From Pennsylvania Coal to Keystone: the Supreme Court's Evolving View of "Regulatory Takings" by Richard M

UCD School of Law Vol. 10 No. 2 Environmental Law Society May 1987 From Pennsylvania Coal to Keystone: The Supreme Court's Evolving View of "Regulatory Takings" by Richard M. Frank Over the past decade, no issue could run afoul of the Takings of environmental law has so cap- Clause of the Fifth Amendment. tured the attention of the United Justice Holmes wrote in Penn- States Supreme Court as has sylvania Coal Co. v. Mahon, "regulatory 260 takings." The Court U.S. 393, 415 (1922) that "If regula- has issued over a dozen opinions tion goes too far it will be during that period which seek to recognized as a taking." In Penn- clarify the slippery concept of sylvania Coal, the Court struck when a regulation becomes so down as such a taking a Penn- excessive as to result in an un- sylvania statute which had pro- compensated taking of private hibited coal mining in a manner property in violation of the Fifth which caused subsidence of land and Fourteenth Amendments to on which certain structures were the U.S. Constitution. The results located. Three generations later, of that judicial effort have been Pennsylvania Coal was still decidedly mixed. But with the characterized as the Court's recent decision in "cornerstone" of federal takings Keystone Bituminous Coal Ass'n jurisprudence-at least until v. DeBenedictis, - U.S. Keystone. __, 55 U.S.L.W. 4326 (March 9, The other crucial Supreme 1987), some much-needed Court precedent in this field is clarification may be at hand. At a Penn Central Transportation Co. minimum, Keystone provides v. City of New York, 438 U.S. 104 government with welcome legal (1978). Penn Central provided for support in its efforts to contain the first time an analytical some of the more dramatic framework in which to view threats to our environment. claims that governmental regulation effect an unconstitutional The Origins of "Regulatory taking. There the Court identified Takings" as the relevant factors "[tihe economic impact of the regula- It was 65 years ago that the tion on the claimant .... the ex- U.S. Supreme Court first ar- tent to which the regulation has ticulated the notion that ex- interfered with investment- cessive government restrictions backed expectations, [and] the character of the governmental ac- beneath such structures or areas as a party. While the Penn- tion." 438 U.S. at 124. In Penn to remain in place as a means of sylvania Coal decision contains Central the Court upheld a providing surface support.) The language concerning the alleged municipal landmark ordinance second provision requires a coal public purpose of the statute in- that precluded the owners of company to forfeit its mining per- volved, Keystone characterizes Grand Central Station from mit if its removal of coal causes this "uncharacteristic . . . ad- building a modern office building damage to these protected sites visory opinion" by Justice atop that venerable site. for which the company has not Holmes. 55 U.S.L.W. at 4330. The criteria identified in Penn promptly compensated the sur- Relying on the stated public pur- Central seems fairly straightfor- face owner. pose of the 1966 Act to ward. Yet they have done little to If this statute sounds vaguely distinguish it from the private clarify that illusory line which familiar, it should. The 1966 Act is controversy at the heart of Penn- separates legitimate exercises of very similar to the Pennsylvania sylvania Coal, Justice Stevens the police power from un- statute invalidated by the concluded that "the similarities constitutional "takings" of Supreme Court decades earlier in [between the two cases] are far private property. Attesting to that the Pennsylvania Coal decision. less significant than the dif- fact are the plethora of regulatory Relying on that precedent, major ferences, and that Pennsylvania takings cases finding their way to bituminous coal operators filed Coal does not control this case." the Supreme Court docket (four suit in federal court in 1982. They 55 U.S.L.W. at 4329. Thus Justice in the 1986-87 term alone), as well mounted a facial challenge to the Stevens effectively transforms as the growing number of such Act, claiming that it violated both the "cornerstone" of takings disputes clogging the state and the Takings Clause and the Con- jurisprudence into mere dictum. lower federal courts. tracts Clause of the U.S. Con- The Keystone decision next The Supreme Court's decision stitution. The stipulated facts in proceeded to apply the Penn Cen- in Keystone represents the latest the case revealed that the Act re- tral criteria to the stated facts. It chapter in this complex tale. quired plaintiff companies to is here that Keystone takes on its leave an aggregate 27 million greatest significance. Whereas Keystone-The Factual tons of coal in the ground, but property owners (and some Background that figure averaged only 2 per- courts) had generally considered cent of the available coal the economic impact of the con- In 1966, the Pennsylvania deposits in individual mines. tested regulation on the property Legislature enactecd the Understandably, plaintiffs owner to be the key variable, the Bituminous Mine Subsidence based their constitutional claim Court for the first time in and Land Conservation Act. The first and foremost upon Penn- Keystone elevated the "character Act was a reaction to a rather sylvania Coal. Nevertheless, both of the governmental action" dramatic environmental and safe- the District Court and the Court criterion to primary significance. ty hazard emanating from the of Appeals upheld the Act, fin- The Court pointed out that the bituminous coal fields of western ding that case distinguishable. 1966 Subsidence Act was Pennsylvania. Underground coal The coal companies were suc- predicated upon detailed mining often causes ground sub- cessful in obtaining Supreme legislative findings, and that the sidence of devastating propor- Court review, with former U.S. legislative purposes involved tions. It results in structural Solicitor General Rex Lee serving "were genuine, substantial and damage to buildings, makes va- as their counsel of record. legitimate . . . ." The majority opi- cant land impossible to develop, nion notes: destroys groundwater and sur- The Supreme Court's Decision [T]he Commonwealth is acting face ponds and-given its un- in Keystone to protect the public interest in predictable nature-can even health, the environment, and threaten human life. Recognizing In a 5-4 decision authored by the fiscal integrity of the area. the potential for such damage, Justice Stevens, the Supreme That private individuals [who coal companies purchased ac- Court sustained the lower court previously contracted away cess and mining rights from rulings and upheld the Act. The their surface rights to the coal thousands of Pennsylvania sur- manner in which the majority companies] erred in taking a face owners many years ago. reached that result suggests that risk cannot estop the State The Pennsylvania statute at- Keystone may be the most impor- from exercising its police tempts to minimize the threat of tant takings precedent since power to abate activity akin to subsidence in a variety of ways. Penn Central. It also calls into a public nuisance. Most important are two re- serious question the primacy of 55 U.S.L.W. at 4331. Keystone quirements: the first prohibits the Pennsylvania Coal decision. relies on several pre- mining that causes subsidence Justice Stevens first treated Pennsylvania Coal cases that damage to public buildings, and distinguished Pennsylvania upheld government's power to private dwellings and cemetaries Coal. He noted that the earlier terminate commercial operations that were in place when the Act case involved a private property found to be offensive, e.g., was passed. (Pennsylvania has dispute between a coal company breweries, brothels, etc. Many interpreted this provision to re- and a surface landowner; no property owners and commercial quire 50 percent of the coal governmental entity was named interests had argued that this line of cases had been effectively had chosen to mount a facial to consider the 27 tons of unex- overruled by Pennsylvania Coal challenge to the statute rather ploited coal in isolation; instead, and Penn Central. The Supreme than an "as applied" attack. The he opined, it had to be viewed in Court expressly rejected this in- Supreme Court in recent years conjunction with the companies' terpretation in Keystone: has repeatedly spurned such property interest as a whole: Under our system of govern- facial takings challenges as lack- Because our test for regulatory ment, one of the state's ing a concrete set of facts taking requires us to compare primary ways of preserving the against which the Court can ap- the value that has been taken public wealth is restricting the ply the Penn Central analysis from the property with the uses individuals can make of with precision. "[W]e have value that remains in the pro- their property . . . . These recognized an important distinc- perty, one of the critical ques- restrictions are "properly tion between a claim that the tions is determining how to treated as part of the burden of mere enactment of a statute con- define the unit of property common citizenship" . . . . stitutes a taking and a claim that "whose value is to furnish the Long ago it was recognized the particular impact of govern- denominator of the fraction." that "all property in this coun- mental action on a specific piece Id. try is held under the implied of property requires the payment Having construed the obligation that the owner's use of just compensation." 55 "denominator" in the broadest of it shall not be injurious to U.S.L.W. at 4333. Stating what by possible manner, Justice the community" ....[T]he Tak- now should be obvious to proper- Stevens' conclusion was not sur- ings Clause did not transform ty owners, the Court concluded prising: that principle to one that re- this portion of its analysis by The 27 tons of coal do not con- quires compensation when- stating that property owners stitute a separate segment of ever the State asserts its "face an uphill battle in making a property for takings law pur- power to enforce it." facial attack on [statutes] as a poses ....There is no basis for 55 U.S.L.W. at 4332. taking." Id. treating the less than 2 While the Court in Keystone The coal companies' case was [percent] of petitioners' coal as hinted that it could have rested made even more difficult in the a separate parcel of property." its decision on this "character of eyes of the Court, given the 55 U.S.L.W. at 4334. The majority the governmental action" factor relatively small economic impact opinion concluded its takings alone, it chose not to do so. In- the Subsidence Act had on their analysis by noting that the coal stead, it relied on the other Penn aggregate operations: "The hill is companies retain the ability to Central criteria and found them made especially steep because mine coal profitabley, even if they no more helpful to the mining petitioners have not claimed, at may not destroy or damage sur- companies. this stage, that the Act makes it face structures at will in the pro- The majority opinion found, for commercially impracticable for cess. example, that the companies had them to continue mining their The Court then briefly ad- failed to demonstrate that they bituminous coal interests . . . dressed and disposed of the com- had suffered a severe economic Id. panies' Contracts Clause argu- impact resulting from the Act. The majority's analytical ment. The Court first noted that it This, in turn, was in large part at- framework for this issue is has traditionally viewed regula- tributable to the fact that they critical. Justice Stevens refused tion which implements the general police power in a more Coal. The Chief Justice disparag- most pronounced impact of the deferential light for Contracts ed the distinctions cited by the decision is on Pennsylvania Coal, Clause purposes than govern- majority between that case and a precedent that has occupied mental acts which attempt to the operative facts of Keystone. case books and the attention of relieve government of its own He rather clearly perceived Penn- law students for decades. proprietary contractual respon- sylvania Coal to be controlling. Keystone appears to relegate sibilities. The statute challenged "Examination of the relevant fac- Pennsylvania Coal to its specific in Keystone indisputedly fell into tors presented here convinces facts. The only ongoing the former category. me that the differences between significance of Justice Holmes' The majority opinion conceded them and those in Pennsylvania landmark decision is its creation that the Subsidence Act works a Coal verge on the trivial." 55 of the notion of "regulatory tak- substantial impairment of a U.S.L.W. at 4337. ings," a concept over which the private contractual relationship. Chief Justice Rehnquist did Court has equivocated in recent Nonetheless, observed Justice not disagree with the notion that years but with which it now Stevens, Pennsylvania's action there exists a "nuisance excep- seems comfortable. See William- was based on its strong public in- tion" to the constitutional pro- son County Regional Planning terest in preventing widespread scription against government tak- Commission v. Hamilton Bank of environmental damage, an in- ings without compensation. "[A] Johnson City, 473 U.S 172 (1985); terest which the Court felt taking does not occur where the and Riverside Bayview Homes v. transcended any private agree- government exercises its un- United States, -U.S.-, 106 ment between contracting par- questioned authority to prevent a S.Ct. 455 (1985). ties. The Act, furthermore, property owner from using his Perhaps more significant is represents a reasonable and ap- property to injure others without what Keystone portends for the propriate response to the having to compensate the value future of government's exercise threatened danger. Thus Justice of the forbidden use." Id. This of the police power. Environmen- Stevens concluded that "the conclusion is not surprising in tal regulation can be divided into Commonwealth's strong public light of Rehnquist's statement of two basic categories: the first is interests in the legislation are the same principle in his earlier the more traditional type which more than adequate to justify the dissent in Penn Central. 438 U.S. seeks to prevent or minimize impact of the statute on peti- at 144-146. harmful private conduct. Hazar- tioners' contractual agree- The Chief Justice did part com- dous waste, air pollution and ments." 55 U.S.L.W. at 4335. pany with the Keystone majority water quality laws are prominent in two important respects. First, examples. The second category The Keystone Dissent he would read the "nuisance ex- seeks primarily to promote ception" far more narrowly to en- aesthetic values important to a Chief Justice Rehnquist wrote compass only private "misuse or well-ordered community. Plann- a dissent in Keystone, in which illegal use" of property, and even ing and zoning laws most typical- he was joined by Justices Powell, then only when the regulation ly embody these concerns. O'Connor and Scalia. Rehnquist does not completely extinguish Keystone strongly suggests was most troubled by the ma- the value of the property. that for purposes of analysis jority's treatment of Pennsylvania Second, Rehnquist disagreed under the Takings Clause, the with the "denominator" of the former type of government activi- takings equation selected by the ty will be treated with more majority. He would find it deference by the courts. Given necessary to treat the 27 million the broad language of Keystone, tons of coal left unexploited by it will be difficult for plaintiffs to the Act as a discrete property in- overcome the presumption of terest for purposes of the Takings validity that attaches to such Clause. Since that property in- measures. (This assumes, of terest is effectively destroyed by course, that government can the Subsidence Act, Rehnquist justify its regulatory actions on concluded, an unconstitutional the basis of strong findings and takings has occurred. an ample record-factors which In light of this conclusion, the majority found to exist in Chief Justice Rehnquist found it Keystone.) unnecessary to address the com- That Keystone's significance panies' Contracts Clause argu- extends far beyond the coal ment in his dissent. fields of western Pennsylvania can be seen from one local exam- The Broader Implications of ple. California and Nevada have Keystone adopted a bistate compact which creates the Tahoe Regional Plan- What, then, are the ning Agency (TRPA) and gives significance and implications of that agency broad authority to Keystone for the future? The (continued on page 7) Defending the Lost Coast-Fighting Roads in the King Range by Lora Moerwald and Jim Eaton

the recently introduced Roosevelt elk roams the KRNCA. Within the KRNCA lie 32,900 acres of the King Range Wilderness Study Area (WSA), managed by the Bureau of Land Management (BLM). Under the Federal Land Policy and Manage- N ment Act of 1976 (FLPMA), the BLM is required to inventory its holdings nationwide, conduct detailed studies of its wild lands, and make recommendations to Congress regarding the suitability for wilderness designation of those areas. While in WSA status,

- .-c. . areas are to be managed to main- tain their wilderness character. Activities that impair the natural values are prohibited until Con- gress makes a final determina- tion on the disposition of each WSA. In the fall of 1985, the BLM a released its preliminary proposal for the King Range WSA. BLM proposed recommending only 21,200 acres as suitable for wilderness designation. At public hearings only a few individuals suggested a smaller wilderness area. More than 80 people expressed their dissatisfaction with the proposal and asked the BLM to recom- mend a larger area. Furthermore, Along most of California's characteristics of the area. local conservationists believe coast, State Highway 1 hugs the In the King Range, mountains that additional lands not part of shoreline, providing beautiful seem to rise directly out of the the King Range WSA should be vistas of rocky cliffs, sandy sea. Kings Peak, only three miles considered for wilderness beaches, and the Pacific Ocean. from the beach, towers 4,087 feet. designation. They support But thirty miles north of Fort Further south, a steep trail wilderness for the entire KRNCA, Bragg, the steep and rugged ter- descends Chemise Mountain to except for a small corridor along rain known as the "Lost Coast" the cobblestone beach below, Shelter Cove Road, which forces the Coast Highway inland, dropping 2,600 feet in about one- separates the larger wilderness leaving a long, unique stretch of half mile. from Chemise Mountain WSA to roadless shoreline. Many of the Besides magnificent vistas, the south. Lost Coast beaches, coastal the KRNCA possesses many slopes, and bluffs lie within the other values. Among the 258 bird Not only is the BLM making King Range National Conserva- species reported within the area plans for the future of wilderness tion Area (KRNCA) and the newly are rare species such as the bald in the KRNCA, it is also propos- expanded Sinkyone Wilderness eagle, peregrine falcon, brown ing significant changes in the State Park. Conservationists are pelican, and spotted owl. portions of the KRNCA open to distressed about the manage- Steelhead, silver salmon, and off-road vehicle (ORV) use. The ment of the KRNCA and its im- king salmon spawn in the area's use of ORVs in the KRNCA has pact on the unique wilderness rivers and streams. Additionally, long been controversial. ORVs, Area Manager quietly approved 1976, and therefore the BLM can- the plan, ignoring the prior public not rely on its outdated plan to requests for notification. The open the WSA to off-road BLM subsequently published vehicles. notice of the decision in the Other events have complicated Federal Register. this controversy. In a surprising move, the California Coastal Outraged over the decision, Commission voted unanimously five conservation groups filed ap- in the summer of 1986 that the peals to the Interior Board of controversial transportation plan Land Appeals (IBLA) in was not consistent with the Washington, D.C. The California California Coastal Act. The BLM Wilderness Coalition, En- must now work with the Commis- vironmental Protection Informa- sion to resolve their differences. tion Center, and the Wilderness Another complication occurred Society contested the legality of last summer when a contractor opening roads within the King hired by the BLM to improve the Range WSA. The conservation roads in KRNCA illegally con- groups requested that the IBLA structed a new route in the WSA. (1) declare the transportation plan In March 1987 BLM announced invalid, (2) order that all roads that maintenance again would be within the WSA be closed to vehi- authorized on the four KRNCA cle use, and (3) compel prepara- roads previously approved. The tion of an EIS for any future Wilderness Society protested transportation plan. this decision. Early this month The BLM's transportation plan the BLM denied the protest. The was not the subject of an EIS Wilderness Society is currently Donna J. Barr even though, appellants argue, preparina an aDDeal. such as jeeps, dune buggies, and the plan is likely to have signifi- As of April 1987, the IBLA has motorcycles are permitted on on- cant impacts on erosion, wildlife, not ruled on the appeals of the ly two miles of the King Range archaeological values, oppor- transportation plan. Since the beach, although many stray into tunities for primitive wilderness IBLA often has taken a year or the closed area, disturbing recreation, and suitability for more to issue a decision, this wildlife, hikers, and archeological wilderness designation. The skirmish in the battle over roads sites. Many consrevationists con- BLM's analysis recognized no in the King Range may not be tend that the BLM, because of a negative impacts resulting from decided this year. lack of staff, cannot control implementation of the plan in ORVs along the shoreline. spite of, and in direct contradic- In the fall of 1985, the BLM in- tion with, earlier BLM documents troduced a transportation plan for outlining potential negative con- KRNCA, allowing visitors to drive sequences. inside the WSA-a move con- In a rather flippant brief, filed in sidered blatantly illegal by con- September of 1986, the BLM servationists. The plan would. referred to the appellants as at the open to ORVs four roads within "several organized groups pur- Lora Moerwald is a Senior the WSA. As a result of the plan, porting to represent persons con- University of California at Davis En- the BLM would permit more cerned about the environmental where she is studying vehicles into the heart of the pro- effects, if any, which the adop- vironmental Policy Analysis and posed King Range Wilderness, tion of the King Range Transpor- Planning. She enjoys backpack- leading to an increase in ORV tation Plan would have upon the ing and hiking and has been an in- trespass into wild lands. The con- land and other natural resources. tern for the California Wilderness sequences of implementing this Coalition since the fall of 1986. plan were very briefly considered The BLM justifies opening the in an "environmental analysis," a roads within the WSA based on document much less comprehen- its 1974 management plan for the Jim Eaton is the Executive Direc- sive than an Environmental Im- KRNCA, which anticipated vehi- tor of the California Wilderness pact Statement (EIS). cle use throughout the area. The Coalition. He is a graduate of U.C. There was, however, a public conservation groups point out Davis and a former Wilderness comment period on the transpor- that this 1974 plan was not re- Society Representative. Jim has tation plan. Conservationists vised to reflect changes man- been instrumental in protecting criticized the plan and requested dated by FLPMA, especially the wild lands in Alaska, Idaho, and notification of the BLM Area wilderness review provisions. California. He probably knows Manager's decision concerning They argue that the roads in ques- more about the wild lands of the plan. After the close of the tion were not open to public use California than any other living public comment period, the BLM when FLPMA was enacted in person. ever-growing list of complex en- From Pennsylvania Coal vironmental problems. The latitude the Court confers in to Keystone Keystone upon reasonable exercises of the police power will continued from page 4 prove especially helpful in those control development in the Lake reading of the "nuisance excep- cases where government acts to Tahoe Basin. TRPA accumulated tion" to the Takings Clause in prevent a private party from "example evidence that private Keystone. ternalizing" the negative effects development on fragile lands was Other likely applications of the of its conduct so as to harm its generating enormous sediment Keystone decision are easily con- neighbors. Conversely, the runoff which was in turn polluting jured up. A state or local govern- Keystone decision increases Lake Tahoe and gradually caus- ment, for example, could shut significantly the legal burden on ing it to lose the pristine clarity down a commercial facility found those who seek to strike down for which the lake is world- to be emitting hazardous environmental regulation in renowned. substances regardless of the reliance upon the Takings In response to those facts, firm's culpability or the economic Clause. TRPA adopted a revised Regional impact upon it of the plant's Plan in 1984 that sought to limit closure. The constitutionality of substantially private develop- floodplain zoning measures is ment on fragile lots within the also assured to a far greater Richard M. Frank is a Deputy At- Tahoe Basin. Private degree by the Keystone opinion. torney General with the California homeowners filed suit against Department of Justice. He re- TRPA, California and Nevada in Conclusion ceived his J.D. from U.C. Davis federal court, challenging the School of Law in 1974. Rick co- plan as an unconstitutional tak- The long-term significance of authored the amici curiae brief ing of their property in violation the Supreme Court's decision in filed on behalf of 26 states in the of the Takings Clause. Keystone cannot easily be Keystone case supporting the A principal justification ad- overstated. The broad language Commonwealth of Pennsylvania. vanced by the defendants was employed in the majority opinion The views expressed in this arti- that the Regional Plan con- should prove of substantial cle are the author's and do not stituted a measured response to assistance to governmental of- necessarily reflect those of the an amply documented record of ficials as they grapple with an Attorney General. Lake Tahoe's environmental decline. Accordingly, they argued, the Regional Plan is valid irrespective of the economic im- .F ° - "" pact on plaintiffs' property. Adop- ting the logic of an earlier trial court decision, they argued that private landowners simply have no constitutional right to turn Lake Tahoe brown. While defendants prevailed in the district court on other theories, see Tahoe-Sierra Preser- vation Council v. Tahoe Regional Planning Agency, 631 F.Supp. 126 (D.Nev. 1986), the court did not directly adopt the above theory. To do so, mused the district judge at oral argument, could violate prior "regulatory talkings" decisions of the U.S. Supreme Court. That decision has now been ap- pealed to the Ninth Circuit Court of Appeals. It would appear that the intervening Keystone decision strongly enhances the defendants' chances of victory in * ,~.'- the Tahoe litigation. The legal - - .- - -. '.--.=- - ______~ -~ argument they advanced in the - -. district court is certainly consis- '' .2~- -. 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Staff: Environs Environmental Law Society Nonprofit Org. Editor-in Chief King Hall U.S. POSTAGE Mary Scoonover University of California PAID Davis, California 95616 Davis, CA 95616 Staff Permit No. 3 Dave Farabee Jean Holsten

Contributors Jim Eaton Rick Frank Lora Moerwald

Faculty Advisor Harrison C. Dunning Environs, a non-partisan natural resources law news- letter, is published by the Environmental Law Society of the University of California, Davis School of Law.

The views expressed herein are those of the authors, and do not necessarily reflect the position of the University of California, Davis, the School of Law, the Environmental Law Society, or of any employer or organization with which an author isaffiliated.