, potentially, attempt to resist cooperation with the DRBC if the regulations are finalized. If New York sues the DRBC after its regulations are finalized--as the court suggested it may do--questions about whether to characterize this Commission as "federal" will continue to raise interesting issues regarding the Commission's powers over its member states and the extent to which it must comply with NEPA, if at all.
As shown by Pennsylvania's recent efforts to prevent municipalities from zoning out shale gas development and New York's latest delay of shale gas activity, important federalism issues will continue to dominate this field. These questions will require more careful thinking about state laboratories, a more complete analysis of whether regulatory experimentation in this area will lead to adequate control of the risks, and a better understanding of the boundaries of regional governance within the interstices of federal and state authority.