Andy Kerr - Regulatory Takings: Legally Justified but a Political Disaster

By Andy Kerr

I really don't know why I was selected for this symposium. I'm not a lawyer; in fact I'm a college dropout. (I have this death pact with a friend. If either of us ever goes to law school, the other one has to kill him.) Don't get me wrong, some of my best friends are lawyers. My organization has between 15-20 lawsuits going at any one time. The Oregon Natural Resources Council is really just a law and order organization trying to make federal agencies comply with the law.

I'm a political hack. I think and act strategically to achieve the environmental objectives of my organization's members. I only work within the law. I try to change laws and I try to enforce laws against federal agencies when they won't comply. I want to talk more in political realities than legal distinctions.

Politically, suing a government agency for its own failure to obey the law and suing a government agency for failing to enforce the law against a private party are quite different matters. Most people don't like the government anyway, but Americans feel strongly about private property rights. They also feel equally strong about protecting and restoring the environment. Developers want to cast regulatory takings issues as antithetical to private property rights. Environmentalists want to cast them as governmental restraint of private actions antithetical to the public good.

While I believe that private property rights are intertwined with equal amounts of private social responsibility, I'm not going to argue that here. If you don't think that government can regulate activities on private lands for the common good, then you aren't a member of society and we have nothing to discuss.

Politically, I'm critical of the environmental community for its over reliance on regulation to meet desirable social objectives.

When Lucas v. South Carolina was pending before the Supreme Court, many of my colleagues retreated to the fine points of the law, many of which have been discussed today by my fellow panelists. My point to them then and to you now is that environmentalists should assume that we are going to lose this issue of regulatory takings. Not that we shouldn't fight like hell in the legal system, but that the trend of the Court is against us and we had damn well better have a Plan B.

Let me use wetlands on private lands as an example. Wetlands provide many "ecosystem services" that society would rightly want to protect—from the provision of wildlife habitat to the purification of water to the prevention or amelioration of flooding. Society basically has four ways to protect wetlands: 1) Acquisition, 2) Regulation, 3) Incentives, and 4) Disincentives. Let's examine them.

1. Acquisition. I like this method the best. Not only does the public have full control and use of the wetland resources, but wetland advocates don't then have ready detractors in the form of landowners who can't do what they please with the land. There is also the rather politically compelling argument that if the public wants certain lands to be used in certain ways to the benefit of the public, rather than the benefit of the private owner, then the public ought to bear the cost.

The downsides to acquisition are financial cost and political opposition. I think both can be overcome. I'll explain how later.

2. Regulation. I like this method the least. Even if it is constitutional, it doesn't work very well. Environmentalists have been too focused on this one method of wetland protection. It has the following downsides:

a. It doesn't work well. Eternal vigilance is required to watch the developers and monitor the regulators. Lots of wetland degrading activities can still be done despite existing regulations.

b. It causes significant political opposition. Landowners get quite annoyed and have political appeal to the majority in this nation who strongly support private property rights. Yes, I know that strong majorities also support protection of the environment. The public doesn't have to be consistent and private property rights and public environmental rights are not inherently incompatible. It is my policy not to make someone mad for no reason. I believe regulation is doing just that.

Let me tell you about "Farmer Dapp." He wasn't a farmer, but the exploiters tried to make him out to be. He was a developer who owned some of the last unplowed Willamette Valley Bottomland. The Oregon Department of Land Conservation and Development sought to protect it under the state land use planning law pertaining to natural areas. The US Army Corps of Engineers tried under Section 404 of the Clean Water Act. The Oregon Division of State Lands tried under the state removal/fill law. All failed. Farmer Dapp simply went out and bulldozed off the native vegetation. For all the governmental resources spent, we could have simply bought the land. He wanted a ridiculously speculative value; however, if the power of condemnation had been used, he would have been fairly compensated and had no desire to bulldoze something he no longer owned.

Regulation should not be the only use of an environmentalist's time.

3. Incentives. By properly structuring the tax system we can significantly discourage the development of wetlands. Incentives are rewards, such as tax breaks, for not developing wetlands. Tax breaks can help, but can't do it all, especially when incentives to develop are great. But tax breaks can help shift the costs of wetlands conservation from the private owner to the public.

4. Disincentives. By properly structuring the delivery of governmental services we can make development of wetlands more costly. How many have heard of the Coastal Barriers Resources System? It was enacted by Congress and signed into law by Ronald Reagan in 1982. It's a kind of "supply-side ecology" that protects undeveloped natural areas along our coast and protects the taxpayer's wallet at the same time. In units of the CBRS, the landowner has no additional federal restrictions placed in the way of development; rather, restrictions are placed on the use of federal monies, such as money to extend roads, water and sewers. And, very importantly, the CBRS contains a prohibition on the use of the National Flood Insurance Program in such units. Bankers are greedy, not stupid. They won't loan money to developers to build in the paths of hurricanes, floods or tidal waves. Developers aren't stupid enough to use their own money to build their houses on the sand, so development essentially stops. You may have an annoyed landowner, but their gripe isn't over something being taken from them but rather about something not being given to them. That's a much harder position to defend politically or legally. Developers can build; it's just that the federal government won't help them.

The environment and the public treasury can both be conserved by this approach. We should have a similar federal and state system of wetlands and open spaces.

If wetland regulation is determined by the US Supreme Court to be a taking, what are wetland advocates going to do? How can this be paid for? The opposite of "taking" is a "giving."

If governmental regulation causes land to be down-valued and such is a taking requiring just compensation, then a governmental action that causes land to be up-valued is a giving. If justice requires that society compensate the loss from regulation, than it is equally just to confiscate the gain from regulation. Regulation not only restrains activity but promotes it as well. Since more governmental actions increase land values than decrease them, we'll have plenty of money to pay for any taking and, I dare say, for most of the national debt.

Such a policy would address the controversial issue of regulatory takings. But another issue will arise: the use of eminent domain. I would conclude by noting that if it is in the public's interest to have a good system of highways, and to do so government must exercise the power of condemnation and pay just compensation, then the public's interest in a good system of wetlands, or open spaces deserves no less.

Andy Kerr is Executive Director of ONRC, the Oregon Natural Resources Council. These remarks were given at symposium at the McGeorge School of Law where Kerr debated the Lucas in Lucas v. South Carolina.